Japan higher rates expand debt pile, balanced budget seen delayed again

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TOKYO :Japan raised its estimates for long-term interest rates over the coming few years in government's twice-yearly fiscal projections issued on Tuesday, following the central bank's decision last month to allow 10-year bond yields to move more widely.

Higher rates will test the government's ability to service the industrial world's heaviest debt burden at more than double the size of Japan's annual economic output.

While a decade of aggressive monetary stimulus under Bank of Japan Governor Haruhiko Kuroda did little to economic growth, which averaged around 1 per cent over that time, it has kept the government's borrowing costs at rock-bottom.

Now the government sees Japan's primary budget surplus in fiscal 2026, although that surplus would "come into sight" in the next fiscal year if it strives to streamline government budget spending.