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The balance of Japan’s weapons loans exceeds 5 trillion yen

When the Japanese government purchases expensive weapons such as fighters and missiles, it pays the cost on an installment plan over multiple fiscal years. Tokyo Shimbun learned that Japan’s balance of “deferred burden” for the first time exceeded 5 trillion yen in the fiscal 2018 budget and the balance will reach as much as 5.3 trillion yen in fiscal 2019. A large factor in the record high balance is increased purchases of the U.S.-manufactured high-priced weapons such as Osprey transport aircraft and other weapons under the Abe administration. With an increase in weapons imports, the payment for deferred burden has also increased every year, which has led to a significant rise in Japan’s defense budget.

 

In recent years, Japan has imported many weapons based on the U.S. government’s “Foreign Military Sales.” In fiscal 2019, the Japanese government plans to conclude purchase contracts with the U.S. to buy state-of-the-art F-35A fighters (6 airplanes at 91.6 billion yen), E-2D early-warning and control aircraft  (2 airplanes at 54.4 billion yen), and Aegis Ashore ground-based missile interceptor systems  (2 systems at 235.2 billion yen).

 

The contract amount based on the FMS in the fiscal 2012 budget was 138.1 billion yen but spiked after the launch of the Abe administration at the end of the year. The Defense Ministry requested 691.7 billion yen, a five-fold increase, in the fiscal 2019 budget.

 

The Japanese government has paid weapons purchase costs to the U.S. government in installments over as long as five years. The loan balance after the second year is called the deferred burden. With the expansion of the purchase of U.S.-manufactured weapons, the amount of the deferred burden has also suddenly increased  including costs for weapons procurement in Japan. During fiscal 1998 through 2012, the deferred burden remained around 3 trillion yen but it has increased steadily since fiscal 2013. As a result, the amount is expected to be 5.3372 trillion yen in fiscal 2019, up by 2.1 trillion yen in six years.

 

The percentage of the FMS in the total balance rapidly expanded from 5.9% in fiscal 2013 to 28.3% in fiscal 2019.

 

The defense budget has increased every year under the Abe administration. The amount requested for fiscal 2019 is 5.2986 trillion yen, an increase by about 540 billion yen in six years. However, the balance of deferred burden, which can be said to be a debt of the defense budget, has swollen by an amount nearly equivalent to Japan’s annual defense budget as of fiscal 2018, which puts pressure on the government budget.

 

Within this year, the government will review the “National Defense Program Guidelines” – guidelines for defense buildup plan for next 10 years – and draw up the “Medium Term Defense Program,” which will show details of defense equipment and the total amount for the period from fiscal 2019 to 2023. In order to prevent the loss of flexibility in the weapons buildup and defense budget, the government will apparently hammer out a plan to further increase the defense budget.

 

The balance of weapons loans accelerated due to military integration between Japan and U.S.

 

The sudden increase in weapons purchases from the U.S. is pushing up Japan’s defense budget. The balance of weapons loans including the procurement of Japanese equipment has swollen as much as the annual defense budget, making repayment difficult to reduce the debt.

 

Citing North Korea’s missile development and China’s military buildup as reasons, the government is advancing the integration of the Self-Defense Forces (SDF) and U.S. forces. After the passage of the security legislation in 2015, the SDF’s mission has significantly expanded to include the escort of U.S. ships and airplanes. The emergence of U.S. President Donald Trump accelerated the trend as he has tried to reduce the trade deficit with Japan through his weapons sales campaign. As if responding to pressure from the president, Japan is accelerating its weapons imports from the U.S. with “weapons loans” under the name of the deferred burden.

 

As a result, payments for such weapons purchases every year put heavy pressure on Japan’s national budget, which can be said to be the cost of accelerated purchases. National and local governments’ debt all together exceed 1,000 trillion yen and this weighs heavily on the stabilization of the social security system and financial reconstruction. Should the deferred burden continue at the current pace, there will be no capping increases in the defense budget.

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