Exporting Frigates to Australia (Part III: Implications for Defense Equipment Transfer Policy)

The greatest implication for Japan’s defense industry arising from the Royal Australian Navy’s adoption of the new FFM is the further acceleration of defense equipment transfers. Both government and industry will gain confidence and move more proactively to promote exports to overseas markets. At the same time, inquiries can be expected from countries that had previously shown interest in Japanese equipment but had hesitated to commit. Their concerns over Japan’s “lack of experience” will have been largely dispelled by this success.

What lessons should then be drawn from this success, and how should they be connected to future projects? As the number of transfer cases increases, what must be kept in mind? Now that the first large-scale equipment transfer has been decided, there is a need to examine and extract lessons for the next project.

Promoting sales by emphasizing strategic relations without considering the recipient’s needs may invite political risks. At the same time, the active involvement of Japan’s Self-Defense Forces (SDF) as operators, together with public-private cooperation, has proven effective. Looking ahead to an expected increase in transfer cases, there is also a need to develop business models and standardized frameworks that will function over the long term.
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Advantages and Disadvantages of Emphasizing Strategic Relations

In its promotion of the New FFM to Australia, the Japanese government from the beginning adopted a policy of placing the highest priority on deepening the Japan-Australia strategic relationship. At the June 2024 National Security Council (director-general level), it was judged that “there is strategic significance with China in mind,” and the decision was made to release technical data on the Mogami-class frigate (the predecessor to the new FFM) to the Australian Ministry of Defence. Furthermore, at the end of November 2024, the NSC officially confirmed a government-wide policy to promote the transfer, stating that it would contribute to improving interoperability and strengthening shipbuilding and maintenance bases in the Indo-Pacific. This posture was received favorably in Australia’s strategic community, and many Australian commentaries referred to the strategic relationship with Japan as a main reason for the adoption of the New FFM.

By contrast, South Korea’s promotion placed greater emphasis on corporate profit before strategic relations, provoking a backlash. Hanwha, the designer and builder of the Daegu-class, simultaneously attempted to acquire Austal—the company expected to handle domestic construction in Australia. The bid met resistance from the Ministry of Defence and was postponed. The background was the ministry’s intention to foster Austal as a “strategic shipbuilding partner,” given its concern that Australia currently lacks a sovereign defense prime contractor.

However, excessive reliance and expectations placed on the strategic relationship can become a double-edged sword. As discussed in “Part I: Why Japan Won,” the decisive factors in the New FFM selection were the prospect of meeting delivery deadlines and compatibility with the Royal Australian Navy’s operational concepts. In other words, the strategic relationship itself was not the direct deciding factor.

Had the New FFM failed to meet the required performance, Japan—having placed the strategic relationship at the forefront—would likely have felt deep disappointment at a second failure following the unsuccessful attempt to transfer the Sōryū-class submarine in 2016. In that case, the bilateral relationship could have stagnated, and Japan-Australia defense cooperation more broadly might have been seriously affected. In fact, after the failure of the submarine transfer, bilateral defense ministerial meetings produced little progress for a year, and defense equipment and technology cooperation entered a long period of stagnation.

In defense equipment transfers, it is essential to not rest on the strategic relationship alone, but to accurately grasp the counterpart’s needs. If the equipment proposed is not optimal for the recipient, negotiations should proceed without excessive expectations. It must also be recognized anew that Japanese equipment—developed for decades solely on the basis of SDF requirements tailored to Japan’s unique circumstances—is often suffers from “Galápagos Syndrome,” where equipment produced for domestic needs is not always suited to foreign operational concepts.

Proactive Promotion and Close Public-Private Coordination

What is particularly noteworthy in the New FFM promotion is the Japanese government’s extremely proactive stance and the close public-private coordination that accompanied it. Japan’s Ministry of Defense and the SDF actively promoted the transfer, with the enthusiasm of the Maritime Self-Defense Force (JMSDF) especially standing out.

At the first Japan-Australia Navy-to-Navy Strategic Dialogue in late August 2024, Rear Admiral Toshiyuki Hirata, Director of the MSDF Defense Department, exchanged views with Rear Admiral Stephen Hughes, Head of Capability Development for the Royal Australian Navy, across a wide range of areas including force operations, technology and equipment, and logistics. Two days later, Commander in Chief of the Self Defense Fleet invited Hughes and explained the Mogami-class’s diverse mission capabilities as well as efforts in automation, unmanned systems, and stealth, thereby promoting understanding of MSDF equipment and operational concepts. In addition, since the start of Australia’s selection process, the MSDF has made at least two port calls in Australia with Mogami-class frigates.

Such proactive efforts were supported not only by overall policy from the Ministry of Defense and the MSDF but also by the enthusiasm of individual officials. One ATLA (Acquisition, Technology & Logistics Agency) officer remarked that “equipment transfer is a battle, and an offensive posture is essential.”

On the public-private partnership side, the Ministry of Defense established a joint promotion committee bringing together relevant ministries and companies under a “one team” slogan, coordinating the various issues accompanying the transfer. Mitsubishi Heavy Industries, for its part, opened an office in Canberra in February 2025 and, immediately before the decision, Chairman Seiji Izumisawa visited Australia to directly lobby Albanese administration ministers in coordination with ATLA. Although many actors are involved in equipment transfers, companies—responsible for design, construction, and operational support—are indispensable. Their proactive posture was conveyed to the Australians, and it was an important factor in the final selection decision.

Because this was Japan’s first attempt to transfer large-scale defense equipment, Australia initially worried that a lack of experience might cause delays. Those concerns were gradually eased, however, by Japan’s clear demonstration of full governmental backing for its companies. A turning point came when Chief of Joint Staff Yoshihide Yoshida stated in an ABC interview that Japan was committed to delivering the frigates to Australia on time, even if it required postponing its own deployment plans. This remark was repeatedly cited within Australia’s strategic community as evidence of strong public–private unity in Japan. As a result, Japan is believed to have gained high trust from the Australian Ministry of Defence and Navy in the transfer project.

Anticipating Further Overseas Demand

In the wake of this success, Japan’s defense equipment transfers are expected to accelerate. Indonesia is reportedly still considering the Mogami-class for its new frigates, while the Royal New Zealand Navy—given its emphasis on interoperability with Australia—may also be inclined toward the same platform following the Royal Australian Navy’s adoption of the New FFM. Indeed, Prime Minister Christopher Luxon visited Yokosuka in June 2024 and inspected the Mogami-class, indicating strong interest. Looking at other equipment, one can envision the Australian Defence Force, having gained trust in Japanese transfers, considering cooperation in satellite constellations operated or planned by the SDF, or the introduction of target observation munitions and surface-to-ship and surface-to-air missiles.

So how should the Japanese Ministry of Defense and industry respond if overseas demand increases?

First, promote local production rather than strictly domestic production. Within Japan, industry can engage relatively frequently with the SDF, providing a degree of predictability in demand. With foreign customers, however, such opportunities are limited, and unexpected requirements are more likely to arise. Small-scale demand can often be met domestically—for instance, the three New FFMs for Australia to be built in Japan required no major additional investment. But if substantial overseas demand emerges, Japan’s defense industry—already constrained by labor shortages and hesitant to invest under uncertain conditions—may struggle to respond in a timely manner. To mitigate this, overseas demand should be addressed through business models centered on licensing production to partner firms abroad.

Local production also helps address structural vulnerabilities in Japan’s defense industry. Many naval shipyards are concentrated in western Japan and Kyushu—regions geographically close to China and therefore highly exposed to missile strikes in wartime. By localizing production overseas, partner countries could manufacture and supply equipment and parts in Japan’s place, thereby enhancing SDF’s endurance capability. For this reason, as well, local production represents a promising path forward.

Of course, licensing involves risks such as leakage of technical information. Therefore, institutional measures must be established in advance—regarding information security and third-country transfers, for example. While Australia has been evaluated as relatively low-risk, careful consideration tailored to national circumstances is needed in other cases.

Second, develop standardized templates rather than ad hoc frameworks. Currently, Japan’s equipment transfers vary somewhat from case to case in terms of public-private cooperation. For example, in radar transfers to the Philippines and FFM transfers to Australia, the handling of government-furnished equipment (GFE) differs. GFE items such as propulsion systems and radars are first procured by the Ministry of Defense from manufacturers, then provided to the prime contractor for integration. The larger and more complex the equipment, the greater the number of GFE items, which increases coordination costs—especially in overseas transfers. While this did not surface as an issue in the Philippines case, the frigate transfer could become more complicated.

At present, such variation may not present a serious problem, but as the number of transfer cases grows, it will impose increasing burdens on both companies and recipient governments, potentially hindering further expansion. To reduce coordination costs, the transfer process must be unified. Standardization should cover not only GFE but also after-service, training, simulation, information management, and technology transfer. Although there are concerns over reduced price competitiveness, frameworks such as the U.S. Foreign Military Sales (FMS) system offer powerful reference examples.

Conclusion

The lessons from the successful frigate transfer to Australia will be decisive in shaping the future of Japan’s defense equipment exports. Careful analysis and application of these lessons to forthcoming projects are indispensable. As Japan gains experience, inquiries are likely to increase, making it unavoidable to manage multiple projects in parallel. Yet, given the current industrial and institutional base—characterized by personnel shortages and ad hoc practices—there is no assurance that Japan can respond reliably to overseas demand.

In this context, the knowledge gained from the frigate case should be applied not only to reinforce successful practices but also to develop new business models and swiftly establish standardized frameworks for equipment transfers. Only then would Japan be able to realize its potential in this vital area.

(Photo Credit: Hideki Nawate/Aflo)

Disclaimer: The views expressed in this IOG Commentary do not necessarily reflect those of the API, the Institute of Geoeconomics (IOG) or any other organizations to which the author belongs.

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Rintaro Inoue Research Associate
Rintaro Inoue is a Research Associate at the Asia Pacific Initiative (API) & the Institute of Geoeconomics (IOG), the International House of Japan (IHJ), a Tokyo-based global think-tank, where he focuses on U.S. security policy, the U.S.-Australia alliance, Japanese defense policy, and economic statecraft including defense industrial base policy. Prior to assuming his current position, he joined the Asia Pacific Initiative (API) as an intern and contributed to multiple projects including the Japan-U.S. Military Statesmen Forum (MSF). He is currently researching defense industrial policies of other countries in the International Security Order Group. He received his BA and MA in law from Keio University and is now a PhD student.
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Rintaro Inoue

Research Associate

Rintaro Inoue is a Research Associate at the Asia Pacific Initiative (API) & the Institute of Geoeconomics (IOG), the International House of Japan (IHJ), a Tokyo-based global think-tank, where he focuses on U.S. security policy, the U.S.-Australia alliance, Japanese defense policy, and economic statecraft including defense industrial base policy. Prior to assuming his current position, he joined the Asia Pacific Initiative (API) as an intern and contributed to multiple projects including the Japan-U.S. Military Statesmen Forum (MSF). He is currently researching defense industrial policies of other countries in the International Security Order Group. He received his BA and MA in law from Keio University and is now a PhD student.

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