Key insights and market outlook
Japan is doubling its military spending to over ¥9 trillion (US$58 billion) in FY2026, marking its largest ever defense budget. This significant increase is driven by rising tensions with China and pressure from the United States to play a larger regional security role. The funds will be used to enhance counterattack capabilities, coastal defense, and develop cruise missiles and unmanned weapon systems.
Japan is set to implement its largest ever defense budget, exceeding ¥9 trillion (approximately US$58 billion) in fiscal year 2026. This significant doubling of military spending marks a major shift in Japan's defense policy, moving away from its traditional post-WWII pacifist stance. The dramatic increase is primarily driven by escalating tensions with China and pressure from the United States to assume a more substantial role in regional security arrangements.
The substantial budget will be allocated across several critical areas:
The military expansion is taking place under the leadership of Prime Minister Sanae Takaichi, known for her hawkish stance on defense issues. This policy shift represents a significant departure from Japan's traditional self-defense doctrine that has been in place since World War II. The government's decision reflects a growing recognition of the need for Japan to take a more proactive role in regional security amid increasing military assertiveness from China.
Defense Budget Increase
Military Capability Enhancement