JPRS ID: 9155 JAPAN REPORT

• Document Type: CREST
• Collection: JPRS
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00850R000200090041-5
• Release Decision: RIF
• Original Classification: U
• Document Page Count: 48
• Document Creation Date: November 1, 2016
• Sequence Number: 41
• Content Type: REPORTS

APPROVE~ FOR RELEASE= 2007/02/08= C~A-R~P82-00850R00020009004'1 -5

~ ~ ~ F
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFtC1AL USE ONLY _
4:
JRRS L/9155
19 June 1980 ~
~ Ja an Re o~~ -
p p
cFOUO , siso~
- FBI$ FOR~IGN BROADCAST INFORMATION SERVICE
_ FOR OFFICIAL USE OPJLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
NOTE
JPRS pubiications contain information primarily from foreign
newspapers, periodicals and books, but also from news agency
transmissions and broadcasts. Materials from foreign-language
sources are translated; those from English-language sources
are transcribed or reprinted, with the original phrasing and
other characteristics retained.
Headlines, editorial reports, and material enclosed in brackets
are supplied by JPRS. Proc~~ssing indicators such as [Text]
or [Excerpt] in the first line of each item, or following the
last line of a brief, indicate how the original information was
processed. Where no processing indicator is given, the infor- -
ma.tion was summarized or extracted.
Unfamiliar names rendered phonetically or transliterated are
enclosed in parentheses. Words or names preceded by a ques-
tion marx and enclosed in parentheses were not clear in the
original but have been supplied as appropriate in context.
Other unattributed parenthetical notes within the body of an
- item originate with the source. Times within items are as
given by source.
The contents of this publication in no way represent the poli-
cies, views or attitudes of the U.S. Government.
For further information nn report content
call (703) 351-3067 (Japan, Korea,
Mongolia); 351-2760 (Vietnam, South and
East Asia) .
- COPYRIGHT LAWS AND REGUI,A.TIONS GOVERNING OWNERSHIP OF
MATERIALS REPRODUCED HEREIN REQUIRE THP,T DISSEMINATION
OF TEIIS PUBLICATION BE RESTRICTED FOK OFFICIAL USE ONLY.
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
~ FOR OFFICIAL USE ONLY
JPR5 L/9155
19 June 1980
~ JAPAN REPORT
(FOUO 16/80)
CONTENTS
MILITAR.Y
Pros, Cons of Military Build-Up Debated
(ASAHI JANARU, 11 Apr 80) 1
Internal, External Presaures, by Shoji Takase
- Medium-Term Operations Estimate
Defense Statementa by Buainess Leaders,
by Susumu Rodama
Political Economics of Draft,
by Takao Kamakura
Defense Induatry Future Examined ~
(INDUSTRIA, May 80) 27
ECONOMIC
'JAPAN TIMES' Hails Growing Buainess Esrnings in
October-March Period
(Edir.orial; JAPAN TIMES, 28 May 80) 30
Five Japanese Computer Makers Have 7tao-Digit Sales Gains
(MAINICHI DAILY NEWS, 29 May 80) 32
Experts Analyze Defenae Related Stocks
(Yoshitaka Kobayashi, Hideo Morita; SHUKAN ASAHI,
2S Apr 80) 34
SCIENCE AND TECHNOLOGY
= New Wonder Drug Nears Commercialization
; (BUSINESS JAPAN, May 80) 43
- a - [III - ASIA - 111 FOUO~ _
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
I
FOR OFFICTAL USE ONLY
MILITARY
PROS, CONS OF MILITARY BUILD-UP DEBATED
Internal, External Pressures
Tokyo ASAHI JANARU in Japanese 11 Apr 80 pp 10-14
[Article by ASAI~I SHIMBUN editor"Sho~i Takase]
(Text) (Introductic~n) The Soviet Union's military intervention in
Afghanistan pulled tfie world back from detente to confrontation. Against
this new background of U.S.-Soviet confrontation, the United Sta~es is
pressing Japan to increase its defense expenditures, and there is economic
friction between Japan and the United States symbolized by the automobile ~
problem and fear of inflation and an energy crisis. In these circumstances
there have begun to be dangerous moves to abruptly "reverse course," and
challenge the "Japanese taboos" against increasing military strength,
lifting the ban on arms exports and reactivating the draft.
Against a backg~ound of change to a new military situation--the Iranian
revolution a year ago and the recent Soviet invasion ~f Afghanistan--there
has been an octave increase in foreign and domestic demands that Japan
increas~ its defense strength. The United States, in particular, has come
to frankly express its strong hope for strengthening of Japan's defense
capability prior to Prime Minister Ohira'~s May visit to the United States.
Domestically, too, there has been a succession of positive statements from
leaders of the economic world and others, along the lines of "making a stir
to stimulate the defense debate among the Japanese people." There have
been, for example, such assertions as "we should raise defense expenditures
to the Swiss level of 1.9 percent of GNP (2 percent i~i 1976)" or "it is
necessary to consider the draft for emergencies" or "there should be broad
discussion, from both political and economic aspects, of defense questions
including reexamination of the policy banning weapons exports."
First let's seek the views of two or thr_ze in�ormed persons on what to make
of the growth of external and internal pressure for a Japanese defense
debate. Hiroshi Takeuchi, chief of the research department of the Long- -
Term Credit Bank of Japan, who is famil3ar with the inner workings of
economic ~rorld, says this:
1
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
"Pressure from ecor.omic circles to strengthen defense capability is going
to keep on increasing, It is ~ust a matter of time before defense expendi- _
tures exceed one percent of GNP. There are various reaoons, but one is
that with changes in the world situation due to the oil crisis and the
Soviet invasion of Afghanistan, business leaders increasingly pride them-
selves on being able to conduct Japan's foreign affairs theinselves, as
seen in such things as commercial stocks of oil. Another reason is
concern over how the Japanese economy would get by if the United States,
_ the biggest customer for Japan's dollar income, became angry and imposed
trade restrictions. The characteristic nationalism of people that age is -
also involved.
"The position of these business people is to ask those who oppose their
thinking to state an alternative proposal, if they have one, on how to
secure oil without exporting weapons, and how to be sure to continuing
exports to the United States without accepting the increased military
expenditures the United States demands."
On the other hand, Isamu Miyazaki, Deputy Director General of the Economic
Planning Agency and author of "Gunshuku no Keizaigaku" (Economics of
Disarmament) (IWANAMI SHINSHO, 1964), says the following with the dis-
claimer that he is not a defense expert and these are only personal views:
"The issue of defense preparations these days is highly technical and compli-
cated, and strategically the issue has become global in scope; there is
thus the suspicion that the arguments of non-experts will be half-baked.
In that sense this issue, aside from its own pros and cons, is no longer one
- which should be discussed in terms of emotion or patriotism. The issue
must be taken up widely and considered cautiously. However~ we have
learned that it is a mietake, in light of precious human experience, to
solve disputes through violence, and we have a constitution which says as
much. This has become the ma,jor criterion for consideration of Japan's
security.
"Speaking economically, we must say that increasing military capability
does iiot have a positive effect on the growth rate because of the infla-
tion.ary tendency of arms production. Not only that, but in the area of
~ fiscal poli.cy it puts pressure on such things as construction of housing
and social welfare of the aged. On this point, there is something which
should be respected in Japan`s achievements and values in the 30 years
= since the war. As for the pressure fram the United States, which is much
talked about now, we should explain clearly the d3fferences between the
positions of the United States and Japan, their national situations, and
the feelings of the people. In response to the argument of the responsibility
of an economic power, we should indicate specifically that the military use
of economic power is not the only way to d3scharge responsibility. Tt is
its use for foreign aid, education for example, which is the new responsi-
bility of those who have learned the lesson of history."
2
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY _
Finally, there is the view of the Budget Bureau of the Finance Ministry, `
on which the foreign and domestic pressure for increased defense expendi-
tures is ultimately concentrated:
"When we hear the statements of financial circles we want to ask if the �
economic world also thinks it will be okay to increase corporate taxes.
At this time when fiscal reconstruction has become ~n urgent task because
of the super-deff~it financing of a 40-percent rel3ance on national debt,
it would take considerable time to move from 0.9 percent of GNP to 1.0 per-
cent; the drastic step of doubling it to 1.9 percent cannot be called
a reasonable proposal.
"If the cost of the 'Medium-Term Operations Estimate' is to be 2.7 or
2.8 trillton yen, it ~an hardly be disposed of by the target year of 1984,
so we do not think the goal of 1 percent of GNP can be reached in 1984.
Of course~ if the politicians hand down a decision to greatly increase
defense spending as a question of allocation within the framework of the
General Account it could be fixed up by cutting other items in the budget,
but even if the defense increase were to be covered by a new deficit bond
issue, we would oppose it fiercely."
The table (following this article) was presented to the House of Representa-
tives' Standing Committee on the Budget on 22 March by Minister of Finance
Takeshita. It shows trial calculations of defense budget grow~h in inter-
mediate years if defense easpenditures are to reach the 1-percent level by -
~the years indicated. To reach 1 percent as soon as next year, there would
have to be an increase over this year of as much as 23.8 percent. To reach
it by 1985 would require an annual increase of 13.8 percent. In any case
the growth of defense expenditures would be higher than that of the General
Account, a marked contrast to the past 5 years in which defense growth has
generally been lower than that of the General Account. . But even so, compared
with the past record of growth of defense-related expenditures over those
of the previous year--13.9 percent in 1976~ 11.8 percent in 1977, 12.4 per- _
cent in 1978 and 10.2 percent in 1979--the 13.8 percent growtn rate needed
to reach 1 percent of GNP by 1985 cannot be called particularly high.
Still, it cannot be denied that having the rate of growth of defense
expenditures higher than that of the General Account would give the impres-
sion af a defense-oriented budget.
Apparently the Defense Agency originally intended to spread the front-line
equipment costs of 2,7 or 2.8 trillion yen in its "Medium-Term Operations
Estimate" over 5 years, raising the defense budget to 0.92 percent of GNP
this year (fiscal 1980) and increasing it 0.02 percent egch year until
1.0 percent was reached in 1984. As far as can be ~udged from the 0.9 per-
cent figure for 1980, the first year, the prospects for reaching that target
in the next 5 years has grown more remote. In particular, it should be
pointed out that the tempo of the estimate as a whole has been slowed by
the fact that equipment for rear services, which is the foundation support-
_ ing the front-line equipment, is given only growth at the same pace as
before.
, 3
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
In that sense, the unfortunate thing for the "Medium-Term Operations
Estimate" is that it collided head on with a period of fiscal reconstruc- -
tion in which the government is *_rying to hold down the General Account.
This is because it can hardly be expected that defense expend.itures alone �
will show sudden growth when maintenance of fiscal moderation is being
demanded. Of course, this is not the first time ~here has been an upsurge
of demands for increased Japanese defense capabilities. Back in the latter
half of the 1960's there was criticism of Japan's "free ride" in connection
with the operation of the Japan-U.S. Security Treaty. Nevertheless, the
defense capability increase argument that the iJnited States has directed
at Japan for the past few years and the moves within Japan to create a
positive recognition of the Self-Defense Force and to activate discussion
- of national defense can be seen as new developments in the environs of the
issue of Japan's defense in the latter half of the 1970's.
What Happened in the 1970's? -
Just what changes did occur in the 1970's? In a speech he made in Hawa3i
on 27 March, U.S. Ambassador to Japan Mansfield said that the attitudes of
tr.e Japanese toward security and military matters has changed dramatically
and become more realistic in reeent years. As the chief factors in this
change he listed three points: 1) the steady growth of Soviet military
st*-ength; 2) the increasing self-confidence of the Japanese people, and
3) improvement of Sino-Japanese and Sino-American relations and the friendly
attitude of the PRC toward Japanese-U.S. security arrangements. I would
- add one other factor: the relative decline of U.S. power since Vietnam
_ and the American people's impatience to regain ~uperior power.
First of all, the Soviet Union, which spends 11 to 14 percent of its GNP
on the military and is stead.ily increasing its fighting strength, has tried
to position increased numbers of defensive land forces on the Sirio-Soviet
border and modernize its Pacific fleet. Recently the light aircraft carrier
"Minsk" has been stationed there, and has begun to make incursions into the
Indian Ocedn from its base in Vietnam; this has caused Japan to be concerned
about the security of its maritime oil supply routes. In addition, the
stationing of Soviet army units in the Northern Territories and the recent
n~ilitary incursion into Afghanistan have undeniably made the Japanese aware
. of their distrust and wariness toward the Soviets, and have given them the
occasion to think about the question of defense.
Second, it is significant that the PRC has m~de a 180� turnaround in its
evaluation of the Japanese Self-Defense Forces and the Japanese-U.S.
, Security Treaty. The PRC, which until the 1960's had consistently opposed
the reemergence of Japanese militarism and called for the abandonment of the _
Japanese-U.S. military alliance, gradually chang~2d its evaluation of U.S.
and Japanes~ military strength starting with the clash with the Soviet
military on Zhenbaodao in March 1969. Begi~ining at that time the priority _
in the PRC's military and political pnsture shifted to strategy toward
the Soviets .
4
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
When a Japan Socialist Party group vis~ted China in October 1970, the PRC
expressed its doubts about the JSP's anti-armaments policy. At a meeting
with the first Komeito group to visit China, in June 1971, the PRC did
not venture to refer to the pros and cons of the Japanese-U.S. Security
Treaty. At the conference of U.S. and PRC leaders in February 1972,
President Nixon tried to persuade the PRC of the importance of Japanese-U.S.
security arrangements, and the PRC accepted that without criticism. Thus,
during Tanaka's September 1972 vis it to China and the negotiations on
normalization of diplomatic relat ions, the existence of the security treaty
did not hinder the n~gotiations; in fact, the PRC went so far as to actively
endorse the significance of the .Tapanese-U.S, security arrangemen~s. It
also recognized that there is no 1 ink between the Self Defense Forces and
reemergence of Japan militarism, and it did not ob~ect to the determination
of the Fourth Defense Preparations Plan which called for strengthening the
self-defense forces.
As seen in this course of events, the PRC's turnabout dealt a near-fatal
, blow to Japan's reformist peace forces which, starting from a. neutral, -
anti-armaments position under the banner of the Peace Constitution more than
20 years after the war, had shoute d in its slogan that the self-defense
forces are a violation of the cons titution and called for abolition of the -
Japanese-U.S. Security Treaty, and had energetically developed struggles
against the treaty and against the bases. The PRC has now ~oined hands
, with "the faction reviving Japanes e militarism" which walks the path of
adhering to the Security Treaty an d strengthening the self-defense forces,
and it appears to be throwing cold water on the anti-ar.naments policy and
- neutralist road of "the faction wh ich opposes reviving Japanese militarism."
This change, of course, by the PRC also became a great obstacle to the
development of security and defens e policies by the JSP, in which the
renovation of Japan and the forces of peace had played a central role.
It cannot be denied that the arguments of the JSP have lost their persuasive-
ness for those who ask, "Why is it that in these days when even the
socialists of the PRC accept the S ecurity Tr~aty and expansian af the self-
defense forces, Japan's Socialist Par.ty alone sticks to a backward anti-
armaments policy and insists on opposing the Security Treaty?"
Moreover, we cannot ignore the pol itical impact of the fact that the PRC's
change has moved the defPnse polic ies of Japan's opposition forces, such
as the Komeito and the Democratic Socialist Party, in the direction of
confirmatir~n of the status quo--or in the direction of strength ening auto-
nomous def ense,
Third, there is the change in Amer ica since Vietnam. There is no change in
U.S. and Soviet strategic nuclear systems, but in the area of conventional
forces, the fact that the United States is changing from the 2 1/2 strategy
to a 1 1/2 strategy can be called a truly immense change. This is a con-
version from a military force capab le of dealing with two wars in Europe
and Asia, plus small, locali2ed disputes, to a force prepared for war on
the European front plus local disp utes. Basically, redueing U.S, forces
5
FOR OFFIC IAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL.USE ONLY _
in Asia to the minimimm and leaving land warfare to allies in the region is
an extension of the "Nix~n Doctrine"; this great conversion has been made
possible by withdrawal from Vietnam and the progress of reconciliation
between the United States and the PRC. The Carter administration's plan -
to withdraw U.S. forces from Soutii Korea, Defense Secretary Brown's "swing"
concept and the concept of sending emergency forces to deal with abnorma?
situations in places likei;the Middle East and the Caribbean are all parts
of the 1 1/2 strategy. .
Weakening of Internal Restraints Against War
Why is it that the United States had to reduce its capacity to respond
from a 2 1/2 strategy to a 1 1/2 strategy? In somewhat simplified terms,
it is because the huge expenditures of the Vietnam War forces a proportional
drop in the economic strength of the United States. In the meantime, the
Soviet Union was steadily increasing its own m3litary strength and closing
the gap with the United States. It is said that to meet this Soviet
challenge, the United States will have to increase its nuclear forces and
the number of warships, aircraft and t~nks,
However, the problem for this "poor America" is that there is no way to
increase military strength without further weakening the economy. The
United State~ is caught in a grave dilemma, with healtny development of
the economy on one side and the increased military strength necessary for
_ security on the other. What the United States has stressed as its last
chance to resolve this dilemma is none other than the formula of having the
allied countries shoulder a part of the American defense burden.
"Deterrents require sacrifices. The United States is willing to make those
sacrifices, but it is absolutely necessary that the allies make their share
of the sacrifices." (From Secretarq nf State Vance's statement before the
Senate Foreign Relations Couanittee on 28 March.) The following examples
af Che defense burdens which the United State$, based on this severe
attitude, is asking Japan to bear are taken from Secretary of Defense Brown's
1980 defense report: 1) promotion and expansion of the military equipment
which is a goal of the "Defense Plan Outline."; 2) increased share of costs
of stationing U.S. ~orces in Japan; 3) participation with the United States
and Wester~ Eiirope in efforts to deal with the worldwide buildup of Soviet
militarlT strength; 4) flexibility to allow the United States to shift its
naval and air forces from the area of Japan under the swing strategy;
5) use of the Maritime Self-Defense Force to temporarily reduce U.S. naval
presence in the western Pacific and the Mediterranean Sea, since U.S. naval
operations in the Persian Gulf and Indian Ocean enhance the security of J3pan.
Within the United States there is an emotional reaction and irritation regard-
ing "weak America," as seen in Republican president3al candidate Reagan's
assertion that "America has grown weak because its leaders have forgotten
the importance of strength. Let us regain superiority over the Soviet Union
now!" It is ~n this sense that Congress, first of a11, and U.S. industrial
leaders who are troubled by increasing imports of Japanese products are
continuing to demand more obstinately and openly an increase in Japanese
defense capability.
6
b'OR OFFICIAL USE ONLY
;
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
"If our allies will not support us, we should cut back our defense commit-
ments. This would hurt us too, but they are the ones who would suffer most."
Even this sort of irresponsible talk has been heard around the Department
of Def ense lately.
The new moves by the United States, the USSR and the PRC involving Japan
are all things which have occurred in the 1970's. One of these, the PRC
= strategy shift at the beginning of the 1970's, had a great impact on _
Japan ese politics and political parties, and it is no exaggeration to
say th at was the starting point for the domestic change of state regard-
ing the iesue of security and defense.
The development of this new international situation in the 1970's naturally
brough t with it new changes in the perceptions and ~udgments of the
Japanese people on the issue of defense. In public opinion surveys on the
existence of. the self-defense forces, the numbers for strengthening and
_ . the numbers for maintaining the status quo both increased, and for the
first time the two groups totaled over 80 percent. Those for elimination, -
on the other hand., have dropped from 9 to 4 percent in the last 12 years.
This can be read as a sort of conservative trend.
On the other hand, over the last 10 years the economy of Japan has overcome
the oil crisis and expanded to the size of an economic power. Ca11s for a
defens e capability suitable to an economic power have come not ~ust from
the Un ited States, but from W estern Europe as well.e But as Chinese criticism
4f the revival of Japanese militarism has died out, similar criticism of
Japan has decreased in the countries of Southeast Asia too, and one effective
restra int against strengthening of the self-defense forces has disappeared.
^ Another inajor factor which has moved the Japanese awarer.ess of the issue of
defens e in the direction of acceptance of reality is the fact that with the
conclusion of the Vietnam War, the heavy odor of gunpowder in the area of
Japan dissipated and peace was somehow revived. B-52's going to Uomb Vietnam
had been stopping in Okinawa and tank repairs had been carried out in the
Tokyo area. In such circumstances, the people hoped for peace and disliked
war.
The po et Jacques Prevert left_ behind the saying that "true peace is when war
breaks out somewhere else." When this war somewY:ere else comes to an end,
- people seem to no longer feel the necessity to talk about peace, of course,
- or to live with the constant consciousness of restraint against war. When
uneasiness about getting involved in the war disappears, there is no need
to th ink about restraints against war. In other words, th e internal
restraints are weakened. Thus, th~ post-Vietnam period has been a"winter
season" for the peace movement which flourished in Japan af ter World War II.
~ The Concept of Peace in Exchange for Military Cooperation
This is none other than what Isamu Mi2aki called "the tendency to discuss
military preparedness in terms of emotion and patriotism, without giving it
cool consideration within the framework of military technology and inter-
national politics." Ar_~ that sort of emotional argument tends to become a
7
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
view such as this: "There is nothing really strange about the economic
- power Japan having armaments on a par with other advanced countries. We
should give up, f or the sake of national security, the argument that
0.9 of 1.0 percent is enough."
_ The Budget Bureau of the Finance Ministry responds to this w;,th a bitter
smile: "People in ger.eral seem to think there is not much difference between
0.9 and 1.0 percent of the GNP. But in terms of money it is 250 billion yen.
That amount would have to be either cut from education and social services,
or added to everybody's taxes." In that sense, since the defense argument
~ is an important question for the exis tence of the nation, it tends to -
gradually become a matter of principles which ignores on~'s own financial
situation. That is because it scunds and looks better as an argument.
However, it is no t possible to erect a nation's security policy on principles
of this sort. If Japan is to begin from reality, moreover, it must proceed
from such commitments as pure self-defense under the constitution, reliance
on the Japanese-U.S. security system, the three nonnuclear principles and
the arms export embargo. Vie�,aed in t erms of principles and eff icient use
of military strength, perhaps these commitments look unseemly and shameful.
But if we are to abandon any commitments, we must calculate in advance the
new costs which will accompany their removal, and make known the advantages
associated with the palicy change.
lluring the 1950's which experienced the Korean War and the 1960's when we
could feel the Vietnam ~)ar close to us, w~ felt only apprehension about
being involved in the war, and concentrated on building the foundation of
an economic power. So now in the 1970's, having grown to an economic power,
Japan is always be ing asked what it will contribute to international society
in this radically different international atmosphere. This has comp to the
surface as military requests to Japan from an America which wants to become
strong.
But will it be possible, as f inancial circles think, to ensure ever-growing
exports to the United States by agree ing to increase Japan's def ense
expenditures? And how far can Japan, which differs from the United States
in its national s ituation, popular emotions and geographical conditions, go
~vithin its presen t constitutional commitments in cooperating with military
requests instigated by the United States? Isn't there also the danger that
- by acceding to the milita]ry demands of the United States, Japan will in
r'act aggravate the military power struggle between the United States and the
Soviet Union?
In order to overcome these doubts, Japan should actively work out, as an
aiternative propos al, a new style of peace concept which will make use of
- Japan's economic strength for world peace and stability.
8
. FOR OFFICIAL USE ONL.Y
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL US~ ONLY
(Tab1e) Comparison of Annual Budget Growth Rates if Militar.y Expenditures `
Are Made 1 Percent of GNP (Units: 100 million yen, ~
Division 1980 1981 1982 1983 1984 1985
(A) 1% reached in 1981 (0.90) (1.00)
(B) Defense costs 22,302 27,600
(C) Growth f rom -
previous year 6.5 23.8
(D) Growth of general
_ account 10.3 12.1
(E) 1% reached in 1984 (0.90) (0.92) (0.95) (0,97) (1.00)
(B) Defense Costs 22,302 25,505 29,168 33,358 38,150
(C) Growth f rom
previous year 6.5 14.4 14.4 14.4 I4.4
(D) Growth of general
account 10.3 12.1 11,5 11.1 10.5
(F) 1% reached in 1985 (0.90) (0.92) (0.94) (0.96) (0.98) (1.00)
(B) Detense costs- 22,302 25,371 28,862 32,833 37,351 42,490
(C) Growth from
previous yeans 6.5 13.8 13.8 13.8 13.8 13.8
(D) Growth of general
account 10.3 12.1 11.5 11.1 10.5 11.9
Notes: 1. Percent of GNP in parenthesis.
2. GNP growth assumed to be 11.4% each year.
_ 3. Growth of expense costs in even annual steps.
4. General account growth rate based on estimated f iscal receipts
and disbursements.
- Medium-Term Operations Estimate
~ Tokyo ASAHI JANARU in Japanese 11 Apr 80 p 13
[Commentary by editors of ASAHI JANARU]
[TextJ This estimate is a sort of S-year plan drawn up by the Defense
~ Agency last ,;uly on the basis of the "Defense Plan Outline" decided by the ~r
Cabinet in October 1976. It is to serv~e as a reference for work within
the agency on budget requests, ~.n connection with the way in which front-
line equipment is to be provided for the self-defense forces for the 5 years
beginning with fiscal 198~. It is not a fixed "medium-term defense equipment
plan" decided by the cabinet as iii the past; the arrangement is that it
will be prepa.red every third year, with annual revisions, as an estimate for
u~e just within the Defense Agency.
9
FOR OFFICIAG USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007/02108: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
Here is the major equipment the Ground, Maritime and Air Self-Defense Forces -
are to receive over 5 years. Ground SDF: 300 tanks, 180 self-propelled
cannons, 11.0 armored vehiclea, 111 helicopters, etc. Maritime SDF; 16
destroyer eacorts, 5 submarines, 39 other warships of varioL~s types to be
constructed, refitting of present eacorts with missilee, 37 P4C antisub-
marine patrol planes and 51 antisubmarine helicopters to modernize anti-
submarine patrol capabilities. Air SDF: F-15 interceptor f3ghters and
4 E2C early warning patrol craft to augment air defense capability, In
addition, as common items for all three selt-defense forces, study is
being given to ammunition stores and successors to thQ Nike and Hawk missiles.
In terms of personnel, the Ground SDF will attempt to increase proficiency
while staying at the 180,000-man level, but the Maritime and Air forces
are to increase personnel by 3,650 and 1,800 respectively. As this shows,
the trend of defense preparations will emphasize the qualitative and
� quantitative strengthening of the Maritime and Air~Self-Defense Forces.
Incidentally, if the plan in this estimate is reali2ed, the goals of the
"Defense Plan Outline" will be almost entirely achieved, the exception being
certain warsh ips. Thus the Estimate artd the Outline are almost identical
in scope. The expenditures required for front-line equipment is estimated
between 2.7 and 2.8 trillion yen (at 1979 prices). Now with regard to
military expenditures as a percentage of GNP if this plan is carried out,
assuming the future growth rate of GNP is under 6 percent it will be
possible to implement the plan without changing the policy (in the cabinet
decisian of November 1976) of not exceeding 1 percent of GNP for the
present.
Defense Statements by Business Leaders
Tokyo ASAHI JANARU in Japanese 11 Apr 80 pp 15-18
[Article by Susumu Kodama, editor of ASAHI JANARU]
[Text] 'I'he 51st General Conference of the Japan Chamber of Commerce and
Industry met in the Tosho BuiLding in Tokyo's Marunouchi on 19 March 1980.
Addressing ab out 200 heads of local chambers gathered there and Prime
Minister Ohira, their guest, the Japan Chamber o� Commerce President
5higeo Nagano spoke on his pet theory on the topic of fostering defense
industries.
"The time has come to discuss the defe:ise problem widely from both political
and economic aspects, and to form a national consensus. For Japan to live
with no natural resources, it will have to foster superior brains and
develop highl.y ~ophisticated technology. Japan should attempt to actively
develop in this field, and must export products corresponding to inter-
national demand."
10
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY _
Then Mr. Nagano aubmitted the ideas behind this statement to the opinion
_ page of ASAHI SHIMBUN (Morning Edition, 23 March). According to this:
, "Recently President Giscard d'Estaing of France received the promise of
large quantities of oil from the ail-producing countries in return for the
export of weapons. With the oil problem as serious as 3t has become,
it could even be said that the French president's action has improved the
livelihood of the French people. When such ~hings are happening, should _
Japan alone continue to fetter itself with unilateral self-restraint?
If the world were asked for permission to export weapone, would it not say
such exports are permitted as a means to ~btain oil? Since the three -
principles on weapons exports were the result of losing the war, is it
right f.or the statesmen~of today to pass policies based on the emotions of
their counterparts of the past on to future generations forever?"
The three principles on weapons exports do not allow weapons to be exported
to 1) the commun3st b1oc, 2) countries which are involved or which are
likely to become involved in hostilities, or 3) countries to which weapons
exports are forbidden by a UN resolution. They were produced at the time
of the Sato Cabinet, and in the time of the Miki Cabinet they were strengthen-
ed to the point of "reluctance to export even to countries other than those
to which exports are forbidden by the three principles."
A little more than a month earlier, on 7 February, the annual "Katisai
Financial Seminar" of the Kansai business world was held in the International
Conference Hall in Kyoto. There Hosai Hyuga, pres3dent of the Kansai
Federation of Econom3c Organizations, developed the defense argument more
boldly than Mr Nagano. "Britain (an island country in the same position as
Japan) spends 4.7 percent of its GHP (on military expenses). Even Switzerland
which ha~ styled itself a neutral country for ages gives 1.9 percent of its
GNP to national defense costs. ...West Germany spends 3.4 percent and also
brings in NATO troops; it is held hostage, so to speak, and it uses the draft.
- France aiso spends 3.3 percent. Thus, each country devotes r_onsiderable
expenditures to national defense. The per capita defense expenditures of
Britain and Switzerland are three times or more those of Japan. Japan,
taking advantage of the Japanese-U.S. Security Treaty, spends a mere 0.9 per-
, cent of its GNP on defense costs.... It is my view that just adding 1 percent -
to the 0.9 percent would make it possib]..e to maintain security in Hokkaido.
I think the whole country--govex~n~-nent, businesses and individuals--will save
1 percent to cooperate in the security of the nation.... And I think it is
necessary to study such things as the draft for emergencies when it is
needed."
Perhaps influenced by the prominent figures of Tokyo and Osaka financial
circles who, when they were ready to act, challenged head-on Japan's big
postwar taboos against the draft, expansion of m~litary expenditures and
promotion of weapons exp~rts, Pres3.dant Yoshitada Konoike of the Japan
Junior Chamber of Commerc~ saiu, "In the long run Japan needs to export
weapons; I am opposed to nuclea.r weapoi2s, but we should have things like
nuclear submarines. Repeating the financial world's arguments on increased
mil3tary preparations and weapons exports has become fashionable.
17.
FOR OFFICIAL USE ONLY ~
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
- Mr Nagano and Mr Hyuga, as the honorary president of Nippon Steel and
president of Sumitomo Metal Industries, are at the top of two ma~or steel
- companies representing Japan, and they are thought of together with Nippon
Steel president Yoshihiro Inayama who several years ago made touchy state-
ments mistakenly taken as pro-war. Thus, they give the impression to public
opinion of "the shrewdnesa of the steel industry as the producer of
munitions."
Even 4 Percent of GNP for Defense
Financial leaders have not 3ust started making statements of this sort.
Whenever business conditio.ns have turned down, these statements have kept
coming up in the form of references to the foreign and domestic political,
economic and social situations. Here are some of the main ones.
First there is the "4 percent of GNP" line of Mitsubishi Electric Co.
- President Ken Okubo, who spoke to the Japan Weapons Industry Association
as its president in May 1969:
"Because this is a very important period involving revision of the security
treaty, reversion of Okinawa and university disturbances, we should eliminate
excessive competition in the defense industry and firm up a posture of
cooperation, and we should be careful, as an industry, to deliver the very
best rnunitions. We would like the government~to share the view of industry
and raise defense spending to at least the French level of 4 pereent."
_ This statement cleverly seized on the upsurge of a self-defense mood the
year before actualization of the reversion of Okinawa and the 1970 renewal
of the Security Treaty.
Next is the constitutional revision line of Takeshi Sakurada, then president
_ .of the Feder~tion of.Japan Employers' Associations.Representative, who spoke
to the federation's interim meeting in October 1979:
"The preamble of the Japan-U.S. Security Treaty specifies that Japan should
at all times participate in common defense involving the United Nations,
but if a UN army were to be formed Japan, under the present constitution, -
cculd not join in. Though we say it is necessary to stre~gthen our capacity
for ~utonomous defense, this cannot be done in a rational .~nanner because of
the 9th article of the constitution which forbids maintenance of war
potential. The constitution must be changed."
With revision of the Security ~reaty coming up, he played to perfection the
role of a hawk of the business world.
There is also the "Malacca Strait Defense" argument propounded in May 1971
by Tokyo Electric Power's Chairman Kazutaka Kikawada, who was then cliairman
of the Board of Trustees of the Japan Committee for Economic Development:
12
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICZAL ~JSE ONLY
"Although the Strait of Malacca is very important geographically, it has
not even received a coastal survey. It must be kept in good repair, even -
if we have to take the ~ob over from the tJnited States."
The Strait of Malacca is between the Malay Peninsula and Sumatra, and is a -
key point in oil tanker traffic going to Japan frcm the Middle East, Africa
and the south. Mr Kikawada was referring to the necessity of international
cooperation, but this was misinterpreted as a hawkish defense argument, and -
Mr Kikawada was busy issuing a denial and defending himself.
Also in May 1971., Toshiba Corp. President Keizo Tamaki, who was then
president of the Japan Weapons Industry Association, made a statement:
"We should think of weapons not just for domestic demand, but for export as
well. For this reason we have spoken with the government about relaxing
applicat ior. of the three principles, which have hindered exports."
This chorus of financial leaders swelled even louder at the time of the
autumn 1973 oil shock and the long recession which followed. In October 1975
Mitsubishi Corp. President Bunichiro Tanabe pressed the matter in chats with
Prime Minister Miki and other leaders of thz government and the Liberal
Democratic Party:
- "I do not mean real weapons, but we should send out things which are nearly
weapons, things which we can export competitively. Otherwise, it will be
- diff icult for Japanese business to recover."
In November 1977 Nippon Steel President Yoshihiro Inayama, then president
. of the Japan Iron and Steel Federation provoked an outcry with his comments
in conversation with a newspaper reporter: -
It would be too bad if war broke out somewhere and Japan missed hundreds
of billions of yens worth of orders. What developed Japan's economy was
receiving orders f rom the Korea War and the Vietnam War. But now there is
no war, and no surge in demand. Japan's economy is having such difficulties
that it cannot get by without a war."
In March 1978 Japan Chamber of Commerce and Industry President Nagano had
made the weapons export argument, as he did this time, to a news conference:
"The Japan Federation of Economic Organizations has called on the government
to ease its administrative guidance measures blocking weapons exports; the
entire business community is going t4 work on the government. Now that
tanker orders have disappeared and the shipbuilding ~ndustry cannot even
feed itself, we could anticipate considerable demand for shipbuilding if
we just did not take the narrow view of not exporting anything--like ships--
associated with weapons, whether or not they are clearly weapons themselves."
On that occasion Nagano's statement was supported by the structural recession;
his recent statement differs in that it 3s a3.*ned at securing oil.
13
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
It is read~:.ly apparent from reading this series of statements from business
leaders that in time of foreign or domestic upheavals or w~en an economic
downturn is approaching, the defense argument is almost certain to make its
appearance. With similar timing before the Security Treaty revision, on
the reversion of Okinawa, after the Vietnam War, with the oil crisis,
structural depression, the Middle East dispute, the Soviet Union's invasion
_ of Afghanistan, and so on, the business world has intoned the arguments of
strengthening defense, exporting weapons, and reviving the draft. And as -
opposed to periods of high growth, when a low-growth period starts and -
- companiea' profits worsen, the defense debate becomes even aharper and
more enthusiastic in financial circles. ~
The Weapons Industry's Sales Estimate
The total value of the weapons, vehicles, aircraft and ships which Japanese
industry will sell to the government in 1980 is about 540 billion yen.
That is s little over one-half the sales of a really super year. When times
are good and there are a f ew other jobs, the industry does not seem to feel
like crying out "More Weapons!" But when times are bad, they want sales so
much that the words seem to leap right out of their throats. Most of the
business leaders who expound the defense argument get very upset when they
are called "merchants of death" and it is suggested that they are acting
in behalf of their own sales; they take the pose that it is "for the nation."
But it is clear from the business leaders' statements cited so fax� that the
ring of the cash register cannot be ignored.
T~'hat are the sales estimate of the arms industries the business leaders are
so enthusiastic about?
First, orders and profite are stable~ and there is no worry about price cuts
. or uncoll~ectabTe payments. With other products, it is not rare for the
merchant to resign himself to sacrifice sales at reduced prices. With
weapons, however, everything ordered is bought by the Defense Agency. There
is no risk to the seller when the buyer is a government office. When
business conditions turn bad, construction firms with few 3obs in the private
sector pressure the government to "increase public works." It is much the
same with the financial leaders' calls to "increase defense preparations."
There are also the "sweet deals" of which one business leader said, "since
they do not know the c~sts of the weapons, it is possible to add on to the
price."
Second, there is the theory of capital called expansionism. In the defense
industry, huge sums are eaten up by research and development and by equipment
funds. Being businessmen, they must recover the money invested and show a
continual profit. To do this there must be a market which consumes large
volumes to enable growt'1 and regeneration. But because of the renunciation
of war in Article 9 of the constitution, there are limits to the growth
of the defense budget. And under the administrat3.ve guidance of the three
principles of weapons exports, Japan is in actuality unable to export
1!~
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
weapons. That is why the financial leaders have demanded revision of the
constitution, strengthening of military forces, and relaxation of the
ban on exports.
Third, there is a plan to mobilize government money as a subsidy for weapons
research and development--the resulting advanced technology could also be
applied to products demanded in the civilian sectors, and thus enhance the
. competitive strength of Japanese products internationally. Although they
complain that "the amounts are too small to be profitable," co~panies like
Mitsubishi Heavy Industries, Kawasaki Heavy Industries, Mitsubishi Electric,
Toshiba Corp., Nissan Motor and Fu~i Heavy Industries are for this reason
devoting much effort to the weapons industry in addition,to their main
business, They calculate that if export competitiveness can be raised by
applying the latest electronics, metallurgy and automation technology,
obtained in the course of weapons development, to automobiles or home
electronics, railroads, pollution control de>>ices or production automation,
they can cover the deterioration in the balance of payments caused by the
j tunp in oil prices .
Fourth, there is the calculation that it is impossible to go bankrupt when
involved in the defense industry; the state would not allow it. The reason
the U.S. Chrysler Corp. will not fail, even though it has l~st out in the
Japanese-U.S. small car war and has been driven into a management crisis, is
that it is also a prominent maker of tanks and is thus in the position in
which the U.S. Government cannot let it collapse. .
In Japan, too, the reason the government and the business world worked so hard
to rebuild Sasebo Heayy Industries is that the company, in addition to being
an influantial business in that region, does work for the Defense Agency.
Recently other considerations, beside these estimates on sales, have been
involved in the defense argument. One of these is the apprehension that
- Japanese goods may well be shut out of the U.S. market unless there is a
quick stop to the deeprooted American displeasure with Japan for not playing
an active role in international political and economic forums--what is
cal.led the "free ride on security."
The United States has called on Toyota and Nissan to build plants in the
United States in connection with the Japanese-U.S. automobile dispute,
_ but the two companies have not agreed and the U.S. mood has taken a serious
turn. With the presidential elections looming ahead, there are increasing '
calls in the United States for import restrict3ons to oppose Japan, which '
does not bear its share of defense costs and puts this surplus strength
into exports. The business leaders dealing in steel, h~busehold electronics,
cars and so on are afraid that unless Japan shows its "sincerity" quickly
by increasing defense spending, it will lose the extensive U.S. market.
For example, Toyota Motor Co. President Eim3 Toyoda says this:
"The friction between Japan and the United States is not a problem that can
be solved by automobiles alone. The Ministry of International Trade and
_ ~5
FOR OFP'ICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
Industry may think that sending automobiles is one solution, but I think
other problems are far more serious, and unless they are cleaned up com-
_ pletely, friction will keep flaring up. The defense question is one of
~ these other more serious problans. This is not a problem that can be
shifted onto automobiles. I think it is time for Japan to uae its common
sense and put a little more money into defense spending."
One other consideration is a sense of crisis regarding the terrible effect r~f
on Japan's economy unless oil is guaranteed by selling weapons to the oil- -
producing countries. If all the other countries are doing it, why must 1~.
Japan alone continue to show self-restraint and fetter itself?
This line of reasoning asks, should we choose an energy crisis and the
threat of inflation, or should we export weapons?
The strange thing about the defense statements of business leaders is the
question of why they are so enthusiastic about defense argimments which are
unrelated to their main business.
It is understandable that the head of a textiles company would talk of
strengthening military forces. If there are more soldiers, there will be
that many more uniforms purchased. It is also reasonable that the president
of the Japan Weapons Industry Association would call for increased production
of wsapons and export promotion. That is hardly unusual when you consider
that the group represents the interests of 88 influential weapons manu-
facturers.
When it comes to the Kansai Federation of Economic Organizat~nns, though
even though Kansai has such prominent weapons manufacturers as Kawasaki
Heavy.Industries, Daikin Kogyo, Shin Meiwa Industry and Shimadzu Seisakusho,
they are certainly not the whole thing. To the contrary, there are many
companies having no connection with weapons. Perilous talk from the leaders
of economic organizations of this sort makes people wonder.
Link Between 'Impatience' and 'Spir3t of Anticipation'
Although the Japan Chamber of Commerce and Industry includes 1.03 million
small and medium enterprises throughout the country, there is no doubt
as to the extent to which they receive the benefits of defense industries,
Why do their leaders call for the lifting of the ban on weapons exports
in this way? And how is that related to the "primary business" of the
chamber, which is to foster small and medium enterprises?
All these gentlemen seem unable to repress the3r patriotism, and seem to
speak from a broad perspective, devoid of commercial motivation, but there
is also the spectacle of the leaders of the Kansai business world making
spirited statements as though competing against each other. Because of
this, there have come to be persons who make the following interpretation:
16
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
This trend is related to the recently conspicuous diminuation of business
leaders and the decline of the influence of economic organizations. The
big names of the business world have died or retired from the front lines,
and recently the business world's strategy of politico-financial bonds
through political contributions has fallen into disuse because of the
~enforcing of political fund regulations. Moreover, (according to a Die~~
member with a business background), "These days businesse~ keep lobbying
the government even about minor details, and they no longer look up to -
puliticians." Thus, the influenc~ of business on politics is retreating
' eve-: ~ore rapidly than the political base of the Liberal Democratic Party,
:here is talk that the economic organization~ ~=e "useless" and should
~ dismantled." It has been said that when people driv~en into extre~r~e
r:~?erty are asked their reason for being, they suddenly become very `
ta.l?cative; it is no different with business. That the business leaders
have come to chat about defense questions outside their "primary business"
is actually nothing but urgent PR activity to say, "we deal with this sort
of question."
Kansai businessmen have long been filled with the spirit of keeping ahead
of the times; in other words, they have been characterized by anticipatory
buying. After th~ war, it was Kansai that took the initiative for improve-
ment of relations between Japan and China. On the defense question, too,
Kansai formed study groups long before Tokyo and began to send survey
teams to Europe. Can it not be said that the link between the "spirit
of anticipation" and the "impatience" of the business regarding the decline
of its influer_ce on the political world is the "challenge against the taboos."
In Tokyo, Yoshihiro Inayama (president of Nippon Steel) became president of _
the Japan Federation of Economic Organizations (Keidanren) in May; this
post is styled "Prime Minister of the Business World." Under the plan of
"competition and cooperation" between Keidanren and the Kansai federation,
between Nippon Steel and Sumitomo Metal Industries, and between Inayama
and Hyuga, it is not surprising that Mr Hyuga showed unusual hustle,
Neither is it unreasonable that Mr Nagano raised his voice to demonstrate
his well-being to the world when his subordinate, Mr Inayama of Nippon
Steel, was made "Prime Minister of the Business World."
This background for development of the defense argument by business leaders--
including patriotism, cash register calculations, and PR for the value of
economic organizations--is animated and complicated. The thing which should
not be forgotten is the tendency of public opiaion to turn to the right and
return to conservatism. This has encouraged statements on defense by
business leaders and provided a basis for favorable receptic,n of those
statements by the publ'Y.c. Those making the statements always have to decide
how f ar it is safe to go.
According to an ASAHI SHIMBUN public opinion survey (S and 6 March), the
number of persons desiring strengthening of the self-defense forces in-
creased sharply from 18 percent to 25 percent since the last survey
(December 1978).
17
FOR OFFICIAL USE ONLY
_ ,
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR UFFICIAL USE ONLY
Labor unions have also come to express clearly right-wing views on the
defense question, as seen in the statement by Keiichi Takahata, chairman
of the Labor Union Comanittee of Matsushita Electric Industrial Co.:
"Speaking as a labor union executive, I cannot understand the anti-armaments,
neutralist argument of the Socialist Party. I think the self-defense forces
have to be clearly recognized. It is thus essential to make a clear
interpretation of Article 9 of the constitution. If there is no capability
for self-defense under the current constitution, then it should be amended
to provide a capability for self defense. Of course, it is not appropriate
for Japan to have nuclear weapons, but I think a self-defense capability
appropriate to Japan shauld be considered within the scope of Japan's
economy." (From a public debate on the national consciousness in
December 1977)
As busines~ conditions turn down, there has been an increase in unions calling
for a quick increase in defense orders, in connection w3th maintaining
employment levels.
There are moves to establish a law for protection of secrets, enactment of
'Era-name Gen-go', the pilgrimage of the Christian Prime Minister to the
Yasukuni and Ise Grand shrines, the PRC insistence on "the importance of
the Japanese-U.S. mutual security system, aggression against neighbors by
- (supposedly) peace-loving countries such as the Sino-Vietnamese dispute,
the Cambodian dispute and the Soviet invasion of Afghanistan--with such
things overshadowing Japan and the world, this surge to the right is ,just
another aspect of the business leaders' idea of "founding the state on the
basis of the weapons industry."
Political Economics of Draft
Tokyo ASAHI JANARU in Japanese 11 Apr 80 pp 19-22
[Article by Takao Kamakura, professor, Department of Economics, Saitama
University]
[Text] It appears that the world has now turned from "detente" back to a
cold war set-up. I:~ his fiscal 1981 State of the Union address, U.S.
President Carter explicitly made confrontation with the Soviet Union his
first order of business and called out for the formation of an anti-Soviet
united front including the NATO countries, Japan and even the PRC. Moreover,
the American Government asked the Japanese self-defense forces to make up
the loss of naval strength in the western Pacific caused by the departure
of the U.S. carriers strike force for the Persian Gulf, and to block access
to the Pacific for the Soviet navy. The Ame~Finan Government asked the
Japan~se Government to increase defense spending, to pay a greater share
of the cost oi stationing U.S. forces in Japan, to increase stores of
auununition, to increase mine and torpedo capability and submarine and
18
_ FOR OF~'ICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
warship detection capability, and even to attain the goals of the "Medium-
Term Operations Estimate" (actually the Fif th Defense Plan), which was a
cabinet decision of July 1979, ahead of schedule (one year early).
Although they saw little actual danger of world war, Japanese Government
authorities also began to make hyaterical statements on ~he danger of
war, unusual intensification of threatening Soviet propaganda, and the drive
toward Hokkaido of Soviet far eastern forces. However, the U.S. military
strategy of an anti-Soviet united front had already been 5tated in the
1968 "Def ense Report," and threatening Soviet propaganda in Japan had been
repeated since before the time of the pro~lem in Afghanistan. The Soviet
Union did not suddenly become intimidating on the occasion of the Iranian
revolution and the problem in Afghan~.stan; there has been no decisive
change in the world situation. The changes have been a definite retreat
from U.S. dominance and a definite uprising--and estrangement from the
U.S.--by the developing countries as seen in the Islamic world. That is the
reason that America has tried to regain 3ts dominance by rebuilding the
united front against the Soviet Union. -
In response to the loud demands ef the Carter administration for formation
of an anti-Soviet united front and increased defense spending in various
countries, the Japanese Government has shown, on the surface, reluctance
out of deference to the constitution and to the people and Diet. In
reality, however, the government is rushing toward a military buildup--with
conscious cooperation--based on the "awareness" of Soviet intimidation and
the growing threat of war. The business world in particular has taken this
opportunity to launch a major campaign for strengthening of military pre-
parations. Such things as the "draft" statement by Kansai Federation of
Economic Organizations President Hosai Hyuga and the statement by
Shigeo Nagano, head of the Japan Chamber of Commerce and Industry, on
"fostering ~che weapons industry and lifting the ban on weapons exports"
are a"courageous" escalation from the businesa world's earlier statements
on strengthening military preparations. Of these, the Hyuga "draft" state-
ment has raised much reaction and controve~sy from various quarters. Just
what did it mean?
Goal of the Draft: Reduced Personnel Costs and Procurement of Armaments
The foundation of Mr Hyuga's "draft" statemer~ is, more than anything else,
the recognitinn that the world situation has changed decisively. That is,
because of such things as the shift in the relative strength of U.S. and
Soviet strength, changes in the Islamic world, the outbreak of problems in
Africa, Indochina and Afghanistan, and particularly the construction of
Soviet military bases in the Northern Territories and deployment of the
Minsk and Backfire bombers, the time for Japanese indolence has disappeared -
and a"serious threat" has arisen. With th is awareness, Mr Hyuga says the
core of a country's security is its "national defense capability," and he
insists on strengthening defense capability from every angle. Specifically, -
he calls for increasing defense spending to the Swiss level of 1.9 percent
to provide "at least the strength to resolve local disputes and to reaist
19
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007/02148: CIA-RDP82-44850R000200094441-5
- FOR OFFICIAL USE ONLY
war" and for "nurturing the will to defend the country in each of its
people" to "establish a defense consciousness." Also, "I think it may be
necessary to study such thYngs as the draft, when necessary in time of
emergency." In short, "thinga have taken a turn for the worse" both in the
international situation and in the status of Japan, making it necessary to _
reorient ourselves in regard to aecurity and to give the people consciousness
of "each person defending th e country to protect his own freedom." This would
"ensure the effective application of the Japanese-U.S. Security Treaty."
As for the draft, he proposed that a"study" may be necessary as an issue
"in time c;f emergency" in connectior~ with fostering a defense consciousness.
The Hyuga statement emphasized defense consc3ousness and education for that
purpose. He also said, on the matter of raising c~efense spending to
1.9 percent, "all the people, government, business and individuals, will
cooperate fo r national secur ity by conserving 1 percent," putting the stress
solely on bui lding a defens e consciousness on the basis of cooperation
between the government and the people, rather than making a straightforward
call for expanded~ production of munitions and relaxation of the ban on
munitions exports like Chamber of Commerce President Nagano. There is
really nothing particularly new about the argument for bringing back the
draft; introduction of an "emergency" draft was suggested in the well-known
'Sanya' strategy study, and both the government and the Defense Agency have
considered introducing it in their emergency legislation. Mr Hyuga cannot _
have been unaware of this. And it is not the case that Mr Hyuga himself sees
a realistic possibility of either a world war or a Soviet invasion of Japan.
But then why did he deliberately raise the Soviet threat, stress enhancement
of the people's defense cons ciouaness, and raise the draft argument as part
of that? I must suppose that the statement, coming as it did from the head
of Kansai bus iness circles, had a hidden, practical goal which may or may not
have been the direct intention of Mr Hyuga.
Something which is importan t in connection with the Hyuga statement is the
paper "Our Views on Defense Preparations" which was released by the Def ense
Production C ommittee of Keidanren in May 1976. This was the basic view of
the busin~ss community calling for expanded production of munitions follow-
ing the Fourth Defense Plan. It first mentions "formation of a fundamental
defense capab ility" and requested "establishment of an efficient defense
set-up," along with "ensuring a national consensus" and increasing "national
depth as a whole." It spec ifically proposes "efficient use of defense
spending by activation of a system of reserve self-defense officers." In
connection with rear services, it proposes maintenance and augmentation of
defense equipment, upgrading of equipment and other factors in establishment
of basic defense produ~tion capacity, and pursuit of efficiency in rear
services--reduction of support units and their replacement by the private -
sector. It also called for "national depth" and "comprehensive and
systematic improvement of cost-effectiveness," together with "ties to the
regional economy" and "effective utilization of the reserve self-defense
officers sys tem." In short, in contrast to the poor business conditions
in the munitions industry wh3ch were aggravated by stagflation during the
course of the Foi~rth Defense Plan, this paper called for "national depth"-- _
greater defense consciousness among the people and a system of defense in the
20
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
private sector--and utilization of a system of reserve defense officers in
order to reduce personnel costs as a portion of defense spending and to use
defense spending efficiently and effectively for increased cap ital outlays
_ for procurement of equipment,
In actuality, the draft proposal in the Hyuga statement has to be taken as
a further advancement of the reduction of personnel costs by use of a
reserve system as mentioned in the Keidanren "views." Of course, there is
a great difference between a reser-ve system and a draft system. In the
latter case it is possible to take the view that an increase in troop
strengt'~ actually increases personnel costs. But methods of f illing out
and ensuring the numbers of the self-defense forces under the present
volunteer system have already reached the limit in terms of personnel
costs. The financial crisis, moreover, has become quite severe. To
increase military strength in this situation, it is necessary to plan an
increase in personnel.
And on the other hand, the primary aim of the business leaders is to try to
strengthen and develop the munitions industry, particularly strategic
industries, beginning in the 1980's. The draft is becoming increasingly
prominent as a practical issue in connection with that. On one side the
draft proposal is an open emphasis on defense, but its other side is the
pursuit of capitalistic "rationality"--reduced personnel costs and increased
capital outlays for procurement of equipment.
Prepared Rolls of Draft Eligibles
As seen in the views of Keidanren Defense Production Cot:m~ittee mentioned '
above, the dQfense production industry has repeatedly requested a positive
- increase in spending for procurement of equipment and for research and
development.
On 9 December 1979, before the 1980 draft budget was set, Keidanren gave
the government a paper entitled, "Memo on Defense Portions of the Budget:
Our Views on Promoting Research and Development for Defense Equipment."
In this Keidanren asked for special measures to keep 1980 def ense spending
from falling below 0.9 percent of GNP, and it asked for an inc rease in
"capital outlays," saying that within 1979 defense expenditures of
2.0945 trillion yen, the capital outlays, including research and development
and purchases of weapons, aircraft and warships, compared with 51.4 percent
for "personnel costs and provisions," and that increasing the number of
self-defense force personnel would improve the equipment per capita ratio
and increase mobility to respond to emergencies. Moreover, research and
development funds for 1979 were only 1 percent of defense spending
(20.4 billion yen). The paper gave the specific guideline that this purtion -
"should be assigned a goal of 2 percent for the present, to be reaci~~d in
a programmed manner. Particular emphasis was put on research and develop-
ment out of recognition that preparaticn of a fundamental defense capability
through autonomous development of technology is an urgent task for dealing
with growing military tensions. This emphasis is also an effort to raise
the level of technology which is propped up by development of munitions
technology.
21
FOR OFFICIAL USE ONLY -
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
The Keidanren Def ense Production Committee had praise for the increase of
capital outlays for defense spending in the 1980 budget to 24.4 percent:
"the business world's assertions on curtailment of personnel expenses and
strengthening of facilities was accepted to a cextain de~ree." But at the
same time it dec ided to put strong pressure on the government to establish
guidelines raising the proportion to the 30 percent maintained in West
Germany, saying that in many western countries it is 40 percent or higher
(ASAHI SHIMBUN of 27 January 1980). Thus it proposed, as specific policies
to hold down spending for personnel and provisions, 1) reducing the authorized
strengths, concentrating on reduction of the Ground Self-Defense,Force,
and 2) turning r ear services not directly related to fighting--ground
facilities, equipment supply, transport, food supply, etc.--over to the
private sector to the extent possible.
The proportion of "capital outlays" in Japan's defense spending actually is
low in comparison with the United States and Europe. As shown in the figure
(at end of this article), capital outlays dropped as low as 19.6 percent in
- 1976 and were still only 24.4 percent for 1980, and spending for research
and development has only maintained a level of about 1 percent. The pro-
portion of spending for personnel and provisions, on the other hand,
averaged 50.1 percent under the Fourth Defense Plan (1972-1976) and was
51.4 percent fis cal 1979. In the 1980 budget it is 49.3 percent. In the
United States and Europe capital out3~ays, including research and development
_ costs, range from 30 to 40 percent; research and development costs alone are
10.2 percent in America, 13.1 percent in Britain, 5.1 F.ercent in France and
4.7 percent in West Germany (1977 data). The proportion for personnel costs
is 42.2 percent in Britain and 42.0 percent in West Germr~ny (1979) .
Keidanren assumes that in the 5 years of the "Medium-Term Operations Estimate"
- (the Fifth Defense Plan) the expenditures for defense will rise to 0.97 per-
_ cent of GNP (GNP is estimated at 289.9 Grillion yen for 1984 and defense
expenditures are estimated at 2.8167 trillion yen--growth each year is
6 percent), and calculates that in order to raise the proportion for capital
outlays to 30 percent by 1984, it will be necessary to hold the growth of -
personnel (and maintenance) costs to an average 4 percent per year and
increase capital outlays an average of 12.3 percent per year.
"The proportion of personnel costs for the ground force is the highest at
76 percent, conpared with 37.5 percent for the maritime force and 37.7 per-
cent for the air force. It is necessary to give the private sector the
indirect jobs that once belonged to the Army Service Corps or to bring
wamen, and put th e money that is saved into equipment." (Secretary General
Tetsuya Chiga of the Keidar~ren Defense Production Committee) This is very
direct managerial thinking, but can this effect of reduced personnel costs
be accomplished by the draft, as the "emergency" draft which is a realistic
possibility, or in any other form?
The Japanese army before the war was a conscript army. Since the war, needless
to say, it has been a volunteer force. The countries in the West with a
draft now includ e West Germany (15 month obligation) and Italy (12 months
. 22
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007/02108: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
� for ttie army, 18 months for the navy); America and Britain use volunteers.
In West Germany, with armed forces of abaut 470,000 persons, the draftees
in the three branches average about 50.5 percent and the volunzeers, at
49.5 percent make up about half the total (1970 data). In volunteer
countries like Ame~ica and Britain, on the other hand, the volunteer system
still has men drafted in time of emergency, and maintains volunteer ready
reserves; the system can mobilize large numbers ~f conscript~ in time of
emergency, In the United States the state National Guard troops can be
incorporated into the federal service by presidential order, and there is
talk of reviving a selective draft. Even in the former Japanese military,
the navy was primarily volunteer and the army, with its high rate oF
r~ttr..ttion, waH primarily conscript.
That is to say, because of modernization of equipment and the high level of.
technology in today's military, relatively long periods are required to gain
the technical knowledge and master the necessary operations. Accordingly,
it is necessary to ensure the presence of soldiers with technical skills,
primarily volunteers, who serve for long periods. There is a great chance,
however, that these volunteers will resign after gaining the technical traiz~-
ing. There many different countermeasures and benefits have been devised
to retain these "technical personnel" and noncommissioned officers with long
service, especially active-duty officers and noncommissioned officers. West
Germany has established such countermeasures as vocational guidance educa-
tion, guaranteed conversion to government employment, enlistment bonuses,
improved wages, increased allowances and so forth. America has career
development plans, conversion plans and job-findinR plans, and also many
bonuses, pensions, allowances and measures to improve the quality of
military life. Retention of these volunteers, especially the technical
personnel and key personnel [soldiers] with the potential leadership, will
require a considerable financial burden. Thus the situation in th~ West
tN to eltl~er reCti~n tidequ~te forces in peacetime and draft ifirgc numberR
of a'frontline soldiers" in time of emergency (America and Britain) or
prepare and maintain forces by drafting for periods of about 2 years. In
actuality, such conditions have also been prepared and are considered in
Japan as well.
As stated above, the proportion for personnel costs in Japan's military
spending is high, and that for capital outlays is relatively low. There
are three reasons for this.
First, improved treatment and benefits have been adopted as a policy to
retain personnel. Salaries 3re relatively high, and pay raises directed
at starting pay have increased personnel costs for units with relatively
high numbers of new people, and costs have been further increased by
active implementation of personnel retention policies based on numerous
~ allowances, an expanded promotion structure, pensions based on cont~nuous
service, vocational training, enlistment incentives and so on.
Second, in the rank structure of Japan's self-defense forces, the ratio of
officers and senior enlisted to junior enlisted 3s unusually high. In the
ground forces, for example, the ratio of senior to junior enlisted in 1960
23
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000240090041-5
FOR OFFICIAL USE ONLY
was 1:1.2, but in 1975 it was 1:1 and now it is 1:0.8. The total number of
officers, warrant officers and senior enlisted is 95,632, but there are
only 58,554 junior enlisted. Taking all three branches together, there are
38,459 officers (14 percent) and 122,282 senior enlisted (46 percent), but
only 109,112 junior enliated (40 percent) (1978 data). In the former.
Japanese military the proportion of ~unior enlisted men was 78 percent, and
in the present West German military it is 67 percent. By comparison, the
structure of the present self-def ense f orces is heavily biased toward
officers and senior enlisted. This is something which was brought on during
the Fourth Defense Plan by a policy of using money to retain personnel and
fill vacancies. It increases the proportion of personnel costa, lowers
capitul outlays, and obatructs equipment expanaion and modernizntian. -
But on the other hand, recruiting and expanding the leaders and field grade
officers will make it possible to provide leadership and discipline to
large numbers of fighting forces in an emergency. At the end of the Third
Defense Plan th e Japanese Self-Defense Forcea had the leaders and nucleus
of inen to provide leadership and discipline for 508,000 men, using the
structure of the former Japanese military, or about 450,000 using the
ratio of the present West German military. In other words, the conditions
for an emergency draft have already been pxepared. At the same time, the
= financial crisis makes it impossible to use money in the volunteer system
for retention, and the proportion for capital outlays will drop even
further. The inevitable course will be to retain and replace decreasing
numbers of highly trained individuals, and to rely on a reserve system and
~ emergency conscription to make up the large numbers needed. An emergency
draft has not only been prepared as an important item of emergency legis-
lation; it is even thought of as constitutional within the government.
Moreover, roles of draft eligibles have already been prepared through the ~
local $overnin~ bodies . _
~The third reason that capital outlays are a small part of defense spending
� is the increase in spending for base countermeasures. This is itself
carried out on the basis the idea of increasing "national depth" to get a
' national consensus on the self-defense forces~ But on this point, the
government has begun, by means of elevating the defense consciousness of
the people, to try to get the approval of local residents for bases, not
by using ~r.oney, but by changing their awareness. This calculation is
behind the national consensus and elevation of defense consciousness.
Military Expansion Under Stagflation
A high rate of growth can no longer be hoped for. Recession in the presence
of inflation will become even more serious in the 1980's. There will
certainly be increased competition among capitalist countries in connection
with obtaining resources, and there will be competition and economic
friction among the advanced countries trying to obtain markets and export
capital. Thus the strategy of government and the business world for the
1980's is to raise the technological level and resource efficiency of
2l~
FOR OFF'ICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
domestic industries, while~using national funds and technical sid to help
obtain resources on the one hand, and rat3onalizing domestic industries
to minimize friction among advanced countries on the other.
Specifically, there are plans to obtain raw materials by exporting weapons,
and to reorganize and technologically upgrade doi...;stic industry by focusing
on the munitions industry. The munitions industry, and particularly the
aircraft industry, has been given the status of the "leading industry" in
the 21st century. ~
However, expansion of the munitions industry will involve a burden for the
state. The financial crisis, moreover, will grow more severe in the
presence of stagflation, and military spending cannot be left to expand
at its own rate. Even in the 1979 budget there were calls for more
efficient financial policy, and "reduction management" developed in both
financial and administrative areas. "Japanese welfare policy" is being
advocated in the face of reduction of personnel costs and welfare cutbacks;
self-help efforts and mutual aid wh~ch does not involve public funds are
being called for and carried out.
It can be said that this trend clearly extends ~to the area of expenditures
for war supplies as well. It is true that since 1977 the production of the
munitions indusfiry has continued to grow at annual rates in excess of
10 percent, but on the other hand, it is not easy to reduce pErsonnel costs
when servicemen are obtained as volunteers, and the costs of dealing with
_ local residents in connection with bases have also mounted up. There is no
flexibility in the expansion of the burden for subsequent years and of
continuing costs, and new pro~ects have been limited. In these circum- _
stances it is necessary to push independent technical development and aim
for a"technologically independent countxy~" while responding to the
American request on the one hand, and foetering and atrengthening the
munitions industry as the focua of atrategic industries on the other. Thus ~
it can be said that the clear aim in the area of munitions expenditures
is to hold down personnel costs and cut back the costs of persuading the
citizens, while still bringing about an increase in costs to the nation.
This is not to say, however, that military strength will decrease; it must
be increased, in fact. How can the personnel costs within this be reduced
_ and rationalized? This is the reason for urilization of a self-defense
reserve system and introduction of an emergency draft. Thus, the deciding
- conditions will be elevation of each citi2en's defense-consciousness and
formation of a national conse~sus on introducing the draft, on increasing
the nation's burden in the direction of increased defense spending, and
on tolerating bases. This is an awareness that the only way to protect
the nation is to use our own strength and bear the burden ourselves. The
characteristic of the 1980's will be the attempt to maintain a system which
_ cannot be maintained unless the masses bear the burden and make the sacri-
fices, doing this by unifying the masses into a nation which voluntarily
agrees to make the sacrifices and bear the burden. This same direction
is indicated even more pertinently in the area of munitions expenditures
and strengthening military capabilities. The hidden reality of proposals
25
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
- ruK urr'1l:lAL USS ONLY
to elevate defense consciousness and introduce an emergency draft is the
attempt to strengthen and expand the munitions industry as the focus of
industry, and to maintain thi~ system.
- 29.g c5 6~ 0'S ~!1 o U)}E fi~
~ ~ . . 1'9 .
.
~ 2'1 ~ 21~7 ~ ~ ~ - ` t7~Eff
. 25 ~flj~r+~~~ ~ s~
� , . , ..24. 1.5,P
~
~ 23 14 ~.3 e~ 222 ~.G 13
8 i
~ ~ - ~b 20.7 205 � 1.1 ~1
, ~g 1.0 L0. 0.9 v
t . , d9 ~ , , Q9 ~ ~ ,
'19'T2~J~73 74 75 76 77 ~8 79 80
Trend of Proportion of eapital putlays and Research and Development Spending
Within Defense-related Spending
Key: A. Capital outlays
B. (Proportion in capital outlays)
~ C. Research and development sgending
D. (Proportion in research and development spending)
COPYRIGHT: Asahi Shimbunsha 1980
- 9601
CSO: 4105
26
FOx OFFYCIAL USL ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
MILITARY
D~FENSE INDUSTRY FUTURE EXAMTNED
" Tokyo INDUSTRIA in English May 8U pp 18-20
[Text ] - _ _
A survey by the Nihon Keizai Shim- ~7,696 million. There were also
bun; a leading economic daily in deliveries of strategic materials (special
Japan, shows that 227 out of 1,592 electronics parts and machinery) under
companies, except financial institu� the Trade Control Ordinance. The -
tions and insurance companies, whose revenue earned by 31 companies from
- stocks are listed on the stock ex- these sales totaled ~84,408 million.
changes, delivered their products to Statistics of the Ministry of Inter-
the Defense Agency in fiscal 1979 national Trade and Industry show
(annual terms ended between April, that Japan's production of color TV
' 1979, and March, 1980). The deliv- sets in 1979 reached ~628,852 million
eries include indirect ones through and that of machine tools ~f476,558
trading firms or business acquain- million. These figures show that the
tances. The results of the survey are scale of the nation's defense business
noticeable in that 14.3% of the com- }?as grown to equal the sales of color -
panies whose stocks are tisted on stock TV sets c~r macfiine toals.
exchanges, or one out of every seven T1~c 'I'ablc 1 shows the sales to
enterprises, is in the defense industry. thc Defense Agency (estimates for
According to the survey, the deliv- fiscal 1979) by the 20 top companies
eries to the Defense Agency in fiscal and the ratios of the sales to their total
, 1�'9 iutaleu ~f511,4bo million, up turnover in the same period. '
7.3% from the previous year. (Of the The top company is Mitsubishi
total, indirect deliveries amounted to Heary Industries, which delivered
~F95,000 million.) 'ihere were no many large weapons, such as F4 jet
exports of weapons, which are banned fightcrs, defense ships and T74 tanks,
by the Government. There were to the Defense Agency. Although the
deliveries of war supplies to the U,S. company's sales are by far larger than
forces in Japan and repairs of ma� those by any other companies, its
chinery and equipment for them. But deliveries to the Defense Agency ~
the income from this business earned accounts for less than 10% of its
6y nine companies totaled only turnover. The deliveries to the
27
~ FOB OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
Defense Agency by other big com- Aceording to ttie Defense Produc-
pxnies do not exceed 10%, either. tion Committee of the Federation of
Kawasaki Heavy Industries and lshi- Economic Organizations, the capital
kawajima-Harima Heary Industries expenditure for equipment, earmark-
rank� high among tl3e 2~:companies, ed in the defense budget, has been
but other major shipbuilding com- increasing since 1952 at an annual rate
panies, such as 69itsui Engineering & of about 15% and is expected to reach ~
Shipbuilding and Hitachi Shipbuilding ~544,800 million in fiscal 1980. The
& Engineering, don't. This is presum- committee says the production for
ably bacause the construction ~of ships defense will continue ro ~~~~rnd by a
takes a long time and Mitsui and big margin for some time to come in
Hitachi had not ships to deliver to the view of the tension in the world and
Defense Agency in fiscal 1979. Mitsu- the U.S. request that Japan increase its
bishi Electric, Nippon Electric, defense spending.
Toshiba - all leading electric appliance The delivery of aircraft, which
makers - rank high in the list because accounts for the largest portion of
they deliver quantities of electronics sales to the Defense Agency, has
equipment for aircraft or missiles. almost leveled off since 1975. But
Japan Aircraft Mfg., an affiliate of the delivery of FIS jet fighters and
Kawasaki Heavy Industries, produces P3C anti-submarine aireraft, for which
airframes and parts and also repairs the Defense Agency issued orders, ~
, aircraft. Sumitomo Precision Products beginning in 1978, is to start in 1980. _
is a maker of propellers and heat ex- However, it appears that the Japan
changers, affiliated with Sumitomo Ordnance Asso~'ation ~s not taking a
, Metal Industries. Japan Aviation Elec- very optimistic ~'vie The defense
tronics Industry, affiliated with budget is held down to
3.RM~ of the
Nippon Electric, produces connecters CNP and it is difficult to increase the
and navigation equipment. Teijin Seiki defense spending.
is a Teijin-affiliated maker of textile Although the Japanese defense
machines, wl~ich is branching out into industry has grown to a noticeable "
the production of aircraft equipment level in the number of the companies
and hydraulic equipment. Ttiese com- involved and in terms of their sales to
panies, relatively small in business the Defense Agency, it appears that the
scale, depend heavily on demand from problcm exists in whether the industry ~
the Defense Agency. wiit be able to continue to grow as
'The Japan Ordnance Association fast as it did in the past. Changes in
also conducts a survey on deliveries to the international situation and moves
the Defense Agency by its member in Japan's politics will determine the
firms every year. According to the fite of the defense industry. ~
association, the 97 member companies
delivered ~450,493 million of prod-
ucts either directly or indirectly during ~
fiscal 1973. The amount was 13% of '
their total tumover. The breakdown
of their sales in the same year is shown
in Table 2.
The deliveries to the Defense
Agency during the past five years
.show an annual growth of 7.4%.
28
, FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
Tabie 1.
Deliveries to Uefcnsc Agency by Manufacturers in FY1979
Names of Manufacturers ~F1 billion q'o
1. Mitsubishi Hcavy Industries 127.0 9.9
2. Kawasald Hcavy (ndustries 43.3 8.8 -
~ 3. h9itsubishi Electric 42.0 4.1
4. Ishikawajirna-Harima Eleavy [ndustries 40.0 5.9
5. Nippon Electric 16.6 2.4
6. Toshiba 16.5 1.2
7. Fuji Heavy lndustries 14.0 3.7
8. Shin Meiwa [ndustry 10.2 15.0
- 9. Japan Steel Works ~ 9.7 8.4
10. ~litachi ~ 8.0 0.5
11. Japan Aviation Electronics Industry 7.8 31.2
12. Sumitomo Precision Products 7.5 41.8
13. Japan Radio 7.4 15.9
14. Tokyo Keiki ' 7.4 19.0
15. Teijin Seiki 7.0 30.7
16. Shimadzu Scisakusho 6.6 7.5
17. Shinko Electric S.8 11.0 ~
18. Japan Aricraft Mfg. 5.8 51.6
_ 19. Daikin Kogyo 5.3 4.5
20. Nissan b'Iotor 5.2 0.2
Note: (1) Source: Nihon Keizai Shimbun
(2) The mark % indicates the ratio to total sales.
Table 2. Table 3. .
Breakdown on Products in FY1978 Change ~of Amounts Delivered
~ 1 million ~ Crowth
Aircraft 188,757 FY ~1 million Rate
Weapon 108,587 1974 339,080
~lectric & Electronic ~ 1975 384,408 13.4
~quipment 62,036 1976 361,185 -7,p
Ship 61,673 1977 420,289 16.4
- Vehicle 26,179 1978 450,493 7.2
Others 3,261
Total 450,493 Source: Japan Ordnance Association
Source: Japan Ordnance Association
COPYRIGHT: Diamond Lead Co., Ltd. 1980
CSO: 4120 �
29
FOR OFFICIAL IISE ONLY
, -
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY '
ECONOMIC ,
'JAPAN TIMES' HAILS GROWING BUSINESS EARNINGS IN OCTOBER-MARCH PERIOD
OW291901 Tokyo JAPAN TIMES in English 28 May 80 p 12
[EdiCorial: "Status of Business Performance"]
[Text] Contrary to earlier predictions of a downturn, business earnings for
the October March accounting term improved markedly in the manufacturing
industries. They are likely to en~oy a handsome gain in current profits for
~ the fifth consecutive half-year period, in spite of the rising cost pres- -
- sures from high oil prices and rates of interest.
Current profits in the manufacturing sector are estimated to have improved
7 to 8~ercent for the last business term. Admittedly, the growth of earn-
ings has slowed down from the first half of fiscal 1979. Still, the pro-
gheaied plunge in profits did not materialize.
In the non-manufacturing sector, the profit picture is entirely different.
Profit~~ fell by an estimated 80 percent on the heels of a 25 percent drop
in the last April-September period. This is largely due to heavy lossea
auffered by electric power companies which were prevented from raising
charges to meet the bloated fuel bill until the start of fiscal 1980 in
April.
All in all, the overall business earnings--that is, earnings throughout the
manufacturing and non-manufacturing sectors--are expected to be about 15
percent less for the last business term than in the April-September period.
An overall profit gain of 12.4 percent was reported for April-September
last ye ar.
What happened is that the manufacturing industries boosted their earnings
at the expense of the electric power and gas companies. Manufacturing
enterpriaes also benefited from a strong expansion of demand, supported by
a surge in investment and ex~orts. This expansionary climate enabled them
to raise product prices, passing on the risen costa of oil and raw materials
to users and consumers.
30
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
The impact of the higher rates of interest seems to have proved less than -
feared, because busineases have ahed excess borrowings from external sources -
after years of "wei.ght-reducing" efforts. They are toda3~ far less burdened
with borrowings than in the 1973-1974 when the first oil crisis plunged
Japan into a deep recession. Also, accelerated production, in anticipation
of rises in steel and electricity prices, has contribu~ed to improving busi-
ness performance in the manufacturing industries.
Of particular significance is the fact that Japanese manufacturing businesses
went ahead with the expansion of plant and equipment investment. Financial
- analysts earlier predicted that capital spending was bound to go down as
large cost rises would cut into corporate earnings.
Businesses, nevertheless, invested actively for the modernization of equip-
ment and, above all, for energq conservation purposes, including conversion
from oil to non-oil energy sources like coal. It woul.d seem that Japanese
industries are investing in order to survive in the age of energy scarcity,
even defying the conventional considerations on investment costs and rates
of returns.
The decline of the yen exchange value, which continued until recently, gave
impetus to export expansion and contributed to business prosperity. In terms
of its impact on domestic prices, however, the yen dapreciation is often
blamed for having magnified the inflation in the prices of imported fuel _
and raw materials. But in some industries, like automobiles, whose depend-
ence on exports is high, bulging export sales and earnings seem to have re-
duced their need to raise product prices in the domestic market.
In view of the strong momentum still shown by exports and domestic demand,
businesses may indeed hope for faworable earnings in the present financial
term. The large gas and electricity rate raises effected in April would
speed recovery in the performance of power and gas companies in the non-
manufacturing sector. The raised power and gas prices will, over a period
of time, translate themselves into higher costs to consumers in the form
of higher product prices. .
One of the sources of uncertainty ahead is consumer spending. Wage settle-
ments of this past spring were somewhat better than last year, but on the
whole they gave consumers only a modest increase in nominal incom~. Their
real purchasing power., on the other hand, has been sharply limited by the
still unabated inflation. In the 1973-1974 oil crisis, the burden of painful
adjustment was chiefly borne by businesses. In the present instance, that
burden seems to be falling on consumers, or the household sector of the
economy.
COPYRIGHT: The Japan Times 1980
CSO: 4120
31
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
ECONOMIC
FIVE JAPANESE COMPUTER MAKEIZS HAVE TWO-DIGIT SALES GAINS
OW301415 Tokyo MAINICHI DAILY NEWS in English 29 Maq 80 p 5
[Text] Japan's five native-capitalized computer makers were Tuesday found
to have all remarkably increased their sales during fiscal 1979 (ending
March this year) to continue business improvements of the year before.
According to their fiscal 1979 sales reports made public by Tuesday, the
best selling of the quintet, Fu~itsu Limited, of Tokyo, outsold, for the
~irst time, top selling IBM Japan, Ltd., also of Tokyo by a slight margin.
Fu~itsu`s sales during fiscal 1979 (staggered three months ahead of calendar
1979) totaled 326.8 billion yen, up 8 percent over fiscal 1978. IBM Japan,
a local ma~ority-owned manufacturing and sales subsidiary of IBM (Inter-
national Business Machines Corp.) of the U.S., during calendar 1979, had
- booked 324.2 billion yen in sales, 3 percent up from the year before.
IBM of the U.S., dominating 60 to 70 percent of the whole world computer
market, commands only 35 percent of the Japanese computer market under the
Japanese Government's policy to foster Japan's computer industry in the
interest of the nation's economic security.
The four other native-capitalized computer makers also built their fiscal
1979 sales by two-digit percentage gains over the preceding fiscal year--
Hitachi, Ltd., of Tokyo, selling 216 billion qen, up 14 percent; Nippon
Electric Co. (NEC), also of Tokyo, 200.7 billion yen, up 20 percent;
- Mitsubishi Electric Corp. (MELCO), also of Tokqo, 53 billion yen, up 18
percent; and Toshiba Corp., of Kawasaki, 50.4 billion yen, up 17 percent.
In contrast, IBM Japan and Nippon Univac Kaisha, Lts., of Tokyo, a~oint
computer dealer of Sperry Corp. of the U.S. and some inveating Japanese
business interests, both witnessed onlq 3 percent or so growth in their
1979 sales.
According to the five indigenously-capitalized computer makers, their sales
increases, decidedly greater than their two American-capitalized rivals,
- are attributable to:
32
FOR OFFICIAL USE ONLY
, .
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
1) Domestic demands have grown very sharply for medium or smaller-size
computers in whose production they excel their U.S.-capitalized rivals, and
for their recently developed compact and easy-to--operate "office" computers;
2) The domestic business and industrial drives for building efficiency have
picked�up speed to require more computerization; and
3) Their recent rush to develop new products to compete with IBM's "E Series"
of efficient medium-size computers introduced earlq last year have worked
well in arousing a new local wave of demands.
- For the current fiscal year 1980, the quintet visualized continued increases
in sales, with Fujitsu anticipating 9 percent more than fiscal 1979, Nitachi
16 percent more, NEC 20 percent more, MELCO 17 percent more, and Toshiba
15 percent more.
But they invariably place hope chiefly on their smaller and "office" compu-
ters. NEC, for instance, sees "an almost unlimited growth potential" for
the local demands for "office" computers, including the recently developed
plain Japanese language-using types. The local demand for big computers is
believed to have hit the limit.
The U.S.-capitalized companies are believed to have suffered from such a
_ trend of the local market and also from an increase in their clientele's
switches from purchase to renting of their products.
But in terms of net profits, the five Japanes~ companies, all burdened by
heavy capital expenditures, were no match before IBM Japan, which reported
a surprising 11 percent in net profit margin in 1979.
COPYRIGHT: Mainichi Daily News 1980
CSO: 4120
33
FOR OFFICIAL USE ONLY _
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007/02108: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
ECONOMIC
EXPERTS ANALYZE DEFENSE RELATID STOCKS
Tokyo SHUKAN ASAHI in Japanese 25 Apr 80 pp 24-27
[Article by Yoshitaka Kobayashi and Hideo Morita] ~
[Text] At the first sign of the smell of gun powder, the stock brokerage
circle reacted sensitively. The big four securities firms of Nomura, Nikko,
Daiwa and Yamaichi are unexpectedly favoring "purchase of defense related
shares" and pushing "defense stocks" as this year's selling point. Under
the Peace Canstitution, it had been practically taboo for securities circle
to push defense industry stocks. The taboo is now beginning to fade away.
The shrewd Kabuto-cho [Japan Stock Exchange] turn~ the slightest change _
in national consciousness into a money-making proposition. -
For example, in the 7 April isaue of the NOMURA SHUHO [NOMURA WEEKLY REPORT],
an information ~ournal pub?.iahed by The Nomura Securities, Ltd. for in-
vestors, there is an article titled, "The Changing People's Outlook of
Self-Defense Forces." Referring to the ASAHI SHIMBUN public opinion poll,
the article points out that within the past 1 year and 3 months, supporters
of the Self-Defense Forces [SDF] increased from 79 percent to 83 percent
and claims that "the 7 percent increase in people who want to atrengthen
SDF is particularly noticeable." The article is trying to draw attention
to the change in the people's awareness of self defense.
According to this publie opinion poll, the number who answered that the SDF
_ should be strengthened increased as follows: 18 percent in December 1978
to 25 percent in March 1980. Pointing to this development, the "Nomura
Shuho" raises the question, "Is it because people are beginning to feel a
threat, such as from the Soviet invasion of Afghanistan, Soviet buildup of
military faciliCies in the northern territory, etc.?"
It is true that public opinion is changing but the main cause which excited
the stock brokerage circle in "defense stocks" was President Carter's
"State of the Union" message in late January. The president determinedly
' stated, "This is the world's strongest coun~ry and it will remain so,
whatever the costs," and revealed that defense expenditures would ~e in-
creased. Japanese securities circle predicted�two developments in the wake
of President Carter's message.
34
FOR OFFICIAI. USE OP1LY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
1) With the increase in U.S. defense expend~tures, imports from Japan,
including materials for fighter aircraft, will increas e.
2) Japan, which is acting jointly with the United States, will also
increase its defense expenditures.
From February to March, the various securities firms thoroughly briefed the
managerial staff that, "defense related stocks will play the leading role
- in this ye~r's stock market." The year before last, it was "pharmaceuti-
cals" (Kaken Chemical Co., Ltd.) and last year, it was "energy" (Nippon ~
Oil Co., Ltd.), and for securities circle which is searching yearly for _
a particular issue to lead the stock market, the defense related stocks
loomed as a savior. As though to support the movements of Che stock bro-
kerage fifins, the leaders of the business and industries have been releasing
hawkish statements since February.
On 7 February, at a Kansai economic seminar, Hosa~i Hyuga, presidenC of the
Kansai Federation of Employers' Association, stated that "Japanese defense
spending should be increased from 0.9 percent of GNP to at least 1.9 per-
cent, which is the equivalent of Switzerland. It is also necessary to con-
sider the draft system."
During the drafting of the 1980 fiscal budget, the def ense production com-
mittee (Fumihiko Kono, chairman) of Keidanren [Federation of Economic
Organizations] urged the Defense Agency to speed up modernization of weapons.
Furthermore, Shigeo Nagano, president of the Japanese Chamber of Commerce
and Industry, called for arms export and even Tadashi Sasaki, chairman of
the board of trustees of the Japan Committee for Economic Development, a
dove faction in the financial circles, urged that "the defenae issue ehould
. be widely discussed as the national problem of the 1980's and efforts should
be made to arrive at a national consensus."
Sell When Wars Nearby and Buy When Wars Faraway
The reaction began to appear from January in the stock market. Generally
speaking, the defense related stocks reached the peak level in February
and declined somewhat in March. They are beginning to advance slightly in
April.
Heretofore, the stock brokerage circle had believed that "it would be
only natural for Japanese defense related stocks to be noticed." However,
the stock firms were not in a position to push "defense stqcks" before
public opinion polls indicated acceptance.
The big stock companies have given the following interpretations of the
development. -
(The Nomura Securities, Ltd.)
To be precise, the so-called defense related stocks ar e stocks of aircraft
related industries. Included are the manufacture of f igh'ter and antisubmarine
35
- FOR OF~ICIAL OSE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
r~a vrrit,iew US~ UNLY
patrol aircraf t such as the F-15 and P-3C, respectively, and the YX plan Co
build the next-generation large civilian aircraft. Together, they will con-
stitute transactions of aeveral trillion yen.
Playing the leading rolea in [post-WW II] Japanese economy were shipa, then
automobiles, and it is only a matter of time for aircraft to take over.
Therefore, this company started research on defense related stocks fr~m a
year ago. As a result of the research, hopeful predictions became possible.
Take titanium alloy, for example. It ia indispensable as an aircraft parC
with high heat resistance. However, the United Statea is markedly deficient
in its aupply. On the other hand, Japan hae Che capability to increase ita
production. It is believed that any increase in U.S. defenae expenditure
will immediately increase its export amount.
Take bearings, as another example. Japan's skill is rated as the world's
best. If automobile bearing costs 300 yen apiece, aircraft bearing coats
tens of thousands of yen apiece. The U.S. industries, which are inferior
in manufacturing skill and capability, cannot do without Japaneae-made
bearings.
(The Nikko S.ecurities Co., Ltd.)
Business transaction will not be limited to the Defense Agency. Transactions
will cover the entire world. That is the scope of Japan's defense indus-
tries. Until last year, iasues to watch were limited normally to stocks of,
a single enterprise but this year, issues to watch will come from enterpriae
conglomerates.
The Afghanistan and Iran problems are atimulating the stock market. In the
aecuritiea circla, ehere is a commonsense eaying to "se11 when wara nearby,
buy when wars faraway."
For Japanese, both Afghanistan and Iran are "faraway wars."
There are many market ingredients to watch ranging from computers and radars
to metallic materials and graphite fibers.
Five Thousand Firms Involved as Subcontractora and Sub-subcontractors
(The Daiwa Securities Co., Ltd.) -
The technology of the high growth period is becoming outdated. The time
has come when new technologies must be developed. In defense industries,
the technologies of a country are brought together. Therefore, interest is
mounting to actively operate defense industries to utilize new technologies
born from them in other industries.
First of all, technological improvements originate from mass production
methods. As experiences are gained in dealing with aircraft such as F-15,
P-3C and YX, Japanese aircraft man~ifacturing technique will be developed
36
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007/02108: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
_ into the world's best. Of course, at preaent, Japan cannoC be compared
with the United Stat~s in aircraft indusCries. The eame can be said for
radary radio communication, etc. However, as American orders are filled,
the technology will be nurtured.
The same is true of stocks. Since the strength of Japanese defense related
industries is not yet publicly recognized, now is the time to buy.
(The Yamaichi Securities Co., Ltd.)
Looking at the cover page of th~ 4 February isaue of the U.S. weekly mc~ga-
zine, BUSINESS WEEK, we gained confidence. -
There was a picture of a fighter aircraft with only one side of the wing
and no engine. The 6-page special article mentioned "lack of titanium,"
"l,ack of bearings," "lack of manufacturing machineries," "lack of skilled
workers," etc. and related the serious deficiency in U.S. military indus-
tries. These are the very fields in which Japanese industrial circles can
perform effectively. -
The outlook of the securities brokers is that "politics and economics will
function with the military as the focal point in the 1980's."
What is the reaction of the "defenae industries" to these movements of the
stock brokerage world? -
"I was surprised at the stockbrokers' sharp sense of direction. It was
around spring of laet year, they'probably sensed the pro-military trend,
stockbrokers came, one after another, and inquired, 'which company is
likely to make profits?' Of courae, I refused to answer. Then, around
January of this year, they came again and asked this time, 'if weapons
are out, isn't there any company which might grofit from materials?"' The
one making the above comments is Jinshichi Hirano, executive director of
the Weapons Manufacturers Association of Japan in which 97 large weapons
manufacturers are members. He further stated:
"Defense industries are sarcastically referred to as stable industries in
a structural recession. In total sales, while the 'pachinko' industry net-
ted 1.5 trillion yen, the defense industries in 1978 netted less than one-
third of that, or approximately 450 billion yen. Besides, because of the
recent inflationary prices, even if defense expenditures in.creased by C.l
percent of the GNP, the situation would be considered satisfactory if the
_ same level were maintained in actual performance."
Thus, he is taking an extremely conaervative stand.
It is true that the amount of Japan's weapons production does not even come
to 1 percent of the total industrial production. The profit margin is set
~ to equal the average profit rate of ";7apan, Inc.," but there are many cases
where the production takes a lengthy period and the capital rotation rate is
low. Moreover, continued production is not guaranteed and risks are not slight.
37
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007/02148: CIA-RDP82-00850R040240090041-5
FOA OFFICIAL USE ONLY c
"Therefore, this is not too attractive an enterprise." This is the unani-
mous comment of those in the concerned industriea.
However, matters dre not as clear-cut as that. Kazuo Tomiyama, Kanto Gakuin
University professor, who is knowledgeable of defense industries asserts,
"It might not be true of the entire industry but examining the performance
level of specially designated enterprises, it can be seen that weapons pro-
duction is well-established business and there are great hopes that increased
defense expenditure means increased profits."
According to the said professor, as an example, orders f~r the Type 74 tanks,
for which Mitsubishi Heavy Industries, Ltd. is the prime contractor, reached
60 tanks from this year, an increas e of 12 over the orders received up to
1979. With these orders, the company's Sagamihara plant will actually have
a 25 percent increase in work ration, an increase of about 4.8 billion yen
in sales and there should be cons id erable profits. GNP 0.1 percent, con-
verted to monetary amount, becomes approximately 250 billion yen (1980
government estimate) and if the money is used Co order weapons from spe-
cially designated enterprises, "companies making exorbitant profits might ~
begin to appear."
(Statement of Professor Tomiyama)
Enterprises which are looking for o rder of defense materials are increasing
yearly. During the transition to low growth period, companies are trying to
find a way out in the defense indus tries which are maintaining a compara-
tively high growth (estimate of the Weapons Manufacturers Association of
Japan is an annual growth rate of 15 percent this year). Companies which
applied to register with the Defense Agency as a participating enterprise
in defense armament bidding numbered 2,107 in 1978, an increase of 5.2
percent over the preceding year. It is reported that among them were about
300 new companies, mainly medium-smal]. enterprises in business recession.
Including subcontractors and sub-subcontractora of weapons production, there
are said to be 5,000 large and small enterprises involved in the so-called
"stable industry" under the "wings" of the Japanese Government.
However, the situation cannot be assessed as "sound and sure to make pro-
fits." The fact is that there is abundant productive capability but no
~ work. According to the survey of the Keidanren's defense production com-
mittee, the strong divisions have a 7~ to 80 percent work ratio and not a
few divisions have only 30 to 40 percent ratio.
- There are some who point out the weakness of defense related costs to in-
flation and high prices. Increase in pay to SDF members, increase in
retirement pay, etc. are said to b e restricting armament expenditure and
reducing orders for weapons product ion. -
~
38
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
Outstanding Technology Wanted Overseas
The capital outlay, mainly of armament purchase costs, ~ell below 20 per- -
cent of the total defense related expenditures for 1976. Although the _
situation improved somewhat since then, the figure barely reached 24 per-
cent in 1980. The absolute minimum requirement is 30 percent for weapons
modernization..."
Lamenting the situation is [Hiroshi] Morikawa, executive director of the
Keidanren's defense production committee. In the industrial circles, there
are not a few hardlinere who advocate "reduction of SDF membera." 'i'his
reflects an up-against-the-wall view that "to protect defense industries,
the only alternative is to cut down on peraonnel and food costs which
account for 50 percent of the total outlay."
Amidst this adverse situation, it is also a fact that Japan's industrial
circles have considerable confidence in weapons production.
"As long as time and money are available, there is fully adequate capabil-
- ity to manufacture the world's best weapons."
Making that boast is Tomio Tanatsugu, president of the Weapons Manufacturers
Association of Japan and vice president of Tokyo Shibaura Electric Co., Ltd.
In support of this statement, a certain military expert made the following
remarks: "The technical standard of Japanese weapons is very high. For
example, the bearings and caterpillars of the Type 74 tanks and the rescue
aireraft of Shin Meiwa Ix~dustry Co., Ltd. are among the world's best. Fnr-
eign countries eagerly desire them. Even with small firearms, they are re-
sistant to moisture and dirt and fit the body size. Besides, if weapons
are purchased from Japan, there is no need to worry about falling into its
aphere of influence. For these reasone, offere are sure to come from South-
east Asia and Middle East.
(Statement of Osamu Inagaki, military commentator) ~
It appears that behind such assertions as "increase defense expenditures"
and "lift the ban on the arms export" made by the hawkish elements among
leading business leaders, are complex considerations and expectations.
On the other hand, since the United States publicly announced armament
expansion, that demands from the civilian sectors in America will come
pouring in to Japanese enterprises is a factor that cannot be overlooked.
, Concretely, because of increased production of military aircraft, U.S. pro-
duction of parts and materials for civilian aircraft will be delayed and
ordera for such items will come to Japanese defense industries. Outwardly,
it is meeting American "demands from the civilian sectors" but indirectly,
it is tantamount to subcontracting U.S. arms industries.
If such is the case, the brisk activities of the stock brokerage circle to
play up "defense stocks" cannot be said to be wholly groundless. It can _
39
FOR OFFICIAL IISE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
- FOR OFFICIAL USE ONLY '
be fully a~iticipated that indirectly, these and related industries will
- reap the benefita. Is it something to be happy about? Somehow, a slight
_ feeling of apprehension steals over one.
Main Defense Related Industries of Japan
[Noted in the following order: Company Name, Percentage of Sales*, Char-
acteristics as a~ Defense Industry]
Mitsubishi Heavy Industries, Ltd.--9 percent--Japan's largest defense re-
lated enterprise. Provides one-fourth of Defense Agency's total procurement.
Leader in energy, aircraft plant.
Kawasaki Heavy Industries, Ltd.--9 percent--Prime contractor of P-3C fuse-
lage. Emphasis on aircraft. Estimated 1982 sales of aircraft division are
100 billion yen.
Ishikawajima-Harima Heavy Industries Co., Ltd.--8 percent--Top in aircraft
engines. Prime contractor of F-15, P-3C engines. Also built escort and
transport naval vesse]:s.
Kobe Steel, Ltd.--percentage omitted--Leader in titanium alloy. Deal for
titantum with U.S. Boeing Co. Estimated sales of 100 billion yen in
5 years.
Hitachi Metals, Ltd.--percentage omitted--Yasugi plant for high-grade
special steel became a specially designated plant of Boeing Co.
Shimadzu Seisakusho Ltd.--8 percent--Ratio of sales to Defense Agency is
8.4 percent. Orders for air conditioners, starting devices, etc. of F15.
Fu~i Heavy Industries, Ltd.--5 percent--Anti-corrosive treatment of titan-
ium alloy for F-15. Subcontract production of tail rudder for Boeing 747.
Nippon Seiko KK--percentiage omitted--Production of bearings for important
, strategic material. Producing ball screwsfor machine tools at good pace.
Toray Industries Inc.--percentage omitted--Holds over 30 percent of world's
share of graphite fiber. Mostly used for aircraft. Interferon is also
highly rated.
Hitachi Seiki Co., Ltd.--percentage omitted--Famous for specializing in
machine tools. In good shape because of rapid increase in orders. Will
have the best account settlement, historically, in 1980.
Mitsubishi Electrir_ Corp.--4 percent--3d highest in share of armament con-
tracts from Defense Agency. Also engaged ia atomic power, alternate energy
sources, space development.
- 40
- FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOA OFFICIAL USE ONLY
Japan Radio Co., Ltd.--20 percent--Assigned pro~ect for improved Hawk
' amounts to 20 billion yen in 5 years. Prime contractor of sonobuoy for
_ P-3C.
Tokyo Precision lnstrument Co., Ltd.--21 percent--Estimated income of 13
billion yen from F-15. Prime conr,ractor of radar warning device.
Sninko Electric Co., Ltd--8 percent--Holds the biggest share in electric
generators for aircraft. Has orders related to F-15 totaling over 4
billion yen.
Komatsu Ltd.--2 percent--Holds half the ehare with Mitsubishi Heavy Indus-
tries in armored cars. Also handles warheads for artillery shells.
The Japan Steel Works, Ltd.--6 percent--Biggest gun maker. Prime con-
tractor of guns for Type 74 tanks and naval ships. Also handles atomic -
reactor parts.
Shin Meiwa Industry Co., Ltd.=-15 percent--As the former Kawanishi Air-
craft Co., has high �:.echnical atandard. Makes P-3C fuselage parts, -
auxiliary fuel tanks for F-15. -
- Sumitomo Precision Products Co., Ltd.--50 percent--Monopolistic maker of
ro ellers and landin ~
P P g gears. Orders related to P-3C, F-15 amount to
22 billion yen. ~
Tei~in Seiki Co., Ltd.--30 percent--Of the aircraft division products, 90
percent delivered to Defense Agency. Maker of hydraulic, fuel and engine
_ syetem parts.
_ Tokyo Shibaura Electric Co., Ltd.--1 Fercent--Second to Mitsubishi Electric
_ Corp. in electric parts. Responsible for inertia navigation system of F-15
' and logic unit of P-3C.
Nippon Electric Co., Ltd.--2 percent--Manufactures microwave network and
special radio equipment. New Badge system orders possibly amount to 200
billion yen.
Kokusai Electric Co., Ltd.--13 percent--Radio communication equipment for ~
aircraft, ships and special vehicles. Prime contractor of HF secret com-
munication equipment for P-3C. ~
Toyo Communication Equipment Co., Ltd.--14 percent--Responsible for
identification device for F-15, P-3C. Also makes aircraft collision pre-
vention device.
Hokushin Electric Works, Ltd.--10 percent--Concentrates on instruments.
Estimated orders of 10 billion yen in 10 years related to P-3C, F-15.
~
FOIt OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
r~ux ur~r'ICIAI~ USE ONLY
Oki Electric Industry Co., Ltd.--4 percent--Defense Agency procurement
amounts to about 6 billion yen. Experienced in manufacture of ineasuring
and communication equipment.
_ Adachi Electric Co., Ltd.--2 percent--Maker of ground radio communication
equipment and microwave measuring equipment. Promi~ing future in new Badge
system.
- Kayaba Industry Co., Ltd.--4 percent--Various types of hydraulics. Re-
ceived orders from Boeing for YX-use hydraulics, for 300 aircraft, amount-
ing to 1 billion yen.
Koito Manufacturing Co., Ltd.--2 percent--Lighting fixtures auch as wing-tip
lights, aircraft interior lights, etc. Outlook is for 20 percent yearly
increase in manufacture for aircraft.
The Yokohama Rubber Co., Ltd.--4 percent--In addition to aircraft tires,
partly responsible for fuel tank, hose and aluminum honeycomb.
Japan Storage BatCery Co., Ltd.--4 percent
- Yuasa Battery Co., Ltd.--5 percent ~ In addition to the main .
storage batteries of submarines, manufacture electrical sources for
missile guidance system. Also, auto batteries such as for jeeps.
Daikin Kogyo Co., Ltd.--5 peYCent--Artillery shells, rockets and fuaes,
missile warheads, etc. Also, aircraft parts.
Howa Machinery, Ltd.--3 percent--Monopolistic maker of rifles. Also, manu-
factures mortars and hand grenades.
Daicel Ltd.--3 percent--In additian to emergency escape equipment for air-
craft crew, manufacturea gunpowder and rocket propellants.
Nippon Oils and Fats Co., Ltd.--3 percent--Sales of a~nunition, rocket pro-
pellants, etc. to Defense Agency amount to 1.3 billion yen. Including space
- related items, totals 2.5 billion yen.
Asahi Chemical Industry Co., Ltd.--1 percent-- Ammunition, rocket propel-
lants. Joint planning with Toray Industries Inc., Teijin Ltd. and Toyobo
Co., Ltd. on ~pace ship R&D.
Toho Titanium Co., Ltd--60 percent
. Oeaka Titanium Co., Ltd.--70 percent Six manufacturers of inetallic
titanium in the world. Japan holds one-third of share. About 30 percent of
products of these two companies exported ica Europe and the United States.
In process of increasing production capabil;~.ti~s.
(Note: Survey of a certain large securities firm. *"Percentage of Sales"
is the ratio of sales to Defense Agency as compared with total company
sales.)
COPYRIGHT: Asahi Shimbunsha 1980 _
9134
CSO : 4105 i 42
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
SCIENCE AND TECHNOLOGY
NEW WONDER DRUG NEARS CO1~Il~IERCTALIZATION
Tokyo BUSINES5 JAPAN in English May 80 p 123
[Text] Japan, ahead of the rest of the world, is going to industrialize
Interferon, which has attracted the hope of mankind as a"new dream drug."
The Research Development Corporation of Japan has commissioned Midori Juji
Co., Ltd. and Toray Industries, Inc. (at commission fees of 880 million yen
and 870 million yen, respectively) to perfect within about three years equip-
ment and technology to produce 4,000 million units of Interferon per i~nonth.
Thus the production of Interferon wi11 be industrialized in Japan by
March 1984, if all goes well.
Interferon is a kind of protein containing sugar, with a molecular weight
o� about 20,000, which the cells of human or animal organisms produce when
they are invaded by a virus.
Interferon moves out of the cell, acts upon other cells of the organism and
induces the production of antiviral protein which inhibits the intracellular
proliferation of the virus. Hence, Interferon is regarded as effective in
the treatment of various virus diseases including virus hepatitis which
cannot be treated satisfactorily with conventional therapies. Furthermore,
Interferon is sa3d to inhibit cancer cells.
One problem is that only Interferon manufactured from human cells is effec- -
tive for human cells. From 100 million to 200 million units of Interferon
are believed to be needed for treating cancer. The prerequisite to practical
application as a medical drug is, therefore, the establishment of a mass -
production process. Research on production techniques has been progr~essing
rapidly throughout the wo~ld.
Present production techniques are based on the reaction of virus or nucleic
acids on such human cells as (1) leukocytes.which have been separated from
the blood for transfusion as superfluous ingred3ent, (2) lymphoblasts, or
high proliferative cancerous leukocytes and (3) human diploids.
43 ~
FOR OFFICIAL USE ONLY .
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5

APPROVED FOR RELEASE: 2007102/08: CIA-RDP82-00850R000200090041-5
FOR OFFICIAL USE ONLY
In our country, the Japan Red Cross Society has produced about 1,000 million
units of Interferon from leukocytes and started deliveries for clinical tests.
The supply is limited, however, because leukocytes themselves do not pro-
liferate, so that a large amount of blood is needed.
Overseas, a~oint research group of U.S. and Swisa scienti:sts has succeeded
in the development of a new process to produce Interferon through the
recombination of DNA.
Two molecules of Interferon are produced from one coliform bacillus bv
genetic engineering. A n2w way has been opened for the mass production of
Interferon. But the realization of higher efficiency and ultimate indus-
trialization depend on future research.
On the other hand, Midori Juji Co., Ltd. and Toray Industries, Inc. have
made giant strides in the field of Interferon.
The technology of Midori Juji is based on research by Director Tadakazu
Suyama and researchers in the Central Research Laboratories of the company,
working on the production of Interferon from cells derived from human
leukocytes.
Toray's technology is based on the research of Direct~r Akihisa Miyake and
researchers at Toray's Basic Research Laborator3es, working on production
of Interferon from human diploids. Both companies intend to conclude their
programs within f ive years.
riidori Juji's process is as follows: Sendai virus or the virus of the
Newcastle disease are introduced as inductor in the culture of leukocytes
separated from human blood. Interferon, released in the culture is
refined in a preparation with a relative activity of over 1 x 10~ units/mg
{protein). ,
Mass production is difficult according to this technology, since leukocytes _
separated from blood are no longer proliferative and the supply of blood
depends on donors. Midori Ju~i is also studying the production of Inter-
feron by means of lymphoblasts which proliferate in a floating tank culture.
In Toray's process, a multistage plane culture process is used since human
diploids do not proliferate except in a single lay and their life span is
limited (about 50 divisio.ns).
Diploids contained in the culture solution proliferate on glass walls under
controlled condition. Interferon, released into the culture through the intro-
duction of an inductor, is refined to an Interferon preparation with a rela-
tive activity of over 1 x 106 units/mg (protein).
COPYRIGHT: Nihon Kogyo Shimbun 1980
CSO: 4120 ~D
~
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000200090041-5