The 2026 edition covers leading defense-related stocks, noteworthy stocks by sector and the latest investment themes. It includes the Big Three, small and mid-cap stocks, laggards and theme stocks related to unmanned aircraft, railguns and space defense. Examples of share price movements are also introduced alongside news of increased government defense spending and eased restrictions on arms exports.
Mitsubishi Heavy Industries (7011), Kawasaki Heavy Industries (7012) and IHI (7013), the Big Three that have led the market for many years as leading defense-related stocks, are attracting considerable market attention due to domestic defense equipment contract awards and the impact of government policy. Their approximate total returns over the past 10 years are estimated at 18%–22%, 12%–15% and 14%–17%, respectively. In addition, Mitsubishi Electric (6503) and The Japan Steel Works (5631) are strengthening their presence in the defense sector and advancing the introduction of next-generation technologies and overseas expansion.
Among the five leading stocks highlighted as complements to the defense Big Three are IHI, with an approximately 70% domestic share of jet engines for Japan Self-Defense Forces fighter aircraft; Kawasaki Heavy Industries, with a track record in submarines and large aircraft; and Mitsubishi Heavy Industries, which serves as the prime contractor for the Japan–UK–Italy joint development program. The Japan Steel Works' initiatives involving next-generation technologies such as railguns are also introduced. Defense equipment contract awards in fiscal 2024 totaled ¥1.4567 trillion, while the defense budget for fiscal 2025 reached approximately ¥8.7 trillion. Efforts continue toward a target of defense spending equivalent to 2% of GDP.
The latest themes include stocks related to the Golden Dome concept, unmanned aircraft, railguns, space defense and cyber defense. Defense-related opportunities are also expanding to small and mid-cap stocks such as SHIFT and Rikei. SHIFT has established a consulting business focused on entering the defense industry, and is reported to be supporting Japan-made defense technology. Rikei is increasing sales of electronic components and equipment to the Ministry of Defense. Government measures include increased defense spending and the easing of the Three Principles on Transfer of Defense Equipment and Technology.
The article organizes the factors driving increased attention to defense-related stocks, including developments in Japan and overseas and the government's response. As an example of share price movements following Takaichi Sanae (高市 早苗)'s appointment as the new party leader, it also introduces a sharp rise in Mitsubishi Heavy Industries' share price. The effectiveness of long-term investment in defense-related stocks and the use of dollar-cost averaging to diversify risk are also explained.