The views of Japan’s defence primes on how the industry can meet the challenges of surging domestic defence production demand was a core theme in a press conference hosted by the Foreign Correspondents’ Club of Japan on 2 April.
The event, which was titled “Building Up Japan's Defense Industry,” featured presentations from Hirohito Ogi and Rintaro Inoue on the findings of their influential 2025 study From decline to surge: The defense industry in the era of excess demand.
That report was based on extensive interviews with leading Japanese defence industry executives and case-studies on European/US defence industry reforms.
Its key recommendations, which were summarised in the conference, include radical funding and regulatory reforms designed to assist the sector to meet the procurement and production capacity goals outlined in the 2022 Defense Buildup Program (DBP) and National Defense Strategy (NDS).
According to Hirohito Ogi, who is a senior researcher at Japan’s Institute of Geoeconomics, the 2022 documents marked a watershed policy shift towards emphasising the integral role of Japan’s domestic defence industry in its national security.
That shift, explained Ogi, was based on fears in Tokyo that a hitherto over-reliance on importing foreign defence technology had restricted the nation’s strategic autonomy and had hollowed out its war sustaining capabilities – or the capacity to produce increased numbers of weapons and scale up rapidly in response to growing defence demands.
Yet while the overall share and absolute value of defence equipment contracts awarded to domestic firms had risen sharply since the release of the DBP (from around 300 billion yen in 2022 to 1.4 trillion yen in 2025) (approx. A $2.71 million to approx. A $12.67 million), poor incentive structures, regulatory hurdles and capacity constraints resulting from decades of industry stagnation continue to pose restraints on the domestic sector’s growth, Ogi added.
Among the key recommendations highlighted by the speakers to address these challenges were amendments to Japan’s Act on Enhancing Defense Production and Technology Bases to broaden policy-based finance to support capital investment, as well as to expand the use of Government-Owned, Contractor Operated (GOCO) facilities to enable scalable and multi-use production.
The report summary also called for a radical rethinking on the way budgets for procurements from local firms are calculated, arguing that the Ministry of Defense (MoD) should incorporate initiatives related to capital investment and workforce development into the corporate evaluation criteria used for determining profit margins in contracts, and consider any potential need to invest in the expansion of excess production capacity.
Special emphasis was also given to reducing investment risks in R&D – as Japanese firms continue their reluctance to invest in early-stage R&D without government support.
The report in particular called for factoring-in R&D costs into profit-margin estimates, ensuring greater engagement between private producers and defence equipment users during research and development phases to avoid the R&D ‘valley of death’ trap and raise contract completion rates, as well as increasing support for R&D programs that bridge basic research and full scale development.
An additional highlight was a proposal to further promote joint production with friendly nations, which the authors argued could both ensure the sustainability of the industry in peacetime, and secure surplus production capacity in times of emergency.
The speakers added that special attention should be given to increasing the synergy between Official Security Assistance (OSA) packages (managed by the Ministry of Foreign Affairs) and equipment part/maintenance exports.
Responding to a question on the current strengths and weaknesses of Japan’s defence industry, Ogi stated that Japan’s strengths lie in its component technologies – including cutting edge dual use technologies. However, Japan continues to lag behind industry leaders in system integration, or the capability to integrate components for defence applications.
Inoue stated that a weakness is that Japan’s defence industry policies are primarily set for peacetime, with limited planning on how the sector can be upscaled and protected during a military conflict.
The speakers also addressed several questions on the potential impact on Japan of the current conflict in Iran.
Ogi said that while the conflict could see the nation’s readiness impacted by the redeployment of US assets away from Japan, the conflict was already helping the nation’s defence industry mobilise to meet international demand, with Mitsubishi Heavy Industries reportedly having been approached to provide locally-produced Patriot missiles to the United States.
Inoue added that Iran’s response to the US, as with the case of Ukraine’s response to Russia’s invasion, could provide lessons for Japan on devising its asymmetric warfare strategy.
In response to a question concerning the greatest threats facing Japan today, Inoue added that while Japan’s industry was adapting to an asymmetric defence strategy set out in the NDS that called on the widespread use of assets such as drones, Japan faced austere challenges from any potential contingency involving China, which not only has a significant numerical advantage in terms of conventional platforms, but also has itself developed and has in some cases pioneered a significant arsenal of asymmetric capabilities.