Japan’s selection of the F-35 for its F-4 Phantom replacement signals that despite technical problems and cost overruns in developing the single-engine stealthy fighter, there is a customer base willing to take a risk in pursuit of a longtime technological advantage on the battlefield.

Japan announced Dec. 20 (local) it would buy 40-50 fighters from Lockheed Martin under its F-X competition, further solidifying the long-standing security relationship between Washington and Tokyo. The package includes a final assembly and checkout (FACO) facility in Japan as well as work there to build components – potentially including the wings or center fuselage – and subcomponents. Specific details on the value of this FACO facility were not disclosed. Italy has a similar FACO facility estimated to cost about $800 million.

Separate contracts will be drawn up to buy of the aircraft and set up the FACO facility. Reuters reported that Mitsubishi Heavy Industries and IHI would participate in the production.

The Japan Air Self-Defense Force is the second foreign military sales customer not involved in the nine-member F-35 development and production partnership led by the U.S. to buy the fighter. Like Israel, Japan expects delivery of its conventional-takeoff-and-landing F-35A in 2016. Israel, the other non-development customer, plans to take delivery of its 19 F-35s from 2016-2018.

The announcement comes as the leadership transitions in nearby nuclear armed North Korea from Kim Jong-il, who died only days ago, to Kim Jong Un, his son.

Lockheed officials declined to identify a potential contract value, but some analysts estimate it to be worth $8 billion. The contract for the first four jets, likely to be used for training, is expected in Japan’s fiscal 2012, beginning in April.

“This program badly needed an endorsement like this, particularly one from a technically respected customer. But there are still many complications, especially price tag and work share demands,” Richard Aboulafia, an analyst with the Virginia-based Teal Group, told Reuters.

The Japanese aircraft will be part of the low-rate initial production 8 (LRIP 8) batch. Israel is also getting its first aircraft from this lot. The LRIP 8 aircraft will have Block 3 software, which will be the version required by the U.S. Air Force to declare initial operational capability, most likely in 2018.

Steve O’Bryan, vice president of F-35 business development, declined to outline any unique modifications that Tokyo requested.

Despite concern from Pentagon testers that the F-35 program will not be able to deliver jets in 2016 owing to an expectation of further developmental problems arising in flight testing (flight tests are only 18% complete), a senior Lockheed executive says that the date “is not something we are very concerned about” achieving. Air Force and Navy testers expressed skepticism over several developmental problems in October followed quickly by a wrap-up of issues in a Quick Look Report sent privately to new acting Pentagon procurement chief Frank Kendall, but later obtained by the press.

O’Bryan also says that the company can accommodate additional sales in LRIP 8 to South Korea should the country follow Tokyo’s lead and select the Joint Strike Fighter for its requirement of 60 aircraft. “There is capacity available,” he told reporters on a late-night teleconference in the U.S. “We have tooling available” for more jets in that lot.

Japan’s choice “reinforces the F-35 value proposition,” O’Bryan says. Per unit price for Tokyo remains to be seen, however. And, with Israel, Japan and possibly South Korea signing on for LRIP 8 buys, it is possible the Pentagon could further slow its early LRIP buys to further reduce the concurrency facing Washington’s piece of the program between development and procurement ramp up.

Lockheed beat Boeing’s F/A-18E/F and Eurofighter’s Typhoon. O’Bryan’s comments suggest that the promise of work on the advanced F-35 design put the F-35 proposal ahead in the competition.

“If they wanted to purchase more fourth-generation technology of aluminum and other older technologies, they already had that in the F-15 line,” O’Bryan said. “With the F-35 they get advanced composite work, automated milling and machining [and] they also get advanced avionics.”

Both losing contestants remain in other competitions around the globe. The F-35 win, though not a surprise, is more of an upset to Boeing, which has been on a campaign to entice nations to continue investing in legacy aircraft on the promise of lower procurement and sustainment cost. A win in Japan, though less likely, would have bolstered the company’s argument that the Super Hornet can provide more cost-effective capability for the price as nations continue to struggle with the global economic crisis.

Boeing issued a statement saying it “respects” Japan’s decision.

Boeing has orders to continue its F/A-18E/F work in St. Louis, Mo., until 2015, including sales to the U.S. Navy of the Super Hornet and EA-18G jammer model and Australia. The Super Hornet is also vying against the Dassault Rafale and Saab Gripen and for a win of Brazil’s long-pending tender for 36 fighters.

Paul Lewis, a Boeing spokesman, notes that the Super Hornet is also a potential for forthcoming competitions in Malaysia, Denmark the United Arab Emirates and “other Middle Eastern nations.”

Typhoon, widely considered as least likely to win in Japan, remains alive in India’s competition to build 126 Medium Multirole Combat Aircraft. BAE announced this fall it was cutting the production rate of Typhoons from 53 to 43; the company has a backlog of more than 260 aircraft, with more than 280 delivered.