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 continue apace.

How Japan spends on defense is radically changing. Personnel expenses, which are barely growing, have dropped from 44% of total spending five years ago to an estimated 29% this fiscal year and 27% in the newly proposed 2025 budget.

Most of the growth in spending has been and continues to be devoted to advanced weapons systems and other technological upgrades.

Like the US, Japan is struggling to recruit ordinary soldiers. Last February, Japan’s Ministry of Defense established a panel to solve the problem and, not surprisingly, suggested higher salaries and better working and living conditions for soldiers and their families.

But the panel also pointed out the need to compete with the private sector for specialists in critical technologies such as cyber security. This is likely to be an ongoing problem as the shift to high-tech war-fighting capabilities continues.

The fiscal 2025 budget proposal was presented as part of an annual progress report on Japan’s defense force development plan, which Prime Minister Fumio Kishida’s cabinet approved in December 2022.

The plan is outlined in the “Three Strategic Documents,” namely the National Security Strategy the accompanying National Defense Strategy and the Defense Buildup Program.

The Defense Buildup Program listed seven major programs as key for radically strengthening the military: stand-off defense (defense from a distance), integrated air and missile defense, unmanned defense capabilities, cross-domain operational capabilities, command and control and intelligence-related functions, mobile deployment capabilities and civil protection, and sustainability and resiliency.

According to this year’s report, progress has been made on all scores. On stand-off defense, both the deployment of enhanced Type 12 surface-to-ship guided missiles and the acquisition of Tomahawk missiles were brought forward from fiscal 2026 to fiscal 2025.

Maritime Self-Defense Force and other personnel training on operating Tomahawk missiles was conducted from March to August 2024.

Type 12 missiles are made by Mitsubishi Heavy Industries (MHI), Japan’s top defense contractor. Tomahawk cruise missiles are imported from the US and made by American defense contractor Raytheon.

In July, the Acquisition, Technology and Logistics Agency of Japan’s Ministry of Defense announced that two Hyper-Velocity Gliding Projectile (HVGP) test launches had been conducted in California, one in March and one in April.

According to Defense News, a high-supersonic HVGP with a maximum range of 500km should be fielded by Japan’s Ground Self-Defense Force in 2026. A hypersonic HVGP with a 3,000km range is expected around the end of the decade. HVGPs are also made by MHI.

With MHI’s production of Patriot missiles constrained by Boeing’s inability to deliver key components, it appears that Japan will reduce its dependence on defense equipment imported from the US and rely instead on its own superior manufacturing capability.

Japan plans to start launching a satellite constellation by the end of fiscal 2025 to provide the target detection and tracking capabilities required for stand-off defense.

The project will be supported by a Private Finance Initiative (PFI), which employs private sector funds plus management and technical expertise to build and operate public facilities.

Progress on integrated air and missile defense capability has included the completion of the basic design of an Aegis-equipped ship and the acceleration of detailed design of the same ship starting in February 2024.

Moreover, Japan and the US announced in May a joint Glide Phase Interceptor (GPI) guided missile development program.

The US will provide hypersonic missile defense capability during the glide-phase portion of hypersonic flight while Japan will lead the development of rocket motors and propulsion components.

Japan-based space and defense expert Paul Kallender of the Keio Research Institute at Shonan Fujisawa Campus points out that it is a Japanese missile, and that “it’s to Japan the US is going for help with its GLP, not anyone else.”

In fiscal 2023, Japan acquired ten types of unmanned aerial vehicles (UAVs), or drones. Japanese mid-range and small-area UAVs and an Unmanned Underwater Vehicle (UUV) are currently operational.

Cross-domain operational capabilities encompass space, cyber, electromagnetic, ground, maritime and air domains.

Developments reported this year include a “new edition” of the Air Self-Defense Force 2nd Space System Management Squadron, reorganization of Ground Self-Defense Force System Communications and Cyber ​​School, reorganization of the Ground Self-Defense Force 2nd Special Forces Brigade and creation of new 7th Surface-to-Ship Missile Regiment in southwest Japan.

Japan is also expanding its cloud computing capacity for more effective command and control. System design and manufacturing of cloud-based command and control services for the Ground, Maritime and Air Self-Defense Forces has started. These will be coordinated by a Central Command System, with the aim of consolidating a Ministry of Defense Cloud.

In the field of mobile deployment capability and citizen protection, one medium-sized vessel and one small-sized vessel scheduled to be launched in the third quarter of fiscal 2024 will be operated by a new Self-Defense Force Maritime Transport Group.

The Self-Defense Forces also acquired two multi-purpose helicopters in fiscal 2023 and provided a PFI vessel for evacuees from the Noto Peninsula Earthquake. The sustainability and resiliency category includes the provision of ammunition, fuel and maintenance.

The ministry intends to create a master plan for the consolidation and rebuilding of Self-Defense Forces facilities and begin structural reinforcement and relocation according to their function and importance. In this connection, it plans to construct 36 new gunpowder magazines in six facilities nationwide.

Other important initiatives include developing next-generation satellites, stepping up R&D, promoting the use of more AI and strengthening the defense production base, the Japan-US alliance and information security.

In the seven years to 2031, the Ministry of Defense plans to develop next-generation defense communication satellites as successors to the X-band satellites currently in operation.

The project includes manufacturing both satellites and ground stations. In addition, a new Space Operations Group will be established to carry out surveillance and response missions in outer space.

In October 2024, Japan’s Ministry of Defense plans to open a research institute dedicated to the development innovative technologies for the defense industry.

Modeled on the US Defense Advanced Research Projects Agency (DARPA), the Defense Innovation Technology Institute will recruit researchers from the private sector and academia as well as from the ministry itself.

Originating with the National Defense Strategy announced in December 2022, the new institute will aim to develop “multi-use cutting-edge technologies that contribute to defense equipment development, and to produce equipment that leads to defense innovation.”

As reported by Kyodo news agency, the Ministry of Defense plans to hire experts in AI, robotics and physics to design and manage projects such as the development of autonomous unmanned vehicles, new methods of submarine detection and the application of dual-use technologies shared by the military and the private sector.

The list of new Japanese defense projects goes on but the trend is clear: Japan is developing a high-tech “porcupine defense” strategy to deter China, North Korea and Russia. First raised in 1970s Japan, the porcupine defense concept was wishful strategic thinking then but is being put into practice now.

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