Can Japan build a defense-startup ecosystem?

The Ground Self-Defense Force fires a Type 88 surface-to-ship missile during a joint exercise with the U.S. and Philippine militaries in Ilocos Norte province, Philippines, in early May. | REUTERS

Oct 6, 2026

Until recently, it was difficult to imagine Japanese startups entering the defense sector. But a changing security environment and proactive outreach by the Ministry of Defense’s Acquisition, Technology & Logistics Agency are drawing new interest from entrepreneurs and venture capitalists. In April, ATLA published “Toward the Utilization of Startups,” calling for faster procurement, greater predictability, partnerships with prime contractors and measures to attract private capital.

The government has also identified advanced technology, R&D and a stronger defense industrial base as priorities. With drones and other low-cost systems proliferating and software becoming increasingly important on the battlefield, Japan needs more than traditional defense contractors. Is Japan entering an era in which defense startups can emerge — and what role can government play in their growth?

As defense-startup policy accelerates, government and startups need to understand each other’s logic. In civilian markets, startups can search freely for customers, set prices and adapt products to customer needs. In defense, however, the customer is essentially the state. Sales opportunities are shaped by Ministry of Defense and ATLA demand, budget allocations, technical evaluations and operational priorities. Demonstration processes can be lengthy and high levels of confidentiality are required. Startups therefore need to develop products with public procurement constraints in mind.

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