Japan considers record initial budget exceeding 120 trillion ten for fiscal 2026
The Japanese government is considering an initial budget exceeding 120 trillion yen ($775 billion) for fiscal 2026, which would mark the largest in the country’s history, according to a source familiar with the matter. The move reflects Prime Minister Sanae Takaichi’s push for aggressive fiscal spending to support an economy strained by persistent inflation, Qazinform News Agency reports citing Kyodo.
If approved, the budget would surpass the current record of 115.2 trillion yen set for fiscal 2025 under former Prime Minister Shigeru Ishiba. Rising personnel expenses and other fixed costs driven by inflation are contributing factors, even as concerns grow over Japan’s worsening fiscal condition.
Debt-servicing costs for fiscal 2026, which begins in April, are also expected to reach a new high, exceeding the 28.2 trillion yen allocated for the current fiscal year. These costs include bond redemptions and interest payments.
Earlier this week, parliament passed an 18.3 trillion yen supplementary budget for fiscal 2025 to fund Prime Minister Takaichi’s expansionary economic measures, aimed at easing the impact of rising living costs. The package was approved by the House of Councillors just before the end of the current Diet session, following passage in the House of Representatives.
Despite lacking a majority in the upper chamber, the ruling coalition led by the Liberal Democratic Party secured support from some opposition groups, including the Democratic Party for the People, after incorporating elements of their proposed relief measures.
Described by the government as part of a policy of “responsible and proactive public finances,” the supplementary budget is the largest since fiscal 2022, when emergency spending was introduced during the COVID-19 pandemic. The package focuses on household support and investment-led growth.
Although higher tax revenues of 2.9 trillion yen are expected, the government plans to issue 11.7 trillion yen in new bonds to finance more than 60 percent of the package, intensifying concerns over Japan’s already weak fiscal discipline - the poorest among Group of Seven nations.
Market concerns have led to increased selling of the yen and Japanese government bonds, pushing long-term interest rates higher.
To help households cope with rising costs, the government allocated 8.9 trillion yen for relief measures, including electricity and gas subsidies for the first quarter of next year, cash payments to families with children, and additional support for local governments.
An additional 6.4 trillion yen was set aside to expand investment in crisis management and economic growth initiatives, aligning with Prime Minister Takaichi’s goal of building a stronger economy. The supplementary budget also earmarked 1.7 trillion yen for security and diplomatic spending, enabling Japan to reach its defense spending target of 2 percent of GDP in fiscal 2025 - two years earlier than planned.
However, critics and opposition lawmakers argue that nonessential spending outside of immediate relief measures should have been included in the initial fiscal 2026 budget rather than the supplementary package.
Previously, Qazinform News Agency reported Japan eyes a record defense budget of 9 trillion yen for 2026.
