Japan's Ministry of Finance plans to use an assumed interest rate of approximately 3.8% for government bond interest payments in its fiscal 2027 budget requests, the highest request-stage level in 29 years. The rate would be 0.8 percentage point above the fiscal 2026 initial budget assumption of 3.0% and 1.2 points above the 2.6% used at the request stage. Higher debt-servicing costs could constrain the Sanae Takaichi administration's active fiscal expansion plans, particularly if market rates exceed the assumption. The government and Financial Services Agency also plan to seek tax incentives for retail government bonds, including possible inheritance tax reductions and eligibility under New NISA, to expand household participation as the Bank of Japan reduces its bond holdings. The proposals are expected to remain item requests without detailed design until year-end tax reform discussions.