Transformation of Strategic Balance in Northeast Asia: Japan's Record Defense Spending, Lifting of Arms Export Ban, and New Deterrence Posture Indicated by Multinational Exercises (May 2026 Analysis)

Japan has allocated a record defense budget of approximately 8.9 trillion yen (about 58 billion dollars) for the fiscal year 2026, steering towards a fundamental enhancement of its deterrent capabilities. This budget, which marks the 12th consecutive increase, is set to put Japan on track to achieve its GDP ratio target of 2% ahead of the initial plan for 2027, while also reflecting the reality that the security environment in Northeast Asia is described as "the most severe since the post-war period." This is not merely an increase in numbers. The budget includes investments in a layered coastal defense concept called "Shield (Synchronised, Hybrid, Integrated and Enhanced Littoral Defence)," the acceleration of procurement for the extended-range Type 12 surface-to-ship guided missile, and the trial operation of the MQ-9B "SeaGuardian" long-range unmanned reconnaissance aircraft, which effectively surpass the traditional framework of "defensive defense."

In parallel with the expansion of defense spending, Japan has implemented a historic shift in its arms export regulations. In April 2026, the government effectively abolished restrictions on the export of defense equipment, allowing the export of finished products including vessels, missiles, and military aircraft. The results have already become concrete. In April, Mitsubishi Heavy Industries received a contract for the construction of the first three general-purpose frigates for Australia, initiating a plan to jointly build a total of 11 upgraded versions based on the Mogami class. Discussions began on May 5 with the Philippines regarding the transfer of used Abukuma-class escort ships from the Japan Maritime Self-Defense Force, confirming a policy of "early transfer" between Defense Minister Gilberto Teodoro and Minister Shinjiro Koizumi. New Zealand has also expressed interest in the same Mogami-class frigates, while Indonesia has shown interest in fast patrol boats. These movements should be understood as strategic measures to incorporate interoperability of defense equipment into the alliance network of Japan, the United States, Australia, and the Philippines, going beyond mere commercial negotiations.

The backdrop for Japan's shift towards arms exports is the supply-demand structure where global military spending is projected to reach a record high of $2.89 trillion by 2025, according to SIPRI, with a pressing demand for air defense missiles and artillery shells. However, more fundamentally, it is Japan's acquisition of a new means of regional security through the "export of deterrence" amid the normalization of China's military power enhancement and North Korea's missile provocations. As pointed out by Professor Stephen Nagy of ICU, Japanese companies still face challenges in terms of international marketing experience and cost competitiveness, but they possess clear technological advantages in areas such as "advanced radar systems, patrol vessels, and jointly produced intercept missiles." Anchored by Mitsubishi Heavy Industries, heavy industry manufacturers like Kawasaki Heavy Industries, IHI, and Mitsubishi Electric have the scale necessary for international procurement, and establishing a mass production system in peacetime can also reduce the risks of rapid production expansion during wartime.

The ongoing U.S.-Philippines joint exercise "Balikatan 2026" (April 21 - May 8) has served as a venue to verify these movements at the operational level. This year's exercise involved approximately 17,000 troops (including about 10,000 U.S. forces), and for the first time, maritime denial training was conducted on Itbayat Island, about 155 km from Taiwan. It is noteworthy that Japan dispatched combat troops. The Self-Defense Forces deployed missile systems in integrated air and missile defense (IAMD) training, demonstrating a shift from traditional observer participation to full operational involvement. Furthermore, the U.S. Marine Corps airlifted the new NMESIS (Naval Expeditionary Ship Interdiction System) to Batanes Islands via C-130, verifying the procedure for deploying NSM (Naval Strike Missile) at a location overlooking the Luzon Strait. This demonstrated the "Stand-in Force" concept, which involves equipping unmanned ROGUE-Fires vehicles with anti-ship missiles with a range exceeding 185 km, allowing small units to rapidly establish maritime denial zones between islands, qualitatively changing the deterrent posture of the allied forces in preparation for a Taiwan contingency.

In response, the Chinese People's Liberation Army aircraft carrier "Liaoning" passed through the Taiwan Strait on April 20, with its carrier-based aircraft deployed on the deck. This marked the first passage of a Chinese aircraft carrier through the Taiwan Strait since the "Fujian" in December 2025, and the Chinese side condemned the simultaneous passage of Japanese vessels through the strait as a "deliberate provocation." Additionally, according to a report by the FDD (Foundation for Defense of Democracies), China has established new flight restriction zones in major air routes in the East China Sea and northern Taiwan Strait, expanding measures that restrict freedom of navigation for both civilian and military vessels. The simultaneous occurrence of the Balikatan exercise expansion and the passage of the Chinese aircraft carrier through the strait highlights the reality that the Taiwan Strait has become the frontline of a sharply intensified military and political confrontation.

On the Korean Peninsula, North Korea's provocative actions have escalated in both quality and quantity. In 2026, North Korea has already conducted seven ballistic missile launches. On April 19, multiple short-range ballistic missiles were launched from near Sinpo on the east coast towards the Sea of Japan, flying approximately 140 km. This provocative act came immediately after the IAEA warned of "extremely serious progress" in North Korea's nuclear weapons development, prompting a strong protest from the Japanese government. In early May, it was announced that the new 155mm self-propelled howitzers inspected by Kim Jong-un would be deployed to long-range artillery units along the southern border within the year. The range is said to exceed 60 km, putting the center of Seoul (about 50-60 km from the military demarcation line) and key industrial areas in Gyeonggi Province well within range. Furthermore, the 5,000-ton destroyer "Choi Hyun" successfully conducted a strategic cruise missile launch experiment and is scheduled to be handed over to the navy by mid-June. The ship is analyzed to potentially serve as a platform for strategic cruise missiles capable of carrying nuclear warheads, indicating that North Korea's naval power is forming a more mobile nuclear threat by combining missile capabilities.

In summary, as of May 2026, the security environment in Northeast Asia is at a stage where three trends are accelerating simultaneously. First, Japan is transforming into a "supplier of deterrence" through the achievement of a 2% GDP defense spending target and the lifting of arms export restrictions. Second, multilateral exercises with allies such as the U.S., Philippines, and Australia have entered a phase of building practical interoperability in anticipation of a Taiwan contingency. Third, the diversification of North Korea's conventional forces and nuclear delivery systems has reached a new stage with the emergence of capabilities to attack Seoul and the acquisition of maritime launch platforms. These trends are interrelated, creating a dense security space where changes in one country's policy can immediately rewrite the strategic calculations of the entire region. Japan's shift in defense policy is one of the most important structural variables in this space, and its consequences will likely determine the balance of power in Northeast Asia for the coming years.