Japan Defence & Security Report Q4 2013: New research report available at Fast Market Research

Following elections in July, the LDP-led government of Shinzo Abe finds itself in control of both houses of parliament, making it Japan's strongest administration since 2007. However, the farreaching defence reform which Abe is understood to instinctively favour may not necessarily follow. First, Abe must decide whether to forge ahead with controversial economic reforms - the third "arrow" of his Abenomics programme. This could prove all-consuming and leave little stomach for major changes in defence. Moreover, Abe, despite his commanding majority, still lacks the two-thirds majority needed in both houses in order to change Japan's pacifist constitution to allow the country to adopt a more assertive stance on defence issues.

The likely outcome is therefore that while Abe will try to do more on defence, progress will be gradual. The defence budget is currently capped at 1% of GDP, but the MoD has been allocated more like 0.8-0.9% of GDP in recent times. Increasing it to the 1% limit is an obvious first step. Another measure which Japan's struggling defence industry has welcomed is the move to promote defence-industry partnerships with foreign countries. Industry pacts have already been signed with Australia and the UK; discussions with France are under way; and the US's top procurement official visited Tokyo in late July to discuss opportunities for greater co-operation between US defence contractors and their Japanese counterparts. Meanwhile, Japan's MoD is in discussions with other government departments about how far the relaxation of the country's defence export rules should be allowed to go in practice.

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New National Defence Programme Guidelines (NDGP) are due to be released later this year, but a provisional document released in July indicated how the MoD is thinking. It identified long-range UAVs and missile defence systems as procurement priorities, and also said that a new US Marine Corps-style unit would be established. Though initially only several hundred soldiers strong, this new formation comes specifically in response to the growing Chinese threat and to the potential need to retake the disputed Senkaku/Diaoyu islands following a Chinese invasion. Relations with China remained tense but stable in Q2 and Q3, with Japan issuing repeated complaints about what it claimed were incursions by Chinese aircraft and naval vessels. More positively, Abe and his Chinese counterpart President Xi Jinping are reported to be working hard behind the scenes to arrange a summit in the near future.

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