Insight – Japanese defence market seeks international collaborators

Like many countries, Japan is undertaking a significant renewal and upgrade of its defence and security capabilities. The Japanese Government is spending just under A$370 billion on defence up until early 2024. With the industry gradually opening to collaborations with overseas partners, this presents many opportunities for Australian businesses.

Historically, Japan’s defence industry has been the major supplier of the nation’s Self-Defense Forces. Japan is now spending a higher proportion of its procurement on foreign systems. New requirements in Japan’s Mid-Term Defense guidelines mean the Japanese industry has to grow new capabilities to support the Japanese Self-Defense Forces.

Australia is currently Japan’s sixth biggest source of defence equipment, having sold roughly A$40 million worth of equipment since the early 2000s. As a fellow US ally, Five Eyes member and Japan’s most trusted security partner in the Asia-Pacific region, Australia is well positioned to fulfil Japan’s capability needs by supplying existing technology and/or jointly developing unique solutions.

While there are language and cultural barriers, Australian businesses have an advantage over competitors due to the strong relationship between the Australian and Japanese Governments and our advanced, niche technologies.

Under the Australian Government’s 2018 Defence Export Strategy, the Department of Defence and Austrade are increasing resources and assistance to Australian exporters. This includes a dedicated Defence and Security Director based in Tokyo, new trade missions and deeper engagement with Japanese defence businesses.

Collaboration a priority for Japan

The Japanese Government and industry have indicated that international collaboration in defence R&D and production is an important priority, to help Japan maintain a defensive edge and spread and reduce costs.

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 opportunities. Australian companies with experience in supplying proven, cutting-edge technologies, products and/or services to the Australian Defence Force and other Western militaries have the potential to be attractive in market.

Opportunities in the Japanese defence market flow out of the National Defence Program Guidelines and Mid-Term Defence Program (MTDP), a five-year capability acquisition plan. The MTDP has allocated approximately A$360 billion to missile defence, cyber, and space and cross-domain warfare capabilities, all of which offer opportunities for Australia.

Overcoming market barriers

Japan, however, can be a difficult market to access. In addition to language and cultural differences, there is historical legacy and a largely protected industrial defence base to contend with. It is also difficult for external parties to access information on the defence decision-making lifecycle.

This is not to say the difficulties can’t be overcome. Patience and persistence, a willingness to understand Japanese needs and invest in relationships, and localised representation and partnership are key to success.

Businesses that have been successful have dedicated significant time to thoroughly researching Japan’s capability requirements and invested in local partnerships and representation. They have also made use of timely, accurate and tailored information – an area where Austrade can provide valuable assistance.

Fostering opportunities in the Japanese market

To explore and better understand the opportunities in Japan’s defence market, Austrade and the Australian Defence Export Office hosted a trade mission in November 2019. This mission helped further develop defence export opportunities in Japan and provided new insights on how Australian businesses can succeed.

The mission was led by the Australian Defence Export Advocate, the Hon. David Johnston, and senior ADF capability owners from each service, headed by Chief Joint Capability Air Marshall Warren McDonald. Eighteen Australian companies, four defence scientists and defence R&D institutions promoted their technologies and developed opportunities during the mission.

A key takeaway from the mission was the importance of and opportunities provided by the shared strategic objectives of our broader defence and security cooperation with Japanese defence officials, industry representatives and R&D institutions.

The mission’s flagship event – the Australia-Japan Defence Technology and Industry Symposium (DTIS) – was held on 22 November adjacent to the Japanese Ministry of Defense. DTIS attracted over 140 pre-registrations from over 50 Japanese companies, as well as many Japanese defence uniforms and officials. The symposium facilitated 21 industry capability presentations showcasing Australia’s defence technology excellence across a broad range of fields.

The presence of senior Australian and Japanese officials at the DTIS networking reception highlighted the importance of the Australia-Japan defence relationship. The reception was opened by the Australian Defence Minister, Senator the Hon. Linda Reynolds, and attended by current and former senior Japanese Government Ministers and defence officials. This senior level of representation is hard to achieve in Japan, emphasising the growing enthusiasm from both governments for finding ways to stimulate greater defence industry collaboration.

Some of Japan’s biggest defence primes, Mitsubishi Heavy Industries and Fujitsu, also exhibited their future technologies at DTIS and held meetings with mission participants.

Austrade assistance

The briefings and panel discussions at the mission revealed some valuable tips for Australian exporters, including the need to localise business development work. Companies should consider partnering with or employing long-term defence insiders who have the native language skills, cultural and market knowledge, and personal networks to assist with market entry.

A clear insight from DTIS is that Japan is increasingly open to collaboration with Australia. In particular, Australian companies with experience delivering to other Western militaries in areas new to the Japanese defence industry such as cyber are well placed to succeed.

To help explore Japanese defence opportunities, Austrade has appointed a dedicated Defence Business Development Manager, Mr Hiroshi Ueno, operating from Austrade’s Tokyo office.

Australian companies interested in entering the Japanese defence and security sectors should contact Austrade’s Defence, Advanced Manufacturing and Space team.