Japan's Fiscal 2027 Budget Requests Reach Record High of Approximately 143 Trillion Yen

Japan's budget requests for fiscal 2027 are expected to reach a record high of approximately 140 to 143 trillion yen. This increase is driven by Prime Minister Sanae Takaichi's goal to spur growth through fiscal spending and rising debt servicing costs caused by inflation. The Ministry of Health, Labor and Welfare submitted the largest request at 36.58 trillion yen due to welfare costs for an aging population. The Defense Ministry also requested a record 8.89 trillion yen to address regional security challenges including North Korea and China; this request includes funding for artificial intelligence and hypersonic underwater launched missiles.

A key driver of the total is a new investment category called the Strong and Rich Japan investment frame. This category allows ministries to request funds without predetermined ceilings to promote economic growth and national security. Requests for this frame exceeded 10 trillion yen, with the Ministry of Economy, Trade and Industry seeking around 4.5 to 6.3 trillion yen for semiconductors, robots, and AI. The government has also urged agencies to include all necessary spending in these initial requests rather than relying on separate supplementary budgets.

Debt servicing costs are projected to hit a record 36.6 trillion yen as the government raised the assumed interest rate to 3.8 percent. This comes as the benchmark 10 year government bond yield recently hit its highest level in nearly 30 years. The Finance Ministry will now review these requests before the final spending plan is submitted for Cabinet approval by the end of the year.