January 27, 2022: In late 2021 Japan approved another record defense budget, which makes it the 8th year in a row that defense spending increased, at least in terms of yen, the local currency. The value of yen in dollars varies from year to year. The 2022 budget is for 5.4 trillion yen. A record $51.5 billion (5.3 trillion yen) was spent during 2021. That’s an increase of three percent over 2020.

A more stable and accurate measure of defense spending is as a percentage of GDP. Japan has hovered around 1 percent of GDP since the 1960s. This meant Japanese defense spending, at one percent of GDP, increased enormously since 1965, when GDP was $105 billion, until 1995 when GDP was 52 times larger, at $5.5 trillion. For the next two decades GDP growth stopped, and even declined in some years. The problem was a real-estate speculation bubble. The banks had lent too much money to many newly affluent Japanese seeking to upgrade their housing faster than new homes could be built. Prices kept rising until many were artificially high and home buyers realized it. Rather than risk an extended economic depression, the Japanese government adopted a series of rules and laws that made possible a manageable reduction of the bubble. This meant there was no GDP growth for nearly two decades. In 2012 that new growth was represented by a record GDP of $6.2 trillion. The growth stagnated again because since the 1990s two other factors had developed. Japanese were having fewer children and the consumer culture that had fueled the real-estate bubble was gone and not returning.

Now the Japanese population is shrinking because not enough babies are being born to replace the elderly who die. This is a worldwide phenomenon. In more affluent nations the birth rates have declined to below replacement rate. meaning the population is shrinking. The most obvious example of that in Asia is Japan, the first Asian nation to modernize and achieve a Western level of affluence. The Japanese government has been providing all manner of incentives for women to marry and have children but that is not working. The growing population shortage has made it more difficult to get anyone to join the military and with the growing threat from China, Japanese efforts to expand its armed forces are crippled by the fact that there are not enough Japanese for that, as well as much else in the country.

There is a similar situation in Singapore, South Korea and Taiwan. Even China is now suffering from low birth rates among the several hundred million well educated and highly skilled people in its new (and growing) middle class. China is now facing, for the first time in its history, a declining population caused by low birth rates, rather than war or pandemic disease.

South Korea also went through decades of explosive growth and managed to avoid the real-estate bubble. China tried to avoid the bubble but failed. Worse, China accelerated the population decline by implementing a “one-child” policy in the 1980s to halt growth in one of the largest populations of any nation. The 1980s was also when China began decades of unprecedented economic growth, which created the largest middle-class of affluent (by Chinese standards) and well educated (by any standard) Chinese who, like newly affluent people everywhere, want fewer children. The government thought canceling the one-child policy five years ago would change things, but it didn’t. As a result, whatever problems Japan and South Korea are having with birth rates and a lack of military recruits, it is much worse in China.

Ironically the most immediate threat to Japan is North Korea, the nation with the lowest GDP per capita in the region. Both Japan and South Korea have GDP per capita that is more than 20 times higher than North Korea’s. What North Korea does have to spend on defense has concentrated on nuclear weapons and ballistic missiles, and these are currently aimed at Japan. North Korea really wants to develop missiles that will reach the United States.

To deal with threats from North Korea and China, Japan is concentrating on its navy and air force. These two contain 40 percent of military personnel and are the easiest to recruit and train to high standards that make the most of the ability of Japan to purchase or build modern and effective weapons. Obviously, Japan has the money and technical talent to build, maintain and operate naval and air force systems. All Japanese realize that as an island nation, Japan can, and historically has, defeated invaders at sea. Japan is a sea-going nation and joining the navy is seen as a prestigious and rewarding career. Japanese ships and weapons are among the most advanced and effective in the world, and Japan constantly upgrades them. That is why Japan continues to replace older ships with new ones. The Japanese fleet is getting more Aegis equipped ships and F-35B stealth fighters for small aircraft carriers. Aegis is the most advanced naval radar and fire control system available. Japan has eight Aegis destroyers, four of them displacing more than 10,000 tons each and more heavily armed than their American counterparts. Smaller Japanese warships are equally advanced and capable. Japan has four small aircraft carriers which operate 42 F-35Bs and dozens of helicopters. Japan has 21 modern diesel-electric submarines that are the most advanced in the world, containing AIP (Air Independent Propulsion) and safe lithium batteries that enable these subs to operate submerged for up to three weeks at a time. This makes these subs superior to nuclear boats because the AIP boats are smaller and quieter. Japan also develops and makes most of its own missiles and fire control systems for its ships and aircraft. In 2014 the Japanese constitution was changed to allow Japanese firms to export weapons, including warships and aircraft.

While the vertical take-off and landing F-35B comes from the United States, the air force is getting a force of over 200 stealth fighters, nearly half of them F-35s and the rest Japanese made. Japan built its own, slightly larger, version of the American F-16 and currently manufactures F-35 components for the U.S. as well as Japan.

Japanese naval and air forces frequently train with American units, which makes cooperation easier and keeps the United States and the world aware of Japan’s high-standards in personnel and equipment.

The army gets 60 percent of the personnel and less lavish procurement budgets. Japan is spending more money on robotic systems so they can do more with fewer troops. Japan is motivated by external threats and its declining population. Japan has some of the strictest immigration and naturalization (granting citizenship) laws in the world. There are lots of east Asians who have the educational skills and willingness to learn Japanese, and there is growing pressure inside Japan to allow more immigrants in and make it easier for them to become citizens.