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The Financial News

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Politics

World

Lifestyle

Friday, June 13, 2025

Japan’s Defense Nightmare: Budget Slashed by 30% Due to Yen Depreciation

Japan has secured a defense budget of 43 trillion yen ($272 billion) over five years but lost 30% of its value due to a historic yen depreciation. The country heavily relies on imports for most of its military equipment.

As the dollar’s value has soared, the original budget fell short.

Nikkei reported that despite the Japanese government’s tax rises, the 43 trillion yen it has raised for the defense budget in the past five years will not be sufficient.

At the end of 2022, the Japanese government decided to increase the defense budget, breaking the unwritten rule of “1% of GDP” in response to China’s military strengthening.

The exchange rate was about 108 yen per dollar, and the government did not anticipate further depreciation. However, the current yen-dollar exchange rate has approached 160 yen per dollar, exceeding the government’s expectation of 50 yen. Nikkei criticized, “The Japanese government made a huge miscalculation for the yen-dollar exchange rate.”

During the February meeting of the Liberal Democratic Party’s Defense Subcommittee, many were concerned that the 43 trillion yen budget was insufficient due to unexpected exchange rate fluctuations.

To make matters worse, the cost of raw materials has also been surging, making the price more expensive. According to the 2024 budget, the price of the latest stealth fighter, F35A, imported from the United States was expected to be 11.6 billion yen ($72.8 billion) per unit in 2018. Still, it was 14 billion yen ($88.2 billion). Similarly, the unit price of the Aegis ship also rose from 240 billion yen ($1.5 billion) per ship to 392 billion yen ($2.45 billion).

Japanese Prime Minister Fumio Kishida emphasized, “The number was decided in a cabinet meeting to prepare necessary defense capabilities,” and added, “The policy of strengthening defense capabilities within the range of 43 trillion yen has not changed.” He responded to whether the budget exceeds 43 trillion yen during the Budget Committee of the House of Councillors in November last year.

The Japanese government plans to raise corporate income and tobacco taxes over several years to secure the defense budget. However, the implementation date has not been decided.

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