Commentary / Japan

What to make of the record defense budget

If all goes according to precedent, the Diet will be approving the government’s budget in the next month or so, including record-high spending on defense.

But what does it actually mean for Japan to set a new record for its defense budget? What is the significance, what will it do for Japanese security and how might it affect criticism that Japan does not pay enough in its alliance with the United States?

In short, the latest defense budget continues a trend for the Abe administration’s incrementally growing military expenditures, but it will still not be enough for many interested parties.

For Prime Minister Shinzo Abe, it is not enough until he can eliminate all trace of a 44-year-old policy on defense spending. For Japan’s defense-related government organizations, it will not be enough to stop the bureaucratic in-fighting for high-profile projects that have already been promised. For the U.S., this latest defense budget will still not be enough to meet the benchmark that is the standard for its other allies.

To understand the debate, one must first understand what goes into the “defense budget.” In its simplest terms, it is how much money a country puts into its military-related spending, but it actually gets far more complicated than that because there is no universal standard for what line items are incorporated.

While the basic elements — money to fund operations, maintenance of facilities and equipment, and defense personnel — tend to be the same anywhere, there are things like research and development, host nation support for foreign forces, retirement pay for former service members and other lines of accounting that differ from place to place.

Complicating matters is the yardstick for defense budgets. Because all countries are different in scale, economic means, size of their domestic defense industries and level of military threat they face, the metric for their defense spending is difficult to pin down. A country of 300 million with perceived existential threats will logically spend more than a nation of 20 million that is sufficiently isolated from adversaries. There is also the question of how much a country contributes in its security relationships. In those cases, comparing the budget sheets tends to be how many measure the “utility” of allies.

In the end, most observers focus on the defense budget as a comparison to the country’s gross domestic product; in other words, what percentage of a nation’s GDP does it spend on defense? For context, the U.S. spent 3.24 percent of its GDP on defense last year, the United Kingdom 2.14 percent and Germany 1.38 percent. By Japan’s own accounting standards, it spends less than 1 percent, but there is a political reason for that.

Back in 1976, the ruling Liberal Democratic Party was reeling from a series of scandals, the most prominent of which was the revelation that Prime Minister Kakuei Tanaka had accepted bribes from Lockheed Martin, a major U.S. defense contractor.

To rebrand itself, the LDP replaced Tanaka with Takeo Miki, who pledged “clean politics.” Miki was a left-of-center politician who did things like visit Yasukuni Shrine for the purpose of expressing regret for Japan’s wartime actions. Among his other similarly progressive moves, Miki declared in the Diet that Japan would never exceed 1 percent of its GDP on defense spending.

By and large, this has remained the de facto threshold ever since. Some observers will argue that Prime Minister Yasuhiro Nakasone did away with the cap in the mid-1980s by busting the ceiling; however, even his move was measured. Nakasone ensured that the scheduled pay raise for Self-Defense Forces personnel would lift the budget past the 1 percent marker, but when he tried to go further than that, factions in his own party threatened to support a vote of no confidence against him.

The fact remains that not every LDP member cares about defense, so expending political capital to secure a major increase in defense spending has not outweighed the party’s desire to avoid what it has collectively perceived as unnecessarily provocative. As a result, Miki’s ceiling has remained a political marker until today, even if not a legal one —something that LDP politicians have stuck to for nearly 45 years now.

Since taking office for the second time in 2012, Abe has been incrementally increasing the defense budget. Driving this is the National Defense Program Guidelines of 2013 and 2018 as well as the Mid-Term Defense Programs of 2014 and 2019. The NDPG outlays Japan’s security requirements based on the strategic environment, and the MTDP provides five-year acquisitions plans for meeting those requirements. As the Abe administration has aimed to do more in the realm of security, it has necessarily pursued higher defense spending to accommodate it.

The budget request currently sitting in the Diet for deliberation calls for ¥5.31 trillion. The government’s official calculation for GDP in 2018 was ¥532.6 trillion (with 2019’s figures projected to come out higher). Among the priorities for the spending includes more robust space and cyber capabilities (both of which are still in fledgling stages for Japan compared with other top-tier military powers).

The government is also looking to continue strengthening its fleet of traditional weapon systems, particularly in the air and maritime domains with procurement of new fighter aircraft and construction of new destroyers and submarines. Importantly, the Defense Ministry has included line items aimed at human capital, including recruiting and improvement of quality of life for service members, as well as installing adequate facilities and support services to facilitate an increased number of female SDF personnel.

The SDF will welcome this additional budget. With expansion in the space and cyberspace domains, there is already a long list of underfunded aspirational projects outlined in the 2019-2023 MTDP. The Defense Ministry, the Acquisitions, Technology, and Logistics Agency and each of the SDF components will still be fighting for every yen to try to meet their promised acquisitions plans.

For them, the latest increase will still not alleviate the internal conflict over whether to transform “helicopter destroyers” (the government’s term for helicopter carriers) to “aircraft carriers” or to procure enough missiles to sustain a viable missile defense shield or to modernize Ground Self-Defense Force assets. The tough choices for prioritization will remain, and even if the budget keeps increasing, there are already more than enough projects earmarked for that extra cash.

The political significance of this latest defense budget is that it does not exceed 1 percent of GDP … yet. The Abe administration has avoided the domestic political turmoil of aiming for a big policy change by skirting the 1 percent ceiling without exceeding it. Once the Olympics are over, though, one should expect Abe to pursue that policy change formally before he is done in office.

He can do this a number of ways: simply pushing a defense budget next year that exceeds the 1 percent cap under the current accounting standards; formally redefining Japan’s defense budget accounting to match NATO standards; or by setting a policy for a 2 percent target for defense spending that the budget could then work toward. Since constitutional amendment is a bridge too far for Abe, permanently breaking down the barrier that Miki set in 1976 would represent another security-related fait accompli to add to his self-proclaimed legacy.

There is still the question of how a record-high defense budget might influence the critics who claim that Japan is a free rider in its alliance with the U.S. Although the GDP yardstick is an inadequate and misleading measure, it is an easy one for critics to employ. As such, they will see the less than 1 percent from Japan as substantially lower than America’s 3.24 percent, and less than half of what the NATO allies adopted as their goal for “burden-sharing” expenditures (i.e., the amount each ally contributes to its own defense).

At the same time, there is the “cost-sharing” argument. Cost-sharing equals the amount a country spends to offset an ally’s stationing/operational costs. In Japan’s case, this is the amount the country spends toward basing U.S. forces in Japan, and this is what will be deliberated when the two countries meet to negotiate a new version of the Special Measures Agreement, which is set to expire in early 2021. Since cost-sharing is based on an already existing deal, this latest defense budget logically did not include any unscheduled increase in Japanese contributions to U.S. forces’ labor, utilities, facilities improvement or training relocation.

What the Abe administration has tried to do is informally advertise their defense spending by NATO standards. By incorporating the Japan Coast Guard budget and other line items not seen in Japan’s official defense accounting, the government has argued that Japan is spending more like 1.1 to 1.3 percent of its GDP on defense. Of course, in the burden-sharing argument, critics will say that the NATO standard is 2 percent, so Japan still has a way to go. Further, in the cost-sharing argument, those who already believe Japan is a free rider tend to do so as a matter of ideology rather than line-item accounting.

In the end, the next defense budget soon to be passed in the Diet is a placeholder for the administration. The “record high” label means little in the broader policy and strategic debates, as it does not represent the policy milestone that Abe would like, it will not solve the deeper-seated budgetary issues in Japan’s defense organizations and it will not mollify American critics. If the Abe administration is seeking to make its mark on defense spending, it will have to try again next year.

Michael MacArthur Bosack is the special adviser for government relations at the Yokosuka Council on Asia-Pacific Studies. He was deputy chief of government relations at Headquarters, U.S. Forces Japan.

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