Defence to Japan

From 2014 to 2018 the Japanese Government committed to spending just under A$300 billion on defence to build an integrated and agile defence force.

Australia is well positioned to forge new partnerships with Japanese industry to serve this large and growing market. Japan and Australia share many of the same security challenges in protecting a vast sea and airspace. The Japan Self-Defense Forces (JSDF) also operate some of the same or similar platforms as the Australian Defence Force (ADF) and are aware of the operational experience and high-level capabilities of the ADF.

Australian defence enterprises that can demonstrate a deep understanding of Japan’s capability needs and that are willing to partner with Japan’s domestic industry and local trading houses will be well positioned to take advantage of the opportunities in this market. However success will require patience, and a keen awareness of the many complexities and challenges of operating in Japan.

Austrade, working closely with the Defence Attaches Office, and having an extensive network of Japanese government and corporate defence contacts, can provide tailored introductions, advice and support to Australian companies interested in accessing this important market.

Key market drivers

Budget

Japan’s budget for defence expenditure is the eighth largest in the world and is increasing in modest increments. This increase is primarily due to an announcement in March 2017, by Prime Minister Abe ending a policy which capped government defence expenditure at 1 per cent of Gross Domestic Product (GDP).^[1] . Total expenditure on defence for the 2016/17 Japanese Financial Year (JFY) which runs from 1 April 2016 to 31 March 2017, was approximately A$55.2 billion. Japan’s yearly defence budget is published in English on the Japan Ministry of Defence website.

Policy and defence spending

The strategic drivers for Japan to spend more on defence are articulated in the foundation documents the National Security Strategy, and the National Defence Program Guidelines (NDPG) published in December 2013.

The National Security Strategy provides the guiding principles of Japan’s security and its national interests and objectives. NDPG is guided by the National Security Strategy and is roughly equivalent to Australia’s Defence White Paper in scope and intent. It has a time horizon of approximately 10 years, and it outlines Japan’s view of developments in its security situation and basic defence policy.

The NPDG concludes the security environment surrounding Japan is becoming increasingly severe, requiring Japan to ‘build a comprehensive defence architecture and strengthen its system for preventing and responding to various contingencies’.

JSDF Overview

JSDF has just under 250,000 active duty personnel and consists of three service branches: maritime, ground and air.

Japan Maritime Self-Defense Forces (JMSDF)

JMSDF operates a modern fleet of approximately 154 ships and 346 aircraft, including AEGIS equipped ballistic missile defence destroyers and the world’s second largest fleet of P-3C Orion maritime patrol aircraft.

Japan Ground Self-Defense Forces (JGSDF)

JGSDF currently has 9 active duty divisions (1 armoured, 8 infantry), and 6 active Brigades. It is currently developing an amphibious force to be named ‘Amphibious Rapid Deployment Brigade’ that will be stationed in Japan’s south.

Japan Air Self-Defense Forces (JASDF)

JASDF operates over 700 aircraft, with approximately half of these being combat aircraft (F-15 and F-2 (based on the US F-16)). The first F-35A (Joint Strike Fighter) for Japan was presented at an official roll out ceremony on September 23, 2016, the first of four F-35As built in the US. Japan’s remaining 38 F-35As for the JASDF are being assembled at the Mitsubishi Heavy Industries Final Assembly and Check Out facility in Nagoya, Japan.

Market Opportunities

JSDF has historically preferred sourcing its equipment from local Japanese industry. However Japan is now spending a higher proportion of its procurement on foreign systems, to include non-US sourced equipment.

Australian companies with experience in supplying proven, cutting-edge technologies, products and/or services to the ADF and other overseas Western militaries have the potential to be attractive in market. However factors for success in Japan include patience, thorough research of Japan’s capability requirements, investment in local partnerships and representation, and timely provision of accurate and tailored information to end users and stakeholders.

Capability build-up program and priorities

The Medium Term Defense Program (MTDP) which is in accordance with the NDPG, establishes a five-year capability build-up for the JSDF from 2014 to 2018. Just under A$300 billion (in 2013 dollars) is allocated to MTDP aimed at making JSDF a more dynamic, and flexible force, capable of responding to a range of contingencies.

MTDP’s six program guidelines for defence build-up are:

1) Emphasis on developing and strengthening the following functions and capabilities:

• Intelligence Surveillance, and Reconnaissance
• Intelligence
• Transport
• C3I (Command and Control, Communications, and Intelligence)
• Response to an attack on Japan’s remote islands
• Response to ballistic missile attacks
• Response to outer space and cyberspace threats
• Response to large-scale disasters
• International peace cooperation efforts

2. Prioritise development of capacities to ensure maritime supremacy and air superiority; development of rapid deployment capabilities, and achievement of greater efficiency and rationalisation of preparations for invasions such as landing invasions

3. Efficiently secure defence capabilities adequate both in quality and quantity

4. Promote measures to reform the personnel management system

5. Strengthen the deterrence and response capabilities of the Japan-US Alliance

6. Achieve greater efficiencies and streamline the build-up of the defence forces.

MTDP also specifies plans related to JSDF’s capabilities and the major military procurement items these plans will require, specifically:

Maritime and airspace security:

• procure new airborne early warning (and control) aircraft and fixed air defence radar; improve airborne warning and control systems (AWACS) (E-767); procure surface-to-ship guided missiles; fixed-wing patrol aircraft (P-1); procure Aegis-equipped destroyers (DDG), submarines, and patrol helicopters (SH-60K).

Response to attacks on remote islands:

• procure fighter aircraft (F-35A); replace fighter aircraft (F-15) unsuitable for modernisation with more capable fighter aircraft; procure new aerial refuelling/transport aircraft; equip transport aircraft (C-130H) with aerial refuelling capabilities; and procure rescue helicopters (UH-60J).

Improving rapid deployment and response capabilities:

• procure transport aircraft (C-2); acquire amphibious vehicles; and refit tank landing ships (LST).

Response to ballistic missile attacks:

• introduce advanced PAC-3 missiles (PAC-3 MSE); improve automated warning and control systems; procure and improve fixed air defence radar (FPS-7) systems; promote Japan-US cooperative development of advanced interceptor missiles (SM-3 Block II-A); in preparation for an attack by guerrilla or special operations forces, continue procurement of a variety of surveillance equipment, light armoured vehicles, NBC reconnaissance vehicles, etc.

Response in outer space and cyberspace:

• develop an X-Band satellite communications system.

Market Challenges

Japan has historically relied on its domestic industry to provide equipment and technology for its JSDF. Major foreign platform and system purchases are predominantly sourced from the US – the first country Japan most often looks to for new capabilities that its industry cannot produce.

In recent years, Japan has increased the purchase of foreign, including non-US sourced equipment, but also has a policy of supporting its domestic defence industrial base.

Any promotion of a foreign system or capability should be tailored to a specific Japanese defence requirement (based on analysis of NPDG and MTDP and other documents), delivered effectively in spoken Japanese and translated into Japanese. Should a proposal proceed, all documentation, negotiations and tenders for Japanese defence contracts should be conducted in Japanese language.

Austrade can provide in-depth briefings and advice to assist firms in overcoming these challenges, as well as with language, business and cultural support. We can also provide in-depth information on Japanese stakeholders and how to analyse Japanese defence needs and prepare business pitches.

Market Stakeholders

The Japanese defence market is comprised of three core stakeholders: the Japanese Government; local Japanese defence industry; and trading houses that represent foreign suppliers, and foreign defence firms.

Government

Japan’s Ministry of Defense (JMoD) was established in 2007 and is currently headed by Defence Minister Itsunori Onodera ^[2] , a member of cabinet reporting directly to Prime Minister Abe.

Acquisition and procurement programs as well as defence R&D is managed by the Acquisition, Technology and Logistics Agency (ATLA), created in October 2015 and is part of JMoD. ATLA is equivalent in functions and responsibilities to the Australian Department of Defence’s Capability and Sustainment Group and Defence Science and Technology Group combined, and is responsible for both procurement and R&D.

The equivalent to ADF Service Chiefs are Chiefs of Staff (CoS) JMSDF, JGSDF, and JASDF, who are four star officers supported by service specific staff offices (Maritime Staff Office, Ground Staff Office and Air Staff Office) who are co-located in Ministry of Defense Headquarters in Ichigaya, Tokyo. The Chief of Staff Joint Staff, currently Admiral Katsutoshi Kawano, is the most senior JSDF officer, equivalent to Australia`s Chief of Defence Force.

A civilian bureaucracy, known as the Internal Bureau, exercises policy control and influence over future capability investment decisions. There are various elements of the JMoD and higher government organisations that are stakeholders in future force design and capability requirements decisions.

JMoD submits its yearly budget request to the Japanese Ministry of Finance around November/December.

An organisational chart of the Ministry of Defense is available on the Ministry’s website

Other stakeholder ministries in Japan are:

• Ministry of Economy Trade and Industry (METI) – which provides approval and interpret policy for Japanese defence exports.
• Ministry for Internal Affairs and Communications (MIC) which judges and grants ‘qualification’ by foreign firms wishing to directly and formally bid for contracts with JMoD.
• Ministry of Finance (MOF), to which the JMoD must submit budget requests along with justifications for purchases.

Japan’s defence industry

The JJMoD’s contracts for FY2015 amounted to 1.81 trillion yen or A$20.43 billion (88.7 yen/dollar) with 6,693 items, and for FY2016 amounted to 1.84 trillion yen or A$20.74 billion (89.87yen/dollar) with 6,767 items.

The Top 20 largest Ministry of Defence contractors in FY2016, by monetary size of contract are:

Source: ATLA, Japan Ministry of Defense 2017

Trading houses

New-to-market Australian companies wishing to access Japan’s defence market are advised to contact a Japanese trading house that has an established reputation for representing foreign firms to JMoD. Japanese trading houses in the defence sector include (but are not limited to) Kanematsu, Marubeni, Mitsubishi Corporation, Mitsui & Co, Sojitz, Sumitomo Corporation, Shintoa and Itochu.

Austrade can provide tailored introductions to trading houses that have experience representing foreign firms to the Japanese Ministry of Defence.

Access to Market

Japan hosts and attends international defence exhibitions, which are a good opportunity to interact with operational end-users and procurement system stakeholders, including Japanese industry.

Over the period 5-7 March 2018, the Australian Department of Defence (DOD) and Japanese Ministry of Defense (JMOD) co-hosted their inaugural Japan-Australia Defence Industry Forum Week in Tokyo to facilitate better understanding of defence industry opportunities in the Japanese and Australian markets. Team Defence Australia (TDA) attended the forum, consisting of Australian industry clients and Australian Government officials from DOD, the Defence Science and Technology Group (DSTG), the Capability Acquisition and Sustainment Group (CASG) and the Centre for Defence Industry Capability (CDIC). The program for the week included industry briefings sessions, presentations to Japanese defence officials and Japanese industry by Australian companies as well as a follow on networking reception hosted by the Ambassador to Japan. Future defence industry forums are planned to occur in both Australia and Japan. Please contact Austrade Tokyo for the latest information on the next forum.

Australian Government Defence Export Controls (DEC)

The Australian Government, through Defence Export Controls (DEC), regulates the export of controlled defence and strategic goods and technologies to ensure their end-use is consistent with Australia’s national security, foreign policy and international obligations. It is important for Australian organisations to note and understand their export control obligations, and to be aware of any catch-all legislation obligations upon their business e.g. military or dual-use goods and technology.

DEC provides a range of services and information to assist Australian exporters to understand how to comply with Australia's export control laws: Defence Export Control website http://www.defence.gov.au/ExportControls or call 1800 66 10 66 / email ExportControls@defence.gov.au

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^[1] Stockholm International Peace Research Institute 2016
^[2] Appointed 03 August 2017

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The Australian Trade and Investment Commission – Austrade – contributes to Australia's economic prosperity by helping Australian businesses, education institutions, tourism operators, governments and citizens as they:

• develop international markets
• win productive foreign direct investment
• promote international education
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• seek consular and passport services.

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