Peter W. Thomson of Raytheon demonstrates a computer system that can simulate the process of a missile interception at a recent security show in Tokyo.

Last week, major U.S. defense firms Lockheed Martin Corp., Northrop Grumman Corp., Raytheon Co., Boeing Co. and Computer Sciences Corp. showcased their missile defense products at the Parliamentary Museum in Tokyo, where Japanese and U.S. defense policymakers, industry figures and politicians gathered for a two-day security symposium.

Lockheed Martin, the largest U.S. defense contractor, set up a full-scale replica of the PAC-3 interceptor missile Japan will deploy for the ground-based portion of the system.

Raytheon, the prime contractor of the SM-3 interceptor missiles Japan will use in the sea-based portion of the system, displayed a computer system that can simulate missile interception on monitors.

But while Japanese defense industry leaders agreed that it was important to learn from and cooperate with their U.S. counterparts, they also stressed the need for Japan to develop its own technology.

"Japan's environment is unique when it comes to missile defense," said Hidetsugu Horikawa, vice president of the aerospace unit of Kawasaki Heavy Industries, the second-largest defense contractor in Japan.

Given the extremely short time it would take for a missile to reach Japan from North Korea, Horikawa said, Japan needs a highly effective system that can detect a launch at the earliest possible stage and rapidly relay that information so the missile can be tracked and intercepted.

"To build a (financially) practical and effective system, Japan needs to carefully assess which parts it should introduce from the U.S. and which parts it should develop on its own," he said.

The Japanese side sees the missile defense project as a great opportunity to establish domestic defense research, development and production bases. The expected lifting of the government's self-imposed ban on arms exports by year's end is also fueling expectations in the sector that military-related production will become a new cash cow.

By 2011, Japan plans to deploy a two-tier missile shield combining sea- and land-based systems. Deployment will begin in 2006, with the total cost estimated at 1 trillion yen.

The government has already decided to purchase interceptor missiles -- SM-3s to be launched from Aegis-equipped warships and PAC-3s to be deployed on the ground -- from the U.S., at least for the next fiscal year.

But the Japanese defense industry, led by the Defense Production Committee of the Japan Business Federation (Nippon Keidanren), is pressing the government to let Japanese companies produce these missiles under license.

"To maintain our current technology level as well as for future technological development, we, the defense industry, will continue urging the government to let us start licensed production as early as possible," said Takashi Nishioka, vice chairman of Keidanren and chairman of Mitsubishi Heavy Industries.

MHI, Japan's largest defense contractor, already makes the PAC-2, predecessor of the PAC-3, under license.

The Defense Agency has promised to consider the request, saying it didn't have enough time to negotiate a PAC-3 licensing agreement with the U.S. this year.

A command, control and communications system for the missile defense system is to be built by upgrading the Air Self-Defense Force's existing Base Air Defense Ground Environment system. The agency has yet to decide how the contracts for this project will be allotted.

The agency is also in talks with the U.S. to launch joint research aimed at improving antiair radar and a battle management system for Aegis-equipped ships. It plans to use technology from both Japanese and U.S firms for the research.

For the U.S., which is expected to declare its missile defense shield to be operational by the end of the year, Japan is the most promising research partner and overseas market for missile defense-related products.

Only the U.S., Israel and Japan are expected to have an operational missile defense system within the next few years. Given that Israel is only deploying the Arrow, a ground-based missile system aimed at countering Iran's short-range missiles, Japan is expected to become the leading missile defense nation after the U.S.

"Japan's addition of missile defense capabilities to its Self-Defense Forces can make Japan a world leader in missile defense," Aaron Fuller III, president of the Defense Mission and Engineering Division at Computer Sciences, said at the symposium. His company developed the software for the Aegis Weapon System.

Indeed, the race for contracts appears to have no bounds.

During last week's symposium, a Boeing representative strongly urged Japan to use the firm's airborne laser system, or ABL, which is designed to detect and destroy intercontinental ballistic missiles as they take off. Defense experts say Tokyo has little use for such a long-range system, as its main concern is North Korea.

Industry officials in both Japan and the U.S. say they welcome the expected lifting of Japan's weapons export ban, expressing hope that it will help promote joint research and technology transfer.

Yet the Japanese side is determined not to give its U.S. rivals a free hand, having learned a lesson from its bitter experience with the FS-X fighter in the late 1980s.

The Defense Agency had intended to develop the FS-X, a successor to the ASDF's F-1 support fighter, using domestic technology. But bending to strong pressure from the U.S., Japan gave up on the option of domestic development and chose to remodel the U.S.-developed F-16 fighter.

U.S. fears over losing key technologies through the project also led to highly limited technology transfers and 40 percent of the work going to U.S. firms.

"As soon as the new government policy (on arms exports) becomes clear, we will start exchanging information with the U.S. private sector and present concrete proposals to the Japanese government," Keidanren's Nishioka said during the symposium. "That will enable Japan to take a more active position toward the U.S."