TOKYO (Reuters) - Japan's government plans to raise its long-term interest rate estimate used to compile the state budget to 2.1% for the next fiscal year from the current year's 1.9%, the Nikkei business daily reported late on Monday.
The plan reflects rising government bond yields as the Bank of Japan raised interest rates in a shift away from a decade-long stimulus programme, the Nikkei said.
As a result, debt-servicing costs are estimated to increase to 28.9 trillion yen ($197.16 billion) for the year starting in April next year, up sharply from 27 trillion yen for the current year, according to the Nikkei.
The overall proposed budget is likely to exceed 110 trillion yen for the fourth consecutive year, it added.
The interest rate estimate is automatically calculated, taking into account the underlying bond yield plus a precautionary 110 basis points in case interest rates spike.
The estimated rate for the next fiscal year will be finalised in the budget compilation in December.
($1 = 146.5800 yen)