Japan Ministry of Finance Estimates 138 Trillion Won Interest Payment on National Bonds in 2027

Japan's Ministry of Finance has projected that interest payments on government bonds alone will cost 15.3 trillion yen (approximately 138 trillion won) in fiscal year 2027 (April 2027 to March 2028), according to reports by Asahi Shimbun and Nihon Keizai Shimbun (Nikkei) on the 3rd.

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In reference materials submitted to the National Diet for deliberations on the 2024 budget proposal, the Ministry of Finance's "Impact Estimates for 2025?2027" forecast that the total government bond expenses (principal and interest repayments) will reach 34.2 trillion yen in 2027, an increase of about 27% compared to 2024.

Specifically, interest payments on government bonds are expected to rise to 15.3 trillion yen, approximately 58% higher than in 2024. This estimate assumes nominal economic growth of 3% and consumer price inflation of 2% from 2025 to 2027, with the 10-year government bond yield?a key long-term interest rate indicator?rising from 1.9% in 2024 to 2.4% in 2027.

Asahi Shimbun reported, "So far, large-scale monetary easing by the Bank of Japan has kept interest rates low, suppressing government bond interest payments, but expectations of an exit from monetary easing policies are growing," adding, "If the interest rate hike phase begins, the increase in government bond expenses could exacerbate fiscal deterioration."

Nikkei pointed out, "According to the Ministry of Finance's estimate, the shortfall between general account expenditures and revenues is expected to increase again from 32.4 trillion yen in 2025 to 34.8 trillion yen in 2027," emphasizing the need to restrain expenditures before the burden of government bond expenses becomes too large.

The government bond expenses for fiscal year 2024, decided at the Cabinet meeting, already account for 27.009 trillion yen, representing 24% of the general account budget proposal of 112.0717 trillion yen.

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