THE DIPLOMAT



 

Japan needs to urgently address key structural problems in order to build an export-driven defense industry.

To get out of its rut, Japan needs two essential components for its defense industry: a brand, and a market with demand for its defense products. Its moves in the last seven years indicate these are exactly what Japan is looking to build.

The most consequential foreign defense sales progress Japan has made in the post-Cold War period has taken place since 2014, when the Abe Shinzo administration overturned Japan’s 47-year-old policy effectively banning arms exports, the famous “Three Principles” first enumerated by Prime Minister Sato Eisaku during a Diet session in 1967.

Since that dissolution, Japanese targets for its defense equipment sales abroad seem to carry an “all of the above” policy. Japan is not afraid to pursue both big fish and smaller minnows in its quest to expand markets for its products, and chase its diplomatic goals while doing so.

Japan was quick out of the blocks, indicating the strategic importance it places on its need to develop a solvent arms export capability. In 2015, Japan leased five TC-90 King Air patrol aircraft to the Philippines in a deal that was at its heart an arms sale despite being called a “lease.” Later, in 2017, Japan transferred large amounts of helicopter parts to Manila to help maintain a fleet critical to securing the littoral nation, and to get its foot further in the Philippines’ door.

2017 continued to be a big year as Japan showcased its new Kawasaki Industries C-2 military cargo aircraft at an air show in Dubai, mainly for UAE and New Zealand audiences. Japan was reportedly in discussions with UAE about a potential sale at the time, but the deal eventually fizzled out. Japan’s government was also excoriated by the Japanese NGO Networks Against Japan Arms Trade, which claimed Japan would be complicit in the regional conflict between Saudi Arabia and Yemen as shinoshounin (merchants of death).

Despite the blowback, the aircraft made a splash and its medium-range, heavy transport capabilities fit well with states who desire airlift capability but cannot afford or do not have diplomatic access to huge, expensive airlifters like the U.S.-made C-17.

In 2016, Japan lost its most high-profile arms sale attempt to date, but gained valuable experience in doing so.

That year, Australia sought to purchase 12 new submarines and Japan initially emerged as the front-runner, largely due to a positive personal relationship between then Australian Prime Minister Tony Abbot and Abe. Poor timing saw both the ascension of Malcolm Turnbull to the prime minister’s position and a decision to open the bid up to international competition, whereupon more experienced German and French defense contractors outmaneuvered Japan’s defense representatives.

Further revealing Japanese thoughts and perspectives on foreign arms sales, both Japanese industrial candidates — Mitsubishi Heavy Industries (MHI) and Kawasaki Shipbuilding Corporation — after hearing of the loss reportedly claimed to lack both interest in the deal and a desire to expand their limited domestic manufacturing capacities to build the submarines.

Worse, Australian requests to construct the subs in Australia with Australian workers for domestic political reasons were met with serious pushback from Japanese government representatives, helping to sour the possibility of Japan as a seller. The relative inexperience of Japanese efforts essentially sunk the deal.

Nevertheless, there have been successes. Closer to home, Japan and Vietnam signed a general agreement to export arms to Vietnam in October of last year. One month later, Japan accelerated talks with Indonesia to sell destroyers to the Indonesian navy. Japan at last exported its first-ever piece of finished defense equipment — Mitsubishi Electric-built maritime radars — to the Philippines in August of 2020. The fact that this sale was made by one of MHI’s corporate partners should be no surprise.

These successes and failures show Japan is determined to enter the international arms market, though its record remains decidedly mixed. Its failures reflect more its approach to arms sales and negotiation — a preference for government-to-government negotiation rather than industry-to-government — but they are signs of growth, not incompetence.

Japan’s arms sales activities up until now have simply helped Japan get to the starting line, where it more or less continues to sit. But tenacity does not always produce success, and Japan faces serious obstacles to improving and expanding its nascent arms industry.

One is economic. The stagnation and “lost decades” of the 1990s and 2000s have weighed heavily on the Japanese psyche, as well as each successive Japanese government since the bubble burst. The Japanese polity has tended to vote parties into office which offer realistic economic solutions to persistent stagnation, and these governments have yet to find the right answer to Japan’s economic recovery. Since the bubble burst, Japan has resisted efforts at major economic reform and macroeconomic diversification of its economy.

After repeatedly refusing to appreciably reform domestic capital liquification to allow private citizens to more easily start business and take market-oriented chances, Japan is running out of things it can actually do to nudge the economy in the right direction.

If Japan does not change its economic strategy, it follows that economic results will not change either, and Japan’s “lost decades” could turn into a “lost century.” An arms export industry may not help this economic problem much, but it probably could not hurt either.

Another is cultural. One issue which faces pernicious cultural resistance is Japan’s relative lack of childcare solutions for its working mothers. While many countries struggle with this issue, for many years Japan has faced a monumental day care shortage which, along with adherence to traditional values and no effective cultural support for change from leaders, forces half of its population — the female half — to choose between raising children or working, both of which the state desperately needs.

The 2020 COVID-19 pandemic made its mark on Japanese life like in other countries, but Japanese cultural norms continue to resist the new changes the virus has brought. In particular, Japan continues its relentless characterization of life as “outside versus inside,” to the nation’s detriment and the detriment of its nascent defense industry.

Astoundingly, in an island nation dependent on imports for survival and exports for economic growth, and in a world where demand for global logistically-driven markets like Amazon have skyrocketed elsewhere in the developed world, following the first lockdown in March 2020 the average Japanese citizen could not post a parcel anywhere outside Japan which was over the size and weight of several large sheets of paper.

While things have eased slightly since then, as of this writing the average Japanese citizen still cannot mail a package outside Japan that weighs more than two kilograms without sending it via ocean-going vessel.

Domestic shipping continues to thrive, however. These inexplicable restrictions based on “health concerns” ultimately mean people in Japan have more freedom to travel than parcels have to enter or exit the country.

Foreigners, except for U.S. military personnel defending the country, remain for all intents and purposes locked out of Japan, despite the steady “the Olympics are coming” drumbeat emanating daily from the Kantei.

Against this backdrop, it is not hard to see how Japanese attitudes and thoughts on “outside versus inside” could seriously hamper crafting a right-fit export-driven domestic arms industry aimed at selling weapons to foreigners.

In one particularly Japanese example, it took the pressures of the pandemic to finally remove the absolute need for, and much-overrated status of, the venerable hanko stamp. Once praised as a quaint cultural throwback and “just how the Japanese do business,” the physical carved seal assigned to either offices or people used on real paper to demonstrate review or consensus was (and is) in reality a speed limit for any organization.

Memos, policies, and permissions could only move at the speed an action officer could carry physical paper between officials required for coordination. Needless to say, in a pandemic this mundane activity actually becomes dangerous; imagine a single infected office worker making his rounds to every level of leadership, physically exchanging objects while lingering in the same room.

This removal has saved millions of Japanese workers nationwide the trouble of going to the office during a viral pandemic, opening the company safe, and finding the nearest ink pad to conduct any paperwork on behalf of the company.

While Japanese businessmen don’t necessarily need the hanko to conduct international deals, they were absolutely required for domestic commerce, which often caused many deals to come to a screeching halt for Japanese cultural reasons.

Odd decisions do not help matters. Despite rising COVID-19 cases in Japan, concern over the country’s economic plight continues to be the repeated refrain and main excuse offered by the central government as to why it refused to initiate stricter restrictions on the Japanese population during a major COVID-19 outbreak. In the summer of 2020 and the depth of the virus’ heyday, as many foreigners looked on in disbelief as Japan pushed its ill-conceived “Go To Travel” domestic travel subsidization scheme.

It appeared to be called off only after it had managed to entice enough of the country’s residents to spread the virus to every prefecture, erasing moderately successful efforts in the spring to contain the virus. It is too early to tell the damage a virus-spreading travel campaign along with its sudden stop have caused, both in economic and human terms.

There are other problems. Japan continues to face massive demographic obstacles, to include an already-aged and increasingly-aging society with little room for social program expansion without serious consequences to the economy.

The herculean efforts of 2019 to prepare the country for the 2020 Olympic games have caused significant economic shortfalls, whether or not a more sedate Olympics occurs this year. Rather than the “COVID baby boom” predicted by some, Japan experienced an opposite effect leading to a further declining birthrate during 2020. It is difficult to build an arms industry, or man a military, if no one exists to fill these roles.

Despite these challenges, if Japan continues to seriously develop its arms export industry, it will find itself well-positioned and well-timed to do so. Currently, there is a real opportunity to begin lasting defense equipment relationships with other states in the Indo-Pacific, and diplomatic opportunities continue to open vis-à-vis Chinese military overreaches.

The region is hungry for affordable, right-sized defense equipment, and as regional economies improve along with the Indo-Pacific’s resurgence, grievances between states will continue to assert themselves. These states will seek arms for deterrence and their own protection. Furthermore, China’s expanding military activity represents clear and urgent threats to nearly all states in the Indo-Pacific.

This, naturally, is good for the defense business, as states seek to find alternative methods to defend themselves and deter Chinese incursions. A functioning arms export industry may be just what Japan needs to make more friends abroad, enhance its security and the security of other like-minded Indo-Pacific nations, and provide a much-needed boost to its economy as well.