Japan Approves Record Defence Budget to Deter China

The draft budget for fiscal 2026 beginning April is up 9.4 per cent from 2025 and marks the fourth year of Japan's ongoing five-year programme to double annual arms spending to 2 per cent of gross domestic product.

The increase comes as Japan faces elevated tension from China. Japanese Prime Minister Sanae Takaichi said in November that her country's military could get involved if China were to take action against Taiwan, the self-governing island that Beijing says must come under its rule.

Takaichi's government, under US pressure for a military increase, pledged to achieve the 2 per cent target by March, two years earlier than planned. Japan also plans to revise the ongoing security and defence policy by December 2026 to further strengthen its military.

Missiles and drones will add to southwestern island defence

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-defence.

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-Defence Force under its security alliance with the US.

The new budget plan allocates more than 970 billion yen (USD 6.2 billion) to bolster Japan's "standoff" missile capability. It includes a 177 billion-yen (USD 1.13 billion) purchase of domestically developed and upgraded Type-12 surface-to-ship missiles with a range of about 1,000 kilometres (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 (USD 640 million) to deploy "massive" unmanned air, sea-surface and underwater drones for surveillance and defence under a system called "SHIELD" planned for March 2028, defence ministry officials said.

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

Tension with China grows

The budget announcement comes as Japan's row with China escalates 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 Defence 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 the southern Japanese island of Iwo Jima for the first time, fuelling 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 defence 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 (USD 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 defence 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 (USD 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 (USD 784 billion) national budget bill.

The five-year defence buildup programme would bring Japan's annual spending to around 10 trillion yen (USD 64 billion), making it the world's third-largest spender after the US and China. Japan will clear the 2 per cent 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.