Assumed interest rate of 3.8% puts government bond costs at ¥36 trillion; FY2027 budget requests exceed ¥130 trillion

Finance Ministry raises assumed rate for FY2027 budget to 3.8%; bond costs swell to ¥36 trillion level Reflecting the rise in long-term interest rates, the Ministry of Finance plans to raise the assumed interest rate used to calculate government bond interest payments in the FY2027 budget request from 3.0% this fiscal year to 3.8%. Total requests from all ministries are expected to exceed ¥130 trillion for the first time, with government bond costs swelling to a record ¥36 trillion level. Rising interest rates are becoming a drag on the Takaichi administration's expansionary fiscal policy. 123

Nikkei's 65,000 yen level is next week's focus; attention on Nvidia earnings and Jackson Hole The Nikkei average has corrected from the 69,000 yen level to around 66,000 yen, and overheating has receded. Whether Nvidia's earnings on the 26th and the Jackson Hole meeting from the 27th to the 29th provide a rebound catalyst, or whether the index breaks below 65,000 yen, will be the turning point next week. 45

U.S. August composite PMI hits record high; NY Dow up 517 points, dollar-yen around 159 yen The flash U.S. August composite PMI came in at 56.0, a record high, strengthening dollar buying. The NY Dow rebounded 517 points from the previous day to 53,277, but the 10-year Treasury yield remains elevated around 4.74%. 678

Japan-U.S. coordinated intervention is a 'currency alliance'; dollar-yen eyes 160 yen but caution remains Citi analyzes the Japan-U.S. coordinated intervention as an informal 'currency alliance,' and notes that U.S. Treasury Secretary Bessent is concerned that yen weakness could recreate the situation before the Asian currency crisis. In the market, there are views that dollar buying will test 160 yen, while intervention caution caps upside, and the Jackson Hole meeting is likely to determine the direction. 91011

Japan's economy to grow 0.8% in FY2026, accelerating to 1.3% in FY27 on consumption tax cut April-June GDP grew at an annualized 1.1%, marking three consecutive quarters of positive growth, but private consumption and capital investment are declining, and the economy is expected to show increasing signs of stagnation. According to estimates, the reduction in the consumption tax on food and beverages in FY2027 will improve real purchasing power and accelerate growth to 1.3%. 12

JT offers dividend yield of 3.9%; weak yen and overseas price hikes support dividend increases JT, popular among NISA investors, offers a high dividend yield of 3.9%. The weak yen boosts overseas earnings and overseas price hikes support dividend increases, but to assess sustainability, the effects of price hikes and currency moves need to be examined separately.