December31, 2005: Japan's defense budget is currently $41.6 billion, making it the second largest on the planet. But the budget has been falling about a percent, or less, each year for the past seven years. That's because the Japanese defense budget has always been something of a public works project. This was done by paying much higher prices for military equipment (sometimes American equipment, like warplanes, which are assembled in Japan, using many more expensive Japanese made parts). In this way, the equipment cost two or three times more than the same stuff bought from the lowest cost producer (usually the United States). Japan has been rearranging it's defense spending priorities, putting more money into missile defense and the navy, and less into the ground forces.