Core Viewpoint - Japan's government has approved a record budget of 122.3 trillion yen (approximately $785 billion), aiming to implement an expansionary fiscal policy while addressing concerns in the bond market through reduced issuance of ultra-long-term bonds and controlled new debt issuance [1] Fiscal Policy - The budget is set at a historic high but is considered manageable relative to the economy, with the initial budget size remaining stable compared to nominal GDP for three consecutive years [1] - New bond issuance has been successfully limited to below 30 trillion yen, achieving a long-standing goal of the Ministry of Finance [1] - The total issuance of government bonds for the new fiscal year will be 180.7 trillion yen, a decrease of nearly 5% from the previous fiscal year [2] Debt Management - The issuance of ultra-long-term bonds has been reduced by nearly one-fifth to 17.4 trillion yen, the lowest level in 17 years, in response to rising bond yields and market concerns about the government's fiscal policies [2] - The debt-to-GDP ratio is projected to decrease to 24.2%, the lowest level since 1998, despite the overall budget increase [4] Technology Investment - The budget for the Ministry of Economy, Trade and Industry has increased by approximately 50% to 3.07 trillion yen, driven by significant investments in chips and AI, which will rise from about 300 billion yen to 1.23 trillion yen, nearly quadrupling [3] - The government has allocated 150 billion yen to support the state-owned chip company Rapidus Corp., bringing total investment in the company to 250 billion yen [3] - An additional 387.3 billion yen is earmarked for developing domestic AI models and enhancing data infrastructure [3] Tax Revenue and Expenditure - Tax revenue is expected to grow by 7.6% to a record 83.7 trillion yen, which will help fund increased expenditures [5] - However, tax growth will not fully offset the rising costs of debt repayment and increased social security and defense spending, with debt repayment costs projected to rise by 10.8% to 31.3 trillion yen, the highest level in 29 years [5] - The government plans to abandon the goal of achieving annual fiscal balance, setting new multi-year targets to allow for more flexible spending arrangements [5]