Is the Korea-Japan Arms Race Beginning? Japan Fully Lifts Ban on Lethal Weapons Exports [Weekend Money]

End of a 70-Year Taboo: Will Korea and Japan Form a Competitive Landscape in Defense Exports?

"Korea to Maintain Its Edge in Export Experience and Production Capacity"

Within the framework of its so-called "peace constitution," Japan has so far focused exclusively on defense, only handling rescue supplies or outdated radar equipment in a highly limited manner. Now, however, Japan is moving to directly sell missiles and fighter jets. With the door to arms exports—locked for over 70 years—finally opening, an inevitable "Korea-Japan match" looms for K-defense, which has been active in the global defense market.

Japan Sheds Its "Defense Only" Label: Could It Become a Game Changer in the Arms Export Market?

According to Eugene Investment & Securities on April 26, Japan fully allowed arms exports after revising the "operational guidelines" of its Three Principles on Transfer of Defense Equipment and Technology on the 21st, a move targeted for this spring. Previously, only five types of non-lethal equipment (rescue, transport, surveillance, reconnaissance, and minesweeping) could be exported in a limited fashion. Now, weapons systems with lethal capabilities can also be sold.

The reasons for Japan's bold actions are clear. In the wake of the Russia-Ukraine war in 2022 and the resulting geopolitical instability, Japan believes that strengthening its own defense capabilities and establishing a robust defense manufacturing base requires not only domestic demand but also an expansion of exports.

Preparatory measures have already been taken: in 2022, Japan raised its defense spending target to 2% of GDP, and in 2023, it doubled the profit cap for defense companies from 8% to 16%. With domestic demand alone expected to more than double defense-related sales, Japan's strategy is to further expand its industrial base through exports.

Short-term Competition in Naval Vessels and Missiles; Aerospace to Be a Variable After the 2030s

Given its geographic characteristics, Japan has highly advanced aircraft, naval vessels (surface ships and submarines), and missile systems to defend its sea routes and airspace. Yang Seungyun, a researcher at Eugene Investment & Securities, analyzed that these same areas—aircraft, naval vessels, and missiles—will be the main fields where Japan will compete with Korean defense exports.

In the aerospace sector, the next-generation fighter jet joint development (GCAP) is expected to be operational around 2035, limiting short-term competition. In contrast, competition in naval vessels and missile sectors could become a reality in the near to mid-term, given the expansion of domestic demand in both countries.

Yang assessed that Korea’s position is unlikely to be shaken immediately. He added, "Korea’s advantage in terms of export experience and the reliability of its weapons systems will be maintained."

The fact that Japanese defense companies’ current production capacity is already maxed out also bodes well for Korea. While companies like Mitsubishi Heavy Industries are expanding their plants, these investments are mainly to meet the surging domestic demand in Japan. In other words, their ability to respond to export orders remains limited for now.

Beyond the U.S.-Japan Alliance: Integration into the Defense Supply Chain Signals a Different Mode of Competition

The issue arises when Japan leverages close defense industry cooperation with the United States and Europe. A prime example is Mitsubishi Heavy Industries’ decision to jointly develop the SM-2 missile with the United States and to produce Patriot missiles under license, in order to help address America’s missile shortages.

The United States and Japan are also jointly producing solid rocket motors, using "Indo-Pacific industrial resilience" as a pretext to scale up their capabilities—a move seen as approaching a "NATO-style defense industry structure." While Korea focuses on exporting finished products, Japan is forming a competitive structure by becoming part of the U.S. defense supply chain, fundamentally changing the nature of the competition.

Japan is also employing a strategy similar to Korea’s past approach, offering outdated weapons systems to Southeast Asian neighbors and targeting the market from the ground up. This is not just simple exporting but a "market penetration strategy" that builds order records and leads to long-term exports, essentially mirroring the growth path of K-defense. There is even speculation that during Japan’s upcoming Golden Week holidays, officials from the Ministry of Defense may visit the Philippines and Indonesia.

Ultimately, for K-defense to maintain its competitive edge, not only technological development but also a detailed export strategy at the national level is essential. Yang stressed, "The level of cooperation must be upgraded from simple direct exports to joint development and local production."

This content was produced with the assistance of AI translation services.