Japan: Defense industry attacking the global market after the end of taboos

After Tokyo lifted restrictions on the export of weapons, the Japanese defense industry is eyeing increased potential in a booming international market, but it will need to focus on specific sectors and strengthen its capabilities.

Prime Minister Sanae Takaichi begins a visit to Australia on Sunday, celebrating a massive contract unveiled last year for the delivery of eleven Japanese-designed frigates to the Australian navy. As Tokyo boosts its arsenal, it aims to integrate further into international supply chains: Japan abandoned its decades-old ban on lethal arms sales in April, authorizing them for 17 countries with defense agreements.

Since 2014, Tokyo has been allowing exports of non-lethal military products (transport, surveillance…), and further relaxed its rules in 2023-2024 for multiple contracts: selling Patriot missiles to the United States, developing an aircraft with the United Kingdom and Italy, and supplying frigates to Australia. The lifting of the latest restrictions enhances the potential of Japanese defense groups. According to the Stockholm International Peace Research Institute (Sipri), five Japanese defense companies are among the top 100 defense enterprises by revenue globally.

They are currently benefiting from domestic demand: Tokyo increased its military spending by about 10% in 2025, to $62.2 billion, representing 1.4% of GDP, with the goal of quickly reaching 2%. “This is a transition from a government-led national procurement model to a standard practice where companies can generate commercial opportunities abroad,” said AFP’s Ian Ma, a Bloomberg Intelligence analyst.

Value Added

IHI does not foresee an immediate acceleration of its defense activities but expects a significant impact on creating an environment conducive to accelerating international cooperation. The group, a supplier of engine parts for the American F-35 aircraft, told AFP it was already increasing its production capacity and workforce, and building a new factory dedicated to rocket engines.

Mitsubishi Electric, which already supplies radar systems to the Philippines and hopes to co-produce American-designed AIM missiles, does not anticipate any immediate significant impact but also hopes for “increased international business opportunities.” The potential is huge: according to Sipri, global military spending increased by about 40% between 2016 and 2025 to reach $2.9 trillion last year.

“The Japanese advantage lies in high value-added segments, where reliability, integration, technical performance take precedence over price alone: naval systems, missiles, sensors, propulsion systems, electronics…” and their integration, noted Ian Ma.

Historic Measure

Nevertheless, the expansion of Japanese production capacities will take years according to experts, with significant startup costs and a chronic labor shortage in the archipelago. Heigo Sato, from Takushoku University, also points out a strategic necessity for Tokyo, eager to deepen its defensive ties amid Chinese military strengthening. “If we just receive armaments from allies, our budget will eventually run out,” he told AFP.

In the immediate future, Australia, the Philippines, and Indonesia are expected to be key markets for Japanese industrialists, along with strengthened European and American cooperation. However, reassuring the pacifist Japanese public remains a challenge: in a recent survey by the Nikkei newspaper, 55% of respondents opposed the expansion of arms exports.

AFP