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Japan sharpens defense posture while strengthening Turkish ties

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In an extensive interview on the Harici YouTube channel hosted by journalist Elif Ilhamoglu, Asia-Pacific research specialist and journalist Mehmet Asil Gonultas provided a comprehensive analysis of East Asia’s shifting geopolitical landscape.

Focusing on the newly released 2026 Japanese Defence White Paper, Tokyo’s military posture, foreign policy recalibrations under Prime Minister Sanae Takaichi, and expanding bilateral ties with Turkiye, Gonultas detailed how systemic anxieties regarding China, Russia, and North Korea are reshaping the region.

“China, Russia, and North Korea are explicitly named as threats”

Addressing the release of Japan’s updated national security strategy document, Gonultas noted that the nearly 600-page publication represents the longest and most assertive security outline produced by Tokyo to date. He underscored that the tone toward regional competitors has hardened markedly compared to previous editions.

“China, Russia, and North Korea are explicitly named as threats in this year’s document,” Gonultas said. “Regarding Russia, the text explicitly characterizes its military presence on the contested Kuril Islands as an occupation, particularly following the recent visit by Russian President Vladimir Putin to one of the islands. North Korea is evaluated through the operational lens of the Russia-Ukraine war, where Pyongyang is actively refining its military capabilities, deploying personnel, utilizing drones, and gaining battle-tested experience in an active combat zone.”

Gonultas explained that the characterization of Beijing as a deteriorating security risk reflects a trajectory that has intensified steadily over recent years. “While China has been identified as a primary security concern since at least 2022, the rhetorical severity increases with every iteration. This year’s assessment is the heaviest yet, directly mirroring the firm posture of the state,” he stated.

Contrasting the current administration with former leadership, Gonultas remarked, “Former Prime Minister Shigeru Ishiba advocated a relatively moderate approach, maintaining that Japan and China must find ways to coexist peacefully given their geographic reality. However, Prime Minister Takaichi adopted an uncompromising stance toward Beijing even prior to assuming office.”

He noted that Beijing’s actions have reinforced Tokyo’s apprehensions: “Beijing continuously provides justification for this stance. During recent missile testings, Beijing claimed to have informed Japan in advance, but Tokyo clarified that notice was provided merely 30 minutes prior to launch, emphasizing that no formal permission was granted. Furthermore, Chinese naval vessels regularly test boundaries in Japan’s exclusive economic zone, and a Chinese warship recently targeted a Japanese fighter jet with a guidance laser. The white paper explicitly argues that China’s actual military expenditures significantly exceed its publicly declared defense budget.”

Following the publication of the document, China’s Ministry of Foreign Affairs and Ministry of National Defense swiftly issued formal condemnations, accusing Tokyo of fanning regional tensions and reverting to historic militarism. “China reacted directly by asserting that this document reflects rising Japanese militarism,” Gonultas said. “In response, Tokyo points to China’s rapid rearmament, its inventory of ballistic missiles capable of striking Japanese territory, its maritime incursions, and its anti-aircraft capabilities targeting Japanese military aviation.”

“There is no question of acquiring nuclear weapons”

Turning to the structural and military capabilities outlined in the white paper, Gonultas clarified that Tokyo is prioritizing high-technology defense systems and diplomatic-economic integration rather than unconventional deterrence.

“There is no question of acquiring nuclear weapons,” Gonultas emphasized, addressing recent media speculation surrounding defense policy debates. “While domestic discussions on nuclear deterrence surfaced during the era of the late Prime Minister Shinzo Abe, implementing such a policy remains politically impossible. Regardless of a ruling party’s parliamentary majority, strong internal factions vehemently oppose the concept. When Abe tentatively raised the question of nuclear deterrence after leaving office, then-Prime Minister Fumio Kishida immediately rejected the notion. Kishida, who remains an influential parliamentary figure, reaffirmed only recently that Japan must unconditionally oppose nuclear armament.”

Clarifying recent remarks made by Japanese Defense Minister Shinjiro Koizumi regarding the public taboo surrounding nuclear debates, Gonultas observed, “The prohibition against discussing nuclear weapons is not a formal statutory ban, but rather a deeply ingrained societal consensus. The public remains firmly opposed to even raising the topic. Defense Minister Koizumi, whose personal popularity has risen significantly among right-wing factions since taking office, uses this rhetoric largely as a political signaling strategy to consolidate his base as he positions himself for a future prime ministerial run.”

Gonultas outlined Tokyo’s actual defense investments, highlighting unmanned systems and domestic defense manufacturing. “Japan’s primary technological focus centers on advanced drone infrastructure,” he stated. “Furthermore, Japan has revised its historical restrictions on arms exports. While the constitution was previously interpreted to ban the export of lethal weaponry—limiting sales strictly to search-and-rescue or non-lethal equipment—legislative shifts now permit defensive exports, provided they are directed toward allied nations that are not actively engaged in armed conflict.”

“Japan is acutely aware that it cannot stand alone against China”

Evaluating Tokyo’s strategic dependence on Washington, Gonultas emphasized that Japan’s defense planners view the US alliance as indispensable for national survival.

“Japan is acutely aware that it cannot stand alone against China’s sheer scale,” Gonultas stated. “This fundamental reality forces Japanese policymakers to maintain flawless relations with Washington at all costs. Recently, when a US serviceman was implicated in an assault incident on Okinawa Island, Defense Minister Koizumi explicitly declined to criticize the US military, drawing sharp domestic backlash. Yet, this reflects Tokyo’s overriding priority: retaining the US strategic presence in the Indo-Pacific.”

“Both the Japanese government and the general public harbour deep anxieties regarding Chinese intentions, particularly concerning a potential military move against Taiwan,” Gonultas continued. “Should China blockade or seize Taiwan, Japan’s vital maritime trade routes would be compromised at Beijing’s discretion. Aside from the United States, no regional power possesses the capacity to offer meaningful deterrence.”

Gonultas added that this strategic anxiety has intensified under the current US administration. “Japanese planners are operating under immense pressure to keep US President Donald Trump fully committed to regional security, even as Washington signals potential adjustments to its military posture, including reductions in joint exercises with South Korea,” he noted. “To build a broader network of deterrence, Tokyo is actively cultivating overlapping bilateral and trilateral security partnerships with Australia, the Philippines, India, and South Korea, aiming to anchor US power within the region.”

“Constitutional limits restrict Japanese forces to purely defensive operations”

Addressing whether growing regional friction could lead to direct military confrontations, Gonultas pointed to the legal constraints governing Japan’s Self-Defense Forces.

“The likelihood of Japan initiating or engaging in direct offensive conflict remains minimal,” Gonultas stated. “Article 9 of the Japanese Constitution explicitly renounces war and prohibits the maintenance of offensive war potential. All military assets held by Japan are structured strictly for self-defense, meaning operational force can only be applied after Japanese territory sustains an explicit attack.”

“When Prime Minister Takaichi previously stated that Japan would protect Taiwan in the event of an invasion, any operational support would realistically be limited to logistics, non-combatant evacuation operations, and naval resupply missions for US forces, rather than direct front-line engagement,” Gonultas explained. “Although Takaichi favors constitutional revision, the Japanese public remains overwhelmingly pacifist and deeply attached to Article 9, driven by demographic aging, historical memory, and a profound fear of military escalation.”

“Turkiye is viewed as a reliable and capable defense partner”

Highlighting expanding diplomatic and industrial engagement between Ankara and Tokyo, Gonultas noted that defense procurement and technological cooperation have gained significant momentum.

“Following high-level diplomatic engagements, including Turkish Foreign Minister Hakan Fidan’s official visit to Tokyo and subsequent defense agreements signed at the SAHA EXPO defense exhibition, bilateral security cooperation has entered a concrete phase,” Gonultas said. “Japan is actively seeking to acquire drone technology. Importantly, Tokyo does not merely wish to purchase off-the-shelf equipment; it seeks technology transfers and co-production frameworks to understand manufacturing methodologies. Ankara has demonstrated a positive reception to these discussions.”

“Turkiye is viewed in Tokyo as a reliable, highly capable defense actor and a non-aggressive diplomatic mediator,” Gonultas added. “With negative public perception toward Israel reaching 80% in Japan, Tokyo has deliberately diversified its defense partnerships away from Tel Aviv, placing increased value on its historical alliance with Turkiye.”

Gonultas further observed that diplomatic coordination extends into Central Asia. “Japanese Deputy Foreign Minister Eri Arfia, who is of Uyghur origin and fluent in Turkish, visited Istanbul and met with representatives of the Organization of Turkic States, expressing Japan’s interest in securing observer status,” Gonultas explained. “Tokyo views Turkiye as a vital bridge to Middle Eastern energy stability and Central Asian critical mineral supply chains.”

“Takaichi’s public approval ratings have dropped toward 50%”

Analysing domestic political dynamics, Gonultas reported that Prime Minister Takaichi faces mounting economic pressures that threaten her initial political momentum.

“While Prime Minister Takaichi entered office with approval ratings approaching 70%, recent surveys show public support dropping toward 50%, with some independent polls placing approval near 40%,” Gonultas stated. “The primary driver behind this decline is economic dissatisfaction. Despite state interventions to stabilize the yen around 170 per US dollar following energy price surges caused by the Iran conflict, living costs remain elevated.”

“Voters supported Takaichi expecting structural economic revitalization, but the administration has heavily prioritized ideological and administrative initiatives—such as designating Osaka as a secondary capital alongside its coalition partner, the Japan Innovation Party, enacting national flag protection laws, and tightening permanent residency requirements for foreign workers,” Gonultas explained. “Although the government plans to cut consumption taxes on food items from 8% to 1%, prominent figures within her own Liberal Democratic Party (LDP), including former Prime Minister Ishiba and veteran leader Taro Aso, have publicly questioned the fiscal viability of these plans.”

Concurrently, economic authorities face severe macroeconomic challenges following joint currency interventions by the US and Japan. “While joint interventions successfully halted the chaotic depreciation of the yen beyond the 170 threshold, Japanese government bond yields recently hit 30-year highs of approximately 3%,” Gonultas noted. “To offset inflationary pressures on households, the government has facilitated a 5% average wage increase—the highest in recent decades—while coordinating with Washington to maintain exchange rate stability.”

Concluding his evaluation of Tokyo’s regional policy, Gonultas noted that despite broader regional instability, Japan continues to maintain active diplomatic communication with Tehran to safeguard energy transit through the Strait of Hormuz. “Tokyo maintains functional diplomatic channels with both Washington and Tehran, leveraging its neutral diplomatic standing to support regional maritime stability and energy security,” Gonultas concluded.

Asia

China leads $54bn capital injection into state banks and insurers

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China’s Ministry of Finance will lead a total capital injection of $54 billion into state-owned insurance companies and banks as part of a coordinated push to reinforce the capital structure across the country’s financial system, according to details disclosed by the institutions in statements on Sunday.

China Life Insurance (Group) Co, the country’s largest life insurer, will receive 35 billion yuan ($5.2 billion) in capital support, whilst China Taiping Insurance Group will receive 7 billion yuan.

In a separate announcement, People’s Insurance Company (Group) of China (PICC) said it plans to raise up to 15 billion yuan via a private placement of A-shares to the Ministry of Finance. The company stated that the proceeds will be used to replenish its capital.

The initiative could fortify the financial position of state insurers, which have been called upon to support the equity market with medium- and long-term funds. At the same time, it could position these institutions to help regulatory authorities manage smaller and higher-risk insurance companies.

Financial sector stability

China’s insurance industry has been contending with shrinking profitability caused by prolonged low interest rates. Solvency ratios across numerous small and medium-sized insurers have also deteriorated.

China Export and Credit Insurance Corp stated that the Ministry of Finance will inject 10 billion yuan to boost the company’s core capital. China Reinsurance (Group) announced that it will execute a capital increase of 3 billion yuan.

“The capital injection represents an important step for enhancing the financial sector’s capacity to serve the real economy and promoting high-quality development across the financial and insurance industries,” China Life said in a statement. The insurer added that the capital support will improve the group’s resilience to risks.

Taiping also noted that the funds provided will strengthen the company’s solvency and other core metrics.

Banks benefit from recapitalisation plan

Separately, three state banks announced on Sunday that they will receive capital support totalling 290 billion yuan.

The recapitalisation framework was first announced during the annual parliamentary meetings in March this year. The move broadens a funding mechanism deployed last year to strengthen the capital structures of several other major state-owned lenders.

Agricultural Bank of China and Industrial and Commercial Bank of China (ICBC), two of the country’s largest state-owned lenders, announced plans to raise up to 160 billion yuan and 100 billion yuan, respectively, through private placements of A-shares to the Ministry of Finance, China National Tobacco Corp, and affiliated entities.

Both lenders confirmed that all net proceeds will be deployed to replenish their Core Tier 1 capital. The measure is expected to help sustain credit expansion at a juncture when Beijing is increasingly relying on state lenders to support economic growth.

Weak credit demand remains a persistent headwind for the world’s second-largest economy, while continuing to erode profitability across the banking sector.

Export-Import Bank of China, one of the country’s three policy banks, stated that the Ministry of Finance will inject 30 billion yuan of capital into the institution, thereby bolstering its capital base.

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BOJ faces critical rate decision as US presses for faster hikes

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The Bank of Japan faces a critical policy showdown as US Treasury Secretary Scott Bessent declares that the era of massive stimulus is over.

When the US joined Japan’s efforts to support the yen, it did not do so unconditionally. This week, US Treasury Secretary Scott Bessent laid out the terms clearly: accelerate interest rate hikes and abandon outmoded ideas regarding massive economic stimulus.

A month after the rare joint intervention carried out by the US and Japan to bolster the yen, Bessent told Reuters that recent currency movements were not disorderly, signalling little appetite for fresh market intervention.

Instead, he expressed hope that Bank of Japan (BOJ) Governor Kazuo Ueda would “do the right thing” in monetary policy to combat the weak yen.

With inflationary pressures mounting, the BOJ was already widely expected to raise interest rates in September. However, Bessent’s remarks effectively boxed the central bank in, while increasing pressure for a faster pace of rate hikes going forward.

“The joint intervention in July was Bessent’s message to Japan that it now needs to get its act together on inflation,” said Izuru Kato, chief economist at Totan Research and a veteran BOJ watcher.

“Japan faces a currency crisis that is becoming increasingly difficult to control without US assistance. For a country in such a position, raising rates even once every three months may be too slow,” Kato said.

The weak yen has pushed up import prices and headline inflation, raising household living costs and creating a headache for Japanese policymakers.

From Washington’s perspective, a BOJ that moves too slowly on rate hikes, combined with loose fiscal policy, could trigger a sell-off in the yen and Japanese government bonds. This could disrupt financial markets with spillover effects reaching US Treasury yields—an outcome Washington wants to avoid.

Markets are focused on potential remarks by BOJ Governor Ueda following his participation in a two-day meeting of G20 finance leaders in Asheville, North Carolina, which concludes on Tuesday. A US Treasury official told Japanese public broadcaster NHK that Bessent met Ueda on Sunday and conveyed that interest rate hikes were necessary.

Even without US pressure, recent hawkish communication from the BOJ indicates it is preparing for a near-term rate hike in response to broadening inflation pressures.

“Given all the pressure coming from producer prices, consumer inflation is likely to accelerate. If that happens, the BOJ must act,” said a source familiar with the central bank’s thinking.

However, a September rate hike is already factored into market pricing. Consequently, the BOJ may need to commit to faster rate increases to alleviate downward pressure on the yen.

“Japan’s real interest rates are clearly too low. One or two more rate hikes will not be enough to reverse the yen’s downward trend,” said Naoyuki Shinohara, Japan’s former top currency diplomat.

Oxford Economics announced that it now expects the BOJ to raise rates in September and December this year, followed by a third hike in April 2027—a faster tightening cycle than the firm initially projected.

“The economic and political cost of disappointing the markets and the US has become too great for the BOJ and the government to ignore,” Shigeto Nagai, head of Japan economics at Oxford Economics, said in a report published on Monday.

For dovish Prime Minister Sanae Takaichi, the starkest message may be Bessent’s declaration that the era of Abenomics is over. Introduced in 2013 to end prolonged deflation, Abenomics combined sweeping monetary easing, heavy government spending, and a structural growth strategy.

Speaking to Reuters on the country’s fiscal policy, Bessent said Japan had defeated deflation and should now “sit back and enjoy the success of Abenomics and let it run its course.” Some analysts interpreted these remarks as a critique of Takaichi’s expansionary fiscal approach.

“This is a message to the Takaichi administration to avoid excessively loose fiscal policy,” a Japanese government official said regarding Bessent’s comments.

A senior ruling party official said: “These remarks show that the US is stepping up its demands on Japan’s policies.”

Both officials spoke on condition of anonymity due to the sensitivity of the matter.

Takaichi, an advocate of Abenomics, has laid out an ambitious spending agenda aimed at boosting investment in growth areas and easing the impact of rising living costs on households.

Following Takaichi’s pledge to remove spending caps in key growth areas, Japanese media reported that ministries and public agencies likely submitted their highest-ever initial budget requests for the upcoming fiscal year.

The focus on large-scale spending has unnerved investors, driving Japanese government bond yields to 30-year highs, which could also generate knock-on effects for US Treasury yields.

“The best way to support the yen would be for the Takaichi administration to deliver a credible message committing to fiscal reform,” said Shinohara, who also served as deputy managing director at the International Monetary Fund (IMF) following his tenure at the Ministry of Finance.

“However, the likelihood of that happening is extremely low,” Shinohara added.

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India faces mounting hurdles to reach developed economy status by 2047

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The Indian economy expanded by more than 7% in the previous quarter, but according to an analysis by Bloomberg, this pace may prove insufficient to realise Prime Minister Narendra Modi’s target of transforming the country into a developed nation by 2047.

Modi aims for India to attain developed economy status by 2047, which marks the centenary of the country’s independence from Britain.

Ashok Lahiri, a representative of a state-backed think tank, argues that gross domestic product (GDP) must expand by approximately 9.25% annually over the next 21 years to achieve this objective.

The programme, titled “Viksit Bharat” or “Developed India”, has become one of the foremost priorities of Modi’s third term as prime minister.

However, some economists express doubt over whether India can reach this target at its current pace of expansion.

Historical growth rates lag behind targets

Economic growth averaged 6.3% between 2000 and 2024. This figure sits well below the country’s current potential rate of 7.5% to 8%.

The report noted that over the past 50 years, the Indian economy recorded growth of 9.25% or higher on only three occasions: in 1975, 1988, and 2021.

Should the Indian economy grow at a rate below 8% annually, it is assessed that the country could slip into what is known as the “middle-income trap”.

This concept describes an economic condition in which rising wages and costs erode the advantage of cheap labour, whilst worker productivity and skill levels have not yet risen enough to compete successfully with developed economies.

The report also noted that attaining high-income country status remains a distant prospect. As of 2025, per capita income in the country stands at $2,813.

For India to cross the high-income threshold by 2047, this figure must increase more than sixfold to reach approximately $18,000.

Targets missed across industry and investment

Economists state that the manufacturing industry must be expanded to accelerate India’s growth.

The Modi administration is also placing emphasis on this sector, yet its share of GDP has remained at roughly 16% to 17% for more than a decade. This proportion falls significantly short of the 25% target set by Modi.

Economists further emphasize that expanding high-tech exports, lifting private sector investment, and curbing reliance on energy imports could accelerate economic growth.

It is also noted that the country needs to draw more foreign investment into manufacturing. Despite record levels of foreign direct investment, India is reportedly struggling to retain this capital domestically.

Indian companies are progressively stepping up their investments abroad, whilst foreign investors are scaling back funding for local ventures.

A high domestic savings rate is likewise critical for India’s economic growth.

Savings allow the construction of factories and infrastructure to be financed without excessive reliance on costly borrowing and foreign capital. However, the capacity of Indian households to save remains constrained by relatively low income levels.

According to a 2021 report by NITI Aayog, approximately 87 million people in India aged between 15 and 29 are neither employed nor in education or vocational training.

Owing to a shortage of employment opportunities, roughly 60% of the working population is self-employed, with the bulk of this cohort engaged in the low-income agricultural sector.

Shumita Deveshwar, Chief Economist at GlobalDataTS Lombard, noted that without a rise in private sector investment and an acceleration in job creation, India will struggle to maintain GDP growth above 6%, let alone reach the pace of over 8% required to achieve developed economy status.

The country’s administration plans to undertake record borrowing of 17.2 trillion rupees (approximately $187 billion) during the fiscal year starting 1 April. This sum represents an 18% increase compared with the current year and surpasses Bloomberg’s previous forecast of 16.5 trillion rupees.

The government projects that the ratio of the fiscal deficit to GDP, which stands at 4.4% in the current period, will decline to 4.3% in the next fiscal year.

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