Japan says may cancel Lockheed F-35 if price rises

Japan may cancel orders for Lockheed Martin's F-35 fighter jets in the case of a price rise or delivery delay, Defense Minister Naoki Tanaka said on Wednesday, putting Tokyo's choice of next-generation combat aircraft in doubt.

Tokyo has warned Washington against increasing the price, but this was the first time Tanaka had raised the possibility of cancelling the order in public.

The Pentagon this month confirmed plans to put off orders for 179 F-35s over the next five years to save $15.1 billion, a move that a Lockheed executive said would increase the price of the radar-evading warplane.

Japan is due to pay 9.9 billion yen ($122.96 million) per fighter for an initial batch of four that are scheduled for delivery by March 2017. Japan plans to buy 42 in total.

"As for the first four planes, I expect an official contract to be concluded by this summer. If it turns out they cannot meet what they have proposed by that time, that would raise concerns about our defense capability," Tanaka told parliament.

"I believe we would need to consider as a potential option matters like cancelling our orders and starting a new selection process if that is the case."

Continued schedule delays and talk of lingering technical issues have prompted the eight countries that are helping to fund Lockheed's development of the new plane -- Britain, Australia, Turkey, Canada, Denmark, Norway, Italy and the Netherlands -- to rethink their own near- and long-term plans.

Japan, which is concerned about China's rapid military buildup and constant threats from impoverished North Korea, in December chose the F-35 over combat-proven but less stealthy rivals.

The F-35 competed against Boeing's F/A-18 and the Eurofighter Typhoon, made by a consortium of European companies including BAE Systems.

Lockheed Martin has said it is committed to providing F-35s that meet the cost, schedule and industrial requirements of the Japanese government, but added that F-35 pricing is determined by talks between the Japanese and U.S. governments.

Japan's defense budget has been under pressure with the country saddled by a public debt twice the size of its economy.

Stealth technology has drawn much attention in Japan since China, which has a long-running territorial dispute with Japan, confirmed last year it had held its first test flight of the J-20 stealth fighter jet. ($1 = 80.5150 Japanese yen)