Amid rising tensions with China, Japan’s cabinet has endorsed a record defense spending plan aimed at boosting missiles, drones and maritime capabilities.
Published December 26, 2025
Japan’s Cabinet has approved a record defense budget of more than 9 trillion yen ($58 billion) for next fiscal year, reflecting efforts to strengthen military and coastal defenses amid rising tensions in East Asia.
The plan still requires parliamentary approval by March and forms part of a broader national budget of 122.3 trillion yen ($784 billion) for the fiscal year starting in April 2026. The increase marks the fourth year of Japan’s five-year commitment to increase defense spending to 2% of gross domestic product.
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The spending increase comes as the Japanese government grows increasingly concerned about China. In November, Prime Minister Sanae Takaichi stated that if China were to take action against the self-governing island of Taiwan, which is claimed by the Chinese government, the Japanese military might become involved.This statement infuriated the Chinese government, which responded with diplomatic and economic measures against Japan.
Under the five-year defense development plan, Japan is expected to become the world’s third-largest defense spender after the United States and China. The Ministry of Finance said Japan is on track to reach the 2% target by March. Takaichi’s administration is facing pressure from the United States to reach this standard two years earlier than originally planned. Japan also plans to revise its existing security and defense policy by December 2026 to further strengthen its military posture.
In recent years, Japan has moved to strengthen its ability to attack targets from long range, a significant shift from its post-World War II approach that limited the use of force to self-defense.
The current National Security Strategy, adopted in 2022, identifies China as Japan’s most serious strategic challenge and calls for a more active role for the military within the framework of the alliance with the United States.
Under the new budget, more than 970 billion yen ($6.2 billion) has been allocated to strengthen Japan’s “standoff” missile capabilities. This includes 177 billion yen ($1.13 billion) to purchase a domestically produced and improved Type 12 surface-to-ship missile with an estimated range of about 1,000 km (620 miles).
The government is also focusing on unmanned systems due to the aging and shrinking population and the difficulty of maintaining troop numbers. To strengthen its coastal defenses, Japan will spend 100 billion yen ($640 million) to deploy “large numbers” of unmanned air, surface and underwater drones for surveillance and defense. The system, known as SHIELD, is expected to be operational by March 2028, defense officials said.
To accelerate implementation, Japan expects to initially rely on imported equipment, potentially sourcing systems from countries such as Turkiye and Israel.
Intensifying tensions with China
This budget decision was made amid worsening relations between Japan and China following Takaichi’s comments regarding Taiwan. Friction escalated this month after Chinese aircraft carrier exercises near Japan’s southwest, with the Japanese government protesting that Chinese aircraft had locked radar onto Japanese planes. This action is considered a potential missile target.
Japan’s Ministry of Defense, already concerned about China’s growing military presence in the Pacific, plans to establish a new office to study China’s operations, equipment and capabilities in the region.
Concerns were further heightened in June when two Chinese aircraft carriers were observed sailing simultaneously near Japan’s Iwo Jima (the first time this had ever happened), highlighting China’s growing ability to expand its influence beyond the East China Sea.
Japan deepens defense industrial cooperation
In response to the recent relaxation of export restrictions, Japan is also aiming to revitalize its domestic defense industry by expanding joint development projects with partner countries and promoting arms sales overseas.
The Japanese government is planning to spend more than 160 billion yen in 2026 to jointly develop a next-generation fighter jet with the UK and Italy, with the aim of deploying it in 2035. The project also includes research into AI-controlled drones designed to operate alongside aircraft.
To boost Japan’s defense sector, Australia in August selected Mitsubishi Heavy Industries to refurbish Mogami-class frigates to replace its fleet of 11 ANZAC-class ships.
The new budget also includes about 10 billion yen ($64 million) to support the defense industrial base and arms exports.
