Japanese prime minister Fumio Kishida is stepping down before the end of September 2024. Many policies from his administration require large budgets, including providing subsidies for the semiconductor industry and the GX policy. There are still questions regarding how these policies would proceed after his leave.
News media such as Nikkei and Asahi Shimbun reported that Kishida announced on August 14 that he would not be running in the party leadership vote. His term will end in September 2024 as per the usual process.
Whether important policies would continue as planned after Kishida's decision to step down has attracted the attention of the political and business worlds.
An official from the Ministry of Finance pointed out that there is often no confirmed financial resource for large expenditures decided by Kishida. For example, the four big policies include semiconductor subsidies, GX, countermeasures for fertility decline, and boosting military spending.
In other words, aside from the annual regular budget, financial resources will have to be obtained via supplementary budgets or amendments. There were plans to increase taxes as another method, but no date has been decided. It is very rare for the Japanese government to decide on expenditures before confirming financial resources.
Rapidus and renewable energy businesses affected by incomplete policies
Since Kishida's inauguration in October of 2021, subsidies for large semiconductor manufacturers have mostly been done through supplementary budgets. For example, the Japanese government announced in June 2022 that the establishment of TSMC's foundry factory in Kumamoto as well as its joint venture with Sony and Denso would receive a subsidy of at most JPY476 billion (US$3.6 billion).
The subsidy's financial resources did not come from the regular annual budget but through the 2021 budget amendment (April 2021 to March 2022), where JPY617 billion was added to set up the funding for semiconductor manufacturing in Japan.
Kishida also supported Rapidus in establishing a mass production system for 2nm chips in Japan. For three consecutive years, Rapidus received subsidies three times through supplementary budgets with a total of JPY920 billion. In addition, he headed down to Hokkaido's Chitose City to inspect Rapidus's first factory and announced right then and there that he would propose a bill to the National Diet as soon as possible to support the production level of the next generation of semiconductors.
Since many Japanese manufacturers and members of the financial industry still have concerns regarding whether Rapidus can successfully mass produce 2nm chips as planned, it is difficult for Rapidus to obtain further investment. The Kishida administration intended to provide financial security to Rapidus through legislation.
However, with Kishida about to step down from his role as prime minister, whether the currently incomplete policy regarding semiconductor subsidy and support would continue to be pushed forward by the next prime minister is uncertain.
Concerning Rapidus's electrical usage, relevant parties in Hokkaido's renewable energy business expressed surprise towards Kishida's sudden announcement to step down. They hope the next prime minister will not make extreme changes to the declared policies in progress. Those in Kumamoto's business circle also hope that the government will continue the policies supporting the maintenance of Kumamoto's semiconductor supply chain and the strengthening of transport infrastructures.
The Kishida administration plans to achieve carbon neutrality in 2050 and completed the GX policy, deciding to push forward a GX economic transition debt of JPY20 trillion in ten years and raise a total of JPY150 trillion through public and private financing to invest in net zero emission.
The financial resource for the GX economic transition debt is unconfirmed. There are plans to impose taxes on manufacturers importing petrochemicals starting from 2028, and auction carbon emission costs to electrical businesses from 2033 onward. However, concrete designs for these systems have not been completed yet.
The incomplete aspects of these large budget expenditures and regulations have all become issues for the next prime minister of Japan to consider.
