Key Facts
• Japan’s Ministry of Finance plans to allocate around ¥30 trillion for 2026 debt costs.
• This surpasses the 2025 initial budget of ¥28.2 trillion, marking a record high.
• Rising long-term interest rates prompted the increase in debt repayment and interest costs.
• Assumed interest rate for debt calculations raised from 2.1% (2025) to 2.6% (2026).
• Total 2026 budget may exceed 2025’s record ¥117.6 trillion due to social security increases.
• Fiscal pressure may lead to reduced funding for growth and public welfare policies.
• Market concerns grow over fiscal deterioration amid potential tax cuts by opposition parties.
• Bank of Japan’s monetary policy adjustments contribute to rising interest rates.
Summary
Japan’s Ministry of Finance is preparing a record-high allocation of approximately ¥30 trillion for national debt costs in the 2026 budget, driven by rising long-term interest rates. This figure surpasses the 2025 initial budget of ¥28.2 trillion. The assumed interest rate for debt calculations has been raised to 2.6%, up from 2.1% in 2025. The total 2026 budget is expected to exceed the previous record of ¥117.6 trillion due to increased social security expenses. Fiscal constraints may necessitate cuts to policy spending aimed at supporting economic growth and public welfare. Market concerns over fiscal health are intensifying, especially as opposition parties push for tax cuts. The Bank of Japan’s monetary policy adjustments have also contributed to the upward trend in interest rates.
