Japan Stock AlphaDefense Policy
Japan's defense buildup: the biggest shift since WWII
For most of the postwar period, Japan's defense spending was capped near 1% of GDP — a self-imposed limit reflecting the country's pacifist constitution. That changed in late 2022, when Prime Minister Kishida announced Japan would double its defense budget to roughly 2% of GDP by 2027.
This is approximately ¥43 trillion in defense spending over five years — the largest sustained increase in postwar Japanese history.
"Japan stands at a turning point in history." — National Security Strategy, December 2022
Why now?
Three factors converged:
- China's military expansion in the East China Sea and around Taiwan
- North Korea's accelerating missile program, with regular test launches
- Russia's invasion of Ukraine — a wake-up call about regional security assumptions
Japan also faces a generational reckoning with deferred procurement: aging F-15 fighters, submarine fleet renewal needs, and an arsenal designed for a previous era.
Where the money is going
Seven priority areas: standoff defense capabilities (long-range missiles), integrated air and missile defense, unmanned systems, cross-domain operations, command and control, mobile deployment, and supply chain sustainability.
The listed companies that benefit
Mitsubishi Heavy Industries (7011.T)
Japan's largest defense contractor. MHI is involved in fighter aircraft (including the next-gen GCAP fighter program with the UK and Italy), destroyers, missiles, and ground systems.
IHI Corporation (7013.T)
IHI manufactures jet engines for Japan's F-15J fleet and the F-2 fleet, and is co-developing engines for next-generation fighters.
Kawasaki Heavy Industries (7012.T)
Japan's primary submarine builder. As Japan looks to expand its submarine fleet from 22 to 24+ boats, Kawasaki is a direct beneficiary.
For educational purposes only. Not investment advice. Past performance does not indicate future results.