RIPS Policy Perspectives
No.16

Summary Report
RIPS Symposium 2012
Responses to Japan’s New Arms Export Policy
December 2012

Acknowledgments
The Research Institute for Peace and Security (RIPS) held the tenth RIPS Public
Seminar, “Responses to Japan’s New Arms Export Policy,” at Grand Hill Ichigaya,
Tokyo, on October 4, 2012. Experts from U.S., European, and Japanese industries
made the presentations and participated in the panel discussions, which were led
by Junichi Nishiyama, a consultant with Mitsubishi Heavy Industries. RIPS
wishes to thank all the panelists and the moderator for making the program sucha success. This report was compiled by Yukari Kubota, Osaka University.

Announcement
Mr. James F. Armington (vice president, Boeing Japan), who was to attend as apanelist, was unable to do so because of a family emergency. Mr. Kevin Maher(senior adviser, NMV Consulting) kindly agreed to take his place.

2

Contents

Welcoming Remarks
Masashi Nishihara

4

Greetings
Masanori Nishi

4

Opening Remarks
Junichi Nishiyama

6
8

Presentations
Japan’s New Arms Export Policy: Responses by Japanese, European, andU.S. Industries
Takashi Kobayashi

8Japan’s 3Ps Arms Export Policy: U.S. Industry View
Gerard P. Lawless

11

The Benefits of Collaboration in Defense Programs
Anthony (Tony) R. Ennis

13

Japan’s New Arms Export Policy: Responses by Japanese Industries
Kunio Kondo

16

Comments
Kevin Maher

18
21

Panel Discussions

Closing Remarks
Masashi Nishihara

25
26

Profiles of Participants3

Welcoming Remarks

Masashi Nishihara
President, Research Institute for Peace and Security (RIPS)

This symposium is the last of the three- or four-part seminar on security issues
that the Research Institute for Peace and Security holds each fall. Today’s theme
is “Responses to Japan’s New Arms Export Policy.” As you know, in December
2011 the Japanese government partially deregulated the Three Principles on
Arms Export. Will the new guideline revitalize the Japanese defense industry?
How will it affect the joint development and production of defense equipment?
Today I hope we will discuss these issues.

Greetings

Masanori Nishi
Director General, Defense Policy Bureau, Ministry of Defense

The Japanese government partially amended the Three Principles on Arms
Control on December 27, 2011, an amendment that paved the way for Japan toparticipate in the international joint development and production of defense
equipment. In turn, this means that Japan must become more creative andforward looking.
Japanese companies have many sophisticated technologies, such as quality
control systems and processing technologies, which are indispensable todeveloping and manufacturing precision defense equipment. We do not yet know,
4however, whether Japan can use these technological capabilities in international
co-production.
Another issue is which country Japan should work with on international
joint projects in order to strengthen their relationship. Japan and the UnitedStates have been sharing defense equipment and its development andmaintenance for many years. Through sometimes very direct and frank
discussions, the two countries have a very good relationship regarding theballistic missile defense (BMD) joint project now under way. Japan does not,however, have the same sort of relationship with European and other countries,
although the government is investigating European technology and the possibilityof joint development and production with European countries. Japan and Europe
can establish a constructive relationship on

the basis of consultation between

their own military services.
Japan faces many challenges. For instance, the Japanese government
included funds for the F-35 in the budget for fiscal year 2012. Because theproduction and maintenance of the F-35 project is so complicated—nine countries,
including the United States, are involved—the Japanese government should takemeasures to avoid cost increases. In addition, if the Japanese government is tocooperate in preparing for the maintenance that the United States is planning, itshould consider whether the new guideline of arms export control could meet therequirement (such as third-party transfer) that might be made by the UnitedStates.
Another issue is emerging for the Japanese government. At a ministerial
meeting, the Australian government asked for cooperation in developing andmaintaining defense equipment, and the Japanese government should respondaccordingly. The Japanese government has just begun to cooperate with
Southeast Asian countries on capacity building, which means that it should make5

available to them the Japan Self-Defense Forces’ expertise. In this way,
governments can cooperate on the military services level and/or broaden theircooperation on a defense ministry level, which then could lead to the joint
development of defense equipment.
I have instructed my staff not to work hastily, but work carefully. It is
important that we take a step-by-step approach. First, the government should
decide on the goal and then determine the shortest possible path to that goal.
Second, it should decide how the government will cooperate with othergovernments, for what purpose it will use the defense equipment, and how it
should carry out these tasks. The government also needs to think about how toestablish a cooperative relationship with the defense industry. Furthermore, theMinistry of Defense must discuss its ideas about defense procurement with therelevant companies. Accordingly, today’s symposium is a good opportunity forJapanese, U.S., and European company officials to exchange views and find where
they agree or disagree.
Although no policy can be implemented overnight, I am sure that Japan canmove forward. For example, in ten years, maintenance of the Asia Pacific F-35
fleet will be located in Japan. It will be difficult for the Japanese government toconstruct this base in this time frame. But it also is certain that having begun
working toward that goal, the Japanese government will want to implement theappropriate policies, along with the new arms export control policy.

Opening Remarks

Junichi Nishiyama, Moderator
Consultant, Mitsubishi Heavy Industries
6Before the panelists make their presentations, I want to briefly go over Japan’sarms export policy. The Three Principles on Arms Exports were established at the
National Diet in 1967 by Prime Minister Eisaku Sato. These principles are, first,
no exports of arms to communist countries; second, no exports of arms to countries
sanctioned by a United Nations resolution; and, third, no exports of arms to thosecountries that are or may be engaged in international conflicts. In 1976, Prime
Minister Takeo Miki added arms-related facilities and technologies, to be treatedin the same way as arms are. He also stated that Japan should be “prudent” inexporting arms overseas, thereby indicating the country’s support of a general ban
on arms exports.
In 1983, Prime Minister Yasuhiro Nakasone approved the export of defense
technologies to the United States, Japan’s ally. This exception to the Three
Principles opened the door for joint Japanese-U.S. research on defense equipment
technology. In 2004, Junichiro Koizumi’s administration announced that theThree Principles on Arms Exports would not be applied to the joint development
and production of a missile defense system with the United States. This policy
also stipulated that exemptions might be made on a case-by-case basis for otherjoint projects and for the export of technologies and equipment to combat
terrorism and piracy.
On December 27, 2011, the chief cabinet secretary of the Yoshihiko Noda
administration issued guidelines stating that the government would takecomprehensive exemption measures for the overseas transfer of defense
equipment for cases related to peacekeeping and international cooperation, as
well as for cases regarding the international joint development and production of
defense equipment contributing to Japan’s security.
Since then, however, there have been no programs of arms exports and7cooperative development and production. Why not? I hope each panelist will
discuss the following three points from the viewpoint of an industrial official: (1)how he understands the partial deregulation of the Three Principles on Arms
Exports, (2) what kinds of defense programs would be appropriate candidates forexport and/or international joint development/production, and (3) what thedifficulties with or obstacles to Japan’s arms exports might be.

Presentations

Japan’s New Arms Export Policy: Responses by Japanese, European, and U.S.
Industries
Takashi Kobayashi, Representative Director, Executive Vice President, andGeneral Manager, Aerospace Systems, Mitsubishi Heavy Industries

By partially amending the Three Principles on Arms Export, the Japanese
government has changed the guidelines for exporting arms, from the 2004
decision allowing exemptions on a case-by-case basis to the 2011 decision allowing
more comprehensive exemption measures. In this way, the Japanese government
simplified the procedures for and judgments about the overseas transfer ofdefense equipment and reconfirmed its position on arms export control. How willthese comprehensive exemption measures affect the Japanese defense industry?
Their purpose is to strengthen Japan’s defense industrial base while keeping
within its limited defense budget. Accordingly, because reducing defense budgets
has become a global trend, international joint development and production would
benefit both Japan and its partner countries.
In July 2012, KEIDANREN (Japan Business Federation) and the American8Chamber of Commerce in Japan issued their Joint Statement on Defense Industry
Cooperation, which outlined the following four scenarios for international joint
development and production under the new arms export guidelines: (1)establishing a joint development and production program based on anintergovernmental agreement, (2) conducting joint research on a commercial level,(3) participating in foreign government programs, and (4) supplying the licenser’s
country.
Scenario 1 is a formal joint development and production program
established by two governments. Because a large-scale defense program requires
both a huge budget and highly advanced technologies, this sort of cooperation
could benefit both countries. For example, Mitsubishi Heavy Industries (MHI) has
been participating in the joint SM-3 Block IIA development program with theUnited States. As a candidate for a future program, MHI expects the government
to agree to the BMDOAR (Ballistic Missile Defense Open Architecture) program,which was canceled because of a third-party transfer issue.
The second scenario assumes industries’ early-stage research collaboration
on studying future defense technologies. Although this scenario requires
companies to make investments up front, this type of cooperation could lead to acomprehensive joint development and production program based on anintergovernmental agreement. An example is the WESTPAC (Western Pacific)
Missile Defense Architecture Study in 1988–1993, which led to a 1999
Japanese-U.S. technological research program and the 2006 SM-3 bilateralco-development program. MHI is now seeking a similar, beneficial researchsubject with a foreign company.
Scenario 3 assumes industry collaboration in support of a single government
program established by a single national government. In this case, a Japanesecompany might supply components to a U.S. company providing products under a9

U.S. government program. Japanese companies’ sophisticated defense equipment
and advanced technologies are comparable to their foreign counterparts, so
including MHI in such a program could contribute to the defense and security ofJapan’s allies and friendly nations.
In the fourth scenario, a licensee supplies defense equipment andtechnologies to the licenser’s country. With its vast experience in the licensed
production of fighter aircraft and missiles, MHI is prepared to meet the needs ofJapan’s allies and friendly nations. Such cooperation would benefit all theparticipating countries.
What are the potential difficulties? First, the Japanese government needs toestablish controls for arms exports within the framework of the new guidelines,
which currently refer only to “comprehensive exemption measures.” Thegovernment also needs to establish a clear policy for the international joint
development and production of defense equipment. Second, the Japanese defense
industry needs not only to make additional investments but also to adopt new
ways of manufacturing competitive, cost-effective products. What kinds oftechnologies does the overseas defense market want? How can Japan’s defense
industry meet this demand? Without carefully drawing up these marketingstrategies, the industry will have difficulty competing in the global market.
Finally, the Japanese government’s budget for defense R&D, which isrelatively small compared with those of the largest defense powers, should be
increased so that Japanese defense technology can become a major player in the
global market. The Japanese defense industry also should use its highlysophisticated commercial technology for defense equipment. Without investingand nurturing the defense industry, Japan will not be able to participate ininternational joint development and production.

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Japan’s 3Ps Arms Export Policy: U.S. Industry View
Gerard P. Lawless, President, Raytheon Japan

Centering my presentation mostly on the Patriot Program, I will try to address a
few of the questions that were stated as the purpose of the symposium. The firstquestion is what the candidate to be exported from Japan will be. Several
programs at Raytheon could provide an opportunity for further collaboration
between the United States and Japan. The Standard Missile Cooperation
Development (SCD) is an example of a joint program that will, I hope, result in a
co-production program in which we collectively produce Standard Missiles anddistribute them around the world to ensure peace and prosperity.
The third-party transfer issue, however, needs to be addressed before thiscan be successful. Raytheon Company is very interested in working together with
the Japanese defense industry to help us deliver the Patriot system to many new
customers worldwide that have expressed an interest in producing these systems.
Several years ago, Raytheon asked the Japanese defense industry to manufactureparts of the Patriot to be exported to various customers; however, the Three
Principles on Arms Export Control did not allow this, and Raytheon wascompelled to find other international partners. Raytheon, however, has not given
up on finding a way to have the Japanese defense industry involved and believes
there are still many opportunities for it to do so. Co-producing the Patriot systems
would provide many benefits, such as helping reduce the impact of obsolescence;
reducing costs and meeting development and production schedules; providing an
additional source of parts and/or assemblies for production, economies of scale,and logistics; and contributing to the U.S.-Japan alliance.
Implementing the comprehensive exemption measures for arms export could
11

dramatically impact the way that Raytheon conducts business in Japan,
depending on the extent of the change. New business opportunity will start slowly
but, in time, will grow. The logistics, maintenance, and training markets could
substantially change, so that Japan could become a player in the United States,
Europe, and neighboring countries. There would also be an increase in the
co-development or co-production of systems in which the Japanese defense
industry and foreign investors choose to work together.
The next question is what the role of the Japanese government will be.
Although it modified the guidelines for exporting defense articles in December
2011, the Japanese government has neither fully implemented the policy nor
established clear guidelines in how this should be accomplished. The Japanese
government really needs to further define the process for implementing this policychange. For the first step, the Japanese government should establish clear
policies and procedures for the industry to follow. The U.S. industry and its
Japanese counterpart also need to move toward a “real partnership” through a
program between licenser and licensee, which will eventually build themselves as“global partners.”
Some concerns with regard to cost and scheduling remain. To start with, thecomplexity of Japanese defense export contracts—including inspection,
paperwork, and personnel expenses—must be simplified and streamlined. As aresult, the first attempt at international co-development and co-production is
likely to take a considerable amount of time as arms export policy implementationand structure will, and should, be spelled out in detail. In this respect, various
agencies and ministries—including the Ministry of Economy, Trade, andIndustry; the Ministry of Defense; and the Ministry of Foreign Affairs—will need
to be involved in the policy review and coordination, as well as MOU(memorandum of understanding) requirements.
12

By implementing the new guidelines for arms exports, Japan will become amember of the international community and thereby gain access to defense
systems with cutting-edge technology at a cost and in a time frame that Japancannot achieve by itself. Japan’s defense technology would be enhanced byparticipating in the world’s advanced defense programs. Japan needs to beinterdependent and more involved in global security, as it has great technologythat should be shared with friendly nations while maintaining its peace-loving
policies. We need to take the focus away from Japan and toward the global market.
Self-isolation is not practical; acquiring defense systems through international
cooperation is more realistic and cost-effective.

The Benefits of Collaboration in Defense Programs
Anthony R. Ennis, President, North East Asia, Tokyo Office, BAE Systems
International, Ltd.

First of all, let us look at BAE Systems International and some European
companies’ collaboration in defense programs. By forming partnerships, European
countries have responded to the growing demands of their armed forces in the faceof increasingly complex technologies and smaller budgets. Although each
European nation has continued to cultivate individual centers of excellence, they
all understand the benefits to be gained from pooling their resources. They
therefore have learned to collaborate to develop products with other European
nations as well as the United States. This joint collaboration has enabled morepartners to bear the cost, as well as the risk, of production. It has also allowed for
economies of scale through larger production runs. Sophisticated arrangements
were developed to share technology in a secure manner while enabling the growth13

of broad defense industries. All this was undertaken in an environment ofcommon interests and mutual benefits. This is what I want to emphasize, that all
parties in a collaboration must consider the benefits of a relationship.
Examples of successful collaborations are, first, the Tornado, aground-attack jet aircraft, which was manufactured by a three-nation (United
Kingdom, Germany, and Italy) fighter-jet collaboration between Panavia andJaguar. The Eurofighter platform is built by a consortium of four leading
European companies. The combined expertise of these companies has produced
the most advance air-to-air fighter on the market today. EUROJET, a consortiumof four companies, is responsible for the EJ200 engine system, installed in theEurofighter. It is the latest-generation military turbofan engine in the
20,000-pound-force-thrust class, designed to fulfill the most demanding
requirements of a fighter aircraft. Another example is the NH 90 helicopter,manufactured in a European program for a new-generation, multiple-role
helicopter, established by France (Eurocopter), Germany (Eurocopter), Italy(AgustaWestland), and the Netherlands (Fokker). This helicopter has beenpurchased by fourteen nations. Finally, BAE Systems is cooperating with
Lockheed Martin on the F35 program.
My second point is, how does Japan view collaborations like these? Only twocompanies have approached us to collaborate on dual-use products, which werevery welcome approaches but for only low-tech products. In contrast, in 2012,
Korean companies came to BAE Systems with many high-end, joint-venture
opportunities, such as exports of T/A 50 fighters to Indonesia, K9 Howitzers, KT1
trainers, and Rotem Tanks to Turkey, APCs (armored personnel carriers) to
Malaysia, Kangnam mine hunters to India, and oilers to the British Royal Navy.
Moreover, China’s defense budget has increased fivefold over the last ten
years, and according to the latest figures from the Center for Strategic and14

International Studies, its official defense budget will be probably on a par with theUnited States’ within fifteen to twenty years. China thus is becoming a major
exporter of defense equipment and a serious competitor of BAE Systems.
What can we do here in Japan? Although the collaboration program for theEurofighter Typhoon ended badly, BAE Systems assumes that it can obtain export
licenses to support its engagement with Japan regarding such defense products as
flight trainers, synthetic training, avionics, and electronic warfare. The Japanese
government has relaxed its control over arms exports so slightly, however, that
opportunities for joint development programs with Japan still are limited. Instead,the government needs to make the Japanese defense procurement environment
more attractive and welcoming so that overseas partner companies can easily
participate in cooperative programs. It could do this by using English, NATO
standards, transparent and more comprehensible RFPs (requests for proposals),
clearer statements of requirements, and better debriefings after contracts areawarded. The Japanese government also should broaden its security
arrangements for industry-to-industry transfers of classified data andinformation, as well as using the U.S. ITAR (International Traffic in Arms
Regulations) model for its export policy, the U.K. DESO (Defence Export Services
Organization) model for the government’s support of defense sales, and the U.S.
FMS (foreign military sales) for the government’s contracting. Moreover, theJapanese government may have to facilitate the collaboration by deciding what
the core capability is and what the company can afford by itself and what should
be co-developed.
Reaching the highest capability at the lowest price not only will contribute tonational security but also will benefit taxpayers. Although Japan should proceed
carefully, I do not recommend that it tiptoe while the rest of the world is sprinting.

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Japan’s New Arms Export Policy: Responses by Japanese Industries
Kunio Kondo, Associate Senior Vice President and Executive General Manager,
Aerospace and Defense Operations Unit, NEC Corporation

I will begin my presentation by describing the advantages and disadvantages ofthe partial deregulation of the Three Principles on Arms Export from theviewpoint of a Japanese industrial official. First, the partial deregulation willallow the Japanese defense industry to remain in business, as access to this larger
overseas market will lead to lower costs and the long-term operation of defense
equipment. Second, Japan’s sophisticated technologies, such as high-precision
instruments and components, are so greatly valued by the rest of the world thatthe defense industry can count on a demand for Japanese-made products formilitary purposes. Third, Japanese companies will be able to use the practicalknowledge of defense production gained through international collaboration
programs for Japanese-developed defense equipment, which would help improveits combat forces’ operation.
In contrast, the Japanese defense industry will have difficulty taking theinitiative in carrying out international co-development programs, as many
companies in other countries already have much experience in defense production.
Therefore, for the time being at least, Japanese companies might have to become
subcontractors. Another possibility is that as the international co-development
programs gain success, imports of global standard products would increase,forcing some companies without strong industrial and technological capabilities toleave the defense market. As a result, the Japanese defense industry would lose
some of its own products. This means what is called Japan’s Galapagos-like
technological trend—technological isolation or deviation from global
16

standards—would be broken, making it difficult to provide end users with thecareful service they would need. In addition, Japanese defense contracts with the
Ministry of Defense and its unique budgeting system could discourage foreigncompanies from entering the Japanese defense market as a prime contractor.
Systematic approaches are needed in order to carry out defense businessunder the new guidelines for arms export control. Japan could use the existingdual-use technologies and develop some pilot projects in the overseas market,
including joint research and development programs with the United States. Doing
this would help make clear what is allowed under the new framework, which inturn would be important to joint commercial research and participation in foreign
government programs in which the Japanese government’s involvement is notneeded.
The next step is to participate in bilateral development and production
programs under the strict control of exports to third-party countries and tosupport peace-building and humanitarian measures. Currently, Japanesecompanies use their competitive defense equipment and cutting-edge commercial
technologies, such as materials and devices, for international defense. This next
step would lead to Japan’s participation in multilateral co-development programs.
In sum, Japan’s defense industry should follow the government’s involvement andinitiatives, gradually determining what it will be able to do.
Finally are the concerns and issues in applying the comprehensive
exemption measures to overseas transfers. The de facto deregulation of the Three
Principles on Arms Export might have a huge impact on the Japanese defense
industry. The market mechanism could force companies that are notinternationally competitive to leave the defense market. Therefore, it is essential
for the Japanese defense industry not only to streamline the structure of theindustry as soon as possible in order to compete effectively in the world market
17but also to develop its negotiating capability and systems engineering knowledge
to enable Japan to take the initiative in international joint development
programs.
The defense industrial base is one of Japan’s most important sources ofnational power. In this regard, industry (manufacturing), the government(operation/politics/foreign policy), and academia (cutting-edge technology) should
further discuss the criteria and procedures for arms exports that the chief cabinet
secretary’s December 2011 statement did not articulate. In this regard, NEC iswilling to determine what it can do now and what it will be able to do in the
future.

Comments

Kevin Maher
Senior Adviser, NMV Consulting

Having had some experience with the U.S.-Japan alliance and security issues as
the former Director of the Office of Japan Affairs at the U.S. Department of State,
and as the Director of Political-Military Affairs in Tokyo, I would like to make abrief comment on Japan’s Three Principles on Arms Export, from the overall
perspective of the U.S.-Japan security relationship. Under the U.S.-Japan
Security Treaty the United States is obligated to contribute to the alliance by
providing its military capability to defend Japan, and to contribute to themaintenance of the peace and security of the Far East region. Japan’s
fundamental obligation under the treaty is to provide “facilities and areas” (bases)
for the U.S. Armed Forces in Japan. This asymmetric security relationship has led
18both governments over the years to discuss to what extent Japan could contributeto the alliance, beyond just the provision of military bases.
How the Japanese defense industry could contribute to the alliance has long
been a key part of this discussion, and has been particularly important to theUnited States. When the Japanese government approved the export of defense
technologies to the United States by making an exception to the Three Principles
on Arms Export in 1983, the United States anticipated that highly sophisticatedJapanese technology with potential for military use would be transferred to theUnited States. The United States saw this potential technology transfer as part ofJapan’s responsibility sharing (or burden sharing as some called it) within theoverall context of the bilateral security relationship.
Despite the new comprehensive exemption measures related to the Three
Principles that were decided in December 2011, Japan’s basic export control policy
remains somewhat unclear; my understanding is that a case-by-case prior consent
decision process is still required for potential third-country transfers. In light ofthe deregulation of the Three Principles on Arms Export, the Japanese
government still needs to put in serious efforts to clarify its defense industrial
policy with respect to arms exports.
To support both the Japanese defense industry and the alliance, theJapanese government should be flexible in its policy implementation to allow
Japanese industry participation in joint development and production projects;
this holds especially true for joint projects with the United States that assume
global responsibility for international security. For instance, the case of the joint
project of the F-35 might require that Japan decide on third country transfers
such as sales to Israel and Taiwan. The U.S. Department of Defense could
consider it difficult to conduct joint projects with Japan that involve export fromJapan of components into the global supply chain unless it could flexibly deal with19

the third party transfer issue. In this regard, the Japanese government should
clarify the guidelines of its new arms export control policy.
In terms of shared alliance responsibilities, Japan also should urgently
enhance its own defense and deterrence capabilities, in view of the dangerous
nature of the surrounding security environment. Given China’s attempt athegemony over both the South China Sea and the East China Sea, Japan has
come to a strategic crossroads. Despite the asymmetric security relationshipbetween the United States and Japan, the real meaning of the alliance is not that
the United States defends Japan, but that the United States and Japan together
will deter such potential threats and together will defend Japan against possible
attack. In this sense, the Japanese government should promptly take effective
action to enhance Japan’s defense capabilities, and the Japanese defense industry
should assume a strategically important role in doing so. To strengthen its defense
industrial base, the partial deregulation of the Three Principles on Arms Export
was important; however, Japan’s persistence in a case-by-case decision process onarms and technology transfer might hinder it in achieving the goal.
One of the most vital issues facing Japan is the urgent need to increase thedefense budget. The small scale of the defense budget means a small scale
Japanese defense industry, very limited in its ability to get economies of scale. In
this respect, it was the right decision for the Japanese government to partiallyliberalize the Three Principles on Arms Export so that the Japanese defense
industry can expand its base through exports. Increasing the defense budget isalso important in coping with China’s growing threat, by allowing Japan toquickly enhance its deterrence. The government needs to make decisions quickly
to accelerate and expand its deterrent capabilities, particular in such programs as
the F-35, Aegis, missile defense, and maritime and air surveillance, and needs
quickly to appropriate the necessary defense budget to do so.
20Japanese defense companies might welcome pressure on the government toincrease the defense budget and increase the volume of defense acquisition. But
beyond these industrial interests, changing the Three Principles on Arms Export
and strengthening the Japanese defense industry are not really about business; inreality these are crucial issues of Japan’s national security. The Japanese
government should do what it needs to enhance Japan’s defense capability withall due haste.

Panel Discussions

Speedy response or step-by-step approach?
Nishiyama:

Although Mr. Nishi, of the Ministry of Defense, said that Japan should not rush
but, instead, take a step-by-step approach to move ahead, the panelists from the
U.S. and European defense industries argued that because the international
security environment and technologies are changing very fast, Japan has no time
to waste. Do you have any comments on this?


Kobayashi:

A quick way for Japanese companies to expand their defense business overseas
would be for a licensee to supply defense equipment in response to a request by
the licenser’s country. In this type of joint development and production, we might
be able to accelerate the pace of our business. For instance, the component
developed by the Japanese company in the joint SM-3 Block IIA project will be
exported in 2014 to the United States, where it will be tested and assembled into
the end product. Taking full advantage of this process might be able to help
21

Japanese companies reexport licensed products and, as a result, to ramp up theirdefense business.
Lawless:If I interpret Mr. Nishi’s comments correctly, Japan would have to “be creative”
and “need new technology” to move ahead. Mr. Nishi has also challenged us toconsider how to move ahead. In reply, I would like to suggest that Japanese, U.S.,
and European industries work together to come up with some concrete examplesof future defense business and to propose them to the Ministry of Defense; theMinistry of Economy, Trade, and Industry; and the Ministry of Foreign Affairs in
the next six months. In this way, we might be able to get some pipelines into thesystem. This is a challenge Mr. Nishi has given to all of us.

Where can we start?
Ennis:

Rather than manufacturing to export defense equipment for a broader market, I
would encourage Japan to look at true collaboration programs like Tornado andEurofighter, both of which were clean-sheet programs. The companies that started
the Eurofighter program obtained their governments’ support and grew fromthere. I would also encourage the Japanese industry and the government to visit
European and other joint ventures to find out exactly how they started, what thechallenges were, and what could be expected from them. A joint venture program
would be a win-win scenario as a workable model. You have lived in a different
defense environment in the last forty to fifty years. Not only U.S. and European
industries but also Japan will benefit from joint-venture programs. The
collaboration must start with a small or clean-sheet program, during which theparticipants could get to know one another and develop mutual trust.


Kondo:
22

The Japanese industry should make proposals to the government that are highly
likely to be approved; these would be the start for joint development andproduction with foreign companies. When conducting defense business overseas,
it is important for the Japanese industry to have multipurpose technologies
applicable to defense items. Japanese electric and communication companies are
the most likely to be selected to participate in joint development projects. This
would be a good way to start. In regard to highly advanced technologies, we need
to begin by building a framework like the joint Japanese-U.S. technologicalresearch project so that interested parties, including the United States, could lookat past joint projects and decide how to collaborate on future projects.

Laying down specific criteria

Maher:

During my thirty-year tenure in office, I often heard Japanese government
officials say that they had not done a particular thing before. They must create aprecedent! The Japanese defense industry is highly competitive in technology,
especially manufacturing technologies and quality control systems, consideredfrom a global standard, and the U.S. defense industry will expect to apply thesetechnologies to military production. Accordingly, the Japanese government should
establish specific guidelines pertaining to the revised Three Principles on Arms
Export. This would make business sense to the Japanese defense industry, and it
would also convince the Japanese government that arms exports and joint
collaboration on defense equipment are security and strategic issues.
Ennis:

You can refer to the United States’ ITAR (International Traffic in Arms
Regulations), which clearly states the terms and conditions for exportingarms—and the procedures for applying to do so—as a model for new regulations.
23

ITAR also addresses issues of dual-use technology and lists the countries to which
you are prohibited from exporting. The Japanese government’s case-by-casedecisions, however, will keep the Japanese defense industry from developing.
Taking a fresh look at ITAR regulations, although they are not perfect one, would
be a starting point.
Lawless:

Almost two years ago, we met at the Swedish embassy to talk about the same
subject as what we are discussing today. According to the people at the embassy,
Sweden’s arms export control policy is almost identical with Japan’s Three
Principles on Arms Export, but it interprets it differently from how Japan does.
Also interesting is the Swedish way of doing defense business. In defense
acquisition, the first thing Sweden does is upgrade its defense systems. When it
cannot upgrade the system, it searches for new equipment overseas. And if itcannot find what it wants overseas, it manufactures what it needs at home. Japan
may also want to consider this kind of priority sequence.

SummaryNishiyama:

To sum up the discussion, let me refer back to what Mr. Maher argued. First,
because Japan has defense and technological capabilities that the United States isaccounting on, Japan should increase its defense budget in order to ensure its own
security as well as the U.S.-Japan alliance. Second, Japan should be more
confident about developing its defense business overseas. When we discussed thismatter in the past, some people contended that even if the Japanese defense
industry tried to enter the overseas market, it would turn out badly. From the U.S.
perspective, however, Japan is competitive enough to develop its defense businessoverseas. Now that the Three Principles on Arms Export have been revised, the24Japanese defense industry should immediately start working with its U.S. andEuropean counterparts.

Closing Remarks

Masashi Nishihara
President, Research Institute for Peace and Security (RIPS)As pointed out in the discussion, the revised Three Principles on Arms Export isone of Japan’s most important national security issues, and I hope that theJapanese defense industry can develop its defense business to reach its goal. In
order to strengthen not only the Japanese defense industry but also Japan’snational security, we must tackle this issue as quickly as possible.

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Profiles of Participants

Junichi Nishiyama is a consultant with Mitsubishi Heavy Industries (MHI). Afterobtaining his master’s degree in mechanical engineering from Hokkaido
University, he joined MHI Nagoya Aircraft Works in 1971. He later served as thegeneral manager of the Guided Weapon Systems Department, as the deputy
general manager at the Aerospace headquarters, and as a senior adviser. He
retired from MHI in 2011.

Takashi Kobayashi is the representative director, executive vice president, andgeneral manager of Aerospace Systems at Mitsubishi Heavy Industries (MHI).
After obtaining his master’s degree from University of Tokyo, he joined MHI in
1976. He served as senior vice president, head of Nagoya Guidance & Propulsion
Systems Works, and then, in 2011, as executive vice president and generalmanager of Aerospace Systems. He has been the representative director sinceJune 2011.

Anthony (Tony) R. Ennis is the president, North East Asia, in the Tokyo office of
BAE Systems (International). Born in Australia and educated at Exeter
University in England, he joined British Aerospace in 1978 and held many senior
management positions in both the United States and Australia. In 1999 he wasappointed senior vice president for exports and the regional managing director for
BAE Systems.

Kunio Kondo has been the associate senior vice president and executive generalmanager of the Aerospace and Defense Operations Unit (ADOU) of NEC
Corporation since April 2010. He joined NEC in 1982 and became the general26

manager of ADOU’s Radio Application Division in 2004. He then served aspresident of NEC TOSHIBA Space Systems in 2008 and returned to ADOU in thefollowing year.

Gerard P. Lawless is the president, Raytheon Japan, for Raytheon’s businessdevelopment in Japan. Before taking this position in July 2010, he was the vicepresident of Japan Programs for Integrated Defense Systems. In this role over the
past twenty years, he was the lead on a number of IDS Japanese programs,
including Patriot, HAWK, JADGE, TPY-2, and MDA. Lawless earned hisbachelor’s degree in business management from Northeastern University in 1970.

Kevin Maher is a senior adviser for NMV Consulting in Washington, D.C. He
obtained his bachelor’s degree from LaGrange College, his master’s degree fromthe University of Hawai‘i, and his law degree from the University of Georgia
School of Law. As an attorney, he joined the U.S. State Department’s Foreign
Service in 1981. He served in Japan for nineteen years, with various assignments
in Tokyo, Fukuoka, and Naha. In 2009 Mr. Maher was appointed director of theState Department’s Office of Japan Affairs and retired in April 2011.

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Recent Publications

No.15（November 2012）
Masashi Nishihara, “Can Japan Restore Its Place in Asia?”

No.14（2012 年 3 月）
RIPS 公開セミナー2011（2011 年 10 月）「災害対策と防衛のために新技術をどう活かすか」

No.13（February 2012）
RIPS Symposium 2011, “New High-Techs for Disaster Relief and National Defense.”

No.12 (2012 年 2 月)
RIPS 春季公開セミナー(2011 年 5 月)、「日露関係と北方領土返還の展望―東日本大震災後に考える日本の対応」

No. 11 (August 2011)
Masashi Nishihara, “Asian Perspectives in 2011: China’s ‘Coercive’ Diplomacy Leads to
New Power Realignments.”

No.10 (January, 2010)
Michimi Muranushi, “North Korea’s Abduction of Japanese Citizens: The Centrality of
Human Rights Violation.”

No.9 (July 29, 2009)
Masashi Nishihara, “Asian Perspectives in 2009: Hopeful Signs and Growing Concerns.”

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