Calls for Establishing a Japanese Version of U.S. Foreign Military Sales Grow in Tokyo

The Japanese government is currently working with the private sector to sell the improved Mogami-class frigate to Australia. The Australian Navy plans to order 11 new frigates, and the Albanese government is expected to choose either the upgraded Mogami, also known as the New FFM, or Germany’s MEKO A200-based frigate by the end of the year.

Japan’s disadvantage compared to Germany is that it has almost no experience with exporting Japan-made finished defense equipment. The only defense technology it has sold so far is an air surveillance radar system to the Philippines.

The Three Principles on Transfer of Defense Equipment, introduced in 2014 under the administration of then-Japanese Prime Minister Abe Shinzo, made it institutionally possible to export defense equipment overseas and engage in international joint development.

However, Tokyo continues to struggle to achieve that in reality.

Japanese defense companies have long been focused only on the domestic market. As a result, they are unable to compete aggressively on price and technology with foreign companies, a problem compounded by their lack of know-how in exporting defense equipment.

In addition, an employee at a major U.S. defense company pointed out that Tokyo lacks a national defense export system, akin to the United States government’s Foreign Military Sales (FMS) program.

The FMS, a U.S. government program, allows its allies and other countries not only to purchase defense equipment but also receive the entire package need to operate that equipment, including technical support and services such as training from the U.S. side. This whole-of-government program is authorized by the U.S. Arms Export Control Act (AECA) and other laws. The FMS is a key component of U.S. security policy, with the double aim of strengthening partnerships and enhancing the defense capabilities of allies.

Other major nations in the world also have a specialized agency in charge of government-to-government transactions for defense equipment exports. For example, South Korea has the Defense Acquisition Program Administration (DAPA).  France has the Direction du Développement International (DI). Israel has the International Defense Cooperation directorate (SIBAT). All are government organizations.

In fact, calls for establishing a Japanese version of the United States’ FMS have been growing in Tokyo in recent years.

In February 2022, legislators with Japan’s ruling Liberal Democratic Party (LDP) put forth a Japanese version of FMS as one possible model for a “new system of public-private partnership.”

Two months later. the Japan Business Federation also proposed the creation of a Japanese version of the FMS system, in which the Japanese government would receive orders from foreign governments, defense-related companies would deliver the equipment to the Japanese government, and the Japanese government would transfer the equipment to the foreign government.

Without an FMS system to control and manage the export of defense equipment as a complete package, Japanese defense companies will be at a disadvantage at a time when Japan is looking to get serious about exporting defense equipment. For example, if the upgraded Mogami were to be selected by Australia, the different Japanese companies might have to sign separate contracts with their Australian counterparts: Mitsubishi Heavy Industries for the ship’s hull, Mitsubishi Electric for the ship’s radar, and NEC for the naval antenna known as “UNICORN.”

The introduction of a version of the FMS would not only speed up contract procedures for Japanese defense firms, but it could also reduce their associated risks as the contracts will be guaranteed by the government. For example, it would reduce the risks of leaks of their confidential information – such as intellectual property – as much as possible after the firms provide equipment to a foreign nation.

Citing the potential sale of the Mogami-class frigate to Australia, I asked Defense Minister Nakatani Gen about the necessity of establishing a Japanese version of the FMS at a press conference on July 8.

“We are currently aiming to transfer frigate equipment to Australia, and for this we have established a public-private joint committee, which has been working on this issue,” Nakatani answered. “Public-private cooperation is extremely important in the future overseas transfer of defense equipment, so we will thoroughly discuss this within the public-private joint committee, and we will do our utmost to ensure that this project is a success.”

He continued: “As for how to develop this project further, I would like the public-private joint committee to have extensive discussions and make recommendations and considerations regarding the future direction of the project.”

Nakatani didn’t answer directly address the possible introduction of a Japanese version of the FMS.

So I asked him again, “If Japan is truly going to put effort into exporting defense equipment, don’t you think we need a Japanese version of the FMS, to show overseas manufacturers and governments that Japan has the systematic hospitality for defense exports?”

Nakatani replied, “Personally, I think that this is a very strong opinion, but until we get to that point, the Japanese defense industry needs to have a proven track record and capabilities.” He added that “discussions are being held between companies in the field of public-private cooperation about what to do going forward. The question is whether we can come to an agreement in that context.”

“That’s a deep theme,” a senior defense official in Tokyo later told The Diplomat on condition of anonymity.

“We really have to have enough time to discuss. I have talked to many Japanese industries. And now the Japanese government is trying to set up the National Defense Industrial Strategy. We are in discussions,” the official said:

“One of the discussion points includes whether or not the government should have an FMS type of model. I think we have to have further discussion with related people. The FMS itself needs to be interpreted in more detailed ways. When you say ‘FMS,’ what are you expecting? Is that government-to-government negotiations? Or financial support? We have to go into that level of aspects. If we go into that level, maybe this Mogami campaign already presented answers – not all but part of the answers to that question.”

The American defense firm employee mentioned above echoed the Japanese official’s view.

“There is a lot to consider behind the FMS, including export control regulations and post-delivery support systems,” the businessperson said. “Also, due to the nature of the system, it is a diplomatic tool and involves a commitment from the nation. The discussion may move forward depending on the results of FFM exports.”

The Mogami-class frigate sale will likely act as a stepping stone to further development of Japan’s procedure for defense exports.