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Defense Industry

Some Leading Japanese Defense Companies
Defense Company NamePrimary Defense-Related Emphasis
2.5Mitsubishi Heavy Industries, Ltd. (MHI) Ships, military vehicles, aircraft, and missiles
1.0Mitsubishi Electric CorporationElectronics and Missiles
0.8Kawasaki Heavy Industries, Ltd.Ships and aircraft (primarily helicopters)
0.4Ishikawajima-Harima Heavy Industries, Co.,Ltd.Ships and engines
0.4NEC CorporationElectronics
0.3Toshiba CorporationElectronics and Missiles
0.3Mitsui ShipbuildingShips
0.3Komatsu, Ltd.Small arms/ordnance and military vehicles
0.3Shinmaywa IndustriesAircraft
0.2Japan Electronic CalculatorElectronics
Fuji Heavy Industries, Ltd. (FHI)Aircraft
The Japan Steel Works, Ltd.Artillery
Hitachi, Ltd.Electronics and military vehicles
Oki Electric Industry Co., Ltd.Electronics
Daikin Industries, Ltd.Small arms / ordnance

Twelve companies account for approximately 95% of all Japanese defense contracts. Dismantled by occupation authorities after World War II, armaments production resumed in 1952 when the nation's manufacturers began repairing and maintaining equipment for United States forces operating in Asia. Individual producers emerged as affiliates of larger industrial conglomerates, including the former zaibatsu of Mitsubishi and Sumitomo. After 1954 the defense industry began to arm the SDF, at first making only slight improvements on United States-designed equipment manufactured for local use. The Japanese defense industry received about US$10 billion worth of advanced technology from the United States between 1950 and 1983.

In July 1970, then Defense Agency director general Nakasone Yasuhiro established five objectives for the defense industry: to maintain Japan's industrial base for national security, to acquire equipment from Japan's domestic research and development and production efforts, to use civilian industries for domestic arms production, to set long-term goals for research and development and production, and to introduce competition into defense production. By the late 1970s, indigenous suppliers had developed and produced an almost complete range of modern equipment, including aircraft, tanks, artillery, and major surface and underwater naval combatants. Certain types of highly sophisticated weaponry, including F-15 fighters, P-3C Orion antisubmarine aircraft, and 8- inch howitzers, were produced under license. Except for the most complex and costly items, such as the E-2C airborne early warning aircraft, little was purchased complete from foreign suppliers.

Over 25 percent of the 18.4 trillion Mid-Term Defense Estimate for FY 1986 through FY 1990 was allocated for equipment procurement, most of it domestically produced; but the most lucrative defense contract was for the FSX. Envisioned as a successor to the F-1 support fighter in the ASDF inventory, the FSX was expected to take ten years to develop at an estimated cost of 200 billion. In October 1985, the Defense Agency began considering three development options for the FSX: domestic development, adoption of an existing domestic model, or adoption of a foreign model. The agency originally favored domestic development. But by late 1986, after consultation and much pressure from the United States, it decided to consider a coproduction agreement with the United States. And in October 1987, Japanese and United States defense officials meeting in Washington decided on a joint project to remodel either the F-15 or the F-16. The Defense Agency selected the F-16.

Once the agreement was reached, it came under heavy criticism from members of the United States Congress concerned about loss of key United States technologies and technological leadership, risks of Japanese commercialization of technology at United States expense, and an insufficient share in the project for United States-based firms. As a result of the controversy, in early 1989 the United States demanded and obtained a review and revision of the agreement, restricting technology transfer and specifying that United States-based firms would receive 40 percent of the work. The controversy left bitterness on both sides, and Japanese industrialists, convinced that a Japanese-designed and Japanese developed FSX would be superior to a modified F-16 co-developed by Japan and the United States, were irritated at United States pressure to renegotiate. They considered the agreement already favorable to the United States. Japanese industrialists and defense planners seem to be inclined to be self sufficient with respect to future weapons research.

All of the big Japanese players in the aircraft field -- Mitsubishi Heavy Industries, Ltd., Kawasaki Heavy Industries, Ltd., Fuji Heavy Industries, Ltd. and Ishikawajima-Harima Heavy Industries Co., Ltd. -- are diversified manufacturers. At most their aerospace operations produce 20 percent of corporate sales, and that figure includes space- and missile-related work. Moreover, Japan's aircraft industry is just a fraction of the size of this country's, and its economywide importance is correspondingly less.

Japan dominated world shipbuilding in the late 1980s, filling more than half of all orders worldwide. Its closest competitors were South Korea and Spain, with 9 percent and 5.2 percent of the market, respectively. Japan's shipyards replaced their West European competitors as world leaders in production through advanced design, fast delivery, and low production costs. The Japanese shipbuilding industry was hit by a lengthy recession from the late 1970s through most of the 1980s, which resulted in a drastic cutback in the use of facilities and in the work force, but there was a sharp revival in 1989. The industry was helped by a sudden rise in demand from other countries that needed to replace their aging fleets and from a sudden decline in the South Korean shipping industry. In 1988 Japanese shipbuilding firms received orders for 4.8 million gross tons of ships, but this figure grew to 7.1 million gross tons in 1989.

In the late 1980s, the defense industry, limited by the lack of research and development, inadequate testing equipment, restricted exports, and no economies of scale, accounted for only 0.5 percent of Japan's total industrial output. The Defense Production Committee of the Federation of Economic Organizations (Keizai Dantai Rengokai -- Keidanren) was an important element in defense production, negotiating with the Defense Agency and coordinating activities among defense firms. Keidanren disseminated defense information and informally limited competition by promoting agreements between companies.

Nearly 60 percent of Japanese defense contracts were awarded to five large corporations: Mitsubishi Heavy Industries, Toshiba Corporation, Mitsubishi Electric Corporation, Kawasaki Heavy Industries, and Ishikawajima-Harima Heavy Industries Corporation. Competition for contracts nonetheless intensified in the 1980s, as larger portions of the defense budget were allotted to procurement. But for the Japanese defense industry to become efficient, it had to depend on economies of scale that could only be achieved through export. Ishikawajima-Harima Heavy Industries Corporation indicated an interest in the arms export market when it changed its articles of incorporation to include arms in its list of products in June 1987 and later asked that weapons export restrictions be eased during the early 1990s.

A secret memorandum circulating among defense contractors in 1988 estimated that lifting the export ban (that existed by general interpretation of Article 9 of the constitution) would result in Japan's capturing 45 percent of the world tank and self-propelled artillery market, 40 percent of military electronic sales, and 60 percent of naval ship construction. In 1989 a Keidanren committee headed by Kanamori Masao, chairman of Mitsubishi Heavy Industries, called for increasing defense research and development to 5 percent of the total defense budget. The FY 1990 defense budget allotted approximately 2 percent for this purpose.

In the late 1990s, Japanese corporations might be expected to market mainly dual-use electronics subcomponents, vehicles, and transport and communications equipment offshore or through front companies and to provide components for missiles and aircraft produced overseas, especially in the United States.

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Page last modified: 10-12-2018 18:37:41 ZULU