METI budget hike Japan lifts chip and AI funding for FY 2026

Japan is gearing up to significantly increase its industrial policy spending in the fiscal year 2026, with the Ministry of Economy, Trade and Industry (METI) planning a substantial rise in its overall allocation to approximately ¥3.07 trillion. A major highlight of this budget increase is the significant boost in funding for semiconductors and artificial intelligence, with about ¥1.23 trillion allocated, nearly quadrupling the previous level. This move by METI is part of Tokyo’s strategy to secure more stable, foundational funding for cutting-edge technologies, moving away from relying on ad-hoc supplementary packages.

What the METI budget hike pays for

Within the ¥1.23 trillion budget allocation, the ministry has earmarked ¥150 billion for Rapidus, Japan’s initiative to advance logic manufacturing, and ¥387.3 billion for domestic AI development, covering areas such as foundation models, data infrastructure, and applications involving software-controlled robots and industrial machinery. Additionally, funds amounting to ¥5 billion are set aside for securing crucial minerals, including rare earths, and ¥122 billion for decarbonisation efforts, particularly focusing on next-generation nuclear power initiatives.

How it fits into the wider fiscal picture

The expansion of the ministry’s budget is part of a broader government plan that is being positioned as both a growth strategy and a move towards strategic resilience. Japan’s cabinet has given the green light to a record national plan for the upcoming fiscal year, with the package now set to undergo parliamentary discussions and approval. A significant aspect of the METI budget increase is the intention to allocate more resources towards the chip and AI agenda through regular funding channels, aiming to reduce uncertainties at the end of the year for long-term projects like fabs, tooling, and ecosystem development.

What this means for Rapidus and the supply chain

For observers of Europe’s electronics supply chain, the focus now shifts to the execution of these plans. The key questions revolve around whether sustained funding will accelerate progress in tooling, pilot-line milestones, and attracting partners for Rapidus. Furthermore, there is anticipation regarding how Japan’s expanded AI initiatives will drive local demand for advanced packaging, memory solutions, and the development of data centers. The METI budget increase provides concrete figures to support Tokyo’s assertion that chips and AI are now considered essential industrial infrastructure, moving beyond mere research and development endeavors.