Japan demands answers on Australian submarine contract

Japan is demanding answers from the Turnbull government over why it lost to France in the $50 billion race to build Australia’s next generation of submarines.

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Japan’s Defence Minister Gen Nakatani branded the decision to award the contract for 12 new submarines to French shipbuilder DCNS as “deeply regrettable”.

“We will ask Australia to explain why they didn’t pick our design,” he said.

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DCNS’ offer to build 97-metre-long Shortfin Barracuda subs beat rival bids from Japanese and German consortiums.

Japan’s 89m-long Soryu-class designs were understood to be the favoured choice of former prime minister Tony Abbott.

However there were concerns about Australia’s second largest trading partner never having exported any complex defence technology, including subs.

Announcing the winning bid on Tuesday, Mr Turnbull stressed both he and Japan’s Prime Minister Shinzo Abe were committed to the special strategic relationship between their countries.

Mr Abbott said the ties were “more than strong enough” to withstand any disappointment.

He claimed credit for starting the process to pick a winning bidder, saying the selection of DCNS flowed from an “exhaustive and very comprehensive” process devised by his government.

French President Francois Hollande welcomed the “historic” contract for DCNS, which is 64 per cent government owned and 35 per cent by defence company Thales.

“I congratulate all those who have contributed,” Mr Hollande tweeted.

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Germany’s ThyssenKrupp Marine Systems was circumspect, saying while it was disappointed its 89-metre Type 216 sub wasn’t chosen it stands ready to contribute to Australia’s naval capacities.

“The competitive evaluation was conducted with high integrity and professionalism and we were privileged to be part of it,” it said in a statement.

Government-owned shipbuilder ASC believes the decision to build the subs in Adelaide is an endorsement of its workforce and recent productivity gains.

The shipbuilders union took credit for the local build, saying the decision was the culmination of four years of campaigning.

“We’ve dragged the government back to an Australian build, kicking and screaming every step of the way,” AMWU national secretary Paul Bastian said.

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However Labor is not convinced DCNS will build all 12 subs in Adelaide, with Senator Penny Wong calling on Mr Turnbull to rule out a hybrid build before the election.

Business SA said the value of the submarines contract could not be underestimated because of servicing and additional economic spin-offs being worth substantially more than the initial contract.

But Greens leader Richard Di Natale warns the deal can’t be relied on to save South Australia’s struggling economy.

The Victorian government is meanwhile demanding that as the largest defence manufacturing state in Australia it should get a fair share of the work to deliver the subs.