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The Japan Defense Market is anticipated to register a CAGR of over 2.5% during the forecast period (2021-2030).
Due to the impact of the COVID-19 pandemic, Japan's economy shrank 4.8% over the year 2020, its first contraction since 2009. However, despite the impact of the pandemic on the economy, the defense spending of the country increased by about 1.2% to reach USD 49.1 billion in 2020. This shows that there is an increased focus on defense even during the pandemic. The increase in spending is due to the country’s focus on bolstering its defense capabilities amid its tensions with countries like China, North Korea, and Russia.
Japan is modernizing its defense arsenal, which involves upgrades in air and maritime defense systems as well as investments in space and cyber capabilities. In order to realize cross-domain operations, the armed forces are planning to acquire and strengthen capabilities in new domains, including space, cyberspace, and electromagnetic spectrum by investing financial resources into the R&D of such systems, which is expected to drive the market growth.
Scope of the Report
The study covers all aspects and provides insights into the budget allocation and spending in the Japan defense market, along with the forecast estimates. The market includes details about procurement and modernization plans of the Japan Self-Defense Forces including aircraft, land tactical vehicles, naval vessels, unmanned systems, and military equipment like weapon systems, missile defense systems, missiles, ammunition, etc. The market also includes details regarding the investments into the research and development of advanced technologies like directed energy weapons, use of composites, and advanced manufacturing technologies like 3D printing, among others. The Japan Defense Market has been segmented by Armed Forces into Army, Navy, and Air Force and by Type into Personnel Training and Protection, C4ISR and EW, Vehicles, Weapons and Ammunition. For each segment, the market sizing and forecasts have been provided in value (USD billion).
|Personnel Training and Protection|
|C4ISR and EW|
|Weapons and Ammunition|
Key Market Trends
The Market is Expected to be Driven by the Growth in Defense Spending
Japan is one of the top 10 countries globally in terms of defense spending. In 2020, military expenditure for Japan was USD 49.1 million, according to SIPRI. The military spending of the country increased by 1.2% as compared to that of 2019 and by 2.4% compared to that of 2011. At 1% of its GDP, Japan’s military burden in 2020 reached the guideline limit that it implemented in 1976. However, in mid-2021, Japan's Defense Ministry proposed a fiscal 2022 budget of more than 5.4 trillion yen (USD 49.3 billion), a record amount that could surpass the long-standing cap of 1% of GDP. Japan plans to revise its Medium Term Defense Program earlier than originally scheduled as it looks to boost spending to counter China's growing assertiveness in surrounding waters and prepare for contingencies in the Taiwan Strait. The current Medium Term Defense Program, approved in late 2018, sets aside roughly USD 250 billion for defense until 2023. The country’s National Defense Program Guidelines (NDPGs) and the associated Mid-term Defense Plan (MTDP) have also put a strong emphasis on three new defense domains in the country, namely, cyber, space, and electronic warfare (EW). In the defense budget of FY 2021, the Japanese government approved about USD 590 million for space-related projects, which includes projects, like procurement of Space Situational Awareness (SSA) Satellite (Space-based Optical Telescope), enhancing resiliency of satellite communication system, etc. Similarly, the cyber-related budget was about USD 270 million, which includes the establishment of the Japan Self- Defense Force Cyber Defense Command and spending on projects, like the procurement of Cyber Information Gathering System and improvement of cyber protection analysing devices and the defense information infrastructure. In the Electromagnetic Domain, the government is also planning to develop Stand-off Electronic Warfare Aircraft and a Network Electronic Warfare System. In addition, the country is also spending towards procurement and modernization of fixed-wing patrol aircraft, helicopters, fighter aircraft, destroyers and submarines. Developments in such domains are expected to be propelled by the growth in defense expenditure, which is driving the growth of the Japanese defense market.
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The Air Force Segment Expected to Register the Highest CAGR During the Forecast Period
The Air Force segment is expected to experience the highest growth rate during the forecast period, owing to various ongoing procurement plans for replacing the aging combat aircraft and expanding fighter jet fleet. The armed forces are focusing on enhancing capabilities in the air domain, with an enhanced focus on stand-off defense capability, comprehensive air, and missile defense capability, and maneuvering and deployment capability to effectively counter incoming threats. Japan plans to acquire 42 F-35Bs and a total of 157 F-35s. Japan's Ministry of Defense plans to allocate over 100 billion yen (about USD 905 million) in the fiscal 2022 draft budget for the acquisition of about 10 additional F-35A and F-35B stealth fighter jets. The country is also working on the development of the Mitsubishi F-X, a sixth-generation stealth fighter for the Japan Air Self-Defense Force. It is Japan's first domestically developed stealth fighter jet and will replace the Mitsubishi F-2 by the mid–2030s. Eight local defense firms are working on the project, while the high cost of military aircraft development may lead Japan to search for foreign partners in order to collaborate on the project. The country is also procuring three P-1 fixed-wing patrol aircraft worth almost USD 600 million to replace the existing P-3 fixed-wing patrol aircraft. Furthermore, with the relaxation in Japan’s strict arms export regulations, the Japanese Ministry of Defense (MoD) entered an agreement with the British government to develop, design, and procure next-generation air-to-air missiles. Such developments are envisioned to contribute to the growth of the Air Force segment during the forecast period.
Prominent players in the market include Kawasaki Heavy Industries, Mitsubishi Heavy Industries, ShinMaywa Industries, Ltd, Japan Steel Works Ltd, and Toshiba Corporation. Despite a strong local manufacturing base, players in the country are currently facing stiff competition from their foreign counterparts for growing their businesses, especially from players from North America and Europe, even with a greater focus on local production and measures like the relaxation of Japan’s self-imposed arms export ban policy. In this regard, local defense giants are undertaking various initiatives and investing in the R&D of new defense systems to produce sophisticated products, thereby enhancing their competitiveness in the market. For instance, in March 2021, Mitsubishi Heavy Industries (MHI) and Japan’s Ministry of Defense (MoD) have concluded a research and prototype production contract to develop a next-generation mine-countermeasure solution. The growth of the local players is being supported by several defense projects currently underway in the country. For instance, as many as 8 major Japanese defense industry firms are collaborating on the country's next-generation fighter jet program development. Such programs are expected to bolster the growth prospects of the players in the country.
- In September 2021, Northrop Grumman Aerospace Systems won a USD 39.9 million contract to develop software for RQ-4 Global Hawks operated by Japan and South Korea. The work, due to be completed by July 2023, will be performed in San Diego, United States.
- In June 2021, Boeing obtained a USD 18.24 million firm-fixed-price contract modification for delivery and support of KC-46A Pegasus aircraft in Japanese service. The modification covers six months of setup and 12 months of post-delivery support services for the first two aircraft that will be delivered to Japan. Work on the modification is expected to be completed by October 2022.
Table of Contents
1.1 Study Assumptions
1.2 Scope of the Study
2. RESEARCH METHODOLOGY
3. EXECUTIVE SUMMARY
4. MARKET DYNAMICS
4.1 Market Overview
4.2 Market Drivers
4.3 Market Restraints
4.4 PEST Analysis
5. MARKET SEGMENTATION (Market Size by Value - USD billion)
5.1 Armed Forces
5.1.1 Air Force
5.2.1 Personnel Training and Protection
5.2.2 C4ISR and EW
5.2.4 Weapons and Ammunition
6. COMPETITIVE LANDSCAPE
6.1 Company Profiles
6.1.1 Kawasaki Heavy Industries Ltd
6.1.2 Lockheed Martin Corporation
6.1.3 The Boeing Company
6.1.4 BAE Systems PLC
6.1.5 Raytheon Technologies
6.1.6 Northrop Grumman Corporation
6.1.7 Thales Group
6.1.8 Mitsubishi Heavy Industries Ltd
6.1.9 ShinMaywa Industries Ltd
6.1.10 The Japan Steel Works Ltd
6.1.11 Toshiba Corporation
6.1.12 Subaru Corporation
6.1.13 Komatsu Ltd
7. MARKET OPPORTUNITIES AND FUTURE TRENDS
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Frequently Asked Questions
What is the study period of this market?
The Japan Defense Market market is studied from 2018 - 2027.
What is the growth rate of Japan Defense Market?
The Japan Defense Market is growing at a CAGR of >2.5% over the next 5 years.
Who are the key players in Japan Defense Market?
Kawasaki Heavy Industries, Ltd., Mitsubishi Heavy Industries, Ltd., ShinMaywa Industries, Ltd., The Japan Steel Works, Ltd., Toshiba Corporation are the major companies operating in Japan Defense Market.