The Guardian report, and FWIW the original full Q&A below, with one comma and two words (in brackets) added to remove ambiguity and one word altered (in brackets) to satisfy Word watchdog.
1. How significant a factor is China, the Senkaku dispute, in today's record-high defence budget?
China is not the only factor driving the level of Japanese defense spending—North Korea, sea lane protection, are serious concerns as well—and the post-Cold War shift in the emphasis away from protection against land invasion and the north to oceanic threats (both in the near abroad and beyond) and the south began long ago. But the tensions around the Senkaku Islands and more broadly in the East China Sea certainly helps the Abe administration justify the level and substance of defense spending as laid out in the current five-year defense spending plan issued in December 2013.
2. In the sense that China is spending three times as much as Japan on defence, lacks transparency, etc., would it be possible to say that Japanese anxiety over territory, particularly outlying islands, is understandable?
That, China’s increasingly assertive behavior in the East China Sea and air space, plus, of course, China’s 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.
3. How will Japan's year-on-year defence budget rises affect relations between the two countries in, say, the coming year?
Not at all. The Chinese authorities, media and netizens will register a modest protest, but Beijing will move on. Remember, the year-on-year increase was determined in December 2013 as a key feature of the current five-year defense plan.
4. Should we be more worried about political changes - such as lifting the ban on collective self-defence, etc - than modest rises in arms spending? If so, why?
It depends on who you mean by “we.” If by “we” you mean “Japanese citizens,” yes, collective self-defense raises theoretical concerns over some future administration causing Japan to be entangled in ill-advised and/or ill-executed wars (Vietnam, Afghanistan, Iraq…). However, the ruling coalition includes the pacifist Komeito, which has an unbreakable hold on the electoral fortunes of the LDP[, which] makes sure that any definition of collective defense will be severely limited. So perhaps the worrying should go the other way.
“We” as the Chinese have more reason to be concerned, since collective self-defense and joint weapons programs embed Japan more deeply into the international security system led by the United States. That should be of far greater concern to China than a few percentage points one way or another in the Japanese defense program. Remember, China does not have national security allies. (It’s growing relationship with Russia is strictly a marriage of convenience.)
5. How significant is this recent deal on a crisis management between China and Japan to prevent an escalation of tensions, and possible conflict, around the Senkakus?
Yes and no. Yes, it surely helps improve the overall bilateral relationship, which is positive in resolving or alleviating the effects of any incident. But remember that most of the incidents in the East China Sea—all [the incidents] in the Senkaku waters and air space if I recall correctly—have involved non-military surveillance and/or policing authorities. Indeed, with a consultation/communication channel in place, the PLA Navy and Air Force might become friskier, as they see the risk of escalation diminished.