When we look back at 2016, Tokyo's failure to land the contract to jointly develop a fleet of submarines with Australia will be one of the biggest disappointments for Japan this year. Canberra's decision to select France came as a shock to Japan, as many considered Japan the front runner in this bid after it had invested two and a half years in the competition.

Japan and Australia's political, economic and strategic relations have grown from strength to strength. In fact, Japan has the strongest ally-like relationship with Australia (outside of the US-Japan alliance) since the signing of the Joint Declaration on Security Cooperation (JDSC) in 2007. The joint cooperation in building the new submarine fleet would have further solidified Australia-Japan relations, with positive implications on the Australia-US-Japan trilateral arrangement as well. 

It is, however, important to note that this is just a blip in Australia-Japan relations. Australia has and will continue to occupy an important role in Japan's evolving security strategic policy. The strengthening of Australia-Japan relations is even more crucial now as East Asia faces the unfolding of two geopolitical forces.

The first relates to China.

China's defence expenditure growth, rapid military force modernisation and assertive behavior in the maritime domain (both in the East and South China Seas) have made Beijing a central factor in Japan's strategic calculations for the region. The trajectory of China's assertiveness in the maritime domain does not show any sign of abatement. Many reasons could be attributed to this, but it is clear that China will step up its claims in the South China Sea – an area it sees as its own 'backyard'. As China continues with its assertive policy, this will cause greater discomfort in Tokyo.

The second factor is related to the role of the US in East Asia. The US is not about to depart from the region, but China's strategic rise is challenging Washington's long-held position as the main source of stability in the region. For example, asymmetric military technology (anti-access/anti-denial capability) utilised by China and North Korea limits the ability of the US to access and maintain military bases in Northeast Asia.

In response to the rising uncertainty, Japan has emerged as a critical security actor in regional and global affairs. This phenomenon did not start with the Abe Government in 2012, but as a process that started at the onset of the post-Cold War period. The Japanese security policy-making elite took significant strides to implement measures both within and outside the US-Japan alliance that signaled an expansion of national security policy practice. However, the evolving structural forces outlined above have offered the Abe Government stronger impetus to contribute even more actively both within and outside the US-Japan alliance. 

Though the upgrade of the US-Japan alliance started in mid-1990s, the agreement to issue new Guidelines for US-Japan Defence Cooperation in 2015 — almost 20 years after the previous version was signed in 1997 — was a significant development. This document authorises Japan to engage in missions to help defend the US and other allies even when Japan is not under attack (known as collective self-defense). These moves have deepened the alliance with the incorporation of more roles/missions and widened the responsiblities of Japan's Self-Defense Force alongside the US military.

Japan has also diversified security partners outside the US-Japan alliance. Australia is the most important country in this regard. Australia and Japan share a common strategic vision for the region and see eye-to-eye on many regional issues, such as the importance of international law and order, visions of East Asian regional security architecture, the promotion of a peaceful resolution of maritime disputes and the protection of the freedom to navigate the air and sea space. However, both states also understand that America's alliances are not immutable, as seen with Washington's relationships with both Cairo and Riyadh.

It is in the interest of both Tokyo and Canberra to work towards keeping the US deeply engaged, interested and committed to East Asia.

Nevertheless, the failed bid for the submarine contract has many lessons for Japan if it aspires to be an arms exporter. Japan is a relative newcomer to this arena due to a self-imposed bad. Japan's venture into the competitive arms exports market only began seriously following Shinzo Abe's limited lifting of the ban in 2014. The experience with Australia should be utilised to gain more understanding and knowledge of this market. If Japan is serious in exercising the selling of military hardware as a tool of defence diplomacy, it needs to overcome the cited weaknesses that caused the bid to fail that included the unwillingness to transfer sensitive defence technology even to friendly states and share the construction process with Australian companies, along with the lack of effective coordination between the Japanese Government and businesses in military arms exports.

Another important takeaway for Japan is the importance of domestic politics. As Yuki Tatsumi wrote, 'defense acquisition is inherently political'. Japan's position in the bid vis-à-vis its competitors was very strong due to the good personal relationship between Tony Abbott and Shinzo Abe; and it was unable to respond to the change in the political conditions in Canberra. As it tries to diversify its strategic partners, the Japanese Government and business need to understand the workings of the domestic politics for each country, comprehend the complexity inherent in the defence acquisition process, and acquire agility to react to internal and external conditions. 

Japan should quickly overcome the disappointment from the failed bid and recognise the critical importance of Australia in Japan's long-term national security strategy. Australia is not just a 'like-minded' state, but it is also Japan's 'best friend' in the increasingly complex region.

Photo courtesy of Australian Defence Image Library.