The international shipbuilding market for oceangoing vessels is currently enjoying relative prosperity with the production level at its highest in 20 years, due to the fact that many of the large vessels built in the 1970s are now due to be replaced. In addition, as the phase-out schedule of single-hull tankers has been brought forward, a decent level of new building demand can be expected in the short-term future. However, while the supply capacity is likely to keep on expanding with a capacity increase in emerging shipbuilding countries and a productivity rise in existing facilities, the demand is anticipated to fall from the middle of the 2000s onward. Therefore it is feared that the supply-demand gap may widen in the future, resulting in increasingly intensified international competition. Furthermore, the future of the shipping market is becoming increasingly opaque as the U.S. economy is slowing down and the tanker market is weakening, and the stability of the shipbuilding market may suffer accordingly.

　

　In order for major and medium-size builders of oceangoing vessels to successfully survive international competition in the 2000s, it is of paramount importance to improve the sophistication of the Japanese shipbuilding industry to enable it to meet diverse needs while strengthening its cost-competitiveness.

　In the domestic market for coasting , smaller shipbuilders are suffering a serious downturn in sales, as the newbuilding demand for smaller vessels has plummeted reflecting a drop in cargo traffic due to the domestic recession structural changes in physical distribution by coastwise shipping ensuing from changes in transportation modes and the reorganization of logistics industries. Tightened international controls on fishing activities entailing a cutback on the tuna fishing fleet represent another negative factor. Therefore, these shipbuilders are urgently required to consolidate their technological and financial bases and to adjust their output to an appropriate level.

　In order to enable shipbuilding to remain an attractive industry in the long-term future, it is essential to develop new markets for shipbuilders through early commercialization of next-generation technologies including those for the Techno Superliner and the Mega-Float in addition to the construction of traditional oceangoing and coasting vessels.

　In the context of intensifying international competition in shipbuilding, the Ministry of Transport in 1999 convened the meeting of an expert group on the structural problems of shipbuilding with a view to analyzing the entire Japanese shipbuilding industry and to finding out what could be done to address these problems. The group released a report stating that the major shipyards constituting the core of the nation's shipbuilding industry should achieve enhanced cost competitiveness and extensive business activities concurrently, which would require the integration of business management in order to realize economies of scale at all stages of the shipbuilding business including sales, design and procurement.

　In the wake of this report, noticeable moves toward realignment of the industry have been under way among major shipbuilding companies since the autumn of 2000, including comprehensive tie-ups in the shipbuilding sector and studies on possible spin-offs or mergers.

　Smaller Japanese shipbuilders, mainly serving the market for coasting vessels, have been affected by decreased demand due to the stagnation of the national economy in general and deregulation of coastwise shipping. On the other hand, both qualitative and quantitative requirements regarding coasting ships are expected to substantially change, which would bring about changes to the nation's economic and employment structures. Against this background, the following measures are implemented in an integrated manner to consolidate the industrial bases of smaller shipbuilders and keep them technically able to supply vessels adequately adapted to changing requirements.

　The Techno Superliner (TSL) is a revolutionary new vessel Capable of carrying large volumes of cargo at twice the speed of, or even faster than, a conventional cargoship. If and when TSLs enter commercial service and high-speed marine transport networks are created this new means of transport will contribute to the vitalization of regional economies, provide an alternative transport route in the event of a major disaster, help create new industries and new job opportunities, and have positive socio-economic effects in other respects as well.

　At the same time because of its entirely new technological features, the TSL is expected to have its own problems including higher construction, operating and maintenance costs than conventional ships. With a view to overcoming these problems, a new ship holding and managing company to lease out TSLs will be established to develop a business environment which will make commercial TSL operation a feasible proposition. Co-ordination is now under way to commence operation of the first TSL on a domestic route in fiscal 2004.

　

　For shipbuilders worldwide operating together in a single international market, it is imperative to pursue international cooperation through developing a common perception of the status of newbuilding supply and demand and establishing competitive rules. As a leading shipbuilding nation, Japan has been committed to international co-operation by taking initiatives in the OECD framework and elsewhere toward addressing the following challenges so that it can continue to contribute to the development of the world and its economy. (For further details, see "International Co-operation.)