Japan to Raise Assumed Bond Interest Rate to 2.6% for FY 2026/27

Japan’s Ministry of Finance is preparing to raise its assumed interest rate for long-term government bonds to 2.6% in its fiscal 2026/27 budget requests, marking the highest level in 17 years, Reuters reported, citing the Yomiuri Shimbun on Friday. The assumed bond interest rate was previously set at 2.1% during the fiscal 2025 budget request phase, before being revised down to 2.0% in the final budget. The planned increase is expected to lead to higher debt servicing costs, the report said, without naming sources. Separately, the finance ministry is expected to allocate around 30 trillion yen (approximately $202 billion) for debt servicing in its fiscal 2026/27 budget request, Kyodo News reported. This would mark a record high, driven by rising long-term interest rates, the report added. Annual budget requests for the fiscal year beginning April 2026 are due to be submitted to the Ministry of Finance by the end of August.