The finance ministry plans to raise its settings for the accumulated interest rate, used to calculate debt-servicing costs, to 1.9% for next year’s budget, according to people familiar with the matter. The increase in debt-servicing costs partly reflects expectations that interest rates will be higher. Reflecting the increasing burden, debt-servicing costs will rise 6.7% to ¥27 trillion from ¥25.3 trillion.
Japan’s general government debt has soared to a size equivalent to 255% of its economy, according to the International Monetary Fund. The spending will exert additional fiscal stress on the world’s most indebted developed nation. There’s ¥1 trillion allocated to spur wage rises and mitigate the impact of inflation in the plan for next year.
The total tally marks a decrease from a year earlier, the first decline in 12 years, but only after factoring a contingency fund for pandemic-era stimulus into this year’s budget, which inflated current-year spending by ¥5 trillion.
