The Japanese government is planning on pumping more than $240 billion over the next five years into the country’s military. Much of the budget is expected to be spent in the United States on US-manufactured equipment and vehicles. This move not only strengthens Japan’s position in the Pacific, but also helps keep the US satisfied when it comes to trade differences. President Trump has been critical over the trade surplus the Japanese enjoy over the United States, but this new spending should narrow the gap, according to a report from Nikkei.

Much of the new budget will focus on bringing the Japanese military into compliance with NATO criteria. Although not a full member of the alliance, Japan is considered to be a “Major non-NATO ally” along with countries like Australia, New Zealand, and Israel, among others. The increased defense spending may also boost the percentage of the country’s Gross Domestic Product allocated for military expenditures, although current projects have that rate resting just above one percent.

“Major Non-NATO Ally (MNNA) Status does not entail the same mutual defense and security guarantees afforded to North Atlantic Treaty Organization (NATO) members,” writes GlobalSecurity.org. “However, designation as an MNNA represents an affirmation of the importance the US places on the relationship.”

Just as important as the actual budget, this new five-year plan also reorganizes the way the military’s funds are allocated. Under the new plan, administrative costs, such as salaries and maintenance, will be separate from acquisitional expenses, allowing Japanese military buyers more flexibility, according to a report from Reuters. Some speculate the Japanese will buy more of Lockheed Martin’s F-35, while others believe missile defense is the country’s top priority.

Despite the news, several large US defense stocks were down after Friday’s close. Lockheed Martin finished at $285.40 a share, down more than $15 from just a week ago. Boeing, Raytheon, and General Dynamics were also in the red. The trade dispute with China and uncertain relations with Saudi Arabia are also weighing on the sector, although Lockheed did sign a multi-billion dollar deal with the Gulf state in November, according to Reuters.

Japan is not only boosting military spending but is also conducting drills with other powers in the region. Currently, the Japanese Air Self-Defense Force is training with units from India’s Air Force to boost the two countries’ ability to deploy heavy-lift aircraft in the event of natural or humanitarian disasters, according to The Diplomat. This is the first such joint mission the two countries have participated in.

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