Special Report: Japan's Kawasaki targets defence growth through AI, autonomy, and missiles

KHI transferred its XEC-2 stand-off EW aircraft to JASDF's Air Development and Test Wing at Gifu Air Base in June. (JASDF)

Kawasaki Heavy Industries (KHI) has increased its fiscal year (FY) 2030 defence revenue forecast to JPY700–800 billion (USD4.4–5 billion), up from a previous estimate of JPY500–700 billion.

According to a 6 October investor briefing document, KHI intends to expand its defence business in response to Japan's rising defence budget and evolving security requirements, including the ‘new ways of warfare' outlined in the country's FY 2027 defence budget request.

Japan's Ministry of Defense (MoD) submitted a budget request of about JPY9 trillion in late August to strengthen Japan's long-range strike, unmanned, air-defence, and space capabilities.

KHI is also targeting defence revenue of more than JPY1 trillion in the mid-2030s and forecasts defence business profit margins to exceed 10% from FY 2027.

The company announced in May that its overall revenue in FY 2025 jumped around 8% to JPY2.3 trillion and profit increased around 1% to JPY145.1 billion.

Capability milestones

The document highlighted KHI's progress on several defence programmes including the delivery of the first XEC-2 stand-off electronic warfare (EW) aircraft in June.

KHI has produced one XEC-2 aircraft, which completed its maiden flight in March. The aircraft was transferred to the Japan Air Self-Defence Force (JASDF) in June, and testing and evaluation began in July.

The aircraft is expected to undergo flight testing throughout 2026 before entering service in 2027, a Japan MoD spokesperson told Janes in August.

KHI also cited as achievements Japan's 2025 anti-ship missile launch test for island defence and research prototype contracts intended to generate technical data for future stand-off defence programmes.