Japanese companies are looking at loans from state-run banks to be able to fund its planned exports of military aircraft when it finally revises its policy regarding international sales of weapons. This will also be part of the current administration’s efforts to strengthen the country’s self-reliant military force and for defense contractors to finally make their mark on a billion dollar market.
After World War II, Japan self-imposed a near-total ban on military exports as part of its steps to renounce war and its role in it. The country’s post-war constitution, which was written by US-led occupation forces, has not been revised in decades and by 1960s, the self-imposed ban on exporting military equipment took full effect. This led to major military equipment makers going into other industries. But now that Japan is looking into making a major policy change, this can intensify tensions with its neighbours China and South Korea, who see this move as a return to Japan’s militaristic ideology.
The initial test case for this shift will probably be the sale of the Kawasaki Heavy-built C-2 military transporter and Shinmaywa Industries’ US-2 amphibious plane. The two companies are considering exporting civilian versions of their aircraft in order to get around the ban. But they are also looking into getting financial help from the government to help them compete against the more established aircraft makers. One precedent for this, albeit on a different level, is Japan extending overseas development assistance (ODA) to the Philippines and Indonesia so they can buy Japanese-built ships for their coastal patrols. But the ODA program does not allow military support, and they only approved the loans upon the assurance that the boats will be used for counter-terrorism and piracy campaigns only.
For the aircraft exporters, their possible options would be to low-interest loans from the Japan Bank for International Cooperation (JBIC), one of the country’s state-funded banks, which reportedly charges just 1% interest on a loan less than five years. The bank has helped Japanese companies win contracts for big infrastructure companies abroad, especially when it comes to securing oil and gas reserves for the country.
[ via Reuters ]