Tokyo -- December 3, 1996 -- To stoke the fires of commerce, the Japanese space industry is investing heavily in research and development aimed at commercial space sales in the face of dwindling government funding.

Total space-related sales topped 411.5 billion yen for 1995, a 7 percent increase over the previous year, according to an annual survey by the Society of Japanese Aerospace Companies (SJAC). Meanwhile, space-related research and development spending rose 18 percent and capital investments soared 23 percent, according to the association's "Report on the Present Status of the Japanese Space Industry."

The days of rapid growth in Japanese space sales appear to be over, officials said. Government funding has reached a plateau and will rise only a few percentage points above inflation until the end of the century, said Mitsugi Chiba, director of the space policy division at Japan's Science and Technology Agency (STA). This would seem to be reflected in STA's FY 1997 budget, which has just been fixed. While the total allocation will be 750.4 billion yen, up 8.3 percent from the previous year, the space development and utilization budget has been raised only 3.1 percent from 177.9 billion to 183.7 billion yen.

Takashi Ishii, general manager of SJAC's space division, predicted that "space-related sales will continue to increase steadily, rather than rapidly." Japan's major space contractors expect to see a steady flow rather than a flood of government contracts in the short term, according to officials from Mitsubishi Electric Co., NEC and Nissan. In response to this new trend, some Japanese companies looking to increase their business base are planning to break free of the largely domestic space market and will compete on the global commercial space market.

Since the late 1980's, imports have risen in line with significant spending by Japan's satellite service providers, Ishii said. To date, Japan Satellite systems and Mitsubishi affiliate Space Communications Corp., both Tokyo based, have bought a total of six satellites from Hughes and Space Systems Loral.

On average, imports were 34 percent higher over the five years from 1991 to 1995 than 1986 to 1990. Total imports reached 67.2 billion yen in FY 1995, 25 percent higher than FY 1994, and 37 percent higher than in FY 1993. These figures are also reflected in capital investment trends, in which satellite purchases are included, which leapt to 4.2 billion yen in FY1993 to 20.8 billion yen and 25.6 billion yen in FY1994 and 1995. Similarly, satellite utilization costs, counted as "others," which includes transponder leasing, jumped from 181 million yen in FY1993 to 14.9 billion yen and 22.4 billion yen in 1994 and 1995.

Japanese space companies spent 29 percent of their research funds on satellite development and another 29 percent on data processing and analysis. Meanwhile, these companies spent 88 percent of capital investment funds in the services arena, according the SJAC report.

SJAC conducts the report annually, according to Ishii who makes requests for information from 83 private corporations from the previous financial year (April to March) each spring, and compiles data on exports, imports and R&D expenditure over the summer. Findings are made open to the public by October.

Advances in satellite communications are a particular area of interest for Japanese space companies, particularly Mitsubishi Electric and NEC, which would like to increase exports of spacecraft components and become prime contractors in the commercial satellite business, industry officials said. "NEC has started R&D spending and capital equipment spending for a broader area to develop both the domestic and international markets," said Mitsuo Kobayashi, the assistant general manager of NEC's space systems development division.

"Complete satellite systems development is going to be a key business for NEC too. Both NEC and Mitsubishi are going to aggressively invest in this area. Neither of them is going to give up," said Ishii.

Nissan eventually hopes to commercialize its J-1 rocket, said Yoshifumi Abe, a manager in Nissan's Aerospace Division. Thus far, the J-1 is currently scheduled a single satellite launch, that of OICETS, an optical communications satellite, in summer 2000. "We are not sure all our products will be marketable at the subsystems level, but with international cooperation, it would become easier," he said. Nissan needs to cut costs through mass production, he added.

Tatsuro Asai, general manager of Nissan's aerospace division, believes that Japan's internal market will provide strong demand in the next century for satellite launching via the J-1 rocket. "Right now we have a definite need for launching of Japanese satellites, and we are concentrating on this," he said.

The Ministry of Trade and Industry (MITI), however, remains very pessimistic about future funding, according to an official in the Space Industry Division who refused to be named. MITI's share of funding, which floated around the 1.5 billion yen mark between FY1990 and 93, largely for the Space Flyer Unit project, dipped dramatically to 1.1 billion this year as the project ended.

MITI, which runs space utilization, remote sensing and robotics programs, feels it will continue to face squeezes. "We're in a tough position, and may face some cuts. We only request enough money to get the project done, but the Ministry of Finance won't see it this way. The Government sees only the short-term, they don't think about the benefits a decade later," the official complained.

MITI's gloom reflects that of both the National Space Development Agency and The Institute of Space and Aeronautical Science who earlier this year expressed disappointment over the paucity of their budget allocations.