Japan's Australian sub bid fits with its strategic and economic transformation

Japan’s pitch to supply Australia’s next generation of submarines became more competitive against its European rivals when the bidding Japanese consortium conceded it would build in Australia. If successful, this bid will complement the recent passage of controversial security bills and strengthen Japan’s defence ties with Australia.

The new legislation now permits the Japanese Self-Defence Forces (SDF) to exercise the right of collective self-defence, formally confirming a cabinet decision in July 2014 to reinterpret the constitution. They were passed by the ruling Liberal Democratic Party (LDP) and Komeito Party coalition. It overcame the delaying tactics of the opposition parties, which led to extraordinary scenes of politicians brawling in the usually sedate Diet.

The strategic imperatives

Prime Minister Shinzo Abe and the LDP were determined to pass the vote despite the largest public protests seen since the 1960s, led by a reinvigorated student peace movement. Opinion polls have consistently shown that the majority do not support the new laws. Large numbers of academics, lawyers and retired judges consider them unconstitutional.

The main opposition parties – the Democratic Party of Japan, the Japan Innovation Party and the Japanese Communist Party – have vowed to overturn the bills, pledging to co-operate to first win back control of the upper house in elections due next year. However, the splintered opposition faces a formidable task of regaining the electorate’s confidence if they are to have any chance of eventually winning government and repealing the bills.

Abe has just won his second and final three-year term as LDP president. This entrenches his position as prime minister and potentially allows him to contest the next lower house election, due in 2018.

China predictably criticised the security bills’ passage. But the US, the Philippines and Australian Foreign Minister Julie Bishop warmly welcomed it. Abe claimed the bills are needed to secure Japan in a more unstable world, and that they allow Japan to contribute more to international peace and security.

The new collective self-defence powers are likely to be first exercised to allow more robust rules of engagement for SDF peacekeepers in South Sudan. The bills’ main intent, though, is to upgrade the SDF’s operational capability to co-ordinate with its allies’ armed forces and so increase deterrence against the rising military power of China, which has an ongoing territorial dispute with Japan over the Senkaku Islands.

During the Diet debate on the bills, the SDF conducted brigade-size amphibious manoeuvres with US forces in California. It also participated in the Talisman Sabre military exercises held in Australia with the US.

As part of this strategic reorientation, the Abe government has already eased export restrictions on military-related equipment – such as for communications and sensors, which have already been exported to the US and Britain. And if construction of its submarines in Australia proceeds, it will be Japan’s first postwar export of a major combat weapons system.

Japan is already transferring coastguard patrol boats and maritime surveillance aircraft to the Philippines and Vietnam. This indicates its desire to support these key ASEAN countries in their territorial disputes with China in the South China Sea.

The economic imperatives

Hoping to move on from the unpopular security bills, Abe last week launched a reboot of “Abenomics”, with the goal of raising Japan’s GDP to 600 trillion yen by 2020. Abe declared there would be three new “arrows” in the Abenomics relaunch:

1. a strong economy;

2. support for child rearing; and

3. enhanced social security.

However, these shallow slogans, announced with little policy substance, expose how the Abe government’s domestic economic and social policy agenda has stalled. Japan’s planned government spending for 2015-16 is a record 102.4 trillion yen. The Bank of Japan’s annual quantitative easing of 80 trillion yen has seen Japan’s public debt continue to rise above 230% of its GDP.

Despite these huge stimulus measures, Abenomics has so far failed to break the Japanese economy out of its decades-long stagnation. Deflation returned for the first time in two years in August, at 0.1%, due to lower global oil prices and ongoing weak domestic demand. This followed a contraction of Japan’s economy by 0.4% in the April-June quarter.

Encouraging Japan’s defence industry to move further into export markets therefore supplements Abe’s hopes of reinvigorating the economy. Rising defence spending is a major component of this attempt at stimulating investment. Japan’s defence ministry has requested yet another record budget for 2015-16 of 5.09 trillion yen. This is a 2.2% increase on 2014-15.

If the Turnbull government decides to accept the Japanese submarine bid, apart from fulfilling a domestic political objective of securing Australian manufacturing jobs, it will be a major reinforcement of Australia’s deepening security links with Japan. It will also encourage Abe’s historic shift of leading Japan towards a more assertive strategic posture.

Craig Mark does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.