Japan PM Takaichi Plans Early Boost to 2% GDP Defense Spending

Japan's new Prime Minister Sanae Takaichi plans to accelerate Japan's defense spending to reach 2% of GDP by the end of March 2026, two years ahead of the original 2027-28 target, as part of a broader shift toward strengthening national security amid rising regional tensions. This move aligns with U.S. pressure on allies to increase defense budgets and comes just before President Donald Trump's visit to Japan. Takaichi is also expected to revise key national security documents by 2026, reflecting concerns about evolving international threats and new warfare forms. The government intends to fund this expansion partly by raising taxes, including corporate, income, and tobacco taxes, although the timing of income tax hikes remains unsettled. The increased defense budget and fiscal expansion are expected to influence Japan's monetary policy, potentially prompting the Bank of Japan to reconsider its low-interest-rate stance amid persistent inflation above its 2% target. Additionally, Takaichi plans to establish a national council to debate social security reforms, aiming to balance benefits and burdens fairly across society.