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During Japanese Prime Minister Fumio Kishida’s recent state visit in April 2024, the White House released a visionary joint statement on deepening U.S.-Japan cooperation across a variety of issue areas—from national security and defense to economic prosperity and technological development. But perhaps most importantly, the statement includes plans to integrate the American and Japanese defense-industrial bases further. The proposal seeks to “establish an Alliance defense production capacity to meet the demand for critical capabilities over the long term”—an admirable, albeit ambiguous, strategic goal with immediate logistical challenges for governments and industry.
This imperative is not new. Since 2022, the United States and Japan have advanced various policy initiatives around defense-industrial integration with renewed urgency. Driven by concerns over defense production exacerbated by the war in Ukraine and increasing demands for combat readiness in the Indo-Pacific region, these initiatives arise at a critical moment in today’s geopolitical climate of strategic competition.
However, recent objectives for integration highlight the disconnect between the U.S.-Japanese strategic vision and political and industry capabilities. Pursuing defense-industrial integration will require segmented, parallel approaches from government and industry actors that focus on phased integration and prioritize building a sustainable business case. On one front, this means increasing standardization, transparency, and alignment to support ongoing and long-term integration. On the other hand, a more immediate integration path will recognize that changes related to services, trade, and research present more immediate opportunities for integration by government and industry.
An Aligned Strategic Vision
American and Japanese policymakers share an overall strategic vision for long-term defense-industrial integration. As part of this integration, the United States and Japan plan to pursue co-development, co-production, and co-sustainment efforts, which require buy-in from government and industry actors. U.S. Undersecretary of Defense for Acquisition and Sustainment Bill LaPlante stated this process of co-production would mean that foreign weapons will be produced and assembled in the United States. Co-development and co-sustainment capture the front and back end of that process, meaning that the development and sustainment of subsequent products will be shared or completed jointly among governments. Both the United States and Japan have expressed intentions to explore the co-production of advanced and interoperable missiles for air defense and pursue the co-development and co-production of cutting-edge technologies such as jet trainers to support next-generation fighter airpower.
The United States has also more broadly discussed incorporating Japanese industry as part of AUKUS Pillar II, which involves trilateral efforts to develop advanced military capabilities among Australia, the United Kingdom, and the United States. In May 2024, the U.S. Department of Defense (DoD) released a statement that “AUKUS partners are considering cooperation with Japan on AUKUS Pillar II advanced capability projects” given Japan’s “strengths and its close bilateral defense partnerships with all three AUKUS countries.” The United States has also suggested it would like to use Japanese suppliers to fulfill resilient supply chain strategic goals as outlined in the National Defense Industrial Strategy (NDIS).
These policies build upon the Memorandum of Understanding (MOU) for Research, Development, Test, and Evaluation Projects (RDT&E) and a bilateral, non-binding Security of Supply Arrangement (SOSA) between the DoD and Japanese Ministry of Defense (MOD) released in early January 2023. The MOU specifically “will support the Alliance’s efforts to maintain its technological edge in critical and emerging technologies, such as high-power microwaves, autonomous systems, and counter-hypersonics.” While the SOSA advocates for the creation of a “streamlined mechanism for DoD and MOD to request expedited handling of industrial resources to resolve unanticipated supply chain disruptions to meet national security needs.”
Inadequate Policy Infrastructure for Integration
While this new political momentum toward further defense integration is promising, execution has been a consistent challenge. Integration is a familiar item on the docket for the U.S.-Japan relationship and has been a consistent sticking point in their bilateral defense cooperation. Several obstacles contribute to this difficulty, but at the crux of this issue is an incompatibility between U.S. and Japanese contracting infrastructure and defense industry standards.
A key element for successful defense integration is the development of timely and cost-effective joint projects. A panel hosted by the Center for Strategic & International Studies (CSIS) Defense-Industrial Initiatives Group (DIIG) discusses inefficiencies at all coordination levels: government-to-government, industry-to-government, and industry-to-industry. Cooperation at these levels faces recurring issues related to information-sharing and timeline alignment.
The United States and Japan lack defined and accessible common requirements and even written frameworks to determine cost-sharing responsibilities for joint programs. The success of past cooperative development on ballistic missile defense programs between the United States and Japan reflects the necessity of common standards. Industry-to-industry interactions are also limited due to differences in industrial information-sharing standards that prevent even initial-stage feasibility studies. Industry actors from both nations are generally not informed of government investment schemes. They are left out of capabilities assessments, creating a disjointed and unaligned development process between government and industry.
There is also the issue that government contracting timelines are long and often not complementary to other government contracting timelines or industry norms, which can, for example, make predicting the approval process more difficult. These incompatibilities introduce a strong degree of uncertainty in the contracting process, which is a deterrent for competitive industry involvement.
Current Opportunities for Government and Industry
These issues are not unbeknownst to the United States or Japanese governments, and both nations have made strides to address integration gaps. The United States released the NDIS in January, outlining a strategy to invest in a diverse supplier base and increase standardization, modularity, and interoperability throughout the acquisition process. One aspect of this desired change is the increased visibility of contracting timelines to create clear demand signals. These changes aim to create greater transparency, predictability, and compatibility in the international development and acquisition environment.
While the United States has announced strategic shifts in its defense cooperation policy, Japan has eased its restrictions on exporting lethal weapons and has steadily opened up its maintenance, repair, and overhaul (MRO) services to foreign entities. Following revised export restrictions, the Japanese exported Patriot missiles to the United States, which Japan produced under a U.S. license. More recently, the U.S. Navy and Japan agreed in January to expand allowable MRO services to take place in Japan on U.S. naval vessels.
Recent progress is paving a path toward the strategic vision for U.S.-Japan defense-industrial integration, but integration at the strategic program co-development level still requires building a robust integration infrastructure. What these recent developments do suggest, though, is that there are lower-level integration opportunities that U.S. and Japanese industry can capitalize on, with MROs being a particularly viable option. The need and demand for global MRO services is partly due to a natural growth in the market, but the aforementioned policy changes make the MRO space more flexible for international entities.
Government and industry should look to engage with defense companies below the prime contractor level and recognize opportunities for integration in areas such as emerging technologies and research. Comparable military innovation institutions, like the Defense Innovation Unit (DIU), the Defense Advanced Research Projects Agency (DARPA), and Japan’s Acquisition, Technology & Logistics Agency (ATLA), make coordination on both of these fronts more feasible, though information security standards still remain a problem.
The relaxing defense trade restrictions additionally signals a greater opportunity for supplier diversification, and therefore, the United States should look to Japan further to fulfill component shortages, especially for satellite parts. Defense supply chain resilience between the United States and Japan can also build upon prior supply chain policy efforts related to semiconductors and critical minerals.
On a different note, one particularly overlooked and advantageous feature of the U.S.-Japan relationship is its robust commercial business relationship. Japan and the United States’ defense industries can certainly leverage existing commercial ties and industrial infrastructures to streamline defense integration. Boeing is one U.S. defense company that appears to be excelling in this area. The American company maintains both a strong commercial and defense relationship with Japan, supplying commercial airlines and the Japanese Ministry of Defense. Japan is a major supplier of Boeing jets, and Boeing assembles many of its defense products in Japan such as the F-15. Boeing can leverage its commercial relationships and in-country know-how to support its defense operations. Other U.S. entities might look to pursue joint ventures with Japanese companies in commercial and dual-use products or pursue operations through Japanese subsidiaries. The same can be said for Japanese companies in the United States, especially in areas of emerging tech, space, and manufacturing, where foreign investment can support American business competitiveness. Pursuing defense integration through commercial relationships offers businesses greater strategic flexibility and overcomes some of the policy challenges associated with defense development and contracting processes.
Looking Forward
The vision for U.S.-Japan defense-industrial integration set out by recent administrations is a lofty proposition that will require considerable bureaucratic and industry movement, considerable patience, and some betting on the U.S.-Japan defense relationship.
Pursuing integration requires political and industry movement on several fronts that look at both near- and long-term goals. For policymakers, this means building a more robust policy environment conducive to profitable and effective international defense programs. For governments and industry now, this means leveraging recent policy changes and current business environments to make strides in integration that will be foundational for ongoing defense integration between the United States and Japan.
The United States and Japan will have to continue to build transparent and streamlined policy and acquisition environments while signaling early program investment schemes. However, in the more immediate future, smaller opportunities for defense integration in services, supply, and research look to be promising ventures. Importantly, industry has a relatively strong degree of agency in creating more robust business ties with Japanese companies that can translate to the defense business. The viability of larger strategic programs, though, will depend on standardization and industry involvement in the U.S.-Japan relationship. Sustainable and robust integration will require pursuing both near-term and long-term initiatives.