Japan-Philippines Defense Industrial Cooperation

In the territorial waters of the South China Sea, the Philippines finds itself under persistent pressure. Beijing’s maritime assertiveness and gray-zone coercion have only grown more aggressive, with the China Coast Guard (CCG) maintaining an almost daily presence inside the Philippines’ exclusive economic zone. While China’s expansion is daunting, Manila has not stood still. In recent years, the Philippines has embarked on some of its most ambitious defense modernization drives in decades, backed by strong political will and growing external support. 

Japan is playing a growing role in supporting the Philippines and its contributions reflect overlapping security concerns, economic interests, and a shared desire to promote regional stability. Recent milestones include the 2023 Reciprocal Access Agreement (RAA), which allows for the deployment of personnel and assets in each other’s territories, as well as the 2024 transfer of coastal radars and patrol boats. By leveraging its technological and industrial strengths, Japan is positioned to complement the Philippines’ modernization push and help Manila build a more sustainable defense industrial base over time.

The Philippines Context

Despite this momentum, capability gaps remain. The CCG, the world’s largest, fields 157 large patrol vessels as of 2023, nearly quadruple its strength a decade ago. By contrast, the Philippine Coast Guard has only 25 major vessels and still struggles with limited surveillance coverage and outdated platforms. Compounding these challenges are budgetary constraints and constitutional limits on defense spending, which slow the pace of procurement.

The Philippines is also nearing the end of a 15-year modernization program, which has been uneven in its progress. Earlier phases were hampered by underspending, project delays, and reliance on foreign suppliers. The final phase, however, has seen marked improvements, with new assets arriving at a faster rate and greater clarity on Manila’s priorities. Going forward, the challenge may not be whether the Philippines is doing enough, but how it can strategically manage partnerships and domestic reforms to maximize the impact of its investments. Modernizing its maritime capabilities while cultivating diversified and sustainable defense partnerships may be essential to keeping pace with regional threats.

Paving the Way for a Japan-Philippines Industrial Partnership

In this context, Japan has emerged as a strategic partner willing to support both tracks through defense technology transfers and development assistance. Japan updated the “Three Principles on Transfer of Defense Equipment and Technology” in 2014 to permit defense transfers, legalizing the transfer of Parola-Class Patrol Boats and Teresa Magbanua-Class Vessels to the Philippines. This military hardware was financed by the Official Development Assistance (ODA) programs of the Japan International Cooperation Agency, which broadly interprets maritime security as a form of economic development. In 2024, Japan was the largest ODA provider to the Philippines with 13.23 billion dollars.

To bolster this evolving public cooperation, Japanese defense manufacturers can consider offshoring auxiliary industrial operations. The Philippines benefits from Japanese Overseas Security Assistance (OSA) launched in 2023 to enhance the security capabilities of like-minded countries by providing military equipment and infrastructure support. These factors present a nascent commercial opportunity for maintenance, repair, and operations (MRO).

Japan has recently constructed the legal and regulatory frameworks for the Philippines to potentially serve as a profitable MRO hub. Japan and the Philippines are negotiating a General Security of Military Information Agreement and an Acquisition and Cross-Services Agreement. Ongoing multi-partisan support for this partnership underlies recent material transfer agreements with the Philippines: a FPS-3ME radar and six Abukuma-class destroyer escorts. Japanese defense firms have an opportunity to provide maintenance to this hardware. Prime Minister Shigeru Ishiba recently noted that Japan and the Philippines “are now partners that are almost like allies,” demonstrating a foundation of diplomatic goodwill and commercial opportunity.

Japanese defense firms that enter the Philippines may build long-term lock-in demand for upstream components. The FPS-3ME provided to the Philippines is exclusively developed and manufactured by Mitsubishi Electric, which profits from ongoing operational support and modular upgrades. Overseas markets such as the Philippines provide diversified and predictable revenue streams that could compensate for unpredictable domestic military spending, and opportunities such as these can support the development and competitiveness of Japanese defense firms.

In short, enhanced industrial harmonization between Japan and the Philippines can bolster security in the South China Sea. Legal, security, and industrial frameworks between Japan and the Philippines can support economic growth and stability in the region. Bilateral frameworks can also strengthen the institutional foundations for enhanced minilateral networking with the United States, the European Union, and the Quad.

Conclusion

Crisis creates opportunity. The considerable security tensions in the South China Sea are putting the Philippines under coercive pressure. In this moment, Japan stepping up in partnership may facilitate defense industrial cooperation that can support regional stability. Japan and the Philippines are aligning their potential shared commercial and strategic interests for defense cooperation, thus forging a prospective pathway for a security partnership in the region.

Christopher Kirch was an intern with the Japan Chair at the Center for Strategic and International Studies. Hpone Thit Htoo is a research intern with the Southeast Asia Program at CSIS.