TOKYO Japan is interested in joining a NATO missile building consortium that would give Tokyo its first taste of a multinational defense project, a move the U.S. Navy is encouraging because it could pave the way for Japan to lead similar partnerships in Asia, sources said.
The 12-country NATO consortium oversees development and shares the costs of the SeaSparrow missile, an advanced ship-borne weapon designed to destroy anti-ship sea-skimming missiles and attack aircraft. The missile is made by U.S. weapons firms Raytheon (RTN.N) and General Dynamics (GD.N).
In May, Japanese naval officers traveled to a North Atlantic Treaty Organization meeting in The Hague to learn more about the consortium, Japan's navy and a U.S. source familiar with the trip told Reuters.
Two Japanese sources familiar with the initiative said discussions in Tokyo were at an early stage, although joining the consortium would dovetail with Prime Minister Shinzo Abe's more muscular security agenda, which included the lifting last year of a decades-old ban on arms exports.
The sources declined to be identified because they were not authorized to speak to the media.
The consortium, established in 1968 by four countries including the United States, is set to develop an upgraded version of the SeaSparrow in the coming years.
Having Japan on board would spread the project's costs, but Washington also sees a role for Japan in leading multinational military industrial partnerships in Asia at a time when China's military modernization and assertiveness is alarming many countries in the region, said the U.S. source.
Such partnerships, which are rare in Asia, would create a network of security ties beyond formal military alliances that mostly involve Washington and its various regional allies.
"We think this project will allow Japan to lay the groundwork for further defense export programs in the future," the U.S. source said. "We would welcome this kind of security cooperation activity by Japan in the region."
Asked to comment, a spokesman for the Japanese navy said in an email: "The U.S. Navy is keeping us informed about the SeaSparrow project. With the aim of improving the procurement efficiency of our ship-based surface to air missiles we are gathering information to make the necessary choice."
The U.S. Navy said it was not immediately able to comment. NATO declined to comment.
TOKYO ALREADY BEEFING UP ASIA TIES
Japan has one of the most advanced military industrial bases in the world, but companies such as Mitsubishi Heavy Industries (7011.T) have long made weapons only for the Self Defense Forces because of the arms export ban.
Since lifting those curbs, Abe has begun boosting security cooperation across Southeast Asia, where several countries with tight budgets are worried by China's creation of man-made islands in the disputed South China Sea.
In June, Abe agreed with Philippine President Benigno Aquino on an exchange of military technology and hardware. Abe in May also agreed to start talks on transfers of defense equipment and technology with Malaysia.
And Australia is considering Japan as the possible builder of its next generation submarines, something U.S. naval commanders have publicly encouraged because doing so would deepen ties between two of Washington's closest allies in Asia.
None of these initiatives, however, are multinational.
SOME CONCERNS IN TOKYO
Japan's navy already uses the SeaSparrow missile, which is assembled locally by Mitsubishi Electric (6503.T) under a co-production agreement with NATO and the U.S. manufacturers.
That would make the transition to a full consortium partner easier, said the U.S. source.
One of the Japanese sources said some concerns had been raised in Tokyo over diminished control over production by being a member, even though sharing of costs would be welcomed.
"The concern is what it would mean to security by having to rely on other nations," the Japanese source said, referring to the possibility supplies of munitions and equipment from other countries could be disrupted more easily than those made at home, especially during any conflict.
It could also become a political issue since Japanese firms that supply parts for the SeaSparrow missiles made in Japan could miss out if Tokyo joined a consortium where work was spread among participating nations.
The U.S. Navy's desire to see Japan in the consortium comes after a proposal for Mitsubishi Heavy to join Lockheed Martin Corp's (LMT.N) F-35 stealth fighter program fizzled out last year.
Japanese defense bureaucrats had hoped working on the F-35 as a subcontractor to rear fuselage maker BAE Systems of Britain (BAES.L) would have given Mitsubishi Heavy exposure to global arms markets.
But it proved impossible for Mitsubishi Heavy to compete on pricing of components given the advantage enjoyed by contractors in the initial nine countries due to their governments' funding of specialized tooling for the program.
"Japan recognizes that it should join these international groups to help amortize purchases and make their industry more competitive," said a U.S. executive who works closely with the Japanese government and industry.
"You're going to see them engaged in more and more bilateral, trilateral and multilateral groups in coming years."
(Additional reporting by Andrea Shalal in WASHINGTON and Adrian Croft in BRUSSELS; Editing by Dean Yates)