Can Japan Optimize Its Record Defense Budget? – The Diplomat – Asia-Pacific Current Affairs Magazine

Can Japan Optimize Its Record Defense Budget?  The Diplomat – Asia-Pacific Current Affairs Magazine

Japan’s Ministry of Defense (MOD) released its fiscal year 2027 budget request in early August. At approximately 9.3 trillion yen – a 3.8 percent increase from FY2026 – it is the largest defense budget request in the country’s postwar history. Predictably, all the attention has been paid to the size of the request, particularly the fact that the it is the highest in Japan’s postwar history. The topline number definitely matters, especially because it allowed Japan to hit the 2 percent of the Gross Domestic Product (GDP) target it set for its defense spending ahead schedule. It is also noteworthy that the request has been followed by a couple of decisions that attracted little attention but are potentially consequential in Japan’s attempt to revitalize its defense industrial base.

At the end of August, MOD announced a plan to acquire former Nippon Steel industrial sites in Kure, Hiroshima and turn them into mixed-use facilities that the government can lease to defense companies. In mid-September, Mitsubishi UFJ Bank, one of Japan’s megabanks, also announced new, more lender-friendly guidelines for financing defense firms. This series of steps come as Japan finalizes the revision of its National Security Strategy (NSS), National Defense Strategy (NDS), and Defense Buildup Plan (DBP), which are slated to be released in December. Together, those documents will set the course