TOKYO - Japan's budget requests for fiscal 2027 are set to hit a new high of about 143 trillion yen ($890 billion), as Prime Minister Sanae Takaichi seeks to spur growth through fiscal spending and as debt-servicing costs are poised to rise amid inflation, a Kyodo News tally showed Monday.
The budget requests come as financial markets remain cautious about the Takaichi government's "responsible and proactive" spending plans and their potential to further worsen the country's fiscal health, already the worst among advanced economies, and trigger another sell-off of the yen and Japanese government bonds.
Among ministries, the Ministry of Health, Labor and Welfare accounted for the largest share at a record 36.58 trillion yen, driven by ballooning welfare costs amid a rapidly aging population.
The Defense Ministry's request also reached a record high of 8.89 trillion yen, as Japan plans to expand spending to confront regional security challenges, including China's military activities and North Korea's ballistic missile and nuclear programs.
The draft budget, expected to be compiled by the end of the year, could still increase given that spending, including defense outlays, will not be finalized for many items until negotiations conclude.
The requests for the general account budget for the year through March 2028 were submitted by Monday under the government's new budget draft policy. The government decided not to impose predetermined request limits, known as "ceilings," for a new investment category to promote economic growth and strengthen national security.
The government has also urged ministries and agencies to request all necessary budgets without counting on supplementary budgets, which have been compiled separately from the initial budgets to fund additional spending in past years.
Given the new budgetary policy, government sources say the figure for the latest requests should be compared with the 140.6 trillion yen combined sum for the supplementary budget for fiscal 2025 and the initial budget for fiscal 2026, both enacted after Takaichi took office in October last year.
The supplementary budget, worth 18.3 trillion yen, was earmarked to finance Takaichi's expansionary stimulus package.
For fiscal 2027, ministries and agencies requested a total of over 10 trillion yen for the new investment category, with the Ministry of Economy, Trade and Industry alone seeking around 6.3 trillion yen to boost spending on artificial intelligence, semiconductors and robots.
Debt-servicing costs, covering interest on existing bonds and redemptions, are expected to hit a record 36.6 trillion yen, as the ministry has set the assumed interest rate used to calculate interest payments at 3.8 percent for fiscal 2027, higher than 3.0 percent for fiscal 2026.
Government bonds have seen yields rising recently on market expectations that the Bank of Japan will continue raising interest rates after lifting its key policy interest rate to a 31-year high of 1.0 percent in June.
The yield on the benchmark 10-year government bond hit 2.950 percent on Monday, the highest in about 29 years and 10 months.
The budget requests were due Monday, the last business day of August. The Finance Ministry will review the requests before drafting the spending plan for Cabinet approval by the end of the year.
