Japan Government responds to China’s growing desire for power and the threat from North Korea with record spending on national defense. The draft budget for the fiscal year 2026, which begins on April 1, provides for defense spending of around nine trillion yen (49 billion euros). This corresponds to an increase of around 3.5 percent compared to the current financial year.
Around 100 billion yen (500 million euros) are earmarked for the construction of a system known as Shield to protect Japan’s long coastline and remote islands, for example against ships, submarines and drones. One focus is on the use of drones.
The total budget is expected to amount to 122.3 trillion yen (611.5 billion euros), as the cabinet announced. In view of the rapid aging of society, this is also intended to finance increasing social spending. Despite record tax revenues, the government has to issue additional government bonds to finance the national budget.
New debt is expected to rise only slightly from 28.6 trillion yen (143 billion euros) this year to 29.6 trillion yen (148 billion euros). The debt ratio falls to 24.2 percent – this is the lowest level since 1998. Higher tax revenue, which is expected to rise by 7.6 percent to a record 83.7 trillion yen (418.5 billion euros), will help finance the increased spending.
Japan’s aggressive spending policies have put pressure on the yen against major currencies. Japan’s national debt is already more than twice the country’s annual gross domestic product (GDP).
Increased tensions with China
The military buildup comes against the backdrop of increased tensions with neighboring China. In November, Japan’s conservative Prime Minister Sanae Takaichi said a Chinese attack on the democratic island republic of Taiwan would pose a “life-threatening situation” for Japan, which could lead to the exercise of the right to self-defense.
China responded with strong criticism and travel warningscanceled flight connections and a ban on imports of Japanese seafood. Japan’s plan to station missiles on the island of Yonaguni, almost 110 kilometers from Taiwan, also met with significant criticism. Japan recently protestedbecause Chinese military aircraft are said to have targeted Japanese fighter jets with special target tracking radar near the southern Japanese island group of Okinawa. China disagreed.
