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🇯🇵 Japan accelerates investment and defense: opportunity or risk?

Tokyo has just approved the largest budget in its history: 122 trillion yen (about 781 billion dollars) for the fiscal year beginning in April 2026. Prime Minister Sanae Takaichi is betting on strengthening national defense in the context of rising tensions with China and the challenge of Taiwan. Alone in defense, 9 trillion yen will be allocated, including the coastal system "SHIELD" with drones to repel invasions.
This massive spending aims to modernize military capabilities and sustain social security amid persistent inflation. However, markets are reacting cautiously: Japan's public debt already exceeds 232% of GDP, one of the highest in the world, raising doubts about sustainability.
🔑 Key points of analysis
- Defense as a priority: Japan faces "the most serious security environment since World War II," according to its Ministry of Defense.
- Economic impact: public spending aims to stimulate growth but could pressure the yen and sovereign bonds.
- Opportunity for investors: increased spending on infrastructure and defense opens doors for technology and security companies.
- Latent risk: high debt and geopolitical tensions may generate volatility in Asian markets.
Meanwhile, foreign direct investment (FDI) in Japan shows an upward trend, rising from 24 billion USD in 2021 to 40 billion in 2025, reflecting international confidence in its innovation capacity and institutional stability.
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