The 7.95 trillion yen ($56 billion) draft budget for the 2024-25 fiscal year was approved by the cabinet, in line with Prime Minister Fumio Kishida's pledge to raise defence spending over the next few years.
Japan has a pacifist post-war constitution, which limits its military capacity to ostensibly defensive measures.
But it updated key security and defence policies last year, explicitly outlining the challenge posed by China and setting a goal of doubling defence spending to the NATO standard of two percent of GDP by 2027.
The defence budget announced Friday includes 370 billion yen to build two new warships rigged with the US-developed Aegis missile defence system.
Japan also plans to spend 734 billion yen to shore up the nation's "stand-off" defence capacity such as purchases of missiles.
And about 75 billion yen will be used for joint development of interceptors to shoot down hypersonic missiles.
The budget also includes costs Japan agreed to pay to the United States over the relocation of the US forces in Japan.
The defence budget is part of the 112.07 trillion yen ($787 billion) Japan plans to spend for the next fiscal year, down from a record 114.4 trillion yen in the previous year.
Japan wants to dramatically expand the country's defence capacity as it has been alarmed by China's expanding military ambitions.
Russia's invasion of Ukraine has also stoked fears that China may move to take over Taiwan, a self-governed democracy claimed by Beijing.
North Korea's missile launches and the possibility of future nuclear tests have also pushed Japan to boost its defence spending.
Earlier this year, Kishida said Japan would purchase 400 Tomahawk missiles from the United States.
Japan eases arms export controls allowing weapons sales to US
Tokyo (AFP) Dec 22, 2023 -
Japan loosened arms export controls Friday, for the first time in nearly a decade, a move that would enable the US ally to sell domestically made Patriot missile defence systems to Washington.
Japan strictly controls the export of arms under its pacifist constitution, which limits its military capacity to ostensibly defensive measures.
"The appropriate transfer of defence equipment overseas will contribute to ... international peace and security, and will also strengthen cooperation with allies and the US in security fields," a government document said after the rule was approved by the Cabinet on Friday.
Sales of the Patriot Advanced Capability-3 (PAC3) system to the United States would be Japan's first export of lethal arms since the end of World War II, local media have reported.
With the new rule, Japan "will be able to export arms which were domestically produced under licence of a foreign company to the licensing country", a national security official in the prime minister's cabinet told AFP prior to the Cabinet approval.
Japan produces the PAC3 surface-to-air missile defence system, paying a licence fee to US defence firm Lockheed Martin which developed the system.
"Theoretically, the new rule will enable export" of the PAC3 to the United States, the official said.
A senior ruling party official told reporters this week that the export plan was at the request of Washington, Kyodo News reported.
US President Joe Biden raised the issue with Prime Minister Fumio Kishida at a meeting at Camp David in August, as well as during an economic summit in San Francisco last month, The Washington Post reported this week, citing unnamed US officials.
Washington is increasingly looking to its allies to supply sophisticated weapons against the backdrop of a shortfall in Ukraine's air defences, and South Korea has quietly pledged to provide hundreds of thousands of rounds of artillery ammunition to Kyiv over the past year, the newspaper said.
Japan used to ban all exports of defence equipment but in 2014 the late prime minister Shinzo Abe's cabinet loosened the rules.
The country's defence industry is small, with the only customer being the Japanese military and the market estimated at around 3 trillion yen ($20 billion) annually -- less than some individual US defence contractors' yearly revenues.
Government also approved on Friday a record defence budget worth $56 billion for the next fiscal year, in line with Kishida's goal of doubling defence spending to the NATO standard of two percent of GDP by 2027.
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