Japan defence contractors get to grips with foreign military buyers

ShinMaywa Industries

14/10/2016 06:39

* Japan wants defence firms to pursue exports after ban 
lifted 
    * Tokyo Aerospace Show has more military flavour this year 
    * Japanese defence industry remains fractured, low profile 
 
    By Tim Kelly 
    TOKYO, Oct 14(Reuters) - Until recently, public meetings 
between Japanese defence contractors and uniformed foreign 
military delegations would have stirred controversy in Japan, 
but this week's aerospace show in Tokyo saw plenty.  
    With the nation stepping back from decades of state pacifism 
amid concern over China's growing power and a deepening North 
Korean threat, Japanese defence companies are finally shedding 
their reluctance to sell arms abroad.    
    At the ShinMaywa Industries  7224.T  booth, Indonesian air 
force officials quizzed the company about its amphibious plane. 
In another corner of the Japan Aerospace 2016 show, Saudi 
Arabian military officers pored over military transport and 
patrol aircraft brochures handed out by Kawasaki Heavy 
Industries  7012.T . 
    "The Indonesians are very interested in our plane," said a 
ShinMaywa salesmen, as one of his colleague went through US-2's 
specifications with the six-man Indonesian delegation. He asked 
not to be identified because he is not authorized to speak to 
the media. 
    The US-2 is one of the home-built military platforms that 
the Japanese government has identified as a candidate for 
foreign sales after Prime Minister Shinzo Abe in April 2014 
lifted a ban on overseas arms sales.  
    The exhibition in Tokyo, which was last held four years ago 
in Nagoya, is the first major aerospace show since Abe came to 
power. The show drew some 800 companies as well as 
representatives from numerous of international militaries. 
    "We were visited by other foreign uniformed representatives 
apart from the Saudi military," a salesman for Kawasaki said, 
also asking not to be identified. "The exhibition is still 
mostly civilian, but it has more of a military feel than four 
years ago." 
     By ending seven decades of military industrial isolation, 
Abe is hoping to widen arms production to lower costs through 
greater economies of scale and share the expense of developing 
new weapons with other nations. 
    India began discussing a possible purchase of ShinMaywa's 
US-2 soon after restrictions on arms shipments were eased, 
although no agreement has yet been concluded.  
    Indonesian interest could provide an earlier opportunity to 
sell the plane abroad, but Jakarta is so far keeping its cards 
close to its chest.  
    "We are looking around at all the stalls," said an 
Indonesian general in the delegation, who declined to give his 
name. 
     
    REPUTATIONAL RISK 
    Japanese companies have been reluctant to highlight their 
arms businesses, wary of reputational damage to their other 
commercial businesses.  
    Japan's population remains sensitive to any perceived 
reversion to the militarism that many still blame for wrecking 
the country during World War Two.  
     Kawasaki, which is better know for making motorbikes, had 
models of a heavy lift military transport, the C-2, and a 
sub-hunting patrol plane, the P-1, both of which it makes for 
Japanese military. Japan's government believes both those could 
compete for overseas sales. 
    "The foreign military delegations were mostly interested in 
the C-2, and they most wanted to know the price," said the 
Kawasaki salesman.     
    Fuji Heavy Industries  7270.T , better known for its Subaru 
cars, also builds military helicopters. 
    At the aerospace show it showed of a full-sized model of a 
planned new transport helicopter, dubbed the UH-X, and an 
experimental unmanned surveillance jet. Both have been ordered 
by the Japanese military. 
    "We haven't wanted our defense work to damage our Subaru 
brand. But things are changing since the change to export 
rules," said a Fuji Heavy official at the booth. "The foreign 
military delegations came by here too," he added, also asking 
not to be identified. 
    Other companies that avoid advertising their defense work 
include ball-bearing maker Minebea Co  6479.T , which also makes 
9mm pistols, and air conditioner company Daikin Industries 
 6367.T , which has a sideline in rifle grenades.  
    Komatsu Ltd  6301.T  builds military-green armored vehicles 
in addition to its yellow excavators and dump trucks.  
     
    SPLINTERED INDUSTRY 
    After decades insulated from the competitive pressures that 
have forced western firms to group together into a handful of 
big makers, Japan's defense sector remains fractured, with work 
spread among hundreds of companies.  
    Military sales even at major defence contractors rarely 
amounts to more than a few percent of overall revenue.     
    Even at the largest contractor, Mitsubishi Heavy Industries 
(MHI)  7011.T , military sales amount to only a tenth of 
revenue. 
    Most of its booth at the aerospace show was devoted to 
civilian products, including space launch vehicles, models of 
Boeing  BA.N  aircraft it help builds, and a mock up of the 
interior of the Mitsubishi Regional Jet, which represents 
Japan's bid to establish itself as a regional jet maker.  
    MHI's defense business was confined to two small models on a 
small display stand at the side of the exhibition. One was a 
marine patrol helicopter; the other, an experimental stealth 
prototype that could evolve it a $40 billion project to build a 
new fleet of frontline fighters for Japan, and perhaps even 
overseas airforces.  urn:newsml:reuters.com:*:nL4N1CF0BZ 
    "Foreign military representatives visited our booth," said 
the MHI official in charge of the display. "I think that is the 
first time that has happened at a show," he added. 
 
 (Additional reporting by Nobuhiro Kubo; Editing by Lincoln 
Feast) 
 ((tim.kelly@thomsonreuters.com; +813-6441-1311;)) 
 
Keywords: AEROSPACE JAPAN/DEFENCE