Earlier this month, on October 7, an informal parliamentary league of lawmakers from Japan’s ruling Liberal Democratic Party (LDP) for promoting the defense industry finalized recommendations that included a call for the government to allocate several trillion yen (or several tens of billions of USD) to establish, by autumn 2027, a new state-backed agency dedicated to promoting the defense industry.
Chaired by former Defense Minister Yasukazu Hamada, the recommendations of the LDP Parliamentary League for the Promotion of the Defense Industry are also said to include a call for the government to allocate up to 500 billion yen (approximately USD 3.1 billion) to fund support programs for technology development by startups and other new entrants into the defense industry.[1]
The group’s proposal comes two months after the Japan Ministry of Defense (JMOD) released on August 31 its fiscal 2027 budget request, which totals roughly 8.9 trillion yen (USD 56.3 billion) and includes numerous unpriced initiatives to support small and medium enterprises (SMEs) and startups.
JMOD’s defense funding request in turn forms part of a record-breaking 143.07 trillion yen (USD 906 billion) budget request made by Japan’s various ministries, with the final government budget amount due to be approved by the Cabinet in December.
The LDP parliamentary league now plans to submit its defense industry promotion proposals to the government in the context of Tokyo’s ongoing review of the country’s three strategic documents, the National Security Strategy, National Defense Strategy and Defense Buildup Program, all of which are scheduled to be published by the end of this year.
As examined next, the group’s funding recommendations for the new government-backed agency and startup support programs can be seen as an effort to press JMOD and the wider Japanese government to increase budget allocations for these initiatives.
A New Government-Backed Agency for Defense Industry Promotion
The LDP parliamentary league’s call for the government to allocate several trillion yen (or several tens of billions of USD) to the establishment of a state-backed agency dedicated to defense industrial promotion includes a proposal that it should be staffed by around 1,000 personnel.
The league’s proposal follows JMOD’s announcement on August 31 as part of its budget request for fiscal 2027 that the defense ministry is to carry out due “[c]onsideration of the establishment of a new government-backed agency” to promote the defense industry.[2]
JMOD describes its proposed agency, which forms part of its overall efforts to strengthen Japan’s defense production and technology base, as a body that can “ensure state involvement and integrally promote the strengthening of domestic production base, defense equipment transfer, and defense innovation.”[3]
JMOD’s August request thus appears to align well with the recommendations subsequently made by the Parliamentary League this month. However, a key potential difference concerns funding and personnel allocation.
While the parliamentary league has suggested several trillion yen and 1,000 personnel for the agency’s establishment, JMOD has only listed the initiative as an unpriced “item request” in its budget request and has provided no details on prospective staffing levels.
Both will likely remain unclear until at least the publication of the government’s final budget, due by the end of December. The parliamentary league’s recommendation can therefore be interpreted as an effort to influence the proposed agency’s funding and staffing levels.
However, given that JMOD’s finalized budget for fiscal 2027 is expected to reach around 10 trillion yen and will cover a significant number of equipment and organizational restructuring projects, the league’s proposal of allocating several trillion yen to the government-backed agency as a single project seems rather ambitious. It can therefore be seen as a means to lobby JMOD to provide adequate funding.
Support for Technology Development by Startups
The LDP parliamentary league’s proposal for the provision of up to 500 billion yen (USD 3.1 billion) for frameworks to support the development of key technologies by startups and other defense entrants is said to prioritize AI and unmanned systems.[4]
The LDP league is also calling for JMOD to ensure that the ministry’s Small Business Innovation Research (SBIR) program, which was launched earlier this month as part of a broader Fast Pass procurement scheme, provides participating startups with sufficient, sustained support from R&D to the procurement phase.
As with the government-backed agency for defense industry promotion, there is likely to be a gap between the LDP parliamentary league’s request for up to 500 billion yen (USD 3.1 billion) and the funding ultimately provided by JMOD.
In fiscal 2026, JMOD has only allocated around 7 billion yen (USD 44.3 million) for Fast Pass, although it is expected that it will facilitate startup participation in the ministry’s full-scale R&D programs totaling around 710 billion yen (USD 4.5 billion).
For fiscal 2027, JMOD has outlined plans for additional frameworks designed to support startups. However, the ministry has demurred on providing any concrete funding details, listing them all as unpriced “item requests”.[5]
These include a “Defense-Tech SBIR Program (tentative name)”, which appears to be an extension of the program launched this month aimed specifically at supporting startup R&D. It would see JMOD award contracts to multiple companies to allow for “comparative evaluation of their technologies” and the implementation of “iterative cycles of operational testing and technological improvement.”[6]
Other unfunded “item requests” put forward by JMOD include a “Defense Challenge Research Program (tentative name)” aimed at soliciting technological solutions from outside JMOD that can help improve defense equipment, and a new government investment scheme to encourage the private sector to finance Defense Tech startups.
Thus, the LDP parliamentary league’s call for up to 500 billion yen in defense sector startup support can be seen as a means to push JMOD and the wider Japanese government to allocate significant funds for such programs in the finalized year-end budget.
Conclusion
The LDP Parliamentary League for the Promotion of the Defense Industry’s recommendations for the government to allocate relatively substantial funds for the agency along with startup initiatives can be seen as an effort to press JMOD and the wider government to ensure that adequate funding is provided. Whether these recommendations will affect the outcome remains to be seen, and we will likely have to wait for the government’s year-end strategic review and finalization of the budget for fiscal 2027.
Notes:
**1 USD = 157.98 JPY
[1] Kyodo, “防衛産業推進で独法新設を 来秋念頭、自民議連提言へ” [LDP Lawmakers’ Group Proposes New Independent Administrative Agency to Boost Defense Industry; Targeting Next Autumn]. Yahoo News, October 7, 2026, https://news.yahoo.co.jp/articles/b87adc031504a471faf2aae6967f61c6bee1aef1.
[2] JMOD, “Budget for the Transformation of Defense Capabilities – Overview of FY2027 Budget Request”, p.38, https://www.mod.go.jp/en/d_act/d_budget/pdf/fy2027_20261009.pdf.
[3] Ibid., p.36.
[4] Nihon Keizai Shimbun, “スタートアップ参入促進へ5000億円 自民の防衛産業議連が提言案” [LDP Defense Industry Parliamentary League Proposes 500 Billion Yen to Boost Startup Entry], October 7, 2026, https://www.nikkei.com/article/DGXZQOUA0777R0X01C26A0000000/
[5] JMOD, “Budget for the Transformation of Defense Capabilities – Overview of FY2027 Budget Request”, p.38, https://www.mod.go.jp/en/d_act/d_budget/pdf/fy2027_20261009.pdf.
[6] Ibid.
This article was originally posted on NSBT Japan, the first defense and security industry network in Japan. The publication provides the latest information on security business trends both within Japan and overseas. Asian Military Review began exchanging articles with NSBT Japan in April 2024.
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