Japan considers cheap-loans plan to support military aircraft exports

Japan is considering providing low-interest loans from a state-run bank to support exports of aircraft designed for military use.

It is the first time such sales are being considered since the end of the second world war, according to officials with knowledge of the proposed policy.

The step would mark an extension of Prime Minister Shinzo Abe's efforts to bolster the self-reliance of Japan's military and could open an overseas market worth tens of billions of dollars in coming years for the country's defence contractors.

It would also mark a sharp reversal of the near-total ban on exports of military equipment, a development that could strain ties with China as a more assertive Japan seeks a market for military technology in Asia and beyond.

Two of the initial test cases for Japan's policy shift are likely to be the C-2 military transporter, built by Kawasaki Heavy Industries, and ShinMaywa Industries' US-2 amphibious plane, according to three officials involved.

Both companies are looking to export civilian versions of the aircraft, which would allow them to avoid the ban. Both have also enquired about the Abe government's willingness to provide finance to help close sales against established aircraft makers.

In one partial precedent, Japan has extended overseas development assistance to the Philippines and Indonesia to help them buy Japanese-built ships for coastal patrols.