(Recasts, adds comments from sources, delegation, details)
By Matt Siegel
ADELAIDE, Australia, Aug 26 (Reuters) - Japan's effort to charm Australian politicians and the public over its bid for a A$50 billion ($35.60 billion) submarine project appeared to stumble on Wednesday, with officials from Tokyo resisting pressure to commit to building the vessels in Australia.
Japanese defence officials and executives from Mitsubishi Heavy Industries 7011.T and Kawasaki Heavy Industries 7012.T made their first major pitch to build 12 stealth submarines for Australia's navy during public briefings for defence contractors and the media in Adelaide, a ship-building hub.
Once seen as the frontrunner to win the contract, the Japanese bid has since come under scrutiny because of Tokyo's unwillingness to commit to building any submarines in Australia, where manufacturing jobs are a hot-button political issue.
Rivals ThyssenKrupp Marine Systems TKAG.DE (TKMS) of Germany and France's state-controlled naval contractor DCNS have both said they would build entirely in Australia, targeting members of the Australian government with the economic and political benefits of their proposals.
Both European firms have also courted the Australian defence industry and media in key cities.
Two sources present at separate meetings between the Japanese delegation and Australian officials said the Japanese did not seem to have much understanding of the political sensitivities and appeared to have lost ground to the rival bidders.
They said the delegation gave few details about the Japanese proposal beyond reassurances they would adhere strictly to the rules of the process.
"It seems like the (Australian) federal government just told them that they had to come down here and talk to us," one source told Reuters under the condition of anonymity because he was not authorised to speak to the media.
"I think they're really struggling to connect to the public. It's just not in their DNA to speak publicly about defence issues."
A defence industry source in Tokyo said the German bid was shaping up as the one to beat.
"There is some concern in the Japanese government," said another industry source in Tokyo familiar with the proposals.
Both sources said Japanese defence ministry officials had informally asked U.S. contractors with close ties to Japanese industry, including Raytheon Co RTN.N and Lockheed Martin Corp (NYSE:LMT) LMT.N , to advise Mitsubishi Heavy on managing its first ever bid to sell military equipment to an overseas government.
NO SECRET DEAL
Australian media has reported that Australian Prime Minister Tony Abbott and Japanese Prime Minister Shinzo Abe privately agreed last year that Japan would get the contract. Both sides have denied the existence of such a deal.
"We are not the ones to be blamed for others speculating that there may be a secret deal. So the current situation has us a little bit perplexed and confused why such speculation is still being voiced," Masaki Ishikawa, director general for acquisition reform at Japan's Ministry of Defence, told reporters.
Ishikawa and other Japanese officials also declined to be drawn on whether Japan would build the vessels in Australia.
Abbott has described Japan as his country's "closest friend in Asia". The United States is also keen to spur friendlier ties between its two key allies in Asia.
Officials in Adelaide, capital of South Australia state, on Wednesday insisted on at least 70 percent local worker participation in the project.
"The state government, local defence industry and workers are committed to protecting Australia, by building a strong defence industry, which supports the workers in our shipyards," state defence minister Martin Hamilton-Smith said in a statement.
Liberal Senator Sean Edwards - chairman of the economics committee in the upper house of Australia's parliament - said he had repeatedly conveyed to Japanese officials the political importance of pledging to build in Australia.
"They get it," he told Reuters in an interview on Tuesday.
Each of the bidders has been asked to provide three estimates: one for construction overseas, one for a partial assembly in Australia and one for a full build in an Australian shipyard.
An expert advisory council is expected to deliver its recommendation in November. ($1 = 1.4047 Australian dollars)