Mitsubishi Heavy expects record defence orders as Japan pours money into military

TOKYO (Reuters) -Mitsubishi Heavy Industries on Wednesday said it expects to book record defence equipment orders this business year as Japan embarks on its biggest military expansion since World War Two.

The government plan to double defence spending to around 2% of gross domestic product within five years includes subsidies to support Japan’s fractured defense industry, and a pledge to make military contracts more profitable.

“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 press conference after the company released its results for the year that ended March 31.

His company said it expects defence orders to jump by around a half to as much as 850 billion yen ($6.29 billion) in the first year of Japan’s five-year $318 billion military build up which began in April.

The maker of missiles, tanks, submarines and other defence equipment is Japan’s biggest defence contractor, with military work accounting for around a tenth of overall revenue. Many other military contractors in Japan, however, have been hesitant to invest in defence businesses as they often represent a much smaller share of sales.

In April Japan’s Ministry of Defence awarded Mitsubishi Heavy contracts worth 378 billion yen to build new longer-range missiles to deter neighbouring China from using military force in East Asia as tensions around Taiwan grow.

The maker of the World War Two-era Zero fighter plane has also been picked by Japan to partner with Britain’s BAE Systems PLC and Italy’s Leonardo to develop a new joint advanced fighter that the three countries plan to deploy by the middle of the next decade.

Mitsubishi Heavy, which makes products ranging from air conditioners to nuclear reactors expects overall operating profit for the business year to increase by a half to 300 billion yen.

($1 = 135.0500 yen)

(Reporting by Tim Kelly and Nobuhiro Kubo; Editing by Stephen Coates & Simon Cameron-Moore)