Inside Japan’s invisible army

August 5, 2013, 2:19 PM UTC
Coming out.

FORTUNE — On paper, Japan is a pacifist nation. It ranks 6th on the Global Peace Index, a list tabulated by peace activists at Vision of Humanity. Japan’s constitution makes illegal a traditional standing army. But a recently published defense white paper shows the extent to which the country has one of the most well-equipped “invisible” armies in the world.

Japan’s armed forces are euphemistically dubbed the “Self Defense Force” (SDF) — officially it’s an extension of the police.

But with the world’s 6th best-equipped troops and a nearly $60 billion defense budget last year, the SDF is not composed of your average beat cops. “Japan enjoyed an isolationist status until now,” says Narushige Michishita, a past adviser to Tokyo on defense and now director of the security and international program at Tokyo’s National Graduate Institute for Policy Studies. “It was very convenient; we didn’t have to get involved in conflicts. But now the U.S. wants Japan to be more proactive,” he says.

Japan’s ruling party, the LDP, acknowledge this. “They know we have to be commensurate with our stature as an economic superpower,” he adds. “The U.S. is asking us to be more proactive in, not rearming, but making use of those arms.”

Now that the LDP’s conservatives are returned to power, including their hawkish prime minister Shinzo Abe, they are demanding a change in the pacifist constitution which would chime in nicely with the U.S.’s desires in the region. Not that Japan is truly pacifist, or ever has been — not with one of the best-trained forces in the word says Michishita. “We are not pacifist in that sense. We supported all the U.S. wars, contributing $13 billion to the Gulf war. Japan isn’t remilitarizing — we are already there.”

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What the U.S. and the new rulers in Tokyo want is a Japan willing to fight as part of a pivot away from Europe toward Asia, by which they mean China.

Prime minister Abe will have little trouble with such a containment policy, promising a “stronger” Japan in the face of “harassment” from China over a territorial dispute near Chinese waters. He also wants Japan’s military to be able to fight alongside its allies. Something the current constitution, written by the US after WWII, prohibits.

The U.S.’s posture rebalancing, or “pivot” toward the Asia-Pacific region, was flagged up by President Obama’s extraordinarily lengthy tete-a-tete with the Chinese premiere recently. Behind the smiles are deep anxieties over China’s rising economic and military strength that challenge U.S. power in the Pacific. Obama had also personally urged Xi Jinping to “de-escalate, not escalate” tensions over territorial disputes with Japan.

The U.S. is content to have Japan, with an active military larger than the U.K.’s, prepared more readily to fight in its corner should Xi not heed the President. “Japan is truly essential, as both a strategic outpost for the U.S. military and customer for the U.S., as well as a strategic actor in its own right,” says Corey Wallace, lecturer at the University of Auckland on Asia-Pacific international relations and a Japanese military technology expert.

A properly remilitarized Japan might also help the nation out of its current economic hole. Japan last year eased its self-imposed ban on arms exports. This end of pacifist foreign policy opens up new markets for its defense contractors — good news for struggling military tech sector giants such as Mitsubishi Heavy Industries and Ishikawajima-Harima. For decades they had allegedly relied on bill‑padding and overcharging. Exports could be a new lifeline.

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Already Australia and Vietnam have voiced an interest in purchasing some of Japan’s more advanced military technology. The country’s submarines are especially admired, says Wallace, and will be particularly appropriate for the types of contingencies we are likely to see in the Western Pacific. Small skirmishes, not nuclear war. “Japan’s most recent diesel-electric E submarine, the Soryu, is considered one of the best non-nuclear submarine systems around,” he says.

Japan has a taste for pricey defense hardware which shows in its high-spec armaments. Typical are the Japanese first-class destroyers, with the latest advanced technology developed combat system (ATECS) that spent 20 years in domestic development. Add to this the knowledge that Japan could be nuclear capable given six months (something a few believe it has secretly achieved already) should its rulers wish it.  Japan could quickly become one of the top military powers in the world. All it would take for the planet’s third-richest nation is to stick its collective head above the parapet and cease being, well, invisible.