Japan has warned defense industry companies that expected orders for missiles and aircraft could be significantly reduced. The reason is budget constraints that threaten to delay the country's military rearmament, which the government of Prime Minister Sanae Takaichi considers necessary to counter China.
Representatives of Japan's Ministry of Finance have proposed allocating between 50 trillion and 60 trillion yen for defense over the five-year period beginning in April 2027. The sum is equivalent to approximately $313 billion-$376 billion. It is higher than the current five-year budget of 43 trillion yen, but significantly below the 80 trillion yen sought by representatives of the Defense Ministry and lawmakers from the ruling Liberal Democratic Party.
Missile and aircraft purchases come under pressure
The gap between the two proposals could lead to cuts of up to 50% in planned purchases of some weapons systems. Potentially affected items include U.S.-made F-35 fighter jets, as well as various types of missiles.
Four sources familiar with the discussions told Reuters about the warnings issued to the companies. Japan's Finance and Defense ministries did not immediately respond to requests for comment, the agency said.
According to Reuters calculations, the proposed funding will leave Japan below its target of increasing defense spending to 2% of gross domestic product. Meanwhile, U.S. President Donald Trump is calling on Washington's allies to allocate more funds to their armed forces.
Pressure from Washington intensifies the dispute
The U.S. National Defense Strategy for 2026 calls on allies around the world to direct 3.5% of GDP to their armed forces and another 1.5% to broader security needs. NATO countries have already agreed to a similar increase.
Japan's Finance Ministry believes that a more significant increase in military spending will be difficult to fund alongside Takaichi's commitments to investing in economic growth and cutting the sales tax on food products. According to three of the sources, the tax change would reduce annual budget revenues by 4.3 trillion yen.
The prime minister will have to make up the shortfall through other sources of funding, which could potentially include the country's foreign exchange reserves.
Clash within the ruling party lies ahead
The Finance Ministry's proposal will likely face opposition from national security hardliners in the Liberal Democratic Party. Thus, the dispute over the next five-year budget will take place not only between the Finance and Defense ministries, but also within the ruling majority.
The key question is whether Japan will be able to finance its economic priorities, respond to pressure from the United States and maintain its plans for an accelerated strengthening of its defense at the same time.
Sources: bta.bg, ca.marketscreener.com