By Aibara Ryo, Ono Taro, and Ito Hiroki
The United States and China are engaged in a struggle for hegemony in economic security, a diplomatic strategy where a country exercises its influence in the international community by integrating its security and economic interests. As Prime Minister Kishida Fumio moves toward the enactment of an economic security law, discussion is urgently needed on how to gauge Japan’s stance vis-à-vis China.
Cabinet Legislation Bureau requires basis for economic security law
Japan’s economic security will be two faceted, according to a newly disclosed outline of the bill: One of the facets is “offensive measures” that promote the development of advanced technologies, and the other is “defensive measures” that prevent technology and information from leaking overseas.
The core of the defensive measures is securing autonomy, in which Japan doesn’t depend excessively on imported sources for communications and energy. This includes designating “critical materials” and providing subsidies to promote their domestic production, as well as allowing patents on sensitive inventions and technologies to remain unpublished.
Developing and securing unique technologies to win the global competition would be categorized as an offensive measure. Offensive measures include providing financial support as well as information for the research and development of advanced technologies.
Kishida established the post of minister in charge of economic security in his new cabinet and appointed Kobayashi Takayuki, the young lawmaker who led discussions on economic security within the Liberal Democratic Party (LDP). On Nov. 11, Kishida instructed Kobayashi to speed up the drafting of a bill. The first meeting among related ministers is scheduled for Nov. 19, followed by the launch of an expert panel tasked with identifying topics for discussion.
The administration has already moved to strengthen Japan’s semiconductor production responsibilities, as symbolized by the approximately 400 billion yen in subsidies extended to a factory that will be built in Kumamoto Prefecture by Taiwan Semiconductors Manufacturing Company (TSMC), the world’s largest supplier of semiconductors.
Semiconductors are used extensively in electronic devices as well as in automobiles and are considered a “staple product for industry.” Robust demand has caused a global shortage. Japan’s share in the semiconductor market, about 50% in the 1980s, has dropped to 10%, forcing the country to depend mostly on imports. As many countries compete to attract semiconductor factories to their shores, the Kishida administration hopes to improve Japan’s competitiveness through the legislation.
There will be challenges in legislating the new economic security law, however. Economic security is a new concept, although it has rapidly gained recognition in recent years. Within the framework of a free economy, an attempt by the government to designate certain materials as “critical” and promote their production, and to allow patents to remain unpublished is unprecedented. According to multiple sources in the government and ruling parties, the Cabinet Legislation Bureau is currently requesting legislative facts that provide the grounds for why a new law is needed. A senior official at the Prime Minister’s Office [Kantei] said: “[Economic security measures involve] concepts that depart from past precedents. We must make careful efforts to obtain the Cabinet Legislation Bureau’s understanding.”
According to a government source, business sectors with close ties with China are expressing concern that economic security “may become a tool for decoupling from China.” The United States is Japan’s ally, but China is its largest trade partner. Japan’s total imports in 2020 were worth 68.108 trillion yen, of which imports from China accounted for 17.5077 trillion yen (25.7%).
On Nov. 15, Keidanren chair Tokura Masakazu met with Economic Minister Hagiuda Koichi to discuss economic security among other topics. At the press conference that followed, Tokura said regarding the government’s move toward legislation: “It is a fact that extremely sensitive technologies are leaking from Japan, and the government is responsible for taking steps to stem the leakage.” He continued, “[The government, however] should not restrict the economic activities of the private sector in any significant way.”