Editorial: Healthy defense industry vital to national defense

July 8 , 2023

The defense industry serves as a pillar to a country’s national defense. Japan being no exception, the government eyes Japan’s robust manufacturing and technology base as being synonymous with its national defensive capability. Legislation was recently passed to strengthen that military-industrial relationship, which Komeito believes is an important first step.

Military tech has been making remarkable leaps worldwide in recent years—and unless Japan keeps up, its national deterrence and operational readiness will clearly suffer. And to remain competitive, Japanese defense contractors have to continue building up their R&D muscle and secure the necessary human resources.

The problem is that these contractors are predominantly dual-use, meaning they are at their core commercial enterprises and produce military equipment as an auxiliary source of revenue. But in recent years, these suppliers have been divesting themselves of their defense assets—and this is hurting Japan’s overall national security infrastructure.

They are being forced to divest because government contracts alone are unprofitable as the Self-Defense Force is the sole buyer of military equipment. Weapons exports are prohibited under the Japanese constitution (collaborative projects with other nations are excluded). Production runs are generally low in volume and stretched out over many years due to fiscal constraints, meaning costly production lines are underused yet must be contractually maintained. Competition over a small, domestic-only pie is thus naturally fierce.

State intervention is unavoidable, which the latest law will allow in such areas as cybersecurity and equipment procurement. Under the same law, the state will be able to temporarily “nationalize” an ailing contractor’s production facility, entrust its management to another firm and, should a third contractor emerge to succeed the business, transfer the facility to that contractor.