GLOBAL DEFENSE MARKET
Japan Eyes Exporting Weapons Overseas (UPDATED)
In 1967 Japan banned the sale of weapons and defense equipment to other nations under its policy referred to as the “three principles on arms exports.” These principles shaped the country’s defense posture for decades until Prime Minister Shinzo Abe relaxed them in 2014, allowing for defense exports that increase national security and international cooperation. The new policy also permitted the joint development and production of defense equipment with allies.
While this revision is a momentous shift from Japan’s post-World War II pacifism, there are still hurdles that the Abe administration needs to overcome. In May, his cabinet approved a legislative package of national security bills. The bills would allow Japan’s self-defense forces to aid the United States if it came under attack, among other changes. Abe has to convince a divided Japanese public and the Diet — the country’s parliament, which is currently debating the legislation — that the changes are the right course of action for the nation.
The reputation risk that many large Japanese businesses face is another hurdle that the Japan-U.S. military alliance will encounter, said a panel of experts during a forum at the Carnegie Endowment for International Peace, a Washington, D.C. think tank.
Most Japanese companies that participate in the production of defense equipment belong to large corporations where the sale of such technology only comprises about 10 percent, or in some cases as little as 3 percent, of total revenue, said Masao Akiyama, vice president and general manager of aerospace and defense systems at IHI Inc., a wholly-owned New York-based subsidiary of Japanese company, IHI Corporation. IHI Inc. manufactures a range of products including defense equipment.
In comparison, almost 90 percent of Lockheed Martin’s total revenue comes from defense-related equipment and weapon systems, according to its 2014 annual report.
“The difference is here in D.C. if you watch TV you see Northrop Grumman or Boeing or Lockheed or [the] U.S. Army in commercials,” Akiyama said. That doesn’t happen in Japan. Companies don’t want citizens knowing they are in the defense business, he said. That is especially true if the equipment has offensive capabilities, he added.
The Japanese government recently gave its defense industry permission to bid on an Australian submarine contract, which is a significant milestone for the country, said James Schoff, a senior associate in Carnegie’s Asia program. Even so, the risk of being linked with this type of deal initially kept companies like Mitsubishi Heavy Industries and Kawasaki Heavy Industries from attending industry days hosted by Australia to discuss its submarine program, he said.
In order for Japanese businesses to commit to the international defense business, they need to be confident in the policy environment, said Yoichi Iida, director of the aerospace and defense industry division at Japan’s Ministry of Economy, Trade and Industry. The United States and Japan need to develop a long-term research-and-development plan as well as a foreseeable production program, Iida said.
Other policy challenges include Japanese rules for third-party transfers, clarified export guidelines, legislation to guarantee a reliable supply chain and new rules to protect Japan’s technological security, according to a Carnegie report written by Schoff titled, “Navigating a New U.S.-Japan Defense Technology Frontier.”
To address these issues, Japan is establishing an acquisition technology and logistics agency under the minister of defense, which will be fully operational this fall, the report said.
Correction: A previous version of this story incorrectly stated that the Abe cabinet proposed a constitutional amendment.