Record Budget Requests: Fiscal Discipline Has Been Loosened Too Much

Editorial

14:00 JST, September 1, 2025

Because mechanisms to curb spending were weakened for the sake of countering high prices, budget requests from ministries and agencies have ballooned. Budget compilation should return to the fundamental spirit of prioritizing fiscal discipline, facing up to the nation’s severe fiscal situation.

The submission of preliminary budget requests by government ministries and agencies for fiscal 2026 has finished. The total amount is expected to exceed ¥122 trillion, a record high for the third consecutive year. This represents a significant increase from ¥114.3 trillion in fiscal 2024 and ¥117.6 trillion in fiscal 2025.

Due to rising social security costs from the graying population, the Health, Labor and Welfare Ministry’s request reached ¥34.7 trillion, accounting for about 30% of the overall total. The Defense Ministry requested a record-high ¥8.8 trillion amid the challenging security environment.

This year, the government suspended the system that allowed increases only if existing expenditures were cut. Out of consideration for rising high prices, the government instead allowed ministries to request a 20% increase over the previous year for important policy expenditures, among those expenditures whose use ministries and agencies can decide on at their own discretion.

There had been concerns that this new system could lead to ballooning budget requests, and that is precisely what happened.

Matters such as increasing rice production, infrastructure development and decarbonization are all important policies. However, with bodies like the Agriculture, Forestry and Fisheries Ministry, the Land, Infrastructure, Transport and Tourism Ministry, and the Economy, Trade and Industry Ministry all requesting increases of about 20% compared to their initial budget proposals this fiscal year, it is difficult to say that the requests were scrutinized in detail.

As in previous years, budget requests that did not specify amounts were also noticeable. This practice is problematic because it heightens the likelihood of budget expansion.

In response to the swelled budgets caused by the COVID-19 pandemic, the government set a policy in 2023 to have its fiscal management return to “normalcy.” However, the budget requests show a complete lack of awareness of the fact that Japan’s fiscal situation is the worst among major advanced nations.

The outstanding balance of government bonds has reached about ¥1.1 quadrillion. As the Bank of Japan signals its intention to continue raising interest rates, the burden of interest payments is also growing heavier. The Finance Ministry requested a record ¥32.3 trillion for debt servicing costs. Concerns are growing that discretionary spending will shrink.

The fiscal situation is only worsening. In future assessments, the Finance Ministry should thoroughly cut wasteful projects to secure the funds necessary to realize economic growth and a secure society.

Because the ruling Liberal Democratic Party and its junior coalition partner Komeito now are minority parties in both the House of Representatives and the House of Councillors, cooperation from opposition parties is essential for passing the budget. Yet, the discussions spreading among the parties are focusing almost exclusively on “returning” increased tax revenues, and it must be said their discussions lack the perspective of fiscal soundness.

Concerns are growing that opposition parties’ calls for consumption tax cuts and similar measures could heighten the risk of worsening fiscal conditions. Interest rates are on a upward trend, potentially increasing constraints on fiscal management. Each party bears a heavy responsibility to formulate budgets that should also take future generations into consideration.

(From The Yomiuri Shimbun, Sept. 1, 2025)