TOKYO – In a move to bolster its military capabilities amidst regional tensions, Japan’s Cabinet has greenlit a defense budget surpassing a historic 9 trillion yen, equivalent to $58 billion, for the upcoming fiscal year. This significant allocation is aimed at enhancing Japan’s strike-back and coastal defense capacities, particularly through the acquisition of cruise missiles and unmanned arsenals.

This draft budget, set to commence in April 2026, represents a notable 9.4% increase from the previous year. It marks the fourth year in Japan’s strategic five-year initiative to elevate its annual defense spending to 2% of its gross domestic product (GDP).

The decision to ramp up military expenditure comes as Japan navigates increasing tensions with China. In November, Prime Minister Sanae Takaichi highlighted the potential involvement of Japan’s military in the event of Chinese aggression towards Taiwan, a self-governing island that China claims as its territory.

Japan’s government, responding to pressure from the United States to expand its military capabilities, has committed to reaching the 2% GDP defense spending target by March, a full two years ahead of the original timeline. Additionally, Japan is set to reassess its security and defense policy by December 2026, aiming to further fortify its military strength.

Key components of this defense strategy include the deployment of missiles and drones, particularly to enhance the security of the southwestern islands, reflecting a strategic focus on modernizing and expanding its defense infrastructure.

Japan has been bolstering its offensive capability with long-range missiles to attack enemy targets from a distance, a major break from its post-World War II principle limiting the use of force to own self-defense.

The current security strategy, adopted in 2022, 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.

The new budget plan allocates more than 970 billion yen ($6.2 billion) to bolster Japan’s “standoff” missile capability. It includes a 177 billion-yen ($1.13 billion) purchase of domestically developed and upgraded Type-12 surface-to-ship missiles with a range of about 1,000 kilometers (620 miles).

The first batch of the Type-12 missiles will be deployed in Japan’s southwestern Kumamoto prefecture by March, a year earlier than planned, as Japan accelerates its missile buildup in the region.

In part due to Japan’s aging and declining population and its struggles with an understaffed military, the government believes unmanned weapons are essential.

To defend the coasts, Japan will spend 100 billion yen ($640 million) to deploy “massive” unmanned air, sea-surface and underwater drones for surveillace and defense under a system called “SHIELD” planned for March 2028, defense ministry officials said.

For speedier deployment, Japan initially plans to rely mainly on imports, possibly from Turkey or Israel.

Tension wit

h China grows

The budget announcement comes as Japan’s row with China escalate following Takaichi’s remark in November that Japanese military could get involved if China were to take action against Taiwan, the self-governing island that Beijing claims as its own.

The disagreement escalated this month when Chinese aircraft carrier drills near southwestern Japan prompted Tokyo to protest when Chinese aircraft locked their radar on Japanese aircraft, which is considered possible preparation for firing missiles.

The Defense Ministry, already been alarmed by China’s rapid expansion of operations in the Pacific, will open a new office dedicated to studying operations, equipment and other necessities for Japan to deal with China’s Pacific activity.

Two Chinese aircraft carriers were spotted in June almost simultaneously operating near southern Japanese island of Iwo Jima for the first time, fueling Tokyo’s concern about Beijing’s rapidly expanding military activity far beyond its borders and areas around the disputed East China Sea islands.

Japan plans joint development of frigates and jets

Japan is pushing to strengthen its largely domestic defense industry by participating in joint development with friendly nations, and promoting foreign sales, after drastically easing arms export restrictions in recent years.

For 2026, Japan plans to spend more than 160 billion yen ($1 billion) to jointly develop a next-generation fighter jet with Britain and Italy for deployment in 2035. There also are plans for research and development of AI-operated drones designed to fly with the jet.

In a major boost to the country’s defense industry, Australia selected Mitsubishi Heavy Industries in August to upgrade Mogami-class frigate to replace its fleet of 11 ANZAC-class ships.

Japan’s budget allocates nearly 10 billion yen ($64 million) to support industry base and arms sales.

Meeting targets but future funding uncertain

The budget plan requires parliamentary approval by March to be implemented as part of a 122.3 trillion yen ($784 billion) national budget bill.

The five-year defense buildup program would bring Japan’s annual spending to around 10 trillion yen ($64 billion), making it the world’s third-largest spender after the U.S. and China. Japan will clear the 2% target by March as promised, the Finance Ministry said.

Takaichi’s government plans to fund its growing military spending by raising corporate and tobacco taxes and recently adopted a plan for income tax increase beginning 2027. Prospects for future growth at a higher percentage of GDP is unclear.