Japan to Spend $2 Billion On AI, Semiconductors In Extra Budget

Japan is set to spend roughly ¥252.5 billion ($1.6 billion) in an extra budget to further support developments of artificial intelligence and semiconductors.

The sum is much smaller than the about ¥1.5 trillion allocation in last year’s supplementary budget, as the government is expected to start securing most of the additional funding for those sectors in regular budgets going forward, according to a ruling party lawmaker and the Ministry of Economy, Trade and Industry. That’s expected to provide more stable funding to the sectors.

After Prime Minister Sanae Takaichi’s cabinet signed off on it Friday, the extra budget now needs approval in parliament. That passage is expected to go more smoothly as Takaichi’s ruling coalition is reportedly set to secure a majority in the powerful lower house due to the addition of a small caucus.

So far, Japan has set aside about ¥5.7 trillion since it came up with a new strategy in 2021 to revive the nation’s semiconductor industry. The government has been allocating sums to specific projects such as Rapidus Corp., Taiwan Semiconductor Manufacturing Co.’s Kumamoto foundries and Micron Technology Inc.’s Hiroshima factory.

In the extra budget, METI also has requested ¥100 billion to invest in Nippon Export and Investment Insurance to strengthen the government-backed trade insurer’s financial foundation. The insurer is set to play a key role in implementing a $550 billion investment program as part of the US-Japan trade deal.

The ministry also aims to secure ¥93.7 billion in the supplementary budget to help private companies secure rare earths and strengthen national stockpiles of the critical minerals. Japan has tried to reduce its reliance on China for rare earths for economic security reasons.