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Australia Selects Contractor to Build New Submarine Fleet

FILE - A French attack nuclear-powered submarine leaves the Toulon military harbor.

Australia has chosen a French contractor to build its new fleet of submarines, turning away competing bids from regional allies Japan and Germany.

Prime Minister Malcolm Turnbull announced Tuesday that naval contractor DCNS will build 12 new submarines for Canberra for an estimated $40 billion -- Australia's biggest-ever defense contract. Turnbull said the offer from DCNS "represented the capabilities best able to meet Australia's unique needs."

The announcement was made in the southern manufacturing hub of Adelaide, where the new fleet will be built. ""Australian built, Australian jobs, Australian steel, here right where we stand," Turnbull said.

DCNS beat out Japan's Mitsubishi Heavy Industries and German-based ThyseenKrupp Marine Systems. Many believed Japan would win the contract as part of former Prime Minister Tony Abbott's push to deepen diplomatic and strategic ties with Tokyo and Washington.

But the deal was thrown in doubt when Abbott was ousted in a party coup late last year, along with fears that it could anger China, Australia's biggest trading partner.

Japanese Defense Minister Gen Nakatani called Canberra's decision "deeply regrettable" and said Tokyo will seek an explanation.