Military Tensions in the Taiwan Strait and Japan-U
As China's military exercises around Taiwan become normalized, Japan and the U.S. are discussing the restructuring of their defense agreement, signaling the approach of the biggest turning point for the post-war East Asian order. This development signifies a fundamental transformation of Japan's security policy, with ramifications across its economy, diplomacy, and society.
── Understand in 3 points ─────────
- • The Chinese People's Liberation Army will increase the frequency of military exercises around Taiwan to 2-3 times per month from the latter half of 2025, an increase of approximately 40% compared to 2024.
- • The Chinese Navy has intensified its activities in the Western Pacific with a three-carrier system, including the aircraft carrier "Fujian," and has for the first time normalized exercises in the waters east of Taiwan.
- • In January 2026, the Japanese and U.S. governments began discussions through the Security Consultative Committee (SDC) to formulate a new joint operational plan anticipating a Taiwan contingency.
── NOW PATTERN ─────────
The increasing military pressure from China and the strengthening responses from Japan and the U.S. are forming a "spiral of conflict." Simultaneously, the redistribution of roles within the alliance carries the risk of "alliance strain," while the "overstretch of power" dynamic, where each nation is compelled to engage beyond its capabilities, is progressing on three fronts.
── Probability and Response ──────
• Base case 55% — The frequency of Japan-U.S. SDC meetings increases to more than once a month, and joint exercises in the Southwest Islands significantly increase, while no news of a formal agreement signing emerges. China's military exercises continue, but without a significant expansion in scale.
• Bull case 20% — Increased direct mention of "Taiwan" at Japan-U.S. summit meetings, submission of defense-related bills to the Diet, and the occurrence of large-scale military escalation actions by China.
• Bear case 25% — Postponement or cancellation of Japan-U.S. SDC talks, increased conciliatory remarks from the U.S. towards China, direct intrusion of Chinese military aircraft into Taiwanese airspace, and an increase in reported incidents (abnormal approaches of aircraft/vessels) in the Taiwan Strait.
📡 THE SIGNAL — What Happened
Why it matters: As China's military exercises around Taiwan become normalized, Japan and the U.S. are discussing the restructuring of their defense agreement, signaling the approach of the biggest turning point for the post-war East Asian order. This development signifies a fundamental transformation of Japan's security policy, with ramifications across its economy, diplomacy, and society.
- Military Trends — The Chinese People's Liberation Army will increase the frequency of military exercises around Taiwan to 2-3 times per month from the latter half of 2025, an increase of approximately 40% compared to 2024.
- Military Trends — The Chinese Navy has intensified its activities in the Western Pacific with a three-carrier system, including the aircraft carrier "Fujian," and has for the first time normalized exercises in the waters east of Taiwan.
- Diplomacy — In January 2026, the Japanese and U.S. governments began discussions through the Security Consultative Committee (SDC) to formulate a new joint operational plan anticipating a Taiwan contingency.
- Diplomacy — The Japan-U.S. alliance is progressing towards a "global partnership," with a joint statement issued at the 2025 Japan-U.S. summit declaring peace and stability in the Taiwan Strait as "critically important."
- Domestic Politics — In Japan, voices from Okinawa Prefecture and the municipalities of the Sakishima Islands are increasingly pointing out deficiencies in resident evacuation plans in response to the Self-Defense Forces' shift to the Southwest.
- Public Opinion — On X (formerly Twitter), the phrase "A Taiwan contingency is a Japan contingency" has sparked both support and opposition, with related posts surging threefold year-on-year from January to March 2026.
- Economy — In response to escalating tensions in the Taiwan Strait, the construction of TSMC's second factory in Kumamoto has accelerated, and the Japanese government is reportedly considering additional subsidies of up to 1 trillion yen.
- Defense Spending — Japan's defense spending reached approximately 8 trillion yen in the FY2026 budget, marking a new record high, towards achieving the goal of 2% of GDP.
- China's Actions — In February 2026, China conducted a large-scale military exercise named "Joint Sword 2026A" in the Taiwan Strait, with 71 vessels participating, the largest scale to date.
- International Cooperation — Multilateral security consultations with Indo-Pacific nations, including Australia, the Philippines, and South Korea, have accelerated since the beginning of 2026.
- Legal Framework — The Japanese government enacted the "Act on the Protection of Important Economic Security Information" related to national security in 2025, strengthening the management system for defense technology information.
- Technology — The joint Japan-U.S. development of the next-generation interceptor missile "GPI (Glide Phase Interceptor)" has been accelerated, aiming for a test launch in 2027.
The current tensions surrounding the Taiwan Strait are not a sudden development. Their roots trace back to the founding of the People's Republic of China and the establishment of the Republic of China (Taiwan) in 1949, where an "unfinished civil war," frozen within the Cold War structure, has become fluid again due to shifts in the 21st-century power balance.
Historically, the Taiwan issue has experienced three major crises. During the First Taiwan Strait Crisis in 1954-55, China shelled Kinmen Island, and the U.S. clarified its defense of Taiwan under the Eisenhower Doctrine. The Second Crisis in 1958 also focused on Kinmen Island, with even the risk of nuclear war between the U.S. and China being discussed. Then, during the Third Crisis in 1995-96, China conducted missile exercises in response to President Lee Teng-hui's visit to the U.S., and the U.S. dispatched two aircraft carriers as a deterrent.
All these crises converged under the premise of "overwhelming U.S. military superiority." However, since the 2020s, this premise has been fundamentally shaken. China's military modernization has advanced dramatically over the past two decades, with its A2/AD (Anti-Access/Area Denial) capabilities, in particular, significantly restricting the freedom of action of the U.S. military in the Western Pacific. The DF-21D anti-ship ballistic missile, the YJ-21 hypersonic anti-ship missile, and rapidly expanding nuclear forces are rendering the traditional U.S. model of "deterrence by carrier strike groups" obsolete.
Japan's deep involvement in this dynamic is a geographical imperative. Taiwan is located just 110 kilometers from Yonaguni Island, Japan's westernmost point, and in the event of a Taiwan contingency, U.S. military bases in Japan (especially Kadena Air Base in Okinawa and Iwakuni Air Base) would inevitably be used as operational hubs. This means Japan would automatically become a party to the conflict.
With the establishment of security-related legislation in 2015, Japan conditionally permitted the exercise of collective self-defense in "situations threatening Japan's survival." However, the legal judgment of whether a Taiwan contingency falls under a "situation threatening Japan's survival" is highly political, and it has been considered difficult to provide clear criteria in advance. This "strategic ambiguity," while functioning as a deterrent, inherently carries the risk of delayed decision-making in an emergency.
After then-U.S. House Speaker Pelosi's visit to Taiwan in 2022, China conducted large-scale military exercises, with missiles landing within Japan's EEZ. This incident brought home to the Japanese public that the Taiwan issue is not "a fire on the other side of the river." Since then, the Japanese government has accelerated the strengthening of defense capabilities in the Southwest Islands, completing the deployment of missile units to Ishigaki Island, Miyako Island, and Amami Oshima.
From 2024 to 2025, the Xi Jinping administration has repeatedly expressed its will for "Taiwan unification" and is gradually escalating military pressure. While this has an aspect of maintaining regime legitimacy amidst a domestic economic slowdown, more fundamentally, it is a manifestation of China's aim to reorganize the regional order, anticipating the end of "U.S. unipolarity."
The background to Japan and the U.S. seeking a new defense agreement is the recognition that the framework of "situations in areas surrounding Japan" envisioned by the conventional Japan-U.S. Guidelines (revised in 1997, re-revised in 2015) cannot adequately address the complexities of a Taiwan contingency. Specifically, the existing framework has significant gaps in joint operations in new domains such as cyber, space, and electromagnetic warfare, civilian infrastructure protection, and evacuation plans for residents of the Southwest Islands.
The ongoing discussions are not merely an update of military arrangements. They signify a decisive departure from the "lightly armed, economy-focused" path that post-war Japan has maintained, touching upon the very identity of Japanese society. The increase in defense spending to 2% of GDP, the acquisition of counterattack capabilities (enemy base strike capabilities), and the formulation of this joint operational plan are all components of this historic transformation.
The delta: The traditional Japan-U.S. alliance has been based on an asymmetric structure where "Japan provides bases, and the U.S. fights." However, with the materialization of a Taiwan contingency, Japan is approaching a historic turning point, transforming into a partner that "fights together." As China's military rise makes unilateral U.S. deterrence difficult, Japan is geographically compelled to stand on the front lines, forced to redefine the alliance amidst the "risk of entanglement" and the "risk of abandonment."
🔍 BETWEEN THE LINES — What the Reports Aren't Saying
While official statements repeatedly use abstract phrases like "peace and stability in the Taiwan Strait," in reality, Japan and the U.S. are discussing concrete Self-Defense Forces operational actions in a Chinese invasion scenario of Taiwan—joint use of ports and airports in the Southwest Islands with the U.S. military, countermeasures against a strait blockade including mine-laying, and evacuation operations for hundreds of thousands of residents of the Sakishima Islands. The primary reason the Japanese government is reluctant to adopt the form of a "new agreement" is that it would reignite domestic debate over consistency with Article 9 of the Constitution and undermine the government's cohesion. Substantive military integration is thus quietly proceeding in an inconspicuous form of "operational improvement."
NOW PATTERN
Spiral of Conflict × Alliance Strain × Overstretch of Power
The increasing military pressure from China and the strengthening responses from Japan and the U.S. are forming a "spiral of conflict." Simultaneously, the redistribution of roles within the alliance carries the risk of "alliance strain," while the "overstretch of power" dynamic, where each nation is compelled to engage beyond its capabilities, is progressing on three fronts.
Intersection of Dynamics
The three dynamics of "spiral of conflict," "alliance strain," and "overstretch of power" form a dangerous structure that mutually amplifies. The more the spiral of conflict accelerates, the more urgent becomes the review of burden-sharing among allies, which in turn exposes alliance strain. Simultaneously, each turn of the spiral demands further military investment from nations, increasing the risk of overstretch of power.
Reverse causality is also at play. The U.S., facing overstretch of power, demanding "do more" from its allies increases discontent within the alliance (alliance strain). As a result, doubts about the alliance's reliability emerge, which China perceives as an opportunity to alter the status quo, thereby intensifying military pressure (accelerating the spiral of conflict).
A particularly dangerous scenario is when these three dynamics simultaneously reach a critical point. For example, a chain of events where U.S. domestic politics leans towards isolationism (a reaction to the overstretch of power), negotiations for a new Japan-U.S. agreement stall (alliance strain), and China seizes this opportunity to escalate pressure on Taiwan (spiral of conflict) is a sufficiently realistic risk scenario.
Historically, situations where such complex dynamics unfold simultaneously have been observed on the eve of World War I in 1914, in Japan-China relations in East Asia during the 1930s, and around the time of the Cuban Missile Crisis during the Cold War. In all these cases, each party believed they were acting rationally, but the system as a whole led to irrational outcomes. The current situation in the Taiwan Strait also carries the risk of a "fallacy of composition," where the rational decisions of individual actors lead to the destabilization of the entire system. This structural understanding is the most crucial perspective in negotiating a new Japan-U.S. agreement, and it is why the agreement must encompass mechanisms for escalation management and risk reduction that go beyond mere military arrangements.
📚 PATTERN HISTORY
1951-1960: Revision from the Old Japan-U.S. Security Treaty to the New Security Treaty
The redefinition of the alliance in response to changes in external threats triggered fierce domestic political conflict. The Anpo protests divided Japanese society, and the Kishi administration was forced to resign.
Structural Similarity to the Present: Redefining an alliance cannot be driven solely by military rationality; domestic political consensus-building is critically important. Hasty progress risks undermining the legitimacy of the alliance itself.
1996: Third Taiwan Strait Crisis and U.S. Aircraft Carrier Deployment
In response to China's military intimidation, the U.S. dispatched two aircraft carriers to demonstrate deterrence. Japan and the U.S. considered responses to "situations in areas surrounding Japan," leading to the 1997 revision of the Japan-U.S. Guidelines.
Structural Similarity to the Present: Taiwan Strait crises have historically served as catalysts for the transformation of the Japan-U.S. alliance. However, the deterrence model based on overwhelming U.S. military superiority has seen its effectiveness diminish due to China's military modernization.
2014-2015: Annexation of Crimea and Establishment of Security-Related Legislation
Russia's alteration of the status quo caused a disturbance in the international norm that "unilateral changes to the status quo by force are unacceptable," leading Japan to establish security legislation enabling the limited exercise of collective self-defense.
Structural Similarity to the Present: There is a ripple effect where changes to the status quo in geographically distant regions (Crimea) impact security policies in other regions (East Asia). The war in Ukraine has a similar catalytic effect on the Taiwan situation.
2017-2018: North Korean Nuclear and Missile Crisis and Strengthening of Japan-U.S. Cooperation
North Korea's ICBM development prompted the Japan-U.S. alliance to deepen missile defense cooperation. However, President Trump's U.S.-North Korea summit talks created anxiety in Japan about "diplomacy over its head."
Structural Similarity to the Present: While common threats strengthen an alliance, there is always a risk that unpredictable diplomatic shifts by a superpower's leader can shake the trust of allied nations.
2022: Pelosi's Visit to Taiwan and China's Large-Scale Military Exercises
The visit of a key U.S. congressional figure to Taiwan triggered China's military escalation, resulting in direct impacts such as missile landings within Japan's EEZ. Japan accelerated the revision of its three security-related documents.
Structural Similarity to the Present: Tensions in the Taiwan Strait have direct security implications for Japan. The perception of it being "a fire on the other side of the river" deviates from geographical reality.
Patterns Revealed by History
The historical patterns of the past 70 years reveal the structural fact that crises in the Taiwan Strait have repeatedly functioned as "catalysts" for the transformation of the Japan-U.S. alliance. The 1996 crisis prompted a revision of the Guidelines, and the exercises following Pelosi's visit to Taiwan in 2022 spurred the revision of the three security-related documents. The ongoing normalization of military pressure is now driving the formulation of more in-depth joint operational plans.
However, there are crucial differences. In past crises, the U.S. maintained overwhelming military superiority, and the premise that "if aircraft carriers are sent, China will back down" held true. In 2026, this premise has fundamentally changed. The maturation of China's A2/AD capabilities has created an environment where conventional deterrence is less effective, placing Japan and the U.S. in a situation where they must seriously address the scenario of "deterrence failure" for the first time.
Furthermore, the fact that past alliance reorganizations were all accompanied by domestic political turmoil is an undeniable lesson. The 1960 Anpo protests and the demonstrations in front of the Diet over the 2015 security legislation demonstrate that shifts in security policy can cause deep societal divisions. The current heated debate on X is a digital-age reproduction of this historical pattern, and policymakers must carefully manage the balance between military rationality and democratic legitimacy.
🔮 NEXT SCENARIOS
The Japanese and U.S. governments will reach a "basic agreement" on a new defense cooperation framework, with a Taiwan contingency in mind, by 2026, but will not proceed to formally conclude a "new agreement." Specifically, the formulation of a joint operational plan through the Japan-U.S. Security Consultative Committee (SDC) will advance, and the expansion of jointly used facilities in the Southwest Islands, mutual ammunition transfers, and strengthening of information-sharing systems will be implemented incrementally. However, these will be positioned as a deepening of existing Japan-U.S. Guidelines at the operational level, without taking the form of a new treaty or agreement.
The background to this scenario includes domestic political constraints on the Japanese side. A formal "Taiwan Defense Agreement" would signify a decisive deterioration of Japan-China relations, carrying a significant risk of economic retaliation. Furthermore, considering consistency with constitutional interpretation and the Diet's ratification process, the political cost would be extremely high. Therefore, the Japanese government is most likely to choose an approach that balances "substantive deepening of cooperation" with "maintaining formal ambiguity." China will strongly condemn the Japan-U.S. moves, but countermeasures will be limited to diplomatic protests and continued military exercises, without resorting to comprehensive economic sanctions. Tensions in the Taiwan Strait will remain high, but direct military conflict will be avoided.
Implications for Investment/Action: The frequency of Japan-U.S. SDC meetings increases to more than once a month, and joint exercises in the Southwest Islands significantly increase, while no news of a formal agreement signing emerges. China's military exercises continue, but without a significant expansion in scale.
Japan and the U.S. formally conclude a new defense cooperation agreement by 2026 that explicitly includes the maintenance of peace in the Taiwan Strait. While this agreement does not explicitly name Taiwan as a direct defense target, it effectively encompasses a Taiwan contingency response plan as a "response to unilateral changes to the status quo by force in the Indo-Pacific region." The joint command and control mechanism between Japan and the U.S. will be strengthened, and the integrated operational system of U.S. forces in Japan and the Self-Defense Forces will advance to a new stage.
Conditions for this scenario to materialize include China undertaking a further stage of military escalation against Taiwan (e.g., direct intrusion into Taiwanese airspace, naval blockade exercises), which would accelerate Japan-U.S. political decisions. The likelihood also increases if the U.S. administration maintains a bipartisan hardline stance against China, and if the Japanese government can suppress domestic opposition with high approval ratings. The conclusion of this agreement would provoke strong backlash from China, leading to a short-term increase in East Asian tensions, but could contribute to stabilization in the medium to long term through clarified deterrence. While it would present significant business opportunities for Japan's defense industry and the U.S. military industry, Japan-China economic relations would cool, and supply risks for rare earths and other resources would materialize.
Implications for Investment/Action: Increased direct mention of "Taiwan" at Japan-U.S. summit meetings, submission of defense-related bills to the Diet, and the occurrence of large-scale military escalation actions by China.
Japan-U.S. defense cooperation talks stall due to domestic political resistance or strategic disagreements between Japan and the U.S., and China seizes this opportunity to further intensify military pressure on Taiwan. In the worst case, an accidental military clash (e.g., abnormal approach of aircraft, maritime collision incident) occurs in the Taiwan Strait, plunging the entire region into a hair-trigger situation.
Triggers for this scenario could include political turmoil in the U.S. (stagnation of foreign policy due to focus on the 2026 midterm elections, rise of isolationist public opinion), destabilization of the Japanese government (loss of momentum for security policy due to declining approval ratings), or domestic political unrest in China (deepening economic crisis inducing external adventurism). Particularly dangerous is if the stagnation of Japan-U.S. talks sends a signal to China that "now is the time to act," which would signify a failure of deterrence.
The economic impact would also be immense. A rapid escalation of military tensions in the Taiwan Strait could materialize the risk of semiconductor supply chain disruption, leading to trillions of dollars in losses for the global economy. The Japanese economy would suffer a severe blow from economic sanctions by China (restrictions on rare earth exports, limitations on Japanese corporate activities in China), with a simultaneous sharp decline in the stock market and rapid fluctuations in the yen. The threat to the safety of the South China Sea and Taiwan Strait as energy supply routes would also have significant implications for Japan's energy security.
Implications for Investment/Action: Postponement or cancellation of Japan-U.S. SDC talks, increased conciliatory remarks from the U.S. towards China, direct intrusion of Chinese military aircraft into Taiwanese airspace, and an increase in reported incidents (abnormal approaches of aircraft/vessels) in the Taiwan Strait.
Key Triggers to Watch
- Results of the next Japan-U.S. Security Consultative Committee (SDC) meeting and the wording of the joint statement: April-June 2026
- Implementation of China's next large-scale "Joint Sword" series military exercise: Summer 2026 (July-August, around the usual Taiwan-related anniversaries)
- U.S. midterm elections and their impact on Indo-Pacific policy: November 2026
- Operational status of TSMC's second factory in Japan (Kumamoto) and decision on additional investment: Latter half of 2026
- Mid-term review and potential revisions of Japan's next National Defense Program Guidelines: End of 2026
🔄 TRACKING LOOP
Next Trigger: Japan-U.S. Security Consultative Committee (SDC) Spring 2026 meeting (scheduled for April-May 2026) — Whether the terms "Taiwan" and "Taiwan Strait" are included in the joint statement will be the biggest indicator of the depth and direction of cooperation.
Continuation of this Pattern: Tracking Theme: Establishment of Japan-U.S. Alliance's Taiwan Contingency Response System — The next milestones are the results of the SDC Spring meeting and the Japan-U.S. joint response to China's military exercises in summer 2026.
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