Deep in the heart of Aichi Prefecture is the headquarters of an engineering company founded 100 years ago to make textile looms. Having borne the name Howa Machinery, Ltd. since 1945, today its products range from window frames to road-sweepers -- but it also derives around 12 percent of its business from weapons sales. In fact, 2004 marks the 40th year since its Type 64 rifle and 81mm mortar were selected by the Defense Agency for use by the Self-Defense Forces.
That the sole Japanese maker of rifles is so long established and diversified should come as no surprise, since many of Japan's oldest companies -- including household names such as Hitachi and Toshiba -- operate divisions that rely on defense contracts to generate profits.
At the other end of the scale, in the case of the top Defense Agency contractor, Mitsubishi Heavy Industries, defense contracts account for roughly 14 percent of its sales, with the "Big Five" (see inset) receiving around 60 percent of the contracts each year between them.
The term "self-defense force" is used to circumvent the constitutional moratorium on possessing "land, sea and air forces." Japan may be forbidden from exporting arms, but its industry benefits from a defense budget that, in purely monetary terms, is surpassed only by those of the United States, Russia and China.
Although still reliant on the U.S. for some technological support, Japan is largely self-sufficient in its ability to supply its forces, which are among the most modern and well-equipped in Asia.
Every August, in a purchasing system reminiscent of that used by the U.S., the Defense Agency, on behalf of each arm of the force, submits the budgetary requests for the following fiscal year, which commences April 1.
After scrutiny by the Finance Ministry, the approved defense budget is ratified in December and given its final seal of approval when announced by the Diet in late March.
This fiscal year alone, total defense spending will amount to the equivalent of a cool $45 billion. Of this, 2 percent ($981 million) will be assigned to SDF preparations for the ballistic missile defense (BMD) program being undertaken with more than a little U.S. acquiescence.
The main impact of all-too-near neighbor North Korea indulging in nuclear brinkmanship will be felt in the pockets of the Japanese taxpayer. The Diet is set to spend $10 billion, perhaps more, on the BMD system over the next decade, perhaps sooner -- this is the same figure used to guesstimate the value of advanced U.S. military technology received in the period from 1950 to 1983.
It was events on the Korean peninsula that helped lay the foundations for all this. The Korean War (1950-53) has been blamed for derailing the government of the day's economic programs, but it undoubtedly proved a boon for a burgeoning defense-related industry that gained its contracts in the 1950s by repairing and maintaining U.S. military equipment -- an area of business that continues, to a lesser extent, to this day.
The Defense Agency, which has a civilian director general who simultaneously holds the title of Minister of State for Defense, came into being simultaneously with the SDF 50 years ago on July 1, and is now pressing for full ministerial status. Back in 1970, the level of defense activity was already such that the then-incumbent in those two key roles, Yasuhiro Nakasone, could set out a raft of realistic industry objectives.
Over and above the desire to maintain an industrial base for "national security," and to support the fruits of Japanese research and development (or, more usually, license-built versions of U.S. equipment), there was a call to use civilian industries for domestic arms production. This initiative enabled companies like Howa, Mitsubishi and a supporting cast of smaller, less well-known companies and subcontractors to prosper from the lucrative niches they carved out for themselves.
Like Howa, Asahi-Seiki assigns part of its 500-strong workforce to the production of small-arms ammunition, having been Japan's sole supplier since 1961. Nippon Koki in Fukushima Prefecture, Daikin Kogyo in Osaka and Komatsu's Defense Systems Division all participate in the manufacture of large-caliber ammunition, while the production of medium- and large-caliber guns for armored vehicles and ships is mainly the preserve of Japan Steel Works' Hiroshima plant.
Perhaps the most famous name in gun suppliers is Sumitomo Heavy Industries, which produces infantry machine guns and, under license, the 20mm cannon fitted to all Air Self-Defense Force fighters. Of the more contentious munitions, although Japan fulfilled its obligations under the international treaty outlawing anti-personnel landmines by destroying the last of its stockpile early in 2003, the GSDF could still use anti-tank versions manufactured by Ishikawa Seisakusho.
Over the years, the tendency with major programs has been to maintain low production rates in order to "drip feed" equipment orders, thereby retaining expertise, keeping contractors busy and controling budget spending.
Has the avowed intent to introduce some degree of competition into defense production been successful? Within their specific areas of expertise, the "Big Five" compete among themselves for about 90 percent of the work, making Japan a closed market to all but the chosen few. Beyond this nexus, however, historical precedent, service preference and the clout wielded by the big conglomerates has generally seen any truly competitive element eroded. Hence there is a general perception of this industry resembling a cozy cartel-like cabal that is particularly protected from any competition emanating from foreign -- that is to say non-U.S. -- suppliers.
The limited successes that European aircraft manufacturers have achieved with the Defense Agency have resulted from the involvement of a Japanese partner or agent, and have been predominantly of a non-combat equipment nature. The latest example of this is the AgustaWestland EH-101 minesweeping and heavy-lift helicopter, which has been selected by the Maritime Self-Defense Force for service entry in 2007, and will be license-built by Kawasaki Heavy Industries.
Meanwhile, Japan's arms industry has also had to defend itself after being tainted by its share of scandal -- a factor that seems to go with the territory, and not just in Japan. In 2001, two former high-ranking executives of Fuji Heavy Industries were handed suspended sentences, having been charged with bribery in connection with the award of subcontracts. Tragically, having confessed to his part in the crime, the Defense Agency's parliamentary vice-minister and grandson of the founder of a famous aircraft company, Yojiro Nakajima, had already taken his own life. Last year, Kawasaki-owned Nippi Corporation admitted that it had been routinely overcharging the Defense Agency for aircraft-maintenance contracts for six years.
Japanese aircraft manufacturers routinely receive such labor-intensive but lucrative "inspect and repair as necessary" (IRAN) work from the Defense Agency for the aircraft they have built. The latest to be announced included a $7.5-million contract awarded to Mitsubishi to cover checks on 37 Air Self-Defense Force F-15 Eagle and 14 F-2 fighters, to be completed by early next year.
More than half of the expected 130 F-2s have been ordered (at around 12 billion yen each), and the aircraft -- with 40 percent Lockheed Martin components -- provides work for a vast array of Japanese suppliers. Although ostensibly a Mitsubishi aircraft, both Fuji and Kawasaki produce major subassemblies, typifying the collaboration inherent in major defense industries. In the wake of the Fuji scandal, the Defense Agency overturned its selection of a Fuji training aircraft, suspended the company's contracts for one year and introduced a competitive bidding system. Criticism that this was purely a cosmetic exercise gained some credence when, having "assessed" rival bids, the same Fuji aircraft was reselected and duly entered production.
The principal aircraft projects fresh off the drawing board are for a planned 44 new transport aircraft for the ASDF, dubbed the C-X, as well as 110 P-X long-range patrol aircraft to replace the P-3C Orion fleet operated by the MSDF. To enable the prime contractor, Kawasaki, to take advantage of economies of scale, it has been planned that both aircraft will, as far as possible, have a shared structure and avionics.
Now that both have entered production, with first flights planned for 2007, the company views them as having passed the point of no return, but the U.S. remains hopeful that the P-X will be canceled in favor of full or partial participation in the U.S. Navy's own MMA (Multi-Mission Maritime Aircraft) program. Bearing in mind the drain on resources caused by going down the BMD road, this option might yet become increasingly more attractive to the government.
BMD is also forcing a major rethink among GSDF planners who, in an effort to tighten budget belts, are considering reducing the number of helicopter types in service even at the expense of certain compromises in terms of capability. Despite the protracted negotiations they would involve, revisions to the procurement rules to speed up deliveries are still being investigated.
While not wishing to cut too many corners, savings will have to be made to ease the burden of the BMD system and the two new MSDF helicopter carriers that will also be rocking the budget boat.
The BMD program, which will involve Mitsubishi producing around 200 Patriot PAC-3 missiles, will necessitate the export of missile components from Japan and compromise the 1976 ban on arms exports, which failed to cover electronic components.
The legal straitjacket would have to be loosened even further were Japan ever to follow the trend set by other countries that are attempting to reduce costs by innovative measures such as outsourcing of flight training to civilian companies and sometimes leasing combat aircraft rather than buying them.
It is hard to imagine the export floodgates being opened to enable, for example, Komatsu-built Japanese armored vehicles to dominate commercial markets in the manner that Japanese automobiles and motorcycles have before them, but there is some potential for expansion currently stymied by tough legislation.
ShinMaywa, well known primarily as a producer of truck bodies, already produces the unique amphibious US-1A rescue aircraft operated by the MSDF, and has an improved version currently under evaluation. Its PS-1 forebear that appeared on the weapons list ultimately proved unsuccessful in the anti-submarine role for which it was intended, but the latest design would lend itself well to the passenger transport and forest-fire waterbomber roles -- were export licenses to be forthcoming.
Another drain on resources is the spy satellite program, which has been designed to give Japan an independent presence in space, despite 1969 government legislation barring its military use of space. This hit some turbulence last November when a rocket carrying the second pair of a planned fleet of eight satellites malfunctioned after launch and had to be destroyed. The program remains in limbo while the Japan Space Exploration Agency (JAXA), with a view to making amends during the winter launch window, irons out technical difficulties.
The transformation from what could be termed conventional forces, to much more of an emphasis on information gathering and reconnaissance, will also see Japan deploy unmanned aerial vehicles (UAVs) for battlefield surveillance and, most likely, coastal patrol.
Fuji Heavy Industries produces a helicopter-based example of the former, which is currently being used to gather data, and funds have been allocated for research into what is perceived by some as the basis of future air power, using either remotely piloted versions of full-size or purpose-built aircraft.
At the heart of such activity are the five research centers of the Defense Agency's own Technical Research and Development Institute, which has sole responsibility for the development, evaluation and ongoing testing of all military equipment. It is thus destined to play a significant role as Japan's position on defense is reinvented, with concomitant changes to its arsenal.
The defense industry in Japan is quite different from what it was when Howa was awarded its first contracts, and this is forcing many smaller companies to anticipate developments and adapt to retain their slice of the cake. At last, though, after years of entrenchment caused by political inertia, Japan's defense industry is poised to react to changes from far beyond the factory gates.
The 'Big 5' in the business
Companies are listed in descending order of military revenues.
Mitsubishi Heavy Industries
Aircraft manufacture (F-2 fighter, SH-60/UH-60 helicopters); maintenance and repair (including F-4EJ and F-15J); helicopter engines (for OH-1); guided-missile destroyers; submarines; Type 90 tank (body/gun turret); Patriot surface-to-air missiles; Type 97 torpedoes; avionics test equipment.
Kawasaki Heavy Industries
Aircraft manufacture (CH-47JA/OH-1 helicopters); maintenance and repair (including P-3C Orion); helicopter engines (AH-1S/CH-47JA/UH-1); anti-tank missiles; generators for submarines.
Mitsubishi Electric
Missiles; targeting systems; radar sets; electronic warfare equipment.
Ishikawajima-Harima Heavy Industries
Engine manufacture (F-2); support and development (P-X); engines for UH-60s and guided-missile destroyers.
Toshiba
Guided weapons; search radar; electric engines for submarines.
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