Japan’s Defense Budget: Double or Nothing?

Calls have intensified for Japan to double its defense spending from 1 to 2 percent of its Gross Domestic Product (GDP) in the wake of the Russian invasion of Ukraine, which experts fear could embolden China to act more provocatively against Taiwan. Germany’s decision to increase its own defense spending has further accelerated this trend.

Consequently, in April 2022 the ruling Liberal Democratic Party’s (LDP) panel on national security advised the Kishida administration to not only increase its defense spending to 2 percent of Japan’s GDP, but also to seek enemy-base strike capability due to rising threats from China, North Korea, and Russia.

However, Japanese leaders should resist the urge to double the country’s defense spending in one fell swoop. Instead, Japan should continue to increase defense spending gradually. Acting in incremental steps, as Japan has consistently demonstrated, will allow for an easier, and overall less costly, transition to meet a 2 percent threshold in case of a regional emergency. The upcoming review of Japan’s three security documents – the National Security Strategy, the National Defense Program Guidelines, and the Mid-Term Defense Program – will set long term budgetary goals and spread spending out over time.

Japan’s 1 percent normative cap on defense spending was first established in 1976. Japanese leaders since then have aimed to stay at or below this threshold with very few exceptions, reinforcing post-war Japan’s exclusively defense-oriented security policy. In recent years, however, Japan’s security environment has steadily deteriorated as its neighbors’ military capabilities have grown and their postures have become more aggressive. China has risen as a global power and has increased provocations around the Japanese-controlled Senkaku Islands (claimed by China as the Diaoyu Islands). North Korea has been testing missiles at an alarming rate, and recent reports indicate that Pyongyang could be close to resuming nuclear tests. More recently, Japan’s condemnation of Russia’s war with Ukraine has all but dashed any hopes for a near-future solution to the Japan-Russia territorial dispute.

In response to Prime Minister Kishida Fumio’s announcement raising the defense budget, Chinese and Russian warships sailed through the Tsugaru Strait last October. In 2021, Japan scrambled fighter jets 1,004 times in response to Chinese aircraft activities, mostly near Okinawa and the Senkakus. Chinese actions in the East China Sea and Taiwan’s proximity to the Ryukyu Islands mean that Japan could be brought into a conflict in the case of a regional contingency. Given these security threats, it is clear that Japan needs to make several key and marginal adjustments.

Currently, Japan’s military spending is seventh in the world, even though it has mostly maintained its defense budget at 1 percent of GDP. Japan has procured state-of-the-art technology and equipment such as the Patriot Advanced Capability-3 (PAC-3) missile defense system and vertical-landing F-35B fighter jets. Increases in Japan’s budget can allow it to upgrade its radar systems in the islands near Taiwan and the Senkakus. It can also cushion the costs of scrambling jets in response to PLA flyovers as well as fund the purchase of additional P-1 patrol boats to monitor Chinese maritime activities in the waters around Japan. Additionally, an increase in Japan’s defense spending can help cover maintenance costs of new equipment and innovative new defense technologies. This would help to enhance Japan’s economic security and revitalize its defense industry. Finally, Japan could attain enemy-strike capability to deter possible North Korean missile launches.

A recent argument for Japan to boost its defense budget calls for following Germany’s own recent military spending increase. While NATO members like Germany have a goal of 2 percent of GDP for defense spending, many have not been able to reach that threshold. Germany’s defense budget hike above 2 percent, though triggered by Russia’s invasion of Ukraine, adheres to that established goal. But due to the rapid increase in its defense budget, Germany may face financial and political repercussions felt by future generations. Not allotting for the time it takes to procure new defense equipment, the lack of a multi-year plan could also create a ripple effect of costs for Germany’s next administration.

Japan has had miscalculations in defense spending before, such as the 2020 cancellation of the Aegis Ashore project, largely due to the government’s failure to foresee how much it would cost Japan to maintain over 30 years. But by normalizing a defense budget marginally above 1 percent of GDP with a clearly stated goal to meet a 2 percent cap over a timeframe such as 5 or 10 years, Japan could rapidly raise its budget to meet that goal in the case of a regional contingency, without breaking any norms. Japan would also have time to properly assess its security needs and procure new defense equipment. With Japan’s intensifying security environment, this forward-thinking approach to the defense budget is a necessary step.