The Ministry of Finance announced on the 4th that the total budget requests for the general account for fiscal 2027 reached a record 143.00656 trillion yen. Finance Minister Satsuki Katayama revealed this at a press conference. The requested amount exceeds the previous year, with increases in social security costs and defense spending seen as the main factors. The government plans to scrutinize the requests from each ministry and compile a draft budget by the end of the year.
Kawasaki Heavy raises fiscal 2030 defense sales target to as much as 800 billion yen
Kawasaki Heavy Industries announced on the 6th that its defense business sales revenue for fiscal 2030 is expected to rise to between 700 billion and 800 billion yen. Its previous plan called for 500 billion to 700 billion yen, and the company says the government's increased defense spending will provide a tailwind. The company held a briefing that day on the progress of its management plan, which ends in fiscal 2030, and said that due to reforms to the contract system with the Ministry of Defense, the defense business's operating profit margin is expected to exceed 10 percent from fiscal 2027 onward. It also said that, in response to changes in the nature of warfare such as the spread of unmanned equipment and artificial intelligence, it aims to lift defense business sales revenue above 1 trillion yen by the mid-2030s.
Defense & Geopolitical Fragmentation › Defense Primes — Europe & Asia ▲Demand
7012.JP · Demand · Positive Kawasaki Heavy raised its fiscal 2030 defense sales target to 700-800 billion yen, citing increased government defense spending as a tailwind.
Mitsubishi Heavy to spend about 100 billion yen on Shimonoseki artificial island to expand shipbuilding capacity
Mitsubishi Heavy Industries announced on the 2nd that it has acquired an artificial island developed by Shimonoseki City, Yamaguchi Prefecture, as industrial promotion land. Amid rising global demand for ships and backing from the Japanese government from an economic security standpoint, its subsidiary Mitsubishi Shipbuilding will invest about 100 billion yen to expand shipbuilding capacity. It will transfer part of the functions of the Shimonoseki Shipyard's Enoura Plant and build a new hull block manufacturing plant to strengthen its production system. Of the investment, it will receive up to 40 billion yen in subsidies from the government. In September, the plan was certified by the Ministry of Land, Infrastructure, Transport and Tourism as a supply assurance plan for specified critical materials, namely ship components, under the Economic Security Promotion Act.
Defense & Geopolitical Fragmentation › Naval Systems & Shipbuilding ▲Supply
Defense & Geopolitical Fragmentation › Defense Primes — Europe & Asia ▲Supply
7011.JP · Capital · Positive Mitsubishi Heavy's subsidiary will invest about 100 billion yen (with up to 40 billion yen government subsidy) to build a new hull block plant and expand shipbuilding capacity.
7011.JP · Demand · Positive The expansion responds to rising global demand for ships, strengthening its production system to capture that demand.
BofA Upgrades Dassault Aviation to Buy on Rafale Order Prospects
BofA Securities upgraded Dassault Aviation to buy from neutral and raised its price target to €360 from €345, citing the French fighter maker's long order book and potential new Rafale contracts. The target implies about 27% upside from the €284 share price cited in the report, and BofA noted the stock has fallen about 20% from its year-to-date high, creating a more attractive entry point. Dassault's Rafale backlog provides about 7.5 years of production visibility at current delivery rates, with further upside possible from India and Ukraine. India's proposed order for 114 Rafales could become a key catalyst in the fourth quarter and would be the largest export order in the aircraft's history, while Ukraine has expressed interest in acquiring up to 100 Rafales, initially ordering 16 aircraft under a July 2026 agreement with France with deliveries due to begin in 2028-29. Neither opportunity has yet become a firm contract, but BofA said that if both orders are secured, Dassault's backlog could exceed 400 aircraft, potentially extending production visibility to about 15 years at 2026 production rates. BofA also raised its 2026 earnings-per-share forecast to €16.40 from €16.30 and its 2028 forecast to €22.31 from €21.42, while cutting its 2027 estimate to €19.36 from €19.67.
JPMorgan Names BAE, Leonardo, Babcock Top European Defence Picks for Q4 2026
JPMorgan said in a note Wednesday that European defense investors are favoring companies with long-duration order books and hard-to-replace products, while marking down those whose technology could be displaced. The European defense sector has underperformed local markets by about 6% this year on average, though with wide variation between individual stocks, analyst David Perry noted. JPMorgan rates BAE Systems, Leonardo and Babcock Overweight, saying all three have those defensive characteristics, while investors have significantly de-rated companies such as Rheinmetall, CSG and Renk on fears their technology could be displaced. JPMorgan placed MTU Aero Engines and Leonardo on Positive Catalyst Watch, ahead of MTU's capital markets day on Nov. 30 and Leonardo's industrial plan update in March 2027, and put Rheinmetall on Negative Catalyst Watch, saying it does not expect the company to cut its 2030 sales goal of 50 billion euros even though the bank's own forecast is 36.9 billion euros. Perry said the debate over technology displacement is complex and the answer will not be clear for many years, making investor events at Rheinmetall on Nov. 27 and Renk on Dec. 8 important, and added that Rolls-Royce and Safran should remain strong performers over the medium term and are core holdings.
0ONG.LSE · Capital · Positive JPMorgan rates Leonardo Overweight and places it on Positive Catalyst Watch ahead of its March 2027 industrial plan update.
BA.LSE · Capital · Positive JPMorgan names BAE Systems an Overweight top European defense pick, citing its long-duration order book and hard-to-replace products.
BAB.LSE · Capital · Positive JPMorgan rates Babcock Overweight as one of its top European defense picks for Q4 2026.
R3NK.XETRA · Competition · Negative JPMorgan says investors de-rated Renk on fears its technology could be displaced, and flags its Dec. 8 investor event as key to a complex displacement debate.
RHM.XETRA · Capital · Negative JPMorgan placed Rheinmetall on Negative Catalyst Watch, doubting it will cut its 2030 sales goal of 50 billion euros versus the bank's 36.9 billion euro forecast.
MTX.XETRA · Capital · Positive JPMorgan places MTU Aero Engines on Positive Catalyst Watch ahead of its Nov. 30 capital markets day.
Trump denies Axios report on easing Iran sanctions in exchange for nuclear deal
US President Donald Trump has denied an Axios report stating that his administration had offered to ease sanctions on Iran, including allowing access to frozen funds, in exchange for Iran softening its stance on its nuclear program. Trump said via social media that the story was untrue and that he had offered nothing to Iran, and he called on Axios to retract the report immediately. Xinhua reported that the Axios report came after Trump rejected a ceasefire proposal put forward by the Iranian side over the past weekend. The peace deal proposed by Iran called for the United States to halt its maritime blockade of Iranian ports in the Strait of Hormuz, in exchange for Iran reopening the remaining sections of the strait and reviving negotiations over its nuclear program. Iranian Foreign Minister Abbas Araghchi said on Sunday, September 27, in response to Trump's rejection of the peace proposal, that it was up to President Trump to choose between diplomacy and continuing war, stressing that Iran was fully prepared if war were to break out again and would stand firm against any form of aggression, even if it led to an apocalyptic war.
Xi Jinping's US visit yields eight-point consensus and $30 billion in tariff cuts
President Xi Jinping's official visit to the United States from September 23 to 25 produced an announcement of eight points of consensus reached jointly with President Donald Trump, spanning strategic stability, global trade, security and technology cooperation. At the heart of the first point is the building of a constructive relationship based on mutual respect, fairness and reciprocity, while the two leaders support each other in hosting the year-end leaders' meetings, with China hosting APEC in November and the United States hosting the G20 summit in December. On the economic and trade front, working teams from both countries reached agreement to establish a trade committee, or Board of Trade, and reciprocal tariff reductions worth 30 billion dollars, alongside cooperation on law enforcement. The two sides also agreed to set up a joint consultation mechanism on artificial intelligence in November, open an emergency communication channel for AI-related incidents, and draw up a memorandum of understanding on military communications to prevent crises and reduce the risk of confrontation. The United States also welcomed two giant pandas to Zoo Atlanta.
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