Japan's Defense Spending Surpasses 3% of GDP

📡 THE SIGNAL — What Happened

Why it matters: The policy to rapidly triple defense spending, which has been maintained within the "1% of GDP framework" for 80 years since the war, represents a rewriting of Japan's national identity itself, and will have a cascading impact on East Asia's military balance, defense industry, and fiscal structure.

• Policy — The Japanese government is reportedly set to raise defense spending to over 3% of GDP in the FY2026 budget.
• History — Since the Miki Cabinet in 1976, Japan has maintained the "1% framework," limiting defense spending to approximately 1% of GDP, for nearly half a century.
• Policy Shift — The December 2022 revision of the Three Security Documents (Anpo San Bunsho) set a target of achieving 2% of GDP by FY2027, but the discussion has escalated to 3% in just three years.
• Threat Environment — North Korea has continued ICBM and SLBM launch tests since 2023, advancing the miniaturization and multi-warhead capability of its nuclear warheads.
• Threat Environment — China's publicly announced defense budget reached approximately 1.7 trillion yuan (about 35 trillion yen) in 2025, marking a 7.2% increase year-on-year.
• Alliance Relations — The United States has repeatedly demanded that allies bear defense spending of 2% of GDP or more, with pressure intensifying under the Trump administration.
• Fiscal Policy — Japan's FY226 general account budget is the largest ever at approximately 115 trillion yen, with government bond dependence in the high 30% range.
• Industry — Stock prices of defense-related companies such as Mitsubishi Heavy Industries, Kawasaki Heavy Industries, and IHI have all formed an upward trend since 2024.
• Equipment — The acquisition of 400 Tomahawk cruise missiles is underway as part of the development of counterattack capabilities (enemy base attack capabilities).
• International Comparison — While many NATO member states have not met the 2% target, if Japan achieves 3%, it would represent a globally prominent pace of increase.
• Public Opinion — Various public opinion polls show 50-60% support for increased defense spending, but a majority oppose tax increases as a funding source.
• Regional Situation — The risk of a Taiwan Strait contingency is incorporated into joint Japan-US plans as the most critical security scenario.

The potential for Japan's defense spending to exceed 3% of GDP emerges against a backdrop of tectonic shifts in security policy spanning 80 years since the war. To understand this development, three historical contexts must be grasped.

First, there is the process of the formation and erosion of the "1% framework." In 1976, the Takeo Miki Cabinet made a cabinet decision to limit defense spending to within 1% of GNP. This served as a compromise between the spirit of Article 9 of the Constitution and the economic growth-first policy, becoming the institutional foundation for Japan's "light armament, economy-focused" path during the Cold War. Although the Nakasone Cabinet formally abolished the 1% framework in 1987, it effectively continued to hover around 1%, functioning as a "de facto ceiling" for over 40 years. This implicit norm began to crumble due to the rapid changes in the East Asian security environment from the late 2010s.

Second, there is China's military rise and the acceleration of North Korea's nuclear and missile development. China's defense spending has swelled approximately eightfold over the past 20 years, surpassing the United States in the number of naval vessels. In particular, China's large-scale military exercises triggered by then-US House Speaker Pelosi's visit to Taiwan in August 2022 strongly impressed upon Japanese policymakers that a Taiwan Strait contingency was not a "hypothetical scenario" but a realistic planning objective. Simultaneously, North Korea launched over 30 ballistic missiles in 2022 alone, steadily advancing the miniaturization of nuclear warheads and the diversification of delivery methods. These threats fundamentally invalidated the traditional "Basic Defense Force Concept"—the idea that maintaining a minimum defense capability was sufficient.

Third, there is the shift in US alliance policy. The first Trump administration (2017-2021) fiercely criticized allies for "free-riding" on security and demanded that NATO member states spend 2% of GDP on defense. While the Biden administration returned to prioritizing alliances, the demand for "fair burden-sharing" from allies continued. And the Trump administration, reappearing in 2025, further escalated its demands for burden-sharing from allies, with a series of statements suggesting 3-5% as insufficient, rather than 2% of GDP. For Japan, the Japan-US alliance is the cornerstone of its security, and there is virtually no option to ignore US demands.

The simultaneous interplay of these three dynamics has resulted in the current "over 3%" debate. What is crucial is that this is not an accumulation of gradual changes, but a qualitative transformation that should be called a "regime change." The explicit inclusion of "counterattack capabilities" in the 2022 revision of the Three Security Documents (Anpo San Bunsho) effectively rewrote the interpretation of exclusively defensive defense (Senshu Bōei). The very fact that 3% is being discussed just three years after the 2% of GDP target was set indicates a decisive departure from traditional gradualism.

Furthermore, the impact of increased defense spending on Japan's overall fiscal structure cannot be overlooked. 3% of GDP amounts to approximately 18-19 trillion yen, more than three times the FY2022 defense budget (approximately 5.4 trillion yen). How to secure the funding for this increase will ripple through all areas of Japanese politics and society as a reallocation issue with social security, education, and public works expenditures. The increase in defense spending is not merely a change in security policy; it is a "structural shift" that fundamentally reorders the nation's resource allocation priorities.

Viewed in an international context, Japan's moves are also part of a larger trend of "rearmament of the liberal bloc." From Germany's "Zeitenwende" declaration (2022) to Finland and Sweden joining NATO, and South Korea's increased defense spending, democratic nations that have enjoyed the "peace dividend" since the Cold War are collectively moving to rebuild their military capabilities. Japan's 3% debate is positioned as one of the most dramatic changes within this global security regime restructuring.

The delta: The fact that Japan's defense spending debate has leaped past the "1% to 2%" stage and reached "over 3%" signifies the complete collapse of the post-war self-restraining security paradigm and the entry into an irreversible phase of "normalization as a nation." This is not merely a change in numbers, but a transformation in the very mode of the nation's existence.