Japan’s budget requests for the financial year beginning in April 2027 have risen to 143.66 trillion yen (about US$922 billion), approaching levels last seen during the Covid-19 pandemic as Prime Minister Sanae Takaichi pursues an expansionary economic agenda.
The figure, released by the Ministry of Finance on Friday, reflects a new approach under which spending previously expected to be dealt with through supplementary budgets is being incorporated into the initial spending plan.
It is already higher than the 140.61 trillion yen combined package approved during Ms Takaichi’s first year in office, which included an 18.3 trillion yen supplementary budget for the 2025 financial year and a 122.3 trillion yen initial budget for 2026.
The total is not yet Japan’s final budget. The Finance Ministry will examine the requests over the coming months before the Government settles its spending plan towards the end of the year, and the eventual figure could rise further because several demands were submitted without precise price tags.
Japan budget requests pushed higher by investment and debt costs
Among the main pressures is a new investment programme covering strategic areas including artificial intelligence, semiconductors and economic security. Ministries and agencies submitted 12.2 trillion yen in requests under the scheme, which does not impose a fixed ceiling on spending.
Defence spending has also been left open-ended while Japan reviews its security strategy. That process could lead to further procurement and investment demands, adding to the pressure on the final total.
Debt-servicing costs have reached a record 36.64 trillion yen, up by 5.36 trillion yen from the current financial year. The increase follows a rise in government borrowing costs, with the ministry lifting its assumed interest rate for the next budget to 3.8 per cent from 3 per cent.
Japan’s 10-year government bond yield recently reached 3 per cent for the first time since 1996, intensifying scrutiny of the Government’s plans to finance its spending ambitions. The higher yields have raised concern that the cost of servicing Japan’s substantial public debt will consume an increasing share of future budgets.
Ms Takaichi has said the Government intends to keep new bond issuance for the 2027 financial year at around 40 trillion yen, broadly matching the level planned for 2025. The pledge is intended to reassure investors even as the scale of ministries’ requests points to a potentially larger state spending programme.
“While Takaichi’s growth strategy seeks to boost Japan’s long-term growth potential through investment, markets remain focused on near-term signals such as budget size and bond issuance,” said Saisuke Sakai, a senior economist at Mizuho Research Institute.
He said investors would be looking for evidence that increased spending produced stronger growth, alongside reforms addressing structural constraints including labour, land and energy shortages.
