Evaluating the Economic Benefits of Foreign Military Sales on Japan's Defense Industry

Abstract

"In response to intensifying security tensions in East Asia, Japan has significantly increased its defense budget. However, its defense industrial base remains economically fragile due to structural issues such as postwar pacifism, legal constraints, and a limited domestic market. This research evaluates the feasibility of adopting the U.S. Foreign Military Sales (FMS) to strengthen Japan’s defense industry. Through comparative qualitative analysis of Japan, the United States, France, and Germany, the analysis finds that FMS—by offering legal assurances, risk mitigation, and diplomatic support—is institutionally more appropriate for Japan than Direct Commercial Sales (DCS). A quantitative analysis based on the F-35’s 23.8% markup model suggests that Japan could recover research and development (R&D) costs by exporting a limited number of Future Frigate Multi-mission (FFM) destroyers and Soryu-class submarines. Policy recommendations include the establishment of an inter-ministerial FMS agency, leveraging overseas diplomatic missions, and fostering sustained public engagement across the short, medium, and long term. This research offers insights not only for Japan but also for policymakers in other countries seeking to promote strategic arms exports. Although the economic impact of FMS adoption warrants further empirical analysis, this study provides actionable guidance for strengthening Japan’s defense industrial resilience through strategic international engagement."