Japan unveils $65 billion plan to support domestic chip industry

Japanese Prime Minister Shigeru Ishiba on November 11, unveiled a $65 billion plan to boost the country's chip and artificial intelligence (AI) industries through subsidies and other financial incentives, according to a detailed report by Reuters.

Objective of the plan

The plan, which will provide support worth 10 trillion yen ($65 billion) or more by fiscal 2030, comes as countries look to strengthen control over their chip supply chains after global shocks including trade tensions between the United States and China, the Reuters report explained further.

Japan's government intends to submit the plan, including bills to support the mass production of next-generation chips, to the next parliament session, according to a draft of the plan seen by Reuters earlier on November 11.

It specifically targets chip foundry venture Rapidus and other suppliers of chips for artificial intelligence, the draft showed. The government expects the economic impact to total around 160 trillion yen, according to the draft.

Rapidus is headed by industry veterans and is targeting mass production of cutting-edge chips on the northern island of Hokkaido from 2027 in partnership with IBM and Belgium-based research organisation Imec.

In a news conference on Monday, Ishiba confirmed that the government would not issue deficit-covering bonds to finance its plan to support Japan's semiconductor industry, although he did not provide details on alternative funding sources. Deficit-covering bonds are typically issued to offset shortfalls in state revenue, the Reuters report elaborated further.

Last year, the Japanese government announced an allocation of 2 trillion yen to bolster the semiconductor sector. The new plan, which is part of a broader economic package to be approved by the cabinet on November 22, aims to secure a total of 50 trillion yen in investments, both public and private, in the chip industry over the next decade.

Ishiba also highlighted that the government would meet with representatives from business and labour unions later this month to discuss next year’s wage negotiations. Ensuring sustained wage increases has become a key priority for the administration as Japan grapples with rising living costs, which are putting pressure on households and could dampen consumer spending and overall economic growth.

Market participants and global investors will closely follow these developments. This will help them make informed investment decisions with regard to the Japanese domestic chip industry.