In 1929, Tetsuo Miki, a designer at Aichi Tokei Denki Kabushiki Kaisha (Aichi Watch and Electrical Machinery Company) started the design of a catapult launched reconnaissance floatplane with the aim of replacing the Nakajima E2N aboard the Imperial Japanese Navy's warships.
Its fuselage was of steel tube construction with fabric covering, while it had wooden wings that folded to the rear for storage aboard ship.
The two-man crew sat in open cockpits, while the aircraft's undercarriage consisted of twin floats.
[1] The AC-1 engine was not successful, however, and the project was abandoned after one of the prototypes was destroyed when an exhaust fire spread to the fuselage.
The type did form the basis of the later Aichi AB-3 floatplane, of which a single example was built in 1932 for China.