Japan’s Finance Ministry is preparing to allocate about ¥30 trillion for debt servicing in its draft budget for fiscal 2026, the largest such amount on record, according to government sources. The sharp increase reflects rising long-term interest rates and would surpass the ¥28.2 trillion set aside this year.
Debt servicing—covering both bond redemptions and interest payments—continues to squeeze the national budget. Analysts warn that spending on social programs, economic growth initiatives, and household support could face cutbacks as borrowing costs climb.
The ministry is assuming an interest rate of 2.6 percent for its calculations, up from 2.1 percent last year, underscoring the government’s shift toward a higher-rate environment. With other ministries expected to seek more money for social security and related programs by the end of August, the overall budget is likely to exceed the current record of ¥117.6 trillion.
Market concerns have intensified as the Bank of Japan shifts its monetary policy and opposition parties, emboldened by the ruling coalition’s minority status in parliament, push for tax cuts—raising fears of further fiscal deterioration.
by MagazineKey4532