Japan greenlights its defense industry

Japan is slowly and inexorably unshackling its defense industries.

The Cabinet of Prime Minister Fumio Kishida recently agreed to ease defense equipment transfer rules to allow exports of next-generation fighter jets it is jointly developing with the United Kingdom and Italy. This follows other steps that allow Japanese companies to participate more fully in the global market for defense equipment.

It is the right decision. Japan must loosen restrictions that have undercut the ability of its companies to compete in this sector. There are limits, however, to how far liberalization should go. Participation in international defense projects ensures that Japan stays on the cutting edge of technology innovation, as well as remains a reliable and credible ally and security partner. Japan’s defense industries should never be contributing to the unrest and instability that unfettered sales can unleash, however.

The Cabinet last week approved new guidelines that relax the “three principles on transfer of defense equipment and technology.” Previously, Japan had banned the export to third countries of weapons it had developed with other nations. While this restriction was consistent with Article 9 of the Constitution, which prohibits Japan from using war as an instrument of national policy and from possessing the means to do so, it essentially cut Japan off from international cooperation on defense items since it forbid their export to other countries, transforming the economics of any such project and tying the hands of its partners as well.

The rising price and technological sophistication of defense equipment have rendered obsolete the former policy. Next-generation items from fighter aircraft to submarines are too complex for most countries to build on their own. Economic concerns — some weapons systems have price tags in the trillions of dollars — necessitate large production runs to cut costs and that invariably requires equipment exports. The technological sophistication of these items demands collaboration and Japan has had to adapt its policy if it hoped to remain on the cutting edge of such efforts.

The Global Combat Aircraft Programme exposed the problems created by Japan’s export limits and forced policymakers to act. GCAP aims to develop a next-generation fighter aircraft. Tokyo originally sought to work with the United States, Japan’s only ally and traditional defense equipment development partner. After those talks broke down, Japan turned to London since it was working on a project with similar requirements. Italy joined the discussions and the GCAP was officially launched in December 2022.

The project, which aims to bring the fighter jet into service by 2035, is Japan's first collaboration with countries other than the U.S. to meet a major defense requirement. To be an equal partner, however, Japan had to relax its defense export regulations.

The revisions agreed last week allow Japan to export the jets to third nations if they have signed agreements with Japan on defense equipment and technology transfers. Currently, 15 nations, the U.S. among them, qualify. That list is expected to lengthen. The government insists that this is not a blank check and each future decision will require Cabinet approval before sales are made. In addition, no transfers will be made to a country where combat is taking place.

Defense Minister Minoru Kihara clarified after the Cabinet decision that this approval process will ensure that Japan remains committed to the “basic philosophy of a pacifist nation.” That allowed Komeito, the ruling coalition’s junior partner, to agree to the revisions.

Komeito is a Buddhist lay-party and its commitment to pacifist principles is a key element of its identity and its political support. It discussed the revisions for months with the Liberal Democratic Party, the coalition’s senior partner, and wanted to take time and impose constraints on future transfers to be able to credibly make the claim that it had not compromised its core principles.

Critics complain that the party leadership has caved again to LDP pressure; they point to a steady erosion of restraints on defense policy that has occurred over a decade. The government lifted its complete ban on arms exports in 2014. Last December, it agreed to allow the export of weapons manufactured in Japan under a foreign license to the country where the licensor is based, a move that allowed Tokyo to send Patriot missile batteries back to the U.S. as its stocks were being depleted by the Ukraine war.

Meanwhile, the government has been expanding the area of operations for the Self-Defense Forces, allowing it to act in more circumstances, and has modernized its capabilities, including the acquisition of counterstrike forces to make it a more formidable fighting force. All this is being financed by a five-year, ¥43 trillion ($284 billion) defense spending plan that is a more than 50% increase over the previous five-year plan.

For all the criticism of its readiness to accommodate the LDP, Komeito deserves credit for slowing that process and ensuring that it has public support. The public is divided over the prospect of exports to third countries, with polls showing a split that fluctuates from majority support to disapproval depending on who conducted the survey.

Change is needed. As Prime Minister Kishida has argued, the regional security environment is deteriorating and Japan needs to be better prepared to address new challenges. Both China and Russia have many more fourth- and fifth-generation fighter jets than does Japan. The Ministry of Defense 2023 Defense White Paper claims that China has some 1,500 fourth- and fifth-generation fighters, while Russia has over 900; Japan by contrast has just 324.

As a result, Japan has expanded ties with other security partners and the U.K. has been a priority. In January 2023, the two nations signed a Reciprocal Access Agreement that facilitates activities between their militaries. They followed that four months later with the Hiroshima Accord, which deepened security cooperation, signed at the Group of Seven summit that Kishida hosted in May. This January, they inked a memorandum of cooperation on cyber issues to promote collaboration on cybersecurity and artificial intelligence.

Italy will become part of the partnership by virtue of its membership in GCAP, a 50-year project that should be considered “a marriage,” not some “short love affair,” in the words of former British Defense Secretary Ben Wallace.

Supporters also note that the more vigorous participation in the development of defense equipment can have beneficial effects on the private sector. Historically, there have been significant spillovers from those efforts as military technologies diffuse to the civilian sector. The U.S. Department of Defense is credited with providing the seed money that yielded Silicon Valley and many of the digital technologies that shape our daily lives.

The Ministry of Defense’s Defense Technology Guidelines note that “The return of advances in defense technology to society as spinoffs, and the enhancement of Japan's scientific and technological innovation, are crucial for strengthening national power.”

That does not mean that Japan should encourage the uninhibited growth of its defense industries. A “growth at all costs” mentality is irresponsible. The availability of weapons can exacerbate tensions and facilitate conflict. Nor can exports be permitted to governments that would use them against their own citizens.

Reinvigorating Japan’s defense industry sector also depends on overcoming reputational constraints. Many people consider this type of work to be morally questionable. Companies and their employees do not want to be known as “merchants of death.”

This too is changing. National security needs are becoming more apparent and employment in this sector is no longer looked down upon. Young professionals see that this work is challenging and necessary and recognize that it can be done in ways that don’t cross moral lines. That must be the logic that guides the development of Japan’s defense industry.