DN - Defence Notes

Japanese exporters slowly gear up

1st December 2015 - 03:12 GMT | by Gordon Arthur in Hong Kong

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Japanese defence manufacturers are slowly appearing on the international stage as companies take advantage of a loosening of the country’s tight regulations regarding military sales.

In December 2011 the Japanese government introduced a first round of eased export restrictions, followed by another in April 2014. In doing so Prime Minister Shinzo Abe overturned the long-standing and self-imposed policy of the Three Principles on Arms Export. 

Renamed the Three Principles on Defence Equipment Transfers, these new rules allow greater technical cooperation with overseas companies, as well as direct sales of equipment that contribute to global peace and serve Japanese security interests.

At October’s Pacific 2015 exhibition in Sydney, for example, Mitsubishi Heavy Industries headlined a marketing push for Soryu-class submarines and other warships. At the Defence & Security 2015 show in Bangkok last month, Japanese companies such as Kawasaki were out in force.

Japan’s defence industry is clearly uncompetitive and pricey, stymied by small production runs solely for the Japan Self-Defence Force (JSDF). Furthermore, companies often have to keep production lines open even though a handful of examples are purchased each year through typically single-year, fixed-price purchases.

Japan also prefers indigenous manufacture for the JSDF, even if this involves licenced production, which always inflates costs. Japan has opted for this avenue with the F-35 fighter, for example.

Exports are thus an attractive way for companies to boost production runs and lower overall unit costs. At the same time, the Japanese Ministry of Defence (MoD) is beginning to order equipment in bulk via long-term contracts to lowers costs. As an example, 20 P-1 maritime patrol aircraft were ordered under the FY2015 budget.

Australia’s interest in cooperating with Japan for its Sea 1000 submarine requirement is a giant opportunity for Japan. However, this comes with risk, as Japan has never shared such technology with an overseas client before, unlike the other submarine-building contenders DCNS and ThyssenKrupp.

With Abe visiting India later this month, there is speculation a deal could be concluded on the sale and local production of ShinMaywa US-2 amphibian aircraft. Japan was also hopeful of selling the P-1 aircraft to the UK, but this ambition was dashed last month when the latter plumped for the Boeing P-8.

A new organisation – the Acquisition, Technology and Logistics Agency (ATLA) – was authorised on 17 June to oversee Japan’s military imports, exports, and research and development. ATLA commenced operations on 1 October 2015 with a staff of 1,800+ controlling around a third of the MoD’s budget, and one of its mandates is to boost defence exports.

However, ATLA faces stern challenges as disparate procurement bureaus are combined together under one roof for the first time, and as the agency charts a course to boost defence exports for the first time.

Japan is intensely interested in security challenges in its own backyard, and it has taken special interest in helping the Philippines and Vietnam as they face Chinese territorial aggression in the South China Sea.

For example, Japan Marine United (JMU) is constructing ten 44m patrol boats for the Philippine Coast Guard after a contract was signed in June. In addition, Japan is currently mulling the transfer of second-hand TC-90 twin-engine turboprop aircraft to the Philippine Air Force.

Given Japan’s longstanding pacifist stance, we will not see a rush of arms exports. Companies seem set to gradually ease themselves into overseas markets, with dual-use products an obvious way to do so as companies and the Japanese public adjust to a new military-industrial complex emerging in one of the most technologically sophisticated countries in the world.

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