A Growing Market
Countries in East Asia such as China and South Korea have been spending more on defence for many years. Japan has been more restrained but since 2012 has been increasing defence expenditure by around 2% annually. In 2022, the new defence strategy identified the need to increase defence spending to 2% of GDP by 2027.
For many years, Japan banned arms exports and provided a focus on indigenous defence capability. However, in 2014 a new policy on defence equipment transfer overseas has begun to change the landscape. Japanese companies are being encouraged to explore overseas markets and work with international partners, both at home and abroad. This is likely to increase in the next few years.
Japan has established equipment cooperation frameworks with a number of countries, including the US, UK, France, Australia and beyond. These provide government approval mechanisms to permit mutual development.
These changes are changing the landscape in Japan for international defence companies. There is a willingness to work with others.