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ADELAIDE, Australia (Reuters) - At least some of Australia's new submarine fleet should be built in the country, an influential retired Japanese admiral said on Thursday, signaling a possible softening in Japan's position on the controversial A$50 billion ($39 billion) project.
Speaking on the sidelines of a conference of Australian naval officials, defense contractors and industry groups in Adelaide, retired Vice Admiral Yoji Koda said Japan should work with Australia to develop and maintain a submarine capability.
"At least some boats should be built in this country," said Koda, who is close to Japan's defense establishment.
"I used to be heavily involved in defense force planning ... Maybe the best way is proportional to the number of ships to be built," Koda told Reuters at the Future Submarine Summit, suggesting that perhaps only the first of up to a dozen submarines would be built in Japan.
Japan had been the frontrunner to replace Australia's aging Collins-class submarines with an off-the-shelf version of its 4,000-tonne Soryu-class vessel after Australian Prime Minister Tony Abbott agreed to cooperate on military technology with his Japanese counterpart Shinzo Abe last June.
But during an internal challenge to his leadership in February, Abbott promised something closer to an open tender to be completed by the year-end in an attempt to shore up political support.
Japan, Germany and France have now been invited to join a 10-month "competitive evaluation process" after which the Defence Department would advise the government on preferred bidders.
Asked in Tokyo about Koda's remarks, Admiral Katsutoshi Kawano, chief of the Self Defence Forces' Joint Staff, told Reuters he had little to say on the issue.
Another retired Japanese admiral at the Adelaide conference, Vice Admiral Masao Kobayashi, echoed the willingness to be flexible in a speech earlier in the day, saying it was "not very difficult" to imagine building submarines in Australia.
Sources had said Japan, only just coming out of a decades-old ban on arms exports, was reluctant to engage in a tender partly to avoid getting embroiled in a bidding war. It was also wary of undertaking significant construction in Australia because of concerns about sensitive technology.
John Bruni, a co-organizer of the submarine conference and director of Sage International, an Australian think tank, called Koda's comments a "game changer".
"That's confirmation from someone who is relatively senior in the Japanese Maritime Self Defense Force, and it gives heart to local industry that if we are going to accept the Japanese design, we could actually do most of the work here," he told Reuters.
Adelaide is home to state-owned shipbuilder ASC.
No current Japanese defense officials are at the conference while the makers of the Soryu-class boats, Mitsubishi Heavy Industries (7011.T) and Kawasaki Heavy Industries (7012.T), rebuffed an invitation to attend.
($1 = 1.2791 Australian dollars)
Additional reporting by Nobuhiro Kubo and Tim Kelly in TOKYO; Writing by Lincoln Feast in SYDNEY; Editing by Dean Yates