Author Topic: Future of F-35 Unclear as Costs Mount in Japan  (Read 184 times)

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Future of F-35 Unclear as Costs Mount in Japan
« on: February 05, 2014, 04:03:35 AM »

Two years after Japan agreed to buy F-35 joint strike fighters to replace its 1960s-era F-4EJ Kai Phantoms, the government has yet to give more than the vaguest hints about its future fighter replacement plans as the Defense Ministry struggles with a rising tide of costs and difficulties with the troubled stealth fighter program.

Following instructions by the hawkish administration of Prime Minister Shinzo Abe to recalibrate Japan’s defense posture to counter rising concerns, the MoD released its five-year Mid-Term Defense Plan and 10-year National Defense Program Outline in December, one year early. Yet the two documents are singularly unrevealing about Japan’s fighter plans.

While the midterm plan is explicit about a number of important new programs, it states only that Japan will buy 28 F-35s through Japanese fiscal 2018. The long-range plan states only that Japan is considering increasing its fighter inventory from 260 to 280.

The midterm plan also called for the purchase of 17 Bell Boeing V-22 Osprey tilt-rotor aircraft, three Global Hawk surveillance drones and 52 amphibious vehicles to counter the increasingly expansionist Chinese Navy and deter threats to Japan’s long southeastern island chain as part of a ¥24.7 trillion (US $240 billion) budget over five years.

The plan for 28 F-35s is in line with the MoD’s December 2011 agreement to eventually deploy 42 of the fighters, which should be completed by around 2021, with 38 to be assembled in Japan under a final assembly and checkout deal, according to internal MoD planning documents, said defense analyst Shinichi Kiyotani.

However, the fact that the MoD has announced only that it will strengthen its overall fleet by 20 aircraft, declining to give more details, is vague even by Japanese standards, reflecting considerable doubts about the country’s ability to meet the rising costs of the F-35 purchase, Kiyotani said.

Under a June 2013 foreign military sales agreement with the US, Japan committed to purchase the first four F-35As at ¥10.2 billion per aircraft, which was about US $124 million each under the exchange rate at the time of ¥82 to the dollar. The price was already at a premium to the ¥9.9 billion originally agreed, due to the then-continuing development and testing difficulties the F-35 program was facing.

Since then, prices have continued to climb, especially with the yen’s devaluation, which began last spring and has seen the value fluctuate between ¥95 and ¥105 to the dollar. The price of the first two fighters to be purchased for fiscal 2013 climbed to ¥29.9 billion, and the cost for the next four for fiscal 2014 has risen to ¥63.8 billion, representing a price of nearly ¥16 billion per fighter, Kiyotani said.

Added to this are plant and tooling up costs of ¥83 billion for 2013 and ¥42.4 billion for 2014 as Japanese companies Mitsubishi Heavy Industries, Mitsubishi Electric and IHI establish assembly and production lines.

Sources here have privately begun to refer to the F-35 deal as a “bottakuri bar,” referring to establishments that lure customers of differing degrees of naivety and force them to pay exorbitant bills through a range of excess charges for items not mentioned explicitly on the menu.

Bearing in mind the rising costs of the F-35 program, the MoD is still figuring out what it can do about the long-term replacement of around 200 F-15J fighters and 90 F-2 fighters, Kiyotani said. The situation is further complicated by the fact that the MoD still purchases fighters based on an annual budget, meaning that it cannot lock in a price.

Kiyotani said the MoD was being vague about the F-15 replacement program because it genuinely didn’t know if Japan could afford more F-35s, especially as Mitsubishi Heavy Industries, Mitsubishi Electric and IHI will be assembling and producing parts locally.

Pointing out that locally produced versions of US kit generally cost double their US prices — for example, Kawasaki Heavy Industry’s version of the MCH-101 helicopter costs about US $60 million a unit compared to $30 million for the US price — Kiyotani said the F-35’s costs could climb to more than ¥300 billion a fighter.

“Is it a case of they don’t know or they can’t say what they want to do [with the F-15 replacement program]? It’s both,” Kiyotani said.

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