The World Begins Paying a "Crisis Premium" — The Reality of the $2.89 Trillion Military Spending Era

The world is investing in "security" on an unprecedented scale.

According to the latest data released by the Stockholm International Peace Research Institute (SIPRI) in Sweden, global military spending in 2025 reached $2.887 trillion, a real increase of 2.9% from the previous year. This marks the 11th consecutive year of increase in global military expenditure, setting a new record confirmed by SIPRI.

At first glance, the growth rate seems to have slowed compared to the sharp increase in 2024. However, this interpretation should be approached with caution. The main factor that restrained the overall global growth was the temporary decrease in the United States, the largest military spender. Excluding the U.S., global military spending has actually increased significantly. In other words, the fervor for military expansion has not cooled. Rather, it is spreading more widely and deeply across regions.

SIPRI's announcement indicates more than just an "increase in defense budgets." War, alliance distrust, geopolitical tensions, economic sanctions, inflation, technological competition, nuclear deterrence, drone warfare, and missile defense are all intertwined, driving countries with the mindset that they must "prepare for the worst."

In other words, the world is now beginning to pay a premium for crises. However, this premium is exceedingly high, and paying it does not necessarily increase security.

The U.S. Has Decreased, But the Trend of Military Expansion Continues

The most notable aspect of the 2025 military spending is that U.S. expenditure decreased by 7.5% from the previous year. The U.S. remains the world's largest military spender, with expenditures reaching $954 billion. The primary reason for the decrease was the lack of approval for new financial military aid to Ukraine in 2025.

In recent years, U.S. support for Ukraine has been a major factor driving up overall military spending. With the halt in new approvals, U.S. spending temporarily decreased in numerical terms.

However, it is premature to view this as U.S. "disarmament." SIPRI points out that the U.S. continues to invest in both nuclear and conventional forces. Maintaining superiority in the Western Hemisphere and strengthening deterrence in the Indo-Pacific with China in mind are central to U.S. security strategy. Furthermore, military spending approved by the U.S. Congress could again exceed $1 trillion from 2026 onwards.

In other words, the decrease in U.S. spending in 2025 is more akin to a temporary numerical change due to the handling of Ukraine support rather than a structural shift. The strengthening of U.S. military capabilities has not stopped.

This point is crucial when considering global military expansion. When the U.S. reduces some foreign support, allies think they must "prepare on their own." When the U.S. continues to invest in its own armaments, rival and neighboring countries also respond. Whether the U.S. increases or decreases, it can be a reason for other countries to increase their military spending. In the current international order, U.S. actions significantly influence the security decisions of other countries.

Europe Becomes the Main Player in Military Spending Increase

The largest region driving up global military spending in 2025 was Europe. European military spending reached $864 billion, a 14% increase from the previous year. The background includes the prolonged Russian invasion of Ukraine, Ukraine's wartime expenditures, and the accelerated rearmament by European NATO member countries.

For Europe, the war in Ukraine is not a distant regional conflict. It is a war of attrition continuing on the eastern side of the continent and a fundamental event that raises the question, "Will the U.S. continue to be involved in European defense?"

Many European countries have relied significantly on U.S. military power and the NATO framework for security. However, amid U.S. political fluctuations, fatigue from foreign involvement, a focus on Asia, and demands for increased burdens on allies, the perception that "the U.S. may not always protect us to the end" is growing in Europe.

This psychological shift is reflected in the military spending figures.

Germany is particularly symbolic. Germany's military spending in 2025 increased by 24% from the previous year to $114 billion, making it the fourth-largest military spender in the world and the largest in Europe. Furthermore, Germany's military spending reached 2.3% of GDP, surpassing NATO's 2% target for the first time since 1990, according to SIPRI's calculations.

Post-war Germany has had a political culture cautious about becoming a military power. The fact that Germany has emerged as Europe's largest military spender is significant. This is not just about budget increases; it indicates a shift in Europe's security perspective itself.

Spain also increased its military spending by 50%, expanding significantly to $40.2 billion instead of $4.02 billion. Among NATO member countries, more are exceeding the 2% target. Given the new NATO spending targets agreed upon in 2025, European military spending is likely to remain high or even increase further.

Russia and Ukraine: War Consumes National Budgets

When discussing the increase in European military spending, the presence of Russia and Ukraine cannot be ignored.

Russia's military spending in 2025 increased by 5.9% to $190 billion, reaching 7.5% of GDP. Ukraine's situation is even more severe, with military spending increasing by 20% to $84.1 billion, amounting to 40% of GDP.

Spending 40% of GDP on the military is an unimaginable level for a peacetime national budget. For Ukraine, the survival of the nation itself is directly linked to the outcome of the war, making the increase in military spending unavoidable. However, this puts pressure on other areas that support the nation, such as education, healthcare, infrastructure, social security, and reconstruction investment.

Similarly, in Russia, the prolonged war is tilting the economic structure towards a military focus. While the defense industry creates jobs and production in the short term, it can lead to a lack of investment in the civilian sector, technological imbalances, and pressure on the lives of citizens in the long term. As long as the war continues, military spending in both countries becomes closer to "compulsion" rather than "choice."

This increase in spending by the two countries also affects neighboring countries. Poland, the Baltic states, Nordic countries, Germany, France, and the UK. The whole of Europe is reviewing its military plans while watching Russia's military power and the outcome of the war in Ukraine.

Military spending does not conclude with just one country. An increase in one country becomes a source of anxiety for its neighbors. That anxiety leads to the next increase. Spending for security can appear as a threat from another country's perspective. This is the difficulty of the arms race.

Rapid Growth in Asia and Oceania

In 2025, military spending in Asia and Oceania increased by 8.1% to $681 billion. This is the largest growth since 2009.

At the center is China. China's military spending increased by 7.4% to $336 billion, marking the 31st consecutive year of increase. China is advancing military modernization in various areas, including the navy, missiles, space, cyber, AI, drones, and electronic warfare. Its activities around Taiwan, the South China Sea, and the East China Sea significantly impact the defense policies of neighboring countries.

Japan's military spending increased by 9.7% to $62.2 billion, reaching 1.4% of GDP, the highest level since 1958. Taiwan's spending increased by 14% to $18.2 billion, with a GDP ratio of 2.1%. As the People's Liberation Army of China intensifies exercises and pressure around Taiwan, the increase in Taiwan's military spending reflects a sense of urgency in terms of security.

In Asia, not only China's rise but also North Korea's nuclear and missile development, territorial disputes in the South China Sea, tensions between India and Pakistan, and U.S.-China rivalry in the Indo-Pacific are layered risks.

Furthermore, the U.S. factor is significant here as well. Japan, South Korea, Australia, and the Philippines, among other U.S. allies and friendly countries, have long relied on U.S. deterrence as the cornerstone of their security. However, as the U.S. demands more burden from allies and its engagement posture may change depending on political circumstances, countries are compelled to strengthen their "self-help efforts."

The increase in military spending in Asia cannot be explained solely by opposition to China. It also includes the uncertainty of "how far the U.S. will be involved."

The Middle East Remains a Flashpoint Despite Stable Spending

Military spending in the Middle East was estimated at $218 billion in 2025, with only a 0.1% increase from the previous year. At first glance, it seems stable, but the regional situation has not calmed down.

Israel's military spending decreased by 4.9% to $48.3 billion. This is said to reflect the reduced intensity of the Gaza war following the ceasefire agreement with Hamas in January 2025. However, Israel's military spending remains significantly higher than in 2022.

Iran's spending decreased by 5.6% in real terms to $7.4 billion, but this is largely due to high inflation, and the nominal amount has increased. Furthermore, SIPRI points out that Iran's official statistics may underestimate actual military spending, as off-budget oil revenues may be used for missile and drone production.

Turkey's spending increased by 7.2% to $30 billion, driven by military operations in Iraq, Somalia, and Syria.

In the Middle East, it is difficult to grasp the reality by looking only at the growth rate of military spending. There are security costs outside the national budget, such as expenditures not reflected in official budgets, support for militia organizations and proxy forces, domestic weapons production, oil revenues, and sanctions evasion networks.

"Inevitability" and "Despair" Intersect on Social Media

The latest SIPRI announcement quickly garnered reactions on social media. SIPRI's official accounts on LinkedIn and X announced the new data with hashtags like "European and Asian spending surge," "military spending," "defense budget," "geopolitics," and "peace." Discussions about the significance of the numbers spread among experts, defense-related media, and users interested in international politics.

On Reddit's international news communities, reactions were largely divided into three categories.

The first is the view that "this trend will not stop." One user briefly commented that global military spending might approach $4 trillion next year. Another user pointed out that many countries have plans to increase military spending for more than a decade. These reactions reflect a sense of resignation, rather than surprise, that "this is inevitable."

The second view is that the breakdown of the international order is leading to military expansion. Comments like "If the rule-based order collapses, it's only natural for military spending to increase" were also seen. This connects to the perception that countries are beginning to feel that international law and multilateral institutions alone cannot protect them.

The third reaction is filled with irony and anger. There are voices that sarcastically comment on job creation through weapons development, the sentiment that funds should be redirected from military spending to social security and living support, and criticism that U.S. instability is prompting military expansion in other countries. On social media, voices seeing defense enhancement as a realistic necessity coexist with those expressing aversion to the arms race itself.

Interestingly, the increase in military spending is not simply criticized as "belligerent." Considering Russia's invasion, China's military pressure, and the uncertainty of U.S. alliance policy, many opinions see the increase in defense spending as unavoidable. However, there remain strong doubts about whether this makes the world safer or leads to further tension.

Social media reactions reflect the emotional temperature, unlike expert analysis. What is visible is not just surprise at the numbers. It is a complex public opinion mixed with anxiety about "whether it will continue to increase," distrust of "whether the defense industry will prosper again," and a sense of reality that "we must prepare, or it will be dangerous."

Is Military Spending Buying "Security"?

When considering the increase in military spending, there is an unavoidable question.

That question is whether military spending is truly buying security.

Of course, defense capability is necessary for a nation. For a country under invasion, military power is not an abstract concept but a condition for survival. Looking at Ukraine's reality, it is undeniable that there are situations where without armaments, a country cannot even sit at the diplomatic negotiation table.

On the other hand, an increase in military spending does not automatically bring peace closer. Military expansion heightens the vigilance of other countries. Even defensive equipment can appear as offensive capabilities from the perspective of neighboring countries. Missile defense destabilizes the opponent's nuclear deterrence, and drones and long-range precision weapons increase the fear of preemptive strikes. With the addition of AI and cyber technology, the speed of crises accelerates further.

The more military spending increases, the more room there is for miscalculation. As equipment becomes more advanced, troop deployments increase, and exercises become more frequent, the risk of accidental clashes also rises. Preparations for defense can appear as preparations for attack to the opponent. Thus, distrust accumulates.

Therefore, the increase in military spending cannot be discussed in simple binary terms of "necessary or unnecessary." How to draw the boundary between necessary defense investment and dangerous arms race competition? How to maintain transparency and crisis management while enhancing deterrence? These are the questions being asked.

Competition with Social Expenditure Becomes More Severe

Another important aspect is that military spending competes with other expenditures within the national budget.

As defense spending increases, the funds available for education, healthcare, welfare, climate measures, infrastructure, and research and development are constrained. Of course, the national budget is not a simple zero-sum game. Revenue can be secured through tax increases, government bonds, growth strategies, and spending reforms. However, in the long term, the continuous increase in military spending changes the priorities of society.

In situations like Ukraine, where 40% of GDP is spent on the military, the impact on post-war reconstruction and civilian life is unavoidable. In Russia, concentration on the defense industry could deprive the economy of flexibility. In Europe, the challenge arises of whether it can withstand significant defense spending increases while maintaining the welfare state model.

This is not a matter for Japan to ignore either. Japan is amid the increase in military spending in Asia and Oceania and is strengthening its defense capabilities. However, it also faces issues such as an aging population, social security costs, local government finances, disaster response, and energy security. If defense spending is to be increased, the purpose, effectiveness, funding sources, and priorities must be continuously explained to the public.

Military spending is not just a security policy. It is a fiscal policy, an industrial policy, and a matter of social contract.

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