Japan: Defense Industry Conquers Global Market After Taboos End

After the lifting of restrictions on arms exports by Tokyo, the Japanese defense industry is eyeing increased potential in a booming international market. However, it will need to focus on specific sectors and strengthen its capabilities.

Prime Minister Sanae Takaichi is starting a visit to Australia, where a massive contract was unveiled last year for the delivery of eleven Japanese-designed frigates to the Australian Navy. As Tokyo expands its arsenal, it aims to further integrate into international supply chains, as it lifted a decades-long ban on sales of lethal weapons to 17 countries with defense agreements in April.

Since 2014, Tokyo has allowed the export of non-lethal military products like transport and surveillance, and in 2023-2024, it relaxed rules for several contracts such as the sale of Patriot missiles to the US, aircraft developed with the UK and Italy, and frigates to Australia. The recent lifting of restrictions has increased the potential for Japanese defense groups. According to the Stockholm International Peace Research Institute (Sipri), five Japanese defense companies are among the top 100 defense companies globally in terms of revenue.

These companies are currently benefiting from domestic demand, as Tokyo increased its military spending by around 10% in 2025 to $62.2 billion, aiming to reach 2% of GDP quickly. There is now a shift from a government-led national acquisition model to a standard practice where businesses can generate commercial opportunities abroad.

Value-added

IHI, a supplier of engine components for the American F-35 aircraft, anticipates a significant impact on creating a favorable environment for international cooperation. The company is expanding its production capacities and workforce, and is constructing a new factory dedicated to rocket engines.

Mitsubishi Electric, which supplies radar systems to the Philippines and hopes to co-produce American-designed AIM missiles, also expects increased international commercial opportunities. The potential is huge, as global military spending increased by about 40% between 2016 and 2025 to reach $2.9 trillion last year.

“The Japanese advantage lies in high value-added segments where reliability, integration, technical performance take precedence over price alone: naval systems, missiles, sensors, propulsion systems, electronics,” noted Ian Ma.

Historical Measure

However, experts believe that increasing Japanese production capacities will take years, with significant startup costs and a chronic shortage of labor in the archipelago. There is also a strategic necessity for Tokyo to deepen its defense ties amid growing Chinese military strength.

In the immediate future, Australia, the Philippines, and Indonesia are expected to be key markets for Japanese industries, along with strengthened European and American cooperation. However, there is still a need to reassure the pacifist Japanese public, as a recent survey showed that 55% of respondents opposed the extension of arms exports.

AFP