TOKYO, Jan 23 (Reuters) - Japan's annual budget spending would increase by more than 7% to top 120 trillion yen ($811.14 billion) over the coming three years, if spending plans are left as they are, due to spikes in debt servicing costs, a draft of government estimates showed.

Assuming that the economy grows 3% in nominal terms over the next three years, and interest rates are at 2.1% in fiscal 2025, 2.3% in fiscal 2026 and 2.4% in fiscal 2027, the cost of redemptions and interest payments would rise to 34.2 trillion yen in fiscal 2027, versus 28 trillion yen earmarked for fiscal 2024.

That would bring the size of annual budget spending to 123.1 trillion yen.

($1 = 147.9400 yen) (Writing by Tetsushi Kajimoto; Editing by Kim Coghill)