Can Japan’s arms industry gain from Trump trust loss?

Japan has eased its arms export rules, breaking with eight decades of pacifist foreign policy.

The announcement by Tokyo comes as Washington’s allies ramp up their military spending, as trust in US President Donald Trump declines, with him wavering on security commitments to allies and the wars in Iran and Ukraine.

Japan’s announcement also comes just months after it announced a record-high new defence budget.

Will Japan’s arms industry gain from all this?

Here’s what we know:

How much is Japan’s defence budget?

Late last year, Japan’s government approved a record defence budget of more than 9 trillion yen ($58bn) for 2026, reflecting a push to strengthen military and coastal defences amid rising global tensions.

The new budget forms part of a broader 122.3 trillion yen ($784bn) national budget for the fiscal year beginning in April 2026. The increase also marks the fourth year of Japan’s five-year effort to increase defence spending to 2 percent of gross domestic product (GDP).

Under the new budget, more than 970 billion yen ($6.2bn) is earmarked to enhance Japan’s “standoff” missile capabilities. This includes 177 billion yen ($1.13bn) for the purchase of domestically produced and upgraded Type-12 surface-to-ship missiles, which have an estimated range of about 1,000km (620 miles).

Japanese Prime Minister Sanae Takaichi told local media last November that one of the main reasons for increasing the country’s defence budget was that the country might have to become militarily involved, if China were to invade Taiwan, the self-governing island territory claimed by Beijing. These comments soured relations between Tokyo and Beijing. China also began expanding its military drills close to Japan and in the Asia Pacific, stirring Tokyo to advance its defence budget and capabilities.

Expanding arms sales

Besides a higher defence budget, this week Tokyo announced it would ease restrictions on its arms sales, after decades of isolation from the global arms markets since World War II.

This means that defence companies in the country will be able to supply arms to other nations.

According to a Reuters news agency report on Monday, Japan’s key defence contractors, Toshiba and Mitsubishi Electric, said they are hiring staff and adding capacity to capitalise on demand for arms.

Countries such as the Philippines and Poland are expected to become customers of Japanese arms.

In recent years, Japan and the Philippines have deepened military ties, with Tokyo agreeing to supply patrol boats and radio gear to Manila.

Two Japanese officials told Reuters that one of the first deals Takaichi’s government will likely approve are exports of used frigates to the Philippines, which is locked in maritime confrontation with Beijing in the South China Sea.

Meanwhile, Mariusz Boguszewski, deputy chief of mission at Poland’s embassy in Japan, told Reuters that Japanese arms could help Warsaw to plug gaps in its arsenal, as well as cooperate in anti-drone and electronic warfare systems.

What is driving this change in Japan?

After World War II, Japan largely became pacifist with the US leading military, economic and political reforms in the country.

According to a March report by the Stockholm International Peace Research Institute (SIPRI) think tank, the US accounted for about 95 percent of Japan’s defence imports between 2021 and 2025.

But in recent years, the country has been taking steps to shape its own security policy and reduce its military dependence on the US, with Washington being occupied in wars in the Middle East and Ukraine.

To do this, Japan wants to build defence supply chains in Asia that do not rely on the US at all, a governing party official involved in drafting security policy told Reuters.

In 2014, then-Prime Minister Shinzo Abe ended a near-blanket ban ‌on arms exports, which had been in place since 1976, allowing some transfers for humanitarian assistance and international cooperation.

In 2023, Japan also joined Overseas Security Assistance (OSA), a mechanism to provide military aid to like-minded countries in Southeast Asia and the Pacific and has since militarily assisted the Philippines, Sri Lanka and Bangladesh.

These defence changes were primarily made to counter threats from China in the Asia-Pacific region.

Now, under the new arms export rules, many Japanese companies are eager to boost sales by selling their products abroad, as well.

Air defence systems builder Toshiba told Reuters it plans to hire about 500 people over the next three ‌years and is ⁠constructing new testing and manufacturing facilities. It has also established a new department to handle defence exports.

“Reputational risk is not what it used to be,” Kenji Kobayashi, vice president in Toshiba’s defence division, told Reuters.

In January, US Secretary of Defense Pete Hegseth welcomed Japan’s initiatives to boost defence spending and take the security of the region into its own hands.

“We see the strength and the investment that Japan is making, and we think that’s a really important step and welcome and appreciate that,” he said.

It has not been uncommon for the US to praise its allies for boosting their own defence budgets. It has, in fact, been one of the consistent demands of the Trump administration, especially to Washington’s NATO allies.

Last June, NATO also pledged to boost its defence spending target to 5 percent of GDP. Washington welcomed the move and called it a success story.