TOKYO Aug 4 Mitsubishi Heavy Industries Ltd's
broader participation in the F-35 stealth fighter
program could be delayed by an intra-governmental spat over
subsidies, two people familiar with the process said.
The dispute could force Japan's biggest arms maker to
renegotiate a deal of undisclosed size with Britain's BAE
Systems PLC to supply F-35 rear fuselage parts under an
international consortium, the people told Reuters.
"Mitsubishi will likely have to backtrack on its earlier
agreement, but if BAE can wait something could be worked out,"
one of the people said.
The spat exposes a rift between arms industry bureaucrats
seeking subsidies to back Japan's part in the F-35 program, and
finance ministry officials intent on reining in spending to curb
Japan's massive budget deficit.
A Mitsubishi Heavy spokesman declined to comment. A
spokesman at BAE was not available to respond to an emailed
request for comment.
Cabinet Secretary Yoshihide Suga declined to comment on the
matter at a regular press briefing.
"Participation in the F-35 program will help improve skills
in Japan and help underpin our defence industry," Suga said.
Prime Minister Shinzo Abe in April eased four-decade-old
restrictions that had sharply limited the ability of Mitsubishi
Heavy and other defence contractors from selling their wares
Abe hopes to spur international collaboration and tap
overseas markets in a bid to widen Japan's arms production base
and lower procurement costs at home, to help build a more robust
military to counter China's growing strength.
Japan's participation in the $400 billion F-35 project has
been touted as a sign of the nation's willingness to end decades
Japan so far plans to buy 42 F-35s, dubbed the Joint Strike
Fighter, for its own military, with analysts expecting it to
acquire as many as 100 more to replace older Boeing Co
F-15 fighters used by its air force. That, however, is a
fraction of what is projected to be a global fleet of F-35s
numbering in the thousands.
Mitsubishi Heavy, maker of the wartime Zero fighter, has
been tasked with assembling the 42 F-35s that Japan has bought
in a plant built with taxpayer money.
So far the government has budgeted 63.9 billion yen ($623
million) for the plant, along with 18.2 billion for IHI Corp
to build the engine parts and 5.6 billion yen for the
But in exporting parts, Mitsubishi Heavy is concerned a lack
of experience in competitive global markets means it will
struggle to make money, prompting some government officials to
back subsidies, the people said.
BAE, Lockheed Martin Corp and other partners in the
nine-nation consortium welcome Japan's F-35 participation, but
not if it means relenting on tight production costs, other
people with knowledge of program told Reuters in January.
Discussions for Mitsubishi Heavy funding have been ongoing
for some time and so the holdup is unrelated to the recent
grounding of F-35s, prompted by an engine on one of the jets in
Florida breaking apart and catching fire during takeoff.
(Editing by William Mallard and Christopher Cushing)