Stand-off missiles and large-scale drone acquisitions were among the standout features in Japan’s 2026 defence budget paper, which was released on December 26 2025.
The proposed budget, which is yet to pass parliament, sees defence spending set to surpass ¥9 trillion (approx. AUD$86 billion) for the first time in the nation’s post-war history.
This figure falls just short of the 2 percent of GDP target touted by Japan’s Prime Minister Sanae Takaichi, which Tokyo projects will be reached in the following year’s budget. Supplementary budget provisions saw total annual defence spending surpass the 2 percent figure for the first time in late 2025.
Excluding expenses associated with the Special Action Committee on Okinawa (SACO) – a US-Japan bilateral initiative to minimize the impact of US forces on Okinawan residents – defence-related spending for the initial budget totals ¥8.8 trillion (AUD$84 billion). This represents a 4.4 percent increase on the initial 2025 budget, and – discounting inflation – is more than 70 percent above the budget delivered five years prior (2021).
Stand-off missile/counter strike capabilities
A big winner in the 2026 budget was stand-off defence capabilities, which was allocated over ¥1 trillion (AUD$9.8 billion) – a 9 percent YoY increase and almost 12 percent of the defence budget.
Developing counter-strike capabilities and upgrading Japan’s stand-off missile arsenal were key tenets of the most recent National Defence Strategy (2022), and a focal point in the Ministry of Defence’s (MoD) “Export Panel on Fundamental Strengthening [Japan’s] Defense Capability” report, which was released last September.
The budget increase also came on the back of solid progress in 2025 in Japanese tests on indigenous platforms, including the Block I Hyper Velocity Gliding Projectile (HVGP) and an improved version of Japan’s Type 12 surface-to-ship (SSM) missile, both are which are now set to be deployed in 2026.
Five other indigenous stand-off missile variants are scheduled to undergo continued developing and testing in 2026, including surface-to-surface and submarine-launched missiles.
The budget paper also sets out plans to import Lockheed Martin’s Joint Air-to-Surface Stand-off Missiles (JASSM), Kongsberg Defence & Aerospace’s Joint Strike Missiles (JSM), and equip more Maritime Self Defence Force (JMSDF) vessels to launch Tomahawk missiles, following expedited efforts, beginning in late 2025, to equip Japan’s Aegis-equipped Kongō-class JS Chōkai guided missile destroyer with Tomahawk launchers by next April.
Drones and SHIELD
A second standout feature in the budget paper was funding for the purchase of “large-quantity UAVs (Unmanned Aerial Vehicles), USVs (Unmanned Surface Vehicle) and UUVs (Unmanned Underwater Vehicles),” and the introduction of a drone-based “Synchronized, Hybrid, Integrated and Enhanced Littoral Defense” (SHIELD) architecture.
The budget paper’s largest drone procurement by value was the acquisition of four General Atomic MQ-9B Sea Guardians, which are set to assume intelligence, surveillance and reconnaissance (ISR) roles. The purchase, which includes the procurement of control stations and is budgetted to cost ¥76.5 billion (AUD$730 million), will bring Japan’s arsenal to a projected 9 units by 2028.
Modest funding was also set aside for the MoD’s priority for procuring AI-driven drone systems to improve manpower-efficiency and optimise operator-to-asset ratios. Two projects of this type were highlighted in the budget paper: 1. further development work on linking multiple UAVs with the Global Combat Air Programme’s (GCAP) next generation fighter (¥4.8 billion = AUD$46 million), following extensive AI algorithm development and successful preliminary flight tests in 2025, and; 2. a grant totaling ¥4.8 billion (AUD$46) for the Acquisition, Technology and Logistics’s Agency’s (ATLA) recent proposal to develop a multipurpose AI-driven UAV-linked off-road unmanned ground vehicle (UGV) system.
Among the highest profile announcements in the paper was the introduction of SHIELD – a plan for the acquisition of ten types of UAVs, USVs (Unmanned Surface Vehicles) and UUVs (Unmanned Underwater Vehicles) capable of simultaneous and coordinated anti-ship and anti-personal operations in Japan’s littoral. The ambitious new initiative, which was allocated ¥100 billion (approx. AUD$950 million), aims to deploy large numbers of relatively inexpensive assets, and is slated to be operationally ready within an ambitious two year timeframe.
Despite the volume of new assets set out in the 2026 budget paper, procurement costs as a percentage of the overall budget fell to 19.4per cent in 2026, a decline of 2.7per cent compared with 2025. Major increases in relative spending in the 2026 budget are in the areas of maintenance (up 2.3per cent for a total of 32.1per cent) and research and development (up 3per cent to 8.8per cent of total budget spending).