The Japanese government has come under fire after it allegedly used unspent Covid-19 relief funds to support state-funded chipmaker Rapidus.

According to a report from Nikkei Asia, the move has been described as misappropriation by opposition lawmakers, an allegation that prime minister Shigeru Ishiba denies.

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In November 2024, the Japanese government announced plans to invest approximately $65 billion to support the country’s semiconductor and AI industries over seven years. However, $8.3bn in funding was included in Japan’s supplementary budget, and of that $8.3bn, $6.26bn had been intended to support SMEs during the Covid-19 pandemic.

According to the report, Ishiba decided to reallocate the funds in order to avoid issuing deficit-covering bonds. Opposition politician Satoshi Honjo reportedly described the move as “nothing more than misappropriation” at a budget meeting in December.

Prime minister Ishiba denied the claim, arguing that because the unspent Covid-19 relief funds had been returned to the treasury, the decision was a legitimate one.

Rapidus was founded in November 2022 when the Japanese government and eight Japanese technology and automotive firms, including SoftBank, Sony, and NTT, invested more than $500 million to launch the business.

In December 2024, the company took delivery of an ASML TWINSCAN NXE:3800E, an EUV lithography tool needed to make advanced chips. In a statement at the time, Rapidus said the delivery of the system represented a “significant milestone for Japan’s semiconductor industry, marking the first time that an EUV lithography tool will be used for mass production in the country.”