Japan weighs 70 trillion to 80 trillion yen five-year defence plan

The range under discussion

Defence buildup spending for the five years from April 2027 would be set at 70 trillion to 80 trillion yen, or US$457 billion to US$508 billion, under the proposal, two people familiar with the matter told Reuters. That is nearly double the roughly 43 trillion yen allocated under the current five-year plan, which began in fiscal 2023.

The figure could still change as the government compiles the budget towards year-end and revises its three security documents. The Defence Ministry said it had no comment. One of the people said the final figure could land in the mid-to-late 70 trillion yen range, and questioned whether that would be enough given the security environment in East Asia. The total remains subject to debate between the government and coalition partners.

Nikkei reported on 24 October that the new plan is expected to total 60 trillion to 80 trillion yen, a wider range that brackets the 70 trillion to 80 trillion yen figure the two sources described.

Washington wants 3.5%, Tokyo is not signing up

Japan is not expected to write a 3.5% of GDP defence target into the national security documents due for revision this year, the Asahi Shimbun reported on 16 October, citing government sources.

Hitting 3.5% would require about 20 trillion yen a year and make tax rises unavoidable, the report said. US officials have pressed behind the scenes and called 3.5% a "global standard". Tokyo is instead considering a category tentatively called "comprehensive security-related expenditures" that would cover budgets outside the Defence Ministry contributing to national security, such as economic security, artificial intelligence and space programmes, the Asahi reported.

The current documents, compiled in 2022, set a goal of 2% of GDP in fiscal 2027, a level the Takaichi administration reached two years early with about 11 trillion yen in defence and related spending in the fiscal 2025 budgets.

What the money buys, and what it does not

The new spending is expected to fund purchases including large numbers of drones, one of the people said. The same person said a weaker yen has pushed up the cost of procuring defence equipment abroad.

Fixed costs are the constraint. Payments under past weapons contracts and personnel expenses will absorb about 30 trillion yen of the five years from fiscal 2027, the Tokyo Shimbun reported. The current programme, formulated at the end of 2022, raised planned spending from an initial 27.5 trillion yen and focused on long-range missiles for counterstrike capability, ammunition and spare parts.

Separately, the Defence Ministry plans to seek a record 8.9 trillion yen in its fiscal 2027 budget request, up from 8.85 trillion yen this fiscal year, the Japan Times reported on 20 August. The request is likely to swell further in the year-end draft because it includes measures whose costs are not yet specified.

The bill lands in a tight fiscal year

Government agencies submitted 143.1 trillion yen in budget requests, the Finance Ministry said on 4 September.

The ministry raised its assumed interest rate to 3.8% from 3.0% after the 10-year bond yield hit 3% for the first time since 1996, pushing debt-servicing requests to a record 36.64 trillion yen, 5.36 trillion yen more than the current fiscal year.

Takaichi told the Yomiuri newspaper she aims to keep new bond issuance around 40 trillion yen. The government also plans to temporarily cut the consumption tax on food from next year and has not set out how it will fund defence increases and tax cuts together, Nikkei reported.

What happens next

The three security documents face revision this year: the National Security Strategy, National Defense Strategy and Defense Buildup Program.

The government and ruling parties will step up talks toward the end of the year on the amount and the funding sources.