Japan’s Cabinet on Friday approved a draft budget for the 2026 fiscal year that includes record military spending amid escalating tensions with China. Defence expenditure is set to rise by 3.5 per cent to roughly 9 trillion yen ($58 billion), with around 100 billion yen allocated to develop the “Shield” system to protect Japan’s coastline and remote islands from ships, submarines, and drones.
The build-up follows statements by Prime Minister Sanae Takaichi warning that a Chinese attack on Taiwan would constitute an “existential threat” to Japan, prompting Beijing to respond with travel warnings, import bans on Japanese seafood, and heightened military activity. Japan also plans to station missiles on Yonaguni Island, near Taiwan, drawing criticism from China.
The total draft budget for the fiscal year beginning April 1 stands at 122.3 trillion yen, aiming to cover rising social spending for Japan’s ageing population. Despite record tax revenues, the government plans to issue additional bonds. Takaichi’s aggressive military spending has contributed to pressure on the yen, while Japan’s national debt already exceeds twice its annual GDP.