U.S. defense company Raytheon has been lobbying lawmakers in Japan to replace Lockheed Martin Corp. as the supplier of powerful radar systems, as Tokyo reconsiders plans for two Aegis Ashore missile defense sites, three sources have said.

"It's game on," said one of the sources, who has direct knowledge of Raytheon's lobbying campaign. Raytheon's pitch includes a proposal to put its SPY-6 radar on refitted destroyers, as the U.S. Navy plans to do. The company says that would save money and time as Japan tackles new missile threats, drones and stealth aircraft.

Lockheed Martin has a contract with Japan to build its $300 million SPY-7 radars at the two canceled Aegis Ashore sites, and says installing the systems at other sites or aboard ships are both possibilities.

But critics say dedicating ships to missile defense pulls them away from other duties, and that new destroyers can cost hundreds of millions of dollars. Japan could also face financial penalties if it pulled out if its contract with Lockheed Martin.

"We are looking at the various options available to us," a defense ministry spokesman said.

A key battle for the two companies will be winning the support of former defense ministers and deputy ministers, who are set to make recommendations to Prime Minister Shinzo Abe as soon as next month.

That group, led by former defense minister Itsunori Onodera, formed in June after current defense chief Taro Kono suspended the Aegis Ashore plan. It has weighed in on missile defense and discussed proposals that Japan acquire strike weapons for that mission, officials have said.

Under Abe, the nation has strengthened its military with stealth fighters designed to fly off carriers, longer-range missiles, new amphibious units and stronger air defenses meant to deter threats from neighbors, including North Korea and China.

Kono said he ordered the Aegis sites relocated because rocket boosters that accelerate interceptor missiles into space could fall on residents. But according to the three sources, concern over mounting costs was the main reason for the decision.

China is rapidly expanding and improving its ballistic missile arsenal, and in 2017 North Korea tested a missile that flew over Hokkaido.

With around three times the range of radars currently used by Japan, both SPY-6 and SPY-7 would greatly enhance the nation's ability to detect multiple attacks.

One option that would avoid any political fallout would be buying both radars, using SPY-6 on Aegis ships and deploying Lockheed's SPY-7 as an early warning radar, one of the sources said.

Backing from Onodera would make that change more likely because he approved the Lockheed Aegis radar acquisition two years ago. At the time he was unaware that testing in Hawaii could add at least $500 million to Aegis Ashore's $4 billion budget, separate sources told Reuters last year.

In an interview in the Asahi newspaper on Thursday, Onodera said the "ideal option" for Japan would be to find a safe ground-based location. He also noted that building Aegis ships would cost both money and manpower.

Onodera's office declined an interview request, but one source familiar with his position on the radars described him as "flexible."

Masahisa Sato, a former deputy defense minister who also served as a deputy minister of foreign affairs, said Japan's choice was between SPY-7 at new sites, with the missile launchers deployed elsewhere, or building Aegis ships equipped with SPY-6.

"I am recommending an increase in Aegis ships," he said. "SPY-7 is under development and there is a question about how it would perform in a new configuration," Sato added.

Lockheed Martin said its system could be adapted to ships, and disputed questions about performance.

"SPY-7 radar is the most advanced radar in the world today and we believe it is the best solution for Japan's defense needs," the company wrote in an e-mail.

For its part, Raytheon said the SPY-6 will be deployed on 50 U.S. Navy ships, calling it the "most advanced radar technology in production today."

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