Japan's budget request to exceed $698 billion for fourth straight year, draft shows

By Takaya Yamaguchi

TOKYO (Reuters) - Japanese ministries' budget demand for the next fiscal year is likely to exceed 110 trillion yen ($698 billion) for the fourth straight year, according to a government draft seen by Reuters, as expected interest rate hikes boost debt-servicing costs.

Japan's public debt, twice the size of its economy is the largest among industrialised nations, and could become more expensive to finance as the Bank of Japan looks at raising interest rates from their current level near zero.

The demand for the year starting in April 2025, expected to be submitted to the finance ministry by the end of August, could even top a record 114.38 trillion yen sought for the current fiscal year, boosted by rising interest rates.

Cabinet is expected to approve the finance ministry's draft at the end of the year.

The budget request could be swelled by measures to cushion people from rising prices brought by a weak yen currency and steps to help boost wages, the draft showed.

Last month, the BOJ said it would start trimming huge bond purchases and is set to unveil a detailed plan at its July 30-31 policy meeting.

That would follow the BOJ's decision to end negative rates and bond yield control in March, in a landmark shift away from a radical stimulus programme.

The 10-year bond yield stands at its highest in more than a decade as the market braced for further tightening by the BOJ.

($1=157.5100 yen)

(Reporting by Takaya Yamaguchi; Writing by Kaori Kaneko; Editing by Clarence Fernandez)