Photo/IllutrationThe Air Self-Defense Force’s F-35A fighter jet at its Misawa Air Base (Asahi Shimbun file photo)

The Defense Ministry paid 4 billion yen ($37 million) more than Washington does for a U.S.-made F-35A stealth fighter jet, due in part to the Japanese government's insistence that domestic manufactures are involved in production, a study by the Board of Audit showed.

The board studied Japan’s procurement of defense equipment under the U.S. government’s Foreign Military Sales (FMS) program, which allows the Defense Ministry to buy military ordnance directly from the United States.

The cost of purchasing defense equipment, including the F-35A, Osprey transport aircraft, Aegis missile defense system and E-2D early warning aircraft, through the FMS amounted to 388.2 billion yen in fiscal 2017, according to the study.

The figure compared with 111.7 billion yen in fiscal 2013.

The board’s findings were reported to the Diet on Oct. 18. The board conducted the survey at the request of the Diet.

For the study, the Board of Audit compared the prices of an F-35A purchased in Japan and in the United States.

The price of a single aircraft was calculated on the basis of a contract concluded between Japan and the United States.

When Japan procured the finished F-35A in fiscal 2012, the price tag came to about 9.77 billion yen, or 1.03 billion yen more than one purchased by Washington, based on the prevailing exchange rate.

In fiscal 2013, when Japanese manufacturers Mitsubishi Heavy Industries Ltd., IHI Corp. and Mitsubishi Electric Corp. participated in production, the gap in prices between the two countries surged to about 4.6 billion yen.

The gap was 3.88 billion yen in fiscal 2014 and 4.76 billion yen in fiscal 2015.

The Board of Audit said the U.S. side attributed the gap to differences in the aircraft’s specifications, share of development costs and Japanese companies’ participation, including the assembly of the aircraft and inspection.

The U.S. side explained that Japanese companies’ participation into the production raised the price tag as those companies had limited experience with building fighter jets, compared with their U.S. counterparts, which resulted in a steep and costly learning curve.

The Defense Ministry said the joint production of the F-35A was intended to help Japanese makers develop technology needed to build and operate fighter jets.

The Cabinet approved the joint production program in 2012, alongside the procurement of 42 F-35As.

The ministry said that an increased outlay covering the rise in the purchase price was justified under the goal of developing fighter-jet technology.

The government spent 146.5 billion yen to help the manufacturers construct facilities they will need to build the F-35A.

But in the current fiscal year, the government ended the joint production project and switched to purchasing finished F-35As.

In August 2018, the Defense Ministry was set to continue with the joint project with a budget plan to procure six F-35As for a total of 91.6 billion yen, or 15.2 billion yen per aircraft.

The switch meant that the purchase of the six aircraft came to 68.1 billion yen, or 11.3 billion yen per aircraft. That represented an overall saving of 23.5 billion yen.

As for the change in the F-35A procurement policy, the ministry cited the need to buy the aircraft more cheaply as the government decided last year to purchase an additional 105 F-35As.

But it also underlined the benefit of the joint production program for Japanese companies.

“They became more experienced after helping to manufacture about 30 aircraft,” a ministry official said. “They will still be involved in the maintenance of the aircraft.”

The Board of Audit called on the ministry to consider opening negotiations with the United States to win an exemption of a contract management fee, which charges 1.2 percent of the total procurement cost under the FMS transactions.

South Korea and other U.S. allies are exempt from such payment after holding negotiations with Washington.