Skip to content
Search

Latest Stories

What We're Watching

Can Japan afford to muscle up?

Japan's Foreign Minister Yoko Kamikawa and Philippine's Defence Minister Gilberto Teodoro shake hands after signing the reciprocal access agreement, at the Malacanang Palace in Manila, Philippines, July 8, 2024.

Japan's Foreign Minister Yoko Kamikawa and Philippine's Defence Minister Gilberto Teodoro shake hands after signing the reciprocal access agreement, at the Malacanang Palace in Manila, Philippines, July 8, 2024.

REUTERS/Lisa Marie David
Make us preferred on Google

Japan and the Philippines signed a new defense pact on Monday, allowing the mutual deployment of forces to each other’s territory for training – part of a larger mutual effort to stave off China. But while Tokyo’s diplomats are sealing deals with much-needed allies, its defense officials are stressing that a weak yen threatens to eat up their budgets.


Before the Filipino deal, Prime Minister Fumio Kishida reached similar defense agreements with Australia and the UK, and he has established historically warmer ties with South Korea, improving political and military cooperation. He is also trying to double defense spending by 2027, which would make Japan the world’s third-largest military spender. So why is Tokyo slashing orders for new airplanes and warning of more cuts?

Exchange rates. The yen has been struggling, going from about 103 to the dollar in January 2021 to around 160 today. Japan buys most of its top-of-the-line equipment from the US, in deals denominated in dollars, meaning that prices for all defense imports have effectively gone up around 55% in two and a half years. We — and folks at the defense ministry in Tokyo — are watching for an interest rate cut stateside to staunch the losses.

More For You

Iranian President Masoud Pezeshkian displays a memorandum of understanding after signing it in Tehran, Iran, on June 18, 2026.

Iranian President Masoud Pezeshkian displays a memorandum of understanding after signing it in Tehran, Iran, on June 18, 2026, after the document was signed by US President Donald Trump.

Iranian Presidency via ZUMA Press
What does the US-Iran deal mean for Tehran? The interim agreement to end the war, signed by both sides on Wednesday, appears to tilt toward Iran: it lifts the US naval blockade of Iranian ports, grants sanction waivers for Iranian oil products – meaning Tehran no longer has to sell oil at a discount – and gives the Islamic Republic access to [...]
People walking along the Dubai Creek Harbour

People walk along Dubai Creek Harbour, amid the U.S.-Israel conflict with Iran, in Dubai, United Arab Emirates, March 6, 2026.

REUTERS/Amr Alfiky/File Photo
Will the Gulf pay for its own protection from Iran? Iran could reportedly receive up to $300 billion in a reconstruction fund for its battered economy as part of its interim peace deal with the US, which is expected to be formally signed in Switzerland on Friday. While the structure and management of the potential fund are unclear, US President [...]
Israeli PM Benjamin Netanyahu at a news conference

Israeli Prime Minister Benjamin Netanyahu holds a news conference, following a US-Iran deal, in Jerusalem, June 15, 2026.

REUTERS/Ronen Zvulun/Pool
US-Iran deal could spell disaster for NetanyahuIsraeli Prime Minister Benjamin Netanyahu was already struggling in polls ahead of elections later this year, but his situation might get worse after Washington and Tehran agreed to a deal (pending its signing on Friday). Why the issue with ending the war? Israel ploughed resources into the war, its [...]
A man holds an Iranian flag on a street while reading a newspaper

A man holds an Iranian flag on a street, after U.S. and Iranian officials said they had reached a deal to end their war and reopen the Strait of Hormuz, in Tehran, Iran, June 15, 2026.

Majid Asgaripour/WANA via REUTERS
Is the US-Iran deal the real deal? The United States and Iran said Sunday that they had reached an interim agreement that could end the months-long war and reopen the Strait of Hormuz. Officials are expected to sign the deal in Switzerland on Friday, following the G7 summit in France. If signed, it would mark the biggest diplomatic breakthrough [...]