Japan Defence & Security Report Q1 2008

Japan's internal and external security situation did not change significantly in Q407, with Japan facing a range of strategic uncertainties. Much of this stems from the country's evolving security identity and the strategic role it will play in the Asia Pacific. Japan's re-evaluation of its security identity has been prompted by changes in government, as well as external factors. For the last six years it has been led by Koizumi and Abe, leaders that are known for their strong nationalist tendencies. However this trend may be reversed in 2008 after Yasuo Fukuda was chosen in Q407 to lead the Japanese government. One of the first key policy pledges made by Fukuda was to strengthen ties with East Asia, with a focus on North East Asia. Prime Minister Fukuda also noted that Japan would extend the Maritime Self Defence Force's (MSDF) deployment in Afghanistan. These commitments suggest that for now, Japan will be as committed to strengthening strategic ties in the Asia region, as well as maintaining its commitment to the West.

In the first quarter of 2008 the Japanese Ministry of Defence (MoD) requested a 0.74% increase for the 2008 budget, at US$41.427bn. If the budget is approved, the defence budget will reach 1% of the country's GDP and approximately 5.6% of the estimated total 2008 budget. This is a distinct shift away from previous budgets which have hovered around the 0.8% of GDP mark. Moreover, expenditure patterns have not changed dramatically, with procurement only receiving some 20% of the total defence budget and personnel costs accounting for up to 45% of the defence budget.

The Japanese defence industry, officially part of the heavy industries, is dominated by giants such as Mitsubishi. The industry's unique structure is underpinned by Article 9 in its Constitution, which prohibits Japan from having a fully developed armed force and defence industry However, there are likely to be substantial changes in the coming quarters as indicated by the shifts in Japan's diplomatic position.

The government is moving forward with plans to produce the PAC-3s missiles indigenously at the cost of JPY10bn, with Mitsubishi Heavy Industries (MHI) initially awarded the contract in 2005 to produce the PAC-3s missiles. In the fourth quarter of 2006, BMI's arms exports forecast for Japan remained unchanged, with Japan importing more arms.