TOKYO, Aug. 22 (Xinhua) -- Budget requests from Japanese government ministries and agencies for fiscal 2027 are expected to exceed 130 trillion yen (around 818 billion U.S. dollars), a significant increase from the current fiscal year's initial budget of 122.31 trillion yen, Kyodo News reported on Friday.

People walk on the street in Tokyo, Japan, May 18, 2026. (Photo: Xinhua)

The report said that the actual budget could rise further when finalized at the end of this year, as spending for many items is yet to be determined.

Among the requests, the Ministry of Defense plans to seek a record of about 8.9 trillion yen. Previous media reports said key spending areas will include procuring large numbers of interceptor drones, introducing artificial intelligence into command-and-control systems, and further deploying long-range missiles with what Japan calls "counterstrike capabilities."

Expenditures on social security, such as pensions and medical costs, are expected to rise by around 390 billion yen due to the country's continued aging of the population.

Ministries and agencies are required to submit their budget requests for fiscal 2027, which runs from April 2027 to March 2028, by the end of this month, after which the Ministry of Finance will compile the budget by the end of the year.

It is worth noting that the Japanese government has previously imposed caps on budget requests to control the scale of spending. This time, however, Prime Minister Sanae Takaichi's government launched a major budget drafting reform by not setting limits on some of the investment projects it is promoting. This is seen as a major factor behind the unusually large increase in overall budget requests.

The report said that with the Japanese government forecasting tax revenue of about 83 trillion yen for fiscal 2026, budget requests topping 130 trillion yen will likely lead to new debt issuance, further straining the debt-ridden country's fiscal health.

Amid growing concerns over the country's deteriorating fiscal situation, Japanese government bond yields have continued to rise recently, increasing the government's debt-servicing burden and putting further pressure on public finances. (1 yen equals 0.0063 U.S. dollars)