Japan may be at serious risk of losing out in the international competition for the booming commercial drone market. The main reason? Archaic laws that restrict public use and hinder industrial development. By contrast, the big winner for many applications such as agriculture, inspection, surveying, and surveillance is increasingly looking like China.

"I wish it weren't true, but Japan's legal system is just too slow to change to the pressing needs of the drone industry," says Tsutomu Yokoyama, President of Yokoyama Corporation TEAD, a drone maker based in Gunma, about 100km northwest of Tokyo. "There are so many restrictions on where they can be flown and under what conditions, etc. I understand the concern for public safety, but it's not positive for industry."

TEAD (the acronym stands for Technological Air's Dream) specializes in the manufacture of relatively large drones, primarily for agricultural uses such as pesticide and herbicide spraying. But its primary market is China, where regulations for drones are comparatively lax.

From an industry perspective, the most recent changes to laws covering drone use can hardly be called encouraging. In mid-2015 Prime Minister Shinzo Abe's Cabinet approved a draft revision to the Aviation Law under which drone operators would be banned from flying drones in Tokyo's 23 wards as well as the central part of each prefectural capital.

Flying drones at night or under conditions in which the drone cannot be directly seen is also illegal. In addition, the transport ministry plans to designate regions with populations of 4,000 or more per square kilometer as "no-fly" zones. Violators would face fines of up to 500,000 yen.

By contrast, China's drone laws are seen as attempting to strike a middle ground between supporting industry and ensuring the public safety. Regulations are loose in rural or less populated areas, particularly for drones weighing up to 7kgs, while major cities like Beijing and Shanghai are more strict - but not onerously so - about when and where drone flights are allowed.

The difference between the countries is huge when considering how companies are incentivized to participate in the market, says Mr. Yokoyama. "There isn't a really unified voice pushing for sweeping legal changes in Japan. Individual companies are lobbying for certain tweaks and loopholes that will benefit themselves, but the whole infrastructure must be revamped," he says.

"The bigger picture is that the domestic industry with its great ability in electronics and precision machinery - all of which suits the drone industry so well - will lose out on a great opportunity."

For its part, TEAD is busy developing machines for its Chinese customers. These include the advanced twin boom hydro X model, which features tiny piston-driven gasoline generators that recharge the aircraft's battery-powered motors. This enables the 22kg UAV to stay aloft for up to 2 hours, many times that of most multi-copters.

In terms of the bigger picture, few question the opportunity at stake. The global commercial UAV drone market is expected to grow over 32% a year to around $5.6 billion by 2020, according to analysts at researcher Markets and Markets.

A less complicated regulated environment has enabled the number of Chinese drone makers to top more than 400, according to some counts. Between January and November 2015, China's drone exports were up 9.2 times to 2.7 billion yuan ($413.3 million), according to ZDNet.

By contrast, UAV Global lists fewer than a dozen Japanese drone makers.

Investor money is following the tiger; more than $500 million worth of funding plowed into China's drone industry last year, highlighted by over $125 million in cash infusions into a slew of Chinese drone makers such as Hong Kong-based Yuneec.

Many still expect sweeping legal changes to help save the day in Japan. These include a long-awaited frequency designations for 5.7GHz and 2.4GHz bands for specific use by drones. The current 10-milliwatt radio signal cap may also be lifted to 1 watt, allowing the transmission of images - including high-quality video - to around 5km.