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bTOKYO (Reuters) – Japan’s Ministry of Finance (MOF) has raised its assumed interest rate used to calculate debt servicing costs in its budget request for the next fiscal year, a senior ministry official said on Tuesday.
The ministry has set the assumed interest rate at 1.3%, up from 1.2% the previous year, reflecting rises in long-term rates, the official told reporters.
It marks the first increase in assumed interest rates since fiscal 2007/08 when the assumed rates increased to 2.9% from 2.7%, the official said.
The increase in the assumed interest rate came as a reminder of how the central bank’s ultra-low interest rate policy has kept government borrowing costs low to help finance debt.
The ministry tends to reduce assumed interest rates later to reduce borrowing costs when the government compiles a draft annual budget in December, after scrutinising all budget requests from ministries.
Budget requests must be submitted by Aug. 31.
The MOF will request 26.9 trillion yen ($194.42 billion) for debt servicing in the fiscal year beginning in April 2023, marking a 10.9% increase from an initial debt-servicing budget for this year.
The rise in national debt-servicing costs, or interest payments and debt redemptions, highlights the industrial world’s heaviest public debt burden that exceeds the size of Japan’s economy by more than two times.
($1 = 138.3600 yen)
Source: Investing.com
