Strategic Horizons --
Abstract
Washington, in seeking to contain China’s rise, may be cultivating its next competitor: Japan. As the United States encourages Tokyo to assume greater regional responsibilities, the unspoken risk emerges—what happens when the apprentice surpasses the master? With China and North Korea potentially crippled by internal decay, and America distracted by debt, isolationism, or domestic dysfunction, Japan may find itself propelled—by necessity or ambition—into the hegemon’s chair. This article dissects the tectonic shifts in Asia’s strategic landscape, highlighting Japan’s economic reach, diplomatic deftness, and a rearmed military no longer content in the shadows. As the US–Japan alliance deepens, so too does the possibility of divergence. What begins as burden-sharing could end in rivalry. The “tenth man” doctrine demands the unthinkable be considered: a post-China Asia led not by Washington, but Tokyo. The American century in the Pacific may not end with a bang, but with a polite Japanese nod.
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By encouraging Japan to assume a greater role in the Indo-Pacific security architecture, the United States may be cultivating its next competitor. Washington’s strategic rationale is clear: bolster Tokyo to counterbalance China’s ascent. Beijing’s assertive foreign policy, expanding military capability, and geographic advantage in a Taiwan contingency compel the United States to depend more heavily on its allies—not only to deter Chinese aggression but also to prepare for potential conflict. Yet war may never erupt. Internal rot or external pressures could deflate China’s power, relegating it to second-tier status in the regional order. If that happens, Japan, which confronts many of the same demographic and economic pressures as China, may fill the vacuum.
Japan’s aging population, economic stagnation, and resource constraints could eventually drive Tokyo to challenge American primacy, just as Beijing has. Alternatively, US fiscal instability or a return to isolationism could force a drawdown in regional presence, compelling Japan to lead.
The US–Japan Mutual Security Treaty has strengthened over the past decade and now serves as a stabilizing force amid a turbulent Indo-Pacific. As China and North Korea execute increasingly disruptive policies, Japan’s growing political and military engagement helps offset what US officials view as a diminishing American military edge. Tokyo’s recent economic, diplomatic, and defense initiatives throughout the region reinforce the alliance and bolster regional deterrence.
But the relationship, for now, remains reactive—bound to the immediacy of Chinese belligerence and Kim Jong-un’s volatility. If Beijing and Pyongyang falter by midcentury, and Japan continues to grapple with internal pressures, the alliance may face fissures. What Washington now sees as a partner may, under different conditions, emerge as a peer—and perhaps, a rival.
North Korea: The Wobbly Pole in the Indo-Pacific Tent Driving US–Japan Cohesion
Since 1950, North Korea has destabilized the region through a relentless mix of provocation and subversion. Whether launching missiles, brandishing nuclear weapons, or abducting Japanese citizens, Pyongyang has ensured its relevance by threatening its neighbors. This persistent menace has drawn Japan closer to the United States over the past half century—not out of affinity, but necessity.
Yet for all Kim Jong-un’s theatrics, his regime teeters on the edge of collapse. North Korea spends an estimated 25 to 30 percent of its gross domestic product on its military and nuclear ambitions, while the civilian economy starves. The country lacks the energy and raw materials to sustain even basic production. In February 2023, Pyongyang convened its first plenary session on agricultural development—an implicit admission that famine looms. The United Nations estimates that nearly half of North Korea’s population—some 12 million people—is undernourished. In January 2024, the Korean Workers’ Party openly acknowledged the economy’s dismal state and the government’s inability to meet basic needs.
None of this, of course, deters Kim from lavishing wealth on his inner circle. Foreign cars, luxury goods, and elite privileges endure amid scarcity. While this is no repeat of the 1990s famine, food insecurity and economic decay present mounting risks to regime stability. The North Korean people, increasingly aware of the outside world, are growing less receptive to state propaganda—and that erosion of belief may be Kim’s greatest vulnerability.
Pyongyang has taken notice. The regime now contends with a population that is no longer wholly captive to its narrative. A 2023 South Korean government survey of defectors revealed that nearly a quarter had watched foreign films, while 57 percent expressed curiosity about the outside world. Harsh punishments have done little to halt this cognitive seepage—labeling it a “vicious cancer.” Despite the regime’s efforts to suppress it, disillusionment is spreading. In 2023, the number of defectors tripled, driven by the twin desires for freedom and food.
Kim Jong-un’s succession plan—or lack thereof—remains one of North Korea’s most dangerous unknowns. His 2020 disappearance and the ensuing rumors of botched heart surgery and a “vegetative state” exposed the fragility of a regime built on hereditary rule. While his teenage daughter began appearing publicly in 2022—prompting speculation that she is the heir apparent—no formal designation has been made. For a dynastic regime, this ambiguity is not just an oversight; it is a vulnerability.
If Kim were to die suddenly, North Korea could face either an orderly transition or a chaotic unraveling. A post-Kim regime might pursue reintegration with South Korea, or it could harden into a more cautious but stable autocracy. In either case, the removal of a major threat to Japan could free Tokyo to assume a more assertive regional role—shifting its strategic focus toward China and Russia and expanding its influence across the Indo-Pacific.
For now, North Korea endures—barely. It lurches from crisis to crisis, maintaining an outward appearance of control while rot festers beneath the surface. Should Kim remain in power and the regime persist, Pyongyang may grow even more belligerent toward Japan, using external aggression to mask internal decay.
Should the United States retreat into domestic preoccupations and China’s power wane, Japan may be forced to assume a more commanding regional role. In such a scenario, Pyongyang would likely view an ascendant Tokyo not as a secondary concern, but as its primary threat. Deprived of a robust US presence in the Indo-Pacific, North Korea could redirect its hostility toward Japan—its historic enemy and now, its most proximate challenger.
Kim could escalate asymmetric aggression, employing a spectrum of tactics designed to intimidate, destabilize, and extort. These may range from cyberattacks and ballistic missile overflights to kidnappings and ransomware campaigns. North Korea’s improving missile accuracy and cyber capabilities could bring Japan’s infrastructure—and resolve—under sustained pressure. A resumption of civilian abductions would stoke public fear and provide hard currency for a bankrupt regime. Any Japanese retaliation could be framed by Pyongyang as proof of Tokyo’s imperial ambitions, a narrative Kim would eagerly exploit to rally domestic and regional support.
For Japan, North Korea remains a persistent source of anxiety. For over eight decades, Pyongyang has harassed Tokyo through threats, provocations, and coercive acts. The regime’s internal fractures grow more visible each year—failing farms, collapsing economic indicators, and the steady intrusion of outside information. Kim himself has admitted the state cannot meet its people’s basic needs. Meanwhile, his health remains uncertain, and his refusal to name a successor compounds the volatility.
A cascade of internal crises could tip North Korea into collapse or radical change. Should the regime fall or integrate into the regional order—and should American power continue to recede—Japan may finally be unbound. No longer hedging against two rogue states, Tokyo could turn its full strategic attention toward China and assert itself not merely as a partner of the United States, but as a Pacific power in its own right.
China: The Ten-Foot Giant on Eight-Foot Stilts
Over the past four years, China’s “wolf-warrior” diplomacy—rooted in Xi Jinping Thought on Diplomacy—has fueled rising apprehension across East and Southeast Asia. Beijing casts itself as a great power destined to reorder the global system under the guise of “true multilateralism.” In practice, this means coercion masquerading as consensus. Although Beijing recently dialed back its diplomatic belligerence to address growing domestic unrest—particularly the fallout from its draconian zero-COVID policy—the damage to regional trust lingers.
For Japan, the threat is neither abstract nor distant. Historical tensions over the Senkaku/Diaoyu Islands, compounded by China’s 2013 declaration of an air defense identification zone, remain unresolved. Meanwhile, Beijing’s accelerating military modernization adds weight to its ambitions. Tokyo sees not only a competitor, but a potential aggressor.
Taiwan represents the most volatile fault line. Japan’s deep historical and strategic ties to the island make its fate a vital national interest. In 2021, Japan’s defense white paper marked a decisive shift from pacifism, calling explicitly for stability in the Taiwan Strait. Defense officials have since gone further—publicly affirming Japan’s willingness to defend Taiwan if conflict erupts.
This is not rhetorical posturing. China’s expanding power-projection capabilities threaten Japan’s lifelines. In a crisis, Beijing could attempt to cut off Japan’s vital imports—crippling both its economy and its military. The perceived risk is driving Tokyo to expand and modernize its defense industrial base—not simply to deter Chinese aggression, but to prepare for the grim possibility of war.
Strong Shows of Force to Disguise the Cracking Foundations
China’s truculence in the Pacific is not simply strategy—it is symptom. Much of Beijing’s aggression reflects the Chinese Communist Party’s effort to mask domestic fragility with foreign bravado. Behind the sharp elbows of wolf-warrior diplomacy lies a regime confronting demographic decline, slowing economic growth, ballooning debt, widening inequality, and an increasingly centralized authoritarianism under Xi Jinping.
Xi’s belligerence abroad is calibrated less for foreign audiences than for a restless domestic one. The party’s hard turn inward—epitomized by zero-COVID lockdowns—has bred discontent, even among its once-docile middle class. In this sense, China’s wolf-warrior stance mirrors Mao Zedong’s shelling of Taiwanese-held islands during the 1958 Second Taiwan Strait Crisis—an external performance to distract from internal disarray. But like Mao’s Great Leap Forward, Xi’s attempt to insulate China from the West may accelerate, rather than alleviate, the regime’s structural ailments.
Despite repeated predictions of collapse, China will likely endure. Its political system and economy may bend, not break. Yet the forces pressuring Beijing are profound: a surging old-age dependency ratio, a brittle economic model, and debt burdens that span government, corporate, and household sectors. The disparity between coastal affluence and interior stagnation only deepens the strain. Faced with rising domestic demands, Beijing may be forced to divert funds from military expansion to social stability—echoing the trajectory of the European Union.
Such a shift would offer Tokyo breathing room. A China increasingly preoccupied with internal maintenance may prove less menacing to its neighbors—and less capable of sustaining the military pressure that currently shapes Japan’s defense posture.
The Shrinking Dragon: Population Decline
China’s population is aging—and declining. The country’s fertility rate fell to 1.3 births per woman in 2020, far below the 2.1 threshold required for population replacement. As a result, China’s old-age dependency ratio is surging. The working-age population peaked at 900 million in 2011 and is projected to fall to 700 million by 2050. By then, each working Chinese will help support a retiree population nearing 500 million.
This demographic imbalance poses a direct threat to the Chinese Communist Party’s (CCP) strategic ambitions. A shrinking labor pool undermines economic growth and complicates military recruitment. With only one child per family in much of the country, few parents are eager to sacrifice their sole heir to conscription—especially when military service offers little economic return and carries high personal risk. The prospect of war is no longer an abstraction but a threat to intergenerational survival.
China’s outdated and underfunded pension system compounds the problem. It recorded its first deficit in 2019, prompting the CCP to inject state funds to stave off collapse. As the elderly population grows and healthcare demands escalate, Beijing will likely be forced to divert a larger share of gross domestic product (GDP) toward social support—at the expense of military modernization. In short, the party faces a stark trade-off: guns or crutches.
The Chinese Pension System: Beijing, We Have a Problem
China’s pension system is buckling under demographic pressure. As the median age rises and the old-age dependency ratio surges, the financial burden on the state deepens. A 2019 report by the Chinese Academy of Social Sciences warned that the National Social Security Fund (NSSF)—China’s principal reserve—could be depleted by 2035. The warning was not theoretical. In 2020, urban pension programs recorded their first annual deficit, prompting the CCP to inject nearly USD 7 billion in subsidies.
The crisis has only accelerated. In 2022, local governments spent over USD 51 billion on pandemic-related costs, siphoning funds from already strained pension obligations. As both urban and rural administrations struggle to meet commitments, demands on the NSSF will grow—and fast.
Public frustration is no longer latent. In February 2023, hundreds of thousands of retirees protested government efforts to reduce healthcare coverage. To prevent broader unrest, the CCP will likely divert more resources to social safety nets, crowding out other budgetary priorities.
The consequences are strategic. As economic growth slows and domestic obligations rise, Beijing will find it increasingly difficult to fund both social stability and military expansion. In the long run, the CCP may not face a dramatic collapse—but a slow, grinding squeeze between aging citizens and shrinking options.
The Chinese Economic Mircle: A Trap in Disguise
China’s economic miracle is faltering. Since 2015, the CCP has steadily reasserted control over the economy, abandoning market liberalization in favor of central planning. The result has been stagnation disguised as stability. Over the past eight years, household bank deposits surged by 50 percent—less a sign of prosperity than of public reluctance to invest. Consumption of durable goods dropped by one-third and remained depressed even after China reopened post-COVID. Most alarming, private investment collapsed by two-thirds, forcing Beijing into reactive stimulus measures.
The 2021 real estate crash only deepened the malaise. What was once the engine of China’s growth has become a structural drag. Meanwhile, the public has grown wary of the CCP’s erratic economic governance—its abrupt COVID policies and unpredictable interventions have sown distrust and stifled initiative.
Foreign investors have noticed. From 2022 to 2023, foreign direct investment plummeted 80 percent, hitting a 30-year low. The USD 33 billion that did arrive was the smallest since Deng Xiaoping’s economic opening in 1992. Beijing’s invocation of “national security”—used to justify crackdowns on foreign research firms and the detention of overseas workers—has only accelerated the exodus.
China is succumbing to a familiar authoritarian trap. At first, autocrats allow market reforms to flourish, using prosperity to buy legitimacy. But as power consolidates, rulers intervene—favoring loyal firms, suppressing dissent, and subordinating economic logic to political control. Growth slows. Innovation withers. Fear replaces investment.
Xi has doubled down on this model. Surrounded by loyalists rather than competent technocrats, he has little internal resistance to his economic course correction. The cost will be paid in diminished growth, decaying institutions, and a brittle economic future that no longer matches the myth of an unstoppable China.
Increased Unemployment in a Worker’s Paradise
Youth unemployment has emerged as a slow-burning crisis within China’s stagnating economy. University graduates now face dim prospects outside the factory floor—a jarring mismatch between educational ambition and economic reality. By June 2023, the unemployment rate for urban Chinese aged 16 to 24 had climbed to 21.3 percent, including 11.6 million recent graduates. While Beijing officially reports 6 million jobless youth, independent estimates suggest the true number may approach 22 million.
The CCP has seen this movie before. During the 2008 global recession, roughly 20 million migrant workers lost their jobs, triggering a wave of protests that spooked the party into action. To avert unrest, the government injected USD 558 billion in stimulus, buying time and temporary calm.
Today’s challenge is deeper—and more ideological. Many of these unemployed are products of a system that spent decades instilling nationalism and regime loyalty. Now, confronted with economic futility, some have embraced the “lying flat” movement, choosing passive resistance over fruitless ambition. Others, once vocal defenders of the party online, turned their ire inward during the COVID lockdowns, criticizing the very state that nurtured their allegiance.
This combustible mix—educated, unemployed, disillusioned—forms a latent threat to the regime. The CCP has done little to reintegrate this cohort. Worse, officials have mocked their grievances, branding them lazy or unpatriotic. Such dismissiveness risks igniting the very unrest the party seeks to avoid.
Should this generation become organized, the CCP may be forced to redirect resources from military expansion to domestic control—policing its own cities instead of projecting power abroad. In a country where legitimacy depends on economic progress, idle youth may prove more destabilizing than foreign rivals.
If domestic pressures fracture the Chinese Communist Party and a post-CCP China emerges—whether authoritarian or democratic—Japan is well-positioned to take the lead in regional reconstruction. Tokyo has spent the last half century honing its role as a stabilizer through diplomatic outreach and economic assistance, particularly in developing nations. Yet historical baggage lingers. Despite Japan’s restrained posture since 1945, some East Asian nations may resist its leadership. South Korea, in particular, could view Japanese aid through the lens of colonial memory—as a veiled attempt to reclaim lost imperial standing.
Absent a stabilizing US presence, Seoul could see itself as the regional counterweight to a resurgent Tokyo. This dynamic could ignite a spiral of economic, diplomatic, and military rivalry—especially if China and North Korea collapse simultaneously. Rather than ushering in an Asian century, the region could stumble into fragmentation and conflict.
Alternatively, recent diplomatic warming between Japan and South Korea could mature into meaningful strategic cooperation. The two could jointly lead the reconstruction of post-collapse regimes in Beijing and Pyongyang, promote democratic reforms, and lay the groundwork for a future regional security architecture—perhaps even an Asian NATO. But such outcomes would still need to navigate the competing interests of external actors like Russia, India, and Australia, all of whom would demand a seat at the table.
From a distance, China still appears to be an economic juggernaut. But up close, cracks multiply. Its population is shrinking, placing crushing demands on younger generations to support a ballooning elderly class. Birthrates continue to fall. The pension system is fraying. Local governments, unable to meet their obligations, are leaning harder on the central government—sparking localized protests that the CCP cannot ignore.
At the other end of the age curve, youth unemployment festers. The regime’s suggestion that young Chinese “return to the countryside” has backfired, spawning a work-resistance movement instead. The party may dismiss these challenges as manageable irritants—paper cuts. But accumulated over time, even paper cuts can bleed a regime dry.
As China and North Korea’s influence wanes, the United States may also recalibrate. Economic constraints and political shifts at home could force a drawdown of American power in the region. In that vacuum, Japan may find itself not merely encouraged—but compelled—to lead.
The United States’ Pacific Role: Debt, America First, and Servicemember Behavior
America’s global posture is under quiet but growing strain. Economic pressures and political currents suggest that a significant rebalance—or even a drawdown—of US forces abroad could occur over the next two to three decades. Two forces drive this possibility: an unsustainable national debt and a resurging appetite for isolationism.
Recently, the US Congressional Budget Office projected that by 2053, the federal government would amass an additional USD 119 trillion in deficits, pushing the national debt to 181 percent of GDP. Servicing that debt currently consumes 2.5 percent of GDP; within three decades, it is expected to triple to 7.5 percent. That rise will directly erode discretionary spending—including defense.
Entitlement programs are the chief drivers. From 1962 to 2022, Social Security, Medicare, Medicaid, and other income security programs expanded by USD 3.3 trillion. In the same period, defense spending grew by just USD 200 billion. The trend is unambiguous: domestic obligations increasingly eclipse national defense.
History reinforces the pattern. Over the last four decades, Congress has struck 14 major deficit-reduction deals. In each, defense bore the largest share of the cuts. If current fiscal trajectories hold, the Pentagon will again serve as the balancing item—shrinking America’s ability to project power just as rivals test its resolve.
As these pressures mount, the logic of reducing America’s forward-deployed military presence becomes politically compelling. If the threats from China and North Korea recede in the 2020s and 2030s, and Japan continues to strengthen its defense capabilities, Washington may opt to reposition its forces to Hawaii or the continental United States—a move justified as cost-saving, but strategically transformative.
Layered atop America’s fiscal strain is an older, enduring instinct: isolationism. From Washington’s farewell warning against foreign entanglements to the post–World War I retrenchment, the urge to turn inward has never fully disappeared. In modern form, it reemerged as “America First”—a doctrine that questions the value of distant commitments and demands allies shoulder more of their own defense burdens.
American isolationism surged again in the 1920s and 1930s—a backlash against the carnage of World War I and a wave of immigration that brought 15 million newcomers to US shores. The resulting retreat from global engagement helped create a power vacuum that emboldened Nazi Germany and Imperial Japan, culminating in World War II. America’s victory in that conflict launched it into a leadership role it has maintained—however reluctantly—ever since.
Yet isolationism never fully disappeared. Today, roughly a third of Americans support a return to nineteenth-century foreign policy principles. Donald Trump capitalized on that sentiment during the 2016 campaign, casting allies as freeloaders under the US defense umbrella. His critique—combined with resentment over globalization’s domestic fallout—tapped into a deeper nativist undercurrent.
Once in office, Trump translated rhetoric into policy. His administration demanded Tokyo triple its annual payments for US troops—from USD 2.5 billion to USD 8 billion. Japan resisted, noting it already contributed more than other US allies.
A second Trump presidency could accelerate US retrenchment. Mounting debt would provide political cover for a drawdown of overseas forces. Japan’s growing military capacity and regional diplomacy could serve as further justification for US withdrawal—especially if China and North Korea continue to weaken.
Beyond strategy and budget, a single incident could shift public sentiment in Japan. A high-profile case of US servicemember misconduct could reignite antibase sentiment, particularly if Japan perceives itself rising while others around it fade. In that environment, Tokyo may not ask the United States to leave—it may tell it to.
Over the past 50 years, a series of incidents have fueled resentment toward US forces among segments of the Japanese population, particularly in Okinawa. The 1970 Koza riot erupted after a US servicemember injured an Okinawan man while driving drunk. The unrest, involving over 3,000 Okinawans, resulted in the arson of US-licensed vehicles, a school, and a US Air Force guardhouse. Tensions were already high following the death of an Okinawan pedestrian killed by three US servicemembers—who were later acquitted by US military courts.
Resentment reached a boiling point in 1995 when US Marine Corps and Navy personnel raped a 12-year-old Japanese girl. The crime triggered nationwide outrage and mass protests, with renewed calls to remove US forces from Japanese soil.
Outside Okinawa, the 2001 collision between the USS Greeneville—a US Navy submarine—and a Japanese high school training vessel underscored a cultural disconnect. Japanese media called it “careless human error”; US outlets framed it as an “unfortunate accident.” The disparity reinforced perceptions of American indifference.
As Japan strengthens its military and diplomatic profile, and as the United States, China, and North Korea recalibrate or retreat from the region, a future incident—particularly one echoing the trauma of 1995—could catalyze public demand for the withdrawal of US troops. At that point, Japan may no longer request American forces to leave—it may insist.
Both China and North Korea face mounting internal pressures that may soon erode their capacity to sustain their current posture of regional belligerence. In Beijing, expanding domestic obligations could force a reallocation of resources away from military power projection. If left unchecked, these pressures—demographic decline, economic deceleration, and systemic debt—could fracture the state within a decade, removing the primary strategic threat to Japan.
North Korea’s vulnerabilities are even more acute. Kim Jong-un’s erratic leadership, compounded by health concerns and chronic economic dysfunction, continues to destabilize the regime from within. Collapse remains a plausible outcome.
Meanwhile, the United States’ Indo-Pacific posture is also at risk. Rising debt-servicing costs, deepening domestic entitlement demands, and a resurgent isolationist impulse could combine with a weakening China and North Korea to justify a strategic drawdown. American disengagement would not require a dramatic rupture—merely a subtle realignment justified by fiscal necessity and shifting threat perceptions.
Complicating matters further is the persistent risk of servicemember misconduct. A high-profile incident—particularly one reminiscent of past traumas—could provoke Tokyo to invoke its rights under the US–Japan Security Treaty and request a full withdrawal of US forces.
In that void, Japan may emerge as the region’s central power. By 2040, absent an existential threat and without US primacy, Tokyo could assume the mantle of East Asia’s leading military and diplomatic force. Domestic challenges remain—population decline, economic stagnation, and labor shortages—but they are now shaping, not stalling, Japan’s geopolitical posture. The country’s recalibrated defense spending, assertive regional diplomacy, and expanding security footprint lay the groundwork for a Japan-led Indo-Pacific order.
Japan: Politely Reasserting Its Role in the Indo-Pacific
Japan faces many of the same internal headwinds confronting China and the United States: population decline, economic stagnation, mounting social welfare burdens, and an unsustainable national debt. These pressures have forced Tokyo to look outward—not for expansion, but for survival. To counteract declining productivity and a shrinking workforce, Japan has boosted foreign direct investment, pursued liberalized trade, and taken steps to attract foreign talent—an implicit admission that its traditional insularity is no longer viable.
Tokyo has also moved to fill the economic vacuum left by Washington’s withdrawal from the Trans-Pacific Partnership. Reviving the agreement under the banner of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Japan not only salvaged the trade framework but rebranded itself as the economic ballast of the Indo-Pacific. For Tokyo, the CPTPP was more than a trade deal—it was a hedge against economic coercion, particularly after China’s punitive rare earth embargo in 2010.
In a further break from precedent, Japan has begun to cautiously incentivize immigration—once politically taboo—to stabilize its labor market. Where Beijing’s foreign policy has turned combative and coercive, Tokyo has opted for soft power and quiet leadership. Through diplomatic subtlety and consistent engagement, Japan has positioned itself as a benign actor—trusted by East and Southeast Asia and increasingly looked to as a stabilizing force.
But Tokyo’s motives, though gently expressed, are strategic. Like any rising power, Japan seeks to shape its region. Its goal is not merely goodwill—but influence: economic, diplomatic, and military. In tone, Japan is cooperative. In intent, it is calculating.
Japan’s population peaked in 2008 at 128 million. Since then, its demographic trajectory has turned decisively downward. By 2050, the working-age population is projected to shrink by 19 million. The labor force participation rate—now at 59 percent—has not been this low since the 1950s and will likely fall further as birth rates stagnate and death rates rise. To compensate, Japan is increasingly relying on workers outside the traditional 15–64 age bracket, straining an already aging society.
As the workforce contracts and the elderly population swells, fiscal pressure on Japan’s social safety nets will intensify. Health care, pensions, and long-term care costs will surge as the entire Baby Boomer generation crosses the 75-year threshold by 2025. In response, former Prime Minister Shinzo Abe launched structural reforms aimed at boosting labor participation. His efforts led to a 10 percent increase in female workforce participation and relaxed immigration rules, bringing a record 2.04 million foreign workers to Japan by 2023.
Japan may have opened the door to foreign labor, but it has yet to offer a genuine welcome. Structural and cultural barriers remain firmly in place. Most immigrants cannot naturalize, which bars them from voting, entering the civil service, or even traveling freely within Japan without permits. Foreign workers earn, on average, 28 percent less than their Japanese peers—an economic marker of second-class status that underscores their limited social integration. While Tokyo has taken pragmatic steps to counteract declining productivity, these measures offer only temporary relief. Without deeper structural change, Japan’s demographic drag will continue to constrain long-term economic growth.
Compounding this challenge is Tokyo’s debt burden—the highest in the world. Public debt now exceeds 200 percent of GDP and could balloon to 600 percent by 2050 if current trends hold. Sustaining the welfare state through borrowing rather than reform risks crowding out private investment and cutting GDP by an estimated 8 percent. This burden will fall hardest on younger generations, who must fund a system from which they may reap little benefit. With wealth disproportionately concentrated among the elderly—more so than in Germany or Italy—the intergenerational inequality could trigger backlash against the very system meant to uphold national cohesion.
Japan has partially insulated itself by globalizing its economy—diversifying investment and production beyond its borders. But no amount of external expansion can fully offset the domestic constraints imposed by demographic decline and fiscal overreach.
Since 1981, Japan has commanded the world’s most complex economy by mastering high-value industries—sophisticated technology, intellectual property, and codified knowledge. Over the past decade, Japanese firms have increasingly shifted operations and foreign direct investment (FDI) abroad to tap younger, more dynamic labor markets. Between 2012 and 2019, Japan’s overall productivity rose by 10 percent—growth driven entirely by foreign operations. Beginning in the 1960s, Japanese corporations led a surge in high-tech exports, outpacing both Germany and the United States in growth rate until 1990. Since then, Japan’s share of global exports has slipped from 11.2 to 3.9 percent. Still, Tokyo retains its economic complexity by specializing in the production of a few highly intricate goods. Meanwhile, Japan’s service exports more than doubled from USD 102 billion in 2005 to USD 240 billion in 2019, and outward FDI skyrocketed from USD 1.7 trillion in 2014 to USD 4.2 trillion by 2022. To safeguard this expanding overseas portfolio, Japan has championed the Free and Open Indo-Pacific (FOIP) framework—a vision for a multipolar, rules-based regional order. FOIP partners are also tasked with collectively countering Chinese coercion. Nested within FOIP, the CPTPP serves as Tokyo’s economic vehicle for regional investment. But as Japan’s economic lifeline increasingly stretches abroad, Tokyo will likely have to lean harder on its diplomatic and military instruments to ensure stable access to foreign markets.
Japan’s Military Comes Out of the Cold
Japan’s military posture began a notable shift throughout former Prime Minister Abe’s second term during the 2010s into 2020. Abe reversed a decades-long decline in defense spending, institutionalized the doctrine of “collective self-defense,” and deepened engagement with East and Southeast Asian partners. He viewed China as an emerging threat, even as Washington continued its policy of “strategic engagement” with Beijing. Prime Minister Fumio Kishida, who succeeded Abe, carried the latter’s legacy forward, arguing that Japan must develop the capabilities to strike enemy bases as a credible form of deterrence. Kishida pledged to double defense spending—from one to two percent of GDP—by 2027. In December 2022, his cabinet approved a sweeping USD 315 billion defense plan for fiscal years 2023 to 2027, representing a 56.3 percent increase over previously scheduled expenditures. If Tokyo meets its target, annual defense spending will reach between USD 73 and USD 81 billion by FY2027. This surge in military investment signals a strategic break from the Yoshida Doctrine, marking Japan’s departure from reliance on economic diplomacy and US military protection toward a more autonomous security posture.The recently elected prime minister, Shigeru Ishiba is seeking an even greater regional interdependence by stating his desire to form an “Asian NATO.” This proposal would interlace the existing bilateral, trilateral, and quadrilateral alliances and frameworks into one overarching alliance.
Japan’s rising defense outlays will make it the world’s third-largest military power, trailing only the United States and China. This budgetary expansion aligns with growing domestic support for the Japan Self-Defense Force (JSDF), Tokyo’s assertive regional diplomacy, and increasing calls to revitalize Japan’s defense industrial base. While Japan’s foreign policy remains broadly aligned with the US-led regional order, Tokyo is crafting a semi-autonomous Indo-Pacific strategy that may eventually diverge from Washington’s operational goals. Future friction could stem from Japan’s need to address internal pressures—chiefly a shrinking population, economic stagnation, and resource scarcity. Tokyo shares many of Beijing’s demographic and structural constraints, which have fueled China’s abrasive wolf-warrior diplomacy. Though Japan is unlikely to return to its militarist past, it may adopt a firmer foreign policy posture across the Indo-Pacific, potentially triggering tensions with Washington. Historical points of friction—outlined earlier—could resurface if Japan perceives a diminished threat from its neighbors and opts to reduce or expel US forces. Tokyo’s strategic resurgence could also be accelerated by a US retrenchment driven by mounting debt or a revival of isolationist sentiment akin to the interwar period.
The growing threat posed by China and North Korea over the past decade has galvanized Japanese public support for the JSDF and fueled Tokyo’s push to deepen ties with South and Southeast Asian nations. Since 1969, the Japanese government has tracked public sentiment toward the JSDF. In 2022, a record 40 percent of respondents supported expanding the force—a sharp increase that reflects shifting regional dynamics. The same survey showed that 78.2 percent of the public expressed interest in the JSDF, a 10-point jump from previous years. While many cited North Korea as the principal reason for bolstering Japan’s defense capabilities, nearly as many pointed to China’s growing assertiveness. Overall sentiment toward the JSDF remains overwhelmingly positive: 90.8 percent of respondents reported favorable impressions, with the 18-to-29 age group registering the highest approval at 93.5 percent. This surge in public affinity may allow Tokyo to leverage the JSDF more assertively in regional engagement, adding a military dimension to Japan’s expanding Indo-Pacific footprint. Over the past 15 years, Japan has steadily strengthened its diplomatic, economic, and defense outreach across South and Southeast Asia—positioning itself as a potential regional security guarantor in the decades ahead.
Expanding Regional Economic, Diplomatic, and Military Engagement
Japan’s regional engagement entered a more assertive phase in 2013 under then–Prime Minister Abe, who shifted the country’s foreign policy from a traditionally passive stance to what he termed “proactive diplomacy.” Abe’s strategy reoriented Japan’s outreach from an almost exclusively economic focus to one grounded in values-based engagement, particularly with East and Southeast Asian nations. This evolution included deeper participation in multilateral forums and the cultivation of bilateral relationships that reflect Tokyo’s long-term strategic interests. While progress has varied by country and institution, Japan has steadily advanced its regional leadership across economic, diplomatic, and security dimensions.
Among Tokyo’s most significant partnerships is its rapidly deepening relationship with Vietnam. Since becoming the first nation to recognize Vietnam’s market economy status in 2011, Japan has signed multiple agreements to foster closer economic integration. By 2019, Japan had become Vietnam’s largest source of official development assistance (ODA), contributing USD 24 billion, and had launched approximately 4,600 FDI projects in the country, totaling nearly USD 60 billion. These robust economic ties have been paralleled by growing defense cooperation. Japan has increased port calls, conducted defense equipment transfers, and, in October 2020, agreed in principle to share defense technology with Hanoi—an arrangement that could open new markets for Japan’s reemerging defense industry.
Should the Japan–Vietnam relationship continue its upward trajectory, and as Vietnam assumes a more prominent economic role in Southeast Asia, Tokyo may find in Hanoi a long-term strategic partner. This alignment would enhance Japan’s regional stature and potentially enable it to lead a broader Indo-Pacific coalition in the coming decades.
Japan’s role in Southeast Asia extends well beyond bilateral ties. Tokyo has methodically cultivated its standing within regional organizations, most notably the Association of Southeast Asian Nations (ASEAN). Over the past five decades, Japan’s relationship with ASEAN has evolved from limited participation—beginning with a synthetic rubber forum in 1973—to a patron-client dynamic during Japan’s era of economic dominance, and ultimately into a mature, equal partnership in the twenty-first century.
In September, Japan and ASEAN elevated their relationship to a “comprehensive strategic partnership,” a milestone that enables deeper cooperation across critical domains including digital infrastructure, infectious disease detection, and decarbonization. According to the State of Southeast Asia 2023 Survey, 55 percent of regional opinion leaders identified Japan as the most trusted major power. This trust reflects, in part, Tokyo’s status as ASEAN’s largest provider of ODA, having contributed USD 129 billion to date. Japan is widely viewed as a “courteous” power—one that consults closely with recipient governments to tailor assistance effectively. Much of this ODA has supported transportation networks and energy development, thus directly contributing to ASEAN’s economic modernization.
Diplomatically, ASEAN relies on Japan to advocate on its behalf in global forums such as the G7 and G20. Japan serves as a conduit for Southeast Asian priorities, particularly in areas like climate change, regional connectivity, and supply chain resilience. In turn, ASEAN provides Tokyo with a valuable partner in advancing Japan’s broader Indo-Pacific strategy. As a counterweight to China’s expanding influence, ASEAN is central to Japan’s efforts to safeguard its economic interests in the region. Japan has invested USD 240.2 billion in FDI across ASEAN, which hosts nearly 30 percent of all Japanese overseas subsidiaries.
Security cooperation between Japan and ASEAN remains nascent and primarily bilateral in nature. However, as economic and diplomatic ties deepen, Tokyo may find increasing opportunities to expand defense collaboration across the region—further anchoring Japan’s strategic role in Southeast Asia.
Japan recently expanded its regional security footprint by deepening defense ties with the Philippines and Malaysia, a move emblematic of Tokyo’s evolving strategic posture. During a high-profile visit, Prime Minister Kishida announced the provision of surveillance radar systems to Manila and initiated negotiations for a reciprocal access agreement that would enable mutual military-to-military visits—potentially paving the way for future joint exercises. In parallel, Tokyo agreed to transfer military equipment to Malaysia through its Official Security Assistance (OSA) program, marking another step in Japan’s broader security engagement with Southeast Asia.
These incremental but deliberate actions have not sparked concern within ASEAN, as member states largely perceive Japan as a stabilizing force rather than a revisionist actor. The absence of alarm reflects the region’s long-standing confidence in Tokyo’s postwar restraint and its collaborative diplomacy. Should China become relegated to a more constrained regional role, and if the United States reduces its forward presence due to fiscal or political pressures in the coming decades, Japan’s half-century of engagement with ASEAN could provide the foundation for assuming a leadership position in the Indo-Pacific.
Beyond Southeast Asia, Tokyo has methodically cultivated a robust security partnership with Australia—an alliance that has grown markedly in the past two decades. Before 2007, military ties between Tokyo and Canberra remained modest, largely subsumed under the US security umbrella. That changed with the signing of the Joint Declaration on Security Cooperation, which laid the groundwork for expanded defense dialogue, bilateral military exercises, and broader collaboration on regional stability.
This partnership deepened further in 2009, with regularized defense exchanges and the institutionalization of joint training activities. In October 2022, Prime Ministers Kishida and Anthony Albanese upgraded the relationship to what many analysts now describe as a “quasi-alliance.” The second Joint Declaration on Security Cooperation outlined a sweeping agenda: enhanced military interoperability, intelligence sharing, joint cybersecurity and space operations, and cooperation across logistics, law enforcement, and energy sectors. Notably, the agreement committed both nations to consult on regional contingencies that might threaten their sovereignty or that of the broader Indo-Pacific. While it stopped short of a mutual defense pact, the language signaled an intent to align closely—politically and militarily—on strategic regional responses.
The signing of a reciprocal access agreement (RAA) between Japan and Australia further institutionalized their growing defense partnership. Building upon the earlier Joint Declaration on Security Cooperation, the RAA provides a legal framework that facilitates regular military exchanges for training and operational purposes. With this agreement, Australia became only the second country—after the United States—granted the right to deploy forces to Japan without case-by-case approval from Tokyo. The RAA and the joint declaration together reflect a shared concern over the potential retrenchment of US foreign policy in the Indo-Pacific and enable Japan and Australia to solidify closer military and energy ties in preparation for such a contingency.
At the heart of this increasingly symbiotic relationship lies Japan’s enduring vulnerability: its chronic lack of natural resources. Since the Meiji Restoration, Japan’s economic development has been constrained by its dependence on foreign energy supplies. Despite its push toward renewables, Japan remains heavily reliant on fossil fuels—particularly coal, petroleum, and liquefied natural gas (LNG)—to power its industrial base.
Australia’s pivot away from China has brought it into closer economic alignment with Japan. As tensions with Beijing fluctuated over the past decade, Canberra sought to diversify its energy exports—Tokyo emerged as a primary beneficiary. Today, Japan receives approximately two-thirds of its coal, one-third of its liquefied natural gas, and 60 percent of its iron ore from Australia. As both nations transition toward cleaner energy portfolios, Japan will increasingly depend on Australia for rare earth elements critical to its green transformation. This shared economic trajectory is fostering a more integrated and enduring bilateral relationship.
Should China’s regional assertiveness wane due to internal challenges, and if the United States adopts a more isolationist “America First” posture, Japan’s ascent to a leadership role in the Indo-Pacific would gain greater urgency. In such a scenario, Australia would serve as a crucial strategic partner—reinforcing Japan’s influence and stability in the region. Together with ASEAN, Canberra offers Tokyo a two-pronged platform to expand its diplomatic, economic, and military reach across Southeast Asia and Oceania.
In East Asia, another geopolitical opening has emerged. South Korean President Yoon Suk Yeol’s outreach to Tokyo presents a rare opportunity to thaw a historically fraught relationship. The legacy of Japan’s wartime occupation—particularly its use of Korean forced labor and “comfort women”—has long obstructed reconciliation and required US mediation to maintain even minimal cooperation.
Yoon’s willingness to move past these entrenched grievances signaled a potential shift. His administration prioritized stronger economic and security ties with Japan, creating a narrow diplomatic window for Tokyo to forge a more durable partnership with Seoul. Prime Minister Kishida seized the moment, becoming the first Japanese leader to visit South Korea since 2011. During the visit, both sides agreed to reinstate reciprocal visits and resume high-level security dialogues.
Crucially, the two leaders committed to normalizing the General Security of Military Information Agreement (GSOMIA), a critical mechanism for intelligence sharing between Tokyo and Seoul. While the move marked tangible progress, South Korean public opinion remains skeptical. Many viewed Yoon’s outreach as overly conciliatory, lacking sufficient reciprocation from Japan. These domestic pressures, combined with unresolved historical grievances, could still derail momentum.
Nonetheless, the current thaw—however tentative—offers Japan an important strategic opportunity. A reinvigorated partnership with South Korea would strengthen Japan’s regional posture and provide a united front on key security and economic challenges. The nascent détente between Japan and South Korea faces a critical inflection point as leadership transitions unfold in Tokyo, Seoul, and Washington between late 2024 and early 2025. In Japan, the ruling Liberal Democratic Party (LDP) selected Shigeru Ishiba as its new leader in September 2024, just ahead of the October general election. Ishiba, a longtime advocate for stronger ties with South Korea, met then-President Yoon Suk Yeol on the sidelines of the ASEAN summit the following month. Citing the volatile regional security environment—particularly North Korea’s continued missile provocations—Ishiba emphasized the need to preserve and deepen bilateral cooperation.
His track record supports this stance. As early as 2019, Ishiba warned that deteriorating Tokyo-Seoul relations undermined strategic stability in a geopolitically vital region. His cabinet appointments reflected continuity in this vision: three moderate former defense officials with extensive experience managing the sensitive issues that have long defined the Japan–South Korea relationship. However, Ishiba's early momentum was tempered by political upheaval. In the October 2024 elections, the LDP lost its majority in the lower house of the Diet for the first time in 15 years. Despite this setback, Tokyo appears committed to sustaining its economic and security engagement with Seoul.
South Korea, meanwhile, entered a period of unprecedented political turbulence. On 3 December 2024, President Yoon imposed martial law amid a domestic crisis, triggering six months of political volatility. His impeachment was upheld by the South Korean Supreme Court on 4 April 2025, with national elections scheduled for 3 June 2025 to select a new government. The upheaval has prompted serious discussions about constitutional reform, with momentum building to revise South Korea’s 1987 charter and reduce the power of the presidency. While such foundational reforms may absorb the political oxygen in Seoul, they could also sideline long-term diplomatic initiatives with Japan.
Any new administration will inherit a fractious political environment marked by deep partisanship, demographic decline, soaring welfare costs, and sluggish economic growth. South Korea’s recent presidential history offers a cautionary tale: newly elected leaders often lack the political capital to enact lasting reforms and instead expend energy undoing their predecessor’s agenda in the name of justice or political retribution.
Still, despite the turbulence, there are signals that Seoul views closer ties with Tokyo as a strategic imperative. Acting President Choi Sang Mok expressed hope for reconciliation, invoking the 60th anniversary of diplomatic normalization between the two nations as an opportunity to build lasting cooperation. Foreign Minister Cho Tae-yul offered an even starker warning, declaring, “Today’s Ukraine may be tomorrow’s East Asia,” and went on to say “the peoples of the two nations must firmly realize that cooperation is not an option but absolutely essential.”
Lee Jae-myung, the leading candidate in South Korea’s June 2025 elections, has signaled his intent to pursue closer economic and security ties with Tokyo if elected. He has expressed support for a Korea Chamber of Commerce and Industry proposal to establish an economic bloc modeled on the European Union, integrating South Korea, Japan, and Southeast Asia. However, Lee’s past anti-Japanese rhetoric casts a long shadow. Political expediency could tempt him to revive nationalist sentiments during the campaign, a possibility that unsettles Tokyo.
Still, historical grievances aside, the primary driver for deeper Japan–South Korea cooperation in the next four years may not be found in Seoul or Tokyo—but in Washington. The United States remains a critical interlocutor in preserving and advancing trilateral cooperation. The August 2023 Camp David summit marked a high point, with the three nations committing to annual military exercises and pledging mutual consultation in the face of regional threats. These moves were prompted by shared concerns over Chinese assertiveness and North Korean unpredictability.
However, President Donald Trump’s return to office has introduced new pressures. Determined to recalibrate trade balances and shift defense costs onto US allies, the Trump Administration has revived its “America First” doctrine—pressuring allies to shoulder more of their own defense burdens as a condition for continued US support. This posture may inadvertently accelerate Japan–South Korea integration, not out of idealism but necessity.
The early signs are mixed. President Trump’s first meeting with Prime Minister Ishiba reaffirmed the US–Japan alliance and the importance of trilateral coordination. Two subsequent foreign minister summits reinforced Washington’s stated commitment to the framework. Secretary of Defense Pete Hegseth’s March visit to Tokyo culminated in upgrading US Forces Japan to a joint command structure, signaling deeper integration with Japanese forces.
Yet anxiety lingers, particularly in Seoul. Acting swiftly, South Korean Foreign Minister Cho Tae-yul called Secretary of State Marco Rubio just three days after Trump’s inauguration and later met with him at the Munich Security Conference. These gestures were meant to reassure Washington of Seoul’s commitment and mitigate fears of marginalization.
Still, those reassurances have not quieted growing unease in both Tokyo and Seoul—especially after the Administration imposed sweeping tariffs on their exports in April. Despite long-standing bilateral trade agreements, Washington levied 24-percent tariffs on Japanese goods and 25-percent on South Korean exports. South Korea responded with “emergency support measures” for critical sectors like automotive manufacturing, while Japan bristled at the tariffs on its steel, aluminum, and auto industries. Early May negotiations offered little optimism; Washington signaled reluctance to ease auto-related tariffs, deepening Japanese concerns over the direction of trade talks.
While Tokyo and Seoul continue to engage Washington in hopes of alleviating perceived economic injustices, the shifting tone of US foreign policy may force both capitals to reconsider the long-term viability of relying on American leadership. In attempting to assert fairness and reduce its overseas burdens, Washington may be unwittingly catalyzing the formation of a more autonomous regional bloc—one that could marginalize US influence in the Indo-Pacific and reshape the strategic architecture it once dominated.
Defense burden sharing remains a perennial point of friction in the trilateral relationship—and a growing stressor in Washington’s bilateral ties with both Tokyo and Seoul. Since 1990, President Trump has repeatedly questioned the value of stationing US forces in South Korea. During his first term, the administration demanded that Seoul quintuple its financial contribution for hosting US troops, raising the annual figure from USD 1 billion to USD 5 billion. On the campaign trail in October 2024, Trump reignited the debate, telling an audience at the Economic Club of Chicago that South Korea “would be happy to pay $10 billion” for US protection—if he were president.
Japan, while less frequently targeted, has not escaped scrutiny. In 2022, Tokyo agreed to a five-year, USD 8.6 billion package to support US troop presence. Yet US Ambassador George Glass, during his confirmation hearing, insisted that Japan should increase its contributions further. President Trump echoed that sentiment in an April 2025 conversation with a senior Japanese official. The request met political resistance: Seiji Maehara, co-leader of the rising Ishin party, declared that Japan had “paid enough” and should refuse any new demands for additional support.
When viewed alongside the administration’s steep tariff impositions, these calls for increased host-nation support may further sour public opinion in both capitals. Tokyo and Seoul could come to view Washington’s demands not as alliance maintenance but as transactional extortion—fueling momentum for greater bilateral collaboration and regional self-reliance.
Yet, if Beijing and Pyongyang were to recede in influence—militarily, economically, or diplomatically—and Washington were to scale back its Indo-Pacific presence due to domestic political or fiscal constraints, Japan would have positioned itself to step into a regional leadership role. In such a scenario, Tokyo’s evolving partnership with Seoul would complement its long-standing ties with ASEAN and its deepening alliance with Australia, reinforcing Japan’s claim as the region’s stabilizing force.
Over the past decade, Japan has pursued a calibrated, three-pronged strategy—leveraging economic, diplomatic, and military tools—to expand its influence across the Indo-Pacific. This approach has largely aligned with US regional objectives but has also positioned Tokyo to act independently if necessary. While Japan has reasserted itself as a consequential Indo-Pacific power, one significant limitation remains: its underdeveloped military-industrial base. Without a more robust defense production capacity, Japan may struggle to sustain its strategic ascent and fully realize its ambition to become the preeminent power in the region.
Building a Defense Industry for Japan and Its Allies
Japan remains overly dependent on foreign suppliers to sustain and modernize its military forces. In the post–World War II era, Tokyo restricted its armed forces to territorial defense against limited-scale invasions, eliminating the impetus for a robust domestic defense industry. This posture was codified in a 1967 policy prohibiting arms exports to nations engaged in, or likely to engage in, conflict.
Although Prime Minister Abe relaxed these restrictions in 2014, he retained significant constraints on the export of defense equipment and technology. In a notable policy shift, Japanese Defense Minister Yasukazu Hamada announced in February 2023 a further loosening of export controls, enabling arms transfers when such actions serve Japan’s national security interests.
The United States took swift notice. Just weeks later, the US ambassador to Japan suggested Tokyo could help close US defense production gaps if Japan revitalized its industrial base. Japan’s global standing as the third-largest shipbuilder by tonnage offers a compelling advantage. A reinvigorated Japanese shipbuilding sector could contribute to expanding Japan’s naval capabilities while helping the United States reach its long-elusive goal of a 313-ship fleet.
By January, the US ambassador underscored the value of this collaboration, hinting at a prospective agreement for Japanese shipyards to perform maintenance on US Navy vessels—relieving pressure on America’s overburdened maritime industrial base. These developments reflect a growing recognition in both capitals that Japan’s latent industrial capacity could become a strategic asset, not only for its own defense but also for allied military readiness in an increasingly contested Indo-Pacific theater.
A major obstacle to revitalizing Japan’s defense industry lies in its fragmented, privately owned structure. Over the past two decades, more than 100 firms have exited the sector, citing unsustainable profit margins and uncertain demand. This erosion has fueled growing calls within Tokyo to bring critical segments of the military-industrial base under direct state control.
With renewed political will at home and strategic encouragement from Washington, Japan now has a window to reorient its defense production away from excessive dependence on US matériel and toward self-sufficiency. The broader objective: establish Japan as an exporter of advanced military technology.
To this end, Tokyo launched the Defense Buildup Plan (DBP) in 2023—its most ambitious defense reform blueprint in decades. The DBP explicitly recognizes the defense industry as a core military capability, not merely a support function. Among its priorities: tighter integration of research and development with operational requirements, streamlined procurement tied to major acquisition programs, and the promotion of defense exports.
As Japan ramps up investment to transform the Self-Defense Forces into a credible regional—if not global—military actor, a more centralized and resilient defense industry will become indispensable. Should the threat from China or North Korea recede over the coming decades, or the United States revert to an isolationist footing or face fiscal constraints, Tokyo’s renewed defense infrastructure would give Japan the means to step into a regional leadership role. A strong domestic military-industrial base will not only sustain Japan’s security but also anchor its strategic autonomy in a shifting Indo-Pacific order.
Like many of its Asian neighbors, Japan grapples with mounting domestic headwinds—but few face demographic challenges as acute. Tokyo’s population decline ranks among the most severe globally, and the downward trajectory appears irreversible. Compounding the demographic crisis is Japan’s ballooning national debt, driven in part by the growing cost of supporting an aging populace.
To offset declining productivity, the government has implemented reforms aimed at integrating more women into the workforce. While these efforts provided short-term relief, they have not reversed the broader trend. In another uncharacteristic policy shift, Japan relaxed long-standing immigration controls—an attempt to slow the erosion of the labor force. These measures have yielded modest gains but fall far short of compensating for the shrinking pool of working-age citizens.
Facing a labor shortfall, Japanese firms began looking outward as early as the 1960s, investing abroad to maintain economic output and bolster national productivity. These moves paid substantial dividends for decades. However, Japan’s export competitiveness has begun to slip, threatening the very model that has sustained its economy. Going forward, Tokyo will need to secure access to new and diversified markets abroad to preserve its economic vitality and offset domestic decline. In short, globalization is no longer optional—it is a strategic necessity.
As Japan’s economic influence has receded, its military has begun a quiet resurgence, propelled by the escalating threats posed by China and North Korea. Public perception of the JSDF has shifted markedly—once viewed with skepticism, the JSDF now enjoys broad domestic support as the guarantor of Japanese territorial integrity and national interests. Tokyo has also begun to invest in defense at levels unseen since the World War II. If current trajectories hold, Japan is poised to possess the world’s third-largest defense budget by 2027.
The JSDF is expanding its operational scope, conducting exercises and military exchanges independent of US oversight and increasing its presence across East and Southeast Asia. Though constitutionally a defensive force, the JSDF has acquired and developed platforms capable of striking enemy targets, providing Japan with credible deterrent capabilities against regional adversaries. Simultaneously, Tokyo is revitalizing its defense industrial base—not merely to support its own military modernization but also to position Japan as a producer and exporter of advanced weapon systems.
The United States has taken note. Facing its own naval shortfalls, Washington has encouraged Japan to assume a larger role in maritime shipbuilding to help close the gap toward a 313-ship fleet. Tokyo’s enduring ties with ASEAN and its East Asian and Oceanic neighbors, cultivated through decades of diplomatic engagement, have flourished. Most regional states continue to regard Japan as a benevolent actor—one that has firmly buried its militaristic past. Even with Seoul, Tokyo has initiated a tentative diplomatic thaw, signaling a willingness to confront and move beyond historical grievances in pursuit of mutual strategic goals.
Tokyo does not appear eager to claim the mantle of Indo-Pacific leadership. Nevertheless, its actions across the economic, diplomatic, and military domains are positioning Japan to shoulder a larger regional role. These are not unilateral moves—they align with Washington’s long-standing encouragement for Japan to assume greater responsibility in collective security. Yet, in a future where the United States retreats from the region—whether by choice or constraint—Japan may find itself the de facto hegemon, propelled into a leadership role it neither sought nor can avoid.
Conclusion
Over the past half-century, Japan has matured into a formidable economic and diplomatic force in the Indo-Pacific. Yet only in the last decade—under consistent US encouragement—has Tokyo begun to reassert itself militarily. The US–Japan alliance remains the cornerstone of regional security, forged in the aftermath of World War II and strengthened during the Cold War. Its contemporary resilience, however, is increasingly tethered to the strategic necessity of countering a rising China and an unpredictable North Korea.
That necessity may not be permanent. China faces a slew of internal headwinds—demographic decline, economic deceleration, and mounting political control—that could reduce its military assertiveness and geopolitical reach in the coming two decades. North Korea, for its part, teeters between nuclear provocation and internal collapse, with Kim Jong-un’s erratic governance raising the specter of regime instability or implosion. If these twin threats recede and Washington opts—due to fiscal pressures or domestic politics—to retrench its forward-deployed posture, Tokyo may no longer view the US security umbrella as indispensable.
Under such conditions, Japan could begin to reposition itself not as a junior ally, but as a peer competitor. While an outright abrogation of the US–Japan alliance is unlikely, Tokyo may push for a more equal footing, particularly if future incidents involving US forces on Japanese soil reignite public backlash. Japan’s rise to regional preeminence remains a low-probability, high-impact scenario. But should it occur, the consequences would be profound. The United States could find itself displaced as the dominant power in the Indo-Pacific, forfeiting influence it may never fully recover—potentially destabilizing the liberal international order it helped construct in 1945.
Even absent a formal rupture, Japan’s ascension could strain the alliance. The more Washington urges Tokyo to shoulder greater defense burdens, the more likely it is to accelerate Japan’s path toward strategic autonomy. In attempting to cultivate a more capable partner, the United States must remain alert to the possibility that it is simultaneously shaping a future competitor. Managing this evolution—encouraging Japanese leadership without relinquishing American primacy—may become one of the most delicate balancing acts of US foreign policy in the decades ahead. ♦
CDR Todd Moulton, US Navy
Commander Moulton is stationed at the Office of Naval Intelligence. He is also an Information Warfare Tactics Instructor.