Japan’s role in regional defense procurement has steadily expanded since 2014—an effort that has fostered closer ties with nations wary of Beijing’s military presence and boosted domestic industry prospects.
Last week, Japan’s Ministry of Defense and Technical Research and Development Institute (TRID) presented the first prototype of the X-2 Shinshin, the first stealth fighter manufactured in Japan. Created by Mitsubishi Heavy Industries, the new prototype represents a pivotal development for the Japanese defense industry—which is seeking to employ a new generation of jet fighters by the 2028. The strategic and economic importance of the X-2 is clear; Japan is now one of only four powers (alongside China, Russia, and the US) to acquire and develop its own stealth jet.
Since Prime Minister Abe has was re-elected in 2012, his agenda has been characterized by a precise desire to reshape Japan’s security policy and forge Japan as responsible stakeholder in the promotion of the peace and international cooperation. In 2014, the administration passed new guidelines that scaled back self-imposed restrictions on weapon exportation and technology transfer. Now, with these decades-old policies removed, Japan’s domestic defense industry is poised to prosper.
With Beijing’s growing military presence in the region stoking tensions, and with the rising nuclear threat represented by North Korea’s unpredictable behavior, boosting Japan’s capacity for self-defense is an imperative for Tokyo. Though China has condemned Japan’s new series of strategic initiatives as a revival of militarism, the administration remains determined to build security partnerships and expand arms exports with countries wary of Chinese military potential—foremost of which being Southeast Asian nations.
To meet these ends, Japan has begun collaborating in shared weapon development with countries such as Australia, France, Great Britain and the US. In 2015, the Ministry of defense established the Acquisition, Technology and Logistic Agency (ATLA)—a body intended to supervise and promote international cooperation on defense procurement and expand Japanese military production. The normalization of Tokyo’s security policy relies on increasing strategic engagement with allies and new partners alike, and the growth of the Japanese defense industry is at the core of the national strategy therein.
Procurement and ‘Japan Inc.’
After nearly 50 years of exclusion from the weapons export market, some of the largest and most iconic Japanese companies—including Mitsubishi, Kawasaki, Hitachi and Toshiba—are now keen to secure positions in the world’s most profitable market: military hardware.
Japanese conglomerates have supplied a large variety of equipment to the nation’s Self-Defense Forces which, since the lift of the ban of the weapon exportation, have still remained their only customer. To stimulate domestic interest, Japan inaugurated its first international defense industry trade fair—known as MAST—for corporate and military leaders to forge networks and discuss the role of Japan in the global defense procurement market.
The administration’s efforts have thus clearly had an important role in promoting the level of sophistication of its military technologies. Recognizing that competition is fierce, PM Abe is now capitalizing further on this progress by offering financial aid, credit guarantees, also lowering the interest rates on loans for developing countries seeking affordable solutions a modern defense capability. So long as Abe is in power, Tokyo will continue to shape defense export policy not only as a valuable incentive to strengthen its industrial base, but also a key element in a new strategic approach to counter Beijing’s regional influence.
This effort, however, is not without challenges. Despite Tokyo’s efforts to build its reputation in the defense procurement, Japan recently lost a $50 billion opportunity to supply Australia with a dozen submarines. While this missed opportunity has represented a setback for the Japan defense industry, the pursuit of new deals and a wider engagement of regional partners interested in acquiring military hardware will remain a top priority for Abe Administration—and a potential opportunity for investors. In turn, Japan will continue to rise as a strategic partner in opposing China’s growing influence in the region.