Japan aims for a shipbuilding revival

From its peak during the 1960s through 1980s, the Japanese shipbuilding industry’s global market share has fallen precipitously – eroded by competition from neighbours South Korea and China. However, efforts to revive the flailing industry are accelerating with the Japanese government recently announcing a one trillion yen fund (US$6.25 billion) aimed at reviving the sector.

All of this comes at a time when China dominates the industry, expands and modernises its navy while the United States struggles to maintain and build new ships on time and on budget, and seeks to collaborate with allies such as South Korea and Japan.

The Japanese shipbuilding industry is plagued with a host of issues, ranging from an aging labour force, stalling productivity growth and fragmented shipyards. Additionally, in recent decades, China has emerged as the biggest player, as Chinese shipbuilders are backed by extensive government support through subsidies, industrial consolidation, and military-civil fusion. As a result, China dominates the global shipbuilding industry with more than half of the market share.

Japanese shipbuilders and the government have set lofty goals to combat this persistent decline. A roadmap aims to double annual shipbuilding output to 18 million gross tons by around 2035. The sector has also been given greater importance recently, with the government labelling shipbuilding as one of 17 nationally important sectors.

The United States, for its part, has a direct interest in the health of the Japanese shipbuilding industry. The US Navy has long been plagued with maintenance queues for current ships and often fails to procure new ships on time and on budget. The Trump administration has also called for a revival of the shipbuilding sector in the United States. Recently, the administration released a Maritime Action Plan (MAP) aimed at reviving the shipbuilding industry and the broader Maritime Industrial Base.

By having American vessels conduct maintenance at Japanese shipyards, they avoid contributing to and suffering from the current naval backlog.

Part of recent efforts by the United States to alleviate its shipbuilding constraints and its burden on the navy has been to collaborate with allies and partners. In Japan, US vessels have long conducted maintenance at American bases. However, Japanese and American officials at Defence Industrial Cooperation, Acquisition, and Sustainment forums have discussed the possibility of expanding ship repair for US ships in Japan and not limiting it to only at US bases.

By having American vessels conduct maintenance at Japanese shipyards, they avoid contributing to and suffering from the current naval backlog. These vessels also benefit from not having to sail all the way back to Guam or the mainland United States, cutting 17 days of potential transit time.

Japanese officials have sought to capitalise on the country’s shipbuilding sector, which, despite its decline, stands as the third largest in the world. In trade talks with the United States, officials have explored the potential for shipbuilding cooperation and investment. Yet, despite these recent developments and potential synergies between Japan and the United States, the Japanese shipbuilding industry faces serious headwinds.

The investment fund – supported by private industry and the government – provides a major boost to ease structural constraints, including on labour and productivity growth. However, barring any major changes in China’s domestic industry, Japanese shipbuilding is unlikely to reclaim a large share of the global sector. The amount of government support for Chinese shipbuilders is at a scale that Japan is unlikely to eclipse.

The ideal scenario for Japan would be a modernised industry capable of loosening its structural constraints – at best, it may reclaim a few percentage points of market share but is able to defend it and stop any further decline. Additionally, a revitalised shipbuilding sector that Japan can use to support US naval forces and maintain its commitments in the Indo-Pacific.