In October 1987, Japan selected the F-16 as the basis of its new secondary fighter, to replace the aging Mitsubishi F-1 and supplement its main air superiorty fighter, the F-15J as well as the F-4EJ. Meanwhile also during the 1980s, General Dynamics (who developed the F-16) had proposed its F-16 Agile Falcon to the USAF. While the US would pass over the design concept in favor of all-new types (F-22/JSF) and upgrades to existing fleet, this enlarged F-16 would find a home in Japan.
The F-2 program was controversial, because the unit cost which include development costs is roughly 4 times that of a Block 50/52 F-16 which does not include development costs. Inclusion of development costs distorts the incremental unit cost (this happens with most modern military aircraft), though even at the planned procurement levels the price per aircraft was somewhat high. The initial plan of 141 F-2s would have reduced the unit cost by up to 10 million dollars per unit not including reduced cost from mass production. As of 2005 up to about 98 aircraft were planned. Also controversial is the amounts claimed to be paid to American side as various licensing fees, although making use of the pre-existing technology was much cheaper than trying to develop it from scratch.
Some differences in the F-2 from the F-16A:
a 25% larger wing area
composite materials used to reduce overall weight and radar signature
longer and wider nose to accommodate a phased-array radar
larger tailplane
larger air intake
three-piece cockpit canopy
capabilities for four ASM-1 or ASM-2 anti-ship missiles, four AAMs, and additional fuel tanks
Also, the F-2 equipes a drogue parachute, like the NATO version of the F-16.
The F-2's maiden flight was on October 7, 1995. Later that year, the Japanese government approved an order for 130, to enter service by 1999; structural problems resulted in service entry being delayed until 2000. The overall result of the program was essentially an aircraft two thirds the size and weight of the F-15J, using a single engine of half the power. As the F-2 is as at least as expensive as one anyway, it may have been simpler to purchase more F-15Js as they were already Japan's primary air superiority fighter.
Because of issues with cost-efficiency, orders for the aircraft were severely curtailed to 98 in 2004.
