Japan to raise long-term interest rate estimate

Japan’s government is set to increase its long-term interest rate estimate for the upcoming fiscal year to 2.1 per cent from the current year’s 1.9 per cent, according to the Nikkei business daily.

This upward adjustment reflects the rising government bond yields following the Bank of Japan‘s recent shift away from its decade-long ultra-loose monetary policy.

As a result of the higher interest rate estimate, the government’s debt-servicing costs are expected to surge to 28.9 trillion yen ($197.16 billion) for the fiscal year starting in April, marking a significant increase from the current year’s 27 trillion yen.

The overall budget for the next fiscal year is projected to exceed 110 trillion yen for the fourth consecutive year.

The interest rate estimate is calculated automatically by adding a precautionary 110 basis points to the underlying bond yield to account for potential interest rate spikes. The final estimate will be determined during the budget compilation process in December.

Attribution: Reuters

Subediting: Y.Yasser