1. Dual-Use Technology: Can It Save Japan’s Defense Industry Base Yuzo Murayama Stimson Center/Doshisha University October 10, 2013

2. Primary Research Field: Economic Security 1) Export Controls 2) National Security Restrictions on Foreign Direct Investment 3) Defense Production and Technology Base Second Research Field: Cultural Economics and Business 1) Revitalize Kyoto’s heritage industries 2) Seek sources of Japanese competitiveness from cultural aspects Yuzo Murayama

3. At Stimson Center Focus on constructing a business model and system utilizing DUT 1.Japan’s defense production and technology base 2.International cooperation on defense production and technology Increasing interests in Japanese policy circle on critical situation of the defense industry Need input from the U.S. to construct workable systems

4. Japan’s Defense Industry Base: Declining Market Decreasing defense budgets (since 2002: 5% decrease with slight increase in 2013) Acquisition of defense equipment 1989: 1,020 bill yen, 2013: 627 bill yen (39% decrease) Increasing trend in service and maintenance fee 2013: 868 bill yen

5. Japan’s Defense Industry Base: Industrial Organization U.S. and Europe: Reorganization started in the mid-1990s, several world-class companies emerged Japan: only two cases 1) Nissan’s aerospace division → IHI 2) Universal Shipbuilding + IHI → Japan Marine United Declining market, but number of system integrators stay the same Why? Implications?

6. Japan’s Defense Industry Base: Politics and Media Three Principles on Arms Export Original version – 1967, Export ban – 1976 Relaxations by making exceptions o 1983: technology transfer to the U.S. o 2004: BMD o 2011: international joint R&D and peace building o 2013: F35 Rising awareness of needs to relax it further among policy makers vs. traditional opposition from media

7. Brief History of DUT in Japan: A Negative Start 1980s – encountered DUT in the U.S., ex. Fujitsu-Fairchild Gulf War (1991) – Japanese components in U.S. weapons Company response: try to deny dual-use aspect of technologies Government response: concerned about consistency with the export ban policy

8. Brief History of DUT in Japan: Post-9/11 9/11 – focus on counter terrorism & such internal problems as earthquake, infectious diseases, rising crimes etc. New thinking: utilize Japan’s technology to solve these problems facing Japan and international community – science and technology for Anzen-Anshin (Publication of my book on economic security?) Study groups were formed in 2003 in MEXT and CSTP Positive recognition of DUT (for Anzen-Anshin) CSTP document (2006) – DUT for R&D in defense, police and fire fighting

9. DUT Programs at MOD Started around 2002 in cooperation with NEDO Millimeter-wave device, Quantum Dot Infrared Photodetector, etc. Good example: Non-cooling infrared sensor In cooperation with The National Institute of Advanced Industrial Science and Technology (AIST) *High-end sensors (night vision devise, unmanned aircraft, etc.) for military use *Low-end sensors (surveillance security, automobile, etc.) for commercial market

10. DUT Programs at MOD SBIR (Small Business Innovation Research) To spin on technologies developed by NEDO’s SBIR project to defense sector ex) Motor for small robot system, toxic substance detection Inter-ministry cooperation for technology development by CSTP Mainly technology development for counter-terrorism ex) Laser technology for remote detection

11. Integrated Defense DUT Base Two steams of DUT development 1) Anzen-Anshin stream by MEXT, METI, CSTP 2)Defense stream by MOD Integration of these two streams provide interesting opportunity Anzen-Anshin-Defense Technology Base *Technology base for defensive technologies: could acquire niche in the world market * Use of Japan’s competitive commercial technologies *Feedback between public and private sectors for raising technology levels

12. Integration of the Safety, Security and Defense Technology Base Defense Safety ( 安全 ) Security ( 安心 ) Technology Government Agencies MOD METI MEXT MHLW MLIT National Police Agency Fire and Disaster Management Agency Organizational Collaboration Industry/Research Composition Defense Industry Military Equipment Responding to new threats (i.e. terrorism, cyber attack) Technology Spin-Off Technology Sharing Funding Safety and Security Industry Companies, Universities, Research institutes Technology Spin-Off Commercialization in the civilian market (safety, security) Spin-on © Yuzo Murayama, Doshisha University

13. Thoughts 1)Need system to insert commercial technologies (especially SME) to defense sector 2)Defensive vs. Offensive: Do not make sense in materials and component levels? (Especially in case of international R&D) 3)How to globalize the defense DUT base? 4)Need changes in the three principles? (How to implement?) 5)Implications for industrial organization and acquisition reform? *Try to answer these Q’s in the next presentation