Defense companies pivot to Japan amid Indo-Pacific’s shifting security dynamics

Marc Jacob Prosser

Global defense contractors are shifting operations and focus to Japan as the country increases defense expenditures to address rising tensions in the Indo-Pacific.

United Kingdom-based BAE Systems will relocate its supervisory functions from Malaysia to Japan by late 2023, according to Japan’s Nikkei Asia magazine. The company, which recently founded a subsidiary in Japan, will play a central role in the Global Combat Air Programme (GCAP), a trilateral initiative by Italy, Japan and the U.K. to develop a fighter jet. In connection with the move, BAE Systems is seeking to strengthen its partnership with Japan’s Mitsubishi Heavy Industries, among others.

United States-based defense company Lockheed Martin is relocating its Asian strategic hub from Singapore to Japan. Other companies, including U.S.-based L3Harris Technologies, Thales of France and Turkey’s STM, also are increasingly interested in Japan, Nikkei Asia reported.

“Japan is not just a customer but a pivotal collaborator in defense and a hub for Indo-Pacific security challenges,” Hirohito Ogi, a senior research fellow at the Asia Pacific Initiative & Institute of Geoeconomics, International House of Japan, told FORUM.

Japan’s strategic position in the regional security framework helps make it a magnet for global defense corporations, according to Nozomu Yoshitomi, a retired major general with the Japan Ground Self-Defense Force and professor of risk management at Nihon University. These advantages include Japan’s political stability, a robust defense technology foundation and a significant defense budget.

“Japan’s rising role in the Indo-Pacific’s peace and stability dynamics is evident,” Yoshitomi told FORUM. “As global defense powerhouses converge in Japan, it becomes imperative for the nation to act as a hub of regional deterrence, fortified by multinational defense commitments.”

Japan is bolstering its defense capabilities amid heightened tensions, with Tokyo identifying three significant security concerns: the People’s Republic of China’s increasing assertiveness in the region; North Korea’s destabilizing missile launches and military maneuvers; and Russia’s belligerence, as evidenced by its unprovoked invasion of Ukraine.

Japan’s defense budget for 2023-27 is a record $294.21 billion and the government is also considering allowing Japanese defense manufacturers to export more types of equipment, such as under the trilateral GCAP.

Increased defense spending and the potential for more exports could boost Japan’s defense sector, even with an influx of global defense giants bringing greater competition. Domestic midsize suppliers anticipate increased orders.

With a sprawling defense manufacturing landscape of more than 10,000 entities nationwide, Tokyo aims to foster collaboration among international defense companies and domestic small to midsize enterprises specializing in parts and components.

Yoshitomi said the arrival of foreign companies could redefine Japan’s defense industry and will require the crafting of policies promoting public-private-military partnerships.

Ogi also highlighted the increased potential for collaboration and stressed the need for restructuring: “The influx of global defense industries should catalyze positive change, preventing Japan from becoming just a secondary supplier.”

Marc Jacob Prosser is a FORUM correspondent reporting from Tokyo.