Japan Approves Record ¥122.3 Trillion Budget for FY2026, Boosts Defense Spending

Tokyo, The Gulf Observer: The Japanese government on Friday approved a record 122.3 trillion yen ($782 billion) budget for the fiscal year beginning in April 2026, aimed at addressing rising social security costs, inflationary pressures, and increased defense spending amid a challenging security environment.

According to foreign media reports cited by News.Az, approximately nine trillion yen has been allocated for defense as Prime Minister Sanae Takaichi seeks to accelerate Japan’s military modernization in response to growing regional tensions, particularly with China.

Japan’s Defense Ministry described the current security situation as “the most severe and complex since the end of the war,” underscoring the urgency of strengthening the country’s defense capabilities. Among the major initiatives included in the budget is the SHIELD coastal defense system—Synchronised, Hybrid, Integrated and Enhanced Littoral Defence—which is expected to employ drones to safeguard Japan’s coastline. The project is scheduled for completion by March 2028, though specific deployment locations have not been disclosed.

The newly approved budget exceeds the 115 trillion yen allocated for the current fiscal year, which itself was a record. Financial markets have expressed concern over Japan’s mounting public debt, already the highest among major economies and projected by the International Monetary Fund to reach 232.7 percent of gross domestic product this year.

Earlier this month, Japan’s parliament approved a 21.3 trillion yen stimulus package as part of a supplementary budget, a move that unsettled markets, weakened the yen, and pushed government bond yields higher. Some analysts have drawn comparisons between the current situation and the United Kingdom’s bond market turmoil in 2022.

Prime Minister Takaichi has defended her government’s fiscal strategy, advocating proactive policies to strengthen national resilience rather than pursuing austerity. She emphasized fiscal responsibility, rejecting what she described as “irresponsible bond issuance or tax cuts,” while stressing the need to support Japan’s economy amid persistent inflation and a rapidly ageing population.

The draft budget will now be submitted to parliament for approval.