Navigating the Competitive Seas

In April 2024, Prime Minister Kishida Fumio of Japan paid an official visit to the United States and held a summit meeting with President Joe Biden in Washington, D.C. Against the backdrop of global challenges affecting Indo-Pacific security and stability, the joint statement issued by the two leaders includes numerous initiatives to enhance defense and security cooperation. It also states that both countries will convene a Forum on Defense Industrial Cooperation, Acquisition and Sustainment (DICAS) to leverage their respective industrial bases to meet the demand for critical capabilities and maintain readiness over the long term.

The first round of DICAS was held in Tokyo this past June, and the Ship Repair Working Group, one of the four working groups established under DICAS, was also launched. With China’s increasingly coercive activities in the East and South China Seas, the forward deployment of U.S. naval vessels in the Indo-Pacific is strategically important for regional deterrence. As a U.S. ally in the Indo-Pacific, Japan needs to work on sending effective demand signals, harmonizing the supply chain, and incentivizing infrastructure development related to shipbuilding to realize the co-sustainment of forward-deployed U.S. Navy ships at Japanese commercial facilities.

The Geopolitical Significance of Ports

The concept of maintenance, repair, and overhaul (MRO) for U.S. Navy vessels at Japanese commercial shipyards has been advocated by U.S. ambassador to Japan Rahm Emanuel. In January 2024, at the U.S. Yokosuka Naval Base, he stated, “Whether Washington is focused on maintaining our ships or on building overall naval strength, Japan is key to our regional deterrence strategy.” This initiative will begin with the ships of the Seventh Fleet, headquartered in Yokosuka, Japan, which controls 10 to 14 destroyers and cruisers at any given time, with 11 based in Yokosuka and 25 ships periodically assigned to the region from Hawaii or San Diego.

U.S. vessels are already maintained and repaired in Japan at the U.S. Yokosuka and Sasebo Naval Bases. However, ships are also routinely sent back to the United States for a large-scale MRO, which can take months or even years to complete. If these ships could undergo MRO services in Japanese ports, they would be able to remain in Indo-Pacific waters for longer periods than at present. Washington also hopes for future joint U.S.-Japan combat shipbuilding in Japan.

When considering the efficient operation of maritime forces, the position of ports that can be used as bases is more important than the number and performance of naval vessels. Through its military-civil fusion strategy, China is promoting the military use of civilian resources, including shipyards, and the diversion of military technology to civilian use, not only in emergencies but also on a regular basis. China’s control over Sri Lanka’s Hambantota port is fueling concern because access to ports is critical to the military balance.

In this regard, enabling U.S. vessels to undergo MRO in Japan is of vital importance to U.S. strategy in Asia. This would facilitate the deployment of U.S. naval forces for longer periods to East Asia. It also aligns with the 2022 National Defense Strategy, which states that mutually beneficial alliances and partnerships are the United States’ greatest global strategic advantage.

In May 2024, the Department of Defense released the Regional Sustainment Framework (RSF), which aims to optimize regional MRO capabilities. The undersecretary of defense for acquisition and sustainment, Dr. William LaPlante, stated, “The RSF leverages our strong partnerships throughout the global defense ecosystem to deliver enhanced sustainment capabilities in theater. Doing so will create a distributed network of MRO facilities that is global in scale.” Expanding MRO services for U.S. vessels in Japan could significantly contribute to realizing this vision.

Strengthening Shipbuilding Supply Chains

Japan’s maritime industry is an agglomeration of interlinked industries known as a “maritime cluster,” which consists of shipbuilding, ship machinery and equipment, and shipping industries, along with closely related entities such as research institutes, financial institutions, and trading companies. Its sales amount to ¥11.3 trillion (approximately $93.8 billion as of December 2015), and its value-added accounts for approximately 1 percent of GDP. A full-fledged maritime cluster, which occurs in Japan due to the presence of almost all maritime-related industries and the close proximity of many companies and related organizations, is a rare occurrence globally and has been a pillar supporting Japan’s strong maritime industry to date. Additionally, all naval and patrol vessels that support Japan’s maritime security are built and repaired in Japan, and the industry has also contributed to the U.S.-Japan alliance through the maintenance of U.S. Navy vessels. Shipbuilding is an indispensable industry for Japan’s security.

After overtaking Europe in 1956 to become the top shipbuilder globally in terms of market share, Japan retained about 50 percent of global construction volume until the early 1990s. However, with the rise of South Korea in the 1990s and China in the 2000s, the world reached a point of global overcapacity in shipbuilding. China has rapidly developed its shipbuilding industry, and its share of the world market, which was only 6 percent in 2001, has risen to 50 percent as of 2023. China, South Korea, and Japan now account for 90 percent of the world’s shipbuilding market, and Japan ranks third in the world after South Korea, with a share of approximately 20 percent of the world’s shipbuilding volume.

The Japanese shipbuilding industry is exposed to fierce international competition in the field of commercial ships and is supported by demand for government ships. However, since domestic demand for government ships is limited, the production and MRO work for U.S. ships could create new demand in Japan. However, the outlook for foreign demand is poor, making voluntary infrastructure investment by companies unlikely. A clear demand signal from the United States would promote infrastructure investment by the private sector. Supportive measures for infrastructure investment by the Japanese government would also be welcome.

According to a May 2022 report by the U.S. Government Accountability Office, the backlog of U.S. ship maintenance was nearly $1.8 billion, with 1 ship decommissioned early in 2021 and 8 ships proposed by the U.S. Navy to be decommissioned early in 2022 and 2023, resulting in a loss of 34 years of ship life. On the other hand, the U.S. Navy has a robust plan to build numerous ships, including 4 Columbia-class submarines, 9 Virginia-class submarines, 10 Arleigh Burke-class destroyers, and 7 Constellation-class guided missile frigates over the five-year period from FY 2025 to FY 2029.

Additionally, under the AUKUS framework, a trilateral security partnership between Australia, the United Kingdom, and the United States, up to five Virginia-class submarines are planned to be built for Australia. However, shipbuilders across the United States are facing a serious workforce shortage challenge as older engineers retire, especially in submarine construction. The co-sustainment of U.S. ships in Japan would help reduce the U.S. backlog and alleviate the workforce challenge, further strengthening the shipbuilding supply chains.

As a further ambitious initiative, if Japanese shipbuilders invest in and reopen closed U.S. shipyards to construct U.S. ships, as Secretary of the Navy Carlos Del Toro is encouraging, it could significantly increase shipbuilding capacity.

Efforts of the U.S. and Japanese Governments

Construction and MRO for Japan Maritime Self-Defense Force (JMSDF) vessels are conducted by Mitsubishi Heavy Industries (in the Nagasaki and Kobe shipyards), Japan Marine United Corporation (in the Isogo and Tsurumi works), Mitsubishi Heavy Industries Maritime Systems (in the Tamano works), and Kawasaki Heavy Industries (in the Kobe works), among others. To meet new demand, flexible use of resources, including commercial ship infrastructure, will be effective.

Additionally, overall schedule and capacity management will be necessary, including the construction and MRO works for JMSDF vessels. For example, if a JMSDF vessel is being repaired at a shipyard and there is no capacity to handle MRO work for a U.S. Navy vessel, it would be necessary to make adjustments, such as assigning the MRO work on the U.S. vessel to another shipyard. Capacity adjustments across multiple shipyards will need to be coordinated by the aforementioned working group at the government level, as it would be difficult for the shipyards to manage alone.

Moreover, the U.S. and Japanese governments should promote the adoption of common systems and parts, as well as the mutual certification of system standards between the U.S. Navy and JMSDF. This will ensure that not only the hulls but also the systems installed on them can be smoothly maintained and repaired in Japan. Such measures will enable the flexible use of subcomponents and parts and allow for the consolidation of education and training for technical engineers, as they will not need to undergo separate maintenance training for U.S. and JMSDF systems.

In the United States, there is a legal restriction (10 U.S.C. 8680 (2024)) that states, “a naval vessel the homeport of which is in the United States or Guam may not be overhauled, repaired, or maintained in a shipyard outside the United States or Guam.” Therefore, as of this writing, Japanese commercial shipyards can provide MRO services only to U.S. vessels whose homeports are outside of the United States, such as Yokosuka.

In the past, Japanese shipyards have provided MRO services to U.S. Navy vessels such as the Aegis destroyer USS Milius and the replenishment vessel USNS Big Horn. However, most of the vessels are auxiliary vessels, and the services provided have been limited to minor works such as hull cleaning, painting, and equipment inspection. To expand the scope of these MRO services and provide them to more U.S. vessels in the future, it is necessary to revise this legal restriction.

Conclusion

The Indo-Pacific region is a growth engine for the global economy, home to more than half of the world’s population, but it also faces numerous security challenges. For example, several states and regions possess large military forces, including nuclear weapons, and do not share universal values or political and economic systems based on such values. Russia’s invasion of Ukraine demonstrates how easily the rules that shape the international order can be breached. The possibility of a similar serious situation occurring in the Indo-Pacific region in the future cannot be ruled out.

Japan will need to build a mutually beneficial strategic relationship with the United States and other allies and partners to address these challenges. Cooperation will be essential. It is necessary to develop a strong and resilient defense industrial base, including in the shipbuilding industry, to support military readiness and ensure a free and open Indo-Pacific.

Moyuru Tanaka is a visiting fellow with the Japan Chair at the Center for Strategic and International Studies in Washington, D.C., from the Acquisition, Technology, and Logistics Agency (ATLA) in Japan’s Ministry of Defense.

The views expressed herein are solely the author’s and do not represent the views of Japan’s Ministry of Defense, nor the government of Japan.