Tokyo, Japan – December 26, 2025 – Japan’s cabinet has approved a record defence budget of over 9 trillion yen ($58 billion) for the 2026 fiscal year, part of a broader 122.3 trillion yen ($784 billion) national budget. The plan still requires parliamentary approval by March.

The budget aims to strengthen Japan’s missile, drone, and maritime capabilities in response to mounting regional tensions with China, particularly over Taiwan. Under the five-year plan, Japan is expected to become the world’s third-largest defence spender after the US and China, targeting 2 percent of GDP in military spending by March 2026.

Key Allocations

• Missile capabilities: Over 970 billion yen ($6.2 billion) for standoff missiles, including 177 billion yen ($1.13 billion) for upgraded Type-12 surface-to-ship missiles with a 1,000 km range.
• Unmanned systems: 100 billion yen ($640 million) for aerial, surface, and underwater drones under the SHIELD system, operational by March 2028.
• Next-generation fighter jet development: 160 billion yen ($1 billion) for joint projects with Britain and Italy, including AI-controlled drone integration, with deployment by 2035.
• Defence industry support: 10 billion yen ($64 million) to strengthen arms exports and domestic production.

Regional Security Context

Tensions with Beijing have escalated after Chinese aircraft carrier drills near southwestern Japan and radar-lock incidents on Japanese planes, prompting Tokyo to monitor Chinese military operations closely. Japan’s Defence Ministry is establishing a new office dedicated to studying Chinese capabilities.

The government also emphasizes expanding joint defence projects and revitalizing Japan’s defence industry to maintain advanced capabilities amid population challenges affecting troop numbers.