A major deal by Australia to buy warships from Japan has lifted shares of ship builders Mitsubishi Heavy Industries and Austal.
The A$10 billion ($6.5 billion) deal announced on Tuesday is Tokyo’s most significant defence sale since the country ended a military export ban in 2014, when it ditched its postwar pacifism to counter China.
Under the agreement, Mitsubishi Heavy Industries will supply the Royal Australian Navy with three upgraded Mogami-class multi-role frigates built in Japan from 2029. Eight more frigates will be built in Western Australia.
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The highly automated vessels, which are designed to hunt submarines, strike surface ships and provide air defence, can be operated by just 90 sailors, half the crew of Australia’s ageing Anzac-class frigates.
Mitsubishi Heavy Industries won a “fierce contest” that beat a bid from Germany’s ThyssenKrupp Marine Systems, according to ABC News in Australia, which said the upgraded Mogami frigates were preferred to the German MEKO A-200.
The initial contract for the first three vessels includes money that will also help provide the workforce, shipbuilding facilities and missiles the whole fleet will need, it said, but “it is not yet clear how much it will cost taxpayers to build the rest of the warships in Australia.”
Shares of Mitsubishi Heavy Industries rose by more than 4%, while shares of Australia’s Austal climbed nearly 8% to a record high of A$6.93. Austal will build the remaining nine vessels
Ships to defend maritime trade routes
Australia plans to deploy the ships to defend critical maritime trade routes and its northern approaches in the Indian and Pacific Oceans, where China’s military footprint is expanding.
“It’s going to be really important in terms of giving our navy the capability to project, and impactful projection is at the heart of the strategic challenge,” Australian Deputy Prime Minister Richard Marles said at a briefing.
The Mogami, emblematic of a global shift toward versatile modular warships, offers more firepower and a 4,000 nautical miles additional range over Australia’s current fleet.
“It takes our general purpose frigates from being able to fire 32 air defence missiles to 128,” including “the most advanced”, Defence Industry Minister Pat Conroy said at the briefing with Marles.
The deal also anchors Japan’s push to forge security ties beyond its alliance with the US to counter China.
Japan’s defence chief said in January that if his country’s upgraded Mogami design was chosen, it would enhance cooperation and interoperability with Australia and the United States.
General Yoshihide Yoshida said the Japanese Maritime Self-Defence Force would give “priority” to Australia if it selected the Mogami to quickly replace its ageing ANZAC-class fleet from 2029.
The defence industry partnership “makes it harder for China to play Japan and Australia off against each other and sends a concerted signal to Beijing that both countries are willing to make their quasi-alliance a functioning reality,” Euan Graham, a senior analyst for defence strategy at the Australian Strategic Policy Institute, said.
- Reuters with additional input and editing by Jim Pollard
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