Annual Budget Request Expands

Ministries of Japanese national government submitted request for FY2026 budget by the end of August. The estimation of total amount of spending will be over 122 trillion yen, making new record of annual budget request. Following the policy for increasing defense budget and due to interest hike by Bank of Japan (BOJ), defense budget and spending for redemption of governmental bond marked the highest.

Annual national budget is a power resource for the prime minister, reflecting preference of the administration. The Ministry of Finance (MOF) wraps up all the requests from the ministries by the end of August every year. The MOF makes a draft of national budget with assessment in late December. The draft is submitted to ordinary session of the Diet, which is regularly convoked in January. The government aims at passing the budget bill by the end of March, before next fiscal year begins in April.

 

The total amount of budget request at the end of August, 2024, was 117 trillion yen, marking a new record at the time. The MOF reduced the size of annual budget to 115 trillion yen in the draft in December 2024. However, the total request in August 2025 went up to 122 trillion yen. Spendings for defense, governmental bond and social security are increasing, tracing the trend of recent years.

 

Shigeru Ishiba administration succeeded defense policy of his predecessor, Fumio Kishida, which promoted increase of defense budget to 1.5 times greater, to the level of 43 trillion yen between 2023 and 2027. The request from Ministry of Defene for FY2026 is 8.84 trillion yen. Although the request marked the highest record, it slightly rose from December 2024 draft which had been 8.66 trillion yen. The draft marked 10 percent of increase from the previous year.

 

The policy change of BOJ in March 2024, which terminated yield curb control and negative interest rate policy, caused increase of governmental spendings for redemption of governmental bonds. The MOF estimated the cost 28.9 trillion yen for FY2025 in August 2024 request, based on assumed interest rate hike for governmental bonds from 1.9 percent to 2.1 percent. But the ministry estimates that the rate will rise to 2.6 percent, and requested 32.7 trillion yen for FY2026.

 

The request for social security by the Ministry of Health, Labor and Welfare is 34.7 trillion yen, increasing by 0.5 trillion yen from the request in the previous year. With advance of aging and low-birthrate society, cost for pension system and medical treatment is swelling. The amount for social security is expected to increase in the draft of annual budget in December.

 

Weakness of Ishiba government may cause further spendings in the budget. His government needs to include certain requests from the opposition parties in the budget, because it needs approval from some opposition powers to pass the budget bill in the Diet. The opposition parties demand Ishiba government reduction of consumption tax and gasoline tax. To maintain his administration to FY2026, Ishiba needs to deliver his own policies with endorsement of budget, which keeps on expanding.

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