Japan has announced its biggest ever defence budget in response to China’s increasing military influence in the region and Beijing’s claims to a group of disputed islands administered by Tokyo.

The 4.98 trillion yen (US$ 42bn) budget approved by the cabinet on Wednesday is up 2% from last year and marks the third straight increase after more than a decade of cuts.

The rise is in line with Japan’s more assertive defence policy under the conservative prime minister, Shinzo Abe, as he seeks to counter Chinese influence and remove the postwar legal shackles from his country’s military.

This year Abe is expected to push for legislation to reinterpret Japan’s constitution to allow Japanese troops to fight alongside allies on foreign soil for the first time since the end of the second world war. The move has been welcomed in Washington, which wants Japan to play a bigger role in the bilateral security alliance.

At US$112.2bn, China’s defence budget dwarfs that of Japan. China is second only to the US, which spent US$600.4bn on defence in 2013, while Japan ranked seventh, according to the International Institute of Strategic Studies in London.

Much of the military hardware included in Japan’s new budget is designed to monitor outlying territories and repel any attempt to invade island chains in the East China Sea.

It includes money for 20 P-1 maritime surveillance aircraft, six F-35 fighters, five Osprey planes that double as helicopters, Global Hawk drones, two Aegis radar-equipped destroyers and a missile defence system to be jointly developed with the US.

The defence ministry also plans to buy 30 amphibious assault vehicles and an early-warning aircraft that will patrol islands in southern Japan.

The defence minister, Gen Nakatani, said extra defence spending was a response to the “changing situation” in the region – a clear reference to repeated incursions by Chinese surveillance ships in waters near the Senkakus.

“The level of defence spending reflects the amount necessary to protect Japan’s air, sea and land, and guard the lives and property of our citizens,” Nakatani said, adding that Chinese planes had flown “abnormally close” to Japanese aircraft.

“The real question is whether increased defence spending is the most effective way to respond to the rise of China,” which boosted military spending by 12 percent last year, said Koichi Nakano, a politics professor at Sophia University in Tokyo.

“Japan is an ageing, mature economy with already huge public debt. China’s GDP is double that of Japan’s, and its population is 10 times bigger, Nakano said.

“Beefing up military deterrence is going to be only part of the solution. Diplomatic efforts to lower tensions are at least as important, if not more so. Quite simply, Japan cannot afford to get into an arms race with China.”

With an eye clearly on the risk of an invasion of one of its outlying islands, including the Senkaku chain, Japan has been developing its own version of the US marine corps, as well as acquiring more amphibious assault vehicles.

But some analysts say Abe’s defensive plans are not just in response to China’s increasingly assertive behaviour in the East China sea.

Tokyo is also concerned about North Korea’s nuclear weapons programme, protecting sea lanes and shifting its priorities from the Cold War focus on its northernmost region to maritime threats further south, said Jun Okumura, a visiting scholar at the Meiji Institute for Global Affairs in Tokyo.

“That said, China’s increasingly assertive behaviour in the East China Sea and air space, plus, of course, its overtly hostile actions against the Philippines and Vietnam certainly have a major influence on the direction of Japan’s military spending, the thrust of its military doctrine and its approach to security alliances,” Okumura said.

Tensions between Japan and China would continue as long as Beijing refuses to observe international law, said Tetsuo Kotani, a senior fellow at the Japan Institute of International Affairs.

“China does not acknowledge freedom of navigation and overflight for foreign militaries, while at the same time it is threatening other countries’ territorial waters and airspace,” Kotani said. “Unless China respects international law and rules, these crises will continue.”

Justin McCurry in Tokyo