Japan’s Defence Industry: From Periphery to Core National Power

The Japanese government’s white paper on defence, released in August, makes one thing clear: Tokyo is serious about transforming its domestic defence sector into a core national power. With trillions of yen at stake, the plan is ambitious, driven by concerns over China, North Korea, and Russia.

For decades, Japan’s defence industry has been treated as an economic afterthought, handicapped by strict post-war arms export bans and limited procurement volumes. However, the government’s decision to ease restrictions on lethal weapon exports and boost support for defence startups and SMEs is a significant step towards addressing its vulnerability in the face of rising regional tensions.

The new policy framework aims to build a globally competitive defence sector that can position Japan as a vital player in international supply chains. This involves not only bolstering deterrence and response capabilities but also creating skilled jobs, revitalising regional economies, and stimulating technological advances in both military and civilian sectors.

Dual-use innovation is at the forefront of the government’s strategy. The war in Ukraine demonstrates how artificial intelligence and mass-deployed drones are reshaping modern battlefields. Tokyo’s aggressive courting of civilian tech start-ups signals a recognition that commercial and military technology are rapidly converging.

However, this shift raises important questions about Japan’s defence strategy. The white paper warns of an “unprecedented and greatest strategic challenge” posed by China, which it says must be responded to with comprehensive national power. But what does this mean in practice? How will Tokyo balance its own military modernisation with the need for regional cooperation and diplomatic engagement?

Japan is looking to the US and other like-minded countries as models for defence spending and strategy. The government’s reference to NATO’s 3.5 per cent GDP target by 2035, South Korea’s 3.5 per cent goal, and Australia’s 3 per cent target by 2033 sends a clear signal that Tokyo is willing to play catch-up with its allies.

But will this be enough? Transforming the defence industry into a core national power will require more than just increased spending. It will demand significant institutional reforms, including the creation of new defence agencies and the establishment of a robust procurement system.

The revision of Japan’s three core security documents by the end of 2026 will be a critical test of this new policy framework. Will Tokyo be able to deliver on its promises and build a defence sector that can truly compete with its regional rivals? The world is watching, and the stakes are high.

As the Japanese government sets out on this ambitious journey, it must also confront the challenges of its own history and identity. For decades, Japan’s defence industry has been shaped by the country’s post-war pacifism and reliance on US security guarantees. But with the rise of China and other regional powers, Tokyo is being forced to rethink its national security strategy.

The white paper’s theme, “Security for the Future,” speaks to Japan’s aspirations for a new era of peace and stability in Asia, where the country can play a leading role as a defence power. However, this vision will require more than just words; it will demand action, commitment, and a willingness to challenge established norms and interests.

The outcome of this experiment will be watched closely not just by Japan’s neighbours but also by the global community. Will Tokyo succeed in building a robust domestic defence base that can deter regional threats? Or will its ambitions be derailed by internal resistance, institutional inertia, or external pressures?

One thing is certain: Japan’s defence industry is entering a new era of transformation and competition. The stakes are high, but so too is the potential for growth, innovation, and regional leadership.