Japan's Cabinet Greenlights Historic ¥9 Trillion Defense Budget for 2026

Post by : Bianca Suleiman

Japan's Cabinet on Friday took a significant step by approving a record-breaking defense budget of over 9 trillion yen ($58 billion) for the upcoming fiscal year. This decision is part of the nation's ongoing efforts to bolster its military capabilities in response to escalating regional tensions.

The proposed budget for the fiscal year 2026, which starts in April, reflects a 9.4% increase from 2025. It signifies the fourth consecutive year of Japan's ambitious five-year plan aimed at doubling its annual defense spending to 2% of its gross domestic product (GDP). If this plan secures parliamentary approval, Japan will join the ranks of the world's top military financiers.

Investments in Missiles and Coastal Defense

A considerable portion of the new budget will enhance Japan's "strike-back" capability, marking a notable departure from its post-World War II defense strategy, which permitted force only for self-defense.

Over 970 billion yen ($6.2 billion) is earmarked for advancing long-range or "standoff" missile capabilities, including 177 billion yen ($1.13 billion) for upgrading Type-12 surface-to-ship missiles with a range nearing 1,000 kilometers. The initial stock of these missiles is slated for deployment in Kumamoto prefecture in southwestern Japan by March—one year ahead of schedule.

Japan's southwestern islands, seen as vulnerable, remain a strategic focus for this missile enhancement initiative.

Enhancing Drone Utilization

Confronted with an aging population and dwindling military personnel, the Japanese government is increasingly leaning on unmanned systems. The budget sets aside 100 billion yen ($640 million) for massive deployments of unmanned aerial, surface, and underwater drones to fortify coastal surveillance and defense.

These drones will be incorporated into a new framework designated as "SHIELD," anticipated to launch by March 2028. To facilitate a quicker rollout, Japan will initially utilize imported systems, potentially sourced from nations like Turkey and Israel.

Assessing the Strategic Challenge from China

Japan's existing security strategy, implemented in 2022, identifies China as its primary strategic threat. Tensions have escalated, particularly regarding Taiwan and surging Chinese military activity near Japanese territorial waters.

In November, Prime Minister Sanae Takaichi indicated that Japan could intervene if China takes action against Taiwan, a statement that provoked strong criticism from Beijing.

Relations soured this month when Chinese aircraft carriers conducted maneuvers near southwestern Japan, leading Tokyo to lodge protests after Chinese aircraft reportedly locked radar onto Japanese planes, a move viewed as a possible precursor to missile targeting.

In response, Japan's Defense Ministry is set to establish a new office focused on studying China's expanding military operations throughout the Pacific.

Collaborative Weapons Development and Defense Industry Growth

Japan is also enhancing its defense manufacturing capabilities through international partnerships. The 2026 budget includes more than 160 billion yen ($1 billion) for the collaborative development of a next-generation fighter jet with the UK and Italy, aimed for deployment by 2035. Research is also underway for AI-controlled drones intended to work alongside this aircraft.

In a significant advancement for Japanese defense contractors, Australia selected Mitsubishi Heavy Industries in August for upgrading its Mogami-class frigates, replacing its outdated ANZAC-class fleet.

Additionally, nearly 10 billion yen ($64 million) is allocated to bolster the defense sector and promote overseas arms sales following Japan's recent relaxation of export restrictions.

Financial and Political Hurdles Ahead

The defense budget will form a part of a broader 122.3 trillion yen ($784 billion) national budget bill that requires parliamentary approval by March. Should it be enacted, Japan's annual defense spending would escalate to approximately 10 trillion yen, making it the third-largest globally, following the US and China.

While the government intends to finance this military buildup through increased corporate, tobacco, and income taxes starting in 2027, uncertainties linger about the sustainability of further spending increases beyond the 2% GDP benchmark.

Nonetheless, this latest budget highlights Japan's resolve to rapidly enhance its military capacity as security anxieties in East Asia continue to grow.