Japan to keep record-low interest rates in FY2018 budget draft
[TOKYO] Japan's government is set to keep an assumed interest rate at a record low of 1.1 per cent as it compiles the budget for the next fiscal year starting in April, which will keep its borrowing costs low, government sources told Reuters on Wednesday.
The assumed interest rate hit a record low of 1.1 per cent this fiscal year following the central bank's adoption of negative interest rate policy in 2016. The government intends to maintain the current borrowing rate assuming that the Bank of Japan's low-rate policy will continue.
Low borrowing rates will help curb the government's overall debt-servicing costs, the sources told Reuters on condition of anonymity because the plan has not been finalised yet.
The government plans to compile next fiscal year's budget draft later in December, along with an extra budget for this year.
The finance ministry earlier estimated next year's debt-servicing costs - interest payments and debt redemption - at 23.8 trillion yen ($209.71 billion), assuming the borrowing rate at 1.2 per cent.
Debt-servicing costs account for roughly a quarter of the annual government budget. Japan has the industrial world's heaviest debt burden at more than twice the size of its economy.
The assumed borrowing rate of 1.1 per cent is seen as the effective floor as the government provides a buffer of 1 percent to the market rate in calculating the borrowing cost, taking into account the r isk of a sudden spike in bond yields.
The benchmark 10-year yield now hovers around 0.045 per cent.
REUTERS
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
International
South Korea’s export growth picks up, supporting outlook
China says Hamas and Fatah express will for reconciliation
US consumer confidence at lowest level since 2022
Record gold prices boost recycling: WGC
Malaysian fast food operator QSR shelves IPO plans amid boycott campaign: sources
WHO warns of bird flu risk spreading to cows outside US