Japan's US dilemma
In the space of a few weeks, Japan has found itself at the centre of a geopolitical storm. On the one hand is a jarring economic fallout with its most important ally, the United States, and on the other, a major recalibration of its defence orientation.
Japan plans to deploy long-range missiles on its southwestern islands by 2026, a historic departure from its post-war pacifist posture. Simultaneously, the reimposition of tariffs on Japanese automobile and steel exports by the Trump administration has raised profound concerns in Tokyo about the stability and reciprocity of its alliance with Washington.
This unfolding tension illustrates a paradox. Japan is rearming to secure American support while facing an economic squeeze from that very ally. For India, this emerging contradiction presents a critical moment of opportunity and responsibility. The opportunity lies in Tokyo's growing willingness to diversify its strategic and economic relationships. The responsibility stems from the fact that the health of the US-Japan relationship is integral for the Quad to succeed.
In 2024, Japan unveiled its largest defence budget, as part of a broader plan to double spending by 2027. It now plans to deploy long-range cruise missiles, capable of striking military bases in China or North Korea, to strengthen deterrence capabilities amid rising tensions in the East China Sea. Late last month, it also carried out its first-ever missile test on domestic soil at the Shizunai Anti-Air Firing Range.
But such assertiveness comes with challenges. Domestically, Japan's pacifist constitution and fiscal constraints limit the extent of militarisation. Public opinion remains cautious, and defence spending, even under current commitments, barely crosses 2 per cent of GDP. More importantly, Japan's defence upgrades are premised on continued US military backing, including interoperability, intelligence sharing, and nuclear deterrence cover.
However, the reliability of that cover is now in question. The second Trump administration's protectionist outlook has resurfaced longstanding doubts in Tokyo about the durability of the alliance. As the US demands more from its allies while offering diminishing assurances, Japan's dependency on a single power is beginning to look untenable.
The imposition of tariffs on Japanese automobiles and steel products by Washington has reopened old wounds. These sectors are core to Japan's export economy and national innovation ecosystem. It signals that security alliances no longer guarantee economic goodwill.
Moreover, Japan's vulnerability to trade coercion is not limited to the US. China's increasing use of informal embargoes, on semiconductors, rare earths, and tourism, means that Tokyo now finds itself squeezed between its top two trading partners, neither of whom are fully reliable.
This economic dilemma has spurred internal calls, particularly from opposition parties, for Japan to diversify its trade architecture and reduce reliance on the US market. In this recalibration, India features as a natural partner.
First, defence and technology cooperation between India and Japan should move beyond joint exercises like JIMEX and Malabar to co-production and co-development. Joint R&D in unmanned systems, electronic warfare, and hypersonic are areas where both countries lag compared to China and the US. A co-production deal on missile components and air defence systems will also reduce reliance on Western original equipment manufacturers.
Second, economic collaboration must be re-energised. The India-Japan Comprehensive Economic Partnership Agreement (CEPA), which came into effect in 2011, has not undergone a formal revision despite several rounds of discussion and joint reviews. India should accelerate the upgradation of the CEPA to include new elements like digital trade, e-commerce, fintech and mutual recognition of standards.
Finally, New Delhi and Tokyo must ensure that their newly institutionalised economic security dialogue continues to be a regular annual affair. Focusing on the weaponisation of trade, supply chain resilience, and financial sanctions, the first round of the India-Japan Dialogue on Economic Security, Strategic Trade and Technology took place in November 2024. As both countries face the ripple effects of the US-China rivalry, they need coordinated strategies to defend their economic sovereignty.
Prime Minister Ishiba is under pressure to deliver a precarious US–Japan trade deal by August 1 or face 25 per cent U.S. tariffs. Before that, on July 20, Japan will head to the polls for a crucial Upper House election. The ruling LDP–Komeito coalition currently commands the upper house, but polls suggest they could lose their majority. 124 of 248 seats are at stake, with the coalition needing to secure 50 seats to maintain its majority.
Recent NHK surveys show the LDP's support is at 24 per cent, its lowest since 2012, while populist parties like Sanseito are gaining ground. Although losing the upper house would not mean an immediate change in government, it could mean crippled governance, creating the prospect of legislative deadlocks.
Tokyo is clearly entering a new phase of geopolitical agency. It is no longer shielded from the turbulence shaping global politics. The country is being pushed slowly from the comfort zone of technocratic governance and soft balancing into a harsher landscape. For decades, Japan has served as a quiet anchor of regional order, but that paradigm is increasingly under strain. A deeper, more symmetrical India-Japan partnership could serve as a stabilising force in the Indo-Pacific.
The writer is a Research Analyst for the Indo-Pacific Studies Program at the Takshashila Institution
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