February 1, 2006  

Give & take

The outlook for U.S-Japan defense industrial cooperation

In December’s cover story, “The sun also rises,” AFJ examined the transformation of the U.S.-Japan alliance in the post-Cold War world. This month, MIT Professor Richard J. Samuels outlines the prospects for greater cooperation in the development of defense systems between the two countries.

Hermann Goering stated in 1936 that “guns will make us powerful; butter will only make us fat.” That is one vision of national security. Postwar Japan proved the Nazi reichsmarrchell wrong altogether by teaching us that butter is as likely as guns to make a nation strong.

The Japanese lesson was simple: A state can subordinate defense production and still emerge as one of the most technologically sophisticated nations in the world. At a time when a nation’s defense skills depend more than ever on the strength of its commercial economy, Japan is well-situated to have butter and guns — should its leadership make the requisite political decision.

More than a decade ago, I spent a year in Tokyo doing research for a book about Japanese ideas about the relationship of technology to national security — and on how those ideas became institutions. The premise of the book, “Rich Nation, Strong Army,” was that in the late 20th century, Japanese ideas about national security and technology contrasted sharply with U.S. ideas. It is instructive to look at what I took to be the most significant differences, and what I expected would be their consequences for economic growth and innovation and for the alliance, and hold them up to what actually has come about in the early 21st century.

The Japanese defense industry is small: Defense production makes up barely one-half of 1 percent of the nation’s total industrial production. Barred since 1976 by Cabinet policy from export markets, the annual volume of Japanese arms production — today no more than $20 billion — is on a par with the annual sales of sushi in Japan. (One major change to this self-imposed restraint has now been lifted, a point to which I will return.) But despite limited production of final systems and large-scale weapons platforms, Japanese companies emerged as world leaders in the design and manufacture of materials, components, and subsystems essential for defense systems at home and abroad.

Indeed, the most rapid growth in postwar Japan was in sectors closely linked to the materials and technologies that enhance the battlefield capabilities of modern weapons: data processing, telecommunications, optoelectronics and lightweight materials. By making integrated circuits in large volumes for consumer electronics and graphite fiber in large volumes for tennis rackets and golf clubs, Japanese manufacturers were able to accumulate experience and “spin on” their knowledge to military aerospace applications. Having responded to the escalating demands of rapidly changing civilian markets for these and other products, they found themselves able to meet military specifications of performance, reliability and quality — often at lower cost.

Notwithstanding the U.S. security guarantee that made this possible, Japanese companies and the government embraced technology and the economy as matters of national security. I say “notwithstanding U.S. security guarantees” because Japan’s embrace of “comprehensive security” predates the U.S. alliance by nearly a century.

In the area of technology and production, this idea maximizes the three values of autonomy, diffusion and nurturance:


This has been Japan’s strategic constant over the course of its industrialization. Since the mid-19th century, Japanese security planners have had to navigate the Scylla of technological backwardness and the Charybdis of foreign dependence.

They have done so with the consistent belief that national security is enhanced by the design and production of weapons, as well as by their deployment. There was rarely an industrial policy document that failed to justify its goals with reference to the development of “autonomous technology” (jishu gijutsu) or “indigenization” (kokusanka).

In accordance with this principle, in both military and civilian cases it was not uncommon for each subsequent generation of Japanese products — whether aircraft, machine tools, eyeglasses or chemicals — to depend less than its predecessor on foreign technology. As one official from the Ministry of International Trade and Industry put it: “Ichigo yunyu, nigo kokusanka” (“The first time, we import; the second time, we do it ourselves”).

Licensing was the middle road toward the higher ground of pure (jun) technological autonomy. Japanese companies purchased enormous stores of (mostly U.S.) knowledge as a way to achieve independence from U.S. technology. And the United States was eager to oblige. We all are familiar with the way “offsets” — the allocation of production among allied nations as a way to entice them to allow deployment of U.S. troops and military systems — provided extensive foreign access to U.S. military and aerospace design and production technologies.

The United States transferred more weapons to Japan than to any other ally except Germany — mostly in the form of licenses at every level of production — from the final integrated platform to the production machinery that formed the components. By the mid-1990s, Japanese defense contractors had licensed and coproduced 29 major U.S. weapons systems, more than any other nation in the world.


The benefits were not insignificant, because these transfers bolstered the second note of the three-note chord: diffusion. Japanese companies and industrial policy officials have been committed to diffuse technologies as broadly as possible throughout the economy.

The history of technology is a history of interdiffusion between commercial and military applications. After all, the wheel wasn’t invented for the Roman chariot, but the spoked wheel was. But in Japanese practice, technology is often a quasi-public good developed and distributed through elaborate networks of producers and bureaucracies.

Thus, Japan built an extensive network of “technology highways” — an infrastructure comprising at least as many lanes, but perhaps fewer roadblocks, than its U.S. counterpart.

Institutions such as research consortia enable competitors to achieve common technical goals before they compete with each other in the market. Japanese companies cooperate in consortia at every level of the development cycle, including basic research, systems development and — especially in aircraft — device manufacturing. While the form and function of these consortia varied — and while competition among the participating companies never disappeared, and often was extremely vigorous — collaboration persisted as a highly valued norm in Japan, while it was denigrated as “collusion” in U.S. thinking. Thus, it came as no surprise to find extensive military “spin-off” and “spin-on” in Japan.


In Japanese practice, autonomy and diffusion are necessary, but insufficient. They are incomplete without a parallel effort to support and sustain producers.

There are many threats to the sustenance of long-term manufacturing capabilities, including market shifts and technological revolutions. This is why companies and the government vigilantly monitor the economy to mitigate the worst effects of each.

So, this three-note chord framed my fin de siécle snapshot: 1. In terms of industrial structure, Japan’s leading defense contractors were also Japan’s most innovative companies. As elsewhere, the top defense contractors are among the largest companies in the economy, but unlike in the United States or much of Western Europe, these companies were highly diversified and depended little upon sales to the military. This is still the case.

2. I concluded that the Japanese aerospace industry was “succeeding without really flying.” They were adding value to final products with U.S. nameplates while also adding technological sophistication to domestic manufacturing. They are still on this same trajectory. Japanese aircraft manufacturers are providing more high-value-added components than ever before — including the composite wings for Boeing’s new 787 Dreamliner — that were inconceivable a decade ago, in part because of Boeing’s experience with the F-16-derived F-2 and other projects.

3. The evidence is more mixed in terms of technology diffusion. On some accounts, Japan’s prime contractors make few distinctions between military and civilian products, except at final assembly. On others, there remain high walls.

4. In terms of foreign partnerships, Japan brought more than a century of experience in foreign technology licensing and “international cooperation” to a global market that was just learning that single companies in single countries can no longer build complex military systems (or even all the necessary components) on their own.

As I understood it, the Japanese lesson was that, under propitious circumstances, a nation need not sacrifice national interests to foreign dependence. A corollary was that propitious circumstances, such as comparative advantage, can be created. In Japanese parlance, technological autonomy and “international cooperation” were not incompatible. Indeed, to the contrary, a central purpose of “international cooperation” has been to enhance the Japanese technology base — which, in turn, strengthens the Japanese position in international projects and enhances the country’s ability to demand more offsets and a higher value added.

But the world refused to stand still. It is worth exploring further the changes to this snapshot of Japanese techno-nationalism.

To be sure, some things have not changed in the Japanese defense industry. Production is still concentrated in a small number of companies, a list that has been remarkably stable for decades. While the number of defense contractors around the world has shrunk, the Japanese defense industry is seen by some as “Japan’s last protected sector.” Shipbuilders have consolidated, but aircraft makers have not.

Second, while the goal of autonomy has been “delegitimated” somewhat, it is far from dead. There remain a number of national projects on the table, such as an unmanned aircraft, the P3-C follow-on and its engine and the C-X transport. While there will be U.S. avionics in both, and a U.S. engine in one, domestic producers are still privileged — now on a “life-cycle cost” rationale.

Indeed, the Japanese Defense Agency (JDA) and the Defense Production Committee of Keidanren speak of the importance of autonomy — though with less vehemence and without a common voice. They also continue to emphasize the desirability of nurturance and technology diffusion. One JDA report issued in June is redolent with the language of the three-note chord: “Japan, as a technology-based nation deploying its technology and productive power, will develop, produce and maintain exceptional equipment by retaining a domestic production base and thereby contribute to our nation’s national security.”

Another, from Keidanren, calls for heightened “nurturing of advanced technology” and even greater “flexibility” in the application of science and technology across the civil-military divide.

Sometimes one even hears echoes of the days when Japan resisted imports by declaring local conditions not suitable for foreign products. In this regard, one JDA official explained that the Self Defense Force needs a domestic P3-C follow-on in order to respond to the especially shallow conditions of the East China Sea and the Sea of Japan. Even the 2004 National Defense Program Guidelines genuflect in the direction of autonomy by declaring that reforms of the weapons acquisition process should proceed with the aim of “establishing a defense production and technology base, especially in core technology areas indispensable for our national security.”

But, while the Japanese defense industry eagerly grabbed at this straw, the current embrace of the three-note chord is less overwhelming than before. Today, the Japanese defense industry formally acknowledges a “new age” in defense procurement and — under pressure from the JDA for acquisition reform — has publicly accepted U.S.-style procurement criteria. Such ideals as “better, faster, cheaper” are entirely new to the Japanese discourse.

In September 2003 the Japanese government began a formal reassessment of its kokusan program. After the normal pulling and tugging, the result was agreement to invoke the autonomy principle under four conditions: if the system is strategic; if it is secret; if it is special; and if it is necessary to preserve the domestic production base.

This cuts a broad swath, but it is clear that the consensus on autonomy as a strategic imperative is not what it was. For example, the Araki Commission, whose 2004 study was the test run for Japan’s new National Defense Program Guidelines, spoke of the need to “outsource” some arms production and insisted that “the government should reconsider its policy of maintaining indigenous weapons production.” This is just one of a number of changes that have affected the Japanese defense industry.

Another has been Japan’s deteriorating fiscal condition. The new guidelines explicitly state that Japan will build a “state-of-the-art defense force ? [but] with the limited resources that are available.”

Defense industry and government officials I have spoken with are clear that while the defense budget ceiling of 1 percent of the gross domestic product needs to be lifted, Japan’s fiscal health makes this impossible for the time being. One expert suggested that until this situation changes, some dual-use technology with important surveillance applications will have to be developed outside the 1 percent limit.

A third modification is the dramatic structural change in the global defense industry. Japanese defense contractors watched as U.S. counterparts transformed themselves through mergers and acquisitions, and have been frustrated to stand on the sidelines as U.S. and European companies shared huge contracts, such as the F-35 Joint Strike Fighter. International cooperation has become the norm — and Japan, having tied its own hands, has been left out.

That said, although Japanese policy may not have shifted with lightning speed, there have been a number of important policy shifts that have enhanced prospects for U.S.-Japan cooperation in defense technology development and the coproduction of weapons systems. The most notable was the relaxation of the arms export ban that came with the missile defense package approved in 2004. Joint development and production of missile defense systems were beyond the scope of the 1983 agreement that had allowed the transfer of Japanese defense technology to U.S. companies. And, in any event, only 13 cases were recorded in nearly two decades. In December 2004 the ban was relaxed further — and the Japanese government explicitly promised that relaxation of the ban for future codevelopment and co-production projects will be considered on a case-by-case basis.

Of course, this is what many in the Japanese defense industrial community had been hoping and lobbying for for years. They welcomed this policy change announced by JDA Director General Shigeru Ishiba as a “major step forward.” After all, fully 12 percent of the fiscal 2004 equipment budget was associated with missile defense.

But they were in for a surprise at first. When the ban was partially relaxed to allow for Japanese-U.S. collaboration in missile defense, the only orders issued by the JDA were from U.S. companies in the form of foreign military sales. One Mitsubishi Heavy Industries (MHI) executive, worried that Japanese companies would be cut out of the systems design phase, lamented: “We had intended to proceed with licensed production. If we buy everything from the United States, our production and technology will decline to zero.”

Not surprisingly, the defense industry mobilized, and negotiations for licensed production began soon thereafter. Also not surprisingly, results soon followed. In March 2005 the Pentagon agreed to license the Patriot Advanced Capability 3 anti-missile system to MHI “to enable quick repair.” More has followed. I am quite sure that we will look back at fiscal 2004 as an outlier.

There are no straight lines in politics, but it seems clear that a new regime is in the making — one in which Japanese defense contractors will be able to sell directly to the U.S. military. The Mainichi Shimbun newspaper reported in July that the JDA and the Pentagon are even consulting over the possibility that the United States would relax restrictions on Japanese access to repair jobs for F-15 and Aegis black boxes, which were originally created to deny Japanese companies access to America’s most sensitive technologies.

Meanwhile, while there has been nothing akin to the wrenching structural change that transformed the U.S. defense industry in the 1990s, there has been a small-scale consolidation and streamlining of the Japanese defense industry. In one case, that of MHI’s tank production, 1,200 suppliers have been reduced to 230, with a 10-year goal of 10 suppliers. There are now three consolidated shipbuilding companies.

Most important, the Japanese defense industry has shown a new eagerness to partner with U.S. companies on a more equal basis. In a briefing to the JDA, the Defense Production Committee of the Keidanren listed six benefits of cooperation with U.S. partners. While one of the benefits — “acquisition of advanced technology” — is associated with the old rhetoric of the three-note chord, the others reflected the new age: “Reduced risk of research and development;” “Increased trust in the alliance”; “Interoperability”; “Efficient research and development”; and “Mutual access to the finest technology in both countries.”

For years, one of the most intractable problems in U.S.-Japan relations was what we called the lack of “symmetrical access.” It goes deeper than the fact that the Japanese government had tied its own companies’ hands through the arms export ban. Throughout the postwar period, “cooperation” has been a Japanese euphemism for Japanese learning and U.S. teaching. Reciprocity had a “you give, I take” quality to it. Japanese researchers were comfortable learning from Americans, but few Americans positioned themselves to learn from the Japanese.

Part of the problem was American hubris. Part was Japanese defensiveness. But the largest part was structural: Generic, nonmilitary, state-of-the-art, nonproprietary technology development was undertaken in U.S. universities to which Japanese students and researchers had unqualified access, but that same sort of research in Japan was undertaken in corporate labs, to which access; was more limited and reciprocity was hindered. So, an open, substantive commitment to “mutual access” is a most welcome development — a possible harbinger of major change.

I say “possible” because the same document that calls for “mutual access” also declares openly that “by participating in international joint development projects, we will be able to acquire the most advanced production equipment, thereby strengthening the industrial base of Japan.” If this sounds like the old rhetoric, that is because it is. My hope — indeed, my expectation — is that alliance imperatives and further shifts in the global marketplace will continue to conspire to make the techno-nationalism embedded in the three-note chord less attractive to Japanese companies and the government.

I hope and expect to see further productive cooperation in technology and systems development. If so, techno-globalism will have become more than mere rhetoric.

Richard J. Samuels is the Ford International professor of political science and director of the Center for International Studies at the Massachusetts Institute of Technology. This article is based on remarks made to the American Enterprise Institute conference in Tokyo in October. The author is grateful to the Smith Richardson Foundation for support of the research from which this article and his forthcoming book, “Securing Japan,” are derived.