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Making the Most of Japan-US Defense Industry Cooperation

On January 25, the White House announced an upcoming state visit by Japanese Prime Minister Kishida Fumio and his wife Yuko Kishida on April 10, 2024. During the visit, the two leaders are expected to discuss ways in which the United States and Japan will continue to deepen partnership to continue to advance the two countries’ shared vision for a free and open Indo-Pacific and the international community.  

Kishida’s visit – the first state visit to the U.S. since he took office in 2021 – will build upon an impactful year of 2023 during which the two countries’ strategic visions grew more closely aligned and began to be translated into policy. 

U.S. Secretary of Defense Lloyd Austin and Japan Minister of Defense Hamada Yasukazu opened 2023 by signing the bilateral Memorandum of Understanding (MOU) for Research, Development, Test and Evaluation Projects (RDT&E) and a bilateral, non-binding Security of Supply Arrangement (SOSA) between the U.S. Department of Defense and Japanese Ministry of Defense. Taken together, the MOU and SOSA help bring together industry and government partners. While the MOU provides an opportunity to operationalize the alliance and set the priorities based on complementary national defense and security strategies, SOSA looks to increase paths of acquisition between the two countries, secure defense related products, and provide a higher level of shared accountability and trust. 

In addition, the two countries announced that they will embark on a cooperative development program for the Glide-Phase Interceptor (GPI) in August 2023. Building upon the past success in cooperative development in ballistic missile defense programs. including Standard Missile (SM) Block-3 IIA, the GPI co-development creates further opportunities for U.S. and Japanese industries to leverage each other’s strengths to benefit the capability of the U.S. military and Japan Self-Defense Forces (JSDF).  

Finally, Japan and the United States ended 2023 by opening another door for defense industrial cooperation. On December 22, the Japanese government further relaxed its defense equipment export regulation to allow defense equipment that was produced under foreign license by Japanese manufacturers to be exported back to the countries that issued the original license. The revision was promptly put into practice with Japanese government’s decision to export Patriot missiles, which Japan produces under U.S. license, to the United States. While the scope of this relaxation remains limited and long overdue, it nonetheless can be a catalyst to accelerate integrated logistics between the two allies.  

These measures have opened avenues for cross investment between Japan and U.S. companies to coordinate on defense development, technology sharing, and future collaboration as Japan looks to develop emerging and foundational technologies, harness strengths to co-develop and co-produce munitions, and diversify and build more redundant supply chains. 

Taking a page from the U.S. Department of Defense’s use of Other Transaction Authority (OTA), Japan will start a similar program aimed to bring about rapid technological advances and incentivize non-traditional defense contractors to enter the arena, increase Japan’s defense industry, and stimulate innovation. Tokyo recently revised weapons export guidelines that will expand the current limited export of weapon components to now include the export of completed products to countries where patent holders are based, while retaining final say on the release of any re-exports to third countries. 

All these developments are spurring a resounding cooperation centered around defense and fostering multilateral growth for the United States and Japan to tackle Japanese, U.S., and regional security problems.

Concerns remain, however, about the barriers to harness this momentum. On the part of Japan, for example, while many Japanese see this period as the most severe post-war security environment, and there is a call for greater support to enhance security and stability in the region, there is an internal cultural barrier that resists Japan’s increasing organic defense capability, slowing Tokyo’s ability to implement tangible outcomes. 

In particular, the SDF has been the only buyer of most defense products that Japan’s defense industry has produced. Thus, Japan has a unique challenge to overcome dwindling security and defense development where the defense industry has lagged involvement due to the low profit incentives. A concerted effort by industry to develop more dual-use technology would help to expand the end buyer list while Tokyo simultaneously tackles export control policy. 

To fuel innovation, both outreach to academia and investment grants are needed to encourage recent graduates to participate in start-ups, versus the typical path of going to work for large corporations, while reducing the cost of entry. Efforts are underway by the Ministry of Economy, Trade, and Industry (METI) to increase the organic defense industry by encouraging growth in industry partnerships and academic pursuits in innovation to fuel ingenuity and development needed within the industrial base.

Moving forward, in addition to the ongoing effort by METI and Japan’s Ministry of Defense, as Tokyo continues its efforts to expand self-defense and counterstrike options, Japan can use what it has learned from the country’s transformation from a purchaser of Patriot missile system to a producer of these systems and apply it toward long-range surface-to-surface missiles, like the $2.4 billion procurement of Tomahawk missiles. Opportunities are on the forefront to harness strengths of Japan and partners to co-develop and produce advanced munitions to strengthen supplies and interoperability.

As the JSDF implements the strategy and policies outlined in 2022, establishment of a new permanent joint headquarters (PJHQ), which is being rebranded as the Japan Joint Operations Center (J-JOC), will be critically important. The successful establishment of the PJHQ will go a long way to improve the joint command and control structure, effectively manage joint operations, and prepare joint doctrine aimed to align the forces for future contingencies as a joint service and with partners.

Furthermore, supply chain concerns are at the forefront of both sides of the alliance as their defense industry bases require high-end components to fuel future efforts and shore up their own national security concerns. Similarly, both sides need policy efforts to loosen export and import controls to ensure both countries are getting the components needed for their defense projects.

Even as there are challenges moving forward, the developments throughout 2023 highlighted that the Japan-U.S. alliance has never been stronger and will only continue to strengthen in 2024. Efforts to solidify the implementation of policy into practice will lift the alliance to new levels. 

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