The Keidanren, Japan’s largest business lobby, argues that Japan’s arms ban is bad for the country.

Japan will be left behind as a “closed nation” in military technology because the ban prevents companies from joining international weapons projects, such as Lockheed Martin Corp.’s F-35 Joint Striker Fighter, said Keiichiro Iwasaki, a member of the defense committee at the Japan Business Federation (Nippon Keidanren).

Mitsubishi Heavy Industries Ltd. and Kawasaki Heavy Industries Ltd. are among Keidanren members that want Prime Minister Naoto Kan’s government to permit some arms sales when it announces new defense guidelines in December. (Link)

The Japanese government flummoxes Japan’s defense industry. On one hand, it is extremely loyal to the industry, spending billions to develop indigenous tanks, missiles, and other systems when Japan could save a lot of money by buying American weapons. When Japan does buy American weapons, it tends to license them so that Japanese companies can do the actual building.

The problem is, lately Japan has been abruptly cutting weapons purchases, leaving industry flapping in the wind. (Witness the Fuji AH-64 Apache attack helicopter debacle.) Japanese companies often charge outlandish prices for weapons because they are unable to leverage domestic sales with overseas sales, thus taking advantage of economies of scale to lower overall unit costs and spread the development burden.

On top of that, the arms ban makes cooperation with non-Japanese defense firms unworkable, because the weapons cannot then be exported. The U.S. government, which jointly developed the SM-3 anti-ballistic missile with Japan, has had to ask Japan to waive the export ban so that it could sell the SM-3 abroad. A decision is expected later this year.

Overall, there is less and less incentive for Japanese industry to participate in a sector that is constantly shrinking. The government is floating the idea of selling some defense equipment in civilian form, such as the new C-2 transport, P-1 maritime patrol aircraft, and US-2 amphibian aircraft, in order to drum up further sales.

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A contributor and editor at the blog War Is Boring, Kyle Mizokami started Japan Security Watch in 2010 to further understand Japan's defenses and security policy.
Kyle Mizokami has 536 post(s) on Japan Security Watch