Japan's biggest defence firms position for growth

Japan's defence budget is forecast by Janes to grow strongly over the next few years. (Janes Defence Budgets)

Japan's biggest defence companies – Mitsubishi Heavy Industries (MHI) and Kawasaki Heavy Industries (KHI) – have said they expect orders for military equipment to expand rapidly on the back of the country's growing defence budget.

The companies reported on 10 May strong increases in defence-related revenues and profits for fiscal year (FY) 2022. The two firms also said that Japan's new defence policies – released in December 2022 – are projected to result in increased demand for their defence products.

MHI and KHI are at the forefront of Japan's defence industrial base. Both companies are involved in developing and producing military aircraft, land systems, electronics, missiles, and naval vessels including submarines.

MHI said sales for FY 2022 from its Aircraft, Defense & Space (ADS) business unit climbed 2% year on year to JPY619.4 billion (USD4.6 billion), or 15% of group revenues. ADS operating profit jumped 66% to JPY39.9 billion, equal to 20% of group profits.

ADS orders for FY 2022 declined year on year by JPY70.5 billion to JPY703.6 billion. However, MHI forecasts that orders for FY 2023 will grow to JPY1 trillion. It also projects FY 2023 revenues to increase to JPY700 billion and profit to hit JPY40 billion.

MHI said ADS growth will mainly be attributable to missile systems. “In FY 2023, [the] defence order intake is expected to increase mainly in missile systems corresponding to increases in the Japanese defence budget planned over the next five years.”

MHI's updated medium-term business plan – issued in April – identified five initiatives for ADS as it pursues increasing defence orders. These initiatives, which are aligned with Japan's new defence policies, comprise: