Not only is the Japanese Defense Agency totally funding the development and production of the F-2 fighter plane, the Japanese government also provides significant support for commercial aerospace projects. In 1996, the government provided ¥2.9 billion ($24 million) for the Boeing 777 project and ¥1.6 billion ($13 million) for the V2500 engine project (Nihon Kôkû Uchû Kôgyôkai 1996, 400). In addition, the government provides financial support for advanced research projects in aerospace. For example, the government provided ¥3.8 billion ($32 million) in 1996 for Japanese participation in the eight-company international collaboration doing research into the materials and systems for a supersonic transport (SST) aircraft of the future and the five-company international collaboration researching the SST engines (Nihon Kôkû Uchû Kôgyôkai 1996, 400).

Boeing 767 and 777

The Japanese, through JADC, have a 21% share in the much larger twin-engine Boeing 777 aircraft, which had its first commercial flight in 1995. This collaboration program has brought significant benefits and experiences to the Japanese aerospace industry. The Japanese companies have worked very closely with Boeing in the design of the plane, including access to Boeing's design/build concurrent engineering software and to Boeing's system of process and material control (Samuels 1994, 255). FHI produces a very critical section, the wing center portion of the fuselage that must endure heavy stress. KHI and FHI have built new factories in Nagoya to support the 777 program, and MHI completely renovated an existing factory in Hiroshima (Garvin, Samuels, and Masterson 1994). The Japanese are also involved in marketing and product support for the Boeing 777 plane. Besides the 767 and 777 program workshares for JADC, many other Japanese companies besides MHI, KHI, and FHI are involved with both of the programs through direct contracts with Boeing. These contracts cover systems such as hydraulics, actuators, and gears (Samuels 1994, 248).

Boeing still protects its advanced technologies. Masterson, a Boeing Director, says that the body sections produced by the Japanese are 'fairly simple structural components', and Boeing still retains full responsibility for high technology areas such as the wings, tail fins made from composites, and cab systems (Garvin, Samuels, and Masterson 1994).

F-2 Fighter Plane

Japan had many discussions in the 1980s about the development of an indigenous fighter aircraft, but Japan felt forced to develop and produce it jointly with the U.S. for three reasons: need for U.S.-produced fighter engine; lack of system integration skills and experience; and political pressure to support U.S. in this joint program (Green 1994). Japan receives about 60% of the F-2 development and production work, with MHI serving as the prime contractor. Other Japanese subcontractors include FHI, KHI, and IHI, and the principal U.S. subcontractors are Lockheed Martin, a large defense firm that produces the F-15, and General Electric.

The U.S. General Accounting Office concludes the F-2 program has strengthened Japan's aerospace industry by providing Japanese engineers with valuable design and system integration experiences that are applicable to other military and commercial aircraft projects. The F-2 program prompted Japanese firms to purchase new equipment and construct new facilities, partly with Japanese government subsidies, that can be used for future projects. By making extensive changes to the original F-16 design, Japan has maximized its use of indigenous design concepts and technologies, and it has ensured a key role for several Japanese aerospace companies. The U.S. General Accounting Office believes Japan's participation in the F-2 program increases the likelihood of future autonomous Japanese aircraft development projects. (U.S. General Accounting Office, 1995, 1, 4, 7, 42)

General Electric and IHI entered into a licensed production arrangement that will allow IHI to produce about 60% of the engine for the F-2 fighter. However, IHI will not gain any significant new capabilities since critical engine technologies are not being licensed by General Electric in accordance with U.S. restrictions on transfers of leading-edge technologies (U.S. General Accounting Office 1997, 10, 16).

V2500 Engine

The Japanese companies involved in IAE have benefited greatly from their significant work share to design and produce the fan, low-pressure compressor, and other parts in the engine. Japanese personnel have been involved in V2500 sales, marketing, and after-sales support, areas in which Japanese engine manufacturers have had very little experience until this project. The Japanese aerospace supplier infrastructure, including many material fabrication, bearings, and electronic controls manufacturers, also benefited widely from the V2500 project (Samuels 1994, 252). But there have been some limitations for IHI, KHI, and MHI. The Japanese have found out first hand how long it takes to recover the significant investments required to develop and produce a new engine. It took nearly 15 years before the V2500 project started to generate positive annual cash flow (Nihon Keizai Shimbun 1996), and it will take many more years before cumulative cash flow turns positive. Two factors have somewhat limited Japanese learning on this project. First, the Japanese companies in IAE have responsibility for the sections of the engine that run at lower temperatures and lower pressures, which are relatively not as technologically difficult to develop and manufacture as those sections assigned to the other companies that make up IAE. Second, the assembly and testing of the engines are performed at Pratt & Whitney and Rolls-Royce facilities with their own personnel.