Japan is one of two finalists in the competition to build Australia*s next general-purpose frigates, in what could potentially be one of the biggest contracts ever for the country*s fledgling defense industry.

The upgraded Mogami class from Mitsubishi Heavy Industries and the Meko A-200 from Germany*s Thyssenkrupp Marine Systems have been shortlisted over Spanish and South Korean contenders for the next round of a multibillion-dollar program to replace the Royal Australian Navy*s aging Anzac-class warships, sources said.

Several Australian media confirmed the decision by Australia*s National Security Committee, adding that final selection is expected next year, although it is unclear whether this will happen before or after a general election that is due by May.