Japan’s Finance Ministry is preparing for fiscal 2027 debt-servicing costs of more than ¥31.3 trillion, including ¥16.6 trillion in interest payments and bond redemptions. The latest projection reflects a rise in the assumed long-term Japanese government bond interest rate to 3.8% from 3.0% for fiscal 2026. An earlier record in the existing budget projection put total debt-service costs at ¥36.6 trillion, or 17% above fiscal 2026; the available materials do not reconcile the difference. Total fiscal 2027 budget requests are expected to exceed ¥130 trillion, surpassing the ¥122 trillion record set in fiscal 2026, as Prime Minister Sanae Takaichi’s administration removes traditional spending ceilings for growth initiatives. Defense is seeking ¥8.9 trillion, the Ministry of Economy, Trade and Industry about ¥7.7 trillion, education roughly ¥8.7 trillion and social security about ¥390 billion more. The Bank of Japan has raised its policy rate to 1.0%, a 31-year high, while the 10-year Japanese government bond yield recently reached 2.945%, its highest level in about 30 years. Japan’s high debt burden and continued reliance on new bond issuance could increase fiscal strain and, if domestic yields become more attractive, encourage Japanese investors to repatriate funds from overseas bond markets.