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Japan: a New Player in the Global Defense Industry

The Japanese defense industry is going international while developing into a serious contender in the traditional target markets of the Israeli defense industry. Exclusive

By Elhannan Harel

In early 2013 the Japanese political system was in turmoil. Heated arguments raged at the top echelons of the ruling party as well as in the corridors of the Ministry of Foreign Affairs. Will Japan consent to the selling of Lockheed Martin's F-35 stealth fighters to Israel? Should the country that attacks targets in Syria and destroys from the air arms shipments to Hezbollah be allowed to acquire the fighter aircraft which contains some critical assemblies and components that are manufactured in Japan?

On February 4, 2013, following a heated debate, the Government of Japan authorized, extraordinarily, the sale of the stealth fighters – including their Japanese components – to Israel. The State of Israel "breathed a sigh of relief", but that was by no means a trivial matter. It was a truly revolutionary move that had far-reaching implications on the Israeli defense industry.

Back in 1967, the Japanese Government headed by Prime Minister Eisaku Satō set forth the following ironclad rules: Japan will not sell any military equipment or combat-support technology (electronics, machinery and tools, measurement equipment and so forth) to communist countries, to countries on which the UN had imposed a military embargo, to countries in a state of conflict with their neighboring countries and to countries involved in an international conflict. In 1976, this resolution became Japan's official and explicit policy – rare exceptions were made exclusively for the benefit of the USA. Since then, Japan has maintained a pacifist policy, in line with Clause 9 of its constitution – without exception.

In view of the dramatic regional changes and the rising tension in Japan's relations with China, numerous voices within Japan have been calling for a revision of Japan's national security concept. While Japan's neighbors, particularly China, interpreted this as an intensification of Japanese nationalism, in Japan they preferred to describe this trend as a reevaluation for the purpose of "Becoming actively involved in peacekeeping."

"Historic Move"

In December 2013, after China had unilaterally declared a no-fly zone (which included sections of the airspaces of Japan and South Korea), the Japanese Government, headed by the present Prime Minister, Shinzō Abe, made a substantive decision that changes Japan's national security concept. Japan undertook to increase its share in the tasks that emanate from the defense agreement with the USA, and announced that it "would adopt an active policy in view of the repeated attempts to change the regional status quo." Paradoxically, Japan – a de jure and de facto pacifist country since the end of World War II – is involved in territorial conflicts with all of its neighbors: Russia, China and South Korea.

In what came to be known as a "historic move", the Japanese Prime Minister defined his government's resolutions as decisions that would enable Japan's Self-Defense Forces (for the first time) to initiate preventive actions (namely – to be the first party using force in the context of a hostile conflict).

The Japanese Government's decision also included an increase of the military build-up budget. It should be noted that since that time, Japan's military procurement would rely primarily on local production. Even the F-35 fighters (as stated above), the future fighters of the US military, Japan and Israel, rely on a substantial percentage (40%) of Made-in-Japan components.

Proven Experience & First-Rate Capabilities

The Japanese defense industry is regarded as a highly advanced industry, possessing proven experience and first-rate technological capabilities. This industry resumed its activity in 1970, when the Director General of Japan's Defense Agency in those days, Nakasone Yasuhiro, set five new goals for the industry: to maintain an industrial base in order to secure Japan's national security; to acquire knowledge and support Japan's research and development centers; to develop an arms industry using the existing civilian industrial infrastructure; to set forth long-term development research, development and production objectives and to introduce internal competition to the defense industry.

During the first few years after resuming its activity, Japan's defense industry focused on the manufacture of tanks, artillery systems, cutting-edge naval vessels and submarines. Additionally – subject to US authorization – Japanese manufacturers were incorporated in the production lines of the most advance US-made fighter aircraft.

The total sales turnover of the Japanese defense industry is estimated at US$ 15.6 billion. The lion's share of the production output is intended for consumption by Japan's Self-Defense Forces, and a smaller share is manufactured through sub-contractor agreements for such leading US manufacturers as Boeing, Lockheed Martin and others.

Now, things have changed and when the Japanese Prime Minister goes abroad on state visits, he takes along with him the captains of the Japanese industry, who present their products to their local counterparts. Prime Minister Abe even takes the trouble to personally promote the sales of the Japanese Defense Industry.

The major players in the aerial systems category are Mitsubishi Heavy Industries, Kawasaki Heavy Industries and Fuji Heavy Industries – all of whom possess the capabilities required in order to manufacture cutting-edge fighter aircraft as well as complete missile systems.

The Japanese defense industries have production and cooperation agreements with US manufacturers. For example, Mitsubishi are engaged in production and development in cooperation with Lockheed Martin, while Fuji manufactures Apache helicopters for the Japanese Air Force. In recent months, a plan has been consolidated for close cooperation between the Japanese defense industry and the French industry, in the context of which think-tanks were established, representing the 15 major industrial corporations of Japan and France.

A committee headed by the Japanese Minister of Economics set forth cooperation procedures vis-à-vis the French industry and specified which weapon systems would be manufactured jointly (mainly in the aerial and naval categories). At the same time, a delegation from the British Ministry of Defence visited the facilities of Mitsubishi Heavy Industries to discuss the joint development of the Meteor-5 air-to-air missile system.

Serious Competitor in Traditional Markets

The most significant development (for the Israeli Defense industry, among others) has been the historic decision to allow the Japanese defense industry to sign export agreements (the only restriction imposed on the Japanese manufacturers is that no permits will be granted for exports to countries involved in a conflict).

So, the Japanese defense industry, with all of its capabilities, has evolved, by the power of a single decision, into a serious competitor of the Israeli defense industry. The first and most significant contract, on the scope of US$ 1.65 billion, was signed with India in January 2014. India (a major client of the Israeli defense industry) will acquire 15 amphibious aircraft from ShinMaywa Industries of Japan for a price of US$ 110 million per aircraft. Before the ink on this agreement has dried up, the Indian Navy announced their intention to acquire advanced patrol boats from Japan. This deal will adversely affect such traditional suppliers of India as Russia, the UK and Israel.

Israel has found itself facing a new, capable and advanced competitor in overlapping traditional theaters: Brazil, Mexico, Argentina, Chile, Canada, Singapore, the Philippines, Taiwan, Australia, Turkey and a host of other markets (Japan also exports to Indonesia, Malaysia and South Africa, where it enjoys a significant political advantage).

The Government of Israel will be well advised to initiate a staff work effort regarding the possible cooperation between the Israeli and Japanese defense industries. Israel has the defensive systems that Japan needs in view of the Chinese and North-Korean threats it faces. Additionally, Israel has the advantage of proven superiority in the field of unmanned aerial systems, which Japan needs for both the military and civilian theaters. Israel also possesses intelligence and technological capabilities in the Homeland Security (HLS) world that are second to none. The Japanese are aware of these facts, but require an Israeli (and an American) 'push' in order to make the necessary moves.


Elhannan Harel is the GM of the Harel-Hertz consulting firm that specializes in Japan, and the Honorary President of the Israel-Japan Chamber of Commerce

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