Confronting the Cost of Japan’s Defense Buildup: A Conflicted Public Considers the Options

On December 16, 2022, the government led by Prime Minister Kishida Fumio approved a new National Security Strategy, along with two other key documents, the National Defense Strategy and Defense Buildup Program. Together, they signal a dramatic shift in Japan’s defense posture over the next five years. In terms of content, the new policy is notable for its commitment to acquiring counterstrike capabilities for the first time and its emphasis on the space and cyber domains. Among a number of important aspects to be discussed regarding the new direction of Japan’s defense posture, this commentary will focus on the issues surrounding the plan to substantially increase the country’s defense budget, fundamental questions raised by the proposed jump in defense spending. In the following, we will consider the significance and implications of this massive budget increase and the ongoing public and political debate over its funding.

Doubling Defense Spending?

Much attention has been devoted to the Japanese government’s stated intent to boost defense spending to 2% of gross domestic product over a period of five years (fiscal years 2023 through 2027). Even in the wake of gradual increases started underPrime Minister Abe Shinzō, current defense expenditures only slightly exceed 1% of GDP. Taken at face value, 2% of GDP would mean a doubling of defense spending. But it is not that simple.

The defense expenditures expected to reach 2% of GDP in 2027 include not only the Ministry of Defense budget but also Coast Guard allocations and various other “supplemental” programs—research and development, public infrastructure, and so forth—deemed related to defense. Without those inclusions, defense spending, i.e. MoD budget, over the five-year period beginning in April 2023 is expected to total ¥43 trillion—not twice but 1.6 times the ¥27 trillion allocated for the current five-year plan.

The initial defense budget for fiscal year 2023 is ¥6.8 trillion, and it is set to reach ¥8.9 trillion in fiscal 2027. To account for 2% of Japan’s GDP, which has been hovering between ¥540 trillion and ¥550 trillion, the budget would need to reach about ¥11 trillion even without taking into account overall economic growth. That means the government will have to include more than ¥2 trillion in defense-related items from other parts of the national budget, and it has yet to provide a full accounting of those items.

The Symbolic Significance of 2%

Much of the criticism leveled at the defense budget centers on the accusation that it is a “figure-driven” process, only aiming to reach the 2%-of-GDP target.

At a press conference held after the cabinet’s approval of the three key strategic documents, Prime Minister Kishida defended the 2%-of-GDP figure. He argued that the current posture of the Self-Defense Forces was “inadequate” and maintained that the 2% figure was arrived at by “adding up” what was needed to “drastically strengthen” Japan’s defense capability. Owing to previous budget constraints, requests for allocations to address long-neglected needs added up very quickly.

Still, no one honestly believes that 2% is the exact ratio of defense spending to GDP that happened to result after all those needs were added up. It is a symbolic number, indeed. It corresponds to North Atlantic Treaty Organization (NATO) guideline, cited repeatedly during defense policy deliberations within the ruling Liberal Democratic Party.

Nor is there any firm military rationale for the 2% NATO guideline. The standard was established in the mid-2000s, based on NATO members’ average defense expenditures in the late 1990s, as a way to stem and reverse the decline of defense budgets. The idea was, “Let’s at least return to that level of defense spending.”

Japan’s long-standing 1%-of-GDP (originally, gross national product) cap on defense spending was equally artificial. There was no military basis for that particular figure, nor did it emerge organically from the budget compilation process. That figure was meant to convey the political message that Japan had no intention of reemerging as a major military power. In a similar fashion, the 2% target makes a political statement, communicating the government’s resolve to shoulder its share of the responsibility for defense amid an increasingly challenging regional security environment.

In a sense, then, the critics are correct in saying that 2% of GDP is an artificial target, inasmuch as it was determined by political considerations. But the basic function of politics is the allocation of resources, and since those resources are finite, their allocation involves prioritization. The 2%-of-GDP target is a political declaration of the high priority the Japanese government means to place on defense.

It is rather inconsistent for those who were happy capping defense spending at 1% of GDP—the epitome of working backward from an artificial number—to turn around and criticize the 2%-of-GDP target as “figure-driven” and artificial. Furthermore, if the security environment surrounding Japan worsens any further, which seems likely, a defense budget compiled on the basis of need could easily surpass 2% of GDP or reach 3% or even higher. In that case, the very people who attacked the artificial 2% target might turn around and embrace it as a new cap.

Beginning with the Basics

What, then, does the government propose to do with these additional resources? We can get a clear sense of the Defense Ministry’s priorities from the ¥6.8 trillion fiscal 2023 defense budget approved by the cabinet on December 23, 2022. To be sure, the budget includes items pertaining to the development of counterstrike capabilities in the form of a “standoff defense”—long-range missiles and other weapons capable of striking enemy targets from outside their firing radius. But many of the biggest spending increases for 2023 are oriented to addressing chronic problems and basic needs. The budget for equipment maintenance and sustainment has been increased by 80% (¥2.36 trillion) in an effort to address chronic shortages of replacement parts and low operational availability. The 3.3-fold increase in allocations for ammunition (to ¥828 billion) is occurring amid rising concerns over Japan’s ability to sustain operations. The 3.3-fold jump in facilities spending (to ¥505 billion, excluding barracks-related expenses) speaks to the urgent need for greater resiliency. Other major increases are found in R&D and improvements in the living and working environment of military personnel.

These are nothing new but long-standing needs and deficiencies that can finally be addressed thanks to the budget increase. For example, funding for air conditioning in military facilities was limited to ¥2 billion in the initial 2022 budget (increased to ¥4 billion in the supplementary budget). That will rise to ¥42 billion in 2023. It is just one indication of how shamefully the quality of SDF facilities have been neglected until now.

Notwithstanding the Defense Ministry’s characterization of the 2023 defense budget as “year 1” of a five-year plan to “drastically strengthen Japan’s defense capability,” the content of the budget reflects a focus on addressing long-overdue improvements before rushing ahead with more ambitious plans, such as the development of counterstrike capabilities. The ministry correctly recognizes the urgency of dealing with basic needs first, understanding that without a firm foundation, programs aimed at transforming Japan’s defense posture would be little more than castles in the sand.

Japan’s Ambivalent Voters

How, then, does the Japanese public view the impending defense buildup?

Since the beginning of 2022, Japan has seen a marked increase in public support for an increase in defense spending. Russia’s invasion of Ukraine that started in February rising tensions over the Taiwan strait, and North Korea’s record-setting missile launches all seem to have forced the Japanese to take the country’s security and defense, including the worsening strategic environment surrounding Japan seriously. In an April 2022 opinion poll by the Nikkei (Nihon Keizai Shimbun), 55% of respondents supported the idea of increasing Japan’s defense spending to at least 2% of GDP, while only 33% disapproved.

However, it is one thing to acknowledge the need for a stronger defense and another thing to be willing to pay for it. It appears that many of the voters who favor higher defense spending in the abstract – paid for by someone, somewhere – are considerably less enthusiastic about the increase if it means paying higher taxes to support it. This should come as no surprise to anyone.

In a December Nikkei poll, following the government’s approval of the National Security Strategy and other documents and the announcement of Kishida’s proposed tax increases, 55% of respondents still supported the government’s proposed buildup. But when asked more specifically if they agreed with plans to spend ¥43 trillion on defense over the next five years, opinion was roughly divided, with 47% in favor and 45% opposed. With respect to the tax increases, a full 84% felt that Kishida had failed to explain the tax plan adequately. At the same time, 50% of respondents thought it “inappropriate” for the government to postpone a decision on when the increases would kick in, while just 39% approved of the delay. In short, while people are unhappy about bearing the costs of the defense buildup, they are also uneasy about putting off difficult decisions regarding its funding.

An earlier Nikkei poll, conducted near the end of October, asked voters their preference for financing the increase in defense spending. The largest group, 34%, went with “cuts in other areas of the budget”; another 15% chose “issuance of government bonds”; and a mere 9% supported tax increases. Putting aside the 31% of respondents who felt there was no need for a spending increase, we find that almost half of those supporting a buildup favored financing it with spending cuts elsewhere. Granted, some of those respondents might well change their minds if they discovered that the cuts would impact them personally. Still, the relatively small number of respondents willing to rely on government bond suggests a certain anxiety about just borrowing money to meet today’s defense requirement. Herein lies the dilemma the public finds itself in regarding the defense burden of the country.

Facing Up to the Costs of Defense

Prime Minister Kishida’s plan to raise taxes to finance the defense buildup triggered dissent from within the LDP. Their opposition to the plan from inside the ruling party reflects a wide variety of viewpoints and rationales. Some politicians oppose any imminent tax increase on macroeconomic grounds, given the current state of the economy. Others want to pay for the buildup with government bond issues because they see no need for concern about the scale of government debt, a kind of “Modern Monetary Theory (MMT)” school. Some are arguing for the use of special accounts or profits from the sale of government assets, or calling for measures to boost revenues without tax increases.

The planned increase in defense spending over the next five years totals ¥17 trillion. The proposed hikes in the corporation tax, income tax, and tobacco tax—to be submitted to the Diet at some unspecified date in the future—are expected to generate no more than about ¥1 trillion in the final year of the five-year ¥43 trillion plan. Clearly, those tax increases will need to be accompanied by a variety of other measures, including public expenditure reform (budget cuts), government bond issues, and the use of special accounts. The government is also counting on economic growth to boost tax revenues. No single source of funding can possibly cover the budget increase envisioned.

Even so, the Kishida government’s modest plan to increase taxes has generated a huge amount of controversy and seems to have contributed to a sharp drop in the cabinet’s approval rating. The way in which the issue was handled was far from perfect, to say the least.

The notion of a defense buildup at no cost to the taxpayer is simply an illusion that should not be allowed to persist. The costs of defense, like the benefits, impact every citizen. They are not someone else’s problem. That realization is dawning on the Japanese people, which helps explain why public opinion is in flux.

Some may imagine that defense spending can be increased painlessly through “natural” increases in tax revenues or the sale of government assets. But the reality is that any money to be spent on defense is money that becomes unavailable for other purposes. Budgeting, by nature, is a zero-sum game. It is the government’s most important responsibility to consider the nation’s competing needs and set its priorities accordingly. If our political leaders want to boost the defense budget in a sustainable manner, they will have to be more honest about the reasons and the distribution of costs, rather than sticking to the illusion of “defense buildup without cost.”

(Originally published in Japanese. Banner photo: The Maritime Self-Defense Force destroyer JS Shiranui sets sail from Yokohama to the sound of a bugle call, November 5, 2022. © Jiji.)