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U.S. gets the upper hand in FMS, Japan has no say

About 20 years ago, a Japanese Defense Ministry official, who was a resident official in the U.S., made phone calls to a U.S. military office located about 1 km away from the U.S. Department of Defense in the suburb of Washington D.C. However, there was no answer. The official left a message on the answering machine. Even so, there was no response. The official therefore went to the office. When he entered the office, phones were ringing here and there but staff members there kept working on their jobs ignoring the phone calls.

 

This is what the Defense Ministry official actually saw in the U.S. at that time over the Foreign Military Sales (FMS) system. When purchasing weapons from the U.S. through the FMS, the U.S. government is the point of contact.

 

The official said, “I felt the U.S. military officials in charge of the FMS were arrogant and they looked down on us as if to say they are doing a favor.” Ichiro Mori, the chief of the FMS procurement office of the Acquisition, Technology & Logistics Agency (ATLA), said, “Even now, the situation remains almost unchanged.”

 

Under the FMS system, the U.S. government takes an advantageous position by taking the lead in setting prices and delivery dates. In October last year, the Board of Audit (BOA) told ATLA that there were deficiencies in some of the FMS transactions, which reflected the fact that Japan has no say in the FMS procurement.

 

The deficiencies included unmatched part numbers, different quantities, and forms left blank. An investigation by the BOA disclosed that there were discrepancies between invoices and bills from the U.S. for all 64 contracts from fiscal 2014 through 2015 including the procurement of airborne early warning airplanes (a total of 67.1 billion yen). Appalled by such discrepancies, a BOA official said, “This is impossible for an accounting process by a government.”

 

To make the matter worse, such discrepancies constantly happened. Despite the fact that the U.S. side was to blame for those discrepancies, Mori said, “We thought that’s the way they are, and we have not asked the U.S. side to improve their process.”

 

The FMS procurement involves contracts at high prices. One single error could result in huge losses on the Japanese side. Even if the U.S. side makes a mistake, unless Japan notifies the U.S. of the mistake within one year, there will be no compensation for the loss. Nevertheless, when Japan inquired of the U.S. about a discrepancy, Washington was late to respond.

 

According to the BOA, the U.S. government once told one of the BOA’s officials: “There are too many inquiries. Could you narrow them down?”

 

Inquiring of the U.S. about discrepancies is the last thing Japan could do. When Japanese officials find discrepancies in the FMS procurements, they usually check U.S. military websites or make an estimate based on what’s written in other documents. Consequently, its check becomes lenient. A BOA official points out, “The ATLA has paid the bills without fully making uncertain transactions clear.

 

“The U.S. side takes mean advantage of Japan’s weak situation,” said former Air Self-Defense Force Chief of Staff Toshio Tamogami, who experienced unreasonable transactions through the FMS.

 

Tamogami was director of the logistics division at the Air Staff Office about 20 years ago. As soon as Japan decided to introduce a U.S. military information sharing system called “Link 16” (Tactical Digital Information Link J), the U.S. side raised the price from 130 million yen to 250 million yen, Tamogami says.

 

Tamogami recalled: “I directly protested to a senior U.S. military official, saying ‘it’s against our faith.’ One month later, the U.S. side lowered the price back to the original one.” He continued: “The U.S. side did not explain why it raised the price and lowered it back to the original one. The U.S. can freely manipulate the FMS system at its discretion.” Such an FMS system remains unchanged and Japan still pays prices set by the U.S. Tamogami feels a sense of crisis about Japan’s future as the country increasingly relies on the FMS.

 

Last December, urged by the BOA, the ATLA requested the U.S. government to ensure there should be no discrepancies between invoices and bills. However, the U.S. side was slow in action. Among 66 contracts made between January and August this year, discrepancies were found in 50 contracts (about 218 billion yen), over 70% of all contracts.

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