Over the past year, Japan has initiated a series of regulatory and policy reforms aimed at accelerating drug development, strengthening oversight, and improving access to innovative therapies, while also reinforcing international regulatory cooperation.

FY2026 Budget Increase

The MHLW estimated budget for FY2026 includes an increase of approximately ¥550 billion (about 3.5 billion USD), bringing total planned expenditure to approximately ¥35 trillion (about 224 billion USD). This budget increase aligns with Japan’s policy objectives to reduce drug lag and improve both the infrastructure for clinical development and regulatory support for innovative products. Some areas that received additional funding include early consultation with the PMDA, increased assistance for patients suffering from ultra-orphan diseases, and stabilizing drug supply chains.

In addition, the MHLW is developing an early consideration program designed to assist drug developers when it is not feasible to conduct traditional clinical trials due to limited scientific evidence. This helps create an avenue for earlier, more structured discussions between drug companies and regulatory authorities regarding their products.

Additionally, the MHLW published new guidelines for both the non-clinical and clinical stages of therapeutic radiopharmaceutical development. This is in recognition of the unique regulatory issues that arise with these types of drugs compared to traditional pharmaceuticals.

Sharp Increase in GMP Inspections

Japan is also significantly tightening its oversight of manufacturing quality. According to the PMDA’s 2024 GMP annual report, the agency conducted 126 on-site GMP inspections and 2,049 desktop inspections in 2024, roughly double and four times the respective figures from 2023. The PMDA has highlighted that many foreign manufacturers continue to fall short of Japan’s GMP requirements.

GMP inspections are mandatory for approvals involving new drugs, recombinant products, radiopharmaceuticals, and products derived from living or human materials, with inspections typically conducted every five years. To improve compliance and transparency, the PMDA published an English version of the GMP Ministerial Ordinance in July 2024. This move signaled heightened expectations for overseas manufacturers interested in the Japanese market.

Drug Pricing and Reimbursement Debates Intensify

In addition to regulatory reforms, Japan is working on drug pricing and reimbursement policies in its proposed preparations for FY2026. There are ongoing discussions between the MHLW, Chuikyo, various industry bodies, and other stakeholders about the continuing tension between cost containment and innovation incentives. For example, on the cost containment front, there are proposals for greater application of cost-effectiveness analysis to high-priced (but limited-value) drugs.

Another example involves proposed changes to the G1/G2 pricing mechanism, which allows pharmaceutical companies to gradually lower prices of certain drugs to match generic pricing. Policymakers are also considering reducing the window for applying these G1/G2 prices to get prices to generic levels sooner rather than later.

The industry also advocates for protective measures for innovation, such as greater consideration of price increases due to inflation, broader coverage of pricing protection to drugs outside of Category A drugs, and more flexibility in selecting comparator drugs for pricing decision-making purposes. There is also a great amount of pushback against any downward adjustment to prices of regenerative, orphan, or pediatric therapies, which supports Japan’s mission to improve access to innovative and high-demand therapies.

Japan PMDA and Korea MFDS Strengthen Regulatory Cooperation

Japan’s Pharmaceuticals and Medical Devices Agency (PMDA) and Korea’s Ministry of Food and Drug Safety (MFDS) recently signed a Memorandum of Cooperation (MoC) to enhance collaboration between the two regulators. Through continued cooperation, both the PMDA and MFDS will benefit from more opportunities to share information regarding their regulatory processes and will work toward aligning their regulations. In addition, the PMDA and MFDS will continue their close working relationship regarding regulatory convergence of drugs and medical devices. Through this MOU, both the PMDA and MFDS will join several other East Asian countries in their joint efforts to increase their regulatory process efficiency and establish consistent pathways to obtain product approval.

Conclusion

Overall, the emerging themes from these activities suggest a much more active and aggressive approach by Japanese regulators to create an environment in which both expedited product development and financial support, combined with stringent oversight and evolving reimbursement policies, provide drug developers with new opportunities and expectations. As such, drug makers should recognize the additional importance of engaging with the Japanese regulatory agencies early in the development process and preparing strategic plans for compliance and pricing/market access activities in anticipation of the new regulatory landscape in Japan.