Japan's space program: an opportunity for growth?

by Scott Peterson

It seems to me that a sector that Japan could be a solid competitor globally would be in the commercial launch business. Basd on my cursory scan of the Japan Aerospace Exploration Agency's page on it's H-IIA-primary large-scale launch vehicle, the vehicle could be competitive
with other commercial launch ventures, such as International Launch Services and Sea-Launch.

In addition, investing in space exploration initiatives would provide high-paying jobs which should help domestic demand somewhat and could provide a source of national pride.

Development of a ballistic missile program would also generate jobs and would raise Japan's profile as a military force to be reckoned with. I don't think that Japan with a credible military is anything to be feared more than say the militaries of India or China.

The Bank of Japan's decision and the underlying data

The BoJ decided not to change the overnight rate, which was not a surprise. However data that was released in the same time frame is concerning. GDP data was released which showed that annualized Q1 GDP growth of 2.4%, was a sharp sequential decline from a revised 5.0% (previously 5.5%). SeekingAlpha quotes a Tokyo analyst to the effect that "the BoJ will hold at 0.5% over the next three to six months, since there is no hurry to hike while consumer prices are still falling"...continued deflation in consumer prices is a concern.

Having a significantly lower GDP number on top of a downward revision of the previous quarter's figure is not good. Recalibration of expectations for the next year for Japan's economy would be wise, I think.

Another high-value export possibility for Japanese manufacturers

Financial Times Deutschland posted a report recently that describes how "China's introduction of locally assembled Japanese "bullet trains" shows that the country has completed the transfer of foreign world-class high-speed rail technology, Beijing's Ministry of Railways has claimed. Lightly modified versions of Japan's E2-1000 Shinkansen went into service on lines around Shanghai recently but the rail ministry and official media have played down the trains' origins and instead stressed China's success in ‘‘ digesting'' foreign technology." According to the same report, China is planning on building "5,400km of high-speed lines in the four years from 2006." If Japanese firms can get a significant portion of that business, it would provide a good boost to the exports side of Japan's GDP books.

There is a potential stumbling block, however. As the above quote mentions, the fact that the high speed train technology came from Japan has been kept as low key as possible. The reason for this as described in the FTD article is that"Lingering Chinese anger at Tokyo's 1931-45 invasion means that purchases of Japanese technology are particularly sensitive, in spite of a recent thaw in bilateral diplomatic ties. Reports of the 2004 Shinkansen deal prompted internet protests and street demonstrations, and an initial batch of trains exported from Japan was shipped without the customary public ceremony."

So politcal relations between Japan and China represent a significant hurdle to increased exports from Japan to China. It is remarkable to me how the Japanese occupation of China remains such a sticking point. Relations between Japan and the United States have been very warm since World War II in spite of the fact that on the US side, Pearl Harbor and the massive number of deaths in the Pacific theater could be sore spots; and on the Japanese side, the nuclear bombings of two of its cities plus catastrophic bombings of other cities could provide fodder for discord even now.

Potential new export market for Japanese manufacturers

According to Aviation Today, "Boeing’s jetliner product rejuvenation coupled with Lockheed Martin’s F-35 and broad U.S. defense export market dominance means expansion of the United States’ share of the industry, and with it dominance in leading edge technologies in such areas as avionics."

The military aircraft sector seems like a logical business for a large Japanese conglomerate to invest in. Japan really should be building up a somewhat greater military for its own self-defense purposes, and a home-grown fighter/bomber would be a logical target for investment by the Japanese government. I'm sure that global purchasers of the US's military aircraft would like to see an additional alternative source down the road.