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Future of the Japanese Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018

Japan defence market: Expenditure to reach $60 billion in 2013

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2014-02-04 03:23:01 - Future of the Japanese Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018 - a new market research report on

Expenditure in the Japan defence market increased at a CAGR of 3.90% during the review period and valued US$58.6 billion in 2013. The focus of the Japanese government will be the modernization of equipment, procurement, and the training and development of personnel.

Japanese defense expenditure is mainly driven by threats from North Korea´s long-range ballistic missiles and China´s maritime expansion. Intrusion in coastal areas, organized crime, natural disasters will drive the Japanese Homeland Security expenditure.

The ban on exports imposed by the Japanese government severely affected the Japanese defense industry. The ban restricted Japanese companies from the joint production of equipment and technology with other technologically advanced countries. Japan is not able to achieve economies of scale and related benefits, thereby making



domestic production cost extremely high. Although, Japan is technologically advanced, developing state-of-the-art defense equipment is expensive, leading the country to buy expensive overseas equipment.

The ban imposed by the Japanese government on arms exports made it difficult for defense companies in Japan to maintain profitability. Despite the relaxation of the ban, Japanese defense companies still have limitations in terms of arms exports and are still subject to government approval; most importantly, companies will still be prevented from selling equipment to other countries.

Japanese defense companies are highly advanced and sophisticated in terms of defense equipment manufacturing, yet Japanese defense industries restrict themselves to tanks, warplanes, helicopters, and warship. This creates the strong need to enter joint development programs with other technological advanced countries. To procure other important defense equipment such as missile defense systems and aircraft, Japanese companies purchase license from foreign firms. These acquisitions of developed and tested technologies account for the majority of Japan´s defense imports. As part of the procurement program, Japan signed a contract with the US based Lockheed Martin for the procurement of F-35 Lightning II fighter aircraft. Japan has spent US$756.5 million in this contract. Japan began its F-35 acquisition from 2011, and this will run throughout the forecast period. Furthermore, Japan will acquire the last chunk of 30 aircraft from 2016 onwards.

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