Peer Review of the Japanese Shipbuilding Industry 2026

3. Competitiveness

Abstract

This chapter presents a SWOT analysis of the Japanese shipbuilding industry and a comparative assessment with the South Korean maritime sector. It outlines the strengths and weaknesses of the industry, focusing on marine equipment self-sufficiency, workforce demographics, and cost competitiveness. The chapter also identifies external opportunities and threats, including emerging alternative fuel markets and shifting global market shares. Finally, it compares the structural differences between the Japanese and South Korean shipbuilding industries.

3.1. Feature of the shipbuilding industry in Japan (SWOT analysis)

3.1.1. Strengths

The Japanese shipbuilding industry benefits from a deeply integrated industrial ecosystem, supported by robust domestic demand, world-class marine equipment manufacturers, and a long-standing tradition of maritime engineering.

Japan has an exceptionally high level of self-sufficiency in marine equipment: in 2022, 92% of equipment installed on Japanese-built ships was produced domestically, up from 87% in 2019. This contrasts with Korea (≈25% imports) and China (persistent trade deficit in high-value machinery). This capability ensures a stable and resilient supply chain, particularly in times of global logistics volatility.

The Green Innovation Fund promotes for next-generation ship development. Projects cover hydrogen and ammonia engines, fuel supply systems, and hull designs optimised for alternative fuels. Public-private research consortia involving NYK, MOL, Kawasaki Heavy Industries, and academia enable strong co-ordination and decentralised innovation.

Japan maintains relatively stable domestic demand: in 2023, nearly 70% of all ships built in Japan were delivered to domestic owners such as NYK, K Line, and MOL. These shipping companies value Japanese yards for quality assurance, after-service capabilities, and integrated logistics. Stable domestic demand provides a reliable revenue stream that supports long-term investment planning.

3.1.2. Weaknesses

The most pressing weakness is the rapid aging and shrinking workforce. Employment declined from 85 000 in 2009 to 70 000 in 2023. The share of skilled workers under 30 fell from 26% in 2009 to 19.5% in 2023, while workers aged 40–49 rose to over 31%. This demographic imbalance is worsened by the limited attractiveness of the sector to younger generations and the absence of a national-level vocational training program dedicated to shipbuilding.

Cost competitiveness is a structural weakness. Although unit labour costs declined slightly from 2000–2008, they remain significantly higher than in Korea and China. In 2021, Japanese shipbuilders earned USD 713 per DWT delivered, compared to Korea’s USD 978 and the global average of USD 877. The average vessel value per GT also lags competitors, as Japan focuses more on mid-range bulk carriers and general cargo ships rather than ultra-high-value segments such as cruise ships or FPSOs.

3.1.3. Opportunities

Japan is well-positioned to capitalise on the structural shift toward green and digital shipbuilding. First, it holds the world’s third-largest orderbook for methanol-capable vessels and is increasingly active in developing hydrogen- and ammonia-fuelled ships, supported by the Green Innovation Fund (2021–2030). This vertically integrated innovation strategy—from fuel tank and engine design to emissions control systems—provides Japan with a competitive edge in alternative fuel technologies.

The domestic rollout of bunkering infrastructure strengthens Japan’s role in the regional energy transition. LNG bunkering hubs have already been established in Kitakyushu and Mikawa Bay, while an ammonia bunkering station is under construction at Tokyo Wan, positioning Japan as a future bunkering leader in Northeast Asia.

Japan’s extensive intellectual property portfolio in low-carbon maritime technologies, particularly in hull design and propulsion efficiency, offers strong potential for licensing and joint development agreements with emerging shipyards in Southeast Asia—aligning both commercial and geopolitical interests.

3.1.4. Threats

The Japanese shipbuilding industry faces intensifying external pressures that threaten its long-term competitiveness. First, China’s rapid rise has pushed its global orderbook share to around 69% in 2024, leaving Japan with only about 11%. Korea also maintains clear dominance in LNG, LPG, and advanced offshore vessels, further squeezing Japan’s position in high-value markets.

Export demand for Japanese-built ships has eroded significantly. Foreign ownership declined from 76% in the early 2000s to just 20–30% in 2023, reducing Japan’s exposure to international projects and weakening its global market presence.

Volatile exchange rates and persistently high raw material costs (e.g. steel plates during 2022–2024) compress profit margins despite stable domestic demand.

Innovation risks are mounting. Japan’s low-carbon maritime patent filings have slowed markedly since 2019, while China has overtaken in this field, threatening Japan’s historical technological leadership. Finally, geopolitical risks—such as tightening procurement rules linked to national security and potential trade restrictions—pose additional uncertainties for Japan’s export-oriented segment, potentially limiting market access even in areas of technological strength.

The competitiveness of the Japanese shipbuilding industry is shaped by a combination of structural strengths, persistent weaknesses, and evolving opportunities and threats. Table 3.1 presents a SWOT analysis that summarises the report’s assessment of Japan’s shipbuilding sector, its industrial ecosystem, and its position in the global market.

Table 3.1. SWOT analysis of the Japan shipbuilding industry

Strength	Weakness
High self-sufficiency in marine equipment (92% of equipment on Japanese-built vessels produced domestically in 2022). Global leadership in marine power systems: 2022 production of 674 522 outboard motors (JPY 231 billion) and 19 522 diesel engines (JPY 226 billion). Strong role in Energy Saving Technologies (ESTs): 29% of global EST-equipped fleet in 2023, ahead of Korea and comparable to China. Governmental support through the Green Innovation Fund. Collaborative R&D consortia involving shipbuilders, equipment makers, and academia. Stable domestic demand: ~70% of ships built in Japan delivered to Japanese owners in 2023. Strong reputation for quality, after-service, and compliance in high-value vessels.	Rapidly aging and shrinking workforce: employment fell from 85 000 (2009) to 70 000 (2023). Share of workers <30 declined to 19.5%. High reliance on foreign workers. Cost competitiveness: in 2021, Japanese builders earned USD 713 per DWT delivered, below Korea (USD 978) and the global average (USD 877). Average vessel value per GT lags competitors, reflecting focus on mid-range bulkers and general cargo rather than ultra-high-value ships. Uneven digitalisation: large builders piloting smart factories, but smaller yards lag in digital twins, MBSE, real-time tracking. Limited global market share: orderbook share fell to ~11% in 2024, down from ~15% in 2019.
Opportunities	Threats
Third-largest orderbook for methanol-capable vessels. Growing R&D in hydrogen and ammonia fuel designs. Domestic rollout of LNG bunkering hubs (Kitakyushu, Mikawa Bay) and ammonia fueling. Extensive IP base: global leader in low-carbon maritime patents. Potential for licensing/export of green tech. Promotion of maritime digital engineering programs. Moderate growth in containership exports.	China’s rapid ascent: ~69% of global orderbook in 2024, dominating volume and increasingly advanced segments / Korea’s dominance in LNG, LPG, and offshore vessels. Declining export demand: foreign-owned share of Japanese-built ships dropped from 76% (2000s) to 20–30% (2023). Exchange rate volatility: weak yen boosts competitiveness short-term but complicates long-term pricing/contracts. High and volatile raw material costs (e.g. steel plates) compress margins. Slowdown in patent activity post-2019. Geopolitical risks / tightening procurement/security regulations may restrict exports.

Source: OECD authors’ elaboration.

3.2. Comparative analysis of Japan and Korea in the shipbuilding industry

The common point between Korea and Japan is, firstly, that they are increasing their investment in future maritime technologies. Secondly, the lack of workforce and the rise in raw material prices appear to be weaknesses for both countries.

On the other hand, the main difference between the two countries is, firstly, that Japan has a high level of domestic ship and marine equipment demand, which is a big difference with Korea. Around 70% of ships built in Japan are delivered to Japanese owners. Approximatively 90% of the marine equipment installed on Japanese-built vessels was domestically manufactured. Second, while Korea tends to address with trends such as decarbonisation and digitalisation at the level of shipyards, especially large ones, Japan, thanks to its long-term use of cluster strategies, is using a consortium strategy involving various stakeholders such as shipping companies and shipbuilders.