Japan as America's Arsenal: A Defense-Industrial Bet
Noah Smith, the economist and prolific Substack writer behind Noahpinion, introduces a guest post by Rie Yano of Coral Capital with a striking premise: the United States cannot reindustrialize its defense sector alone, and Japan is the partner best positioned to fill the gap. The piece, published after Smith attended the Andreessen Horowitz American Dynamism Summit in Washington, D.C., lays out a case that is part geopolitical strategy, part investment thesis, and part love letter to Japanese manufacturing.
Yano wastes no time establishing the scale of the problem.
The United States faces a defense-industrial problem that money alone can't solve. Even though reindustrialization is now supposedly an American national priority, there are hard limits to what the U.S. can actually build, repair, and replenish at scale.
The diagnosis is blunt: American shipyards are years behind schedule, munitions production is thin, and the skilled workforce needed to run advanced manufacturing lines is aging out faster than replacements arrive. Even when Congress approves funding, permitting and litigation drag production timelines into irrelevance against the pace of modern threats.
Why Japan and Not Somewhere Else
Yano methodically eliminates the alternatives. Taiwan sits under the shadow of Chinese invasion. Europe is fragmented, geographically remote from the Indo-Pacific theater, and preoccupied with Russia. Canada lacks manufacturing throughput. Mexico lacks the precision required for modern defense systems. India remains early in its technological development arc.
That leaves Japan and Korea -- of which Japan is far larger. Fortunately, over the next two years, Japan plans to increase defense and industrial capacity more than at any point since World War II.
The article frames Japan's defense buildup as a convergence of three forces: increased military spending heading toward 2% of Gross Domestic Product by 2027, explicit industrial policy with government subsidies, and a new willingness to use Foreign Direct Investment (FDI) as an accelerator rather than a threat. This is a meaningful shift for a country that has historically been cautious about foreign ownership of domestic industry.
The Poland Analogy
Yano draws a parallel to Poland's rapid defense expansion after Russia's full-scale invasion of Ukraine in 2022. Poland surged from roughly 2.4% of GDP on defense toward 4%, compressed procurement timelines from years to months, and paired military buildup with decades of accumulated FDI that had already modernized its industrial base.
Japan is now signaling that it wants to do something similar. As of 2023, Japan's inward FDI stock stood at about $350 billion, which is low for an economy of its size. The government has now set an explicit target to double that figure to $650-700 billion by 2030.
The comparison is instructive but imperfect. Critics might note that Poland's urgency was driven by a shooting war on its border, with Russian forces operating in neighboring Ukraine. Japan faces no equivalent immediate catalyst. The threat environment in the Indo-Pacific is serious but remains, for now, below the threshold that produces the kind of political consensus Poland achieved almost overnight.
Already in the Supply Chain
The strongest section of Yano's argument details just how deeply Japanese firms are already embedded in American defense manufacturing. This is not a speculative partnership -- it is an existing one that most people simply do not see.
Right now, if you're building hardware, deep tech, or anything that goes into defense or critical infrastructure at a significant scale, Japan is probably already in your supply chain -- you just don't always see it.
The examples are concrete and compelling. Japanese firms supply roughly half the world's silicon wafers and photoresists for advanced chipmaking. Toray's T1100 carbon fiber is embedded in the Pentagon's Future Long-Range Assault Aircraft program. Japan produces nearly half the world's industrial robots through companies like FANUC and Yaskawa. And while the U.S. Navy struggles with maintenance backlogs, Japanese shipyards already handle overhaul work for American vessels in the Indo-Pacific.
This supply chain depth is the article's most persuasive evidence. It transforms the argument from aspirational to descriptive.
Regulatory Speed and Labor Advantages
Yano contrasts the American and Japanese regulatory environments in terms that will resonate with anyone who has watched a factory project get strangled by permitting delays.
In the U.S., permits are often challenged in court, tied up for years in legal proceedings, and sometimes revoked. In Japan this almost never happens -- once you get approved to build something, you can go ahead and build it.
She also highlights labor advantages that go beyond cost. Japanese engineers are cheaper than their American counterparts, but the real value lies in lower attrition, tighter process control, and deep experience in precision manufacturing. The cultural emphasis on continuous improvement -- the Kaizen philosophy that Japanese automakers famously brought to American factories -- translates into higher reliability at production scale.
Japan also offers the opportunity for industrial scale without the strategic IP risk that hurt many multinational companies in China. After years of technology leakage and forced transfer in jurisdictions with weak IP protections, global players are understandably wary.
A counterargument is that Japan's regulatory speed comes packaged with its own bureaucratic opacity. Foreign companies entering Japan have historically found the approval process relationship-driven and opaque in ways that formal descriptions understate. The article does not address whether American defense startups, many of which lack established Japanese networks, can actually navigate this system at the speed Yano describes.
The Industrial Alliance Already Exists
Perhaps the most compelling framing in the piece is that this partnership is not new -- it is simply being redirected toward defense.
Today, Japan is the largest source of foreign direct investment in the U.S., with roughly $800+ billion in cumulative investment and more than 1,600 Japanese-affiliated firms operating across the country. In roughly 40 states, Japan ranks as the #1 foreign investor.
Japanese companies built factories across America, trained American workers, and exported production systems that transformed U.S. manufacturing. Yano argues that the same model is now being applied in reverse: American defense companies building in Japan, with Japanese industrial culture and infrastructure providing the foundation.
She points to early movers as evidence. Palantir has built one of its strongest international businesses in Japan. Anduril entered the Japanese market in 2025 and announced a manufacturing partnership with the Japanese motor company Aster. These are positioned not as outliers but as the leading edge of a broader trend.
The companies that understand how to build with Japan won't just participate in the next phase of reindustrialization. They'll define it.
Bottom Line
Yano and Smith make a structurally sound case. Japan's manufacturing depth, IP protections, regulatory environment, and geographic position in the Indo-Pacific create genuine advantages for defense co-production. The existing supply chain relationships give the argument an empirical foundation that most "ally-shoring" proposals lack.
The argument is weakest on timing and political durability. Japan's defense consensus is real but historically fragile -- public opinion on military expansion can shift, and the pacifist strain in Japanese politics has not disappeared so much as been temporarily overridden by threat perception. The article also glosses over the challenge of International Traffic in Arms Regulations (ITAR) compliance and the layers of export control bureaucracy that make cross-border defense manufacturing genuinely difficult even between close allies. Finally, the piece reads partly as a venture capital pitch -- Yano is a partner at a VC firm that would benefit directly from increased American investment in Japan, a fact that does not invalidate the analysis but should inform how readers weigh it.
Still, the core insight stands: the United States has a defense production bottleneck, Japan has underutilized industrial capacity and a new political mandate to use it, and the two countries already share the deepest bilateral industrial relationship in the world. Whether that translates into the kind of rapid co-manufacturing the article envisions depends on execution, not strategy.