Japan’s global defense business may be on the cusp of a big breakout
SAN ANTONIO, ZAMBALES, PHILIPPINES – APRIL 28: A Japanese Self-Defense Forces personnel carried a Japanese national flag in front of missile systems, during an Integrated Air and Missile Defense (IAMD) drill, as part of the ongoing Balikatan (Shoulder-Shoulder) multinational exercise, at a naval base in San Antonio, Zambales, Philippines, on April 28, 2026. The IAMD exercise, which sees the deployment of troops and missile systems from the United States and Japan, comes at a time of escalating tensions in the disputed South China Sea and the Taiwan Strait, with the Chinese People’s Liberation Army increasing military activities in the water and Beijing denouncing Tokyo’s strengthened defense cooperation with the Philippines. (Photo by Daniel Ceng/Anadolu via Getty Images)
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Japan easing decades-old restrictions on arms exports opens a big opportunity for the country’s defense industry in a world increasingly hungry for weapons.
The global conditions seem favorable. On April 27, SIPRI reported that global military spending hit a record of $2.89 trillion in 2025, the 11th straight year of increase.
Countries are “desperate” to acquire weapons such as air defense missiles, artillery shells and armored vehicles, areas where Japan Inc. might expand its market share in the international defense economy, Hirohito Ogi, senior research fellow at the Tokyo-based Institute of Geoeconomics, told CNBC in an interview.
South Korea may offer a template — defense companies there have had a roaring few years producing arms cheaper, faster, and of comparable quality to U.S. weapons, benefiting as the Russia-Ukraine war drags on — and the Iran war is likely to fuel demand even further.
What’s more, traditional U.S. partners are now looking for alternative defense suppliers amid surging demand and doubts over American alliance commitments.
Japanese engineering is “top-tier,” and its “crown jewel” will be the next-generation Global Combat Air Programme fighter jet developed with Britain and Italy, said Stephen Nagy, professor of politics and international studies at Tokyo’s International Christian University.
The new fighter aircraft will reportedly replace the Eurofighter Typhoon in the U.K. and Italy, and the Mitsubishi F-2 fighter in Japan.
Export areas
Japan’s near-term opportunities are likely to be concentrated in areas where the country already has clear technological strengths.
The country will have a heavy initial focus on maritime domain awareness and air defense like “advanced radar systems, patrol vessels, and co-produced interceptor missiles,” Nagy said.
In April, Australia signed contracts for its first three general-purpose frigates, which will be built by Mitsubishi Heavy Industries and based on the upgraded Japanese Mogami-class design.
There has also been increasing foreign interest in Japanese defense systems, with Indonesia expressing interest in high-speed patrol boats.
The Philippines is in discussions for the…
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