The 11-day joint military exercise between the Royal Australian and Japanese navies has coincided with speculation over whether Japan will win the contract to build Australia's future submarines.
Captain Brian Schlegel of the Royal Australian Navy says it is an important annual naval exercise.
"It just continues to build that seemless interaction between ships that fundamentally work together and engender regional stability," Captain Schlegel said.
“We will cover the full gamut of operations that the Japanese navy and the Australian navy can work on.”
The exercise has run between the two countries since 2009, and aims to improve communication and tactical readiness at sea.
"The fact that the Japanese have come here and brought the submarine with them, means that we are truly going to have an excellent bilateral exercise over the next couple of days," Captain Schlegel said.
While the arrival of these warships is extremely significant, it's the submarine which has attracted the most attention.
The last time a Japanese sub was in Sydney harbour was an unwelcome entry during World War II.
Now, 74 years later, the relationship between Australia and Japan has warmed in a way neither country back then would have ever imagined.
Admiral Ryo Sakai from the Japanese Maritime Self-Defense Force said it was a moment not lost on his sailors.
"I'm sure they felt a special sentiment, and it's very for good for our sailors to know the history," the Admiral said.
In just a few weeks, the federal government is tipped to announce which country will build Australia's future fleet of submarines.
The lucrative $50 billion contract is currently in a three-way competition between Japan, France and Germany.
"I'm just a sloppy shipdriver, so I'm not a position to say anything about this issue," Admiral Sakai said.
The fleet will move south to the Jervis Bay naval base on Wednesday, before returning to Sydney on Friday.
