The government intends to provide low-interest loans through the Japan Bank for International Cooperation (JBIC) to promote exports of defense equipment, The Yomiuri Shimbun has learned.
The move is intended to create an environment that will allow partner countries to purchase defense equipment more easily by offering low-interest loans through the JBIC, a government-affiliated financial institution.
Although the Japanese government lifted the ban on arms exports in 2014, the move has not boosted exports significantly. The government apparently hopes to break the impasse with this financial support framework.
As many pieces of defense equipment, such as destroyers and transport aircraft, are expensive, costing hundreds of millions of yen, foreign governments have often shown reluctance to purchase them.
There have been cases in which developing countries facing funding shortfalls asked the Japanese government for low-interest loans as a condition for buying defense equipment, according to sources. However, as private financial institutions often could not agree on interest rates, the government concluded that it was necessary to establish a framework to extend low-interest loans, the sources said.
The government plans to encourage Japanese exporters to use its fully funded Nippon Export and Investment Insurance (NEXI), which underwrites insurance services for high-risk overseas transactions that are not covered by private sector insurers. Even if partner countries fall into arrears, NEXI can act as a guarantor.
The Defense Ministry is currently negotiating with the Indonesian government to export Maritime Self-Defense Force destroyers for the first time. It is expected to propose the use of such a financial support framework.
"This must become a positive factor in the contract negotiations," a senior ministry official said.
In 2014, the government replaced the "Three Principles on Arms Exports," which prohibited Japanese exports of defense equipment in principle, with the "Three Principles on Transfer of Defense Equipment and Technology," which allows exports only if they contribute to peace and Japan's security. This move was also aimed at bolstering Japan's shrinking defense industry by developing overseas markets.
However, in terms of exports of finished products, Japan has had only one deal, worth about 10.5 billion yen, with the Philippine government, which ordered air defense radars developed by Mitsubishi Electric Corp.
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