The Weekly Wire: For Your Situational Awareness 11.29.18
Can Japan Afford an Additional 100 F-35s?
Aaron Lin, Senior Market Analyst
On November 27, news outlet Nikkei Asian Review reported that Japan is considering the purchase of 100 additional F-35s. The plan for the purchase may be approved along with the approval of new National Defense Program Guidelines in December. The reported price tag is about $8.8 billion, which is roughly based on the current price of an F-35A. Previous F-35 considerations included around 60 additional F-35s, including 40 STOVL F-35Bs. Japan’s fighter inventory is currently in decline and without new aircraft, Japan could be left with about 250 fighters or less by the late 2020s, depending on F-4 retirement rates. This is down from the current fleet of more than 350 fighters. F-15Js that entered production in 1981 are frequently being used to intercept Chinese aircraft, placing high stress on the airframes. The domestically produced F-2 is expected to begin retiring in 2030. Japan’s F-3 future fighter will not be operational until the 2030s and it will take years before a sufficient number of fighters are in service.
The bigger issue is whether Japan can afford 100 more F-35s. Japan is spending over $2 billion to deploy Aegis Ashore by 2023, over $7.5 billion over the next 10 years on expensive domestically produced P-1 maritime patrol aircraft and C-2 transports, over $1.2 billion on nine more E-2D early warning aircraft, and potentially $2 billion to replace old P-3 and YS-11 aircraft used for intelligence and electronic warfare missions. Past defense budgets show that since Prime Minister Abe has taken office, the defense budget has only grown an average of 1% per year to 2018 in yen terms. A weakened yen over that time has meant that the budget is growing even less in dollar terms, not to mention making weapon imports more expensive. If the Japanese defense budget continues to grow at this rate, it may only be able to support the acquisition of about 50-60 additional F-35s, assuming that they are not assembled in Japan, which increases the price. If Japan wants to purchase 100 more F-35s, continue to provide the Japanese assembly line with work beyond 2023, support the other previously stated expensive aircraft acquisitions, and provide the F-3 future fighter program with adequate R&D funding, a significant change in Japanese defense budget growth rate trends will be needed over the next two Mid-term Defense Plans, which will span from 2019-2028. Although the Abe government has said that it is willing to spend more than 1% of GDP on defense, the powerful Finance Ministry will likely act as a dampening force on defense growth plans as it tries to minimize costs.
On November 20, India officially awarded a contract worth $1.5 billion for the Igla-S very short-range air-defense system (VSHORAD). The announcement ended a nearly decade-long search for a replacement to the Indian Army’s aging inventory of Igla-M variants. The Igla-S, from Russian firm Rosoboronexport, was chosen despite operational and technical concerns. It appears that cost was the decisive factor for New Delhi. Until this summer, it appeared that India was poised to select Saab’s RBS-70 missile systems, and the Swedish company has lodged formal protests on the decision with the Indian Ministry of Defense.
On November 26, a second Gripen-E fighter aircraft successfully completed a test flight in Sweden. The Gripen-E’s software, life support system, and radio were tested during the flight. Earlier this month, Saab tested the Meteor Beyond Visual Range Air-to-Air Missile weapon integration on the Gripen-E. Currently, the Royal Swedish Air Force and the Brazilian Air Force are the first customers that will procure the fighter aircraft, with deliveries expected to begin in 2019 if everything remains on track. Sweden is looking to acquire a total of 60 aircraft with the option to procure an additional ten units. Saab is working with Brazilian firm Embraer Defense and Security to jointly produce the Gripen for the Brazilian Air Force in a deal signed in 2015 worth $4.68 billion for 36 fighters.
On November 27, Norway and Germany started prepping for negotiations with ThyssenKrupp Marine Services over the planned procurement of six submarines. Norway and Germany will be jointly negotiating in the hopes of acquiring identical submarines for each country’s navy, which should improve their ability to perform joint exercises. The offer from ThyssenKrupp Marine Services was received on October 30, and negotiations will begin soon with the goal of having a signed contract sometime in 2019. The new submarines would likely be used to augment the existing submarine fleets in Norway and Germany, as both countries currently have six functional submarines already.
On November 28, South Korea’s Defense Acquisition Program Administration (DAPA) announced the acquisition of two Green Pine Block C ballistic missile warning radars from ELTA and confirmed the purchase decision for six P-8A Poseidon. The $292 million contract for the Green Pine radars is expected to be signed within a year and will augment South Korea’s existing Green Pine Block B radars. The contract award comes amid signs that North Korea has not abated its nuclear activities. Meanwhile, the increased activity of North Korean submarines spurred the purchase of the P-8As, which will be acquired through the FMS process for approximately $186 million each.
On November 23, Airbus handed over the first two of nine H145M light helicopters ordered by the Serbian Air Force in 2016. Serbia is the second country to receive the H145M twin-engine helicopter with Germany taking delivery in 2015. Hungary, Luxemburg, and Thailand have also ordered the platform. The delivery is significant because Serbia has traditionally fielded Russian helicopters. The delivery of the H145M represents the first time a non-Russian helicopter has been delivered to the Serbian Air Force.