Japan to Quadruple Spending on Semiconductors and AI in 2026 Budget

According to Bloomberg, Japan is set to increase its government support for the semiconductor and artificial intelligence (AI) sectors by roughly four times, reaching about 1.23 trillion yen (approximately $7.9 billion) in the fiscal year starting April 2026, as per official sources.

A draft budget shows the Ministry of Economy, Trade and Industry (METI) will raise its total budget by about 50% year-on-year to 3.07 trillion yen, driven mainly by the sharp rise in spending on advanced chips and AI. The Cabinet, led by Prime Minister Sanae Takaichi, has approved the plan, which will be submitted to parliament for discussion early next year.

This expansion comes as Japan seeks to boost its capabilities in next-generation technologies amid accelerating global competition - particularly between the US and China - and efforts to improve supply chain security for critical technologies and reduce external dependence.

Starting next fiscal year, METI plans to shift to regular, stable funding for semiconductor and AI support within the core budget, moving away from ad-hoc supplementary budgets. This is expected to provide greater clarity and financial sustainability for both sectors.

In semiconductors, the government has allocated 150 billion yen to support state-backed Rapidus Corp., raising total government investment in the company to 250 billion yen to help establish a domestic base for advanced chip production.

In the AI sector, 387.3 billion yen has been earmarked for developing domestic foundational AI models, enhancing data infrastructure, and investing in so-called “physical AI,” which integrates AI technologies into robotics and industrial machinery.

The budget also includes 5 billion yen to secure critical minerals, including rare earth elements, and 122 billion yen to back emission reduction efforts, such as developing next-generation nuclear power plants.

Additionally, the government plans to issue special bonds worth 1.78 trillion yen to support activities of the Nippon Export and Investment Insurance (NEXI), facilitating Japanese investments in the US as part of bilateral trade agreements.

EcoPulse24 Analysis: This budget reflects a strategic shift in Japan’s industrial policy, with a clear focus on semiconductors and AI as pillars of economic security and long-term growth amid intensifying global competition for advanced technologies.