Japan plans a defence industrial base strategy and a new agency to grow its arms makers

Japan's government has decided to draw up a defence industrial base strategy by the end of this year, in step with its revision of the country's three national security documents, the Yomiuri Shimbun reported on 25 October, citing several government officials. According to the paper, the strategy will include measures to grow industries built on dual-use technologies such as artificial intelligence and will set out plans for a new public body to support the defence industry as a whole.

The Yomiuri said the government wants a larger defence industry to secure production capacity for a contingency while also lifting the wider economy, a goal officials describe as a virtuous cycle between defence and economic growth. The paper said that strengthening deterrence now depends on adapting to new ways of fighting that rely heavily on AI and drones, and on being able to keep producing equipment over a long conflict.

The paper pointed to Ukraine as the model behind that thinking. It noted that Ukraine has kept fighting Russia's invasion for more than four and a half years by expanding domestic output of drones and ammunition on top of foreign deliveries, and it said the ability to sustain a war in that way can itself deter an attacker.

Under the plan described by the Yomiuri, the defence ministry and the economy, trade and industry ministry would work together to nurture companies with dual-use technology. Besides AI, the fields under consideration include aviation and space, semiconductors, and biotechnology and medicine. The trade ministry's experience with industrial policy and support for small and medium-sized firms would be applied to the defence sector, and the government also hopes that innovations made for defence can be turned to civilian use to support growth.

The strategy is also expected to include steady, continuing government purchases meant to help start-up companies grow, the paper said.

The new organisation is envisaged as an independent administrative agency. According to the Yomiuri, it would support exports of defence equipment, strengthen the industrial base including by fostering start-ups, and promote technological innovation. The government plans to submit a bill creating it to the ordinary session of parliament next year, launch it in October next year with about 300 staff and expand it to about 600 people within five years.

For exports, the body would help find overseas customers, handle contract procedures and provide maintenance and training after a sale. The Yomiuri said it would also take on a government-owned, contractor-operated model, under which the state owns equipment production facilities and private companies run them, with the aim of being able to increase output in an emergency.

The government hopes to turn the defence sector, where a small market and low profits have led a string of companies to withdraw or scale back, into a growth industry that underpins the country's defence capability, the paper reported.

The strategy is being prepared alongside the wider rewrite of the security documents. The Sankei Shimbun reported on 22 October that the government's expert panel on that revision is now expected to hand its report to Prime Minister Sanae Takaichi in early December rather than in November as first planned, and that it is likely to call for higher defence spending and a stable source of funding. According to the Sankei, the panel's fifth meeting was being arranged for 27 October, with defence and the economy and the funding of defence spending as the main themes.