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The Corporate Service Price Index (CSPI), more commonly referred to as Japan’s services producer price index, measures the change in prices charged between companies for services, such as transport, communications, advertising and other business-to-business services. Unlike traditional producer price indexes focused on goods, the CSPI captures service-sector price pressures that can be a leading signal for consumer inflation and broader cost dynamics in a service-driven economy.
The CSPI is closely watched by economists and the Bank of Japan as it tends to feed through to consumer services inflation with a lag. Because many services are labour-intensive, upward price momentum here can reflect wage pressure and firms passing on costs, which is pertinent at a time when Japan is trying to cement inflation above its 2% target sustainably.
In this November release, markets will dissect it looking for whether service price inflation remains firm or moderates, and how that fits into the broader inflation narrative that has seen Japan’s core CPI steady above target.
For context, the latest available CSPI year-on-year figures (BOJ data) show a generally elevated but stabilising trend through 2025:
CSPI YoY (total services)
May: +3.1%
June: +2.8%
July: +2.7%
August: +2.8%
September: +3.0%
October: +2.7%
These readings indicate persistent service price pressures, albeit with some ebb and flow. The slight deceleration from September to October suggested that while inflation in services remains solid, the pace of increases isn’t uniformly accelerating.
The November CSPI will therefore be interpreted not in isolation, but as part of the inflation story spanning goods prices, consumer services inflation and labour costs. A stronger-than-expected outcome could reinforce expectations of continued, and sooner than otherwise, monetary tightening by the BOJ, while a clear slowdown might bolster confidence that inflation is moderating without derailing the broader price trend.
In sum, the CSPI is a leading gauge of underlying inflation pressures in services that matters for both CPI forecasts and the central bank’s policy calculus in a period of evolving price dynamics.
This article was written by Eamonn Sheridan at investinglive.com.
Summary
Japan plans to assume a 3% interest rate on bond expenses in its FY26 budget
The assumption reflects rising JGB yields and BOJ policy normalisation
It marks the highest budgeted rate in roughly two decades
Higher debt-servicing costs could constrain fiscal flexibility
The move signals a more realistic acceptance of a higher-rate environment
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Japan’s government is reportedly planning to budget for a ~3% interest rate assumption on its long-term government bond expenses in the FY2026 budget, the highest assumed rate in about two decades. The news dribbled out overnight and its getting a rerun in markets here in Asia.
This rate assumption is used when the Ministry of Finance builds the budget to estimate how much it will cost to service Japan’s huge public debt, i.e., the interest payments the government expects to make on its outstanding bonds.
There are a few key drivers behind this jump in assumed rates:
1. Rising market yields
Market yields on Japanese government bonds (JGBs) have climbed sharply as bond markets repriced in anticipation of tighter monetary policy and reduced central-bank support. Longer-dated yields, including 30-year JGBs, have already exceeded 3% in the market, the highest since they were introduced.
2. BoJ normalisation
With the Bank of Japan raising policy rates to 0.75%, the highest in 30 years, and gradually shrinking yield-curve support, market pricing for longer-term rates has moved materially higher.
3. Fiscal pressures and spending plans
Japan’s national debt is among the highest in the developed world, above 230% of GDP, and recent large fiscal packages under Prime Minister Sanae Takaichi have reinforced market concerns about debt sustainability.
Fiscal impact
Assuming higher interest costs in the budget means the government is preparing for greater debt-servicing expenses, even without issuing significantly more bonds. That can crowd out spending on other priorities and tighten fiscal flexibility.
Market realism
A 3% assumption signals that Tokyo is acknowledging higher global and domestic real yields, rather than clinging to artificially low cost forecasts. This can build investor confidence — or at least reduce the likelihood of surprise — but also reflects a harsher financing environment.
Yields and the yen
Higher assumed rates in the budget tend to correlate with higher real yields in markets. If markets truly price longer-term JGB yields around 3% or more, it can underpin flows into JGBs but also support a stronger yen, as higher real rates make yen assets more competitive. However, commentary suggests the FX impact has been uneven, in part because of expectations around BoJ’s future path and policy signalling.
Debt sustainability narrative
Budget assumptions rising to 3% underline a broader shift in Japan’s macro narrative: from decades of ultra-low rates and easy financing, toward a gradual repricing of risk and cost, both domestically and globally.
Bottom line
This isn’t just bookkeeping. It’s a visible marker that the market’s repricing of Japanese bond yields, driven by BoJ normalisation and fiscal realities, is now being baked into the government’s budget framework. That has implications for fiscal policy, JGB markets, and the broader narrative about Japan’s macroeconomic transition. 2026 is gonna be lit!
This article was written by Eamonn Sheridan at investinglive.com.
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