Japan’s budget requests for the next fiscal year hit a record high for the third year in a row, the Finance Ministry said on Wednesday. The surge comes as political tensions within the ruling party raise concerns over the country’s already fragile fiscal health.
Government agencies submitted requests totaling 122.45 trillion yen ($831.13 billion). The figure underscores the challenge of controlling spending in the world’s most heavily indebted major economy.
Rising debt-servicing costs and record defence spending drove much of the increase. Both categories are set to rise by 10% compared with the initial budget this year. Social security spending is also climbing as Japan struggles to support its fast-aging population.
Some requests were filed without specifying amounts, meaning the final budget could rise further. Local media reported that Prime Minister Shigeru Ishiba may also ask ministers to draft a stimulus package funded by an extra budget.
Uncertainty around Ishiba’s political future is adding to fiscal worries. On Tuesday, senior aides in the ruling Liberal Democratic Party (LDP), including Secretary-General Hiroshi Moriyama, offered to resign after the party’s July 20 upper house election loss. Moriyama, a close Ishiba ally, has been key to maintaining a tough fiscal stance despite pressure from opposition lawmakers pushing for tax cuts and subsidies.
Market concerns over soaring government spending, combined with rising global bond yields, pushed Japan’s 30-year government bond yield to record highs this week.
Ishiba’s leadership faces a major test on September 8, when the LDP will decide whether to hold a leadership contest. A majority vote would open the way for Ishiba’s replacement before his term ends in 2027.
According to a recent Jiji Press poll, former economic security minister Sanae Takaichi is the frontrunner with 15.9% support. Investors view her reflationary policies with caution, adding another layer of uncertainty to Japan’s economic outlook.
