* Ministry sees 13.7 pct rise in debt-servicing costs -
* Rising cost to fund public debt may affect tax hike debate
* Finance Ministry request needs govt, parliament approval
By Takaya Yamaguchi
TOKYO, Aug 27 Japan expects to spend a record
$257 billion to service its debt during the next fiscal year, a
document obtained by Reuters showed, underscoring the huge
burden created by the government's borrowings.
The amount to be allocated for debt-servicing for the year
that will begin on April 1 is nearly as large as the gross
domestic product of Singapore, which the World Bank put at $275
billion at the end of 2012.
Japan's Ministry of Finance (MOF), charged with drafting the
state budget and issuing government bonds, will request 25.3
trillion yen ($257 billion) in debt-servicing costs under the
budget, the document showed on Tuesday.
That will be up 13.7 percent from the amount set aside for
the current fiscal year, reflecting the ministry's plan to guard
against any future rise in long-term interest rates.
The increased debt-servicing cost may heighten pressure on
Prime Minister Shinzo Abe to proceed with a scheduled two-stage
sales tax hike from next year, which is seen as a necessary
first step in fixing Japan's tattered finances.
But with Abe having made ending 15 years of deflation and
revitalisation of Japan's economy among his top policy
priorities, some of his advisers and members of his ruling
Liberal Democratic Party want to delay or water down the tax
hikes, worried they could hurt a budding economic recovery.
Years of fiscal stimulus to revive a stagnant economy and
surging social welfare costs for a rapidly ageing population
have led to Japan running a record 1,000 trillion yen ($10
trillion) in public debt, double the size of its economy and the
biggest among major industrialised nations.
The MOF will compile spending requests for next fiscal
year's budget, including its own to fund debt-servicing costs
and other expenses, and draft the state budget, which needs
government and parliament approval to take effect.