Japan's opening of defense exports and manufacturing is a challenge and an opportunity for Latin America, especially Brazil, because of the multibillion-dollar investments made into developing an export-oriented arms industry in the region.

Brazil launched a military regeneration program three years ago and has secured partners for building civilian and military aircraft, diesel-electric submarines and a nuclear-powered submarine. It is in talks for key technology transfers in a fighter jet program.

Japan, too, needs to catch up on defense production after decades of a moratorium that forbade development of military hardware production and technologies.

Although Japan is collaborating with the United States on several defense-related technology exchange programs, it has no known program to develop and produce weapons.

For Brazil, Japan's advanced technologies are an incentive to explore and build technology exchange programs with Japanese industry that may now be free to develop its defense capacity.

Analysts said Japan's decision was likely influenced by China's and South Korea's increasing investment in their defense industries and recent success with export contracts for defense and security products and services.

Brazil is in the forefront of defense production in Latin America but is also developing extensive defense production programs in collaboration with Argentina. Chile began looking into defense industry development and Bolivia has actively sought foreign partnership on a smaller scale.

Japanese Foreign Minister Koichiro Gemba said the policy shift meant Japan will be able to transport military equipment for peace-building tasks and international cooperation.

Officials said changes because of Japan's reinterpretation of its pacifist policy, which was enforced after World War II, means Japan would be able to respond more proactively to international threats of terrorism and security issues.

While Japan looks to revive research and development in its largely neglected defense industry, Brazil has reinstated programs for defense manufacturing that became a major earner under military dictatorship. Brazil's arms industry thrived as it became a key customer for Iraq during the Iran-Iraq war but suffered when the conflict ended in 1988.

Japan's announcement has also raised the possibility of the international defense aviation market expanding further after Brazil emerged as a major contender for small- and medium-sized military transport aircraft. Japanese industry analysts said Japan would enter the defense market with a modest beginning, supplying small-scale defense supplies, before its defense research and manufacturing catches up with existing suppliers in the market.

Brazil has the largest Japanese community outside of Japan, now estimated at about 2 million. Impoverished Japanese farmers driven out by the end of Japan's feudal system formed the first wave of immigrants, followed by more Japanese migration to Brazil between the first and second world wars. Internment, mistreatment and slavery during the two wars soured relations between the countries.

Bilateral trade and economic collaboration has thrived in recent years and Japanese direct investment in Brazil exceeded $1.6 billion in 2009.