The Japanese defence market is forecast to increase at a compound annual growth rate (CAGR) of 6.25% over the next five years, growing from a market value of US$59.06 billion in 2012, to reach US$69.46 billion in 2017.
Spending within the market is however likely to be limited as Japan capped its defence budget at 0.99% of GDP, and is expected to continue to do so.
The rising military power of North Korea and the security of sea trade routes are driving growth within the Japanese defence market.
The scarce natural resources of Japan mean that it is crucial to secure its sea routes to ensure safe trade routes. As Japan is an island, the security of its maritime borders from illegal intruders and external forces is paramount. Therefore, the country's maritime forces must maintain surveillance through patrol ships, aircraft and search and rescue helicopters in order to defend its commercial ships in emergency situations.
The Japanese government's policy to ban arms exports to other countries makes it difficult for defence companies in Japan to maintain profitability.
Since 2003, 20 companies have discontinued their participation in the fighter jet manufacturing business. Furthermore, as the Japanese government makes a minimal amount of procurements domestic companies may diversify from the defence industry and enter other civilian industries.
For more information on the Japanese defence market, see the latest research: Japanese Defence Market Report
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