Japan is considering a new midterm defense spending target of 3.5% of gross domestic product in line with NATO and other U.S. allies, a move that could send a shock wave through financial markets concerned about Prime Minister Sanae Takaichi’s spending plans.
Japanese defense officials have already signaled a willingness to sharply increase defense spending in meetings with their U.S. counterparts, according to people familiar with the matter.
One scenario under consideration is to match a commitment made by South Korea to increase defense spending to 3.5% of gross domestic product over 10 years, according to the people. A lower target, such as 3%, is also possible, according to one of the people.
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