On 5 August 2025, Australia accepted Mitsubishi Heavy Industries’ bid to construct Australian warships; the Japanese company’s Mogami-class stealth frigate outcompeted Germany’s MEKO A-200 from Thyssenkrupp Marine Systems for the contract, according to the Associated Press. The fleet of 11 naval vessels, three of which will be built in Japan, are expected to be operational in Australia by 2030.

Australian Defense Minister Richard Marles told reporters the deal is “The biggest defense industry agreement that will ever have been struck between Japan and Australia,” after announcing the deal. “We welcome the decision by the Australian government as a major step to further elevate Japan’s security cooperation with Australia, which is our special strategic partner,” Japan’s Defense Minister Gen Nakatani said.

The deal between Australia and Japan is a result of the increasing global tension in the South China Sea. Since 2014, China has increased its military presence and development of artificial islands in the body of water. These actions have prompted countries such as the Philippines and Taiwan to strengthen ties with the U.S., and motivated countries such as Australia and Japan to increase joint security cooperation and defensive military investments into their GDP and compelled the U.S. to increase their naval presence in the region. The region of the South China Sea is a lucrative one, as 40% of the world’s liquified natural gas can be found in the sea. Additionally, 30% of the world’s trade passes through the sea, an annual amount of which equates to $3 trillion. All countries – including China – must abide by the United Nations Convention on the Law of the Sea (UNCLOS). Each non-landlocked country is entitled to its respective exclusive economic maritime zone. Given China’s adherence to and lack of clarification of its nine-dash line – which has been invalidated internationally – and the deteriorating situation in the region, defensive military bolstering such as the kind done by Japan and Australia is unfortunately necessary for deterrence. Bilateral talks within the Association of Southeast Asian Nations (ASEAN) over codes of conduct and territorial disputes could help ease tensions within the region.

The crux of the historical conflict in the region can be traced back to the end of the second world war, when after Japan ceded its possession of the sea, China drew an eleven-dash line around the waters and claimed the sea as its ‘historical right’. The advent of the United Nations and U.N.C.L.O.S., a convention that 169 nations including China are bound by, runs in direct conflict with China’s historical claim on the sea. China’s historical claim was invalidated in 2016 by an international tribunal by the Permanent Court of Arbitration, where the Philippines took China to court and won. China’s military growth and increased military activity in the sea and waters of Taiwan has prompted Japan to take more proactive measures in security collaboration and military defense. In 2014, article 9 of its pacifist constitution was reinterpreted to allow Japan to exercise a right of “collective self-defense”. Between 2020 and 2024, its defense budget more than doubled from $9.2 billion to $18.6 billion. For Australia, the importance of the South China Sea is a strategic and economic location of interest. Ultimately, the recent trade deal is but one piece in a larger geopolitical puzzle of the two countries to shore up their defenses to counter China’s encroaching presence.

Japan’s contract win with Australia not only signals a deeper forging of military ties in response to China’s growing military presence, but also signals preparation for a potential escalation of conflict in the Indo-Pacific. Even if territorial disputes over who owns what part of the South China Sea is resolved, China’s intention to invade and reclaim Taiwan will likely drag the U.S. and its allies into a war. Conflict that escalates to war will greatly disrupt global trade and create food insecurity for the fisheries that rely on the sea for sustenance. Deterrence and negotiation efforts should be taken to prevent, deescalate, and mitigate damage caused by geopolitical conflict.