The economic security promotion act was passed into law with the aim of strengthening domestic supply chains for semiconductor and other industries and protecting the nation’s critical infrastructure from foreign threats. The confrontation with China, Russia and other autocracies is intensifying, and concerns over the spread of infectious diseases and terrorism are growing urgent. The government took a big step forward by following the examples of the United States and Europe and creating a legal framework on economic security.
Excessive interference and surveillance by the state must be prevented as it has the potential to sap businesses of dynamism. The government must build and operate a system that can simultaneously strengthen economic security and maintain corporate vitality.
The drafting of the bill started before Russia’s invasion of Ukraine in late February. Through the course of discussions, there was a renewed recognition of the risks, such as potential attacks on nuclear power facilities and the nation’s reliance on overseas for the procurement of critical supplies. The bill was enacted into law with the backing of many opposition parties as well.
The four pillars of the economic security promotion act include the strengthening of supply chains, the ensuring of security in infrastructure, support for the development of advanced technology, and non-disclosure of patents.
The government will manage the procurement of semiconductors, rare-earth metals and pharmaceuticals and require 14 infrastructure-related industries, such as electricity and railways, to report in advance information on their system management and procurement sources. On the development of highly competitive cutting-edge technology, such as artificial intelligence, the government and the private sector will work together to prevent the outflow of patents that could be used for military purposes. Government involvement to some extent is reasonable.
The U.S. and European nations are one step ahead of Japan in building stronger economic security frameworks as they are well aware of China’s growing clout on the military front. Coordination with them is essential for Japan, too. During his recent trip to the U.S., Minister of Economy, Trade and Industry Hagiuda Koichi confirmed with U.S. Secretary of Commerce Gina Raimondo the basic principle of building a semiconductor supply chain network covering like-minded states, including Japan and the U.S.
In late May, U.S. President Joe Biden will visit Japan. The enactment of the economic security promotion act will become a forward-looking tool for Tokyo and Washington to discuss the strengthening of the Japan-U.S. alliance.
This is only a starting point. How should we deal with the protection of data of strategic importance and rapidly evolving information technology and cutting-edge technology? Various points need to be discussed, but how to make economic security more effective should be discussed and considered continuously.
Yet the government should narrow the scope of private activities subject to state intervention. It is extremely important to have a perspective that does not impede corporate vitality.
The new law stipulates penalties for false reporting and information leaks. The government must provide a thorough explanation of the importance of the four areas and regulations, and when it drafts ministerial ordinances, it needs to ensure that these rules do not impose an excessive burden on big as well as smaller firms subject to the law. It should be operated transparently as well as smartly to avoid distortion of the market economy.