Can Japan regain shipbuilding might with US$6.3 billion funding plan?

Japan is forging ahead with an investment plan that could see as much as 1 trillion yen (US$6.3 billion) pumped into its shipbuilding sector as it tries to wrest back greater control of a key strategic industry.However, analysts said money alone would not be enough to restore Japan’s former standing in a sector now dominated by China, with higher costs, labour shortages and years of lost capacity all standing in the way.The effort has taken on greater urgency as turmoil in the Middle East has exposed the vulnerabilities of global shipping routes, with Tokyo increasingly viewing shipbuilding as both an economic and security priority.Concern over Japan’s declining role in the global shipbuilding sector has persisted for more than a decade, but attitudes shifted more sharply after Donald Trump returned to the White House in January last year and shipbuilding emerged as an area for possible cooperation between Japan and the US.For Tokyo, repairing and building US warships in the eastern Pacific was seen as a way to offset the tariffs Trump imposed early in his second administration.In June, the ruling Liberal Democratic Party’s special committee on marine transport set up a new forum to examine shipbuilding’s links to economic security. Before the end of the month, a proposal for large-scale investment totalling 1 trillion yen had been put forward.Japan’s private sector has offered to contribute 350 billion yen of that total, while the government is proposing to match that figure over the first 10 years and meet its full commitment in the years that follow. The initial target is to double domestic shipbuilding production by 2035.“Japan is still the third-largest shipbuilding country in the world by tonnage output, so not insignificant, but it is clearly far behind China and South Korea,” said Darron Wadey, an industry analyst with shipping consultancy Dynamar BV of the Netherlands.A shipbuilding yard in Chongqing, China. Photo: AFPJapan accounts for about 13 per cent of annual global output, according to the UN Conference on Trade and Development, around half its share at the turn of the decade. The number of shipbuilding facilities across the country fell from 194 in 2018 to 178 in 2024.South Korea’s share has been “pressurised” but is still around 28 per cent, according to Wadey, while China has dramatically expanded its shipbuilding sector and now controls about 55 per cent of global output.Wadey told This Week in Asia that rebuilding the sector and making Japan competitive again would not be as simple as injecting funds, regardless of the amount.“Much like ships take years to build, it will similarly take years to rebuild any manufacturing capacity. And to make these investments work will require backing from both the state and commercial sectors in the form of vessel orders,” he said.Further Reading“It is not a case of ‘build the yards and the orders will come’. Owners need sound reasons to order in Japan.”Japan’s shipbuilding sector is looking to pivot towards “more complex, higher-end vessels than standardised, easy-to-produce types”, according to Wadey – a tactic already adopted by both Europe and South Korea, though one that “would suggest the days of Japan’s tonnage-based production dominance will never be regained”.Details of how the funds will be allocated have yet to be released, though outline plans exist for a “national dockyard” scheme under which the central government would finance the construction of new yards, refurbish unused facilities and equip them before handing site operations to the private sector.Investment will also be needed in training skilled engineers, as the industry shed around 10,000 skilled jobs in the six years to 2024.A shipbuilding yard of Hanhwa Ocean in Geoje, South Korea. Photo: NurPhoto via Getty ImagesTimothy Renshaw, an industry analyst and editor of Vancouver-based Substack Shipping News, cautions that Japan cannot afford to repeat the mistakes successive US administrations have made.“Aside from Korea and Europe, the rest of the world – including Canada and the US – has been relegated to a paltry 5 per cent,” he said, noting that shipyards were unable to compete with China’s “market-distortion tactics” in steel, labour and other areas.“For North America, that abdication of shipbuilding power is proving to be a calamitous mistake that will take many years and many multibillions of investment dollars to reverse.”Wadey believes Japan needs to harness its skills across industries to regenerate the shipbuilding sector.“Quite clearly, Japan is a highly developed and technologically advanced country that across its industries consistently looks for innovation. I cannot see why the country’s shipbuilding sector would not show the same spirit and application,” he said.“Furthermore, Japan has a loyal shipping sector who would prefer to order locally if at all possible. This is not unique to Japan, but the raw potential is there with shipping concerns as “K” Line, MOL and NYK, plus others whose fleets number the many hundreds of vessels and criss-cross the globe.”Hurdles beyond funding remain, however. “Japan has similar challenges being faced by other industrialised nations, namely a higher cost base, principally labour, and an ageing workforce as labour-based work becomes less attractive to the newer generations entering the workforce,” Wadey said.00:57World’s largest container ship leaves dry dock in ShanghaiWorld’s largest container ship leaves dry dock in ShanghaiThat cost premium explains why shipbuilding initially migrated from Europe and the US to Japan, then to South Korea and ultimately China.In 2025, Taiwan’s Yang Ming ordered three 8,000-container vessels from Japan’s Nihon Shipbuilding at around US$120 million apiece. By contrast, Doun Kisen of Japan ordered a pair of 8,800-container ships from a South Korean yard for US$105 million each.“Geopolitical events have highlighted the vulnerabilities of dependence, think here of maritime routes through Hormuz or the Red Sea,” Wadey said.“Shipbuilding is increasingly being seen as a national strategic issue, with moves to improve the state of the sector in the US, for example, even predating the current administration.”Europe, Japan and South Korea may still have narrow qualitative and technological advantages, according to Wadey, but they no longer enjoy standardised – and therefore cheaper – production capacity.That means balancing cost, quality and capacity would be the challenge for Japan to overcome if it wanted to effectively regain control of its own shipping capacity, he added.