Photo/Illutration The Air Self-Defense Force's F-2 fighter jet (Asahi Shimbun file photo)

The Lower House on May 9 approved legislation to bolster a defense industry that has seen many Japanese contractors leaving it because of low profitability, but critics charge the bill may just prop up inefficient companies. 

Some of the provisions of the bill are designed to address and shore up the unique nature of the defense industry in Japan, in which overseas arms exports are strictly limited. 

While a number of major companies, such as Mitsubishi Heavy Industries Ltd., Kawasaki Heavy Industries Ltd. and Mitsubishi Electric Corp., manufacture destroyers, fighter jets and other defense equipment, such companies are supported by thousands of subcontractors.

The total scale of the defense industry is estimated to be about 3 trillion yen ($22 billion), but  many companies decide to leave the sector because of low profitability as the Defense Ministry is the only customer. 

One measure in the bill would provide support for companies seeking to find customers outside Japan. All expenses related to modifying specifications and functions for export of the defense equipment would be subsidized.

About 40 billion yen has been set aside in the fiscal 2023 budget to provide such support.

Any company certified as one producing “essential equipment” needed by the Self-Defense Forces to carry out its duties would also be supported by the central government, which would shoulder the burden of improving manufacturing efficiency by, for example, installing advanced technology such as artificial intelligence as well as paying for cybersecurity measures.

In the current fiscal year budget, 36.3 billion yen has been set aside for such support.

Where the bill becomes more controversial is an option for the central government to purchase the land and manufacturing equipment of companies that decide to discontinue working in the defense industry.

The government would find another company to take over the operations and as ways of making that easier some of the property taxes and manufacturing equipment maintenance costs would be borne by the government.

That has led to the assertion that the measure would constitute "nationalization" of the defense industry. 

The Japanese Communist Party is one of the few opposition parties that opposed the bill in the Lower House. Other opposition parties, such as the Constitutional Democratic Party of Japan and Nippon Ishin (Japan Innovation Party), voted for the bill because they felt it was important for Japan’s defense.

During earlier debate in the Lower House National Security Committee, the JCP’s Seiken Akamine said, “Purchasing manufacturing facilities while ignoring profitability and efficiency and allowing production to continue after reinforcing the facility is nothing more than the ultimate form of defense industry support.”

And while the Democratic Party for the People also voted for the bill, party member Alex Saito said any purchase of manufacturing facilities because a company is facing difficulties is a sure path for the decline of the industry.

Heigo Sato, a professor of international cooperation at Takushoku University, said the legislation is not to support the defense industry but to leave open the option of saving companies.

"Companies have good reason to leave a specific sector and it would become a problem if taxpayer money was used only to protect the manufacturing facilities and technology of companies that leave a sector,” Sato said.

Debate on the legislation will now shift to the Upper House.

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