Japan's 2027 budget requests hit record high for 4th consecutive year: Report

Japan's ministries requested a record 143 trillion yen ($918 billion) for the fiscal 2027 budget, marking a record high for the fourth consecutive year, according to the Finance Ministry.

The total includes 12 trillion yen ($76 billion) under a new uncapped special investment category, Kyodo news agency reported Friday, citing the ministry.

The category was created to support Prime Minister Sanae Takaichi's “responsible and proactive” fiscal policy as financial markets remain concerned about the government's rising spending commitments.

The government is seeking to shift spending long funded through supplementary budgets into the initial budget.

Japan already has the worst fiscal position among major advanced economies, while rising interest rates are increasing the cost of servicing its debt after years of low rates.
The initial budget for fiscal 2026 totaled 122.3 trillion yen.

“We will craft a budget that achieves both strong economic growth and fiscal sustainability,” Finance Minister Satsuki Katayama told reporters.

“The budget-making process will closely assess each initiative's contribution to growth and its potential to spur private investment,” she said.

“The goal is to fundamentally reshape Japan's budget to strengthen its growth potential.”

Chief Cabinet Secretary Minoru Kihara said at a separate news conference that the increase from the combined total of the fiscal 2025 extra budget and fiscal 2026 initial budget is “not that big.”

Kihara added that Takaichi's government has not ruled out compiling a supplementary budget.

Debt-servicing costs reached a record 36.64 trillion yen ($234 billion), with the assumed interest rate used to calculate payments raised to 3.8% from 3% in the fiscal 2026 budget.

The Health, Labor and Welfare Ministry submitted the largest request at 36.58 trillion yen ($234 billion), reflecting the country's aging population.

The Defense Ministry requested 8.84 trillion yen ($57 billion), including funds to develop attack drones.

Many ministries also submitted “itemized requests” without amounts, raising the possibility of further increases.

The Cabinet is expected to finalize the draft by year-end, with the government aiming to pass the budget by the end of March after submitting it to parliament next year.