Tokyo is weighing a significant increase in its defence spending target to 3.5 percent of gross domestic product (GDP), aligning itself with NATO members and other United States allies, sources familiar with the matter said. This proposed shift marks a notable departure from Japan’s previous policy, which limited defence expenditures to about 1 percent of GDP until just a few years ago.
Japanese defence officials, during discussions with U.S. counterparts, have indicated a readiness to substantially expand military funding. One scenario under consideration is a gradual increase over 10 years to match South Korea’s commitment to raising defence spending to 3.5 percent of GDP. Alternative targets, such as 3 percent, remain under consideration, according to sources who requested anonymity due to the sensitive nature of the discussions.
The build-up in defence spending is partly driven by pressure from the United States to strengthen Japan’s self-defense capabilities and reduce reliance on American forces. Since 2024, under Prime Minister Sanae Takaichi’s leadership, Japan has accelerated its military budget from the longstanding informal cap of about 1 percent of GDP to nearly 2 percent by the fiscal year ending in March 2026—two years ahead of initial projections.
This fiscal expansion coincides with a challenging economic backdrop. Japan faces rising borrowing costs, with yields on 10-year government bonds reaching around 3 percent in early September, reflecting inflation concerns and speculation about faster interest rate hikes by the Bank of Japan. The potential jump to 3.5 percent of GDP in defence spending—equivalent to roughly 24 trillion yen annually based on current GDP forecasts—could exacerbate investor apprehension about Japan’s fiscal discipline, especially as Prime Minister Takaichi’s economic agenda calls for significant public and private investment exceeding 370 trillion yen by 2040.
Japan’s Defence Minister Shinjiro Koizumi has emphasized that budget decisions will be guided by operational needs rather than fixed fiscal targets. The government has yet to make any formal announcements regarding a new spending goal, and some officials have reportedly denied that a 3.5 percent target has been set. The Defence Ministry did not respond to requests for comment, and the Pentagon declined to provide an official statement.
U.S. defence officials have publicly refrained from demanding a specific defence spending figure from Japan but have urged Tokyo to substantially increase its military investment. “We are anxiously looking for a Japan to step up,” noted U.S. Under Secretary of Defence for Policy Elbridge Colby in August.
Japan’s defence budget, which includes both core spending—such as troop salaries and weaponry—and related expenditures, differs from NATO’s accounting, where the 3.5 percent target applies strictly to core military expenditures. As a result, even if Japan reaches this higher target, its direct military outlay as a share of GDP may still trail NATO members.
Recent Japanese defence initiatives have focused on enhancing capabilities such as long-range strike weapons, including land- and ship-launched Tomahawk missiles. The Ministry of Defence requested a record 8.3 trillion yen budget for the fiscal year beginning April 2027, a modest increase over the current year, though many planned expenditures have yet to be costed fully.
Experts note that while the timing remains uncertain, a significant increase in Japan’s defence spending appears inevitable given the strategic imperative to bolster the U.S.-Japan alliance amid evolving regional security challenges. “Whether it’s over five years or 10 years, I don’t see any alternative given how important the US alliance is,” said Robert Ward, Japan chair at the International Institute for Strategic Studies.
A new five-year defence spending blueprint is expected to be unveiled by the end of 2026, which may formally establish Japan’s future military budget trajectory.