Japan plans record 16.6 trillion yen for FY2027 interest costs as borrowing expenses surge

Japan’s Finance Ministry is bracing for a fiscal year 2027 budget that will shatter records in all the wrong places. The government plans to spend 16.6 trillion yen on interest payments alone. That figure represents just the cost of servicing existing debt, not paying it down. Total debt-servicing costs, which bundle interest payments with bond redemptions, are projected to exceed 31.3 trillion yen. Why the bill is getting so much bigger The key driver is a sharp upward revision in the assumed long-term interest rate for Japanese government bonds. The Finance Ministry bumped its planning assumption from 3.0% in FY2026 to 3.8% for FY2027. Japan’s debt-to-GDP ratio has long been the worst among G7 nations, and higher rates mean the cost of rolling over that mountain of obligations grows significantly. The Bank of Japan has been gradually normalizing its monetary policy after decades of ultra-loose conditions. The BOJ recently raised its policy rate to 1.0%, a 31-year high. A record budget for a country under pressure Total FY2027 budget requests are expected to exceed 130 trillion yen, blowing past the previous record of 122 trillion yen set just one year earlier in FY2026. Prime Min...