A PEER REVIEW ON THE

GROWTH OF JAPANESE
SHIPBUILDING

JUNE 14, 2021

BUSINESS DEVELOPMENT, KARACHI SHIPYARD AND ENGINEERING

WORKS

WEST WHARF-2, Karachi, Pakistan

Page of 14
Introduction:
The report aims to give an insight overview to the Japanese shipbuilding and its rise
globally. Being the third highest country of shipbuilding, Japan has come across a long
way to achieve its target.

The report emphasizes on the major policies made by the Japanese government and
its history from just being the producer of small shipyard to the largest shipyards; from
the trade, transfer of materials and orders, fishery to the need of market worldwide.
The high capital generated by the shipbuilding industry made it more dominating from
the other local means of transport.

However, the extensive rise of shipbuilding can have a major effect on the
environment; therefore, the report also formulates the steps taken by various
corporations and the efforts made by the Japanese government in order to overcome
this situation.

This report is prepared by Engr. Ammara Shaikh, Intern of Business Development to

identify the factors behind the growth of Japanese shipbuilding and to adopt such
steps for the betterment of Karachi Shipyard and Engineering Works.

i
List of abbreviations:
MLIT: Ministry of Land, Infrastructure, Transport and Tourism

OECD: The Organization for Economic Co-operation and Development

LNG: Liquified Natural Gas

IMO: International Maritime Organization

R&D: Research and Development

GHG: Greenhouse gases

JSIF: Japan Ship Investment Facilitation

JBIC: Japan Bank for International Co-operation

DPJ: Development bank of Japan

MHI: Mitsubishi Heavy Industries

MES: Mitsui Engineering and Shipbuilding

KHI: Kawasaki Heavy Industries

MALS: Mitsubishi Air Lubrication System

USC: Universal Shipbuilding Corporation

NMRI: The National Maritime Research Institute

JSTRA: The Japan Ship Technology Research Association

OPRF: The Ocean Policy Research Foundation

CAJS: The Cooperative Association of Japan Shipbuilders

ii
Executive Summary:
Undoubtedly, the shipbuilding industry is considered as one of the largest ventures
nationwide. Its relevance in production, design and manufacture of ships has enlarged
its growth in the economy sector. From small infrastructures to large modern complex
infrastructures; from small ship carriers to large modern ship carriers; from fuel
oil/diesel oil to Air lubrication system and LNG, the Japanese shipbuilding industry
marked its presence worldwide.

The study focuses on the ships recycling industry, core maritime industry, the loan,
the subsidies, the relations with international countries and the policies of government
to maintain long-term viability.

Initially, the Japanese shipbuilding was in a decline phase but soon after the end of
Tokugawa leadership, the industry started to grow and expand. This research also
pays attention to the history of Japanese shipbuilding and briefly discusses every Era.
The research also points out the technological development of shipbuilding and the
research strategy to experiment new ideas for its future.

The report acknowledges the authors of the research papers whose works are cited
in the reference column and have proved to be very helpful in this report. The study
also suggests that if such design is introduced in Karachi shipyard, further
advancement in the shipbuilding can be observed.

iii
Table of Contents
Introduction: ......................................................................................................................................... i
List of abbreviations: ........................................................................................................................ ii
Executive Summary: ........................................................................................................................ iii
1. History of Japanese Shipbuilding: ........................................................................................ 2
1.1. The Sino-Japanese War (1894 - 1895): ......................................................................... 2
1.2. Tokugawa Era (1600-1867): ............................................................................................. 2
1.3. The Meiji Restoration (1868-1912): ................................................................................ 3
1.4. Taisho Era (1912-1926): .................................................................................................... 3
1.5. Showa Era (1925-1989): .................................................................................................... 3
1.6. The 1990’s and towards the twenty-first century: ..................................................... 4
2. Policies set by the Japanese Government to facilitate Shipbuilding industry: ........ 4
2.1. The Organization for Economic Co-operation and Development (OECD):......... 4
2.2. The New Comprehensive Policy on the Shipbuilding Industry [4]: ...................... 5
2.3. Environmental and Safety Policy: ................................................................................. 5
2.4. Facilities of Export credits: ............................................................................................. 6
2.5. Facilities of Home credits: ............................................................................................... 6
3. Economic Development Strategies by Japan in shipbuilding: ...................................... 6
3.1. Upstream and downstream products: .......................................................................... 7
3.2. Ownership and internationalization: ............................................................................. 7
4. Technological Developments in Japanese Shipbuilding: ............................................... 8
4.1. Mitsubishi Air Lubrication System (MHI):.................................................................... 8
4.2. Universal Shipbuilding Corporation (USC): ................................................................ 8
4.3. R&D:....................................................................................................................................... 8
5. Workforce: ................................................................................................................................... 9
6. Future Vision of Japanese Shipbuilding [10]: .................................................................... 9
7. Conclusion: ............................................................................................................................... 10
8. Recommendation: .................................................................................................................... 10
References ............................................................................................................................................ 11

Page 1 of 14
 1. History of Japanese Shipbuilding:
To understand the history of Japanese shipbuilding, it is pivotal to identify the different
Era’s for its success. Although, China and Korea are up to the list of shipbuilding
industry but Japan within its core showed a major improvement in its productivity
during these years.

The below mentioned timeline describes its struggle to enter the World of competition
becoming the third largest supplier of ships.

1.1. The Sino-Japanese War (1894 - 1895):

The first Sino-Japanese War was a dispute among China and Japan for their
leadership and control over Korea’s landform [1].

Korea was one the old client of China and China did not want to cut its ties in Korea
for the trade. At the same time Japan developed its keen interest in the strategic
location of Korea and its rich production of coal and iron which started the first Sino
Japanese War. Japan forced Korea to end its foreign relation with China.

As soon as China lost its Weihaiwei port which was the closest Chinese city to Korea,
Chinese government (Queng Dynasty) declared peace in 1895. This marked Japan
as a major world power and for the very first time the transfer of power went from
China to Japan. The attempts made by China to modernize its military suffered a major
decline.

After the Sino-Japanese war, Japan’s entry to the international shipping began to
grow. Its links to the international countries such as Europe, Australia or America
opened.

1.2. Tokugawa Era (1600-1867):

Tokugawa won its victory against Toyotomi clans during the battle of Sekighara and
was appointed as the first Shogun (title of prime minister). The government of
Tokugawa was established in Tokyo. Since Tokugawa was the most powerful among
the territorial lords and it had the ability to control the other lords; therefore, Japan was
considered as a fairly centralized state during its Era.

On the other side, Osaka is a city of Japan and is considered as a large port city for
trades, shipments or particularly rice so any shipment order was first received by
Osaka and then it was distributed all over the Japan. Therefore, the governor of
Tokugawa was placed in Osaka.

In this Era, the general ban on the wheels was implemented so the only means to
travel was horses and ships but the government of Tokugawa suddenly collapsed
because of its strict authorization and regulation. They banned the travel to foreign

2
countries and restricted the construction of large ocean vessels which became the
cause of their limited trade. Japan went into isolation cutting its connection to the rest
of the World.

Also, it gave a serious shock to Japan when British defeated China and Japan got
insecure for its islands.

1.3. The Meiji Restoration (1868-1912):

The Meiji Restoration was a turning point in the Japanese history as the young
emperor worked enthusiastically to optimize Western modernization. It opened the
roots of Japan for international trades [2]. This gave benefit to the shipbuilding
industry, military industry, fishery and agriculture industry. Its main slogan was “A rich
country, a strong military”.

Under this era or restoration, the private firms were given funds for shipbuilding or
machinery by the military of Japan. The Japanese military supported non-military firms
to produce ships upstream and downstream products such as Osaka Arsenal
produced steam engines, gears whereas the Ishikawjima shipyard was provided with
the facilities of technical assistance and the goods on borrowing rate.

Also, the ship Maru was built at the Mitsubishi company and the Japan’s first iron ship
was developed.

1.4. Taisho Era (1912-1926):

The Taisho Era was an Era of modern ship developments where Katori Maru class
ships and Hawaii Maru class vessels were formed.

During this Era, the shipbuilding industry grew rapidly as all the warships were built in
Japan and also the engine technology improved. In 1913, the first Anyo maru (first
vessel geared turbine ship was formed). Many ships were developed so the import of
ships went approximately to zero.

The domestic production of voyages/ships increased to 600 thousand GT whereas

Japan also signed petition with US as US Ship Steel Exchange Contract in 1918 in
order to build ships for them in return of steel [3].

1.5. Showa Era (1925-1989):

During the early time of World War II, many ships like Asama Maru, Hikawa Maru class
ships, Argentina Maru ships and the cargo ships were established [3]. Soon after the
World War II, everything sunk and abolished.

3
After the World War II, the government started to make policies in collaboration with
the shipbuilding industries especially with the headquarters of powerful countries and
made its programs for funding with the United States.

This was considered as a golden era of shipbuilding and maritime industry. The
demand of oil tankers for the shipbuilding also increased and its production went
above 50%.

1.6. The 1990’s and towards the twenty-first century:

The Japanese shipbuilding have been honing their skills and expertise from the very
beginning. They have built many ships including Fuji Maru, Oceanic Grace cruisers,
passenger ships such as Crystal Harmony and Asuka. Crystal Harmony was one of
the world's greatest ships for vacationing or going on a long journey.

Following this, a 50-knot speed with a 1000-ton cargo vessel was made with a project
name "Techno Super Liner (TSL)" to develop a high-speed cargo [3]. Meanwhile, a
ship (Yamato-1) with electromagnetic force was developed which took the attention of
World. There are other projects also which are on the way of their process such as
Mega Float Project. Its purpose is to construct floating airports.

2. Policies set by the Japanese Government to facilitate

Shipbuilding industry:
The policies initiated by the government in order to improve ship building, international
shipping, short-sea shipping and its machinery was laid by the Japanese Ministry of
Land, Infrastructure, Transport and Tourism (MLIT). Moreover, it handles the
responsibility of safety, precautionary, environment, maritime human resources policy
also.

Following are the policies set by the Japanese Government:

2.1. The Organization for Economic Co-operation and

Development (OECD):

In 2006, The OECD under the guidelines of MLIT developed a strategy to maintain the
capacity of domestic building of 1/3 of market demand [4].

Under this organization, steps were taken to improve economic scale both
domestically and internationally and to meet the new demand of technology with safe
environmental policy.

4
The organization focused on ship recycling considering some international
developments i.e. (the Hong Kong International Convention for the Safe and
Environmentally Sound Recycling of Ships, adopted in 2009) and greenhouse gas
emissions. The Hong Kong convention aimed to address issues which can be harmful
to human and risk to the environment.

2.2. The New Comprehensive Policy on the Shipbuilding

Industry [4]:

In 2011, the “New Comprehensive Policy on the Shipbuilding Industry” report was
published to propose some points for the future of Japanese shipbuilding. This was
published under the supervision of MLIT who invited the members of ship building
industry, the marine equipment industry, the shipping industry, trading companies,
financial institutions and academics to start a joint venture between the government
and industry. The report consisted of several advices to strengthen their relationship
with the international parties. Some points are as follows:

• To avoid losing money or in other words (the currency risk), Japanese shipbuilders
are advised to expand their sales in overseas market in the form of trade or
manufacture.

• Tor expand the export of Japanese shipbuilding; Japanese companies should start
funding their own companies by themselves in order to make their own Maritime
equipment.

• Shipbuilders should start working on designing, manufacturing, maintenance and

repairing aspects to meet customer or company’s orders and demands.

• Collaborating with LNG suppliers and maritime cluster parties for shipping will give
a rise to international competitions.

• Maritime industries should prepare young maritime engineers to assist them in

various projects and become a project manager.

2.3. Environmental and Safety Policy:

The government in collaboration with the International Maritime Organization (IMO)

provided grants to the shipbuilders in order to design such ships which can contribute
to the environmental and safety policy. This includes designing of hulls, propellers or
hybrid propeller designs or air lubrication system.

R&D board throughout its journey focused mainly on the reduction of CO2 emission.
The question arises how CO2 is emitted while shipping? Japan uses fuel oils as its

5
source of shipping and fuel oils contain carbon which in return produces greenhouse
gases (GHG).

According to 3rd IMO GHG study, greenhouse emission can rise from 50% to 250%
by 2050 if no action is taken [5]. Policies were made in accordance to its reduction.

To reduce CO2 emission, it is necessary to reduce friction. Lesser the friction, lesser
the fuel used to continuously overcome it, so lesser emission of carbon and
greenhouse effect. To achieve this, Japan redesigned their hulls and adopted air
lubrication system method which used air bubbles to reduce the resistance between
ships hulls and water.

In addition, the discharge of industrial waste or food waste to water ways increased
the risk of environmental damage as these provide direct pathways for pollutants to
reach soil, air or water. For this, efforts were made to implement 3R’s (reduce, reuse,
or recycle) in order to establish friendly- environment system [6].

2.4. Facilities of Export credits:

To enhance the export market, the Japan Ship Investment Facilitation Co. Ltd (JSIF)
was established to increase the international competitiveness of Japan shipping
industry. It has a capital of JPY 67.5 million (around USD 850 000). It provides the
financial facility or loan facility of USD 1.3 billion to shipbuilders with the government
body Japan Bank for International Co-operation (JBIC).

JBIC reported that in fiscal year 2010, shipping received 26% of total export loans
granted by the organization (JFC 2011, p. 40) – this equated to JPY 38.6 billion (USD
440 million) [4].

2.5. Facilities of Home credits:

Home credits are given to the ship-owners who have a direct link of building modern
infrastructure for ships. The development bank of Japan (DPJ) provides financial
scheme to the shipping companies for future endeavors. Its financial scheme is
developed on the purpose of credit rating of the company and the loan maturity.

3. Economic Development Strategies by Japan in

shipbuilding:
Following are the development strategies incorporated by The Japanese to increase
their economic and technological growth.

6
 3.1. Upstream and downstream products:

The foundation of the Japanese shipbuilding is based on the marine upstream and
downstream products. Upstream products refer to the early process or raw materials
which are needed for the ships whereas the end result is a downstream product.

As an upstream product, the equipment of marine sector or steel is an important part.

In 2011, Japan was listed as a World’s second largest producer of steel producing
107.6 million tons of steel and giving an employment to almost 100 000 people. SAJ
members took advantage of it and used almost 4.5 million tons of steel for making
different shapes and bars for ships.

As a downstream activity, where ships are manufactured or produced; it is important

to hire such expert technical staff that provides high standard of service and quality.
ClassNK had this responsibility. ClassNK is a non- profitable organization which
accounted to 13% of Japanese vessels. Under this organization, around 967 technical
staff were employed and were given training and certifications.

3.2. Ownership and internationalization:

A total of 1000 shipyards are formed in Japan from which some are privately owned
and some are publicly owned.

The two private companies Oshima Shipbuilding Company and Imbari Shipbuilding
not only just specializes in building ships but they possess a diverse ownership in other
businesses as well. For instance, Oshima has its expertise in constructing bridges,
steel structures, agricultural business and Imbari has its expertise in golf courses and
a hotel.

Some of the publicly listed shipyards Mitsubishi Heavy Industries (MHI), Mitsui
Engineering and Shipbuilding (MES), Kawasaki Heavy Industries (KHI), Sasebo
Heavy Industries are heavy industries and keep interests beyond shipbuilding as well.
It is known that Sumitomo Heavy Industries is a shareholder in Oshima Shipbuilding.

Several Japanese companies founded yards in other countries to increase their

economic stability. For instance: Kawasaki Heavy Industries (KHI) founded shipyards
in China, Tsuneishi Holdings founded shipyards in China and, Onomichi Dockyard
founded shipyards in Sri Lanka.

Through diverse ownership, shipbuilding enterprises started making their links to the
internationals by investing in their firms. Such connections with internationals can open
the doors for new market opportunities or technology innovation and skills which will
have a great impact on the economy of shipbuilding.

7
 4. Technological Developments in Japanese
Shipbuilding:
Japanese shipbuilding companies created its own resources and material
to increase the state of the art of shipyards. Some of its developments are
as follows:

4.1. Mitsubishi Air Lubrication System (MHI):

To reduce the CO2 emissions or frictional resistance between the hulls and water, MHI
came up with an idea of “Mitsubishi Air Lubrication System” (MALS). It was reported
in 2010 that MHI successfully reduced the CO2 emission by 13%.

On the other hand, LNG is considered as one of the efficient fuel due to its properties.
To a greater extent, LNG can eliminate all SOx emission with reduction in CO2 and
NOx emission. MHI developed LNG carriers or tanks to control the emissions for better
efficiency and fuel consumption.

For marine engines, MHI developed a system for supplying high pressure natural gas
as a fuel. Also, it developed SOx scrubbers to eliminate SOx for controlling the
pollution.

4.2. Universal Shipbuilding Corporation (USC):

USC formed a “Next-Generation Ship Development Department” to develop a ship

which is energy efficient. In 2011, it developed a large bulk carrier that reduced the
greenhouse emission by 25%. It has now set a target to reduce CO2 emission by 50%
by 2020.

4.3. R&D:

R&D is an important aspect in the development of shipbuilding. It provides guidance

to the shipbuilders to enhance their knowledge and research in design and
construction. Following are the research bodies which contributed in Japanese
shipbuilding:

• The National Maritime Research Institute (NMRI) consists of 170 research staff
members and its theme of work is to ensure safe environmental technology for
marine to reduce emission of CO2, NOx and SO2 from ships engine to provide safe
transport for marine. It also aims to produce reliable infrastructure of ships to avoid
any type of accidents [7].

• The Japan Ship Technology Research Association (JSTRA) aims to address

current issues of ship technologies and set some regulations to meet the standards

8
 with the participation of administrative bodies such as shipbuilding, ship
machinery industries and marine transport industry.

• The Ocean Policy Research Foundation (OPRF) is responsible for providing over
500 research projects which are related for the reduction of greenhouse gases and
safe maritime transport etc. It addresses the issues related to ocean.

5. Workforce:
To bring a change in the shipbuilding industry, Japan with the Cooperative Association
of Japan Shipbuilders (CAJS) established training centers in Innoshima, Imabari,
Nagasaki, Oita and Yokohama . It was identified that nearly half of the workforce of
Japan shipbuilding was over 50 years of age and they had an excellent command on
the shipbuilding procedure. Therefore, the organizations taking benefit from subsidies
decided to give these people the task of educating people with their expertise to
increase the labor market.

Many universities like Kobe university, Osaka University’s Department of Naval

Architecture and Ocean Engineering launched programs to teach maritime
technology. The courses were Maritime Technology Management, Maritime Logistics
Sciences and Marine Engineering. This initiative increased the number of
undergraduate, master and phd students and the students showed their keen interest
in ship designing or other relevant issues.

These programs were offered in Japan particularly in nine locations and expanded to
foreign countries as well. May conference and seminars were held under the
supervision of classNK focusing mainly on R&D and shipbuilding skills.

6. Future Vision of Japanese Shipbuilding [10]:

The Japanese shipbuilding companies aims to:

• Develop ammonia battery ships with zero emission by 2028.

• Develop an autonomous vessels over navigable water with little or no human

interaction by 2040 .

• Develop stainless steel cargo ships to avoid corrosion. This project is launched
by Usuki shipyard.

• Develop heavy lift cranes with a capacity of 500 tons. This project is launched
by Manabi Zoki in Imbari.

9
 7. Conclusion:
The success of the Japanese shipbuilding is based on the effective communication
between the shipbuilders and the suppliers. For instance, the steel maker industries
provide steel to the shipbuilding companies according to their requirements. This co-
operation especially in the supply chain management Is hard to find in other nations.
Furthermore, the participation of government in providing low interest loans and funds
to the shipbuilding industry also plays a significant role to take new orders of ships
from overseas.

8. Recommendation:
As we can observe a big gap in success between the Japanese shipyard and Pakistan
shipyard, one of the reasons is that Pakistan has only one functional shipyard catering
for shipbuilding and repairing compared to the 1000 shipyards of Japan. Therefore,
initiating projects for development of shipyards is recommended.

Moreover, more interest in research should be shown to learn about foreign policies
and development and implement them in Pakistan. This will also increase our
international connection and will help us to meet the international criteria.

Environmental pollution in 2021 is of a great concern and transport of any mean

especially ships are great contributors in greenhouse gas emission; therefore, utmost
importance should be given to reduce carbon emission from fuels by replacing diesel
with LNG (as used in Japan) or incorporating Air lubrication system or using ammonia
batteries in future.

10
References

[1] P. K. K. Professor Peter N Davies, "ASPECTS OF JAPANESE SHIPPING

HISTORY," London, November 1999.

[2] A. Yoshio, "THE FORMATION OF HEAVY INDUSTRY".

[3] S. MOTORA, "A hundred years of shipbuilding in Japan," in Journal of maritime

science and technology, TOkyo, 1997.

[4] WP6, "Peer Review of the Japanese Shipbuilding Industry," in OECD, 2012.

[5] M. K. Yuko Sakita, "The Japanese Industrial Wate Experience," in UNEP, 2013.

[6] WP6, "ENVIRONMENTAL AND CLIMATE CHANGE ISSUES IN

SHIPBUILDING," 2010.

[7] K. Mori, "National Maritime Research Institute," 2011.

[8] J. V. Fenhann, "CO2 Emissions from International Shipping," in UNEP DTU ,

2017.

[9] "OPRF".

[10] F. V. o. J. M. Industries, in The Nippon Foundation, 2020.

11