Japan Defense Industry
Japan’s increased defense spending budget provides real opportunities for U.S. manufacturers of critical defense items that Japan continues to purchase based on its challenging regional security environment, including perceived threats from advancing North Korean missile technologies and China’s growing regional influence. On December 10, 2025, Japan’s Cabinet approved a record defense budget of approximately $58 billion (¥9.04 trillion) for Japan Fiscal Year (JFY) 2026 which runs from April 2026 to March 2027. This defense budget represents an increase of roughly 3.8 percent from the previous fiscal year’s budget and marks the fourteenth consecutive year of record Japan defense spending. These budget increases reflect Japan’s trajectory toward its previously stated goal of allocating approximately 2 percent of GDP to defense by 2027.
According to Japan’s Ministry of Defense (JMOD), Japan’s FY2026 budget prioritizes seven core defense capability areas, including stand-off defense capabilities; integrated air and missile defense; unmanned defense systems; cross-domain operations; and command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR). Japan’s defense budget includes expanded funding for the acquisition and deployment of unmanned aerial, surface, and underwater systems; enhanced missile defense assets; and next-generation sensors and networks. These priorities align closely with U.S. strengths in advanced defense technologies and reinforce Japan’s continued emphasis on interoperability with U.S. forces.
Major U.S. defense contractors have developed effective working relationships over many years with Japan manufacturers for licensed production of U.S. military technology and equipment in Japan. The Japanese market’s need for interoperability of military technology and equipment has historically strongly favored U.S. defense suppliers over European and other third-country suppliers. The U.S. Commercial Service in Japan (CS Japan) expects this trend to continue. CS Japan encourages new-to-market U.S. suppliers of defense products seeking sales growth opportunities in Japan to seek local partnerships with specialized trading firms capable of representing the U.S. companies as registered vendors to JMOD.
For more information about defense market developments in Japan and related opportunities for U.S. firms, please contact the U.S. Commercial Service at Office.Tokyo@trade.gov.