Japan’s Economic Pivot: Record Defense Spending and the ¥1.2 Trillion Tech Bet
Tokyo, Japan – December 30,2025
The Japanese economy enters the final days of 2025 in a state of high-stakes transition, caught between a spiraling diplomatic crisis with China and a bold new era of fiscal expansion.
On Monday, December 29, the Takaichi administration confirmed that the newly approved 9-trillion-yen defense budget—the largest in the nation’s history—is just the beginning of a broader “national resilience” strategy.
With the Bank of Japan (BOJ) recently raising interest rates to a 30-year high of 0.75%, the “Land of the Rising Sun” is effectively ending its era of cheap money in exchange for a seat at the head of the global technological table.
The “Rapid” Race for Semiconductors
A central pillar of the CJ Tokyo economic desk will be the “Rapidus” project.
The government has officially allocated ¥1.23 trillion ($7.9 billion) for the 2026 fiscal year specifically for artificial intelligence and advanced semiconductors.
This nearly fourfold increase in funding is designed to fast-track the production of 2-nanometer chips in Hokkaido by 2027.
As the U.S.-China trade war intensifies under the new Trump administration’s tariff policies, Japan is positioning itself as the “Secure Hub” of Asia. By 2026, Japan is projected to achieve its first primary balance surplus in 28 years, a feat economists attribute to a surge in high-tech exports and a resilient domestic service sector.
The Tourism Tax and Fiscal Strain
However, the path to sovereignty is not without its costs to the public. Yesterday , December 29, the government announced plans to triple the International Tourist Tax from 1,000 yen to 3,000 yen starting in July 2026.
This “Departure Tax” hike is part of a desperate search for revenue to offset the massive national debt and the ballooning costs of the new “Drone Shield” being built to defend Japan’s southwestern islands.
While real wages are finally starting to “bottom out” and are expected to grow by 5.2% in 2026, food inflation remains high at 6.1%.
Key Economic Highlights :
Interest Rate Milestone:
The BOJ summary released today suggests rates could hit 1.5% by early 2027.
Tech Sovereignty:
¥1.23 trillion allocated for AI and chips to bridge the gap with TSMC and Samsung.
Fiscal Target:
Japan set to reach a primary balance surplus in 2026 for the first time since 1998.
Trade Fallout:
Chinese airlines report a sharp drop in demand for Japan routes amid the ongoing diplomatic row.
New Tourism Fees:
International departure taxes to triple to help fund infrastructure and defense.
CJ Global Investigative Insight
Our economic desk has uncovered an “exclusive secret” regarding the ¥21.3 trillion stimulus package signed in November.
While publicly labeled as “household support,” internal documents suggest a significant portion is being quietly funneled into “Physical AI” and robotics for the elderly care sector.
