Japan Making Headway in Defense Industry Buildup, but Much Work Remains

The Yomiuri Shimbun

15:04 JST, October 2, 2025

The Acquisition, Technology and Logistics Agency marked its 10th anniversary on Wednesday. In response to changes in the security environment, its role has expanded from its original focus on streamlining the procurement of defense equipment to strengthening the defense industry. While it has achieved some success in transferring equipment to countries like Australia, challenges remain, including strengthening supply chains and fostering advanced technologies.

“The challenges we face are changing at a pace far exceeding initial expectations,” said Defense Minister Gen Nakatani in an address to agency officials on Wednesday.

At its founding, the agency focused primarily on centralizing procurement — previously handled by multiple parts of the Defense Ministry — to improve efficiency. However, the security environment has changed drastically with Russia’s invasion of Ukraine and heightened concerns over a Taiwan contingency, leading to a shift in the agency’s role.

At a press conference on Tuesday, Nakatani listed three key future tasks: ensuring sustained combat capability by improving equipment supply chains, incorporating cutting-edge civilian technologies and promoting equipment transfers.

Because many companies have withdrawn from the defense industry, the agency has raised the profit margins on equipment it orders. As manufacturing capacity for items like ammunition remains below what is needed, the agency is considering setting up state-owned factories.

Efforts to bring startups with advanced technologies, such as drones, into the defense industry are still in their early stages. Some highly skilled startups have failed to win bids for agency contracts, prompting calls to review how contracts are awarded.

While the Australian Navy has decided to acquire the improved Mogami-class frigate from the Japan Maritime Self-Defense Force, the warships cannot be exported under the current operational guidelines for the Three Principles on Transfer of Defense Equipment and Technology. Within the Liberal Democratic Party, there is persistent pressure to relax these regulations to promote exports.

“I hope they will foster the industry, given that it contributes not only to security and deterrence but also to economic growth and job creation,” said Takeshi Ishikawa, the agency’s former commissioner.