The changing defense industry: The relationship between “defense” and “companies” February 1, 15:18
It has been just over a year since the government made a major change in its postwar security policy. Japan is increasing defense spending to 43 trillion yen over five years, 1.6 times the previous amount, and is promoting a fundamental strengthening of its defense capabilities.
The defense industry, which is responsible for producing equipment, sees this as an opportunity. The government is also actively encouraging new entry into the defense field, and some companies are actually considering it.
The relationship between "defense" and "business" is currently undergoing major changes. I covered the scene.
(Economics Department reporter Hiroki Obi/Politics, Economics and International Programs Department Directors Takashi Hirao, Nobuchi Mizutani, Junpei Noda)
Major companies moving to strengthen defense business
Mitsubishi Electric is a major electronics manufacturer that plays a part in the defense industry.
It manufactures equipment such as radars that detect missiles.
In response to the government's policy to strengthen its defense capabilities, the company is reviewing its organization in this field.
In May of last year, the company announced a policy to focus management resources on the defense business.
The company announced plans to increase the number of personnel in the defense and space sector by about 1,000 people and make capital investments of 70 billion yen.
In order to increase the number of employees, the company is recruiting people from a wide range of industries and is also deploying people from other departments within the company.
We are also working on human resource development at a rapid pace.
Last December, I covered a training session held for employees in charge of defense-related sales.
Some of the employees have transferred from the Ministry of Defense.
I was impressed by the lecturer's detailed explanation of why the transfer of equipment overseas had not progressed until now.
This company is strengthening its defense equipment production system and is focusing on production not only for the Self-Defense Forces but also for overseas markets.
This time, I was able to interview the factory in Amagasaki City, Hyogo Prefecture, which is the core of the company's business expansion.
The products manufactured here are radars that monitor the movements of aircraft and missiles.
This is the main product of the company, which has been delivering it to the Japan Air Self-Defense Force for over 50 years.
The company will export this radar to the Philippines as a completed product for the first time based on the current defense equipment transfer rules.
Military use began in October last year.
The factory in Amagasaki City is currently manufacturing the third radar to be exported to the Philippines.
Including the fourth unit to be manufactured in the future, total sales will exceed 10 billion yen.
The company plans to market to other countries in Asia as well.
As manufacturing costs continue to rise due to soaring raw material prices, the company's future challenge is whether it can sustainably maintain profits.
Another key point is whether or not it is possible to build a production system and supply chain for this purpose.
For the time being, the company's policy is to prioritize solidifying the foundation of its defense business, but in the future it hopes to identify areas with promising growth and increase profitability.
Masahiko Arai, General Manager, Defense Systems Division
: ``The government will invest 43 trillion yen over five years to strengthen our defense capabilities, but we want to solidify our production base during this period.And how will we develop business over the next five years?'' I think it's time to think about what we're going to do. It's going to be an extremely important 10 years."
Other major companies are also making moves to strengthen their defense businesses.
Last November, Mitsubishi Heavy Industries announced plans to double its sales to around 1 trillion yen in three years, and to increase the number of defense division employees by around 30% from the current 6,000.
IHI also announced plans to hire 100 new experienced people in its ``Aerospace, Defense'' division by March this year.
The government plans to increase the number of employees by 300 in the defense sector alone by fiscal 2025.
Government encouraging “new entry”
Meanwhile, the Defense Equipment Agency, which is responsible for procuring equipment for the Self-Defense Forces, held an event called the ``Defense Industry Entry Promotion Exhibition'' in Osaka last October.
The aim is to encourage small and medium-sized enterprises to enter the defense industry and create points of contact with private companies that have not previously been involved in the defense industry.
Kazumi Ito, Director, Equipment Policy Division, Defense Equipment Agency
: ``Competition among countries is intensifying over how to incorporate advanced civilian technologies such as information communications and AI into defense projects. We believe that incorporating new technologies will improve technological capabilities and strengthen the supply chain."
40 companies are participating in the Defense Industry Entry Promotion Exhibition, including start-up companies that manufacture robots and small factories that process metal processing.
Participating companies said, ``Budgets are expanding for defense.We feel there are great business opportunities.'' (Digital content production) ``If properly used in defense, our technology can be used in many other places.'' (robot manufacturing).
I am aiming to enter...
We interviewed a metal processing company in Osaka that participated in this event.
The company has 25 employees.
The company manufactures plates and weights using lead, but sales have fallen to about half what they were 15 years ago due to fierce competition from overseas.
President Masaaki Ikegami said, ``With the number of employees reduced by half, there was a feeling of sadness as to whether the company would survive.''
Meanwhile, I attended an event at the recommendation of a bank I do business with.
The company is considering whether it is possible to enter the defense business by utilizing its metal processing technology.
However, his wife Kimiko, who is a board member, is concerned that the products could be used on the battlefield.
Kimiko Ikegami, managing director of Sanko Kinzoku
: ``I would hate it if it were to be used on the battlefield.I don't think it's disgusting, but I would hate it.If it were to be used in a war, I would feel disgusted.''
Going forward, the company plans to explore ways to get involved in the defense industry while exchanging opinions within the company.
Masaaki Ikegami, President of Sanko Kinzoku
: ``The fact that there is talk of increasing the defense budget means that there may be some work that we can do.There is a possibility that we will be a stable source of orders, and it will help the company's basic profits.'' As a resource, we would like to consider whether there is anything we can be involved in."
The future of the defense industry
Isn't being involved in the defense industry damaging a company's credibility and image?
There are deep-rooted concerns about this kind of "reputation risk."
Furthermore, in the defense industry, business partners are almost limited to the Self-Defense Forces, and many companies are withdrawing from the business because they are unable to secure sufficient profits.
The defense industry is a wide-ranging industry, and if a company withdraws and cannot maintain its supply chain, many companies may be affected.
Furthermore, while the government and ruling party are moving forward with moves to promote exports overseas, there are voices of opposition among opposition parties who say that this is a reversal of Japan's progress as a ``peaceful nation.''
The government will be asked how it will respond to such voices.
(Broadcast on “Good Morning Japan” on December 12, 2023)
Economic Affairs Department reporter
Hiroki Obi Joined the agency
in 2016
After working at the Gifu and Shizuoka bureaus, he joined his current position this summer.
Director of Politics, Economics, and International Programs
Kaoru Hirao Joined the agency
in 2016
After working at the Okinawa Bureau, currently in the agency
Covering foreign affairs, security policy, etc.
Director of Politics, Economics and International Programs
Nobuchi Mizutani Joined the station
in 2004
Worked at the News Bureau, Nagoya Bureau, Sendai Bureau, and Takamatsu Bureau
Junpei Noda,
Director of Politics, Economics and International Programs Department Joined
the station in 2007
After working in the Okinawa and Osaka bureaus, he is currently in charge of “International Reporting 2024” etc.