Space-related budget increases fivefold! Explanation of the reasons for government support and the warnings it raises about international competition for companies.

Introduction

In recent years, the "space industry" has been gaining momentum worldwide. In particular, Japan's 2026Space-related budgetThis is the best in the last 10 years1.0446 trillion yenThis includes fund-related businesses, and it is showing greater growth than other industries.

However, a crucial question remains for many companies: While it's easy to assume that government support provides security, the reality is that this approach won't allow them to succeed in international competition.

This article will explain the following points in detail:

• The real reason why Japan's space budget has increased
• Details of the "Space Strategy Fund" provided by the government
• Warnings about international competition that businesses should be aware of
• Future growth strategies and investment perspectives

This is a must-read for companies, investors, and policymakers interested in the space industry. By the time you finish reading, you will understand why now is the time to focus on the space business.

The true nature of government support
~The Space Strategy Fund Discusses the Ecosystem of Growth~

The fact that Japan's space budget has nearly tripled in the past decade is due to a clear government strategy. At the heart of this strategy is the **"Space Strategy Fund"**.

Basic structure of the Space Strategy Fund

In the supplementary budgets for fiscal years 2023 and 2024, a space strategy fund totaling 600 billion yen was established. This fund is structured as follows:

Features of the "Stage Gate" judging system

A crucial element of Japan's government-backed space industry is a review system known as "stage-gate." This system has the following characteristics:

• We undergo an annual review.
• The evaluation will not only check the progress but also assess whether or not it will be commercially successful.
• We function like a venture capital firm, but with a long-term perspective to provide support.

Breaking down high barriers to entry for startups

Of the projects to which this strategic fund was selected, the following facts have become clear in the first phase:

• One-third were startups.
• Private companies that applied30%It was a company that conducted businesses other than space (such as communications and agriculture).

In other words, the selection is not limited to hardware manufacturers such as satellites and rockets, but also includes the following types of companies:

• Companies that utilize data obtained from space
• Companies that provide services utilizing space systems

The fact that the government is supporting industrialization is noteworthy because it takes a long-term perspective rather than focusing on short-term returns.

Specific Facts – Explaining in 3 Points Why International Competition is Necessary Now

Point 1: Technology is maturing and standardization is progressing.

Currently, space technology is gradually maturing, and the following changes are occurring:

• The manufacturing of rockets and satellites is becoming standardized.
• We are beginning to enter the mass production phase.
• Satellites can now be built even at the university research lab level.
• Rocket development has reached a level where private companies can handle it.

As a result, the cost of building space systems is being driven down. This change is occurring on the supply side.

Point 2: Changes on the demand side and specific examples

At the same time, there are also significant changes on the demand side:

Technological innovations such as Starlink's satellite communication service are emerging, including:

• Simultaneous operation of numerous satellites orbiting in low Earth orbit
• We are deploying "satellite internet" that allows communication anywhere.
• Communication in mobile devices such as aircraft has improved dramatically.
• Support for the use of drones in the Russia-Ukraine war
• An impact so profound it could change the very nature of warfare.

As space industrialization and commercialization progress, the demand for space-based services is increasing.

Point 3: Opportunities and fundraising for startups

Startups entering the space business are finding more opportunities in the following areas:

• Developing satellite communications and Earth observation businesses.
• It is possible to develop new business models.

However, Japan faces the following challenges:

• There is a shortage of venture capital (VC) firms capable of nurturing startups.
• Even angel investors aren't enough.
• Most of them rely on investments from large corporations or loans from banks.

Heading 3: Supplementary Information and Points to Note
Five things you should know about the truth behind government aid.

Fact 1: It is important to have an "exit strategy."

To seize opportunities in the international market, it is crucial for the government to provide an "exit strategy" for strategic funds. Here's why:

• Space systems cannot be marketed solely on the basis of novelty in terms of technology or services.
• Someone needs to use the system and verify its functionality and added value.
• The government needs to step in as a "customer willing to take risks."

Fact 2: It is essential to be prepared to curb complacency.

Relying on heavy government support is dangerous. Please understand the following:

• If businesses become complacent simply because they can continue operating, they may lose sight of the fact that the market they need to compete in is "global."
• We must curb complacency and create and market products and services that can withstand international competition.

Fact 3: Development needs to be mindful of US-China competition.

The Space Strategy Fund's "stage gate" requires you to continue reviewing the following:

• Products and services that can beat US and Chinese competitors
• Supporting not only short-term returns but also long-term industrialization.
• It has a government strategic perspective.

Fact 4: High growth rate compared to other industries

Not only is the budget for semiconductors increasing, but the space sector is also experiencing rapid growth. This is due to the following factors:

• The government positions it as a next-generation growth industry.
• Taken as a reference for rapid privatization in the United States.
• We have a strong determination to prevent Japan from being left behind.

Fact 5: Changes since fiscal year 2015

The budget increases over the past 10 years have shown the following changes:

• Government support is rapidly expanding.
• The entry of private companies is particularly noticeable.
• Privatization is progressing (see the United States).

Summary

The space industry is "a next-generation growth industry that we should be challenging now."
The threefold increase in the space budget over the past decade is due to a clear government strategy. However, there is a trap that many companies tend to fall into: the misconception that "government support means everything is fine."

In fact, Japanese startups face the following challenges:

• Venture capital (VC) shortage
• Shortage of angel investors
• High dependence on large corporations and banks

This situation is not merely a matter of fundraising; it questions the very attitude of companies. Becoming complacent and relying on generous government support means losing international competitiveness.

The Space Strategy Fund has launched with a scale of 1 trillion yen, and its structure includes a screening system called "stage gate." This is not simply about providing funding, but is designed to support long-term industrialization. The fact that one-third of the applicants are startups, and that 30% of the applicant companies have experience outside of space, shows that the government is interested not only in hardware, but also in areas such as data utilization and service provision.

We need to be prepared for international competition.

In the United States, SpaceX has brought about a revolutionary change in the rocket launch business, and "privatization" is progressing. Japan's space industry also needs similar changes. While the technology is maturing and satellites and rockets are becoming standardized, whether this will enhance competitiveness depends on the determination of the companies involved.

Implications for both investors and companies

This information is important for the following stakeholders:

Final realization: Don't be afraid of change, but don't become complacent either.

The growth of the space industry presents a great opportunity for the next generation. However, it's not as simple as saying, "It's secure because there's government support." Rather, we need a perspective on how to respond to the speed of change.

What we can learn from cases like Starlink is the immense impact that technological innovation has on society. It has not only improved aircraft communications but has even enabled the use of drones in the military. Companies that can adapt to such changes will be the ones that can shape the future.

Future prospects

The government, through the Space Strategy Fund, is attempting to balance commissioned and subsidized projects to achieve both market-ready technology and research and development. However, the following elements are essential for its success:

1. Readiness for international competition
2. Breaking free from "dependence"
3. Maintaining a long-term perspective

The space industry is no longer solely a government enterprise; it is undergoing a wave of "privatization" with the entry of private companies. Understanding this trend and clearly defining your company's position is crucial for future growth strategies.

lastly

The threefold increase in the space budget compared to 10 years ago indicates a turning point in history. However, adapting to this change will not be easy. What is important is not complacency due to government support, but the resolve to accept that failure to compete in the international market will result in elimination.

In rapidly changing industries, it is essential to consider not only short-term profits but also long-term growth. In that sense, what the Space Strategy Fund aims for through "Stagegate" is not merely funding, but true industrialization and strengthening of international competitiveness.

I hope that our readers will be able to consider both the perspective that "now is the chance" and the perspective that "we must not be complacent." In this era of change, being able to make the right choices will be your greatest advantage.