Japan’s Ministry of Economy, Trade and Industry plans to nearly quadruple its budget for supporting cutting-edge semiconductors and artificial intelligence (AI) development to approximately ￥1.23 trillion (US$7.9 billion) for the fiscal year starting in April. This major budget increase comes as Japan seeks to bolster its technological capacities in response to the accelerating advancements in these fields by global leaders, particularly the United States and China.
The overall budget for the ministry has risen by about 50 percent compared to last year, reaching ￥3.07 trillion. Following the approval by Japanese Prime Minister Sanae Takaichi‘s Cabinet, the budget plan will be presented to parliament in the new year, marking a significant strategic pivot as Japan aims to secure better supply chain access for essential technologies.
This increase in semiconductor and AI spending is particularly timely, given the ongoing tensions between the U.S. and China, despite a recent lull in their trade conflicts. Japan’s government is making concerted efforts to ensure its competitive edge in frontier technologies as the global landscape evolves rapidly.
Starting with the upcoming fiscal year, the ministry intends to allocate most of the additional funding for chips and AI through regular budgets, in contrast to the previous approach of relying on supplementary budgets later in the year. This shift is designed to provide more stable and predictable funding for these critical sectors.
Within the semiconductor sector, ￥150 billion has been earmarked for the state-backed chip venture Rapidus Corp, bringing the total government investment in the venture to ￥250 billion. In parallel, the budget allocates ￥387.3 billion to enhance domestic foundation AI models, improve data infrastructure, and develop “physical AI,” which involves AI controlling machinery and robots.
Moreover, the broader budget includes ￥5 billion dedicated to securing vital minerals, including rare earths, which are essential for various technologies. For efforts related to decarbonization, ￥122 billion is set aside for initiatives such as the development of next-generation nuclear power plants. Additionally, special bonds totaling ￥1.78 trillion will be issued to assist the state-backed Nippon Export and Investment Insurance in supporting Japanese investments into the U.S. as part of the bilateral trade agreement.
As Japan accelerates its investments in these key technological areas, the implications for the global semiconductor and AI markets could be significant. By enhancing its capabilities, Japan aims not only to secure its technological infrastructure but also to play a more integral role in the global supply chain of cutting-edge technologies, thereby ensuring its competitiveness in a rapidly changing landscape.
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