Japan poised for another record-busting defense budget

Japan’s military spending is edging closer to its targeted 2% of gross domestic product (GDP), with big new budget earmarks for drones, missile defense, satellites, cyber defense and cloud-based command and control systems.

The proposed budget, now awaiting final approval, shows Tokyo is banking more on military technology boots on the ground to meet rising security threats and challenges from China, North Korea and Russia.

On August 30, Japan’s Ministry of Defense requested a record-high budget of 8.5 trillion yen ($58 billion) for the 2025 fiscal year that ends in March 2026.

The figure, a whopping 7.4% increase over an initial budget of 7.9 trillion yen, is equal to about 1.4% of projected GDP and is two-thirds greater than the 5.1 trillion yen spent in fiscal 2021.

The Ministry of Finance will review and perhaps reduce the proposed budget, which should be finalized by the end of this calendar year. If history is a guide, any reduction will likely be minimal, perhaps around 3%, meaning the final budget would still hit a record-high level of 8 trillion yen.

Official Japanese policy is to raise defense spending to NATO’s standard of 2% of GDP by fiscal 2027. For decades, Japan capped defense spending at 1% of GDP, in line with its “pacifist” constitution.

Japan’s GDP is growing at an annual rate of about 1%, so hitting the 2% target will require defense spending to rise by another 45% to over 12 trillion yen.

That’s a fiscal stretch, to be sure, but it commits the nation to a target that makes cutting the defense budget nearly impossible under any conceivable new Japanese government.

Whether or not the 2% target is reached on time in 2027 (or at all), Japan’s military build-up has been institutionalized and will likely