TOKYO -- Australia will increase defense spending and honor a commitment to buy war ships from Japan despite budget cuts planned for fiscal 2026, Australian Treasurer Jim Chalmers said.

"The budget update by the end of the year will have a savings package in it," Chalmers told Nikkei in an interview on Tuesday during his trip to Japan.

The budget cuts are largely aimed at dealing with ballooning debt obligations and labor costs. The Australian treasurer is the state minister who oversees government revenue collection, expenditures and economic policy as head of the Department of the Treasury.

Australia's economy faces "an inflation challenge, a productivity challenge and the issues familiar to other countries around global economic uncertainty," Chalmers said.

While the government will "continue to manage the budget responsibly," he provided no specifics about cuts.

The Reserve Bank of Australia raised its policy interest rate to 4.6% last week, a level not seen for roughly 15 years and one of the highest among major developed economies. The hike stems from prolonged inflation, as the August consumer price index rose 4.0% year-on-year.

Much like Japan, Australia faces pressure from Washington to increase defense spending. In April, Australia announced that it would essentially double its defense budget from current levels by fiscal 2035. The plan for that budget included buying upgraded Japan-made Mogami-class frigates built by Mitsubishi Heavy Industries.

"Our commitment to increasing defense funding is rock solid," Chalmers said. The treasurer revealed that he had met with executives from Mitsubishi Heavy during his visit, saying, "building those frigates in the first instance here in Japan, and then in time in Australia, is absolutely central." Australia intends to put some of its increased defense spending toward buying upgraded Mogami-class frigates from Japan.

On Monday, Chalmers met with Japanese Finance Minister Satsuki Katayama on economic security,g a memorandum of cooperation that established an annual Finance Ministerial Dialogue" between the countries. Tokyo and Canberra plan to cooperate on securing critical minerals and energy resources in the Indo-Pacific region.

"Economic security, supply chain resilience -- whether it's critical minerals, data, or in some of these other important areas we've been talking about -- it's been absolutely central to the discussions we've been having with the government here, and really one of, if not the major reason why I'm here," said Chalmers.

In May, Australia's government ordered China-linked investors to sell off shares in an Australian rare-earth developer, a move meant to remove Chinese influence from the critical minerals supply chain.

"China or other countries will raise issues in their national interest, and we work through any differences in a considered, methodical and sober way," Chalmers said, alluding to China's economic sanctions on Australia as a result of Canberra's support of calls for inquiries into the origins of the COVID-19 virus and signaling a tough stance in dealing with Beijing. Australia's pension fund is the world's fourth largest. "Japan is so attractive to Australian superannuation investors," Chalmers said.

The treasurer indicated an awareness that investment flows are shifting away from movement primarily from Japan to Australia toward the opposite direction, including investments in Japan by Australian private companies in data centers and other fields.