Exclusive-Britain and Japan to pay for most of fighter project agreed with Italy-sources

5/5 © Reuters. A concept model of the Global Combat Air Programme (GCAP)'s fighter jet is displayed at the DSEI Japan defense show at Makuhari Messe in Chiba, east of Tokyo, Japan March 15, 2023. REUTERS/Kim Kyung-Hoon 2/5

By Nobuhiro Kubo and Tim Kelly

TOKYO (Reuters) -Britain and Japan are set to dominate a three-nation project with Italy to build an advanced jet fighter, with Rome set to pay around only a fifth of the overall development cost, two sources said.

Italy's defence ministry said the sources' assessments were "speculative", while Britain's Ministry of Defence (MOD) said it "does not recognise these comments".

Known as the Global Combat Air Programme (GCAP), the project is expected to cost tens of billions of dollars before the new jet fighter enters service around the middle of the next decade.

"The cost of the project will likely be around 40% each for Japan and Britain," one of the people with knowledge of discussions told Reuters. Both sources, who asked to remain anonymous because they were not authorized to talk to the media, added that most of the programmes details were yet to be decided.

That rough investment breakdown is among the first details to emerge from talks on a high-profile venture that will be a test of whether Japan and Europe can collaborate on major military projects.

Britain's defence ministry said details were still being worked out.

"The MOD does not recognise these comments," a spokesperson said. Work on cost-sharing arrangements "is being conducted before the development phase starts in 2025 and is not yet complete", the spokesperson added.

The Italian defence ministry said reports about a "non-equal participation" in the GCAP programme were "totally speculative".

In a statement, it said Italy, Britain and Japan "are steadily and swiftly working together on a partnership informed by the shared principle of equal partnership as stated" in December.

Japan's defence ministry said that discussions were ongoing and declined to comment on the cost-sharing ratios.

The defence ministers from the three countries, Japan's Yasukazu Hamada, Britain's Ben Wallace and Italy's Guido Crosetto, will gather in Tokyo on Thursday for their first face-to-face meeting since the fighter deal was agreed in December.

Although the upcoming meeting is not expected to produce any major fresh agreement, it may serve to boost political backing for collaboration.

"GCAP is not going to be a love affair, it's going to be a marriage," Wallace said during a speech on Wednesday at the DSEI Japan defence show near Tokyo, which featured a display of the proposed fighter.

Details of which companies would build what components were being hammered out in regular talks between more junior government officials and contractors in Britain, Japan and Italy, the sources said.

Those include Japan's Mitsubishi Heavy Industries, which is expected to lead the design with Britain's BAE Systems (OTC:BAESF) PLC. Italy's Leonardo Spa is working with Japan's Mitsubishi Electric (OTC:MIELY) on the aircraft's sensors, with Rolls Royce (LON:RR) PLC working with Japanese jet engine maker IHI Corp.

Since its defeat in World War Two, Japan has only ever worked with the United States on big defence projects. But in recent years it has begun to forge security ties with other U.S. allies, including Britain and Australia, as neighbouring China's military power has expanded.

Development of the new advanced fighter from 2025 will be overseen by a joint development organization, the sources said.