Japan's government issues guidelines for creating the national budget for fiscal year 2026
Japan's Budget Request for Fiscal Year 2026: Key Highlights
The Japanese government has given cabinet approval for guidelines on budget requests for the upcoming fiscal year 2026. The guidelines allow ministries and agencies to request up to 20% more funds than in the fiscal 2025 initial budget for priority policies, including measures to cope with rising prices.
The total discretionary funding for these priority policies can be increased by up to 2.8 trillion yen overall. One particular priority under discussion during the budget compilation is the plan to make high school tuition free, as agreed by the ruling coalition and Nippon Ishin no Kai.
The total government budget requests for fiscal 2026 are expected to surpass 110 trillion yen for the fifth consecutive year. Social security costs, which comprise the largest portion of expenditures, are estimated to automatically increase by 400 billion yen—slightly less than the previous year’s estimate—reflecting a slower increase in the elderly population. However, these costs are expected to rise further when accounting for wage and price increases.
Ministries and agencies will submit their budget requests by the end of this month, and the Finance Ministry will examine these requests to draft a fiscal 2026 government budget by the end of the year. It's important to note that the guidelines do not mention any changes in the budget requests being made by ministries and agencies, and the total budget requests for fiscal 2026 are not yet disclosed.
In summary, the key policy budget measures and their associated fiscal parameters are:
- 20% increase allowed in funding requests for priority policy measures, notably including inflation coping strategies.
- An increase of discretionary funds for priority policies capped at 2.8 trillion yen total.
- Ongoing consideration to implement free high school tuition starting fiscal 2026.
- Social security costs expected to increase automatically by 400 billion yen, with potential additional increases due to wage and price hikes.
- Overall budget requests projected to exceed 110 trillion yen again.
- Ministries and agencies will submit their budget requests by the end of this month.
- The Finance Ministry will examine the requests to draft a fiscal 2026 government budget by the end of the year.
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The policy of allowing a 20% increase in funding requests for priority policy measures, such as inflation coping strategies, is industry-agnostic and applies across different departments. The Finance Ministry's examination of budget requests from various ministries and agencies for fiscal 2026, expected to surpass 110 trillion yen, involves determining the total funds needed in various sectors, including finance.
