In 2014, a blossoming friendship between Australian Prime Minister Tony Abbott and Japanese counterpart Shinzo Abe looked to have all but sewn up a $40 billion submarine deal. Then French naval contractor DCNS hatched a bold and seemingly hopeless plan to crash the party.

Almost 18 months later, France this week secured a remarkable come-from-behind victory on one of the world's most lucrative defense deals. The result: Tokyo's dream of fast-tracking a revival of its arms export industry is left in disarray.

Interviews with more than a dozen Japanese, French, Australian and German government and industry officials show how a series of missteps by a disparate Japanese group of ministry officials, corporate executives and diplomats badly undermined their bid.