While there’s little prospect that Japanese consumers will ever buy enough American cars to please Donald Trump, the Abe government’s record spending on defense is shaping up as a bright spot in bilateral trade for the US president.
Japan’s purchases through the US Foreign Military Sales programme represent 16 percent of all non-personnel costs for the nation’s self-defense forces so far this year, more than double the level in 2014, according to calculations by Bloomberg based on government data.
Plans to buy advanced American radars, stealth fighter jets and missile-defense systems in coming years will mean billions of dollars for US weapons makers. Japanese companies, already struggling to compete, don’t stand to benefit as much because economies of scale have made homegrown technology more expensive and Prime Minister Shinzo Abe’s government wants to get more bang for its buck.
During a visit to Tokyo last November, Trump urged Abe to buy “massive amounts of military equipment” from the US. Even without the incentive to ease trade friction, Japan was already an enthusiastic consumer as Abe pushed defense spending to a record $47 billion this fiscal year to counter both a nuclear-armed North Korea and a more assertive China.
To Trump’s dismay, Japan bought just $533 million in new passenger vehicles from the US in 2017 while Americans purchased $39.8 billion in Japanese cars and trucks. Outside the military sphere, Japan has looked to boost energy purchases such as liquefied natural gas to placate the US The nation’s biggest imports from the US in 2017 were agricultural products, chemicals and machinery.
While there is little threat to domestic production of warships, costs are an issue especially for aircraft.
A finance ministry committee has recommended switching to the Lockheed Martin Corp.-made C-130 J30 cargo plane, which although slower and with a shorter range, costs less than half the cost of the domestically produced C-2. Japan will buy two C-2s from Kawasaki Heavy Industries this fiscal year, after buying three last year.
Japan is currently purchasing new F-35A fighters to replace decades-old planes. The next battleground for domestic manufacturers will be who makes the fighter jet to replace the F-2, which is the last domestically produced fighter.
Even before new F-2 production ended in 2011, suppliers were fleeing the defense
business. Sumitomo Electric Industries started ending its business with the defense ministry in 2007.