The risk of a conflict over Taiwan is shaping Japanese defence planning, with Tokyo shoring up security at home and abroad for a potentially prolonged fight. But there are economic, demographic and political constraints on how far its military transformation can go. In the third of a three-part series, Gabriel Dominguez examines the various challenges confronting Japan in its bid to expand its military.
Driven by the growing risk that a conflict over Taiwan could draw Tokyo into a high-intensity confrontation with Beijing, Japan is pursuing its most ambitious military transformation since World War II.
Tokyo is acquiring long-range missiles, embracing drones and expanding defence partnerships stretching from Canberra to London.
Yet, analysts say some of the toughest obstacles to the transformation may lie at home.
As Tokyo prepares to revise its strategic security documents by year’s end, its historic military build-up must contend with growing constraints.
These include a shrinking pool of military recruits, an ageing population, mounting fiscal pressures, an industrial base struggling to expand and lingering questions over how far the Japanese public would support the use of its ascendant military power.
Together, the pressures raise a fundamental question about the next phase of Japan’s transformation: not simply how much military capability Tokyo can acquire but whether the country has the economic, human and political resources to sustain it, especially if a prolonged regional conflict were to erupt over Taiwan.
According to Misato Matsuoka, an associate professor at Teikyo University, acquiring the hardware is only one part of building an effective force.
“Japan may acquire increasingly sophisticated weapons without necessarily developing the manpower and institutional capacity required to operate them effectively,” Matsuoka said.
She warned that the mismatch could create a “hardware-capability gap”, with sophisticated equipment outpacing the ability of Japan’s Self-Defence Forces (SDF) to translate it into operational capacity.
Understaffed, outdated
The first test is therefore whether Japan can find enough people to operate the force it is building.
The country’s declining birth rate is shrinking the pool of potential recruits while a tight labour market forces the SDF to compete with private employers.
Recruitment improved in the 2025 financial year, but the SDF still had only 217,701 personnel against an authorised 247,154 at the end of March – a staffing rate of 88.1 per cent.
Defence ministry projections released in February suggested that, without corrective measures, personnel numbers could fall from about 220,000 to about 130,000 by 2045.
Tokyo is responding with better pay and working conditions as it turns to uncrewed systems and automation to do more with fewer personnel.
But the ministry itself acknowledges that strengthening recruitment and retention alone will not be enough.
The shortages could become particularly consequential in a contingency over Taiwan. Japan’s southwestern islands lie close to the potential conflict zone and the SDF could face demands to defend Japanese territory while maintaining operations under sustained pressure.
Beijing sees Taiwan as part of China to be reunited by force if necessary. Most countries, including the United States and Japan, do not recognise Taiwan as an independent state, but Washington is opposed to any attempt to take the self-ruled island by force and is committed to supplying it with weapons.
Filling the ranks, however, is only part of the problem for Tokyo. The force itself may also have to change.
Rintaro Inoue, a research fellow specialising in Japanese defence strategy and industry at the Institute of Geoeconomics as well as a PhD candidate at Keio University, said the challenge went beyond recruitment.
“In order to deter China from initiating a conflict in the region, the [Japan Self-Defence Force] will need to significantly change its force composition,” he said.
For instance, preparing for high-end warfare could require Japan’s Maritime Self-Defence Force to shift resources from some existing vessels and crewed patrol aircraft towards Aegis destroyers, uncrewed vessels and sensors, Inoue said.
Meanwhile the Ground Self-Defence Force may need to reduce its reliance on infantry, tanks and artillery as it expands missile forces, he added.
Internal organisational politics, resistance from local governments concerned about the economic impact of base closures and continuing demand for disaster-relief operations could make such changes difficult.
The structural problems are emerging even as the amount of money Tokyo is committing to defence keeps climbing.
The defence ministry has requested a record ¥8.9 trillion (US$55.7 billion) for the financial year 2027 – its 15th consecutive annual increase in defence requests.
In addition, officials have indicated that the figure could ultimately rise to about ¥10 trillion once the revision of Japan’s three main security documents is completed by the end of the year.
But spending more does not necessarily mean Japan can buy proportionately more military capability.
Matsuoka said the financial burden should not be measured merely by the initial cost of acquiring weapons. New systems bring long-term spending on personnel, maintenance, training, ammunition, infrastructure, upgrades and eventual replacement.
Once incorporated into the SDF, such capabilities could also become politically and strategically complicated to give up, potentially locking Japan into “a long-term cycle of defence spending that is increasingly difficult to sustain”, she said.
Japan says it has already reached its goal of spending about 2 per cent of gross domestic product on defence ahead of schedule. But sustaining that level, let alone substantially exceeding it, could prove harder.
High debt, weak yen
Darren Tay, head of Asia-Pacific country risk at BMI, a Fitch Solutions company, said the 2 per cent level itself was affordable but would become more difficult to sustain as Japan’s enormous stock of government debt was refinanced at higher interest rates.
National debt servicing is budgeted at ¥31.3 trillion in financial year 2026 and, under one finance ministry scenario, would reach ¥41.3 trillion by financial year 2029.
Tay identified debt servicing as the biggest economic constraint on Japan’s defence ambitions, ahead of demographics or procurement inflation.
BMI expects the government’s effective borrowing cost to rise to about 2.4 per cent by 2035 as older, near-zero-yield bonds mature and are refinanced at higher rates.
That would force defence, social-security spending and interest payments to compete for the same government revenue, Tay said.
At the same time, the weak yen is eroding the defence budget’s purchasing power. Much of the equipment Tokyo buys from the US is priced in dollars, meaning depreciation raises its cost in yen.
According to Tay, procurement planning underpinning the five-year build-up had assumed an exchange rate of about ¥108 to the dollar.
Moving towards defence spending of 3.5 per cent of GDP would therefore be of a “different order of difficulty”, Tay said, while reaching 5 per cent would require painful trade-offs with other public spending and was unrealistic without an acute geopolitical crisis directly involving Japan.
Fiscal constraints could thus force Japan to scale back what it can afford to buy.
“The more likely outcome is not a further rise in the budget but quietly accepting what is effectively a smaller defence budget,” Tay added. “Japan ends up buying less rather than paying whatever it takes.”
Inoue framed the dilemma differently. Given Japan’s security environment, Tokyo might have little choice but to spend more, he said, making the question whether the country was willing to bear the cost.
Sustaining a prolonged conflict
The Sanae Takaichi administration has sought to ease the burden by promoting a “virtuous cycle between defence and the economy”, including investment in dual-use technologies and expanded weapons exports that could lower unit costs.
Inoue described the objective as optimistic, saying the actual savings were likely to be limited.
Even if Tokyo finds the money to buy the force it wants, sustaining it through a prolonged conflict poses another challenge.
Japan’s defence industry has historically been structured to supply the SDF in relatively small quantities rather than replenish weapons at wartime rates.
Companies have withdrawn from parts of the sector, while limited production runs have contributed to high unit costs and made it harder to maintain suppliers and skilled workers.
Tokyo is trying to reverse that decline by improving conditions for contractors, attracting new entrants and expanding weapons exports, potentially increasing production volumes and spreading costs across larger orders.
Nevertheless, Tay said, the economic benefits would be “real but modest” this decade.
“The bigger pay-off is keeping Japan’s industry technologically capable and its equipment supply secure”, rather than substantially relieving pressure on the defence budget, he added.
Japan is also expanding ammunition production, shoring up supply chains and pursuing joint production with allies and partners.
Still, the defence ministry has acknowledged shortcomings in its ability to sustain operations, prioritising ammunition, fuel, equipment availability and hardened facilities.
Building stockpiles before a crisis is one challenge; replacing missiles, repairing damaged equipment and maintaining production as fighting continues is another.
And while hardware can be manufactured, public resolve cannot automatically be assumed.
Matsuoka cautioned against equating a growing public acceptance of a stronger SDF with a willingness to fight.
“There is an important distinction between support for strengthening defence in principle and support for actually using military force,” she said.
Acceptance of higher defence spending and new weapons would not necessarily mean the public would accept Japanese forces taking part directly in a war, suffering casualties or conducting operations that could expose Japan to retaliation, Matsuoka added.
“The build-up has therefore shifted the debate away from the traditional question of whether Japan should possess military power towards the more consequential question of how and under what circumstances that power should be used.”
The distinction is particularly important regarding Taiwan.
Japan’s stated mission is to defend its own territory rather than Taiwan itself, but its proximity to the island, the presence of major US bases and the strategic importance of its southwestern islands mean a cross-strait conflict could force Tokyo to make decisions on how far and under what legal circumstances the SDF should be involved.
Regional reactions
Takaichi brought the question directly into the Taiwan debate last November when she said a contingency involving mainland Chinese warships and the use of force could constitute a “survival-threatening situation”, a legal designation that could allow Tokyo to exercise collective self-defence under certain circumstances.
The prime minister’s remarks drew a strong reaction from Beijing, which called them a violation of Tokyo’s Article 9 – the war-renouncing clause of Japan’s constitution that constrains the use of military force.
Beijing could raise the cost of Japan’s transformation through tighter controls on rare earths and dual-use materials, Inoue said.
However, such pressure could reinforce Japanese threat perceptions and accelerate efforts to reduce Tokyo’s economic dependence on China.
Other than the reaction from Beijing, Japan’s transformation also depends on regional acceptance of its growing military role.
Inoue said Japan enjoyed considerable support, pointing to renewed military training with South Korea and wider defence cooperation with Southeast Asia.
Matsuoka was more muted, describing the receptivity as “conditional rather than unlimited”.
“We should distinguish between welcoming Japan as a security partner and welcoming Japanese military expansion,” she said.
Southeast Asian states may welcome Tokyo’s security assistance without necessarily supporting unrestricted military expansion.
Furthermore, historical concerns could become more salient if Tokyo’s posture were perceived as increasingly autonomous or offensive, she said.
Despite such constraints, Matsuoka said Japan’s defence transformation was becoming more difficult to reverse.
Institutions, budgets, procurement programmes and alliance arrangements were being built around a particular conception of the regional security environment, she noted, giving the transformation a structural staying power that could extend beyond any single government.
But threat perceptions themselves are mutable. A major improvement in Sino-Japanese relations, shifts in US policy, economic pressure, domestic political change or declining public willingness to bear defence costs could all alter the trajectory, she said.
The opposite outcome is also possible: a self-reinforcing cycle in which Japanese capabilities intended to bolster deterrence reinforce Beijing’s perception of Japanese militarisation, prompting Chinese responses that further strengthen Tokyo’s perception of threat.
“Japan’s challenge is not only to strengthen deterrence but also to avoid a security strategy in which military expansion becomes the default answer to every deterioration in the regional security environment,” Matsuoka said. -- SOUTH CHINA MORNING POST
