Japan's Diet is poised to enact a record 122.31 trillion yen ($766 billion) budget for fiscal year 2026, marking the first time in 11 years that the annual spending plan has not been enacted before the April 1 start of the fiscal year [1]. The delay was caused by Prime Minister Sanae Takaichi's announcement of a snap election in January, which was held on February 8 and postponed budget deliberations by about a month compared to previous years [1]. The ruling Liberal Democratic Party (LDP), led by Takaichi, holds a minority in the 248-member House of Councillors, but the draft budget is expected to pass with support from two members of a minor right-wing opposition party and three independents. The budget bill had already cleared the House of Representatives on March 13 [1].
The FY2026 budget is a record high for the second consecutive year, driven by rising welfare expenditures amid Japan's aging population. It also includes a record 9.04 trillion yen allocation for defense-related purposes [1]. Despite increased revenues from last year, the government plans to issue 29.58 trillion yen in new bonds to cover the shortfall, highlighting Japan's continued heavy reliance on debt at a time when its fiscal health is considered the worst among Group of Seven economies [1].
Due to the missed deadline, an 8.56 trillion yen stopgap budget was enacted on March 30 to fund government spending for 11 days from April 1. This provisional budget, the first since 2015, will be absorbed into the fiscal 2026 budget and expire, covering basic government services and new policies such as expanded private high school tuition subsidies [1].
Opposition lawmakers have criticized the budget for not including measures to address rising energy and other costs stemming from the Iran war, and are calling for the government to consider drafting a supplementary budget [1]. The Constitution stipulates that the budget would be automatically enacted if the upper house fails to vote within 30 days of receiving it from the lower house, which would be April 11, but the LDP prioritized an earlier vote to secure passage [1].
CONCLUSION
Japan's record-setting FY2026 budget is expected to be enacted after an unusual delay, reflecting both expansionary fiscal policy and ongoing reliance on debt. While the budget addresses welfare and defense spending, opposition calls for additional measures signal potential future fiscal adjustments. The market impact is medium, with attention focused on Japan's fiscal health and possible supplementary budget developments.