Japan hunts for dual-use goods makers to aid military expansion

By Kaori Kaneko

TOKYO (Reuters) – Kyoto-based Mitsufuji got its start nearly 70 years ago as a weaver of decorative belts for kimonos. One day soon, it could be spinning high-tech fibres to shield fighter jets from electromagnetic interference.

The company, whose core business is making consumer-facing wearable gadgets, is one of dozens of small ventures that have caught the Japanese government’s eye in recent years as it looks for dual-use technologies to beef up its military capabilities.

Cultivating a home-grown defence industry was a key plank of Japan’s 43 trillion yen ($275 billion) military build-up strategy launched in 2022 to counter escalating security threats from China, Russia and nuclear-armed North Korea.

But it faces a challenge. Unlike some of its allies, Japan has no defence industry champions, such as Lockheed Martin Corp (NYSE:) in the U.S. and BAE Systems (LON:) in Britain, that depend on military work for almost all of their sales. Even at Mitsubishi Heavy Industries , Japan’s leading defence contractor, sales of combat aircraft, warships and other military equipment account for less than a fifth of revenue.

Nudged also by the fast-changing landscape of modern warfare, including the use of small drones in Russia’s war with Ukraine, Japan’s military – officially called the Self-Defense Forces (SDF) – decided to court smaller companies to cast a wider net for procurement.

“If we don’t pioneer on our own, we won’t be able to keep up with global trends,” former defence minister Minoru Kihara told Reuters. “Japan should invest in research and development that contributes to national security, including dual-use technologies, without fear of failure.”

In the latter part of 2023, the government began holding meetings with several companies at a time, looking to see what innovative products and technology they had on offer. Mitsufuji, which was already supplying the SDF with wrist bands that monitor heat stroke risk, attended the second such meeting.

“We don’t know what the needs are, so we basically showed them what we have,” Mitsufuji CEO Ayumu Mitera told Reuters. “It’s not that we have a desire to enter the defence business, but if there’s demand, we’re happy to make proposals.”

Using its highly conductive silver-metallised fibre, Mitsufuji produced a small-scale prototype of a hangar tent that could shield military aircraft and other equipment from electromagnetic interference.

In some cases, the meetings have led to deals. The Air Self-Defense Force (ASDF) last year procured powered exoskeleton “muscle suits” from Tokyo startup Innophys and introduced cutting-edge wind measuring instruments from Kyoto’s Metro Weather on a trial basis.

“I don’t think matching dual-use technologies with national security can be achieved unless the government plays an active role and does not simply wait for companies to come to it,” said former vice defence minister Kazuhisa Shimada.

BUILDING BRIDGES

    The ASDF has been particularly active in approaching companies, meeting about 300 firms for its space operations since late 2023 in downtown Tokyo.

“Times have changed,” said ASDF Colonel Ryoji Kondo, a former F-2 fighter jet pilot. “We really need to get help from startups.”

His team is in talks towards a deal with startups CollaboGate Japan and Wyvern.

The government has also helped smaller firms set up booths at international defence exhibitions to tout their wares under the Japanese flag and drum up interest overseas.

Mitsufuji’s Mitera said his company had displayed at several such exhibitions, including the Vietnam Defence Expo last month. The company has secured deals to supply its high-tech fibre to companies in Asia and Europe, he said.

Building those bridges could also fortify Japan’s security bonds with friendly nations, Kihara said.

“Even if it doesn’t go as far as using the same technology or equipment, using the same parts will strengthen cooperation between nations, in terms of security,” he said.

($1 = 155.88 yen)