Core Points - Japan's Ministry of Finance announced a record budget request of 122.4 trillion yen for the fiscal year 2025, driven by rising prices, increased defense spending, and higher debt financing costs [1][2] - The budget request marks the third consecutive year of record-high applications, with significant increases from the Ministry of Finance, Ministry of Health, Labour and Welfare, and the Ministry of Defense [1] - The Ministry of Health, Labour and Welfare requested the largest share of the budget at 34.8 trillion yen, primarily due to rising medical and pension costs associated with an aging population [1] - The Ministry of Defense's budget request of 8.84 trillion yen exceeds the current fiscal year's 8.7 trillion yen, marking the largest defense budget request in Japan's history [2] - Japan is moving towards enhancing its "counterattack" capabilities, with military spending set to reach 2% of GDP, reflecting a shift from its long-standing pacifist stance [2] - The defense budget will fund the development of a defense system named "SHIELD," which includes deploying drones and producing hard-to-detect hypersonic missiles [2] - Concerns about Prime Minister Kishida's political stability may impact the government's control over fiscal spending, contributing to rising yields on Japanese government bonds [3] - Japan's current debt level is twice its economic output, ranking among the highest in developed economies [3]

Core Viewpoint - Japan's fiscal budget application for the fiscal year 2025 has reached a record high of 122.4 trillion yen, driven by rising prices, increased defense spending, and higher debt financing costs [1][2]. Group 1: Budget Overview - The budget application amount has increased significantly for the third consecutive year [1]. - The Ministry of Finance, Ministry of Health, Labour and Welfare, and Ministry of Defense are the three departments with the most notable budget increases [1]. - The Ministry of Health, Labour and Welfare has requested the largest budget of 34.8 trillion yen due to rising medical and pension costs associated with an aging population [1]. Group 2: Defense Spending - The Ministry of Defense's budget application is 8.84 trillion yen, surpassing the current fiscal year's 8.7 trillion yen, marking the largest defense budget request in Japan's history [2]. - Japan is increasing its military spending to 2% of GDP and is focusing on enhancing its "counterattack" capabilities [2]. - The defense budget will fund the development of the "SHIELD" defense system, which includes deploying drones and producing hard-to-detect hypersonic missiles [2]. Group 3: Economic Context - Japan's debt level is currently twice its economic output, ranking among the highest in developed economies [3]. - Concerns about the government's ability to manage fiscal spending are heightened due to the fragile political position of Prime Minister Kishida [3]. - The rise in government spending and global long-term bond yields has led to a record high in Japan's 30-year government bond yields [3].