Aug 4, 2025 (Bloomberg) –Japan’s Mitsubishi Heavy Industries won a multi-billion dollar deal to build a fleet of advanced naval frigates for Australia, boosting Tokyo’s ambitions to become a major exporter of military equipment and develop its defense sector.
MHI was chosen over Germany’s Thyssenkrupp Marine Systems to build eleven frigates optimized for undersea warfare and air defense that will replace Australia’s Anzac-class warships. The replacement program has a budget of between 7 billion and 11 billion Australian dollars ($4.3 billion to $6.8 billion).
The decision is a landmark for Japan’s attempts to become a player in the global defense export market. Tokyo’s only other major export deal was an agreement in 2020 to provide the Philippines with radar systems.
In recent years, Japan has sought to accelerate industry growth by gradually loosening restrictions on defense exports imposed amid anti-militarist feeling in the wake of World War II.
Both Australia and Japan are seeking to build up regional security partnerships amid growing concerns about China’s military prowess and anundercurrent of doubtover ties with their mutual ally, the US, as wrangling continues over tariffs.
“This is a huge proof of concept for Japan’s defense export potential,” saidJames Angelus, president of the International Security Industry Council of Japan, an organization that promotes defense industry collaboration.
MHI shares gained as much as 4.5% in Tokyo on Tuesday after the news of the deal.
Japan is targeting exports as a way to help shore up the country’s relatively small and fragmented defense industrial base. MHI is the largest company in the sector, but like rivals, most of its defense business is supplying the Japanese military, known as the Self-Defense Forces.
In announcing the decision Tuesday, Australian Defence Minister Richard Marles noted that the Japanese frigate is a much larger ship than theAnzac-class frigateit would replace, but can operate with a smaller crew.
While more expensive than the alternative German Meko A-200 frigate offering, MHI’s Mogami-class frigate offers “stealthy” protection from radar detection and 32 vertical launch cells capable of delivering long-range missiles, more than those of its rival in the bid.
Australia will now proceed with the next stage of the procurement process to enter into binding, commercial contracts with MHI and the Japanese government in 2026, Marles said in a statement. Plans call for the first three of the frigates to be built in Japan and the remainder in Western Australia, with the first vessel to be delivered in 2029 and come into service in 2030.
“The upgraded Mogami-class frigate will help secure our maritime trade routes and our northern approaches as part of a larger and more lethal naval surface combatant fleet,” Marles said.
MHIsaid in a statementit believed the choice had been made on the basis of its frigate’s proven performance and reliability, as well as factors such as reduced manpower requirements compared with conventional frigates.
Japan has bitter experience of losing a major defense export bid in Australia. In 2016, Japan was widely considered to be the frontrunner in a project to supply Australia with submarines, but it lost out to a French bid.
Tokyo sought to make its frigate proposal more attractive with plans for local production in Australia after the initial delivery. Japan’s top uniformed military officer has also suggested that Australia may get priority for the first ship ahead of Japan’s navy.
The deal is also the latest sign of deepening defense relations between Tokyo and Canberra. The two countries’ militaries have stepped up joint military drills in recent years.
“This will be a great step toward raising our defense cooperation to even greater heights,” Japan’s Chief Cabinet Secretary Yoshimasa Hayashi told reporters. He added that he expected the final contract to be signed early next year.
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Australia, an open, trading island nation flanked by the Pacific and Indian Oceans, relies on secure sea lanes to move goods in and out of the country. The overhaul of its fleet reflects an increasingly contested region as China’s military expands alongside its economic heft.
Canberra decided to buy the new frigates in early 2024 after finding the defense forces were “not fit for purpose,” with delays in the delivery of a different ship meaning the surface fleet was shrinking in numbers.
The government decided to buy an “off-the shelf” vessel and has agreed for at least some of the vessels to be fully built overseas so that delivery is quicker than previous attempts to build at home.
Under that plan, the Navy will have 26 warships by the mid-to-late 2040s from 11 in 2024, making it the country’s “largest fleet since the end of the Second World War,” Marles said when he announced that plan.
