Data Stories: Budget Scenarios and Options for Funding Japan’s F-3 5th Generation Fighter

Facebooktwittergoogle_plusredditlinkedinmailby feather

By Aaron Lin, Senior Market Analyst

Funding the F-3 is a complex and expensive undertaking and will become the driver of Japanese R&D budgets in the future. Recent months have seen Prime Minister Abe and the Liberal Democratic Party (LDP) begin more open discussions on breaking the 1% of GDP cap on defense spending and even going to 2%. An earlier data story examined how much of Japan’s defense R&D budget the F-3 could take up depending on how funding was split between Japan and a potential development partner. It also showed the projected remaining budget space for other priorities. As demonstrated by recent cost projections for Aegis Ashore, Japan will still be spending lots of money on foreign imports for key priorities. This data story will now add a few scenarios for future Japanese defense spending, allowing the reader to gain additional perspective on remaining budget space after accounting for F-3 R&D.

Another factor to consider is funding from supplementary budgets, which are used to fund emergency initiatives or give additional support to key projects. These budgets have not typically been used for R&D projects, but could be used to fund other priorities, creating additional room for the F-3 in the regular budget. Due to the way that the supplementary budgets are put together, it is not easy to project how large future supplementary budgets may be, let alone how much could be allocated for F-3. The chart below shows the size of previous MoD portions of past supplementary budgets in dollar terms and as a proportion of the defense budget. This should be approached more as an illustration of what is in the realm of the possible, rather than a firm projection. Again, keep in mind that if the F-3 gets any of this money, it will only be a portion of it.

The UK’s Tempest reveal at Farnborough raises the possibility of consortium development, which would greatly alleviate budget pressure. It also means that Japan could extract economic benefits from the program while lowering their own costs. Such an arrangement could be more attractive to the political decision-makers who will need to sign off on the program after ATLA makes its recommendation. Some of the spotlight on the budgetary issues would then be shifted to how much of a share of involvement and potential economic benefit would Japan be willing to pay for. Japan will need to negotiate industrial and operational requirements with potential consortium partners, like Sweden, who will be pushing to maximize their own industrial benefit while meeting unique operational needs.

To request a demo of Avascent’s full capabilities, please contact Sebastian Sobolev.