Future of the Japanese Defense Industry Market ... fileMarket Attractiveness, Competitive Landscape and Forecasts to 2020 . Future of the Japanese Defense Industry – Market Attractiveness,

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Future of the Japanese Defense Industry –

Market Attractiveness, Competitive

Landscape and Forecasts to 2020

Future of the Japanese Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2020

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Summary

“Future of the Japanese Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to

2020” report offers the reader detailed analysis of the defense budget over the next five years. Alongside it

offers insights into the market opportunities and entry strategies adopted by foreign OEMs (original

equipment manufacturers) to gain a market share in the Japanese defense industry.

The report provides detailed analysis of the current industry size and growth expectations during 2016-2020,

including highlights of the key growth stimulators. It also benchmarks the industry against key global markets

and provides detailed understanding of emerging opportunities in specific areas.

Key Findings

The Japanese defense budget (including SACO related expenditure and US force realignment expenditure)

stands at US$XX billion in 2015, registering a CAGR of -XX% during the historic period. An increase in

defense expenditure is expected for the forecast period, at a CAGR of XX%, to value US$XX billion in 2020.

The country’s defense expenditure will largely be driven by threats from North Korea’s long-range ballistic

missiles and China’s maritime intrusion. Moreover, the cumulative capital expenditure over the forecast

period will total an estimated US$XX billion, registering a CAGR of XX% during 2016–2020. In addition, the

Japanese government is expected to direct a substantial part of its budget towards homeland security,

driven by measures to check intrusion in coastal areas, organized crime, and natural disasters. Over the

forecast period, the country’s homeland security budget is projected to increase at an estimated CAGR of

XX%, to value US$XX billion in 2020.

Key Features and Benefits

The report provides detailed analysis of the Japanese defense industry during 2011–2020, including the

factors that influence the military expenditure. It provides detailed expectations of growth rates and projected

total expenditure.

It provides the manufacturers with insights on market opportunities along with industry structure and

dynamics prevalent in the country. In addition, the report focuses on the regulations governing the Japanese

defense industry and the potential market entry strategies with an expert analysis of the competitive

structure.


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1. Market Attractiveness and Emerging Opportunities

1.1. Defense Market Size Historical and Forecast

1.1.1. Japanese defense expenditure expected to register a CAGR of XX% over the forecast period

In 2015, the Japanese government allocated US$XX billion to its total defense budget, registering a CAGR of

-XX% during 2011–2015. Japanese defense expenditure is inclusive of expenditure on the army, navy, air

force, SACO, US force realignment, and other expenses. The defense expenditure is expected to grow at an

estimated CAGR of XX% during the forecast period, to value US$XX billion in 2020.

The Special Action Committee on Okinawa (SACO) is a formal agreement made between the US and the

Japanese government. The agreement's purpose was to reduce the impact of the US military presence on

the people of Okinawa. In order to achieve that, SACO developed recommendations to realign, consolidate,

and reduce US facilities, and adjust operational procedures. The US forces stationed at Okinawa fulfill all

obligations of SACO and also help to maintain regional stability in the APAC (Asia-Pacific) region. The

forward-deployed presence of the US Air Force and Navy also provides an advantage when responding to

humanitarian disasters in the region.


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The following table and figure show the Japanese defense expenditure during the historic period:

Table 1: Japanese Defense Expenditure( US$ Billion), 2011–2015

Year Defense expenditure (US$ bn)

Defense growth percentage

2011

2012

2013

2014

2015

CAGR 2011-2015

Source: Ministry of Defense and SDI analysis © SDI

Figure 1: Japanese Defense Expenditure (US$ Billion), 2011–2015


-5%

0%

5%

10%

15%

20%

25%

30%

35%

0

1

2

3

4

5

6

2011 2012 2013 2014 2015

Gro

wth

ra

te (

%)

De

fen

se

ex

pe

nd

itu

re (

US

$ B

illi

on

)

Defense expenditure (US$ bn) Defense growth percentage


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The following table and figure show projected defense expenditure of Japan over the forecast period:

Table 2: Japanese Defense Expenditure (US$ Billion), 2016–2020

Year Defense expenditure (US$ bn)

Defense growth percentage

2016

2017

2018

2019

2020

CAGR 2016-2020


Figure 2: Japanese Defense Expenditure (US$ Billion), 2016–2020


0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

0

1

2

3

4

5

6

7

2016 2017 2018 2019 2020

Gro

wth

ra

te (

%)

De

fen

se

ex

pe

nd

itu

re (

US

$ B

illi

on

)

Defense expenditure (US$ bn) Defense growth percentage


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1.2. Analysis of Defense Budget Allocation

1.2.1. Share of capital expenditure expected to increase over forecast period

Between 2011 and 2015, the country allocated an average of XX% of the total defense budget to capital

expenditure, which is expected to further increase at an average of XX% during the forecast period. The

capital expenditure of the country is primarily driven by a number of procurements formulated by the

Japanese military, along with increasing material and R&D expenses. Moreover, the Japanese MoD is

expected to allocate an average of XX% of its defense budget to revenue expenditure, and the remaining

XX% to SACO related expenses.

The following table and chart display the Japanese defense budget share of capital, revenue and other

expenditure during the historic period:

Table 3: Japanese Defense Budget Split Between Capital and Revenue Expenditure (%), 2011–2015

Year Capital Expenditure Share Revenue Expenditure Share

2011

2012

2013

2014

2015

Source: Ministry of Defense, Japan and SDI analysis © SDI

Figure 3: Japanese Defense Budget Split Between Capital and Revenue Expenditure (%), 2011–2015


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 2014 2015

Defe

nse B

ud

get

Sp

lit

(%)

Capital Expenditure Share Revenue Expenditure Share


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The following table and chart display the Japanese defense budget share of capital, revenue and other

expenditure over the forecast period:

Table 4: Japanese Defense Budget Split Between Capital and Revenue Expenditure (%), 2016–2020

Year Capital Expenditure Share Revenue Expenditure Share

2016

2017

2018

2019

2020

Source: Ministry of Defense, Japan and SDI analysis © SDI

Figure 4: Japanese Defense Budget Split Between Capital, Revenue and Other Expenditure (%), 2016–2020


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2016 2017 2018 2019 2020

Defe

nse B

ud

get

Sp

lit

(%)

Capital Expenditure Share Revenue Expenditure Share


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1.3. Homeland Security Market Size and Forecast

1.3.1. Japanese homeland security expected to grow at a steady pace

The Japanese homeland security market, as represented by the budget for National Police Agency (NPA),

values US$XX billion in 2015, and recorded a CAGR of -XX% during 2011–2015. The National Police

Agency has seven regional police bureaus, each responsible for a number of authorities. The country’s

homeland security budget is expected to witness significant growth during the forecast period, with

expenditure growing at a CAGR of XX%, to reach US$XX billion in 2020, from US$XX billion in 2016. This

increase is due to the government’s efforts to combat organized crime within the nation and prevent intrusion

into coastal boundaries. Japan’s MoD is expected to invest in the procurement of biometric systems, airport

security equipment, patrol naval vessels and aircraft, and a number of information security platforms.

The table and chart below show the Japanese homeland security expenditure during the historic period:

Table 5: Japanese Homeland Security Expenditure (US$ Billion), 2011–2015

Year Homeland expenditure (US$ million)

% Growth

2011

2012

2013

2014

2015

Source: Ministry of Finance, Japan and SDI analysis © SDI

Figure 5: Japanese Homeland Security Expenditure (US$ Billion), 2011–2015

Source: Ministry of Finance, Japan and SDI analysis © SDI

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

0

1

2

3

4

5

6

7

2011 2012 2013 2014 2015

Gro

wth

rate

(%)

Ho

mel

and

Sec

uri

ty e

xpen

dit

ure

(US

$ B

illio

n)

Homeland Security Budget (US$ bn) Growth rate (%)


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2. Industry Dynamics - Porter’s Five Forces Analysis

Figure 4: Industry Dynamics – Porter’s Five Forces Analysis

Source: SDI analysis © SDI

Intensity of Rivalry Bargaining Power of Supplier

Bargaining Power of Buyer

Barrier to Entry

Threat of Substitute


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Report Methodology

SDI’s dedicated research and analysis teams consist of experienced professionals with a background in

industry research and consulting in the defense sector. The following research methodology is followed for all

databases and reports:

Secondary Research

The research process begins with exhaustive secondary research to source reliable qualitative and

quantitative information related to the defense market. The secondary research sources that are typically

referred to include, but are not limited to:

Industry associations

National government documents and statistical databases

Company websites, annual reports, financial reports, broker reports, investor presentations

Industry trade journals and other literature

Internal and external proprietary databases

News articles, press releases, and webcasts specific to the companies operating in the market

Primary Research

SDI conducts hundreds of primary interviews a year with industry participants and commentators in order to

validate its data and analysis. A typical research interview fulfills the following functions:

Provides first-hand information on market size, market trends, growth trends, competitive landscape,

and future outlook

Helps to validate and strengthen secondary research findings

Further develops the analysis team’s expertise and market understanding

Primary research involves e-mail interactions, telephone interviews, and face-to-face interviews for

each market category, division, and sub-division across geographies

The participants who typically take part in such a process include, but are not limited to:

Industry participants: CEOs, VPs, business development managers, market intelligence managers,

and national sales managers

External experts: investment bankers, valuation experts, research analysts, and key opinion leaders

specializing in defense markets

Conventions

Currency conversions are performed on the basis of average annual conversion rate format

calculations

All the values in tables, with the exception of compounded annual growth rate (CAGR) and

compounded annual rate of change (CARC), are displayed to one decimal place; therefore, due to

this rounding method, growth rates may appear inconsistent with absolute values

The forecasted values are projected on the basis of nominal values; the inflation was not taken into account

Future of the US Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2020

TABLE OF CONTENTS

1. Introduction ......................................................................................................................... 12

1.1. What is this Report About? ..........................................................................................................12

1.2. Definitions .....................................................................................................................................12

1.3. Summary Methodology .................................................................................................................14

1.4. SDI Terrorism Index ......................................................................................................................15

1.5. About Strategic Defense Intelligence ..........................................................................................15

2. Executive Summary ............................................................................................................ 16

3. Market Attractiveness and Emerging Opportunities ........................................................ 18

3.1. Defense Market Size Historical and Forecast..............................................................................19

3.1.1. Japan to cumulatively invest US$XX billion in the defense sector over the forecast period .................... 19

3.1.2. Nuclear missile development programs of North Korea and strategic challenges from China are the

major drivers of Japanese defense industry ......................................................................................................... 24

3.1.3. Defense budget as a percentage of GDP expected to average XX% over the forecast period............... 25

3.2. Analysis of Defense Budget Allocation .......................................................................................27

3.2.1. Ministry of Defense is expected to allocate an average of XX% towards capital expenditure during the

forecast period ...................................................................................................................................................... 27

3.2.2. Procurement of equipment expected to pick up over the forecast period ................................................ 29

3.2.3. The Japanese Army accounts for the largest percentage share of overall defense budget .................... 33

3.2.4. Army defense expenditure expected to increase over the forecast period .............................................. 35

3.2.5. Air Force expenditure to cumulatively value US$XX billion over the forecast period .............................. 39

3.2.6. Japanese Naval defense expenditure to grow at a CAGR of XX% over the forecast period ................... 43

3.2.7. Per capita defense expenditure expected to increase over the forecast period ...................................... 47

3.3. Homeland Security Market Size and Forecast ............................................................................49

3.3.1. The Japanese Homeland Security expenditure is expected to grow at a CAGR of XX% over the

forecast period ...................................................................................................................................................... 49

3.3.2. Intrusion in coastal areas, organized crime, and natural disasters are expected to drive the Japanese

Homeland Security expenditure ............................................................................................................................ 54

3.3.3. Japan faces “Some risk” of terrorism ........................................................................................................ 55

3.4. Benchmarking with Key Global Markets .....................................................................................56

3.4.1. Japan is the sixth–largest defense spender globally ................................................................................ 56

3.4.2. Japan’s defense expenditure is low compared to US, China and Russia ................................................ 58

3.4.3. Japanese defense budget as a percentage of GDP is expected to remain below 1% over the forecast

period 59

3.4.4. Japan has a score of 0.1 on the SDI Research Intelligence Terrorism Index .......................................... 60

3.5. Market Opportunities: Key Trends and Growth Stimulators ......................................................63


3.5.1. Transport Aircraft ...................................................................................................................................... 63

3.5.2. Border Surveillance and Detection ........................................................................................................... 64

3.5.3. Multi-role Aircraft ....................................................................................................................................... 65

3.5.4. Reconnaissance and Surveillance Aircraft ............................................................................................... 66

3.5.5. IT Services - Hardware ............................................................................................................................. 67

4. Defense Procurement Market Dynamics ........................................................................... 68

4.1. Import Market Dynamics ...............................................................................................................69

4.1.1. Japan to sign new defense import programs with foreign countries ........................................................ 69

4.1.2. Procurement of F-35 aircraft to increase defense imports marginally over the forecast period ............... 69

4.1.3. US was the key defense supplier to Japan .............................................................................................. 70

4.1.4. Aircraft and missiles were the key defense imports during 2009–2013 ................................................... 71

4.2. Export Market Dynamics ..............................................................................................................72

4.2.1. Relaxation in export policies to boost the Japanese exports ................................................................... 72

5. Industry Dynamics .............................................................................................................. 73

5.1. Five Forces Analysis.....................................................................................................................73

5.1.1. Bargaining power of supplier: low ............................................................................................................. 74

5.1.2. Bargaining power of buyer: high ............................................................................................................... 74

5.1.3. Barrier to entry: high ................................................................................................................................. 74

5.1.4. Intensity of rivalry: high ............................................................................................................................. 74

5.1.5. Threat of substitution: medium ................................................................................................................. 74

6. Market Entry Strategy ......................................................................................................... 75

6.1. Market Regulation .........................................................................................................................75

6.1.1. No offset policy in Japan........................................................................................................................... 75

6.1.2. Restrictive defense policies to prevent increase in foreign investment .................................................... 75

6.2. Market Entry Route .......................................................................................................................76

6.2.1. Affiliation with Japanese defense companies can be used as an entry strategy ..................................... 76

6.2.2. Foreign military sales to Japan ................................................................................................................. 76

6.2.3. Entry through technology transfer program .............................................................................................. 77

6.3. Key Challenges .............................................................................................................................78

6.3.1. Domestic companies fail to achieve economies of scale ......................................................................... 78

6.3.2. Japanese export policy still poses a challenge for domestic defense companies ................................... 78

7. Competitive Landscape and Strategic Insights ................................................................ 79

7.1. Competitive Landscape Overview ...............................................................................................79

7.2. Key Foreign Competitors .............................................................................................................80

7.2.1. Lockheed Martin: overview ....................................................................................................................... 80

7.2.2. Lockheed Martin: products and services .................................................................................................. 80

7.2.3. Lockheed Martin: recent announcements and strategic initiatives ........................................................... 80


7.2.4. Lockheed Martin: alliances ....................................................................................................................... 82

7.2.5. Lockheed Martin: recent contract wins ..................................................................................................... 83

7.2.6. Lockheed Martin: financial analysis .......................................................................................................... 84

7.2.7. Raytheon: overview .................................................................................................................................. 86

7.2.8. Raytheon: products and services ............................................................................................................. 86

7.2.9. Raytheon: recent announcements and strategic initiatives ...................................................................... 86

7.2.10. Raytheon: alliances .................................................................................................................................. 88

7.2.11. Raytheon: recent contract wins ................................................................................................................ 89

7.2.12. Raytheon: financial analysis ..................................................................................................................... 91

7.2.13. BAE Systems: overview............................................................................................................................ 93

7.2.14. BAE Systems: products and services ....................................................................................................... 93

7.2.15. BAE Systems: recent announcements and strategic initiatives ............................................................... 93

7.2.16. BAE Systems: alliances ............................................................................................................................ 94

7.2.17. BAE Systems: recent contract wins .......................................................................................................... 94

7.2.18. BAE Systems: financial analysis .............................................................................................................. 95

7.2.19. Airbus Group: overview ............................................................................................................................ 97

7.2.20. Airbus Group: defense products ............................................................................................................... 97

7.2.21. Airbus Group: recent announcements and strategic initiatives ................................................................ 98

7.2.22. Airbus Group: recent contract wins .......................................................................................................... 99

7.3. Key Domestic Companies .......................................................................................................... 100

7.3.1. NEC Corporation: overview .................................................................................................................... 100

7.3.2. NEC Corporation: products and services ............................................................................................... 100

7.3.3. NEC Corporation: recent contracts and strategic initiatives ................................................................... 100

7.3.4. NEC Corporation: alliances .................................................................................................................... 101

7.3.5. NEC Corporation: recent contract wins .................................................................................................. 102

7.3.6. NEC Corporation: financial analysis ....................................................................................................... 103

7.3.7. Toshiba Corporation: overview ............................................................................................................... 105

7.3.8. Toshiba Corporation: defense products ................................................................................................. 105

7.3.9. Toshiba Corporation: recent announcements and strategic initiatives ................................................... 105

7.3.10. Toshiba Corporation: alliances ............................................................................................................... 106

7.3.11. Toshiba Corporation: recent contract wins ............................................................................................. 106

7.3.12. Toshiba: financial analysis ...................................................................................................................... 107

7.3.13. Mitsubishi Heavy Industries: overview .................................................................................................... 109

7.3.14. Mitsubishi Heavy Industries: defense products ...................................................................................... 109

7.3.15. Mitsubishi Heavy Industries: recent announcements and strategic initiatives ....................................... 110

7.3.16. Mitsubishi Heavy Industries: alliances .................................................................................................... 110

7.3.17. Mitsubishi Heavy Industries: recent contract wins .................................................................................. 111

7.3.18. Mitsubishi Heavy Industries: financial analysis....................................................................................... 112


7.3.19. Kawasaki Heavy Industries: overview .................................................................................................... 114

7.3.20. Kawasaki Heavy Industries: defense products ....................................................................................... 114

7.3.21. Kawasaki Heavy Industries: recent announcements and strategic initiatives ........................................ 114

7.3.22. Kawasaki Heavy Industries: alliances .................................................................................................... 115

7.3.23. Kawasaki Heavy Industries: recent contract wins .................................................................................. 115

7.3.24. Kawasaki Heavy Industries: financial analysis ....................................................................................... 116

7.3.25. Ishikawajima-Harima Heavy Industries Co. Ltd.: overview .................................................................... 118

7.3.26. Ishikawajima-Harima Heavy Industries Co. Ltd.: products and services ............................................... 118

7.3.27. Ishikawajima–Harima Heavy Industries Co. Ltd.: recent announcements and strategic initiatives ....... 119

7.3.28. Ishikawajima-Harima Heavy Industries Co. Ltd.: alliances ..................................................................... 119

7.3.29. Ishikawajima-Harima Heavy Industries Co. Ltd.: recent contract wins ................................................. 119

7.3.30. Mitsubishi Electric Corporation: overview ............................................................................................... 120

7.3.31. Mitsubishi Electric Corporation: products and services ......................................................................... 120

7.3.32. Mitsubishi Electric Corporation: recent announcements and strategic initiatives ................................... 120

7.3.33. Mitsubishi Electric Corporation: alliances ............................................................................................... 121

7.3.34. Mitsubishi Electric Corporation: recent contract wins ............................................................................ 121

7.3.35. Mitsubishi Electric Corporation: financial analysis .................................................................................. 122

8. Business Environment and Country Risk ....................................................................... 124

8.1. Demographics ............................................................................................................................. 124

8.1.1. Total Rural population ............................................................................................................................. 124

8.1.2. Total urban population ............................................................................................................................ 125

8.1.3. Number of households............................................................................................................................ 126

8.2. Economic Performance .............................................................................................................. 127

8.2.1. GDP per capita at constant prices .......................................................................................................... 127

8.2.2. GDP at current prices (US$) ................................................................................................................... 128

8.2.3. Exports of goods and services (current US$ billion) .............................................................................. 129

8.2.4. Imports of goods and services (current US$ billion) ............................................................................... 130

8.2.5. Gross national disposable income (US$ billion) ..................................................................................... 131

8.2.6. Manufacturing output (US$ billion) ......................................................................................................... 132

8.2.7. Consumer price index ............................................................................................................................. 133

8.2.8. Wholesale price index ............................................................................................................................. 134

8.2.9. LCU per US$ (period average) ............................................................................................................... 135

8.2.10. LCU per Euro (period average) .............................................................................................................. 136

8.2.11. Lending Rate (%) .................................................................................................................................... 137

8.2.12. Deposit rate (%) ...................................................................................................................................... 138

8.2.13. Real interest rate (%) .............................................................................................................................. 139

8.2.14. Market capitalization of listed companies (US$ billion) .......................................................................... 140

8.2.15. Market capitalization of listed companies (% of GDP) ........................................................................... 141


8.2.16. Total Government cash surplus/deficit (LCU billion) .............................................................................. 142

8.2.17. Government cash surplus/deficit as % of GDP (LCU) ............................................................................ 143

8.2.18. Central government debt (LCU billion) ................................................................................................... 144

8.2.19. Goods exports as a % of GDP ............................................................................................................... 145

8.2.20. Goods imports as a % of GDP ............................................................................................................... 146

8.2.21. Goods balance as a % of GDP ............................................................................................................... 147

8.2.22. Services imports as a % of GDP ............................................................................................................ 148

8.2.23. Service exports as a % of GDP .............................................................................................................. 149

8.2.24. Services balance as a % of GDP ........................................................................................................... 150

8.2.25. Foreign direct investment, net (BoP, current US$ billions) ..................................................................... 151

8.2.26. Net foreign direct investment as % of GDP ............................................................................................ 152

8.2.27. International reserves, including gold (US$ billion) ................................................................................ 153

8.3. Energy and utilities ..................................................................................................................... 154

8.3.1. Total Conventional Thermal Electricity Net Generation (Billion Kilowatt hours) ..................................... 154

8.3.2. Hydroelectricity Net Generation (Billion Kilowatt hours) ......................................................................... 155

8.3.3. Nuclear Electricity Net Generation (Billion Kilowatt hours) ..................................................................... 156

8.3.4. Total Conventional Thermal Electricity Installed Capacity (Million Kilowatts) ........................................ 157

8.3.5. Proved Reserves of Natural Gas (Trillion Cubic Feet) ........................................................................... 158

8.3.6. Total Petroleum Consumption (Thousand Barrels Per Day) .................................................................. 159

8.3.7. Crude Oil Proved Reserves (Billion Barrels) .......................................................................................... 160

8.3.8. Total Non-Hydro Renewable Electricity Net Generation (Billion Kilowatts) ............................................ 161

8.4. Infrastructure Quality and Availability ....................................................................................... 162

8.4.1. Roads, total network (km) ....................................................................................................................... 162

8.4.2. Rail lines (total route-km) ........................................................................................................................ 163

8.4.3. Air transport, freight (million ton-km) ...................................................................................................... 164

8.4.4. Overall construction (US$ billion) ........................................................................................................... 165

8.5. Mineral ......................................................................................................................................... 166

8.5.1. Mining, Manufacturing, Utilities Output (US$ billion) .............................................................................. 166

8.6. Technology .................................................................................................................................. 167

8.6.1. Research and development expenditure (LCU Thousands) .................................................................. 167

8.6.2. Patents Granted ...................................................................................................................................... 168

8.7. Telecommunication .................................................................................................................... 169

8.7.1. Telephone lines (In million) ..................................................................................................................... 169

8.7.2. Telephone lines Penetration Rate (per 100 people) ............................................................................... 170

9. Appendix ............................................................................................................................ 171

9.1. About SDI ..................................................................................................................................... 171

9.2. Disclaimer ............................................................................................................................................... 171


LIST OF FIGURES Figure 1: Japanese Defense Expenditure (US$ Billion), 2011–2015 .......................................................................................................... 20 Figure 2: Japanese Defense Expenditure (US$ Billion), 2016–2020 .......................................................................................................... 21 Figure 3: Japanese Defense Expenditure (JPY Billion), 2011–2015 .......................................................................................................... 22 Figure 4: Japanese Defense Expenditure (JPY Billion), 2016–2020 .......................................................................................................... 23 Figure 5: Japanese GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP, 2011–2015 ........... 25 Figure 6: Japanese GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP, 2016–2020 ........... 26 Figure 7: Japanese Defense Budget Split between Capital, Revenue, SACO and the US Forces Realignment Expenditure (%), 2011–201527 Figure 8: Japanese Defense Budget Split between Capital, Revenue, SACO and the US Forces Realignment Expenditure (%), 2016–202028 Figure 9: Japanese Capital Expenditure (US$ Billion), 2011–2015 ............................................................................................................ 29 Figure 10: Japanese Capital Expenditure (US$ Billion), 2016–2020 .......................................................................................................... 30 Figure 11: Japanese Capital Expenditure (JPY Billion), 2011–2015 ........................................................................................................... 31 Figure 12: Japanese Capital Expenditure (JPY Billion), 2016–2020 ........................................................................................................... 32 Figure 13: Japanese Defense Expenditure Breakdown (%), 2011–2015.................................................................................................... 33 Figure 14: Japanese Defense Expenditure Breakdown (%), 2016–2020.................................................................................................... 34 Figure 15: Japanese Defense Expenditure for Army (US$ Billion), 2011–2015 .......................................................................................... 35 Figure 16: Japanese Defense Expenditure for Army (US$ Billion), 2016–2020 .......................................................................................... 36 Figure 17: Japanese Expenditure for Army (JPY Billion), 2011–2015 ....................................................................................................... 37 Figure 18: Japanese Defense Expenditure for Army (JPY Billion), 2016–2020 ......................................................................................... 38 Figure 19: Japanese Defense Expenditure for Air Force (US$ Billion), 2011–2015 .................................................................................... 39 Figure 20: Japanese Defense Expenditure for Air Force (US$ Billion), 2016–2020 .................................................................................... 40 Figure 21: Japanese Expenditure for Air Force (JPY Billion), 2011–2015 .................................................................................................. 41 Figure 22: Japanese Expenditure for Air Force (JPY Billion), 2016–2020 .................................................................................................. 42 Figure 23: Japanese Expenditure for Navy (US$ Billion), 2011–2015 ........................................................................................................ 43 Figure 24: Japanese Expenditure for Navy (US$ Billion), 2016–2020 ........................................................................................................ 44 Figure 25: Japanese Expenditure for Navy (JPY Billion), 2011–2015 ........................................................................................................ 45 Figure 26: Japanese Expenditure for Navy (JPY Billion), 2016–2020 ........................................................................................................ 46 Figure 27: Japanese Per Capita Defense Expenditure (US$), 2011–2015 ................................................................................................. 47 Figure 28: Japanese Per Capita Defense Expenditure (US$), 2016–2020 ................................................................................................. 48 Figure 29: Japanese Homeland Security Budget (US$ Billion), 2011–2015 ............................................................................................... 50 Figure 30: Japanese Homeland Security Budget (US$ Billion), 2016–2020 ............................................................................................... 51 Figure 31: Japanese Homeland Security Budget (JPY Billion), 2011–2015 ............................................................................................... 52 Figure 32: Japanese Homeland Security Budget (JPY Billion), 2016–2020 ............................................................................................... 53 Figure 33: SDI Terrorism Heat Map, 2015 ................................................................................................................................................. 55 Figure 34: Benchmarking with Key Markets – 2011–2015 vs. 2016–2020 ................................................................................................. 57 Figure 35: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2015 and 2020 ................................................... 58 Figure 36: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2015 ............................................................ 59 Figure 37: SDI Terrorism Index, 2015 ........................................................................................................................................................ 60 Figure 38: Transport Aircraft (US$ Million), 2015–2025 ............................................................................................................................. 63 Figure 39: Border Surveillance and Detection (US$ Million), 2015–2025 ................................................................................................... 64 Figure 40: Multi-role Aircraft (US$ Million), 2015–2025 .............................................................................................................................. 65 Figure 41: Reconnaissance and Surveillance Aircraft (US$ Million), 2015–2025 ...................................................................................... 66 Figure 42: IT Services - Hardware (US$ Million), 2015–2025..................................................................................................................... 67 Figure 43: Japanese Defense Import Trend, 2009–2013 (TIV values) ....................................................................................................... 69 Figure 44: Japanese Defense Imports by Country (%), 2009–2013 ........................................................................................................... 70 Figure 45: Japanese Defense Imports by Category (%), 2009–2013 ......................................................................................................... 71 Figure 46: Industry Dynamics – Porter’s Five Forces Analysis ................................................................................................................... 73 Figure 47: Lockheed Martin Corp. – Revenue Trend Analysis (US$ Billion), 2010–2014 ........................................................................... 84 Figure 48: Lockheed Martin Corp. – Operating Profit Trend Analysis (US$ billion), 2010–2014 ................................................................. 85 Figure 49: Lockheed Martin Corp. – Net Profit Trend Analysis (US$ billion), 2010–2014 ........................................................................... 85 Figure 50: Raytheon – Revenue Trend Analysis (US$ Billion), 2010–2014 ................................................................................................ 91 Figure 51: Raytheon – Operating Profit Trend Analysis (US$ billion), 2010–2014 ...................................................................................... 92 Figure 52: Raytheon – Net Profit Trend Analysis (US$ billion), 2010–2014 ................................................................................................ 92 Figure 53: BAE Systems – Revenue Trend Analysis (GBP Billion), 2010–2014 ......................................................................................... 95 Figure 54: BAE Systems – Operating Profit (GBP Billion), 2010–2014 ...................................................................................................... 96 Figure 55: BAE Systems – Net Profit Trend Analysis (GBP Billion), 2010–2014 ........................................................................................ 96 Figure 56: NEC Corporation – Revenue Trend Analysis (Billion Yen), 2010–2014 ................................................................................... 103 Figure 57: NEC Corporation – Operating Profit Trend Analysis (Billion Yen), 2010–2014 ........................................................................ 104


Figure 58: NEC Corporation – Net Profit Trend Analysis (Billion Yen), 2010–2014 .................................................................................. 104 Figure 59: Toshiba– Revenue Trend Analysis (Billion Yen), 2010–2014 .................................................................................................. 107 Figure 60: Toshiba – Operating Profit Trend Analysis (Billion Yen), 2010–2014 ...................................................................................... 108 Figure 61: Toshiba – Net Profit Trend Analysis (Billion Yen), 2010–2014 ................................................................................................ 108 Figure 62: Mitsubishi Heavy Industries – Revenue Trend Analysis (Billion Yen), 2010–2014 .................................................................. 112 Figure 63: Mitsubishi Heavy Industries– Operating Profit Trend Analysis (Billion Yen), 2010–2014 ......................................................... 113 Figure 64: Mitsubishi Heavy Industries – Net Profit Trend Analysis (Billion Yen), 2010–2014 .................................................................. 113 Figure 65: Kawasaki Heavy Industries – Revenue Trend Analysis (Billion Yen), 2010–2014 ................................................................... 116 Figure 66: Kawasaki Heavy Industries – Operating Profit Trend Analysis (Billion Yen), 2010–2014 ......................................................... 117 Figure 67: Kawasaki Heavy Industries – Net Profit Trend Analysis (US$ Million), 2010–2014.................................................................. 117 Figure 68: Mitsubishi Electric Corporation – Revenue Trend Analysis (Billion Yen), 2010–2014 .............................................................. 122 Figure 69: Mitsubishi Electric Corporation– Operating Profit Analysis (Billion Yen), 2010–2014 .............................................................. 123 Figure 70: Mitsubishi Electric Corporation– Net Profit Analysis (Billion Yen), 2010–2014 ......................................................................... 123 Figure 71: Japan Rural population (In million), 2015–2024 ...................................................................................................................... 124 Figure 72: Japan Urban population (In million), 2015–2024 ..................................................................................................................... 125 Figure 73: Japanese Number of Households (Million), 2008–2017 ......................................................................................................... 126 Figure 74: Japanese GDP Per Capita at Constant Prices (US$), 2015–2024 .......................................................................................... 127 Figure 75: Japan GDP at Current Prices (US$ Billion), 2015–2024.......................................................................................................... 128 Figure 76: Japanese Exports of goods and services (US$), 2002–2011 .................................................................................................. 129 Figure 77: Japanese Imports of goods and services (US$), 2002–2011 .................................................................................................. 130 Figure 78: Gross national disposable income (US$ billion), 2002-2011 ................................................................................................... 131 Figure 79: Japanese Manufacturing output (US$ Billion), 2003–2011 ...................................................................................................... 132 Figure 80: Japanese Consumer price index, 2015–2024 ......................................................................................................................... 133 Figure 81: Japanese Wholesale price index, 2003–2012 ......................................................................................................................... 134 Figure 82: Japanese LCU per US$, 2015–2024 ..................................................................................................................................... 135 Figure 83: Japanese LCU per US$, 2015–2024 ...................................................................................................................................... 136 Figure 84: Japanese Lending Rate (%), 2003–2012 ................................................................................................................................ 137 Figure 85: Japanese Deposit rate (%), 2002-2011 ................................................................................................................................... 138 Figure 86: Japanese Real interest rate (%), 2003–2012 ......................................................................................................................... 139 Figure 87: Japanese market capitalization of listed companies (US$ billion), 2003–2012 ........................................................................ 140 Figure 88: Japanese market capitalization of listed companies (% of GDP), 2002–2011 ......................................................................... 141 Figure 89: Japanese Total Government cash surplus/deficit (LCU billion), 2005–2011 ............................................................................ 142 Figure 90: Government cash surplus/deficit as % of GDP (LCU), 2005–2011 .......................................................................................... 143 Figure 91: Japanese Central government debt (LCU billion), 2005–2010 ................................................................................................ 144 Figure 92: Japanese Goods exports as a % of GDP (%), 2002–2011 ...................................................................................................... 145 Figure 93: Japanese Goods imports as a % of GDP (%), 2002–2011 ...................................................................................................... 146 Figure 94: Japanese Goods balance as a % of GDP (%), 2002–2011 ..................................................................................................... 147 Figure 95: Japanese Services imports as a % of GDP (%), 2002–2011 ................................................................................................... 148 Figure 96: Japanese Service exports as a % of GDP (%), 2002–2011 .................................................................................................... 149 Figure 97: Japanese Services balance as a % of GDP (%), 2002–2011 .................................................................................................. 150 Figure 98: Japanese Foreign direct investment, net (BoP, current US$ billion), 2002–2011 .................................................................... 151 Figure 99: Japanese Net foreign direct investment as % of GDP, 2002-2011 .......................................................................................... 152 Figure 100: Japanese International reserves, including gold (US$ billion), 2002–2011 ............................................................................ 153 Figure 101: Japanese Total Conventional Thermal Electricity Net Generation (Billion Kilowatt hours), 2002–2011 .................................. 154 Figure 102: Japanese Hydroelectricity Net Generation (Billion Kilowatt hours), 2003–2012 ..................................................................... 155 Figure 103: Japanese Nuclear Electricity Net Generation (Billion Kilowatt hours), 2003–2012 ................................................................. 156 Figure 104: Japanese Total Conventional Thermal Electricity Installed Capacity (Million Kilowatts), 2001–2010 ..................................... 157 Figure 105: Japanese Proved Reserves of Natural Gas (Trillion Cubic Feet), 2004–2013 ...................................................................... 158 Figure 106: Japanese Total Petroleum Consumption (Thousand Barrels Per Day), 2003–2012 .............................................................. 159 Figure 107: Crude Oil Proved Reserves (Billion Barrels), 2004–2013 ...................................................................................................... 160 Figure 108: Total Non-Hydro Renewable Electricity Net Generation (Billion Kilowatts), 2003–2012 ......................................................... 161 Figure 109: Japanese Roads, total network (km), 2002–2010 ................................................................................................................. 162 Figure 110: Japanese Rail lines (total route-km), 2003–2011 .................................................................................................................. 163 Figure 111: Japanese Air transport, freight (million ton-km), 2002–2011.................................................................................................. 164 Figure 112: Japan Overall construction (US$ billion), 2006–2016 ............................................................................................................ 165 Figure 113: Japanese Mining, Manufacturing, Utilities Output (US$ billion), 2002–2011 .......................................................................... 166 Figure 114: Japanese Research and development expenditure (LCU million), 2001–2009 ...................................................................... 167 Figure 115: Japanese Patents Granted, 2003–2012 ................................................................................................................................ 168


Figure 116: Japanese telephone lines (in millions), 2003-2012 ................................................................................................................ 169 Figure 117: Japanese Telephone lines Penetration Rate (per 100 people), 2003–2012 .......................................................................... 170


LIST OF TABLES

Table 1: Japanese Defense Expenditure (US$ Billion), 2011–2015 ........................................................................................................... 20 Table 2: Japanese Defense Expenditure (US$ Billion), 2016–2020 ........................................................................................................... 21 Table 3: Japanese Defense Expenditure (JPY Billion), 2011–2015............................................................................................................ 22 Table 4: Japanese Defense Expenditure (JPY Billion), 2016–2020............................................................................................................ 23 Table 5: Japanese GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP, 2011–2015 ............ 25 Table 6: Japanese GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP, 2016–2020 ............ 26 Table 7: Japanese Defense Budget Split between Capital, Revenue, SACO and the US Forces Realignment Expenditure (%), 2011–201527 Table 8: Japanese Defense Budget Split between Capital, Revenue, SACO and the US Forces Realignment Expenditure (%), 2016–202028 Table 9: Japanese Capital Expenditure (US$ Billion), 2011–2015 ............................................................................................................. 29 Table 10: Japanese Capital Expenditure (US$ Billion), 2016–2020 ........................................................................................................... 30 Table 11: Japanese Capital Expenditure (JPY Billion), 2011–2015 ............................................................................................................ 31 Table 12: Japanese Capital Expenditure (JPY Billion), 2016–2020 ............................................................................................................ 32 Table 13: Japanese Defense Expenditure Breakdown (%), 2011–2015 ..................................................................................................... 33 Table 14: Japanese Defense Expenditure Breakdown (%), 2016–2020 ..................................................................................................... 34 Table 15: Japanese Defense Expenditure for Army (US$ Billion), 2011–2015 ........................................................................................... 35 Table 16: Japanese Defense Expenditure for Army (US$ Billion), 2016–2020 ........................................................................................... 36 Table 17: Japanese Expenditure for Army (JPY Billion), 2011–2015 ........................................................................................................ 37 Table 18: Japanese Defense Expenditure for Army (JPY Billion), 2016–2020 .......................................................................................... 38 Table 19: Japanese Defense Expenditure for Air Force (US$ Billion), 2011–2015 ..................................................................................... 39 Table 20: Japanese Defense Expenditure for Air Force (US$ Billion), 2016–2020 ..................................................................................... 40 Table 21: Japanese Expenditure for Air Force (JPY Billion), 2011–2015 ................................................................................................... 41 Table 22: Japanese Expenditure for Air Force (JPY Billion), 2016–2020 ................................................................................................... 42 Table 23: Japanese Expenditure for Navy (US$ Billion), 2011–2015 ......................................................................................................... 43 Table 24: Japanese Expenditure for Navy (US$ Billion), 2016–2020 ......................................................................................................... 44 Table 25: Japanese Expenditure for Navy (JPY Billion), 2011–2015 .......................................................................................................... 45 Table 26: Japanese Expenditure for Navy (JPY Billion), 2016–2020 .......................................................................................................... 46 Table 27: Japanese Per Capita Defense Expenditure (US$), 2011–2015 .................................................................................................. 47 Table 28: Japanese Per Capita Defense Expenditure (US$), 2016–2020 .................................................................................................. 48 Table 29: Japanese Homeland Security Budget (US$ Billion), 2011–2015 ................................................................................................ 50 Table 30: Japanese Homeland Security Budget (US$ Billion), 2016–2020 ................................................................................................ 51 Table 31: Japanese Homeland Security Budget (JPY Billion), 2011–2015 ................................................................................................. 52 Table 32: Japanese Homeland Security Budget (JPY Billion), 2016–2020 ................................................................................................. 53 Table 33: Benchmarking with Key Markets – 2011–2015 vs. 2016–2020................................................................................................... 56 Table 34: SDI Research Terrorism Index ................................................................................................................................................... 61 Table 35: FMS deals to Japan ................................................................................................................................................................... 76 Table 36: Cost Comparison of Defense Equipment in Japan and the US................................................................................................... 78 Table 37: Lockheed Martin – Product Focus .............................................................................................................................................. 80 Table 38: Lockheed Martin – Alliances ...................................................................................................................................................... 82 Table 39: Lockheed Martin – Recent Contract Wins .................................................................................................................................. 83 Table 40: Raytheon – Product Focus ......................................................................................................................................................... 86 Table 41: Raytheon – Alliances ................................................................................................................................................................. 88 Table 42: Raytheon – Recent Contract Wins ............................................................................................................................................. 89 Table 43: BAE Systems – Product Focus .................................................................................................................................................. 93 Table 44: BAE Systems – Alliances ........................................................................................................................................................... 94 Table 45: BAE Systems – Recent Contract Wins ....................................................................................................................................... 94 Table 46: Airbus Group – Product Focus ................................................................................................................................................... 97 Table 47: Airbus Group – Recent Contract Wins ....................................................................................................................................... 99 Table 48: NEC Corporation – Product Focus ........................................................................................................................................... 100 Table 49: NEC Corporation – Alliances ................................................................................................................................................... 101 Table 50: NEC Corporation – Recent Contract Wins ............................................................................................................................... 102 Table 51: Toshiba Corporation – product focus ....................................................................................................................................... 105 Table 52: Toshiba Corporation – Alliances .............................................................................................................................................. 106 Table 53: Toshiba Corporation – Recent Contract Wins .......................................................................................................................... 106 Table 54: Mitsubishi Heavy Industries – product focus ............................................................................................................................ 109 Table 55: Mitsubishi Heavy Industries – Alliances ................................................................................................................................... 110


Table 56: Mitsubishi Heavy Industries – Recent Contract Wins ............................................................................................................... 111 Table 57: Kawasaki Heavy Industries – Product Focus ........................................................................................................................... 114 Table 58: Kawasaki Heavy Industries – Alliances .................................................................................................................................... 115 Table 59: Kawasaki Heavy Industries – Recent Contract Wins ................................................................................................................ 115 Table 60: Ishikawajima-Harima Heavy Industries Co. Ltd – product focus ............................................................................................... 118 Table 61: Ishikawajima-Harima Heavy Industries Co. Ltd. – Alliances ..................................................................................................... 119 Table 62 Ishikawajima-Harima Heavy Industries Co. Ltd. – Recent Contract Wins .................................................................................. 119 Table 63: Mitsubishi Electric Corporation – Product Focus ...................................................................................................................... 120 Table 64: Mitsubishi Electric Corporation – Alliances ............................................................................................................................... 121 Table 65: Mitsubishi Electric Corporation. – Recent Contract Wins ......................................................................................................... 121

Documents

Future of the Japanese Defense Industry Market ... fileMarket Attractiveness, Competitive Landscape and Forecasts to 2020 . Future of the Japanese Defense Industry – Market Attractiveness,