Japan Defense Budget to Increase for First Time in 11 Years

Japan is set to increase its defense budget for the first time in 11 years and boost Coast Guard spending as it copes with mounting incursions by Chinese ships in waters near islands claimed by both countries.

The defense budget will rise 0.8 percent to 4.68 trillion yen ($51.7 billion), the Defense Ministry said. The Coast Guard budget will go up 1.9 percent to 176.5 billion yen, its first expansion in six years. Prime Minister Shinzo Abe’s Cabinet yesterday approved a 92.6 trillion yen budget for the fiscal year starting April that must be approved by parliament.

Abe is beefing up Japan’s ability to monitor and protect the uninhabited East China Sea islands called Diaoyu in China and Senkaku in Japan. His plans are limited by a shortage of funds as Japan struggles to service record debt, as well as a decades-old informal military spending limit of 1 percent of gross domestic product.

“They should spend more, but it’s significant that they’ve managed to stop the shrinkage,” said Ikuo Kayahara, a former general and a visiting professor at Takushoku University in Tokyo. “The events around the Senkakus made the Japanese realize they might not be safe.”

The Coast Guard has taken the lead in efforts to warn off Chinese government vessels that today entered Japan-administered waters for the 25th time since the dispute over the island chain heated up. The budget calls for setting up a 400-strong team with 14 patrol vessels to defend remote islands.

China this week expressed caution over Japan’s defense budget increase.

‘Great Attention’

“Owing to historical reasons, any move taken by Japan in the military area will draw great attention from neighboring countries,” Foreign Ministry spokesman Hong Lei said Jan. 28 at a daily press briefing in Beijing.

Tensions between China and Japan showed signs of easing last week after Chinese Communist Party Secretary General Xi Jinping met with the head of Abe’s junior coalition partner in Beijing. New Komeito Party leader Natsuo Yamaguchi handed over a personal letter from Abe and told reporters Xi said he would consider a summit.

“I would like to think about a summit with China if the circumstances are right,” Abe told Nihon TV yesterday in an interview.

The dispute between Asia’s two largest economies reignited after the Japanese government bought three of the islands from a private owner in September. The move set off riots in China, damaging the $340 billion bilateral trade relationship.

Territorial Waters

Chinese ships today entered Japan-controlled waters for the first time since Jan. 21, undermining hopes of a swift improvement in relations.

“This is extremely regrettable and we cannot accept it,” Chief Cabinet Secretary Yoshihide Suga said. He told reporters that Japan would make a strong diplomatic protest.

Japan’s defense spending in 2011 was the world’s sixth largest at $59.3 billion, according to the Stockholm International Peace Research Institute. China was second behind the U.S. at $143 billion, spending 2 percent of GDP, compared with Japan’s 1 percent.

Military outlays account for about 5 percent of Japan’s budget, while almost a quarter goes to servicing the world’s largest debt and nearly 30 percent goes to social security spending, according to Finance Ministry data.

Defense spending will total 4.8 trillion yen according to Finance Ministry figures that include some expenses for relocating American troops and aid to residents of Okinawa, where 75 percent of the U.S. bases in Japan are located.

To contact the reporter on this story: Isabel Reynolds in Tokyo at ireynolds1@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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