Japan and Australia’s strategic imperative for deeper defence and dual-use industrial cooperation

In this environment, industrial capacity and technological innovation have become as central to national security as traditional military platforms. For Japan and Australia, the logic is increasingly clear: neither country can meet its defence needs alone, and the next phase of their strategic partnership must be built on deeper industrial integration, shared technological development, and resilient supply chains. This is now compounded with the declining production rate of a range of capabilities in the US which has been the traditional supply chain lead.

Yet despite strong political alignment and a shared strategic outlook, progress remains uneven and several features of current Australian government policy are now impeding the level of cooperation the moment demands.

The strategic rationale for closer industrial coordination is compelling. Japan and Australia are both maritime trading nations whose prosperity and security depend on open sea lanes and stable regional order.

Both face growing pressure on the maritime commons, particularly in the Western Pacific and south-east Asia, where grey-zone coercion, militarised infrastructure and increasingly capable missile forces are eroding the assumptions that underpinned regional stability for decades. As the technological foundations of warfare shift towards autonomy, space-based systems, cyber capabilities and advanced materials, the ability to innovate, produce and sustain these technologies domestically, or with trusted partners, has become essential.

Japan’s defence industrial base is undergoing a profound transformation. After decades of restrictive export policies and inward-looking production, Tokyo is now liberalising defence exports, investing heavily in next-generation technologies and seeking deeper industrial partnerships with like-minded states. Australia, meanwhile, is attempting to build sovereign guided-weapons manufacturing, expand naval shipbuilding and accelerate the development of advanced capabilities under AUKUS Pillar 2.

Both countries recognise that industrial power is now a core component of deterrence. But the scale of the challenge means that neither can succeed through national effort alone.

VIEW ALL

Their strengths are complementary. Japan brings world-leading manufacturing discipline, robotics, materials science and dual-use innovation. Australia offers vast test ranges, critical minerals, advanced research institutions and a regulatory environment more permissive for experimentation.

Together, they could form a genuinely integrated industrial ecosystem capable of producing the technologies that will define Indo-Pacific security.

Nowhere is this more important than in the dual-use domain. The future of deterrence will be shaped less by traditional platforms and more by the enabling technologies that sit beneath them. Space systems, autonomous vehicles, cyber defence, quantum-enabled sensors and advanced energy technologies are all areas where Japan and Australia have natural synergies.

Japan’s rapidly expanding commercial space sector aligns neatly with Australia’s launch sites and ground-station infrastructure. Australia’s experience with autonomous systems and its vast testing environments complement Japan’s robotics and sensor technologies. Both countries face similar cyber threats and share a need for secure, interoperable digital infrastructure.

And Australia’s critical minerals sector, combined with Japan’s processing and manufacturing expertise, offers the potential for a resilient, trusted supply chain for the materials that underpin advanced defence technologies.

Yet despite this strategic logic, several features of current Australian government policy are slowing or complicating deeper industrial cooperation. The first is the persistent fragmentation and sluggishness of Australia’s defence procurement system. Japanese firms often struggle to navigate the opaque decision-making processes, shifting timelines and risk-averse culture that characterise Australian acquisition.

While the Defence Strategic Review promised a more agile and responsive system, the practical reforms have been slow to materialise, leaving foreign partners less certain about how to engage.

A second impediment lies in the ambiguity surrounding export controls and technology sharing. Japan’s willingness to engage in co-development depends on clear, predictable rules for handling sensitive technologies. Australia’s export-control regime, however, remains in flux as AUKUS Pillar 2 reforms are implemented.

Japanese companies face uncertainty about how Australian regulations will align with US ITAR reforms, whether co-developed technologies could be re-exported, and how intellectual property will be protected. This uncertainty discourages investment and slows negotiations at precisely the moment when momentum is needed.

A third constraint is the Australian government’s increasingly cautious political posture on defence industrialisation. Fiscal pressures and domestic political sensitivities have produced a more restrained approach to defence spending and industrial expansion.

While Japan is accelerating its defence industrial transformation, Australia is signalling caution, creating a mismatch in political tempo. This manifests in delayed decisions, underfunded industrial programs and a reluctance to commit to long-term co-production arrangements that Japanese industry requires for planning.

Finally, Australia has not yet created the incentives necessary to attract Japanese firms into its market. Unlike the United States or the United Kingdom, Australia offers limited targeted grants, few dedicated partnership frameworks and no streamlined pathway for Japanese companies seeking to establish a local presence. Without clearer incentives and a more predictable regulatory environment, Japanese firms will naturally prioritise markets with more stable returns.

If Japan and Australia are to realise the full potential of their partnership, they must move beyond declarations of shared values and into structural industrial integration. Japan is moving decisively. Australia must match that momentum or risk allowing political caution and bureaucratic inertia to undermine one of its most important strategic partnerships at a critical moment for the region.

Guy Boekenstein is a senior associate at the Cognoscenti Group and has more than two decades experience working closely with Japan in defence and dual-use technology.