Japan’s Defense Industrial Base

Obstacles and Opportunities for Growth

Japan faces a major turning point for the future of its defense industrial base. For the nation and its companies, threats are rising, income is falling, and reliance on imported products and systems is deepening.

In a survey of the global Top 100 Defense Companies by Defense News in the U.S., where 6-8 Japanese companies are usually listed year after year, there was only one in 2020. Concerns are rising that Japan will not be able to sustain its industrial capacity without specific reforms and a shift in public opinion.    

For decades, the defense industry has focused on licensed production of foreign equipment and procurement of indigenously developed systems. A long-standing ban on exports kept the defense industrial/technology base sheltered from interaction and foreign competition.

Thus far, the new Principles for export policy published in 2014 have had little impact. Inefficient, high-cost, acquisition of capabilities for Japan’s Self Defense Forces was accommodated when the regional security situation was relatively stable. This strategy is no longer viable.

Regional security is more challenging, with substantial investments in advanced defense capabilities by neighboring countries. Limited defense budgets, more imports of leading-edge defense systems, and continued isolation of Japan’s defense industry from the international defense community has steadily eroded its capabilities.

Smaller suppliers cannot find work, and even some larger suppliers are withdrawing from defense. The defense industry remains rooted predominantly as small parts of very substantial companies who by default do not see investment in defense products or associated exports as a priority. 

What can be done?

Inaction will lead to ever greater dependence on imported systems, and further decline in Japan’s capability. Some challenges may have internal solutions; rationalization among suppliers and a need to attract commercial suppliers; restructuring through mergers and acquisition, new consortiums and national champions, inward investment from international defense companies, together with options for external defense investment, may be necessary.

The biggest challenges are international. A strong competitive defense industry must effectively engage the outside world. Government of Japan policy and regulation, particularly in information security and transfer, must support such efforts. Export strategies, not just revised policy, must encourage joint programs and Japanese industry investments overseas. Japanese companies must become players in the global community.

This webinar is intended to be the first in a series of events that will address problems facing Japan’s defense industrial base and possible solutions.

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