Japan’s cabinet has approved a record defence budget proposal of more than 9 trillion yen ($58bn) for the coming fiscal year, reflecting a push to strengthen military and coastal defences amid rising tensions in East Asia.

The plan still requires parliamentary approval by March and forms part of a broader 122.3 trillion yen ($784bn) national budget for the fiscal year beginning in April 2026. The increase marks the fourth year of Japan’s five-year effort to increase defence outlays to 2 percent of gross domestic product.

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The spending increase comes as Tokyo voices growing concern over China. Prime Minister Sanae Takaichi said in November that Japan’s military could become involved if China were to take action against Taiwan, the self-governing island claimed by Beijing – comments that caused outrage in Beijing, which hit back with diplomatic and economic measures against Japan.

Under the five-year defence build-up plan, Japan is expected to become the world’s third-largest defence spender after the United States and China. The Finance Ministry said Japan is on track to meet the 2 percent target by March. Takaichi’s government has faced pressure from the US to hit that benchmark two years earlier than originally planned. Japan also intends to revise its existing security and defence policies by December 2026 to further enhance its military posture.

In recent years, Japan has moved to strengthen its ability to strike targets at long range, a significant shift away from its post-World War II approach that limited the use of force strictly to self-defence.

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The current national security strategy, adopted in 2022, identifies China as Japan’s most serious strategic challenge and calls for a more assertive role for the military within the framework of the country’s alliance with the US.

Under the new budget, more than 970 billion yen ($6.2bn) is earmarked to enhance Japan’s “standoff” missile capabilities. This includes 177 billion yen ($1.13bn) for the purchase of domestically produced and upgraded Type-12 surface-to-ship missiles, which have an estimated range of about 1,000km (620 miles).

Citing an ageing and shrinking population and difficulties in maintaining troop numbers, the government has also placed emphasis on unmanned systems. To strengthen coastal defence, Japan plans to spend 100 billion yen ($640m) on deploying “massive” numbers of unmanned aerial, surface and underwater drones for surveillance and defence. The system, known as “SHIELD,” is scheduled to be operational by March 2028, defence officials said.

To speed up deployment, Japan expects to rely initially on imported equipment, potentially sourcing systems from countries such as Turkiye or Israel.

Strains with China intensify

The budget decision comes amid a deterioration in relations between Tokyo and Beijing following Takaichi’s comments on Taiwan. Friction intensified this month after Chinese aircraft carrier drills near southwestern Japan led Tokyo to lodge a protest, saying Chinese aircraft had locked their radar onto Japanese planes — an action seen as a possible prelude to missile targeting.

Already concerned about China’s expanding military presence in the Pacific, Japan’s Defence Ministry plans to set up a new office to study Chinese operations, equipment and capabilities in the region.

Concerns were further heightened in June when two Chinese aircraft carriers were observed operating near the southern Japanese island of Iwo Jima at the same time — a first — underscoring Beijing’s growing ability to project power beyond the East China Sea.

Japan deepens defence industry cooperation

Japan is also seeking to revitalise its largely domestic defence industry by expanding joint development projects with partner countries and promoting overseas arms sales, following a relaxation of export restrictions in recent years.

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For 2026, Tokyo plans to allocate more than 160 billion yen ($1bn) to jointly develop a next-generation fighter jet with Britain and Italy, with deployment targeted for 2035. The project also includes research into AI-controlled drones designed to operate alongside the aircraft.

In a boost to Japan’s defence sector, Australia selected Mitsubishi Heavy Industries in August to upgrade the Mogami-class frigate, replacing its fleet of 11 ANZAC-class vessels.

The new budget also sets aside nearly 10 billion yen ($64m) to support the defence industrial base and arms exports.