On April 18, Japan and Australia announced the official signing of a milestone contract for Mitsubishi Heavy Industries to construct the first three of Australia’s new general-purpose frigates. 

With the Albanese government committing up to AU$20 billion (US$14.3 billion) over the next decade to its SEA 3000 general-purpose frigate program, the project is set to deepen the Australia-Japan bilateral relationship, long described as a “quasi-alliance,” bringing it closer to the level of a formal military alliance.

However, the nature of the agreement is often misunderstood. Contrary to some perceptions, this is not a government-to-government procurement arrangement akin to the U.S. Foreign Military Sales (FMS) system. Rather, it is a commercial contract between the Australian government and MHI, supported politically by both governments.

At a ceremony in Melbourne, Japan’s Defense Minister Koizumi Shinjiro and Australia’s Deputy Prime Minister and Defense Minister Richard Marles signed a Memorandum of Cooperation (MoC), known as the “Mogami Memorandum,” reaffirming their intent to deepen defense industrial cooperation. Yet one industry source confirmed to The Diplomat that the contract work had been completed and signed off in late March, suggesting the April event served more as political signaling than as a formal conclusion. The choice of Melbourne – Marles’ electoral district – as the backdrop further underscores the political dimension of the announcement.

On April 18, MHI formally announced the company had concluded a contract with the Australian government for the construction of three upgraded Mogami-class frigates for Australia’s General Purpose Frigate (GPF) program.

The contract – covering the first three vessels of a planned 11-ship fleet – represents Japan’s largest postwar defense export case and highlights deepening strategic alignment between the two U.S. allies in the Indo-Pacific.

As the program moves from political commitment to implementation, however, three critical challenges are coming into sharper focus.

The first is the sustainability of Australia’s much-publicized “zero-change” approach. Canberra has repeatedly emphasized that adopting the Japanese design with minimal modification would be key to controlling costs and accelerating delivery. Early discussions even suggested that changes would be limited to minor adjustments – such as switching onboard language displays from Japanese to English – implying that the platform could be transferred largely “as is.” 

In practice, the Australian variant will differ significantly from the Japan Maritime Self-Defense Force’s upgraded Mogami-class design. It is expected to integrate the Evolved Sea Sparrow Missile (ESSM) Block 2 for air defense, the Naval Strike Missile (NSM) for anti-ship warfare, and the Mk 54 lightweight torpedo – none of which are standard systems in the Japanese configuration. By contrast, the upgraded Mogami class to be operated by the MSDF will employ domestically developed systems, including the Type 23 ship-to-air missile (A-SAM), the upgraded Type 12 surface-to-ship missile (ship-launched variant), and the Type 12 torpedo.

These are not simple substitutions. Integrating different systems requires modifications to the combat management system, sensor interfaces, and the ship’s internal design, including power, weight, and space allocation. Such cascading changes are a well-known driver of cost overruns and delays.

Australia’s own experience underscores the risk. The Royal Australian Navy’s Hunter-class frigate program – once promoted as a low-risk derivative design – has since become a cautionary example of design creep, marked by rising costs and persistent delays. With the lead vessel unlikely to enter service until the mid-2030s, that program casts a long shadow over SEA 3000. Against this backdrop, the goal of delivering the first Mogami-based frigate by December 2029 appears increasingly ambitious, as Marles admitted.

Cost uncertainty further complicates the picture. Australia’s latest Integrated Investment Program estimates the cost of the SEA 3000 at AU$15 billion to AU$20 billion over the next decade – roughly double earlier projections of AU$7 billion to AU$10 billion in 2024. Separate reporting suggests the initial three-ship contract alone is valued at around AU$10 billion, underscoring the scale of upfront costs within the broader program.

The second challenge lies in industrial and technology-security considerations. While the first three ships will be built in Japan, the remaining eight are supposed to be constructed in Australia by Austal. Tokyo has raised concerns over South Korea’s Hanwha increasing its stake in Austal to 19.9 percent, making it the company’s largest shareholder. Given the sensitivity of advanced naval technologies, any perceived risk of technology exposure could complicate trust between partners.

The third challenge is more structural: a relative lack of experience on both sides in managing a program of this scale.

For Japan, this is its first major postwar case of exporting and co-developing a large surface combatant. While its shipbuilders possess strong technical expertise, Japan lacks a government-backed export framework comparable to the U.S. FMS system. As one U.S. defense industry executive noted, this gap means complex projects may require multiple parallel contracts – for hull construction, sensors, and other systems – complicating coordination and oversight. A Japan-style FMS framework could streamline such arrangements while providing stronger safeguards for sensitive technologies.

For Australia, the challenge lies in domestic production capacity and technology absorption. Shipyards such as Austal have limited experience with advanced steel warship construction and high-end systems integration. Effective technology transfer will require sustained cooperation, including the dispatch of Japanese engineers and training of Australian personnel. Gaps in experience on both sides could create bottlenecks during the transition from Japanese-built ships to local production.

Taken together, these challenges suggest that the success of SEA 3000 will depend less on the political appeal of the “zero-change” concept than on disciplined execution. The ability to freeze requirements, control scope, and manage integration will be decisive.

If managed effectively, the program could become a model for Indo-Pacific defense cooperation. If not, it risks repeating a familiar pattern of cost escalation and schedule slippage – the very outcomes the “zero-change” approach was meant to avoid.