The government will set aside several hundreds of billion yen under this year's supplementary budget to create a pool of funds at NEDO, a state-run body promoting research and development on energy and industrial technology.

Companies will be eligible for the subsidies on condition they ramp up chip production in times of short supply. It does not say what the government will do if a foreign player like TSMC suddenly finds itself unable to comply due to its own government’s insistence.

However, Japan is likely to subsidise up to half of TSMC's estimated $8.82 billion investment for building a chip plant in Kumamoto, southern Japan, the Nikkei said. The plant in Kumamoto, southern Japan, is expected to produce semiconductors for automobiles, camera image sensors and other products which have been hit by a global chip shortage, and is likely to start operations by 2024.