The draft budget for fiscal year 2026, starting in April, represents a 9.4 percent increase from 2025 and is the fourth year of Japan’s five-year military buildup. Once completed, the program would lift annual defense spending to around 10 trillion yen ($64 billion), making Japan the world’s third-largest military spender after the U.S. and China.

Officials say the expansion is driven by heightened regional tensions, particularly China’s growing military activity around Japan and Taiwan.

Missiles and Counterstrike Capability

More than 970 billion yen ($6.2 billion) is allocated to strengthen Japan’s long-range “standoff” strike capability. This includes 177 billion yen ($1.13 billion) for upgraded Type-12 surface-to-ship missiles, with an extended range of about 1,000 kilometers.

The first batch of these missiles is scheduled for deployment in Kumamoto prefecture by March, a year earlier than originally planned, reflecting the urgency of Japan’s missile buildup in its southwestern regions.

Unmanned Systems and Coastal Defense

Japan will also spend 100 billion yen ($640 million) to deploy large numbers of unmanned aerial, surface, and underwater drones for coastal surveillance and defense under a system known as SHIELD, planned for 2028. Officials say unmanned systems are essential due to Japan’s aging population and military recruitment challenges.

Initial drone deployments are expected to rely on imports, potentially from Türkiye or Israel, before domestic production scales up.

Industry and Long-Term Planning

The budget includes over 160 billion yen ($1 billion) for joint development of a next-generation fighter jet with Britain and Italy, targeted for deployment in 2035, as well as funding for AI-enabled drones to operate alongside manned aircraft.

The defense plan still requires parliamentary approval by March as part of a broader 122.3 trillion yen ($784 billion) national budget.