Japan’s Defense Industry Charts an Uncertain Global Path

Following decades of self-imposed constraints, Japan’s defense industrial base is poised to expand its international presence as legal restrictions are lifted and business culture evolves. Historically limited to serving only the Japanese Self-Defense Forces—a single domestic customer with historically modest spending—the sector has been defined by specialized, Japan-specific solutions delivered by firms deeply rooted in civilian industries, as well as limited economies of scale. Nevertheless, these long-standing conventions may be on the cusp of major upheaval thanks to the sale of Mogami-class frigates to Australia and revision of defense export rules. This inflection point carries significant consequences for Tokyo’s partners and allies, as Japanese firms emerge in the global market as both new partners and potential rivals.

Japan’s Defense Industrial Base in Context

Before disarmament and the U.S. occupation, Japan’s defense industrial base was formidable—world-class in aviation and shipbuilding, and broadly able to keep pace with the other great powers of the day. The occupation dismantled this sector, and in the years immediately after World War II, Japanese firms played only a modest defense role, repairing equipment and supplying U.S. operations during the Korean War. That war proved a turning point: U.S. “special procurement” revived Japan’s flattened heavy industries, and the 1954 Mutual Defense Assistance Agreement allowed firms to license-produce U.S. designs such as the F-86 Sabre jet, launching a decades-long pursuit of indigenous production known as kokusanka. Importantly, that pursuit was aimed at technological autonomy and spillover into the civilian economy, not at selling weapons abroad.

The constraints that locked the industry inward arrived in two steps. In 1967, the Satō Eisaku government’s Three Principles barred arms exports to communist states, countries under UN embargo, and nations involved in or likely to face conflict. It was the Miki Takeo cabinet that effectively sealed the door in 1976, declaring that Japan would also refrain from exporting arms to all other countries and extending controls to cover weapons production equipment. From then on, for the better part of half a century, Japan’s defense firms would serve a single customer: their own Self-Defense Forces.

The door that Miki shut began to reopen in 2014. Prime Minister Abe Shinzo’s cabinet scrapped the blanket ban and replaced it with the Three Principles on Defense Equipment Transfers, which permitted exports that served Japan’s security or international peace, subject to National Security Council review. The following year Japan consolidated its scattered procurement and export functions into a single Acquisition, Technology & Logistics Agency.

The pace then accelerated: The December 2022 National Security Strategy committed Japan to raising defense spending toward 2 percent of GDP, and in December 2023 the rules were loosened again to allow the export of licensed-produced systems—Patriot interceptors among them—back to their U.S. licensor, and lethal systems to partners with whom Japan codevelops. By 2024 Japan had cleared the way to export the next-generation fighter being developed with Britain and Italy under the Global Combat Air Programme. The last wall fell in April 2026, when the Takaichi Sanae cabinet abolished the five categories that had confined finished exports to non-lethal roles—rescue, transport, warning, surveillance, and minesweeping—and reclassified defense equipment simply as weapons or non-weapons. Warships, missiles, and fighters can now be sold outright to the seventeen countries with which Japan holds defense equipment and technology transfer agreements.

Japan as a Competimate

Japan’s defense sector was never a walled-off industry on the U.S. model; it grew inside civilian heavy industry, drawing on what Richard Samuels calls “spin-on”—the flow of commercial process and product technology into military systems—with diversified primes including Mitsubishi and Kawasaki carrying world-class shipbuilding, materials, and electronics into their defense lines. That heritage is what now makes Japan, all at once, a partner and a rival—what the defense industry calls a “competimate.” For allies, the partnership is real: A capable, exporting Japan deepens the allied industrial base, widens codevelopment, and spreads the burden of deterrence in a region fixed on China. But the same capability also makes it a competitor. In winning the Australia contract, Japan displaced an established European supplier, and it will increasingly compete with U.S., French, German, and a fast-rising South Korean industry for the same export opportunities. This potential friction can reach inside the alliance, as it did between Japan and the United States during the FS-X fighter fight of the late 1980s, which turned a technical program into a bruising dispute over who would control technology and workshare.

None of this is guaranteed. Japanese systems are advanced but expensive, and Japanese firms still lack the marketing reach, sustainment networks, and financing that established exporters use to close and service deals abroad. The Australia deal is a commercial contract with Mitsubishi rather than a government-to-government sale, and its “zero-change” design promise will be tested as Australian weapons and systems are integrated. That kind of rework has driven cost and delay on Canberra’s own programs before, such as the Hunter-class frigates, adapted from a British design. Japan’s international sales inexperience was evident a decade ago when its Soryu-class submarine failed to win in Australia. Whether Japan can turn these lessons and a handful of landmark wins into a durable export industry remains in question.

The United States and its allies will now have to see Japan as two things at once: a partner whose industrial weight relieves strained supply chains and shores up deterrence, and a competitor bidding against their own national champions. The strategic case for welcoming the first is strong; the commercial cost of the second falls on specific set of global defense firms. Reconciling the two has become an allied problem, not merely a Japanese opportunity. How this tension is managed will determine whether Japan’s reemergence adds to allied strength or just redistributes it.

Aleksandar (Alek) Jovovic is deputy director of the Center for the Industrial Base and a senior fellow in the Defense and Security Department at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Awais Hanif is a research intern in the Center for the Industrial Base at CSIS.