Tokyo Japanese Prime Minister Shinzo Abe's cabinet has approved a record budget of 97.45 trillion yen with military expenditure continuing to grow under the hawkish premier.

The record-high budget will add to the difficulty of restoring Japan's fiscal health, with debt more than double the size of the country's gross domestic product - the worst ratio among major industrialised countries.

Debt-servicing expenses account for 24 per cent of the budget, which covers the financial year beginning in April.

Defence spending will grow 1.4 per cent, to a record 5.13 trillion yen, amid North Korea's nuclear and missile threats and China's military buildup.

Social security costs, such as pensions and medical expenses - the largest portion of the budget in an ageing Japan - will rise 1.6 per cent from the current year's budget, to 32.47 trillion yen.

"We need to make tireless efforts to make both social security and finances sustainable by promoting reform of medical and elderly care," Chief Cabinet Secretary Yoshihide Suga told a news conference.

A total of 5.98 trillion yen is earmarked for public and other works, such as promoting tourism - with a goal of drawing 40 million overseas visitors to Japan in 2020 - and boosting the defence of disputed islets in the East China Sea.

The uninhabited, Japanese-administered Senkaku Islands are also claimed by China and Taiwan, where they are known as Diaoyu and Tiaoyutai, respectively.

Tax revenue is expected to be almost flat, with a 0.2 per cent increase to 57.71 trillion yen.