By John Q. Hosedrinker 
Japan’s Cabinet has approved a record defense budget exceeding 9 trillion yen for the coming year, marking a 9.4% increase and the fourth year of a program to double annual arms spending. This allocation aims to bolster the nation’s strike-back capabilities and coastal defense through the acquisition of cruise missiles and unmanned systems, driven by rising regional tensions. The budget, which includes plans for joint development of fighter jets with Britain and Italy, along with the purchase of upgraded missiles, reflects a strategic shift towards a more offensive military posture. This military buildup has raised concerns from China, while Japan plans to fund its military spending by increasing corporate and tobacco taxes.
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Japan on track to become world’s third-largest defence spender? Well, that headline initially raised a few eyebrows for me. The idea of Japan surging to the top of the defense spending charts feels a bit off, especially when you consider that they are not even in the top ten at the moment. However, the comments suggest that the information is in reference to a future timeline. Japan’s projected defense budget is still significant, but it trails behind countries like the United States, China, Russia, and several others. Even with a considerable budget increase, they wouldn’t necessarily leapfrog those top spenders.
The context here is crucial. Japan’s defense spending increase is tied to a five-year plan, and it’s within that timeframe that they’re expected to climb the global rankings. The “on track” part of the headline seems to align with this, suggesting a trajectory rather than an immediate reality. However, there’s a caveat. Economic realities could impact their ability to spend at this level in the long run. There’s a chance they might even fall behind other nations in terms of total GDP.
Looking at the bigger picture, it’s not entirely surprising that Japan is ramping up its defense spending. They are in close proximity to some concerning neighbors, and the United States, a key ally, might not always be as reliable as it once was. The geopolitical landscape is shifting, and Japan is responding accordingly. The plan to increase spending includes raising corporate and tobacco taxes, with income tax hikes planned for the future. The question is, can the economy support this?
The economic challenges are significant. Japan is facing an aging population, stagnant wages, a declining yen, and a high debt ratio. These are not easy problems to solve, and the government faces an uphill battle in balancing increased defense spending with the needs of the economy. Some commentators have mentioned that the Takaichi regime might not be able to sustain its policies given the economic pressures. Moreover, the long-term prospects for consistent growth at a higher percentage of GDP seem uncertain.
The potential for Japan to become a major military power also raises questions about its broader strategy. Some commentators think that Japan should develop nuclear weapons, arguing that it’s the best way to safeguard against potential threats, since relying on the US is a potential liability. Others believe that Japan should invest in conventional military capabilities, like aircraft carriers. This is a debate within Japan, and it’s one that will likely continue as they navigate a more complex international environment.
The United States’ role in this equation is also critical. While there’s a strong belief that the U.S. won’t abandon Japan, South Korea, or Taiwan, the shifting geopolitical dynamics and US political instability raise questions. The US’s strategic interests are deeply intertwined with the security of these nations, particularly in the face of a rising China.
From a fiscal perspective, Japan’s debt ratio, while appearing high, is somewhat misleading. A large portion of their debt is held internally, primarily by the Bank of Japan, and it’s denominated in yen. The nation also boasts substantial savings. However, this doesn’t negate the challenges of an aging population and slow economic growth. To sustain increased defense spending, Japan may need to implement key reforms. These include boosting labor force participation, especially among women and older workers, encouraging immigration, investing in productivity-enhancing technology, and making pension and healthcare more sustainable.
The need to secure funding is critical. Some of this funding may come from increased taxes, including income taxes, which could be unpopular. Others have indicated that the focus on defense spending might come at the expense of social programs. For example, Japan spends a considerable amount on social programs, and defense spending accounts for a relatively smaller part of the budget.
It’s important to remember that Japan’s economy has been struggling for decades. They call it the “Lost Decades,” and this economic stagnation complicates any effort to dramatically increase defense spending. While defense spending is growing, it’s still a relatively small percentage of Japan’s overall budget. Japan also faces geopolitical challenges. China’s growing military capabilities and the potential for conflict in the region add to the pressure for Japan to bolster its defenses.
Considering the historical context of Japan, with its past as a military power, the current situation is even more complex. Japan has constitutionally restricted itself from having military strike capabilities. The present climate is forcing them to address these restrictions and reconsider their defense strategy, but the path forward is difficult. Ultimately, it’s a tightrope walk. Japan needs to balance economic realities, geopolitical threats, and its own historical context to navigate this new chapter.