Japan's next defence budget to post biggest rise in 18 years

TOKYO Japan's defence budget will grow 2.2 percent in the next fiscal year from April, Defence Minister Itsunori Onodera said on Friday, posting the biggest rise in nearly two decades.

The budget increase comes as tension between Japan and China simmers over tiny islands they both claim.

Japan's defence spending next year comes in at 4.78 trillion yen ($45.86 billion), up 2.2 percent on the year, Onodera told reporters after meeting Finance Minister Taro Aso. That would be the biggest percentage rise in 18 years and mark the second consecutive year of growth.

The Defence Ministry has said, however, much of the budget growth next year will be linked to higher cost of equipment imports due to a weaker yen, and the end in March of temporary pay cuts for government workers aimed to help finance reconstruction after a 2011 earthquake and tsunami.

Saddled with hefty public debt, Japan had cut its defence spending for 10 straight years through to 2012, before Prime Minister Shinzo Abe, who returned to power a year ago pledging to bolster Japan's defence posture, raised defence expenditure by 0.8 percent this year.

"This is quite satisfactory for the Defence Ministry. We will carry on defending Japan's safety securely," Onodera said.

In the latest flare-up in tension between Japan and China, Beijing last month declared a new air defence identification zone in an area that includes disputed East China Sea islets, triggering protests from Tokyo as well as Washington and Seoul.

The budget decision comes on the heels of new defence guidelines and military build-up plans, unveiled this week, which call for a 2.6 percent rise in defence spending for five years starting next April.

Asked if the 2014/15 budget was enough to implement the five-year build-up plan, Onodera said: "I believe we have received enough. But there is a precondition of tight fiscal situation. We need to work hard to cut costs and streamline whenever possible when it comes to equipment and training."

The government is in the final stages of compiling next year's draft budget, which will be approved by Abe's cabinet on December 24.

The Defence Ministry's initial budget request, submitted to the Ministry of Finance in August, has been trimmed by 0.7 percent.

Items in the budget request include 69.3 billion yen for four of Lockheed Martin's F-35 fighter jets, 73.3 billion yen to build a destroyer with improved capability to detect submarines and 77.3 billion yen to buy four P-1 patrol planes made by Kawasaki Heavy Industries.

Japan also plans to allocate 300 million yen for research on surveillance drones and tilt-rotor aircraft, with an eye to procuring them in the year starting April 2015, the budget request showed.

Japan hopes that tilt-rotor aircraft such as the Osprey and unmanned aircraft including Northrop Grumman Corp's Global Hawk will help it better defend remote islands, including the contested East China Sea isles, called the Senkaku in Japan and Diaoyu in China.

The Osprey, built by Boeing Co and Textron Inc's Bell Helicopter unit, can fly as quickly as a plane but lands like a helicopter. In the five-year build-up plan, Japan aims to buy 28 F-35s, 17 tilt-rotor aircraft and three drones.

When costs associated with the realignment of U.S. forces in Japan are included, defence-related spending next year will reach 4.88 trillion yen, up 2.8 percent from this year, sources with direct knowledge of the matter told Reuters. ($1 = 104.2300 yen)

(Editing by Robert Birsel)