Exclusive: Pentagon's chief weapons buyer builds Japan ties as it eyes arms exports

By Tim Kelly

TOKYO | Wed Jul 31, 2013 6:25am EDT

TOKYO (Reuters) - The U.S. Defense Department's chief weapons buyer, Frank Kendall, will on Thursday meet officials in Tokyo overseeing Japan's defense contractors, his first visit with industry regulators reviewing the pacifist nation's decades-old ban on overseas arms sales.

The under secretary of defense for acquisitions, technology and logistics will meet officials at the Ministry of Economy Trade and Industry, a spokesman for the U.S. military said. He will also visit the foreign affairs and defense ministries.

The three ministries are together considering guidelines on what weapons, and to whom, Japanese defense contractors could sell arms.

Almost half-century-old export restrictions have isolated Japan's defense contractors, keeping the industry small, fractured and cost heavy.

While dual-use equipment such as cameras, that are also sold for civilian use, are exempt, such devices are rarely sold directly to armies by their Japanese makers.

The U.S. military, for example, uses Panasonic Corp's rugged laptop computers to guide drones, but buys them through a third-party vendor.

Kendall's visit to the Ministry of Economy Trade and Industry, which regulates exports, could help the U.S. Defense Department build deeper ties with industry officials who will play a key role in formulating rule changes that may allow companies such as Mitsubishi Heavy Industries, the maker of the World War Two-era Zero fighter, and Kawasaki Heavy Industries Ltd, which builds submarines, become suppliers to the United States.

"We see the possibility of joint development as a major step," Tatsuhiko Nojima, executive vice president at Mitsubishi Heavy told a news briefing in Tokyo to announce the company's results for the quarter that ended on June 30.

"This represents a big business chance."

Kendall, who was appointed by President Barack Obama in October 2011, wants to visit the ministry because it regulates Japan's defense industry, said an official at the ministry, who declined to be identified. The meet-and-greet may include discussion of the export restrictions, he said.

GOING FOR JOINT DEVELOPMENT

Japan's government on Friday published a policy paper, its latest step away from the constraints of its pacifist constitution and part of Prime Minister Shinzo Abe's review of defense posture in the face of perceived threats from China and North Korea.

In it, the government said it would "aggressively promote joint international development production with the United States, Britain and other countries".

Doing so could help it beef up its military by letting defense-equipment makers expand production and lower costs through greater scale without having to raise spending. The United States too could benefit from lower costs by widening its supply chain.

Japan's defense spending has stayed at around 1 percent of gross domestic product for decades, but rising maintenance costs cut its procurement budget by a third over the past 20 years.

Lockheed Martin Corp, which helped Japan build its F-2 fighter and will supply it with F-35s assembled locally by Mitsubishi Heavy, says it wants to include Japanese companies in its supply chain.

Raytheon Co is also interested in Japan as a supplier as it see renewed demand for its Patriot missile defense system. Mitsubishi Heavy makes them under license in Japan.

As it revamps its twin-rotor Chinook transport helicopters, Boeing Co too could view Kawasaki Heavy, which builds them for Japan's Self-Defense Forces, as a potential supplier.

The most immediate goal of arm exports guidelines, say industry sources, could be to allow an upgraded ship-based SM-3 missile to be sold to third countries beyond the United States and Japan.

Designed jointly by Raytheon and Mitsubishi Heavy, it is meant to destroy ballistic missiles as part of a defense shield Japan is deploying to counter any potential threat from missile-armed North Korea.

(Editing by Robert Birsel)

Source: http://feedproxy.google.com/~r/reuters/topNews/~3/m37bUwu8U-Y/story01.htm

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