Japan Facing Industrial Base Issues

Last Updated Sep 21, 2009 5:56 AM EDT

Japan is starting to understand that due to little recent investment in their domestic arms production the country is facing major industrial base issues. The Japanese economy has been in doldrums of growth for several years with the successive governments spending money on domestic stimulus programs. This has meant that the defense budget has actually declined every year for the last seven. This has meant that domestic producers have been unable to keep working which is leading to the businesses exiting the market.

The United States Government has already began to express concern about the same thing happening in their country. In the Nineties the last major cut to defense spending there occurred a great deal of Mergers & Acquisitions (M&A) as the funding didn't support multiple sources for many products. Now the U.S. is faced with having mainly one major domestic supplier for some systems. The U.S. has relied on European and other foriegn firms entering the U.S. market to provide the necessary competition.

In Japan there has been some purchases of foreign equipment to help modernize their military but that has had a negative effect on the domestic industry as well. Currently the Japanese government is not building any ships for their Navy which may lead companies to leave that business. Once the current F-2 aircraft production line shuts down there will be no new aircraft built in Japan for years. This means that the suppliers and parts makers will not have any new production to support so they too will look for other markets.

The problem will be if there is a time when production needs to quickly ramp up again. There will be no trained workers left available to support this expansion as the companies move on or go away. That alone will hamper any attempt to rapidly increase production of products. That is why both the government and contractors prefer a steady stream of production even if it is at a low rate. This allows the company to maintain the necessary certifications of their production processes as well as keep a core of workers busy. No body will be willing to pay workers to sit around without doing anything.

In World War One and Two the United States was able to quickly convert their civil manufacturing industry to produce military arms. Other then in aviation where the U.S. was able to rapidly develop modern and effective aircraft the U.S. standardized designs on things like the M4 Sherman tank which allowed massive production with some incremental upgrades. The available work force due to the Great Depression also helped a great deal. This is not an option that will be available necessarily in the future as the U.S. heavy manufacturing industry has declined greatly or become foriegn owned.

Japan is in much worse straits then the United States in this matter but it does offer a warning as to what may happen if defense spending falls greatly. There have to be concerns that the United States without some level of steady investment may see its industrial base negatively effected over the next ten years.

  • Matthew Potter

    Matthew Potter is a resident of Huntsville, Ala., where he works supporting U.S. Army aviation programs. After serving in the U.S. Navy, he began work as a defense contractor in Washington D.C. specializing in program management and budget development and execution. In the last 15 years Matthew has worked for several companies, large and small, involved in all aspects of government contracting and procurement. He holds two degrees in history as well as studying at the Defense Acquisition University. He has written for Seeking Alpha and at his own website, DefenseProcurementNews.com.