Banknotes of Japanese yen are seen in this illustration picture taken Sept 23, 2022. (FLORENCE LO / ILLUSTRATION / REUTERS)

TOKYO- Japan is set to earmark 40 trillion to 45 trillion yen ($295 billion-$333 billion) for defense spending over five years starting in the next fiscal year, which begins in April, three sources with knowledge of the matter told Reuters on Friday.

That would be a jump from the current five-year defense plan for spending 27.5 trillion yen, stoking worry about worsening one of the industrial world's worst debt burdens, which amounts to twice the size of Japan's annual economic output.

Prime Minister Fumio Kishida told key ministers on Monday to work on a plan to lift defense spending to an amount equivalent to 2 percent of gross domestic product within five years, from 1 percent now

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Prime Minister Fumio Kishida told key ministers on Monday to work on a plan to lift defense spending to an amount equivalent to 2 percent of gross domestic product within five years, from 1 percent now.

The key ministers - Finance Minister Shunichi Suzuki and Defence Minister Yasukazu Hamada - are expected to meet again with Kishida this month to iron out differences over the spending plan.

Defence authorities had informally floated an idea of spending in the upper range of 40 trillion yen over five years, while finance bureaucrats had sought spending along the lines of the current five-year plan.