Toyota Motor Corporation (ADR) (TM), Lockheed Martin Corporation (LMT): Is Japan the Defense Industry’s Next Hot Spot?

Page 1 of 2

Despite a terrible end to the week, Japan’s NIKKEI 225 (INDEXNIKKEI:NI225) stock index managed to pull in small gains during the past five days. It’s the latest gain in what’s been a 31% year-to-date jump in the world’s hottest index, but Japan’s strong year has slowed recently. As the government looks to keep its unprecedented stimulus on track, tensions between Tokyo and rival Beijing are heating up in the Pacific.

Is the Pacific rivalry setting up the perfect storm for defense contractors in traditionally pacifist post-World War II Japan?

Japan and China square off
Japan and China have rolled out the big guns recently — or big ships, to be precise. The dispute between the two countries over the Senkaku Island chain has inflamed tensions between the governments and citizenries, resulting in an economic backlash. Auto giant Toyota Motor Corporation (ADR) (NYSE:TM) has certainly felt the effects, with its sales falling 3.5% year over year in China’s market in July. The drop has forced Toyota behind European and American rivals in the world’s largest auto market, and it has leading Japanese exporters and their investors worried about what the future in China holds.

Toyota Motor Corporation (ADR) (NYSE:TM)The two nations have responded to the growing rift by unveiling massive warships, something that’s done nothing to repair relations, but has made things interesting for the defense industry. After China unveiled its first aircraft carrier earlier in the year, Japan launched its own giant helicopter carrier this month — the largest warship in the Japanese fleet since World War II. China’s fired back once more by planning a series of live fire drills in the waters off of the Senkakus, and the standoff looks no closer to ending between these powers.

For a company like U.S. defense titan Lockheed Martin Corporation (NYSE:LMT), the opportunity’s something to watch. Japanese prime minister Shinzo Abe’s government has looked to bolster its domestic defense industry by partnering with foreign firms, and Lockheed’s expensive F-35 fighter is one of the top priorities for Japan’s Air Self-Defense Force’s future. The craft is still dominated by planned future U.S. sales, but Japan’s rising acceptance of a strong military could mean growing sales in the future.

Which other companies could benefit from a long-term Pacific standoff between the continent’s two largest economies? Missile and electronics manufacturer Raytheon Company (NYSE:RTN) is hoping to turn to Japan for future suppliers as the country considers nixing its half-century ban on arms exports. Japan currently utilizes only around 1% of its GDP for defense spending, far less than the likes of the U.S., but Raytheon already has ties to the country’s defense sector.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!