CANBERRA - A former Japanese naval chief confirmed on Friday his country was capable of building 12 submarines for Australia in Adelaide, should Japan win the Australian government's $40 billion tender.

News Corp reported on Friday that former Japanese Navy Commander in Chief, Yoji Koda, had said it was "feasible and possible" to build submarines in Australia.

Construction companies from France and Germany are competing with the Japanese government for the right to build Australia's next class of submarines, with locals campaigning for the vessels to be built in Australia, regardless of where they are designed.

The report came after former chairman of the Submarine Institute of Australia retired Rear Admiral Peter Briggs said it would be a "significant national disaster" if the submarines were built overseas. A negative impact of $22 billion on the Australia economy has been predicted if the contract is fulfilled entirely overseas.

Vice Admiral Koda said it got "much easier" if the submarines were built in Adelaide.

"If all the boats are built in Japan, it's very difficult - we 're not so good at English," he said, "Building all of them in Japan is not realistic."

Koda, an adviser to Japan's national security body, said Japanese Prime Minister Shinzo Abe was keen to win the Australian contract but denied a secret deal had already been struck between Abe and Australian Prime Minister Tony Abbott by saying it would cost Abe his political credibility.

The Australian government is said to favor the Japanese bid.

Rear Admiral Briggs, speaking at a submarine discussion at the Royal United Services Institute, said the Australian government needed to consider two options after its "competitive evaluation process," rather than just one.

"A two-horse race would guarantee the best capability and the best price," he said, "It would be a significant national disaster if they were not built here."