Subsidy squabble hits Mitsubishi's F-35 deal with BAE

Mitsubishi Heavy Industries' (OTCPK:MHVYF) involvement in the $400B F-35 project could be delayed as concerns have surfaced over the subsidies which back the program, Reuters reports.

Arms industry bureaucrats who seek subsidies to back Japan's stake in the project are in a squabble with the finance ministry which wishes to curb spending due to Japan's massive budget deficit.

Japan also wishes to participate in the F-35 project as a sign of the nation's willingness to end decades of isolation, after a four-decade-old ban on selling arms overseas was recently lifted.

The worries could force Japan's biggest arms maker to renegotiate the deal with Britain's BAE Systems (OTCPK:BAESY) for supplying F-35 rear fuselage parts under an international consortium.

BAE, Lockheed Martin (NYSE:LMT) and other members of the nine-nation group welcome Japan's F-35 participation, but not if it means relenting on tight production costs.

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