Morning Edition · Saturday, November 14, 2026Published at 12:15 AM EST · New York
The figure would be about 40% above the current ¥43 trillion plan, and Kyodo reports that a corporate tax increase is under discussion to help pay for it.
Japan's government is considering setting its next five-year defense plan at ¥60 trillion, the Japan Times reported. The Defense Ministry estimates that the necessary spending over the period will total ¥70 trillion to ¥80 trillion. The gap between the two numbers reflects the dispute between the Defense Ministry and the Finance Ministry. The current plan, covering fiscal 2023 to 2027, set the required level at about ¥43 trillion.
Funding is the political problem. Kyodo, in a report carried by the Kumamoto Nichinichi Shimbun, said an additional corporate tax increase has been floated inside the government and that annual defense spending is likely to exceed ¥10 trillion. The next plan, for fiscal 2027 to 2031, is expected to center on large purchases of drones and on stockpiles of munitions and missiles for a prolonged conflict.
Domestic critics question the money. Shimbun Akahata, the Japanese Communist Party newspaper, wrote that an earlier draft would make the plan about 1.8 times the current one and said the government of Prime Minister Sanae Takaichi cannot show how it would pay for it. The figures may change during year-end budget work and the planned revision of Japan's three security documents.
Tokyo presents the increase as a response to China's military growth and to doubts about how much it can rely on US commitments. Beijing has repeatedly said Japan's military buildup threatens regional stability.
Part of a tracked trend
Indo-Pacific Arms Race Accelerates
Over the next 3-6 months a sharpening regional arms race drives Japan and its neighbors to expand militaries and export weapons—Tokyo moving to sell missiles—as maritime confrontations with China multiply and Asian rearmament gathers pace.
A ¥60 trillion ceiling helps the Finance Ministry and Prime Minister Takaichi, because it avoids a large tax increase. Japanese defense contractors gain under any figure in the range. Beijing can cite each increase in its argument that Japan is remilitarizing.
Jiji and Kyodo confirm ¥60 trillion as the working figure, but Reuters had earlier reported that the government and coalition were weighing ¥70 trillion to ¥80 trillion, so the number is a negotiating position. Keidanren already opposes a corporate tax increase, and government officials estimate that such a tax would raise only about ¥1 trillion a year.
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Synthesized from: The Japan Times · Kumamoto Nichinichi Shimbun (Kyodo) · Shimbun Akahata
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What this means
Japan is moving from about ¥8.6 trillion a year to more than ¥10 trillion a year in defense spending at a time when Japanese government bond yields are under pressure from rising global rates. Higher spending funded partly by debt adds bond supply, and a corporate tax increase cuts into earnings for Japanese companies. Domestic defense contractors, shipbuilders and drone and munitions makers gain directly. The market expected the defense budget to keep growing, but not that the government would consider a figure close to 40% above the current plan, or a new corporate tax. Germany's 2025 decision to exempt defense from its debt brake is a recent precedent: defense stocks rose and Bund yields moved higher. The likelier outcome by the end of December is a plan near ¥60 trillion with partial tax funding, followed by pressure from the Defense Ministry for supplementary budgets. This depends on the ruling coalition keeping its majority on the tax measure. It would be wrong if Tokyo settles well below ¥60 trillion, which would mean fiscal limits are winning over security demands.
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Observations to monitor, not financial advice.
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