Last week, the Japanese Diet passed a law to launch a comprehensive effort to protect the economy from hostile actors. This, along with a review of national strategy and a long-term defense plan, will strengthen Japan’s ability to navigate rising geopolitical tensions in the Indo-Pacific and across the globe. Designed to put Japan’s infrastructure, technology and supply chains under greater scrutiny, the law will require government departments to set out the steps necessary to implement this goal over the next few years.
Economic security was a priority for Kishida’s Cabinet, and in October last year Prime Minister Fumio Kishida added a new cabinet post dedicated to economic security. Appointing Takayuki Kobayashi as his minister, he then set up a promotion council to draft legislation defining economic security goals. Finally, the Kishida Cabinet has appointed a private sector advisory group to help refine these goals and prioritize government planning. Needless to say, Keidanren and Keizai Doyukai, the major business associations, also weighed in by urging the government to stay in close contact with private sector actors the state would oversee as it seeks to bolster economic security.
Japanese political parties received little criticism of this new initiative as the government first introduced the legislation in the Lower House and then in the Upper House. During the deliberations in the Lower House, several opposition parties presented their own ideas. The Ishin no Kai has emphasized building government surveillance capabilities, while the Democratic Constitutional Party of Japan has suggested shifting the focus from technology and patents to industries like energy and manufacturing. eating. The only real criticism came from the Japanese Communist Party, which initially said it was concerned that this was simply a way for bureaucrats to get lucrative jobs after retirement (amakudari). Later, the JCP argued that this new law would allow too much state control over the private sector. In the end, however, the bill easily passed both houses.
Four areas of policy attention make up this economic security initiative. First, securing supply chains for critical materials, such as semiconductors, will be a priority. Second, the security of basic infrastructure will be ensured. Third, government and private sector-led research to identify key areas for innovation and technological development will be undertaken to ensure competitiveness. Fourth, some Japanese patents will be classified to protect critical technologies.
The law provides the mandate for government action, but various departments must now refine this economic security agenda through orders and other executive actions. Securing supply chains and identifying critical next-generation technologies for protection should be accomplished within the next nine months, while securing national infrastructure and overhauling the patent system will likely take longer. Improving protection against cyberattacks will remain a priority. Overall, the Japanese government expects this to take several years to implement.
Already, Japan has taken steps to secure the supply of semiconductors. TSMC, the Taiwanese chipmaker, will build a new manufacturing plant with Sony in Kumamoto, a deal in which Sony is investing $500 million. Other critical materials, such as rare earths and materials needed for battery production, will likely be on Japan’s priority list. It remains to be seen how much of the financing to ensure supply chains will be borne by the state and how much by the private sector. Similarly, Japanese companies will be alert to the specific mechanisms put in place by the government to oversee and, if necessary, penalize technology transfer.
Likewise, coordination between Japan, Europe and the United States on economic security measures will be a growing area of strategic alignment. All industrial economies will seek to stabilize the supply of essential technologies, either through foreign direct investment or by diversifying sources of trade. Aligning economic security approaches should also be an important priority for strategic coordination between Japan and the United States, and the most obvious venue for this would be the new 2+2 economic meetings.
Serena Waters assisted with research for this blog.