Japan's government on Friday approved a record budget for the next fiscal year, ramping up spending on social welfare and defence.

The 115.5 trillion yen (US$730 billion) budget for the year from April 2025, greenlit by the cabinet, includes 8.7 trillion yen in defence spending.

It also includes social security spending of around 38.3 trillion yen – up from 37.7 trillion the previous year.

The defence ministry said in a briefing document that Japan was facing its "toughest and most complex security environment" since the Second World War, repeating a warning from Prime Minister Shigeru Ishiba.

The 8.7 trillion yen approved on Friday will help pay for measures to help attract recruits to Japan's Self-Defense Forces, and to improve relations between the US and Japanese militaries with locals in Okinawa.

It will also go towards a system to collect satellite information on ballistic missiles, such as those fired by North Korea.

Another challenge facing the country is its ageing population caused by chronically low birth rates and a cautious approach to immigration.

Japan is one of the world's oldest societies, and this year the proportion of its people aged 65 or over reached a record 29.3 percent.

The draft budget needs to be approved by the parliament, and the ruling Liberal Democratic Party and its smaller coalition partner Komeito will need cooperation from opposition parties, having lost their majority in an October snap election. (AFP)