Keen to boost its military capabilities and global security profile, Japan is undertaking the most drastic review of its forces in five decades - a move analysts say will involve both pain and gain for domestic firms.
Under a new National Defence Programme Outline to be unveiled this year, Japan will realign its troops and overhaul its armaments to respond more quickly to terrorist, guerrilla and missile attacks involving nuclear and biochemical arms.
The 9/11 attacks on the United States, missile threats from North Korea and concerns about regional rival China are the driving forces behind Japan's decision to review its armed forces for the first time in nine years.
"In the aftermath of the collapse of the Soviet Union and emergence of other threats, Japan has started to refocus its strategy," said Lance Gatling, an independent defence expert and aerospace consultant in Tokyo.
Japan also wants to realign its military, known as the Self-Defence Forces, to enable it to participate more actively in overseas non-combat missions, defence ministry officials said.
In a move likely to be contentious, the government is set to delete from the new outline a 1976 "basic defence plan" limiting Japan to a "minimum" defence capability in order "not to cause instability in neighbouring areas by creating a power vacuum".
"That's a major shift in Japan's defence policy. Japan is moving to a stage that is a far cry from where the Self-Defence Forces have been," said independent defence analyst Haruo Fujii.
Japan's pacifist constitution has been interpreted as allowing a military, but only for self-defence.
The government has been stretching that restriction, most recently with a decision to send up to 1,000 soldiers to help rebuild Iraq.
The new outline will call for cuts in equipment aimed at defending against a traditional land invasion and replacing it with gear needed to fend off missile and terror attacks.
The number of "regular" ground troops may be raised from the current 145,000 to 150,000 by shifting about 5,000 of Japan's 15,000 "reserve" troops to the main contingent to respond better to terrorist or guerrilla attacks, defence ministry sources said.
The number of army tanks and artillery pieces is likely to be cut by 30 percent, while the number of strategic aircraft including fighter jets and P3C patrol planes could also be reduced.
"It is natural that we should make those changes because we do believe that the possibility of our country being invaded by a foreign country is very slim today," one of the sources said.
Japan recently decided to buy a missile defence system from the United States. Experts say the system, to be partially deployed in 2007 and fully operational by 2011, will cost up to one trillion yen ($9 billion) over the next 10 years.
"Within the Defence Agency (ministry), the watchword of late has been 'get prepared to do without more fighters, warships and tanks' because the focus of the Defence Agency is going toward long-range surveillance, intelligence and reconnaissance assets," Gatling said.
Japan will also need to buy mobile and satellite communication systems as well as long-range aircraft to realise its ambition to take part more actively in international operations such as United Nations peacekeeping, he added.
Some Japanese officials say the defence budget - about 4.95 trillion yen annually - could snowball over time.
According to "The Military Balance 2002-2003", published by the London-based International Institute for Strategic Studies, Japan was the world's fourth-biggest defence spender after the United States, Russia and China.
The Military Balance put US defence spending in 2002/03 at $322.36 billion, Russia at $63.68 billion, China at $46.04 billion and Japan at $39.51 billion.
"It would cost a huge amount of money to procure hardware capable of dealing with attacks using nuclear, biological and chemical weapons," another defence ministry official said.
The defence ministry spends about $14-16 billion each year to buy military hardware, about 90 percent of which comes from Japanese companies.
Defence experts including Gatling said the ministry was becoming more lenient towards spending on information technology.
The budget for information technology upgrades to be approved this month is roughly the same as the $1.45 billion outlay for the missile defence scheme in the next fiscal year beginning in April.
High-tech firms such as Fujitsu Ltd ,NEC Corp Toshiba Corp and Hitachi Ltd would likely benefit most from the new-look military focusing on information technology, while cuts in traditional weaponry could hurt domestic arms makers, analysts said.
The government, however, will try to ensure such damage is offset - for example by having Japanese companies produce part of the missile defence system under license from US firms.
"For possible cuts in traditional sectors, we may have to consider increasing contracts for them in other areas such as the missile defence system," a Japanese official said.
"We must do something to prevent them from dying out."
Some 60 percent of total contracts go to six major Japanese defence contractors - Mitsubishi Heavy Industries Ltd, Kawasaki Heavy Industries Ltd, Mitsubishi Electric Corp, Ishikawajima-Harima Heavy Industries Co Ltd, NEC and Toshiba.
Most of the remaining 10 percent goes to US contractors such as Lockheed Martin Corp, Northrop Grumman Corp, Raytheon Co and Boeing Co.
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