(June 24): Prime Minister Sanae Takaichi unveiled a long-term vision for Japan’s economic development featuring massive investment in artificial intelligence and semiconductors as well as other key sectors including defence, space and shipbuilding.
The plan calls for investing more than ¥370 trillion (US$2.3 trillion or $3 trillion) in the 14-year period ending in March 2041, with ¥101.6 trillion earmarked for artificial intelligence and chips spending alone, according to documents released Wednesday after a policy advisory panel’s meeting.
The blueprint calls for a combination of public and private investment to reach the target amounts, with the government seen contributing a little less than half if inflation stays in line with expectations.
The investment roadmap marks a key step in Takaichi’s effort to put her stamp on Japan’s growth strategy as technological change and geopolitical tensions reshape economic priorities. The premier is seeking to channel investment into sectors that can strengthen economic security — from supply-chain resilience to critical technologies — while boosting the country’s long-term growth potential through support for emerging industries.
Of the investment for AI and chips, the bulk will go toward semiconductors, which form the core of physical intelligent systems, as well as vertical AI, which is designed for a specific job or industry. The investments are meant to ease supply bottlenecks by addressing structural labor shortages in the aging nation.
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The plan estimates semiconductor investment will generate ¥443 trillion in economic spillover effects by fiscal 2040, while physical AI and vertical AI investment will produce ¥144 trillion and ¥222 trillion, respectively.
The investment plan is part of Japan’s ongoing efforts to revive its chip industry. Since releasing a new strategy in 2021, the government has set aside about ¥7.2 trillion for semiconductors and AI, according to the Industry Ministry. Of the total, the government has allocated sums to specific projects such as state-backed chip venture Rapidus Corp, which has received public support worth roughly ¥2.6 trillion.
Three scenarios
The government also released Wednesday long-term economic and fiscal projections incorporating Takaichi’s growth strategy under three scenarios. In the most optimistic case, in which the strategy delivers as intended, the debt-to-GDP ratio is expected to decline steadily even as the government contributes ¥10 trillion in real spending toward the plan each year.
In the other two — where technological and market uncertainties curb the strategy’s impact, or where current trends persist — the ratio is projected to begin rising again during the 2030s. All three scenarios assume inflation stabilises at around 2%.
Takaichi’s government has shifted its fiscal focus toward reducing the debt-to-GDP ratio, moving away from using a primary balance target that had guided government policy for more than two decades. The debt-to-GDP metric is generally considered easier to improve during periods of inflation.
The projections underscore how heavily Japan’s fiscal outlook depends on the success of Takaichi’s growth agenda. The estimates do not take into account the costs of any hikes in defense spending or any potential consumption-tax cuts, suggesting fiscal pressures could prove greater than the forecasts imply.
Takaichi’s economic agenda has split investor sentiment. In the stock market, her push for large-scale investment helped the Nikkei 225 briefly top 70,000 for the first time ever this month. At the same time, concerns about fiscal sustainability helped push super-long Japanese government bond yields to multi-decade highs earlier this year.
Uploaded by Magessan Varatharaja
