Japan Raises Defence Budget by 3.5% as Tensions with China Escalate

Japan is set to significantly increase its defence spending as relations with China remain strained, approving a record rise in military expenditure amid growing regional security concerns.

The Cabinet on Friday approved a draft budget for the 2026 fiscal year that includes a 3.5 per cent increase in defence spending, taking military expenditure to around 9 trillion yen (approximately $58 billion).

As part of the budget, about 100 billion yen has been allocated for the development of a defence system known as “Shield”, designed to protect Japan’s extensive coastline and remote islands from threats posed by ships, submarines and drones.

The military build-up comes against the backdrop of heightened diplomatic and security tensions with China, following remarks made in November by Prime Minister Sanae Takaichi regarding Taiwan. Takaichi warned that a Chinese attack on the self-governed island would constitute an “existential threat” to Japan and could trigger the country’s right to self-defence.

Beijing responded sharply, issuing travel warnings, cancelling flights and imposing an import ban on Japanese seafood.

Tensions were further inflamed by Japan’s plans to deploy missiles on Yonaguni Island, located less than 110 kilometres from Taiwan, a move that drew a strong reaction from China.

More recently, Tokyo lodged a protest after Chinese military aircraft allegedly used specialised targeting radar against Japanese fighter jets near the southern archipelago of Okinawa. Beijing has denied the allegations.

Beyond defence, the draft budget for the fiscal year beginning on April 1 totals a record 122.3 trillion yen, reflecting increased social spending to address the challenges of Japan’s rapidly ageing population.

Despite record tax revenues, the government plans to issue additional bonds to fund the budget, adding to concerns over public finances. Takaichi’s assertive spending approach has also placed pressure on the yen against major currencies, with Japan’s national debt already standing at more than twice its annual gross domestic product.