Japan's government to overhaul budget and create special growth‑investment fund

Prime Minister Sanae Takaichi's administration announced a fundamental revision of next year’s national budget. A “special framework” will be set up for growth sectors such as artificial intelligence and semiconductors, allowing agencies to request funds without an upper limit. The plan is presented as a shift toward “responsible active fiscal policy” aimed at strengthening Japan’s economic growth and expanding the nominal size of the economy.

Critics warn that the new spending drive could undermine the yen’s value and increase the government’s debt burden. They point to rising long‑term yields, accelerating yen depreciation and the risk of higher inflation, arguing that expanding fiscal outlays may erode confidence in Japan’s currency and fiscal sustainability.

The reform also signals a move away from strict primary‑balance targets, allowing temporary deficits if they support growth investment, while still pledging to lower the debt‑to‑GDP ratio over the medium term.