Nation-states are perpetually engaged in the act of balancing between ‘guns’ and ‘butter’ as they seek to answer the question of whether spending is to be concentrated on military or the economy. Particularly amid a sense of growing instability in the era following the Russian invasion of Ukraine, fiscal policies in the West and Europe have started to lay significant impetus on Guns, alongside allocations made towards strengthening domestic industrial bases, social welfare systems, and diversifying supply chains. Such a trend is particularly evidenced by growing defense budget outlays coming out of a pacifist country like Japan which has constitutionally abandoned its right to war or maintain military capabilities that amount to war potential.
Japan’s defense buildup which commenced in 2022 enters its third year in 2025 with 8.7 trillion yen having been allocated to defense spending. This is part of a broader push to double military expenditure to 2 per cent of the Gross Domestic Product (GDP) by 2027, in alignment with defense spending standards set by NATO. As a nation located geographically near both Russia, a country which has been growing increasingly hostile, Taiwan, and China, Japan sees itself as being in dire straits. Japan’s dramatic turn to defense in this regard is indicative of a larger ongoing process of military mobilization that major players in the geopolitical chessboard are avidly engaged in.
The Unwritten 1% Rule
Japan’s defense spending has been guided by the 1 per cent rule in the post-World War II era. Overwhelmed by war guilt and a prevailing climate defined by an antiwar taboo, the country has been following this as an unwritten rule from as early as 1958. Of course, considering Japan’s exclusively self-defense-oriented policy (senshu boei), the unwritten rule went on to become a norm. It went on to attain the status of an official policy guidance during the 1970s especially as Japan was experiencing a certain level of consternation amid the unexpected US-China rapprochement in 1971 and the 1973 Oil Shock in quick succession. Answering a question in Diet during this time, then Prime Minister Kakuei Tanaka stated that the one per cent may be established as an appropriate limit on peacetime military spending.
This limit would remain unbroken till 1987 when Prime Minister Yasuhiro Nakasone’s cabinet passed a military budget amounting to 1.004 per cent of the GDP. It would later go on to breach the limit in both 1988 and 1989 with the spending standing at 1.013 per cent and 1.006 per cent respectively. Japan’s military budget further started to climb upwards from 2012, when Shinzo Abe commenced his second term as PM. Abe announced in 2017 that Japan was no longer bound by the 1 per cent rule, a prescript which his successor Yoshihide Suga would repeat in 2021. This trend further peaked during Fumio Kishida’s term, during which Japan made the historic announcement to double its annual spending on defense.
Doubling Up on Defense
Japan’s decision to boost defense spending comes amid a grave sense of crisis. The country feels a profound sense of insecurity amid intensifying US-China competition on one hand, and the US-Russia competition on the other hand. The growing bonhomie between China, Russia and North Korea further puts Japan in at unease. Keenly watching the battles unfolding in Eastern Europe and the Middle East, Japan realizes that it needs to be prepared for an eventuality when its own survival comes to stake. For Japan, “today’s Ukraine could be tomorrow’s East Asia”. This statement while alluding to the prevailing sense of fear and uncertainty indicates the turnaround in Japan’s strategic psyche, which now sees self-defense as closely tied to the ability to neutralize threats, an act its pacifist constitution originally prohibits. This is evidenced by its historic 2022 National Security Strategy which clearly marks a departure from an exclusively self-defense-oriented doctrine to lay down a counterstrike doctrine (hangeki noryoku). This allows Japan to attack foreign territories to neutralize incoming attacks.
To acquire these foreign strike capabilities as well as to bolster its own capabilities for self-defense, Japan is currently implementing a systematic military buildup. Out of the total 8.7 trillion yen allocated to defense, the largest sum (940 billion yen) has been earmarked for acquiring standoff missile systems and satellite constellations to support them. Priority has also been accorded to naval modernization (314.8 billion yen), with 533 billion yen allocated for missile defense, including for the installation of a mobile interceptor radar in Okinawa where majority of the American soldiers are based. To make up for a dearth of manpower, the budget outlay further allocates resources to increased integration of artificial intelligence and unmanned systems.
Woes Aplenty
The leadership in Tokyo has shown significant resolve towards overcoming the constraints emanating from its post-World War II policy traditions to create avenues for proactively shaping Japan’s future. However, a question remains whether its economy in its current form can cash the cheques as and when required to meet its grand military plans. The country is currently burdened with economic woes with the Yen having slid to its lowest in a decade. Adding to this are the woes flowing from Japan’s growing debt which the IMF estimates from 2024, reveal to be at over 250 per cent of GDP. All of this is significantly adding to Japan’s travails while casting a shadow over the prospects of its military buildup.
Japan has already struggled with an unprecedented rise in procurement costs for American-supplied equipment including the F-35A stealth fighters and the Aegis missile defense system. Not even the defense equipment made in Japan is immune to fluctuations in the Yen-USD exchange rate, as Japan sources several components from abroad. In this background, Japan’s Self Defense forces are said to be making acquisitions on a priority basis. A senior Liberal Democratic Party (LDP) politician in April 2024 had mulled over the possibility of reducing the number of Tomahawk missile purchases. Japan’s plans to finance its defense budget through income tax and cigarette tax starting Fiscal Year 2026 have also raised several eyebrows, especially as the country is grappling with multiple economic pressures and an ageing problem.
Pressures are also flowing from the political front as the LDP-led ruling coalition lost majority in the Diet in October 2024. The biggest hurdle however flows from Japan’s public itself the majority of whom remain heavily influenced by anti-militaristic values. Japan’s ability to solve the gun v butter conundrum at hand would depend on how well Tokyo is able to convince the public on increased defense spending as an absolute necessity.
Anupama Vijayakumar is Consultant, RIS