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Spear and shield (2): Defense business

Japan Defense Industry Remains Stagnant amid Chinese Threats

Washington, Sept. 14 (Jiji Press) — The United States is eager to spur innovation in its defense industry, at a time when China is investing in advanced technologies including fifth-generation, or 5G, high-speed communications equipment, artificial intelligence systems and hypersonic weapons.

In March, the U.S. Air Force held a new event to hear presentations from about 60 small and startup businesses, with contract money available on the spot to those with innovative ideas.

Speed, as well as originality and innovation, is essential in competition between major powers, according to then Air Force Secretary Heather Wilson.

In particular, the United States is alarmed by China’s development of hypersonic weapons, as its existing missile defense equipment is unable to shoot them down.

“The hypersonic threat is going to cause a revolution, and our industry has to work together,” a Raytheon Co. executive said. “This threat is not going to be solved by any one company. It’s not going to be solved by any one government entity.”

In contrast to the vibrant U.S. industry, Japanese defense-related companies have long been spoiled in a “lukewarm environment where business opportunities are guaranteed but profits are limited,” a Japanese defense industry source said.

Five years ago, the administration of Japanese Prime Minister Shinzo Abe adopted the three principles of defense equipment transfer, meant to be a shot in the arm for the domestic defense industry.

Although the government move paved the way for exports of Japanese defense equipment, however, there has been no case of finished defense products being shipped from the country.

“Most companies are reluctant to take risks to expand overseas,” another Japanese industry source said.

Last year, the Japanese Defense Ministry selected Lockheed Martin Corp.’s LMSSR radars for Aegis Ashore missile defense systems to be introduced in Japan, while planning to procure gallium nitride devices for the U.S.-developed radars from Fujitsu Ltd. <6702>. This arrangement was viewed as a new model for Japan-U.S. defense cooperation.

The selection of the LMSSR radars, instead of Raytheon’s SPY-6 radars, which the U.S. Navy has adopted for its new Aegis vessels, partly reflected the ministry’s hope that the Japanese company’s supply of radar components would help develop the domestic defense industry.

But the plan for Fujitsu to be a supplier of Aegis Ashore radar parts has been scrapped.

According to an informed source, the Japanese maker hesitated to make the investment needed to provide enough gallium nitride devices for the LMSSR radars. Until now, it has been producing only a small volume of such devices for tests and other purposes.

With the U.S. government initially willing to allow Japanese products to account for as much as 80 pct of Aegis Ashore radars’ components, several Japanese companies assessed the feasibility of supplying radar parts, but they gave up eventually, partly because it was too difficult, the source said.

James Schoff, senior fellow in the Carnegie Asia Program, likened the Japanese defense industry to a car parked on a hill.

“What the 3 Ps (three principles of defense equipment transfer) did…was to…release the parking brake on that car,” Schoff said. “If that car doesn’t get some acceleration and some steering, it’s just going to start sliding backward.”

Meanwhile, Japan increasingly relies on the United States for defense equipment, especially large items, including sophisticated F-35 stealth fighters.

Its defense budget for fiscal 2019 includes 701.3 billion yen for purchases under the U.S. Foreign Military Sales system, 12 times the fiscal 2010 level, at a time when U.S. President Donald Trump himself is making a sales pitch for U.S. weapons.

An expert panel set up by the government emphasized in its 2016 report the defense industry as a cornerstone of Japan’s defense power, but at the same time cited its weakening as a source of national security concern.

“We have to take the initiative to reform the industry in earnest, and develop a system to support defense equipment exports,” a Japanese Defense Ministry official said.

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