Japan reaches for opportunities amid growing weapons appetite worldwide

Japan’s decision to ease decades-old restrictions on arms exports is opening major new opportunities for the country’s defence industry at a time of soaring global demand for military equipment.

New rules adopted on April 21 allow Japan to export advanced weapons systems, including fighter jets, missiles, combat drones and destroyers. Previously, Japanese exports were largely limited to non-lethal categories such as rescue, transport and surveillance equipment.

The policy shift comes as global defence spending continues to surge. Worldwide military expenditures reached a record $2.89 trillion in 2025, marking the 11th consecutive year of growth, as reported by American media.

The urgent demand for weapons systems — ranging from air-defence missiles and artillery shells to armoured vehicles — is creating significant opportunities for Japanese manufacturers to expand their role in the global arms market.

“The desperate need” for military hardware among allied nations could help Japanese firms gain market share internationally, Hirohito Ogi of the Tokyo-based Institute of Geoeconomics told CNBC.

The shift is also being driven by growing uncertainty among some traditional US allies regarding Washington’s long-term security commitments, prompting countries to diversify their defence suppliers.

Japan’s technological strengths

Japan’s near-term export opportunities are expected to center on sectors where the country already has strong technological expertise.

Stephen Nagy, a professor of politics and international studies at Tokyo’s International Christian University, said Japan is likely to focus initially on maritime security and air-defence technologies, including advanced radar systems, patrol vessels and jointly produced interceptor missiles.

In April, Australia signed contracts for its first three general-purpose frigates, which will be built by Mitsubishi Heavy Industries and based on Japan’s upgraded Mogami-class design.

Nagy described Japanese engineering as “top-tier,” adding that the country’s “crown jewel” could become the next-generation fighter jet being developed jointly with United Kingdom and Italy under the Global Combat Air Programme.

The aircraft is expected to replace the Eurofighter Typhoon in Britain and Italy, as well as Japan’s Mitsubishi F-2 fighter fleet.

Foreign interest in Japanese defence systems has also been growing elsewhere in the Indo-Pacific region. Indonesia has reportedly expressed interest in Japanese high-speed patrol boats, while Philippines and New Zealand are exploring potential defence equipment deals with Tokyo, including possible purchases of upgraded Mogami-class frigates.

Challenges to the industry remain

Despite the growing opportunities, analysts say Japanese defence firms still face significant obstacles, including limited international marketing experience and higher production costs compared with established global competitors.

Nagy said Japanese companies are more likely to establish themselves in specialized, high-tech defence niches among trusted allied nations rather than quickly becoming dominant global arms exporters.

A previous easing of export restrictions in 2014 produced relatively limited results, according to Ogi, who previously worked at Japan’s Ministry of defence. He said many observers attribute that outcome to Japan’s lack of experience in promoting military products internationally.

The International Institute for Strategic Studies reported in May that since 2014, Japan had exported only a small number of finished systems — including fixed and mobile air-surveillance radars sold to the Philippines — prior to the recent Australian frigate deal.

Analysts also point to production capacity as a major constraint. For decades, Japanese defence companies primarily supplied the country’s own Japan Self-defence Forces, limiting incentives to build export-focused marketing networks, lower manufacturing costs or expand production capacity.

At the same time, Japan itself has been steadily increasing defence spending. The country boosted military expenditures by 9.7% in 2025 to $62.2 billion, equivalent to 1.4% of GDP — the highest level since 1958.

A February report from Japan’s Ministry of Economy, Trade and Industry warned that the defence sector remains less attractive than civilian industries because of lower profit margins and limited growth prospects, contributing to companies exiting the market.

By Nazrin Sadigova