Japan Passes $118 billion Supplementary Budget, Combining Support for Economy and Security

Japan’s upper house of Parliament has approved a supplementary budget of $118 billion for the 2025 fiscal year, which ends on March 31, 2026. The government explains the increase in spending by the need to simultaneously support households and finance strategic economic and security priorities.

Borrowing will be the key source of funding: Tokyo plans to issue $75.6 billion in government bonds, supplementing them with tax revenues. The approved funds form the financial basis of a broader anti-crisis package, which the government estimates at $137 billion.

The largest share of spending – about $57.5 billion – is aimed at curbing the growth of household spending. Another $41.4 billion is earmarked for strategic investments, including artificial intelligence, shipbuilding, and semiconductors. Tax breaks amount to $17.5 billion, while security and diplomacy spending amounts to $11 billion. Separately, $4.5 billion has been allocated to the emergency response reserve fund and $5.8 billion – to special accounts.

In parallel, Japanese lawmakers have begun discussing the defense budget for fiscal year 2026, which could exceed $58.1 billion and set a new record. Priorities include the purchase of modernized Type 12 anti-ship missiles for $1.14 billion, hypersonic missiles for $0.19 billion, and the development of a new-generation fighter jet costing $1.03 billion. There are also plans to finance the SHIELD air defense/missile defense system to protect the coastline using unmanned platforms.

The approval of the supplementary budget and the start of discussions on large-scale defense spending underscore the government of Japan’s focus on internal stability and security amid growing tensions with China.