Mitsubishi Heavy Industries (7011.T) anticipates record defense equipment orders this fiscal year as Japan embarks on its largest military buildup since World War Two.
Japan’s fragmented defense sector will be subsidized, and military contracts will be made more profitable under the government’s five-year goal to raise defense expenditure to 2% of GDP.
“This is not just helping prime contractors but is also good for the partners that work with us, making it easier for them to plan ahead,” CEO Seiji Izumisawa said at a news conference after the business reported its results for the year ending March 31.
His business anticipates defense orders to rise by half to 850 billion yen ($6.29 billion) in the first year of Japan’s five-year $318 billion military buildup, which began in April.
Japan’s largest defense contractor makes missiles, tanks, submarines, and other military equipment, generating around 10% of sales. However, many Japanese military contractors have been cautious about engaging with defense firms due to their reduced sales share.
As tensions around Taiwan rise, Japan’s Ministry of Defence gave Mitsubishi Heavy 378 billion yen to construct new longer-range missiles in April to dissuade China from deploying military force in East Asia.
Japan’s Zero fighter jet maker will work with Britain’s BAE Systems PLC (BAES.L) and Italy’s Leonardo (LDOF.MI) to build a new sophisticated fighter that the three nations hope to deploy by the middle of the next decade.
Mitsubishi Heavy, which builds air conditioners and nuclear reactors, expects its annual operating profit to rise by half to 300 billion yen.
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