By Haruzake (pen name)
The enactment of an “economic security promotion act” is one of the major policy goals that the government of Prime Minister Kishida Fumio seeks to achieve. The legislation is aimed at preventing the outflow of semiconductor and other state-of-the-art technologies overseas and promoting foreign investment in Japan from the perspective of the national interest and security.
The emphasis on the national interest and economic security is seemingly a good reason to promote the law, but in a general sense, government’s intervention in the market is bad for the economy. One very recent example is the case involving Toshiba. METI made headlines in preventing aggressive foreign shareholders of the Japanese firm from making proposals at a shareholders’ meeting and exercising their voting votes.
The METI minister at the time commented that “we did what we thought was right as a policy,” suggesting he was saying, “What’s wrong with it?” This highlighted that he did not seriously reflect before taking an action that led to undermining the fairness vital to corporate governance and that hurt trust in the capital market.
If an economic security promotion act is newly created, METI will gain legal backing to interfere in markets. At present, it is working on a semiconductor project involving a subsidy of several tens of billions of yen for the building of a chip factory by a Taiwanese firm. METI emphasizes the reason that “securing a stable supply of semiconductors is vital to the national interest.”
But history shows that many of METI’s industry promotion measures are all dead. Most recently, Japan Display, which the ministry played a role in creating by merging LCD operations of three firms under the banner of protecting the domestic industry, suffers from poor earnings.
Because there are aspects of economic security that cannot be made compatible with “economic rationality,” the government must give businesses and investors thorough explanations and fully inform them when it executes its authority. Economic security must not be made a handy “toy” that METI can play with at its convenience.