Japan to encourage 200 high-tech startups to join defence sector

The Japanese government has unofficially selected about 200 startups to enter the defence industry in a bid to take advantage of their advanced technology. It will explain its plans for the introduction of defence equipment and giving financial support and will listen to the requests of each company while encouraging new entrants.

The Ministry of Defence and the Ministry of Economy, Trade and Industry met with the startups in June in Tokyo and plan to hold further meetings that startups will join, Nikkei Asia reports

Candidates include companies that develop drones that can be used for surveillance patrols of bases and ports, and companies that provide training in cyberdefense. Companies related to analysis of satellite communications data and the electromagnetic spectrum were also selected.

At the meeting, the government will inform the startups about its priority areas for research and development. It will provide an example of a technology that uses electromagnetic waves to dampen the impacts of shock waves and other phenomena. It will also emphasize technologies such as the creation of a metaverse to deceive opponents and holograms to make images appear three-dimensional, in addition to high-powered lasers used by remotely operated robots to detect and destroy weapons, and quantum technology for the instantaneous processing of vast amounts of information.

For startups with these kinds of technologies, a lack of knowledge about the defence sector can easily become a barrier to entry.

Through exchanges of opinion, the government will hear the strengths of each company's technologies and consider the development of new defence equipment and the application of advanced technology in the defence field. Smaller companies will be able to participate in bidding for larger contracts if they meet conditions such as possessing advanced technology.

Startups will be connected with venture capital and government funds, as well as major defence companies. The Acquisition, Technology and Logistics Agency will hold an exhibition in Osaka in October that will feature up to 40 startups. Companies will learn about Self-Defense Forces equipment deployment and government support measures, and they will look for opportunities for entry and collaboration.

The SDF, which has seen a decline in enlistees, has introduced drones and digital technology to improve mission efficiency in its land, sea and air units. At the same time, it is rushing to respond to modern hybrid warfare, which combines new domains such as cyber, space and the electromagnetic spectrum.

There is also an urgent need to strengthen the SDF's capacity for sustained fighting, such as securing the procurement of ammunition and the capability to repair ships. The government will take a series of measures to help new companies and other diverse players enter the industry and improve its capacity.

The US and Europe, as well as China, are developing dual-use technology that has both military and civilian applications, producing state-of-the-art equipment. In the U.S. and Germany, venture capital-backed startups are active in the defence industry. Tokyo aims to create similar conditions in Japan.

The government will increase the total defence budget for the five years through fiscal 2027 to 43 trillion yen ($300 billion), 1.6 times the amount of the most recent five years, to fund the deployment of defence equipment. That will provide opportunities to take advantage of the technology of small and medium-size companies, but the defence industry is challenged by low profit margins. Over the past 20 years or so, about 100 companies have left the defence sector.

Although the government is putting new policies in place, concerns remain about the viability of small and medium-size companies.