TOKYO—Japanese military contractors are taking their first steps toward selling weapons abroad since Prime Minister Shinzo Abe relaxed an export ban, a politically sensitive shift for a nation that long hesitated to turn its technology prowess into arms-sales profits.
On Thursday, the Ministry of Defense approved exports of a sensor made by Japan's largest military contractor, Mitsubishi Heavy Industries Ltd. 7011.TO -0.92% , for use in air-defense missiles manufactured by Raytheon Co. RTN +0.74% of the U.S. The ministry also cleared a Japan-Britain research project involving technology for air-to-air missiles.
A week earlier, Mr. Abe and Prime Minister Tony Abbott of Australia signed an agreement to collaborate on submarine development. Analysts say the deal could give Australia access to a propulsion technology that allows Japanese submarines, built by Mitsubishi Heavy and Kawasaki Heavy Industries Ltd. 7012.TO -1.27% , to remain submerged for unusually long periods.
"My sense in talking to Japanese defense companies is that there is a great deal of excitement and anticipation about what they can achieve," said Jon Grevatt, an analyst at IHS Jane's in Bangkok.
But they are being careful not to show that excitement too openly. Along with Mr. Abe's recent move to ease restrictions on the nation's military activities, his decision to permit limited arms exports has angered neighbors like China and South Korea, which see a retreat from Japan's postwar pacifism.
What's more, it isn't clear how quickly Japanese companies can learn the intricacies of the international arms trade—a tough business with no shortage of competition. Weapons manufacturers in countries like South Korea, Turkey and Malaysia are also moving to carve out a bigger share of a business long dominated by U.S., Russian and Western European companies.
"People outside Japan think that Japan is really opening up its defense industry,'' said Yuzo Murayama, a professor and defense expert at Doshisha Business School in Kyoto. "It's not true. This will take a long time."
The government says Japanese arms manufacturers need to be able to export in order to lower the country's high cost of procuring weapons. Because the industry is fragmented and production runs are small, Japan sometimes pays twice or three times as much as other countries' armed forces for comparable weapons, analysts say. And the country has been mostly cut off from international weapons-development joint ventures, which are increasingly used for complex, expensive weapons systems.
The largest Japanese arms manufacturer is Mitsubishi Heavy, with $3 billion in military revenue in 2012, according to the Stockholm International Peace Research Institute. That is one-twelfth the total of Lockheed Martin Corp. LMT +0.72% of the U.S. and puts the Japanese company only 29th among military contractors world-wide, according to the Stockholm institute.
Even under the new policy, Japanese contractors will be restricted from selling to regimes involved in international conflicts and to countries that intend to re-export military hardware.
Sales will be subject to government approval on a case-by-case basis, and much will depend on Japanese public opinion, which polls have shown to be skeptical about the changes.
Satoshi Tsuzukibashi, director of the office of the defense-production committee of Keidanren, the Japanese business lobby, compared the tentative steps abroad to the dawn of the Meiji era in 1868, when Japan turned its back on centuries of isolation. "The current situation is a little bit like that," he said.
In June, more than a dozen Japanese companies with military contracting arms, including Mitsubishi Heavy, Mitsubishi Electric Corp. 6503.TO -0.92% , Toshiba Corp. 6502.TO -0.42% , Fujitsu Ltd. 6702.TO +1.82% , Hitachi Ltd. 6501.TO -1.05% and NEC Corp. 6701.TO -1.56% , hung out their shingles at a security trade fair in Paris. At the Farnborough International Airshow in Britain last week, Japanese aerospace companies discreetly displayed promotional material for military aircraft like Kawasaki Heavy Industries' P1 maritime patrol plane alongside their latest civilian technologies.
"We are seeking the possibility to expand our business,'' said Takumi Kobayashi, a Kawasaki manager. "The export of defense, it is just the beginning. We are seeing how it will go."
Mr. Tsuzukibashi said he expected Japan's military exports to remain well below $1 billion a year for many years to come. By contrast, France and Britain, whose military spending is roughly equal to Japan's, exported an average of $10.8 billion and $8.7 billion of weapons a year, respectively, from 2006 through 2011, according to a French government report.
Under the export deal that the government approved Thursday, Mitsubishi Heavy will be permitted to supply sensors to Raytheon for Patriot Advanced Capability-2 missiles destined for Qatar. The PAC-2 is an older version of the Patriot system, so the sensor is no longer produced in the U.S., officials said.
Mr. Tsuzukibashi said other potential exports include the C-2 transport aircraft, made by Kawasaki Heavy, and the US-2 seaplane, produced by ShinMaywa Industries Ltd. 7224.TO -1.56% Japan has been talking to India for several years about the US-2, which can be used for civilian maritime-rescue operations as well as military functions. But analysts say the high cost of the plane, about $100 million, has been a barrier, and the countries haven't reached a definitive agreement.
Because of the high prices and political sensitivities surrounding overseas sales of complete weapons systems, analysts say it is more likely that Japanese military contractors will focus their export efforts on parts, including sensors and advanced building materials such as carbon fiber.
"On nonlethal equipment, the market is a bit more open,'' said Siemon Wezeman, senior researcher at the Stockholm institute. "Japan will have to develop a structured policy on what is allowed and where. They still have to invent that wheel." —Rory Jones in Farnborough, England, contributed to this article.