Turning Point in Japan's Defense Policy: The 2026 Budget, Overseas Missile Launches, and the Lifting of Arms Export Restrictions Indicate a New Security Strategy

In May 2026, Japan's defense policy is undergoing the most significant transformation since the post-war era. The expansion of defense spending to its largest scale ever under the administration of Sanae Takaichi, the first overseas live-fire launch of the Type 88 Surface-to-Ship Missile (SSM-1) by the Japan Ground Self-Defense Force in the Philippines, and a fundamental review of the three principles of defense equipment transfer—these developments indicate that Japan is fundamentally changing its security posture from "defensive defense" to "expeditionary deterrence in cooperation with allied nations." This article will analyze each element constituting this historic shift in detail and consider its implications for the security environment in Northeast Asia.

The defense budget for fiscal year 2026 has been set at a record 9.4 trillion yen (approximately 58 billion dollars). This represents a further 9.7% increase from the defense spending of 6.22 billion dollars in fiscal year 2025 (1.4% of GDP, the highest level since 1958). According to a report released by SIPRI (Stockholm International Peace Research Institute) on April 27, global military spending reached a record high of 2.89 trillion dollars in 2025, marking an increase for the 11th consecutive year. Amid this global arms buildup trend, Japan aims to achieve 2% of GDP by fiscal year 2027, and the 2026 budget has been evaluated by the defense economic research organization MilitarySpend as a substantial shift from mere symbolic increases to concrete equipment procurement, ammunition stockpiling, unmanned system development, and strengthening the defense production base.

As the prolonged wars in Ukraine and Iran drive up global demand for weapons, on April 21, 2026, the Japanese government revised the operational guidelines for the three principles of defense equipment transfer, lifting the ban on the export of lethal equipment under certain conditions. According to a CNBC report (May 14), Professor Steven Nagy of International Christian University cited the next-generation fighter Global Combat Air Program (GCAP), jointly developed with the UK and Italy, as Japan's defense industry's "masterpiece," positioning Mitsubishi Heavy Industries as the industry's "anchor." In April, Australia signed a contract for the construction of three general-purpose frigates based on an improved version of Mitsubishi Heavy's Mogami-class destroyer. Furthermore, New Zealand has also shown interest in the same-class vessels, and discussions have begun regarding the export of used destroyers to the Philippines. Hiroshi Ogi, a senior researcher at the Institute of Geoeconomic Studies (IOG), pointed out that "countries are desperate to procure air defense missiles, shells, armored vehicles, and more," analyzing that there are certainly areas where Japan's defense industry can expand its share in the international market.

The most dramatic symbol of Japan's shift in arms export policy was the live-fire launch of the Type 88 Surface-to-Ship Missile by the Japan Ground Self-Defense Force on May 6, 2026, in Ilocos Norte, Luzon, northern Philippines. Conducted during the Balikatan 2026 exercise, this launch marked the first instance since 1945 that Japan has fired offensive missiles from foreign territory. At 10:30 AM, two Type 88 SSM-1 missiles launched from a six-pack launcher were fired at the decommissioned Philippine Navy corvette "BRP Quezon (PS-70)," located approximately 75 km offshore, hitting and sinking the vessel within six minutes. High-ranking officials, including defense leaders from Japan and the Philippines, witnessed this exercise.

The strategic significance of this missile launch far exceeds the mere symbolism of being the "first overseas launch." Ilocos Norte is located about 400 km south of Taiwan and directly overlooks the Luzon Strait, making it a critical point for blocking the Chinese Navy's routes of advance from the South China Sea to the Western Pacific. This firing demonstrated the formation of a multi-layered, distributed coastal defense network involving Japan's Type 88 missile battalion, the U.S. Marine Corps' NMESIS (Naval Expeditionary Ship Interdiction System) and HIMARS (High Mobility Artillery Rocket System), the Philippines' C-Star anti-ship missile, and forward reconnaissance assets. This network is central to the "Access Denial/Area Denial (A2/AD)" concept, which aims to complicate the Chinese Navy's breakthrough through the Luzon Strait in the event of a Taiwan contingency.

Notably, there is a dramatic change in Japan's operational doctrine. The Type 88 Surface-to-Ship Missile, a turbojet cruise missile with a range of 150-200 km developed by Mitsubishi Heavy Industries, was originally designed for the defense of Hokkaido and the Ryukyu Islands against the Soviet Navy during the Cold War. However, in this instance, approximately 1,400 Self-Defense Force personnel from Japan participated in various components of the exercise, including the Amphibious Rapid Deployment Brigade, which conducted landing operation training alongside the Philippine, Canadian, and U.S. forces. This deployment was made possible for the first time by the Japan-Philippines Reciprocal Access Agreement (RAA), which came into effect on September 11, 2025, indicating that Japan's defense scope has expanded from "defending its own territory" to "joint operations with allies in the First Island Chain."

Simultaneously, the ongoing discussions regarding the transfer of used destroyers to the Philippines must be understood within this strategic context. On May 5, Defense Minister Shinjiro Koizumi and Philippine Defense Secretary Teodoro Locsin agreed to establish a framework for practical discussions, including the transfer of the Japan Maritime Self-Defense Force's Abukuma-class destroyers (six vessels with a standard displacement of about 2,000 tons, commissioned between 1989 and 1993). According to Naval News, the Abukuma-class, suitable for anti-submarine warfare and coastal operations, is equipped with Harpoon anti-ship missiles, ASROC anti-submarine rockets, a 76mm gun, and CIWS (Close-In Weapon System), serving as a highly responsive force multiplier for the Philippine Navy, which possesses only a few modern surface combatants against China's fleet of over 400 vessels. The transfer could occur as early as 2027.

South Korea is also accelerating its own defense capabilities. The defense budget for fiscal year 2026 is set at 65.8642 trillion won (approximately 45 billion dollars), representing a significant 7.5% increase from the previous year. This budget allocates about 6 billion dollars to strengthen the "three-axis system" (Kill Chain, Korea's Missile Defense, and Massive Retaliation) to counter North Korea's nuclear and missile threats. Notably, the Lee Jae-myung administration is promoting a plan to develop "500,000 combat drones," aiming for a dramatic improvement in manned-unmanned teaming (MUM-T) capabilities. South Korea's defense spending has already reached 2.6% of GDP (2024 figures), with a goal of reaching NATO standards of 3.5% by 2035. This is both a response to pressure from Washington for increased defense spending and part of a long-term autonomous defense strategy to reduce dependence on U.S. forces in South Korea.

The backdrop to these movements in Japan and South Korea is the acceleration of China's maritime expansion in the South China Sea and East China Sea. According to a report from the Asia Maritime Transparency Initiative (AMTI) in March 2026, China is rapidly advancing land reclamation and construction at Antelope Reef in the Paracel Islands, which could become the largest Chinese-occupied base in the South China Sea once completed. Furthermore, in April, a floating barricade was established by Chinese-flagged vessels at the entrance to Scarborough Shoal (Chinese name: Huangyan Island) within the Philippines' exclusive economic zone, physically restricting access for Filipino fishermen. An analysis by the Foundation for Defense of Democracies (FDD) warns that as international attention focuses on the situation in Iran, China is opportunistically seeking to establish facts on the ground.

Considering these circumstances, the security environment in Northeast Asia in the spring of 2026 is characterized by three trends. First, Japan's defense policy is irreversibly shifting from the framework of "defensive defense" to joint deterrence and operational integration with allied nations. Second, both Japan and South Korea are urgently building their own deterrent capabilities to counter China's maritime expansion through unprecedented levels of defense investment. Third, China is accelerating the consolidation of its bases and the establishment of maritime control in the South China Sea, taking advantage of the international community's attention being diverted to the Middle East.

The military equation's implications are clear. While the multi-layering of "Access Denial/Area Denial" capabilities in the First Island Chain is rapidly advancing, the risk of accidental conflict is also certainly rising in the waters where U.S.-Japan-Philippines military exercises and Chinese surveillance activities intersect. What I want to emphasize as an analyst is the fact that this concentration of complex military power is advancing at a pace that outstrips the establishment of hotlines and crisis management mechanisms to prevent unintended escalation. Strengthening defense capabilities is essential, but alongside this, the urgent need for institutional frameworks for conflict prevention is vividly illustrated by these developments in May 2026.