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Major companies hire former bureaucrats to head economic security departments

By Mikami Koki

 

“Economic security” has become a well-known expression. The government will soon submit to the Diet a bill to promote economic security. In preparation for the new legislation, major companies are one after another setting up economic security departments. Those companies are in succession hiring former senior officials of central government ministries and agencies. As it is difficult to grasp the real picture of economic security, the trend could trigger the creation of new “amakudari” (the phenomenon of bureaucrats descending by “golden parachute” into high-profile positions in the private sector).

 

One of the pillars of economic security requires companies to take special care in their business activities to prevent the leakage of advanced technology and data out of Japan for the sake of national security. However, details of the government regulation remains vague. Since economic security involves state secrets, the administration’s actual implementation of economic security policy tends to be secretive like a “black box.”

 

Under the circumstances, businesses seem to follow precedents set by other companies. A survey of  leading companies that have newly created an economic security department discloses that many have hired former officials of the Ministry of Economy, Trade and Industry (METI) to take charge of economic security.

 

As METI is one of the authorities in charge of economic security, major companies are apparently trying to tap the expertise of the former government officials.

 

The following are some examples of former government officials hired by major companies: two former commissioners of the Agency for Natural Resources and Energy (METI); two former officials from the Cabinet Office secretariat for Intellectual Property Strategy Promotion; and one former vice-minister for International Affairs from METI.

 

When they were in active service, however, some of them did not focus on economic security. This shows the complicated nature of economic security.

 

Companies have pursued business activities until now without economic security-related restrictions, but with the upcoming economic security legislation, that is no longer the case for some companies.

 

One example is the Rakuten Group. In 2021, the Rakuten Group received an investment from a subsidiary of Tencent, a major Chinese IT company, which resulted in increased scrutiny by the Japanese and the U.S. authorities for “possible leaks of customer information.” The increased scrutiny resulted from the U.S. suspicion of a  connection between Tencent and the Chinese military, even though the Rakuten did not violate any laws or regulations.

 

Another example is Fast Retailing Co., Ltd., whose brands include UNIQLO. The importation of UNIQLO shirts into the U.S. has been suspended due to the suspicion that their manufacture involves forced labor in China’s Xinjiang Uyghur Autonomous Region.

 

Economic security, which started as a trade war between the U.S. and China and competition for dominance in high technology, has now expanded to include human rights and environmental issues. One of the objectives of economic security is to counter China’s “military-civilian fusion” strategy of using civilian technology to enhance its military power. There are also concerns that quantum cryptography and artificial intelligence (AI) might be diverted to military use.

 

However, the boundary between military and civilian use is becoming increasingly blurred, and the contours of economic security are changing according to the ever-changing international situation. Under the circumstances, even seemingly unrelated technologies and products may become subject to economic security-related regulations at any time.

 

Mitsubishi Electric Corporation set up an economic security management office in October 2020. Denso Corporation and Fujitsu also established economic security offices in 2021. Panasonic Corporation established the Panasonic Research Institute, which deals with economic security and environmental issues. The heads of these newly established offices are all former METI officials.

 

The National Public Service Act prohibits active government officials from asking businesses to hire other officials or former officials. The act also prohibits government officials from seeking employment or inquiring about job openings at companies that would pose conflicts of interest with their duties, such as licensing and subsidies.

 

On the other hand, former government officials are free to re-enter the workforce in the private sector.

 

Since economic security is an unknown field for most companies, and the impact on companies could change depending on relevant policy implementation by government authorities and the international situation, many companies want to rely on former government officials’ “connections” to Kasumigaseki. (Abridged)

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