Japan's Fiscal Discipline Weakened Amid Record Budget Requests

Japan's record-high budget requests for fiscal 2027 have raised concerns over the sustainability of Prime Minister Sanae Takaichi's fiscal policy. The Finance Ministry reported that budget requests from ministries and agencies reached about 143 trillion yen ($918 billion), a fourth straight record.

This figure reflects a new approach that brings spending previously covered by supplementary budgets into the regular budget process, according to data released on Friday. However, experts warn that expanding spending without secured funding amid rising interest rates 'could be described as an abandonment of fiscal discipline,' said Yangchoon Kwak, a professor at Rikkyo University's College of Economics.

The 10-year Japanese government bond yield reached 3 percent for the first time since 1996, prompting the Finance Ministry to raise the rate used to estimate debt costs from 3.0 percent to 3.8 percent. Debt-related requests reached a record 36.64 trillion yen, up 5.36 trillion yen from the current fiscal year.