Japan’s Ministry of Defense (MoD) has asked for a record 8.89 trillion yen (approx. A $78.8 billion) in its 2027 draft budget request.
While a new high, the number was lower than many expected.
The headline number represents below-inflation increase over the previous year, coming in at only a quarter of the 3.9 per cent year-on-year (YoY) rate of increase achieved in 2025.
Moreover, the largest category in terms of costs was not for the slated procurement of new capabilities, but rather inherited funding obligations for prior acquisitions.
However, this year’s budget saw provisional requests for as-yet un-costed tenders, recorded as “item requests,” soar to almost 170 items – reflecting uncertainty as to the constitution of this year’s updated National Defense Strategy and Defense Buildup Program, which will outline government priorities for defence acquisitions.
This has led to widespread media speculation in Japan that the final figure may reach 10 trillion yen (approx. A $88.7 billion).
The likely larger increase in part reflects the document’s expansive agenda, which includes both large investments to upgrade and expand the nation’s conventional arsenal, while investing in asymmetric and other capabilities the MoD associates with the “new ways of warfare” on display in theatres including Ukraine and the Hormuz Strait.
Among the former were a minimum of 144 billion yen (approx. A $1.28 billion) earmarked for a new supply ship, 72 billion yen (approx. A $639 million - plus item request) for an ocean surveillance ship, over 100 billion yen (approx. A $902 million) for vehicles including armoured personnel carriers, tactical vehicles and mobile missile launchers, un-costed requests for Boeing KC-46A aerial refuelers, Kawasaki C-2 transporters and F-35A/B multi-role combat aircraft variants, and nearly 600 billion yen (plus item requests) (approx. A $5.4 billion) to be spent on upgrading Japan Self-Defense Force (JSDF) facilities.
Yet arguably the greater emphasis was on capabilities that reflected the nation’s new warfighting doctrines, the highlights being standoff capabilities – which until recently had been deemed incompatible with the nation’s pacifist constitution – and unmanned systems.
Standoff capabilities, which included air, land and sea (including submarine) launched missiles, were the largest category by cost, totalling over 540 billion yen (approx. A $4.8 billion), along with 12 un-costed item requests.
The biggest ticket items were hypersonic missiles (167 billion yen – approx. A $1.5 billion) – possibly referring to the procurement of Japan’s new Block I Hyper Velocity Gliding Projectile (HVGP), as well as newly developed Type 25 Surface-to-Ship Guided Missiles (157 billion yen – approx. A $1.49 billion) and other upgraded versions of Mitsubishi Heavy Industries’ Type 12 Surface-to-Ship Missile (91 billion yen).
Notable un-costed requests included research on a submarine launched hypersonic glide missile – although there was no mention in the report in relation to previous debates on Japan acquiring nuclear powered submarines.
Significant attention was also given to the acquisition of unmanned aerial and ground systems, as Japan looks to invest substantial resources into the rapid development of its recently advanced SHIELD unmanned asset integrated littoral defence system.
Total allocated funds for drones were around 360 billion yen (approx. A $3.2 billion) with 8 un-costed item requests, of which the dominant share went to Intelligence, Surveillance, Reconnaissance, and Targeting (ISRT) drone acquisitions, largely due to the hefty 292 billion yen (approx. A $2.6 billion) price tag (along with an item request) for 17 General Atomics MQ-9B Sky Guardian long-endurance drones. 7.6 billion yen (approx. A $67.7 million) was set aside for interceptor drones, likely in reference to the recent decision to procure Japanese start-up Terra Drone’s Terra B1 unmanned aerial vehicles (UAVs) for Japan’s Maritime Self-Defense Force (MSDF), while 36.3 billion yen (approx. A $328 million) was earmarked for three types of small attack UAVs, a portion of which will likely be dedicated to the ongoing procurement of Australian firm DefendTex’s Drone40 multi-modal UAVs.
Drones and anti-drone systems were in addition listed in other “new ways of warfare” sections of the document, including research on the use of unmanned underwater vehicles (UUV) for launching standoff missiles (item request), and close-range air defence systems (including research on high power microwave systems) to target drone swarms as part of the MoD’s integrated missile defence capability program.
A final notable inclusion in the budget were largely un-costed proposals for a raft of defence industry reforms to improve Japan’s industrial readiness for a prolonged contingency – a key theme in the Cabinet Office’s 2026 Basic Policy on Economic and Fiscal Management of Reform.
Listed proposals, many of which closely mirror recent reforms in the United States’ Department of War, included a reduction of standalone parts acquisition contracts and more performance-based logistics (PBL) to improve industrial readiness, and the use of Government-Owned, Contractor-Operated (COCO) facilities to retain a stable, long term supply of critical defence components.
State support packages were also proposed for defence supplier investments in productivity improvements and surge production capacity, while over 40 billion yen (approx. A $360 million) was earmarked to support exporters.
The report also lodged an item request to fund new defence technology suppliers through the inter-ministerial Small Business Innovation Research (SBIR) scheme in order to hasten the induction of dual use technology and reduce R&D investment risks for capital-poor start-ups.