Japan's defence budget grew at a CAGR of 19.3% from 2020 to 2024 despite economic challenges.
A new “Japan Defense Market 2024-2029” report from GlobalData highlights Japan's response to regional threats through military modernisation and international collaboration.
In the face of rising geopolitical tensions and a weakening Yen, Japan's defence strategy remains unchanged. Its Ministry of Defense has requested a 17.2% increase in the 2024 budget.
According to a report from GlobalData titled “Japan Defense Market 2024-2029”, Japan’s defence spending has gone from $9.2bn (Y1.3trn) in 2020 to a projected $18.6bn in 2024. This growth shows the country’s need to modernise its military assets in response to threats from neighbouring nations such as North Korea and China.
Key insights from GlobalData’s report
The report “Japan Defense Market Size and Trends, Budget Allocation, Regulations, Key Acquisitions, Competitive Landscape and Forecast, 2024–29” analyses Japan's defence strategy. The primary driver of this spending surge is Japan’s strained relations with regional powers, particularly China and North Korea. Ongoing disputes over the Kuril and Senkaku Islands and North Korea's missile tests have prompted Japan to accelerate its defence modernisation efforts.
The focus of Japan's defence strategy includes:
Naval and aerial modernisation: Japan is actively enhancing its naval and aerial fleets through the procurement of platforms such as the Taigei-class submarines, Mogami-class frigates, and F-35A/B fighter jets. These acquisitions aim to bolster Japan’s deterrence capabilities and improve its ability to project power in regional conflicts.
Partnerships for next-generation aircraft: Japan’s collaboration with Italy and the UK under the Global Combat Air Programme (GCAP) reflects a goal of minimising development costs while strengthening security ties beyond the United States. Japan fortifies its standing in international defence cooperation by engaging in such partnerships.
Economic challenges vs. defence priorities
Despite a challenging economic backdrop driven by a devaluating Yen, Japan has demonstrated its commitment to ensuring defence procurement plans remain unaffected. Akash Pratim Debbarma, Aerospace and Defence Analyst at GlobalData, notes that Japan's defence planners have prioritised continuing key procurements, reflecting the importance of these assets in national security.
“Japanese policymakers are ensuring that scheduled procurements of critical assets such as the Taigei-class submarine, Mogami-class frigates, and F-35A/B aircraft are not impacted due to the current economic turmoil,” said Debbarma.
This prioritisation signals that Japan is looking beyond short-term financial constraints, focusing instead on the long-term stability and modernisation of its defence capabilities.
Implications for the industry
Japan’s expanding defence budget has several implications for the global aerospace and defence industry.
The surge in spending creates opportunities for defence contractors and suppliers involved in naval and aerial systems.
As Japan seeks to mitigate costs through partnerships like the GCAP, it opens doors for collaborative defence ventures with traditional allies such as the US and European partners.
With the ongoing development of North Korea's missile programme and China’s assertiveness, Japan is likely to focus increasingly on procuring systems capable of long-range strikes. This trend indicates future investments in missile defence and offensive strike capabilities, adding new dimensions to Japan's traditionally defensive posture.
Opinions and outlook
Japan's historical stance as a non-nuclear nation continues to evolve in response to emerging security threats. Debbarma highlights the significance of missile defence systems like the US-developed Aegis Combat System, which Japan has deployed on its naval platforms to counter the growing threat from North Korea.
On September 3, 2024, the US State Department approved a $150m foreign military sale to Japan for technical support and updates to the AEGIS Combat Systems on its destroyers.
“As North Korean missiles continue to expand their range and disputes with an assertive China persist, Japanese policymakers will likely push for the procurement of weapons systems capable of conducting long-range strikes,” Debbarma explains.
The defence spending trajectory outlined in GlobalData indicates that Japan will continue prioritising modernisation and procurement to counter external threats. As Japan reinforces its missile defence capabilities and deepens international partnerships, the global defence industry benefits from new opportunities in cooperation and procurement.
As Japan navigates regional dynamics and economic challenges, its focus on modernising defence platforms, enhancing deterrence capabilities, and forging new international partnerships will have far-reaching impacts on the global defence industry.
