Japan is aiming to enhance its military capabilities with a proposed defence budget of 8.9 trillion yen, equivalent to approximately $55.6 billion, for the fiscal year beginning in April 2027. The Defence Ministry outlined the plan on August 31, 2026. The preliminary budget request represents a slight increase from the 8.8 trillion yen, or $55 billion, sought for the current fiscal year.

The government, led by Prime Minister Sanae Takaichi, is expected to finalise this amount in the context of a new comprehensive security and defence strategy designed to improve Japan’s counterstrike capabilities. The final budget figure could increase following this approval later in the year.

Focus on Modern Warfare Technologies

Under its five-year defence strategy established in 2022, Japan has committed to doubling its defence expenditure to roughly 2 per cent of its gross domestic product. This increase is largely in response to perceived threats from China’s more assertive military posture. Japan plans to deploy advanced technologies, such as drones and artificial intelligence, as part of its military arsenal.

The Defence Ministry’s documents indicate an intention to substantially enhance Japan’s deterrence and response mechanisms by adopting novel forms of warfare, inspired in part by developments observed during the conflict in Ukraine. A priority within this strategy is the domestic production of low-cost uncrewed systems, which are expected to help reduce costs and casualties while streamlining air defence operations.

Among the ambitious plans is the acquisition of unmanned attack drones capable of launching operations from both above and under water. However, the ministry has not disclosed monetary requests for this initiative. It has anticipated such uncrewed systems to mitigate the impact of Japan’s shrinking military workforce, a consequence of an ageing population and declining birth rates.

Development of Advanced Military Technologies

To bolster its counterstrike capabilities further, the Defence Ministry is also focused on the development of hypersonic missiles that can be launched from submarines. This initiative highlights Japan’s commitment to enhancing its strategic deterrence. The ministry also plans to implement an integrated artificial intelligence platform to streamline command and control processes.

This system aims to improve the speed and accuracy of decision-making related to battlefield assessments and target selection. Japan is exploring the option of leveraging existing foreign AI technologies, particularly from the United States, while concurrently working on domestic development.

A major feature of their plan includes the establishment of an “AI orchestrator” that would manage multiple AI systems autonomously. The Defence Ministry is also looking to construct a “Defence Ministry cloud” for secure data handling and stable communications during crises, although the cost for this project remains unspecified.

Need for a Stable Defence Industry

Officials have indicated that a robust and sustainable defence industry is essential for ensuring that Japan can maintain its deterrent capabilities. In recognition of the challenges posed by potential shortages in supplies, the ministry has proposed an initiative for state ownership of certain manufacturing facilities, outsourcing production to private companies.

This request includes funding to support research and development linked to defence initiatives, along with plans to restructure the industry to enhance efficiency and output. While major manufacturers, such as Mitsubishi Heavy Industries and Kawasaki Heavy Industries, have benefitted from increased military spending and arms exports, many smaller companies have exited the defence sector due to historically low profits and other concerns.

Overall, Japan’s budget request signals a significant shift in its military posture, focusing on technological advancements in drones, missiles, and AI, alongside industry support, as it prepares to formalise its defence strategy later this year.

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