Japan is considering a medium-term defence spending target of about 3.5% of GDP to align with NATO and US allies; officials have indicated willingness to sharply increase defence outlays. One option under discussion would mirror South Korea’s 10‑year pledge to raise defence spending to 3.5% of GDP; a lower target around 3% remains possible. Markets flagged the risk of large-scale government borrowing as Japan’s funding costs climb: 10‑year JGB yields earlier this month hit 3% for the first time

Japan is considering a medium-term defence spending target of about 3.5% of GDP to align with NATO and US allies; officials have indicated willingness to sharply increase defence outlays. One option under discussion would mirror South Korea’s 10‑year pledge to raise defence spending to 3.5% of GDP; a lower target around 3% remains possible. Markets flagged the risk of large-scale government borrowing as Japan’s funding costs climb: 10‑year JGB yields earlier this month hit 3% for the first time since 1996. At the time of reporting the 5‑year JGB yield rose to a record 2.315% and the 30‑year yield was up 5.5 bps at 4.12%.