Japan warns defence contractors of deep order cuts as budget tightens
Finance officials have proposed 50 trillion to 60 trillion yen over five years, well short of the 80 trillion yen some defence planners had assumed.
Japanese officials have warned defence contractors to expect deep cuts to orders, with planned purchases of some missiles and aircraft possibly halved, The Straits Times reported, citing four sources who spoke to Reuters. The Japan Times also reported that the revised spending proposal could cut some of those purchases by as much as half.
Finance ministry officials last week proposed defence spending of between 50 trillion yen (S$402 billion) and 60 trillion yen over the five years from April 2027, the sources said. That is more than the 43 trillion yen in the current five-year plan. It is well below the 80 trillion yen that some defence officials and ruling Liberal Democratic Party lawmakers had assumed and used in negotiations with contractors.
The purchases at risk include US-built F-35 stealth fighters, along with other equipment from domestic and overseas suppliers, according to the sources, who spoke anonymously because they were not authorised to talk to the media. One said drone orders would not be affected.
Japan's largest defence contractors include Mitsubishi Heavy Industries, Mitsubishi Electric and Kawasaki Heavy Industries. The two Mitsubishi companies declined to comment and Kawasaki did not immediately respond, The Straits Times reported.
Three of the sources said finance ministry officials argue a steeper increase would be hard to fund alongside Prime Minister Sanae Takaichi's pledges to invest in economic growth and cut the sales tax on food. The tax cut would leave an annual revenue gap of 4.3 trillion yen, which could be filled from sources that may include foreign exchange reserves.
Finance Minister Satsuki Katayama said the government's advisory panel on security and defence had not discussed the matter in that detail, so "I don't think we are at a stage where I should comment." A Defence Ministry spokesperson said: "Nothing has been decided on the size of the next defence build-up plan."
By Reuters calculations, spending of up to 60 trillion yen would leave Japan short of its goal of lifting defence outlays to 2 per cent of GDP. US President Donald Trump is pressing allies to spend more, and the 2026 US National Defence Strategy calls on them to put 3.5 per cent of GDP into their armed forces and a further 1.5 per cent into broader security.
Takaichi's government says the build-up is needed to counter China. Tokyo is concerned that a Chinese attack on Taiwan could threaten its nearby islands and sea lanes, and it wants larger munitions stockpiles and military drones.
Security hawks in the ruling party are expected to resist the proposal. "A figure in the 50-trillion-yen range is out of the question," one party official familiar with the talks said. The government is expected to release a revised national security strategy and defence plan by the end of 2026.
Sources: The Straits Times, Japan warns arms suppliers of deep cuts to expected orders due to budget squeeze, sources say; The Japan Times, Finance Ministry looks to rein in defense spending push amid funding concerns.
