Japan's Defense Industry Faces Challenges As China Threat Looms.

• Author: Harper, Jon

Confronting economic and security challenges, Japan aims to boost its defense industrial base and sell more military equipment overseas to allies and partners. However, it must overcome a number of problems to realize its goals, analysts say.

Over the past decade, Tokyo has rolled out new guidance including: a new National Security Strategy (2013), Strategy on Defense Production and Technological Bases (2014), and a revised policy on defense exports (2014). In 2015, it also stood up a new Acquisition, Technology and Logistics Agency to enable more cost-effective acquisition and promote international outreach. The moves came amid growing concerns about China's military modernization and aggressive behavior toward Japan and other nations in the Asia-Pacific region.

"In order to develop, maintain and operate defense capability steadily with limited resources in the medium- to long-term, Japan will endeavor to engage in effective and efficient acquisition of defense equipment, and will maintain and enhance its defense production and technological bases, including through strengthening international competitiveness," the National Security Strategy stated.

However, the nation is hindered by a number of factors. One is that, unlike the United States and other developed countries, it has few defense-focused firms, noted retired Lt. Gen. Shinichi Iwanari, former commander of Air Development and Test Command for the Japanese Air Self-Defense Force.

"Most defense companies in the U.S. focus ... on the military sector strategically. They have market penetration strategies and product development strategies," he said through an interpreter during a recent panel hosted by the

International Security Industry Council Japan, a Tokyo-based nonprofit.

In contrast, Japanese companies that supply military equipment to the nation's Self-Defense Forces are still more focused on the civilian sector, Iwanari noted.

Japan's defeat in World War II--and subsequent adoption of a pacifistic foreign and defense policy that lasted for 70 years--created conditions that led to the country's current situation, he said.

"Military work disappeared and civil work took center stage," he explained. "That diversification predominates as a business strategy" today, he added. "Looking at the composition of Japan's defense industry, most of the companies have many business divisions, and defense accounts for only a few percent of their business."

Gregg Rubinstein, a Japan expert at the Washington, D.C.-based Center for Strategic and International Studies, said the country's defense industry is characterized by inefficient, high-cost production, and...