Japan's Defense Ministry disclosed on Monday a preliminary budget request of 8.9 trillion yen ($55.6 billion) for the fiscal year beginning in April 2027, a modest increase from the 8.8 trillion yen ($55 billion) requested for the current fiscal year.
The ministry says the figure will grow substantially once Prime Minister Sanae Takaichi's government approves a new security and defense strategy later this year aimed at strengthening Japan's counterstrike capability.
Under a five-year defense strategy adopted in 2022, Japan has already doubled defense spending to roughly 2% of GDP, building up the Self-Defense Forces' offensive role as Beijing's regional assertiveness grows. China has criticized the buildup as "new militarism," according to the ministry.
The request seeks funding for unmanned attack drones launched from above or under water, to be paired with long-range missiles for cheaper counterstrikes. Officials say low-cost, domestically produced uncrewed weapons can cut casualties and expense while helping offset a shrinking pool of military personnel as Japan's population ages. Experts cited by the ministry note that building fully homemade drones will be difficult, since Japan's commercial drone market is dominated by Chinese imports.
Tokyo is also pursuing hypersonic missiles launched from submarines to reinforce its counterstrike posture, and an integrated AI platform — an "AI orchestrator" — to speed battlefield decisions, assess targets and select responses autonomously. Japan is weighing a mix of foreign AI technology, including from the United States, and homegrown systems. A separate "Defense Ministry cloud" would handle sensitive data and emergency communications.
Perhaps the most consequential line item is a state-owned, contractor-operated manufacturing system: the government would acquire weapons factories outright and outsource production to private firms, aiming to guarantee stable supply after suppliers withdrew from the defense sector over past decades due to poor profits and reputational concerns tied to lethal weapons production.
The budget also funds private-sector R&D and restructuring meant to shore up production efficiency at contractors. Profits at Mitsubishi Heavy Industries, Kawasaki Heavy Industries and IHI Corp. have risen as Japan expands its military buildup and arms exports, though the ministry notes the broader industry still lags because Japan's constitution limits the use of force to self-defense.
The strategic logic is straightforward: as China's military posture hardens, Tokyo needs cheaper, faster, more autonomous weapons systems and a defense-industrial base that won't buckle when private capital walks away.
But the mechanism Tokyo has chosen deserves scrutiny. A government buying factories and outsourcing their operation is not free enterprise solving a supply problem — it is the state stepping in because the market, driven by thin margins and reputational risk, declined to. That may be a rational emergency measure against a genuine security threat from Beijing. It is not, however, a model for how democracies generally build capacity. The taxpayer is underwriting risk that private industry judged unprofitable, and Tokyo will need to prove the arrangement produces deployable hardware rather than another layer of bureaucracy.
Washington should watch closely. An ally serious about deterrence, AI-driven command systems and drone swarms is a stronger partner against Chinese expansion than one hollowed out by demographic decline. Capital and security policy do not always align neatly — but a free and armed Japan remains a better bet than a passive one.
