Japan's ambassador to Australia says both nations must "advance defence industrial co-operation". Photo: Dominic Giannini/AAP PHOTOS

A successful bid by a South Korean defence giant to take over an Australian-based shipbuilding company expected to construct Japanese ships would cause "some reaction" in Tokyo.

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Hanwha is seeking to double its stake in Austal, the nation's sovereign shipbuilder, to 19.9 per cent, which needs approval from Australia's Foreign Investment Review Board.

Australia's selection of Japan's upgraded Mogami-class frigate for the navy's future fleet includes a p

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