Japan’s Cabinet on Friday approved a record defence budget plan exceeding ¥9 trillion (about US$58 billion) for the coming fiscal year, underscoring Tokyo’s accelerating military buildup as security tensions rise across East Asia, particularly with China. The draft budget for fiscal 2026, beginning in April, represents a 9.4 per cent increase from 2025 and marks the fourth year of Japan’s five-year programme to double defence spending to 2 per cent of gross domestic product.
If enacted, the plan will place Japan firmly on track to meet the NATO-standard 2 per cent target by March, two years earlier than originally scheduled. Prime Minister Sanae Takaichi’s government has framed the expansion as essential to ensuring a credible deterrent amid what it describes as the most severe security environment since World War II.
The budget reflects growing concern in Tokyo over China’s military modernisation and increasingly assertive activities around Taiwan, the East China Sea and the wider Pacific. In November, Takaichi said Japan’s military could become involved if China were to take action against Taiwan, a statement that drew sharp criticism from Beijing and heightened diplomatic friction.
A central feature of the new budget is a major investment in so-called “standoff” strike capabilities. More than ¥970 billion has been allocated to long-range missiles and related systems, including ¥177 billion for domestically developed and upgraded Type-12 surface-to-ship cruise missiles with an extended range of around 1,000 kilometres. The first batch of these missiles will be deployed in the southwestern prefecture of Kumamoto by March, a year earlier than planned, reflecting Japan’s urgency in strengthening defences in its southwestern island chain near Taiwan.
Japan’s current national security strategy identifies China as its “biggest strategic challenge” and calls for a shift toward more proactive and offensive roles for the Self-Defense Forces under the security alliance with the United States. Washington has long pressed Tokyo to shoulder a greater share of regional defence responsibilities, particularly as China expands its naval and air operations.
Unmanned systems also feature prominently in the budget. Facing an ageing and shrinking population and chronic recruitment shortfalls in the military, Japanese officials see drones as vital force multipliers. About ¥100 billion has been earmarked to deploy large numbers of unmanned aerial, surface and underwater vehicles for coastal surveillance and defence under a programme known as SHIELD, scheduled for rollout by March 2028. To speed up deployment, Japan plans initially to rely on imported systems, potentially from Turkey or Israel.
The budget decision comes amid a sharp deterioration in Japan-China relations. This month, Tokyo lodged a formal protest after Chinese aircraft reportedly locked radar onto Japanese planes during drills near southwestern Japan, an action widely viewed as a potential precursor to missile targeting. Earlier, in June, two Chinese aircraft carriers were observed operating near the remote Japanese island of Iwo Jima at the same time for the first time, intensifying concerns about China’s expanding reach deep into the Pacific.
In response, Japan’s defence ministry will establish a new office dedicated to analysing China’s Pacific operations, equipment and strategy. The ministry has warned that Beijing’s activities increasingly extend beyond the disputed East China Sea into areas closer to the Japanese mainland.
The budget also aims to revitalise Japan’s defence industry. Tokyo plans to spend more than ¥160 billion in 2026 on the joint development of a next-generation fighter jet with Britain and Italy, slated for deployment in 2035, alongside research into artificial-intelligence-enabled drones designed to operate with the aircraft. Japan has also eased arms export restrictions to boost foreign sales, a shift underscored by Australia’s recent selection of Mitsubishi Heavy Industries to upgrade its future frigate fleet.
Overall, nearly ¥10 billion has been allocated to support the defence industrial base and arms exports. The budget plan, part of a broader ¥122.3 trillion national budget bill, requires parliamentary approval by March. Once fully implemented, Japan’s five-year defence build-up would raise annual military spending to around ¥10 trillion, making Japan the world’s third-largest defence spender after the United States and China.
To finance the expansion, the government plans to raise corporate and tobacco taxes and has approved an income tax increase starting in 2027, though prospects for sustaining even higher defence spending beyond the 2 per cent threshold remain uncertain.
