The Journal The Authority on Global Business in Japan

Mankind’s relationship with space changed forever on October 4, 1957, when the Soviet Union launched Sputnik 1, an 83-kilogram unmanned satellite. This was followed on November 2 by Sputnik 2 and its canine passenger, Laika, and on April 12, 1961, by Vostok 1, which carried cosmonaut Yuri Gagarin, the first human to go into space.

These events pushed the United States to prioritize and accelerate its own space program and led to groundbreaking achievements such as the Apollo moon landings and the space shuttle program, which offered Japanese explorers and scientists access to space. Japan itself put its first satellite, Osumi, into orbit on February 11, 1970.

Interstellar Technologies‘ MOMO rocket could greatly reduce launch costs for small payloads.
Photo: ©2017 Interstellar Technologies Inc.

One thing all these efforts have in common is government backing. That has continued to be the case in the years since. And while today government continues to play the primary role in the development of technology for reaching space, the private sector has come on strong over the past two decades. Jeff Bezos founded Blue Origin LLC in 2000, Elon Musk launched Space Exploration Technologies Corp.—better known as SpaceX—in 2002, and Richard Branson expanded his transportation empire to the stars in 2004 with Virgin Galactic. The quests of Bezos and Musk are chronicled in The Space Barons, a new book by Christian Davenport released on March 20.

Japanese entrepreneurs are also eying space. Interstellar Technologies Inc. (2003), PD AeroSpace, LTD. (2007), and Axelspace Corporation (2008) are all homegrown private space companies, and Singapore-based Astroscale Pte. Ltd., founded in 2013, opened its research and development office in Tokyo in 2015.

Photo: Mitsubishi Heavy Industries, Ltd.

LEADING THE WAY
Japan, a relative latecomer to space business, draws great inspiration from the United States. The US National Aeronautics and Space Administration (NASA) and the Japan Aerospace Exploration Agency (JAXA) have a long history of cooperation. So, it is natural to look across the ocean for the direction Japan’s space industry may take.

The ACCJ Journal asked Garvey McIntosh, NASA Asia Representative at the Embassy of the United States, Tokyo, about the synergy between government and private efforts. “In the United States, the private sector is a key partner in space exploration. NASA’s ambitious commercial space program has enabled a successful partnership with SpaceX and [defense industry company] Orbital ATK to resupply the International Space Station,” he said. “And soon, NASA and its international partners will able to use commercial services to deliver crew from the United States to the International Space Station and other destinations in low Earth orbit. A successful and vibrant commercial sector is extremely important to overall US objectives in space exploration.”

The Japanese government has taken its own steps to nurture the private space industry. On November 16, 2016, the Diet passed the Space Activities Law and the Remote Sensing Law, both of which will take effect this November.

“These government initiatives are intended to facilitate and boost the private sector’s momentum and activities,” said JAXA spokesperson Nobuyoshi Fujimoto, speaking to The ACCJ Journal about US–Japan parallels. “Interstellar Technologies Inc. illustrates the ongoing private partici­pation in space transport services. However, the social landscapes of the two countries are different and the size of investment in the Japanese market is smaller. Japanese private businesses will evolve to offer services and products that are unique to the market. Private-sector space companies in Japan will probably not be the same as SpaceX or Blue Origin.”

But while these companies may not be planning missions to Mars, they are charting paths into low Earth orbit that are important for business—and by doing so they free up the government agencies to focus on exploratory missions.

McIntosh explained: “While there is a clear focus on the Moon and, ultimately, Mars, it is important that we look back to make sure there is a vibrant low-Earth-orbit economy spurred by the work that has already been done on the International Space Station. Low Earth orbit is the area in which space startups might be able to contribute immediately. We are looking for them to be innovative and to come up with ideas as to how they might best contribute.”

GO LOW
Axelspace is advancing the use of low Earth orbit through satellites that are more affordable and flexible. The company’s microsatellites offer service providers the ability to bring technologies to market that might otherwise be too expensive.

Axelspace President and Chief Executive Officer Yuya Nakamura cites low cost and short development time as benefits. “Traditional satellites are normally too expensive for private companies, so microsatellites would be a best fit for most applications in the private sector. We can design a dedicated satellite for our client and offer full flexibility for what they want to do with their satellites.”

The company’s own AxelGlobe, an infrastructure for observing Earth, is a good example of how microsatellites can be used effectively despite their size and individual limitations. “Small satellites are low cost, but their capabilities cannot compete with traditional big satellites. You get what you pay for,” explained Nakamura. “So, we wanted to create a new value in a different manner from big satellites. The number of satellites in orbit is our answer. Big satellites are expensive, so typically it is a single satellite mission for most applications. We can launch dozens of small satellites if we have the same budget of a big satellite. Frequency is the new value. We can monitor the whole world on a daily basis with our AxelGlobe constellation.”

Comprising 50 satellites, AxelGlobe will be able to obtain imagery of more than half of the planet’s dry land once a day at a resolution of 2.5 meters—high enough to make out individual cars. The first three satellites will be launched this year, 10 more will be added in 2020, and the full 50-satellite formation will be in place by 2022.

Nakamura says Axelspace is talking with US satellite imagery analytics companies about collaboration. “They are data hungry, and Axelspace can be a good partner for them.”

50 satellites will make up Axelspace’s AxelGlobe imaging constellation.
Image: Axelspace Corporation

AIM HIGH
But, there is a challenge: getting the satellites into space. Accessible and reliable launch vehicles that can deliver payloads more frequently are critical to the success of efforts such as those being undertaken by Axelspace.

“Currently we use Russian rockets. It is a ride-share service, which is typical for most small satellites,” said Nakamura. “However, in that case, we are not a primary passenger and cannot decide when to launch or in which orbit to place our satellites. We want small rockets. It is important to have a right to decide such parameters for our own business.”

This is where companies such as Interstellar Technologies come in. Founded in 2003 by former Livedoor President Takafumi Horie, Interstellar Technologies is developing a liquid-fuel sounding rocket called MOMO. The 9.6-meter launch vehicle can carry small satellites into orbit from the facility in Hokkaido. In contrast, Japan’s current workhorse, the H-IIA built by Mitsubishi Heavy Industries, Ltd., measures 53 meters. Each H-IIA launch costs about $90 million, whereas a MOMO launch—although not officially stated—is estimated by industry experts to be about $470,000.

Meanwhile, PD AeroSpace is working on an engine that combines rocket combustion and jet combustion technologies, which can improve safety and also lead to cost savings in unique ways.

“It is possible to use already existing airports because the space­plane can fly like an airplane in jet mode when returning to Earth,” explained founder and CEO Shuji Ogawa. “It can hold in the air and the landing speed can also be reduced, therefore there is no need to own specific­ally designated spaceports. This allows us to reduce ground infra­structure operation costs.”

Since the spaceplane’s structure is simple, the number of parts can be decreased, to reducing both manufacturing and maintenance costs.

PD AeroSpace’s engine technology can be used as a flyback booster to launch orbital rockets for small satellites, for space tourism planes, and even for hypersonic flights to more quickly move goods and people around the world.

Astroscale’s Chris Blackerby

DRIVING FORCE
Regardless of path, what motivates entrepreneurs to tackle the challenges of space when they know that return on investment (ROI) and profit may be elusive?

Astroscale Chief Operating Officer Chris Blackerby, whose company is focused on cleaning Earth’s orbit, says it’s a desire to make difference. “Any investment in space takes a different kind of vision. It’s not going to be the immediate ROI. It’s not going to be ‘I need to see a three- or five-year return on what I invest.’

“We fully believe that there is a strong business case for what we are doing, but there is also a societal benefit case. So, the companies that are investing are doing so for the return, yes, but also for the betterment of society.

“I would say that the people who are doing things in space, who are trying to start businesses in space—whether they be Elon Musk, Jeff Bezos, Richard Branson or small startups in Tokyo—have the same mindset and passion for space generally. There’s a desire to help society in the long term and, of course, to make a profit—I mean, that’s behind any business, and no business is going to survive without that and it’s a motivating factor for people. But if it was only that third thing, if it was only a desire to make a profit, there’s a lot of other places that all of us could go to do that. It’s in those first two things where we see that this is a special place to be. That’s a common thread among all the people who are doing this investing.”

FUNDING
Because ROI is particularly uncertain—or at least far off—securing money for the development of space-related technologies can be difficult.

Blackerby said Astroscale has been successful thanks to a CEO with a vision and the ability to articulate it in a very compelling way. “He would go to these conferences and hear about this threat of space debris—this looming problem—and everyone was talking about it. Everyone still is talking about it, but very few are putting forward a solution to actually solve it. He had an idea to tackle it and over the past four and half years has raised more than $50 million.”

Ogawa agrees that the biggest problem facing the private sector is funding but does feel that the Japanese economy is becoming favorable to private space endeavors. “Beginning in 2015, some Japanese space ventures started to succeed in raising billions of yen in funds. At this time, I found respective articles about space business by H.I.S. Co., Ltd. President Hideo Sawada and ANA Holdings Inc. President Shinya Katanozaka. So, I went to negotiate directly with both.”

Reaching out to them was a key move for PD AeroSpace. The company now has collaborations in place that will see H.I.S. selling their services and ANA operating their spaceplanes in the future.

For Axelspace, it was blockchain startup and venture capital firm Global Brain, a general partner of KDDI Open Innovation Fund (KOIF), which helped. “One of the venture capitalists at Global Brain had a background as a space engineer. Our angel investor introduced us to him,” said Nakamura. “At that time, few capitalists knew about space business, but he fully understood our idea and decided to invest. We worked together to persuade other companies to invest in our project.”

H.I.S. and ANA are investors in PD AeroSpace’s spaceplane.
Photo: ©PD Aerospace, Ltd. / Koike Terumasa Design and Aerospace

NEXT PHASE
While private-sector activity such as SpaceX’s Falcon 9 launches in the United States or Interstellar Technologies’ compact MOMO rocket in Japan grab media attention these days, the reality is that our future in space still depends largely on the resources of nation-states. Rather than transitioning from government to private sector, the next stage of space business and exploration will require synergy between the two.

“It is going to be something that government and private industry will have to continue to do together,” said Blackerby, who worked at NASA for 15 years, including five as the attaché at the embassy in Tokyo, from 2012 to 2017. “What happened in the past five to 10 years is this transition to more of these smaller venture space companies, which are doing a variety of things. That excitement that they bring to the industry is necessary, and this creative thinking to find new solutions is really important. But I would say a transition from a solely government-run to a jointly cooperative small venture industry is where we are heading. The government has a very important role in driving exploration and initiatives where there isn’t a real tangible return that can be articulated. So, the government is not going away in terms of space.

“People invest in space to get the benefits of space utilization and exploration, and the impact that space utilization—both in low Earth orbit and exploration—has on our lives is only going to increase. And it’s going to increase from an inspirational standpoint, from a security standpoint, from a communication standpoint, from just everyday life. Space is only going to be more relevant to what we’re doing; and governments know that, so they’re going to continue to invest in capabilities that can help them.”

Ogawa sees Japan’s space business as staying on a small scale in terms of investment compared with that of the United States, but remains confident that the tech­nology has developed to the point where private companies can do business in space without government funding.

Meanwhile, Nakamura sees ways the government can help, both in terms of funding and beyond it, saying they can “provide risk money, make regulations simple and easy, and give credibility when we negotiate with foreign governments.”

He closed by stressing that a transition to the private sector is mandatory. “The government-only space activities are not sustainable. One of the biggest challenges we now face is launch. It would take years for us to see small launchers to frequently put small satellites into orbit. We require high frequency, high reliability, and low cost. The current situation is not easy, but such problems will definitely be solved someday in the near future. I’m optimistic about that.”

Christopher Bryan Jones is Editor-in-Chief of The ACCJ Journal. Originally from Birmingham, Alabama, he has lived in Japan since 1997.