The TOKYO analysis of the lifetime cost of 26 items including aircraft and destroyers that the Ministry of Defense designates as critical equipment shows that 14 of them ended up costing 20% more than the original estimate.
The increases occurred mainly because of changes to specifications after contracts were signed, and because of lack of foresight in domestic development plans.
The administration of Prime Minister Fumio Kishida is preparing for a drastic strengthening of defence capabilities from fiscal 2023 onwards, as it remains wary of moves by China and North Korea, but before that happens, it appears that there is a need to dissect ballooning costs.
The Ministry of Defense calculates the life cycle cost of 26 types of equipment annually, with the total standing at around 23 trillion yen about $159 billion and the Mainichi Shimbun analyzing these items based on recent figures released by the ministry and other information.
Per aircraft, the C-2 military transporter cost about 104% more than originally envisaged, the P-1 maritime patrol aircraft about 68% more and the SH-60 K patrol helicopter about 53% more. The cost increases at the top end of the scale resulted in an average hike of 20% among the 14 types of equipment that rose in price.
10 items required additional parts necessary for their maintenance and repair, according to a look at the reasons for the increases. The cost of parts for patrol helicopters was about three times higher than originally anticipated, while the average increase in parts costs for the 10 items was 38%.
Ten of the 14 items whose lifetime cost increased were domestically produced. Mass production brings down costs, but the government restricts exports of defense equipment, and mass production for overseas markets is unlikely, this tends to push up costs. A series of specification changes after acquisition contracts were signed was a factor in the increased prices.
The defense ministry updates the life cycle cost of important equipment annually. If the cost is over 30% or more than the previous estimate, the plans are reviewed, and if the cost rises by 50% or more, then the ministry considers suspending the plan. An official from the Acquisition, Technology Logistics Agency, which is under the Ministry of Defense, said that we can't deny that our previous estimates were too low. The ministry would have to accept reviews or suspension of plans, according to the official.
The Kishida administration noted in June 2022 that North Atlantic Treaty Organization NATO guidelines require that member states maintain defense spending of at least 2% of GDP. The administration has announced preparations to strengthen Japan's defense capabilities over the next five years. Japan's defense spending was about 5.4 trillion yen about $37 billion for the initial budget for fiscal 2022, about 0.96% of GDP. The Kishida administration is going to revise its national security strategy and other security-related documents this year to increase defense budget and solidify measures to secure financial resources.
If costs are not sufficiently assessed, the defense budget could expand unchecked. Takero Doi, an economist at Keio University, said the government's cost consciousness is low based on its perspective of protecting the domestic defense industry, so it probably doesn't have much of a sense of guilt when defense equipment expands. The government has accepted the purchase of relatively expensive equipment because of the 'drastic strengthening of defense capabilities'. The Ministry of Defense and the government should have a mindset of deploying more effective equipment at a lower cost.