Fiscal alarm sounded: Japan applies for the highest debt repayment budget in history, with a quarter of the national budget allocated for debt repayment!

Japan sounds the fiscal alarm, with debt repayment funds for the next fiscal year reaching 32.4 trillion yen, the highest debt repayment cost budget in history.

On Tuesday, documents obtained by the media showed that the Japanese Ministry of Finance requested 32.4 trillion yen (approximately 219 billion USD) as debt repayment funds for the next fiscal year, reflecting the impact of rising Japanese government bond yields on public finances. This requested amount represents an increase of about 15% compared to the initial budget of the previous fiscal year, far exceeding the 3% inflation rate during the same period.

If approved, this will become the highest debt repayment cost budget in Japan's history, with debt repayment expenditures currently accounting for about one-quarter of Japan's national budget.

The Bank of Japan's continued gradual interest rate hikes have raised the cost of government debt. Last week, the yield on Japan's 10-year government bonds reached its highest level since 2008, as market expectations for further interest rate hikes by the central bank intensified, while concerns about fiscal sustainability persisted.

This request comes at a time when the Japanese government is seeking to double its defense spending. After the ruling party's poor performance in the July Senate elections, the government faces pressure to provide cash subsidies or reduce certain consumption taxes.

Debt Repayment Burden Hits Record High

The Ministry of Finance has requested a total budget of 34.1 trillion yen, the vast majority of which is allocated for debt servicing, with a small amount set aside for overseas development assistance and other agendas.

As the country with the heaviest debt burden among developed economies, Japan continues to face enormous costs associated with maintaining its debt. With an aging population and expanding social security needs, the government requires financing support for its growing pool of funds.

The initial budget for the current fiscal year totals 115.2 trillion yen. As per tradition, each summer, various departments submit their initial budget requests for the next fiscal year, which are ultimately consolidated into a formal budget proposal.

The Bank of Japan's gradual increase in interest rates has directly pushed up the cost of government debt. Market expectations for further interest rate hikes by the central bank are rising, with the yield on 10-year government bonds climbing to its highest level since the 2008 financial crisis.

The rising yields reflect two pressures: first, investors' expectations regarding the normalization of the central bank's monetary policy, and second, concerns about Japan's long-term fiscal sustainability. This dual pressure creates greater challenges for the government's financing environment.

In addition to debt repayment pressures, the Japanese government also faces multiple demands for increased spending. The government is seeking to raise defense spending to 2% of GDP, aiming to double its defense budget