Japan's government approved a major defence policy overhaul on Friday, including a significant spending hike, as it warned China poses the "greatest strategic challenge ever" to the country's security.

In its largest defence shake-up in decades, Japan vowed to up security spending to two percent of GDP by 2027, reshape its military command, and acquire new missiles that can strike far-flung enemy launch sites.

"Fundamentally strengthening our defence capabilities is the most urgent challenge in this severe security environment," Prime Minister Fumio Kishida said last week.

Polls suggest Japan's public largely backs the shift, but the changes could still be controversial as Japan's post-World War II constitution does not officially recognise the military and limits it to nominally self-defensive capabilities.

The moves are outlined in three defence and security documents approved by the cabinet on Friday.

They describe Beijing as "the greatest strategic challenge ever to securing the peace and stability of Japan", as well as a "serious concern" for Japan and the international community.

In response, the government plans to raise its defence spending to two percent of GDP by fiscal 2027, bringing Japan in line with NATO member guidelines.

That marks a significant increase from historic spending of around one percent and has sparked criticism over how it will be financed.

The money will fund projects including the acquisition of what Japan calls "counterstrike capacity" – the ability to hit launch sites that threaten the country.

The documents warn that Japan's current missile interception systems are no longer sufficient and a "counterstrike capacity is necessary".

However, the documents also rule out preemptive strikes, and insist Japan is committed to "an exclusively defence-oriented policy".

Other changes include the establishment of a permanent joint command for Japan's armed forces as well as enhancement of the country's coastguard.

Among the documents is the National Security Strategy, which is being updated for the first time since its 2013 launch.

Its language on relations with China has hardened significantly.

The strategy document previously said Japan was seeking a "mutually beneficial strategic partnership" with Beijing, a phrase that has disappeared from this iteration.

Instead it suggests a "constructive and stable relationship" and better communication. China's foreign ministry on Friday urged Japan to "reflect on its policies".

"Japan disregards the facts, deviates from the common understandings between China and Japan and its commitment to bilateral relations, and discredits China," ministry spokesman Wang Wenbin told reporters of the new stance. (AFP)