Japan is spending like there’s no tomorrow, and Moody’s Ratings has essentially responded with a shrug. The agency is maintaining its credit assessment on Japanese sovereign debt despite a fiscal 2026 budget that ballooned to 122.3 trillion yen, roughly $783 billion, and bond market volatility that has investors chewing their nails.
Japan’s fiscal numbers are getting hard to ignore
The new budget represents a meaningful jump from the 115 trillion yen allocated the previous fiscal year. Tucked inside that number is a record defense budget of 9.0353 trillion yen, reflecting Japan’s evolving security posture in a tense geopolitical neighborhood.
Ten-year Japanese government bond yields have surged to around 2.8% as of May 2026, levels that would have been unthinkable just a few years ago when yields were pinned near zero. Longer-dated maturities have crossed 4%.
Japan’s central government debt hit a record 1.343 quadrillion yen by the end of March 2026. That’s approximately $8.58 trillion.
