Asia Defense | Security | East Asia

Can Japan Optimize Its Record Defense Budget?

All nine priority areas require substantial spending, and the investment needs to be sustained over many years to come.

A Type 88 surface-to-ship missile is test-launched by Japan’s 1st Artillery Brigade from Point Mugu Sea Range, California, the U.S., in July 2021.

Japan’s Ministry of Defense (MOD) released its fiscal year 2027 budget request in early August. At approximately 9.3 trillion yen – a 3.8 percent increase from FY2026 – it is the largest defense budget request in the country’s postwar history.

Predictably, all the attention has been paid to the size of the request, particularly the fact that the it is the highest in Japan’s postwar history. The topline number definitely matters, especially because it allowed Japan to hit the 2 percent of the Gross Domestic Product (GDP) target it set for its defense spending ahead schedule. 

It is also noteworthy that the request has been followed by a couple of decisions that attracted little attention but are potentially consequential in Japan’s attempt to revitalize its defense industrial base. At the end of August, MOD announced a plan to acquire former Nippon Steel industrial sites in Kure, Hiroshima and turn them into mixed-use facilities that the government can lease to defense companies. In mid-September, Mitsubishi UFJ Bank, one of Japan’s megabanks, also announced new, more lender-friendly guidelines for financing defense firms. 

This series of steps come as Japan finalizes the revision of its National Security Strategy (NSS), National Defense Strategy (NDS), and Defense Buildup Plan (DBP), which are slated to be released in December. Together, those documents will set the course for Japan’s national security policy over the next five years. As such, the FY2027 budget request offers a preliminary look at how these documents likely to take shape.

The request’s most notable feature is its emphasis on a “new way of fighting” (atarashii tatakai-kata), followed by operational sustainability and the industrial and personnel base. Across these categories, the MOD identifies nine priority areas for investment, including artificial intelligence, uncrewed systems, stand-off – or counterstrike – capabilities, space, cyber, sea-lane defense, the defense industrial base, and personnel. Investment in all of these areas is much overdue. 

The request also appears to seek a better balance between what Japan calls shomen sobi (frontline equipment) and koho (the logistics and support systems that keep a force operating) in the budget allocation. Finally, it makes an explicit effort to harness emerging technologies such as AI and uncrewed systems. 

In many ways, the FY2027 request could be a precursor to a genuinely transformational effort to strengthen Japan’s defense capabilities, if fully implemented.

At the same time, however, the request also reminds us of the challenges in executing such transformation. Nine priority areas is a lot. In other words, with this many so-called “priorities” running concurrently, Japan risks spreading its investment too broadly and........

© The Diplomat