Rising Geopolitical Risks Spur Gains in Japan and South Korean Defense Stocks

By Kwanwoo Jun

Defense names in Japan and South Korea rallied Monday on expectations for a rise in demand for military equipment after U.S. action in Venezuela over the weekend raised the spectre of more geopolitical risks.

Shares in Mitsubishi Heavy Industries, a top Japanese defense contractor making a wide range of military equipment, surged 9.2% to 4,193 yen, equivalent to $26.74, in afternoon Tokyo trading, outperforming the benchmark Nikkei Stock Average's 2.6% gain. Shares of another local defense company, Kawasaki Heavy Industries, also climbed 6.6% to 11,065 yen.

Japanese defense-related stocks were higher as the U.S. military operation in Venezuela renewed expectations for greater defense spending, said Tomoichiro Kubota, senior market analyst at Matsui Securities.

In a surprise weekend military raid on Caracas, U.S. forces captured and brought Venezuelan President Nicolás Maduro to New York. The ousted Venezuelan leader is slated to appear in a Manhattan federal court on Monday, facing charges related to cocaine trafficking.

Separately, President Trump threatened Colombia over its alleged role in drug flows.

Reiterating that the U.S. is now in control of the oil-rich Venezuela, Trump also said that Cuba is ready to fall as it is getting no further oil from Venezuela.

The developments in Latin America highlight the ever-growing security and defense needs globally, with geopolitical risks already heightened by the prolonged Russia-Ukraine war in Europe, as well as the continuing Middle East conflicts.

In South Korea, aircraft-engine and howitzer maker Hanwha Aerospace shares rose as much as 6.2% to 1,005,000 won while fighter-jet manufacturer Korea Aerospace Industries gained as much as 6.8% to 124,700 won in Seoul trading.

Seoul-based Kiwoom Securities analyst S.J. Park said Monday that Hanwha Aerospace led the local defense stocks' gains because of continued market expectations for the company to secure solid new contract wins from Poland and Middle East countries in dire need of self-propelled K9 howitzers, surface-to-air missiles, and armored vehicles.

South Korea's defense industry is expected to continue solid growth in 2026 on brisk demand after securing more than $15 billion in new orders in 2025, Eugene Investment & Securities analyst S.Y. Yang said in a research note.

Kosaku Narioka contributed to this article.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com

(END) Dow Jones Newswires

January 05, 2026 01:07 ET (06:07 GMT)