Japan's government said Tuesday it has selected Lockheed Martin Corp. (LMT)'s F-35 Lightning II Joint Strike Fighter as its next generation jet, capping a multi year vetting process to upgrade its aging fleet.

The contract for the new fighter, dubbed the FX, totals 42 planes, Japanese officials said. They did not disclose the value of the deal, but the order is expected to be worth more than $4 billion, making it Japan's most expensive fighter procurement ever and one of the world's largest military contracts this year.

"The F-35 is the best fit for our defense needs," Shigeru Iwasaki, chief of staff of Japan's Air Self Defense Forces, told reporters after the announcement of the decision.

The Lockheed Martin jet won the contract over two lower-cost, combat-tested aircraft--Boeing Co.'s F-18 Super Hornet and the European consortium Eurofighter GmbH's Typhoon fighter. But those planes were seen to lack the stealth capabilities of the more advanced F-35.

"Many countries will look at Japan's decision as a sign of the maturity of the F-35 program," said Dave Scott, director of F-35 international business development at Lockheed Martin.

Washington, Japan's chief security ally, had quietly pushed the case for a U.S. jet by highlighting the importance of interoperability and the ability to share critical parts and conduct joint maintenance.

In their decision, Japanese officials cited the F-35's cutting edge technology, such as its so-called fifth-generation stealth design that provides radar-evading capability both in front of and behind the aircraft.

Japan sees the jet's advanced technology as a way of both deterring potential aggressors such as China and Russia, and also to help foster the development of Japan's own aviation industry. A key concession came in the form of partial licensed F-35 production, which is expected to be handled by a consortium of Japanese companies.

The Defense Ministry said that Mitsubishi Heavy Industries Ltd. (7011.TO), IHI Corp. (7013.TO) and Mitsubishi Electric Corp. (6503.TO) will participate in production of the plane.

One potential source of controversy is the F-35's checkered development history, as the yet-to-be-deployed fighter has been dogged by repeated delays and cost overruns. Lockheed Martin has assured Japan that it can meet the country's procurement schedule, which calls for the first new fighters to be deployed by 2016.

The F-35 will replace the Japanese Air Self Defense Force's 70 aging F-4 fighters made by McDonnell Douglas, which is now part of Boeing.

The long-awaited upgrade comes as China has ratcheted up its military spending, which is expected to rise 12.7% this year to 601.1 billion yuan ($94.3 billion). Meanwhile, Japan's defense budget--at Y4.6 trillion ($59 billion) this year--has declined for nearly a decade amid a debt-to-gross domestic product ratio that has soared to 200%.

While the F-35 was the most expensive option by far, Japanese defense officials say the country's strategic needs outweighed the extra cost burden, noting the debut of two rival stealth prototype fighters--China's J-20 and Russia's Sukhoi T-50.

"We've seen a lot of changes in the regional security situation, so we placed a high premium on the performance attributes" of the F-35 in its selection, Defense Minister Yasuo Ichikawa told reporters.

The decision on the new fighters has been delayed for years as successive administrations in Tokyo sought more time to reconcile declining defense budgets with an appetite for the latest technology.

-By Chester Dawson, The Wall Street Journal; +81-3-6269-2837; chester.dawson@wsj.com

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