Introduction
On April 22, Japan’s Sanae Takaichi government revised its arms transfer policy to substantially reduce its export restrictions. The shift represents another important step towards a transformation in Tokyo’s approach to international security cooperation and reflects the country’s efforts to adapt the foundations of its postwar military policies to an increasingly volatile geopolitical environment.
The Takaichi government’s reforms come as the wider international security cooperation ecosystem is also witnessing early signs of its own transformation. Rising global defense spending, emerging efforts among many U.S. allies to reduce their defense dependency on Washington, and the evolving demands for a mix of sophisticated and low-cost capabilities have the potential to widen the defense export market. As Japan adjusts to a changing global order, these trends present both opportunities and challenges.
The Policy Reform Explained
The reforms announced on April 22 refer to revisions to the “Implementation Guidelines for the Three Principles on Transfers of Defense Equipment and Technology,” itself a then-new policy document established in 2014 that provided the basis for Japan’s approach to limited arms exports. Most importantly, the latest revisions remove previous stipulations that limited exports to five categories of non-lethal capabilities, now permitting the Japanese National Security Council to authorize the transfer of completed lethal equipment to the 17 governments with whom Tokyo has established formal joint production or defense cooperation agreements. Additionally, while the revised policy document states that Japan will maintain a principle of prohibiting transfers to countries engaged in an armed conflict, the policy also provides a caveat for special circumstances in which Japan’s own security may be at stake.
As expressed by Prime Minister Takaichi, the revisions support efforts to “strengthen Japan’s national power” amidst growing geopolitical tensions. These latest efforts are expected to culminate in a revision to Japan’s current National Security Strategy documents by the end of 2026, an unusually fast revision of documents last revised less than four years ago.
Japan Enters an Evolving Global Arms Market
Japan’s effort to play a larger role in the global defense trade comes amidst emerging trends in international security cooperation that are especially inviting for new market entrants. Driven by rising rates of armed conflict and heightening geopolitical tensions, global defense spending has grown every year since 2015, or 41% over the past decade, hitting the record figure of $2.8 trillion in 2025. Unsurprisingly, rising budgets and growing demand have led to a surge in international arms transfers. The volume of international arms transfers between 2021 and 2025 exceeded any five-year period since the end of the Cold War.
Changes in technology and warfighting are also paving the way for a more diffuse global arms market. The technological disparity between the United States and other defense producers is shrinking, with new players able to deliver increasingly sophisticated or niche capabilities. Relatedly, the wars in Ukraine and the Middle East have catalyzed a growing interest in not just the most advanced weapon systems, but also lower-cost capabilities like drones that have elevated the export sectors of several smaller, niche producers.
Beyond the financial or technical developments, shifting international security partnerships are also creating new opportunities for smaller defense exporters. Aside from the steep decline in Russian arms exports in recent years, the United States’ increasingly unpredictable, extractive, and at times confrontational approach toward even longstanding partners has led many traditional U.S. arms importers to question the wisdom of continued defense dependence on Washington. To be sure, U.S. market dominance remains unparalleled – U.S. arms exports accounted for 42% of global arms trade in 2025, more market share than the next seven exporters combined. But the Trump administration’s tariff wars, its willingness to tease the use of military force against longtime allies and partners, its sometimes cavalier attitude toward alliance commitments, and its accusation of security freeloading are prompting traditional U.S. partners to consider alternative military suppliers. Though the trend remains nascent, for Japan, the wandering eyes of traditional U.S. defense partners could add to the demand for the sorts of sophisticated capabilities Tokyo is well-prepared to offer.
Japan’s Defense Sector Poised for Expansion
Japan’s deepening foray into the arms export market is, in part, a reflection of the strengths and weaknesses of its own defense industrial base. Though limited in scale, Japan possesses sophisticated maritime, missile/missile defense, and electronic warfare sectors – but export restrictions have meant the markets for these industries have been confined to Tokyo and co-production with the U.S. (its only formal ally), limiting efforts to reduce unit costs, achieve economies of scale, and enable the entry of new producers. Expanding the market for Japanese defense exports could shift some of these longstanding dynamics and provide a boost to the country’s defense industrial base.
Nevertheless, the Takaichi administration will continue to have to grapple with structural constraints on its defense sector, including the capital-intensive startup costs for new production and skilled labor shortages that are related to Japan’s challenging population demographics. Similarly, an expanding export market will require a corresponding enhancement of Japan’s regulatory and oversight systems, something that Tokyo has said it intends to do as part of its planned revision of its primary security documents later this year.
Conclusion
Japan is entering the global arms trade at a time of growing demand, proliferating technology, and as the largest traditional players in the market are pushing longtime clients to look for new suppliers. In principle, Japanese firms are well-positioned to benefit from these market trends. Whether they will take advantage of new opportunities for exports or double-down on their traditional focus on supplying the domestic market will likely depend on how extensively Japan’s national security strategy documents also evolve later this year and how much government support for Japanese defense producers emerge as part of this planning process, as well as broader policy initiatives to support Japan’s industrial base.
Japan’s Tentative Entry Into a Shifting Global Arms Market
By Andrew Oros • Elias Yousif
Conventional Arms
Introduction
On April 22, Japan’s Sanae Takaichi government revised its arms transfer policy to substantially reduce its export restrictions. The shift represents another important step towards a transformation in Tokyo’s approach to international security cooperation and reflects the country’s efforts to adapt the foundations of its postwar military policies to an increasingly volatile geopolitical environment.
The Takaichi government’s reforms come as the wider international security cooperation ecosystem is also witnessing early signs of its own transformation. Rising global defense spending, emerging efforts among many U.S. allies to reduce their defense dependency on Washington, and the evolving demands for a mix of sophisticated and low-cost capabilities have the potential to widen the defense export market. As Japan adjusts to a changing global order, these trends present both opportunities and challenges.
The Policy Reform Explained
The reforms announced on April 22 refer to revisions to the “Implementation Guidelines for the Three Principles on Transfers of Defense Equipment and Technology,” itself a then-new policy document established in 2014 that provided the basis for Japan’s approach to limited arms exports. Most importantly, the latest revisions remove previous stipulations that limited exports to five categories of non-lethal capabilities, now permitting the Japanese National Security Council to authorize the transfer of completed lethal equipment to the 17 governments with whom Tokyo has established formal joint production or defense cooperation agreements. Additionally, while the revised policy document states that Japan will maintain a principle of prohibiting transfers to countries engaged in an armed conflict, the policy also provides a caveat for special circumstances in which Japan’s own security may be at stake.
As expressed by Prime Minister Takaichi, the revisions support efforts to “strengthen Japan’s national power” amidst growing geopolitical tensions. These latest efforts are expected to culminate in a revision to Japan’s current National Security Strategy documents by the end of 2026, an unusually fast revision of documents last revised less than four years ago.
Japan Enters an Evolving Global Arms Market
Japan’s effort to play a larger role in the global defense trade comes amidst emerging trends in international security cooperation that are especially inviting for new market entrants. Driven by rising rates of armed conflict and heightening geopolitical tensions, global defense spending has grown every year since 2015, or 41% over the past decade, hitting the record figure of $2.8 trillion in 2025. Unsurprisingly, rising budgets and growing demand have led to a surge in international arms transfers. The volume of international arms transfers between 2021 and 2025 exceeded any five-year period since the end of the Cold War.
Changes in technology and warfighting are also paving the way for a more diffuse global arms market. The technological disparity between the United States and other defense producers is shrinking, with new players able to deliver increasingly sophisticated or niche capabilities. Relatedly, the wars in Ukraine and the Middle East have catalyzed a growing interest in not just the most advanced weapon systems, but also lower-cost capabilities like drones that have elevated the export sectors of several smaller, niche producers.
Beyond the financial or technical developments, shifting international security partnerships are also creating new opportunities for smaller defense exporters. Aside from the steep decline in Russian arms exports in recent years, the United States’ increasingly unpredictable, extractive, and at times confrontational approach toward even longstanding partners has led many traditional U.S. arms importers to question the wisdom of continued defense dependence on Washington. To be sure, U.S. market dominance remains unparalleled – U.S. arms exports accounted for 42% of global arms trade in 2025, more market share than the next seven exporters combined. But the Trump administration’s tariff wars, its willingness to tease the use of military force against longtime allies and partners, its sometimes cavalier attitude toward alliance commitments, and its accusation of security freeloading are prompting traditional U.S. partners to consider alternative military suppliers. Though the trend remains nascent, for Japan, the wandering eyes of traditional U.S. defense partners could add to the demand for the sorts of sophisticated capabilities Tokyo is well-prepared to offer.
Japan’s Defense Sector Poised for Expansion
Japan’s deepening foray into the arms export market is, in part, a reflection of the strengths and weaknesses of its own defense industrial base. Though limited in scale, Japan possesses sophisticated maritime, missile/missile defense, and electronic warfare sectors – but export restrictions have meant the markets for these industries have been confined to Tokyo and co-production with the U.S. (its only formal ally), limiting efforts to reduce unit costs, achieve economies of scale, and enable the entry of new producers. Expanding the market for Japanese defense exports could shift some of these longstanding dynamics and provide a boost to the country’s defense industrial base.
Nevertheless, the Takaichi administration will continue to have to grapple with structural constraints on its defense sector, including the capital-intensive startup costs for new production and skilled labor shortages that are related to Japan’s challenging population demographics. Similarly, an expanding export market will require a corresponding enhancement of Japan’s regulatory and oversight systems, something that Tokyo has said it intends to do as part of its planned revision of its primary security documents later this year.
Conclusion
Japan is entering the global arms trade at a time of growing demand, proliferating technology, and as the largest traditional players in the market are pushing longtime clients to look for new suppliers. In principle, Japanese firms are well-positioned to benefit from these market trends. Whether they will take advantage of new opportunities for exports or double-down on their traditional focus on supplying the domestic market will likely depend on how extensively Japan’s national security strategy documents also evolve later this year and how much government support for Japanese defense producers emerge as part of this planning process, as well as broader policy initiatives to support Japan’s industrial base.
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