January 7, 2026 /SemiMedia/ — Japan is preparing a major overhaul of its industrial policy framework for fiscal 2026, with semiconductors and artificial intelligence elevated to the status of long-term strategic infrastructure. The Ministry of Economy, Trade and Industry (METI) plans to raise its overall budget by about 50% to roughly 3.07 trillion yen, with approximately 1.23 trillion yen earmarked for chipmaking and AI-related initiatives.

Japan shifts semiconductor policy toward stable, long-term funding

A key feature of the proposed increase is the shift away from one-off supplementary funding toward more predictable, recurring budget allocations. Japanese policymakers aim to provide stable financial support for advanced manufacturing and digital technologies, reducing uncertainty for projects that require multi-year investment cycles, such as wafer fabs and ecosystem buildout.

Advanced logic manufacturing remains a central focus. METI plans to allocate around 150 billion yen to Rapidus, the government-backed initiative intended to establish leading-edge logic production in Japan. In parallel, about 387.3 billion yen will be directed toward AI development, covering foundation models, data infrastructure, and so-called “physical AI” applications, including software-driven robotics and industrial machinery.

The budget also extends beyond core technologies to supporting elements of the semiconductor supply chain. Funds have been set aside to secure critical minerals, including rare earths, as well as for decarbonization measures. Part of the latter is linked to next-generation nuclear power projects, reflecting concerns over long-term energy stability for power-intensive manufacturing.

Rapidus and AI investment anchor Japan’s chip strategy

METI’s budget expansion forms part of a broader government strategy focused on economic growth and strategic resilience. Japan’s cabinet has approved a record-scale national fiscal plan scheduled to begin in April 2026, which is currently under debate in parliament.

For semiconductor industry watchers, execution will be the key test. It remains to be seen whether sustained funding can accelerate Rapidus’ process development, pilot line milestones and partner engagement, and whether Japan’s push into AI will translate into tangible domestic demand for advanced packaging, memory and data center infrastructure.

What is clear is that Japan is repositioning chips and AI as core industrial foundations rather than short-term policy experiments, a shift that is likely to influence long-term investment expectations across the semiconductor value chain.