Japan’s Cabinet OKs record defense budget that aims to deter China

Japan’s defense budget for the upcoming fiscal year has reached an unprecedented 9 trillion yen ($58 billion), marking a significant 9.4% increase from the previous year. The Cabinet-approved plan represents the fourth consecutive year of Japan’s five-year program to double its defense spending to 2% of GDP.

The military expansion comes amid rising tensions with China in the region. Prime Minister Sanae Takaichi made headlines in November when she suggested Japan’s military could intervene if China were to take action against Taiwan—a self-governing island that Beijing claims as its territory.

Under pressure from the United States, Takaichi’s government has pledged to achieve the 2% defense spending target by March, accelerating the timeline by two years. Additionally, Japan plans to revise its security and defense policies by December 2026 to further strengthen its military capabilities.

The defense buildup marks a significant shift in Japan’s post-World War II military stance, which has traditionally limited the use of force to self-defense. Japan’s 2022 security strategy explicitly names China as the country’s biggest strategic challenge and calls for a more offensive role for Japan’s Self-Defense Force under its security alliance with the U.S.

Nearly 970 billion yen ($6.2 billion) of the new budget will be allocated to enhancing Japan’s “standoff” missile capability, including 177 billion yen ($1.13 billion) for domestically developed and upgraded Type-12 surface-to-ship missiles with a range of about 1,000 kilometers. The first batch of these missiles will be deployed in southwestern Kumamoto prefecture by March, a year earlier than originally planned.

To address challenges posed by Japan’s aging and declining population, which has led to military understaffing, the government is heavily investing in unmanned weapons systems. The budget allocates 100 billion yen ($640 million) for the deployment of “massive” unmanned air, sea-surface, and underwater drones under a surveillance and defense system called “SHIELD,” scheduled for implementation by March 2028. Initially, Japan plans to rely mainly on imports, possibly from Turkey or Israel, for faster deployment.

The budget announcement follows escalating tensions with China. The dispute intensified this month when Chinese aircraft carrier drills near southwestern Japan prompted Tokyo to protest after Chinese aircraft locked their radar on Japanese aircraft—a move considered a possible precursor to missile firing. In June, two Chinese aircraft carriers were spotted operating near the southern Japanese island of Iwo Jima simultaneously for the first time, heightening Tokyo’s concerns about Beijing’s expanding military activities beyond its borders.

Japan is also strengthening its defense industry through international collaboration. The 2026 budget includes more than 160 billion yen ($1 billion) for joint development of a next-generation fighter jet with Britain and Italy, targeted for deployment in 2035. Research and development for AI-operated drones designed to accompany these jets is also planned. In a significant boost to Japan’s defense sector, Australia recently selected Mitsubishi Heavy Industries to upgrade Mogami-class frigates to replace its fleet of 11 ANZAC-class ships.

The budget plan requires parliamentary approval by March to be implemented as part of a 122.3 trillion yen ($784 billion) national budget bill. If approved, this five-year defense buildup program would bring Japan’s annual defense spending to approximately 10 trillion yen ($64 billion), making it the world’s third-largest military spender after the United States and China.

To fund the increased military expenditure, Takaichi’s government plans to raise corporate and tobacco taxes and has recently adopted a plan for income tax increases beginning in 2027. However, analysts note that prospects for sustaining higher percentages of GDP on defense spending remain uncertain beyond the current five-year program.