Japan’s newly appointed Prime Minister Sanae Takaichi announced plans to accelerate the country’s defense spending target, committing to reach 2% of GDP within the current fiscal year ending March 2026—two years ahead of schedule.
Delivering her first policy speech to parliament on Friday, Takaichi said Japan must “take the initiative in fundamentally strengthening its defense capabilities.” The accelerated target reflects her intention to pursue what she called a “proactive” fiscal policy, using defense and strategic spending as tools to stimulate economic growth.
Takaichi, a long-time advocate of expansionary fiscal and monetary policies, stated that her government would maintain market confidence while reducing public debt as a share of GDP. She emphasized shifting the focus from achieving a primary budget surplus to managing the debt-to-GDP ratio, marking a departure from previous fiscal frameworks.
“The strategic deployment of fiscal measures will raise household income, improve consumer sentiment, boost corporate earnings, and generate higher tax revenues without raising tax rates,” Takaichi said.
Japan originally set its goal of raising defense spending to 2% of GDP in 2022, pledging 43 trillion yen ($285 billion) over five years. Defense expenditures in the current fiscal year account for about 1.8% of GDP. However, the government has faced challenges securing stable funding sources for the plan.
Takaichi said part of the increase would be financed through a supplementary budget, which will accompany an economic stimulus package expected to exceed 13.9 trillion yen.
According to Barclays Japan economist Naohiko Baba, the additional 1.1 trillion yen needed to advance the 2% target could be “a cheap price to pay” if it strengthens ties with Washington. Reuters reported that Takaichi is expected to signal Japan’s openness to increasing defense spending beyond the 2% threshold during her upcoming meeting with U.S. President Donald Trump.
The meeting comes as the United States continues to encourage allies in Asia to take on greater roles in regional security.