Japan’s Ministry of Economy, Trade and Industry is set to nearly quadruple its budget for supporting cutting-edge semiconductors and artificial intelligence (AI) development to about ￥1.23 trillion (US$7.9 billion) for the fiscal year starting in April.

Overall the ministry’s budget rose by about 50 percent from last year to ￥3.07 trillion, largely due to the jump in chips and AI spending. After Japanese Prime Minister Sanae Takaichi’s Cabinet signed off on it yesterday, the government’s budget plan would be discussed in parliament in the new year.

The jump in chips and AI spending comes at a time when Japan is trying to strengthen its capacities in frontier technology, as the US and China race ahead. As the world’s two largest economies continue to remain on tense terms despite a lull in their trade war, Japan is trying to secure better supply chain access for key technologies.

Starting with the fiscal year beginning in April, the ministry plans to secure most of the additional funding for chips and AI in regular budgets, instead of through the more ad hoc approach of funding it through extra budgets later in the year. That is expected to provide more stable funding to the sectors.

For semiconductors, the ministry has earmarked ￥150 billion for state-backed chip venture Rapidus Corp, bringing cumulative government investment in the venture to ￥250 billion. For AI, ￥387.3 billion is budgeted for the development of domestic foundation AI models, strengthening data infrastructure and “physical AI” where AI controls robots and machinery.

In the broader budget, ￥5 billion

is being set aside for securing key minerals including rare earths. For decarbonization, ￥122 billion is earmarked for areas, including the development of next-generation nuclear power plants.

Special bonds of ￥1.78 trillion will be issued to help state-backed Nippon Export and Investment Insurance support Japanese investment into the US as part of the two countries’ trade agreement.