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Japan's advanced attack Soryu submarine carried out drills with Australia's navy on Tuesday as a German company launched a campaign to advertise its expertise - as a race for a A$50 billion contract to build Australia's next submarine fleet neared a climax.

 

Industry sources told Reuters the Australian government is speeding up its decision on the contract - France is the other major bidder - with a winner now expected to be announced by the end of the month.

 

Australia intends to buy 12 new submarines, a centrepiece of its defence strategy unveiled in February, which called for an increase in military spending of nearly A$30 billion over the next 10 years to protect strategic and trade interests in the Asia-Pacific.

 

Industry watchers had anticipated a decision for one of the world's most lucrative defence contracts to come later in the year, but Australian Prime Minister Malcolm Turnbull's recent gamble on a July 2 election has sped up the process.

 

The contract is politically sensitive as it will likely have an impact on thousands of jobs in the shipbuilding industry in South Australia state. Retaining votes in key electorates in that state will be critical for the government.

 

Two industry sources in Asia who are involved in the bid process told Reuters they were expecting an announcement as early as April 29. They declined to be identified because they are not authorized to talk to media.

 

On Tuesday, the Japanese Soryu submarine, a variant of the submarine that Mitsubishi Heavy Industries and Kawasaki Heavy Industries are offering to build, began exercises in Sydney harbour with Australia's navy - the first of its kind since 1999.

 

Despite the presence of the Soryu submarine and a well-attended media tour, Japan's Chief of Staff Commander Fleet Escort Force insisted the exercise was not a sales pitch.

 

"We do not have an ulterior motive in having this media conference," Rear Admiral Ryo Sakai told reporters.

 

As Japan showcased its submarine, Germany's ThyssenKrupp AG's launched an advertising campaign to illustrate its commitment to build the 12 submarines in South Australia.

 

"The German industry, backed by the German government felt it would be appropriate to explain to the Australian public the nature of the proposal being made," said John White, chairman, ThyssenKrupp Marine Systems Australia.

 

ThyssenKrupp is proposing to scale up its 2,000-tonne Type 214 class submarine.

 

France's state-controlled naval contractor DCNS has proposed a diesel-electric version of its 5,000-tonne Barracuda nuclear-powered submarine.

 

America's Raytheon Co, which built the system for the Collins-class boats, is vying for a separate contract for a combat system for the submarine with Lockheed Martin Corp, which supplies combat systems to the U.S. Navy's submarine fleet.