The local defense industry, which supplies most of the supplies to the Japan Self-Defense Forces (JSDF), is shrinking as companies find it increasingly difficult to develop and manufacture military products in an economically viable way.
Largely limited by current official state policy, export sales of defense systems are not possible, and their only customer base is the Japanese Self-Defense Forces. Faced with the increased cost of developing and producing items with strictly military use, the number of systems required and ordered by the Japan Self-Defense Forces alone is simply not enough to support a favorable business model.
As a result, it is increasingly difficult for industry leaders to justify participation in the Japanese defense market. Given the limited number of markets and profit margins, there are fewer companies willing to commit resources. Since it is also a policy goal of achieving a high degree of self-sufficiency in defense equipment, it creates a potential dilemma by reducing industry benefits and resulting in higher potential system costs. Officials worry that the trend threatens Japan’s security and the sustainability of its defense industry.
Defense experts recognize that a key step in retaining existing defense operations and attracting more players is to increase the attractiveness of the defense sector by increasing the size of the addressable market.
For example, given the limited demand for machine guns, tanks, missiles, radars, warships, and fighter jets by the Japanese Self-Defense Forces, the obvious way to expand the market is through exports. Given the level of capability and combination of state-of-the-art technology of many military systems developed by Japanese industry, they can compete with other current candidates.
Examples include the Kawasaki family of precision ground-launched missiles, Mitsubishi and Toshiba air defense and anti-ship missiles, and Mitsubishi F-2 and Kawasaki transport and trainer aircraft.
Defence equipment and technology transfer agreements have been signed with Australia, India, the UK and nine other countries, with others just signed earlier this year with the US and Thailand. Still only one Radar was sold to the Philippines.
As a result, the sources said that opportunities to expand exports in certain defense categories are being considered as part of a new national security strategy that establishes the country’s long-term security and foreign policy guidelines. Measures to support the strengthening of state support for the defence industry are being discussed. It may be limited to “defensive capabilities” similar to German policy.
Even so, it would be a shift in defense export policy over the past few decades. However, many see this change as critical to the survival of Japan’s defense industry and a key aspect of addressing current security challenges.
Stephen W. Miller
