Japan Seeks Payoff for Shedding Pacifism With $36 Billion Deal

Abe knows once economy in China tanks, Chinese politicians are going to blame neighbors and go to war with them to distract Chinese public.

Less than two years after lifting a decades-old ban on arms exports, Japan is navigating one of the most complex and sensitive areas of the defense market: submarines.
The country faces a Nov. 30 deadline to submit a final proposal to Australia for its next-generation submarine, the largest such tender in the world right now. A team of government officials, military officers and corporate executives with no experience in international arms marketing is facing off against global heavyweights ThyssenKrupp AG of Germany and DCNS of France for the A$50 billion ($36 billion) program.

More than commercial interests are at stake. Winning the race to design and build the submersibles would cement the "special" relationship Prime Minister Shinzo Abe has sought to build with a fellow U.S. ally against an assertive China. For Australia, cooperating with Japan -- whose Soryu is widely seen as the best submarine of its type -- risks angering China, its biggest trading partner.
"We are basically prepared to share all our technology," Masaki Ishikawa, a Ministry of Defense official working on Japan’s bid, said in an interview Friday. "Until now, we had never even shown our submarine technology to our ally, the U.S.”

Japanese Pacifism
The submarine competition comes as Japan agonizes over how far to loosen the constraints of the pacifist constitution imposed by the U.S. after World War II and revered by many Japanese. The passage of laws to expand the role of the military met with huge street protests over the summer.
“Make no mistake: a decision in favor of Japan would have tangible strategic implications," said Mark Thomson, a defense economics analyst at the Australian Strategic Policy Institute. "It would assist Japan down the path of military normalization, and it would also send an unambiguous message to both Beijing and Washington about the willingness of Australia and Japan to work together."

With Australia and the U.S. set to jointly develop a combat system to be installed in the new submarines, a Japanese deal could tighten ties between the three countries’ armed forces, Ishikawa said.

Sales Pitch

The A$50 billion contract would be to build the subs and service them over their decades-long lifetime. Defence Minister Marise Payne said at the Submarine Institute of Australia Tuesday the number of subs would be announced next year, though the country needs between eight and 12, analysts say.

Japan is set to ratchet up its sales pitch. Defense Minister Gen Nakatani leaves Thursday to meet South Australian premier Jay Weatherill and shipbuilder ASC, with that state a hub for naval manufacturing. He’ll join Foreign Minister Fumio Kishida for a meeting with Payne and Australian Foreign Minister Julie Bishop Nov. 22.
Japan has deployed its conventionally powered, 4,000-ton Soryu class subs -- the largest of their type in the world -- since 2009. The latest models cost about 60 billion yen ($487 million). The Soryu, manufactured by Mitsubishi Heavy Industries and Kawasaki Heavy Industries, is a close match for the Australian Navy’s needs, though the new submarines would be a fresh design, Ishikawa said.

Big Sub

ThyssenKrupp, Germany’s largest steelmaker, has said its marine unit could build 12 submarines for Australia for about A$20 billion. Germany has experience exporting submarines, but it hasn’t constructed one to the size Australia requires.
“Our design will be customized according to Australia’s requirements and will be exclusively offered to Australia,” John White, chairman of ThyssenKrupp Marine Systems in Australia, said Wednesday. The company targets about 70 percent Australian involvement, pledging to create thousands of jobs.
The German government “is confident that our company is able to offer good quality” and “interesting” possibilities to produce locally, Chancellor Angela Merkel said last week at a briefing with Prime Minister Malcolm Turnbull in Berlin.