Challenges of Yen’s Collapse on Japan’s Military Buildup

The Impact of Yen’s Collapse on Japan’s Military Buildup

The yen’s recent collapse to a nearly four-decade low is significantly hampering Japan’s ambitious plans for its largest military expansion since World War II. The government’s procurement of aircraft has been drastically reduced, with further cuts looming on the horizon. Japan predominantly purchases its military equipment from American suppliers, with transactions conducted in dollars.

As a result of the yen’s depreciation, the government’s purchasing power has been severely diminished. According to Satoshi Morimoto, a former Japanese defense minister, the actual defense capabilities achieved and the original targets set are no longer aligned. The value of the defense budget for the next five years has effectively decreased by 30% due to the currency fluctuations.

Japan’s currency challenge comes at a critical time when the country faces increasing missile threats from North Korea and other security concerns related to China, such as the potential China-Taiwan conflict. In 2022, Prime Minister Fumio Kishida unveiled a new national security strategy aimed at more than doubling the defense budget. The allocated budget of 43 trillion yen over five years, approximately $319 billion at the time, was intended to enhance Japan’s defense capabilities by enabling it to target enemy bases and deter potential attacks.

This significant increase in military spending marked a departure from Japan’s traditional restraint on defense expenditures and reliance on U.S. military support. Prime Minister Kishida described the surge in military budget as a pivotal “turning point” in Japan’s history.