[Japanese Stocks] The Path to Reviving the Shipbuilding Industry Supported by the Government | Hideki Wajima's Discovery! Noteworthy Stocks | Moneyクリ Monex Securities' Investment Information and Media Useful for Money

Strengthening the Maritime Cluster Included in the "Robust Policy 2025"

On June 13, the government decided on the "Basic Policy on Economic and Financial Management and Reform 2025" (the Basic Policy). This includes a plan to strengthen the maritime cluster, which is centered around the shipping and shipbuilding industries. The maritime cluster refers to regions or conditions where industries and companies engaged in economic activities centered around the sea are concentrated.

According to the Ministry of Economy, Trade and Industry and others, Japan's share of the global shipbuilding industry was nearly 40% in the 1990s, but has gradually declined due to the rise of China and South Korea, falling to 25% in 2018 and 17% in 2022. China has implemented massive public support to enter and expand its shipbuilding industry, while South Korea appears to be supporting the technological development and productivity improvement of its shipbuilding industry as a national strategy.

As it becomes difficult for Japanese private companies to compete on their own, the government is stepping in to provide support. According to government data, Japan relies on maritime transport for 99.6% of its trade volume, making the revival of the industry essential. On the other hand, the global maritime cargo movement is showing an expanding trend, with an average annual increase of 3.5%.

It has been reported that the government and the Liberal Democratic Party are considering the formulation of a policy package to revive the domestic shipbuilding industry. The revitalization of the shipbuilding industry is extremely important from the perspective of economic security, and cooperation with the United States, which is also aiming to rebuild its shipbuilding industry, is also being considered.

The main pillar of the proposal submitted by the Liberal Democratic Party's Economic Security Promotion Headquarters is the "National Dock" concept, where the government leads the construction and maintenance of shipyards. Based on the provisions of the Defense Production Base Strengthening Act and the Economic Security Promotion Act, the government will construct and acquire shipbuilding facilities and delegate their operation to the private sector. It is also expected to designate "hull" as a specific important material under the Economic Security Promotion Act. By covering construction costs, the government can reduce the capital investment and depreciation burden on companies, thereby enhancing profitability and international competitiveness.

The revival of the shipbuilding industry is urgent in the United States as well, and it is also a card in Japan-U.S. negotiations.

There are movements in the private sector as well. On June 26, Imabari Shipbuilding Co., Ltd. (a non-listed company), the top shipbuilder in Japan, announced that it would raise its stake in Japan Marine United (JMU) from the current 30% to 60%, effectively making it a subsidiary. A group will be formed that accounts for more than half of the domestic construction volume.

In the Japan-U.S. negotiations regarding U.S. tariff measures, Japan has proposed cooperation in the shipbuilding sector as one of its negotiation cards. Prime Minister Ishiba has mentioned support such as repairing U.S. warships in Japan, and cooperation with icebreakers has also been brought up. Icebreakers, which are used for navigation in the Arctic and can break through hard ice, are solely constructed by JMU. Special technical skills to enhance the hull's strength are essential, and it is viewed that technology transfer to the U.S. could be a bargaining chip.

The United States was once the strongest in the shipbuilding industry, but it has declined due to the rise of Japan and other factors. Since the 1980s, subsidies have been cut, leading to a shift overseas. President Trump expressed his intention to revive the shipbuilding industry in his policy speech in March and has established a shipbuilding bureau within the White House. Given its direct connection to naval power, the revival of shipbuilding has become an urgent necessity in the U.S.

Picking Up Shipbuilding Related Stocks

Namura Shipbuilding Co., Ltd. (7014)

A major player in shipbuilding. In 2008, it acquired Hakodate Dock, and in 2014, it made Sasebo Heavy Industries, a publicly listed company, a subsidiary. It handles a wide range of vessels from large tankers to bulk carriers and small tankers. As of the end of March 2025, the backlog of new ship orders is 394.1 billion yen, a 27% increase compared to the previous year. It has received orders for two environmentally friendly VLGCs (large ships carrying LNG = liquefied natural gas) and ten large bulk carriers. Foreign securities firms believe that "steady improvements in unit prices will progress in future new shipbuilding-related orders for commercial vessels."

[Figure 1] Namura Shipbuilding Co., Ltd. (7014): Weekly Chart (Moving Average Lines Green: 13 Weeks, Orange: 26 Weeks) Source: Monex Securities website (as of July 17, 2025)

Mitsui E&S (7003)

Former Mitsui Shipbuilding. The company is the domestic leader in the manufacturing of marine diesel engines and is also one of the world's top companies in port cranes. It withdrew from shipbuilding itself in 2022 and is focusing its management resources on the ship engine and crane businesses. For the fiscal year ending March 2025, the order value for the marine propulsion systems division, including ship engines, increased by 44% year-on-year to 212.9 billion yen. The expansion of orders for large dual-fuel engines (engines that can operate by mixing two types of fuel) is one of the contributing factors.

[Figure 2] Mitsui E&S (7003): Weekly Chart (Moving Average Lines Green: 13 weeks, Orange: 26 weeks) Source: Monex Securities website (as of July 17, 2025)

China Coating (4617)

A major paint manufacturer. Holds a 60% domestic market share for marine paints. Boasts the second largest scale in the world. Operates in 20 countries globally. Antifouling paint for ship bottoms prevents the increase in surface resistance caused by barnacles and marine organisms adhering to the hull, contributing to improved fuel efficiency and reduced CO2 emissions. Regular repainting is necessary.

[Figure 3] China Paint (4617): Weekly Chart (Moving Averages Green: 13 weeks, Orange: 26 weeks) Source: Monex Securities website (as of July 17, 2025)

Japan Engine Corporation (6016)

A specialized manufacturer of marine engines. Formerly known as Kobe Diesel. In 2017, it integrated the diesel engine business of Mitsubishi Heavy Industries Marine Machinery and changed its name to the current one. It is well-regarded for its consistent services from development, design, manufacturing, to maintenance.

[Chart 4] Japan Engine Corporation (6016): Weekly Chart (Moving Averages Green: 13 Weeks, Orange: 26 Weeks) Source: Monex Securities website (as of July 17, 2025)

Akasaka Ironworks (6022)

A medium-sized company specializing in marine diesel engines. They also offer engines for large ships. They develop remote controllers (remote control devices for engines) and machinery monitoring devices to understand the operating status of engines. They also provide parts and maintenance services.

[Chart 5] Akasaka Iron Works (6022): Weekly Chart (Moving Averages Green: 13 Weeks, Orange: 26 Weeks) Source: Monex Securities website (as of July 17, 2025)