Alexandru Arba
Research expert covering Japan
Defense industry in Japan - statistics & facts
Following defeat in WW2 and subsequent U.S. occupation, Japan renounced waging war as a means of settling international disputes and also possessing weapons such as missiles and nuclear warheads purely used for offensive attacks. However, Japan retains military forces for defensive purposes called the Self Defense Forces (SDF). Most of the military equipment of the SDF is manufactured domestically by conglomerates such as Mitsubishi Heavy Industries. The rest of the technology and equipment is purchased from the U.S. via Foreign Military Sales.
While Japan’s defense manufacturing industry is sizable, its scope is limited and well-defined. Barring a few exceptions, Japan has not exported any military technology or equipment until now, which means that the demand is purely domestic. Hence, the defense budget determines much of the market size of defense manufacturing.
The new Medium Term Defense Program planned for the next five-year period (FY 2023-2027) promises to alleviate the situation as the government pledges to considerably increase defense spending. This shows a change of course regarding defense-related investments, as the government backs down from its former commitment to keep defense spending under one percent of Japan’s GDP. The new Medium Term Defense Program is intended to strengthen Japan’s defensive capabilities in every aspect. The increased defense budget is also expected to invigorate the defense manufacturing industry and stop defense equipment providers from turning their backs on the industry.
However, with advancements in technology, new challenges loom on the horizon. The new frontiers that warrant concern for national security include outer space, cyberspace, artificial intelligence, quantum computing, electromagnetic equipment, and 3D printing. The advent of these new frontiers has led to the realization that civilian and military-use technologies are increasingly difficult to separate. The landscape of the defense manufacturing industry is complex and rapidly changing as technology plays a more pivotal role than ever, and cooperation with civilian entities becomes necessary.
New Medium Term Defense Program
The problem of financing state-of-the-art technology and equipment manufacturing with limited demand is a persistent characteristic of the industry. Although the largest players in the industry take contract orders worth billions of Japanese yen, reported profits are low or non-existent. Purchases from Foreign Military Sales further exacerbate the situation for domestic suppliers.The new Medium Term Defense Program planned for the next five-year period (FY 2023-2027) promises to alleviate the situation as the government pledges to considerably increase defense spending. This shows a change of course regarding defense-related investments, as the government backs down from its former commitment to keep defense spending under one percent of Japan’s GDP. The new Medium Term Defense Program is intended to strengthen Japan’s defensive capabilities in every aspect. The increased defense budget is also expected to invigorate the defense manufacturing industry and stop defense equipment providers from turning their backs on the industry.
The future of defense manufacturing
The question of financial sustainability is one factor shaping the future of defense manufacturing. Increasing the defense budget certainly incentivizes companies to keep being involved and possibly rely more on and expand their hitherto low defense-related profit segments. As of now, much of the investment of the current (and next) Medium Term Defense Program is spent on conventional warfare equipment (land-, water-, and air-based machinery).However, with advancements in technology, new challenges loom on the horizon. The new frontiers that warrant concern for national security include outer space, cyberspace, artificial intelligence, quantum computing, electromagnetic equipment, and 3D printing. The advent of these new frontiers has led to the realization that civilian and military-use technologies are increasingly difficult to separate. The landscape of the defense manufacturing industry is complex and rapidly changing as technology plays a more pivotal role than ever, and cooperation with civilian entities becomes necessary.
