The plan, detailed in documents released after a policy advisory panel meeting, earmarks 101.6 trillion yen for AI and chip-related spending alone. Unveiling the strategy, Takaichi said she intended to build a “strong and prosperous investment framework”, with the government expected to fund a little under half the total if inflation tracks current forecasts.

In introducing the plan, Takaichi said she aims to create a “strong and prosperous investment framework”, while mentioning that the blueprint calls for a combination of public and private investment to reach the target amounts. The government may contribute 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 prime minister 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,” reported The Japan Times.

The blueprint forms a central part of Takaichi’s bid to reshape Japan’s growth strategy amid rising geopolitical tension and rapid technological change. It channels funds towards sectors seen as critical to economic security, including supply-chain resilience, while attempting to offset the structural labour shortages caused by Japan’s ageing population.

Within the AI and chips allocation, the largest share will go to semiconductors, alongside “vertical AI” tools built for specific industries. The government projects semiconductor investment will generate 443 trillion yen in economic spillovers by fiscal 2040, with physical AI and vertical AI adding a further 144 trillion yen and 222 trillion yen, respectively.

The initiative builds on Japan’s existing chip revival efforts. Since 2021, the government has committed roughly 7.2 trillion yen to semiconductors and AI, including about 2.6 trillion yen in support for state-backed venture Rapidus, according to the industry ministry.

Separately released long-term fiscal projections modelled three scenarios for the strategy’s impact. Under the most optimistic case, Japan’s debt-to-GDP ratio would decline steadily even with annual government spending of 10 trillion yen. In the other two scenarios, assuming weaker uptake or a continuation of current trends, the ratio would resume climbing during the 2030s. All three assume inflation settles near 2%.

The figures exclude potential rises in defence spending or consumption-tax cuts, suggesting fiscal strain could exceed current estimates. Takaichi’s agenda has already moved markets: The Nikkei 225 briefly breached 70,000 in June 2026, even as superlong government bond yields hit multi-decade highs on fiscal sustainability concerns.

The Japanese government has also released 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 yen in real spending toward the plan each year,” The Japan Times reported.

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, as per the government, assume inflation stabilises at around 2%.

The blueprint’s debut also coincides with Takaichi’s government shifting 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.

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Japanese Prime Minister Sanae Takaichi and Brazilian President Luiz Inacio Lula da Silva confirmed the launch of the negotiations during a meeting in Evian-les-Bains, France, on the sidelines of the recently concluded Group of Seven (G7) Summit.

Through the pact with the Mercosur bloc, which also includes Argentina, Bolivia, Paraguay and Uruguay, Japan hopes to expand market access for automobiles and other products, apart from diversifying supplies of critical minerals amid China’s recent rare earth export restrictions.

In her opening remarks, Takaichi described Brazil as a strategic global partner that shares values and principles with Japan. Mercosur is an attractive growth market with a population of about 300 million and a combined GDP of roughly USD 3 trillion. It is richly endowed with resources such as critical minerals, energy and agricultural commodities,” said Deputy Chief Cabinet Secretary Kei Sato, while giving out more details about the bilateral meeting.

Brazil, the largest economy in the Mercosur bloc, is also a major oil producer, thereby making the Latin American region increasingly important for Japan’s efforts to diversify supply chains and resource procurement. However, as per Sato, Takaichi is also taking into consideration the concerns raised by lawmakers of the ruling Liberal Democratic Party, who have warned that increased imports of animal protein-related products could end up hurting domestic producers.

“The Japanese government is aware of those concerns and will seek to protect sensitive agricultural sectors during the negotiations,” Sato said.

Apart from Brazil, Japan is looking to deepen its ties with France, with Takaichi and French President Emmanuel Macron meeting on the sidelines of the G7 Summit and discussing cooperation on economic security, critical minerals and advanced technologies.

Meanwhile, Japan’s exports grew for a ninth straight month in May, as a weaker yen, higher commodity prices and solid semiconductor demand offset the drag from major supply disruptions linked to the Iran war.

“Total exports by value rose 17% year-on-year in May, outpacing a median market forecast for a 16.2% increase and following a 14.8% rise in April. By volume, however, they rose just 0.5% last month,” the government data stated.

Exports of electronic components drove overall growth, with the ongoing AI boom pushing up prices for memory chips and non‑ferrous metals. While exports to the United States rose 12.5% in May from a year earlier, the China tally went up by 17.9% as well.

Overall imports grew 12.5% in May 2026, compared with the May 2025 tally. However, the ratio fell short of market forecasts, which predicted a 12.8% increase. The gains were witnessed despite a plunge in crude oil import volumes, as the maritime trade disruptions at the Strait of Hormuz severely raised the prices of crude and other energy products.

With per-unit cost in yen hitting an all-time high, crude oil imports plunged 28.5% in value terms and 57.3% in volume terms. That resulted in the Far East Asian nation ⁠running into a trade deficit of 378.7 billion yen (USD 2.36 billion) in May, compared with the forecast of a 564.6 billion yen deficit.

Japan, heavily dependent on imported energy, has faced higher costs following disruptions to ⁠Middle Eastern supply routes. In May, crude oil imports from the Middle East tumbled 61.9% in volume terms. Despite the Takaich government securing alternative crude supplies from alternative sources like the United States, they were not being able to offset the impact that was created by the downfall in Gulf tally.

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