Japan's Cabinet has approved a record defence budget exceeding 9 trillion yen ($58 billion) for fiscal 2026, marking a significant escalation in military spending amid rising regional tensions, particularly with China.

This draft budget represents a 9.4 per cent increase from the previous year and forms part of Japan's ambitious five-year programme to double annual arms expenditure to 2 per cent of gross domestic product.

Prime Minister Sanae Takaichi's administration, facing pressure from the United States, has pledged to meet this 2 per cent target by March—two years ahead of the original schedule.

The funding aims to enhance Japan's strike-back capabilities and coastal defences through advanced cruise missiles and unmanned systems.

A major shift is evident in Japan's bolstering of offensive capabilities with long-range missiles, departing from its post-Second World War doctrine that restricted force to self-defence.

The 2022 security strategy identifies China as Japan's primary strategic challenge, advocating a more proactive role for the Self-Defence Forces within the US-Japan alliance.

Over 970 billion yen ($6.2 billion) has been allocated to develop "standoff" missile capabilities, including a 177 billion yen ($1.13 billion) investment in upgraded Type-12 surface-to-ship missiles with a range of approximately 1,000 kilometres.

The first deployment of these Type-12 missiles will occur in Kumamoto prefecture in Japan's southwest by March, accelerating plans by a full year to counter threats in the region.

Japan's ageing population and military staffing shortages have underscored the need for unmanned technologies.

The budget earmarks 100 billion yen ($640 million) for a "SHIELD" system, deploying large-scale unmanned aerial, surface, and underwater drones for surveillance and defence by March 2028.

To expedite rollout, Japan will initially procure these drones from overseas suppliers, potentially including Turkey or Israel.

Tensions with China have intensified following Takaichi's November statement that Japanese forces might intervene if Beijing acts against Taiwan, which China claims as its territory.

This month, Chinese aircraft carrier exercises near Japan's southwestern islands prompted Tokyo's protests after Chinese planes locked radar on Japanese aircraft—a move seen as preparatory for missile strikes.

Japan's Defence Ministry, concerned by China's expanding Pacific operations, will establish a new office to analyse Beijing's activities, equipment, and countermeasures.

In June, two Chinese carriers operated simultaneously near Iwo Jima for the first time, heightening Tokyo's fears of China's reach beyond the disputed East China Sea islands.

To invigorate its domestic defence sector, Japan is pursuing joint projects with allies and easing arms export rules.

The budget includes over 160 billion yen ($1 billion) for collaborative development of a next-generation fighter jet with Britain and Italy, slated for 2035 deployment, alongside AI-operated drones to accompany it.

Australia's selection of Mitsubishi Heavy Industries in August to upgrade its Mogami-class frigates—replacing 11 ANZAC-class vessels—provides a substantial boost to Japan's industry.

Nearly 10 billion yen ($64 million) supports the defence industrial base and export initiatives.

Parliament must approve the budget by March as part of a 122.3 trillion yen ($784 billion) national budget.

Upon completion, Japan's five-year build-up will position it as the world's third-largest military spender at around 10 trillion yen ($64 billion) annually, behind only the US and China.

Funding for this expansion draws from hikes in corporate and tobacco taxes, with income tax increases planned from 2027; however, sustained growth beyond 2 per cent of GDP remains uncertain.

Based On AP Report