Interim Report of the Study Group on Defense Production and Technological Bases (Summary)
Challenges and Issues in the Formulation of a Strategy for Defense Production and Technological Bases

A strategy for defense capability and technological bases, and the status of the Report

  • The purpose of the Report is to make recommendations to the Ministry of Defense with regard to the direction of a strategy for defense capability and technological bases, which is to be set forth as stated in the National Defense Program Guidelines and the Mid-Term Defense Program (hereinafter referred to as the “Strategy”).

Defense production capability and technological bases, and the need of the formulation of the Strategy

  • With no significant increase in defense expenditure being expected, the amount of procurement has been declining. In such a situation, it is becoming increasingly difficult for defense industries to maintain their research departments and manufacturing departments for defense equipment, which has little demand for civilian use..
  • Since the failure to retain defense production and technological bases in Japan
    would be damaging to maintain necessary defense capability in the country, . the government needs to set forth a strategy to maintain and develop defense production and technological bases, taking into account the survey of defense industries conducted by the Ministry of Defense and the characteristics of each type of equipment.

Direction of a strategy for defense production and technological bases

  • The following are the important issues that would be a basis for the discussion on the direction of the Strategy. The study group will go further in-depth in future discussions.

(1) Basic ideas toward the formulation of the Strategy

  • Necessary equipment for the defense of Japan ought to be developed and produced principally in Japan. However, the direction of the strategy would be discussed as follows, based on the idea of the National Defense Program Guidelines and the Mid-Term Defense Program:

(i) Selecting important areas based on judgment criteria for Selection and Concentration, and choosing priority areas for investment that need to be developed and maintained within Japan, while taking into account the technological level of Japanese industries, with the goal of realizing domestic development and production.

(ii) Pursuing international cooperative development and production as well, with regard to equipment which falls within the important areas and involves cutting-edge technology and requires huge costs.

(iii) Importing equipment temporarily which falls within the important areas but cannot be produced domestically, due to the lack of adequate technology within the country.

(iv) Procuring other equipment from world market, considering the price and performance.

(2) Judgment criteria for selection and concentration

  • It is necessary to set judgment criteria in order to realize selection and concentration on the premise of the concept of a dynamic defense force, advocated in the National Defense Program Guidelines and the Mid-Term Defense Program.

Proposed judgment criteria
Strategic assurance Equipment which is or will be the key for Japan’s defense capability, which has no assurance for its stable procurement from overseas in the future
Confidentiality Equipment which must be retained domestically, because disclosure of specifications of equipment has a serious influence on the performance of its function, or which is unlikely to be procured from overseas due to its nature
Operability Equipment which must be retained domestically due to the necessity of maintenance and repair
Difficulty in
introduction
Equipment required for performance unique to Japan
Difficulty in restoration Equipment whose production base and technology are extremely difficult to restore, once they are lost
Level of advancement Equipment for which Japan has superior technology and does not need to procure it from overseas

(3) International cooperative development and production

  • In the areas of advanced equipment where the performance and price levels have been rising, international collaboration is indispensable in the course of development and production.

<Advantages of international cooperative development and production>

(i) The strengthening of the alliance and bilateral relationship and improvements in interoperability

(ii) The sharing of development risks as well as development and production costs among multiple countries

(iii) The stabilization of the business management base and the operational base for equipment

(iv) The access to and acquisition of the technology

  • As the technological capabilities and intentions of the countries participating in a development project can have an influence on the course of the project, there is the possibility that the equipment finally developed in the project may not meet Japan’s operational requirements or that the development costs increase to an unexpected level.

(4) Procurement by import or through competition

  • With regard to such equipment to be procured by import or through competition based on the judgment from the perspective of selection and concentration, or in consideration of Japan’s technological level, it is necessary to study the possible impact in the event of the loss of domestic production bases.

(5) Acquisition reform

  • In order to develop and maintain defense production and technological bases, it is also important to review the procurement system as well as the framework for such development and maintenance, so as to create a win-win relationship between the government and industry. Examples: Review of the contract system, etc., introduction of Performance Based Logistics (PBL), and promotion of the use of defense equipment for civilian purposes

(6) Industrial organization

  • In order to develop and maintain defense production and technological bases in light of the severe fiscal situation and with a view to taking part in future international cooperative development and production, it is essential to explore an industrial organization that will be the most effective under the structure and features of Japan’s defense industry.

<Points at issue>

(i) The industry consolidation and restructuring may strengthen the competitiveness of Japanese businesses in preparation for taking part in international cooperative development and production, and can be expected to reinforce Japan’s defense production and technological bases.

(ii) No progress is being made in the consolidation and restructuring of Japanese defense industry because it may not be bring about much economic benefit..

(iii) The issue of the industrial organization should be further discussed, including what measures should be taken by the government to strengthen the international competitiveness and supply chain.

(7) Relationship between the 1970 Administrative Vice Minister’s Directive and the Strategy

(8) Demonstration of the measures necessary for the implementation of the Strategy

  • Deregulation and other special measures should be implemented in cooperation with the relevant ministries and agencies. Examples: Review of the Three Principles on Arms Export so as to enable the participation of Japanese government and businesses in international cooperative development and production, deregulation for increasing the international competitiveness of Japanese businesses, etc.

(END)

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