Japan Sets Record High 2026 Budget at 1,126 Trillion Won; Defense Spending Also Hits New Peak

Japanese Finance Minister: "A Budget That Achieves Both a Strong Economy and Sustainability"

The Japanese government finalized the budget plan for the 2026 fiscal year (April 2026 to March 2027) at a record high of 122.3092 trillion yen (approximately 1,126 trillion won) during a Cabinet meeting on December 26, 2025.

Satsuki Katayama, Japanese Minister of Finance. Photo by AFP Yonhap News

According to Kyodo News and other sources, Japan's 2026 government budget plan (on a general account basis) increased by about 7 trillion yen from the previous year, marking a record high for the second consecutive year. Notably, defense spending (including costs for the realignment of U.S. forces in Japan) was set at a record 9.0353 trillion yen. The government allocated 100.1 billion yen to the establishment of the "SHIELD" system, which aims to strengthen coastal defense using large drones, and 30.1 billion yen for hypersonic guided missiles capable of flying at more than five times the speed of sound, intended to bolster counterstrike capabilities (enemy base attack capability).

Additionally, to strengthen defense in the Nansei region with China in mind, the Ground Self-Defense Force's 15th Brigade will be upgraded to a division, and a "Pacific Defense Initiative Office" will be newly established to review the Pacific defense system, with budget allocations provided for these measures.

Costs for servicing government bonds (principal and interest) rose to a record 31.2758 trillion yen due to higher interest rates, surpassing the 30 trillion yen mark for the first time. The projected long-term government bond interest rate was raised from 2.0% to 3.0% per annum compared to the previous year. The amount of new government bonds to be issued is set at 29.584 trillion yen, an increase of 936.9 billion yen from the previous year, but the ratio of new government bond issuance to total revenue decreased slightly to 24.2%, down from 24.9% in the previous year.

At a press conference following the Cabinet meeting, Japanese Minister of Finance Satsuki Katayama stated, "This is a budget that achieves both a strong economy and fiscal sustainability." The Japanese government plans to submit the budget bill to the regular session of the National Diet convening next month, aiming for its passage by the end of March.