Japan considers boosting defense spending to 3.5% of GDP

Japan is contemplating raising its defense spending to 3.5% of GDP, following pressure from the United States and other NATO allies, according to sources familiar with the matter. This move, if implemented, could have significant implications for financial markets, as it would signal a major shift in Prime Minister Sanae Takaichi's spending plans.

Japanese defense officials have already indicated their willingness to significantly increase defense spending in discussions with their U.S. counterparts, according to the sources. One potential scenario being considered is matching a commitment made by South Korea to increase its defense spending to 3.5% of GDP over a decade, as per the information provided.

While a 3.5% target is under consideration, a lower figure of 3% is also a possibility, according to one of the sources. The decision on the exact target will likely be influenced by various factors, including financial considerations and the need to maintain a strong defense capability in the face of evolving security challenges.