The Japanese government will raise its long-term rate estimate to 2.1% in the 2025/2026 financial year, reports Nikkei By Reuters

TOKYO (Reuters) – The Japanese government plans to raise its estimate of the long-term interest rate used to compile the state budget to 2.1 percent for the next fiscal year from 1.9 percent this year, the business daily reported on Monday evening.

The plan reflects rising government bond yields as the Bank of Japan raised interest rates in a shift from a decade-long stimulus program, the Nikkei said.

As a result, debt servicing costs are expected to rise to 28.9 trillion yen ($197.16 billion) for the year starting next April, up sharply from 27 trillion yen for the current year , according to Nikkei.

The proposed general budget is likely to exceed 110 trillion yen for the fourth consecutive year, it added.

The interest rate estimate is automatically calculated by taking into account the underlying bond yield plus 110 basis points of caution in case interest rates rise.

The estimated rate for the next fiscal year will be finalized in the December budget.

(1 USD = 146.5800 yen)