Japan eases arms export rules, setting stage for rivalry

April 22 (Asia Today) -- Japan's defense industry is poised for rapid expansion after the government lifted key restrictions on arms exports, but analysts say structural challenges could shape its ability to compete with established exporters such as South Korea.

Government of Japan on Monday removed the so-called "five categories" rule, a core element of its long-standing restrictions on defense equipment transfers. The move significantly broadens the scope for exporting finished military systems, which had previously been limited largely to non-combat purposes.

The policy shift is aimed at strengthening security cooperation with allies while reinforcing Japan's domestic defense industrial base. Industry officials, however, caution that removing regulatory barriers does not automatically translate into export competitiveness.

Japan's defense sector has long relied on domestic demand from the Self-Defense Forces, resulting in limited production scale and profitability. That dynamic is now changing.

According to data from the Stockholm International Peace Research Institute, combined sales of five Japanese firms ranked among the world's top 100 defense companies rose 40% year-over-year in 2024 to $13.3 billion.

Major manufacturers such as Mitsubishi Heavy Industries, Kawasaki Heavy Industries and IHI Corporation are expected to post further gains, with projected combined defense-related sales of about 1.8 trillion yen ($12 billion) in fiscal 2025.

Still, industry insiders say Japan faces a "triple bottleneck" in scaling up exports: limited production capacity, fragile supply chains and a shortage of skilled labor.

While Japanese firms are recognized for advanced technology - particularly in submarine and naval construction - they have less experience in mass production and post-sale support compared to competitors.

Officials warn that a sudden increase in overseas demand could expose weaknesses in parts procurement and delivery timelines.

"The door to exports has opened, but the real test is whether companies can produce at scale and deliver reliably," an industry official said.

The shift underscores a growing contrast with South Korea's defense sector, which has built a reputation for rapid mass production and timely delivery in global markets.

As Japan lowers institutional barriers and enters the export market more aggressively, analysts say competition between the two countries is likely to intensify - with production capacity and supply stability emerging as key differentiators.

For now, Japan's defense industry faces a transition from regulatory reform to operational execution, as it seeks to convert new policy flexibility into sustained export growth.

-- Reported by Asia Today; translated by UPI

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Original Korean report: https://www.asiatoday.co.kr/kn/view.php?key=20260422010007031

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This story was originally published April 22, 2026 at 9:47 PM.