Japan considers broader definition of security spending to inflate defense outlays, sources say

Japan is looking at broadening the range of expenditures that could be counted as security-related in an effort to inflate defense outlays, five government officials familiar with the matter said, as Tokyo grapples with U.S. calls for more spending amid fiscal constraints.

Specifically, the government is looking at whether spending on areas like AI, satellites, research and development and infrastructure — including ports and railways — could be classified as defense-related costs, the officials said.

The move is intended to help Japan move closer to defense spending equivalent to 3.5% of gross domestic product, a level that the U.S. has urged its allies to achieve.

“The key issue is how much can be included as defense-related spending,” one of the officials said. The officials spoke on the condition of anonymity as they were not authorized to speak publicly.

When asked for comment, Chief Cabinet Secretary Minoru Kihara said on Thursday that no decisions had been made on defense spending levels or related expenditures.

“The important thing is not the amount of money itself but the substance of our defense capabilities,” he said.

The discussions come as Japan faces growing external pressure to strengthen its military capabilities, while also dealing with record budget demands and limits on additional debt issuances.

Already, Prime Minister Sanae Takaichi’s tax-cut and big spending plans have jolted bond markets by stoking fears that they could add to Japan’s debt pile, which is the largest among the world’s major economies.

While total budget requests for the next fiscal year have exceeded a record ¥143 trillion ($910 billion), market pressure has forced Takaichi to pledge to keep the issuance of deficit-covering bonds at around ¥40 trillion.

Based on Japan’s current growth estimates, spending equivalent to 3.5% of GDP would be roughly ¥24 trillion annually, compared with about ¥9 trillion allocated to defense in the current fiscal year’s budget.