“Economic Security” Became Magic Words in Japan. Here’s Why

Japan made global headlines in December with its new National Security Strategy, which dropped the country’s post-World War II pacifist posture to call for counterstrike capabilities.

Less visible but in many ways more instructive for U.S. policymakers are Japan’s economic security policies, which aim to shore up its national interests from an economic perspective. These policies were initially conceived by Japan’s Liberal Democratic Party in 2019, with a formal recommendation toward developing Japan’s “economic security strategy” published by the party’s Strategic Headquarters in late 2020. Over the last two year, implementation began. It includes funding to support supply chain resilience and promotion of crucial industries of tomorrow, as well as the participation of the corporate sectors. The most striking thing about Japan’s economic security is its focus on a government restructuring.

The United States is only now becoming aware of the national security threats posed to its economic dependence upon China. In many ways, the United States has an enviable record of international security. economic war China requires a wider definition of security than what the U.S. defense system was built for. Policymakers are becoming more aware of what is called the “The” “China shock” as well as the loss of manufacturing jobs in China. But they are only just starting to address the national security implications that deindustrialization will have on them.

China’s rise as an economic competitor to the United States requires a wider and more integrated strategic response than was traditionally the case in the United States. The concept of “Economic security” All political parties will find it appealing. Japan offers a model of political leadership.

The country’s new National Security StrategyThe entire section of ‘The First in Nearly 10 Years’ is included in ‘The First in Nearly 10 Years’. “Promoting Economic Security Policies to Achieve Autonomous Economic Prosperity.” It begins with:

“Japan will curb excessive dependence on specific countries, … promote capital reinforcement of private enterprises with critical goods and technologies, and strengthen the function of policy-based finance, in pursuit of protecting and nurturing critical goods.”

China is not specifically mentioned. This is common in discussions about economic security in Japan. The context is clear.

Two major factors account for the rise of economic security in Japan, according to Akira Igata, a project lecturer at the University of Tokyo’s Research Center for Advanced Science and Technology: “One is China. The other factor is critical emerging technology like quantum computing or drones that can be used for civilian purposes but also military purposes.”

Igata, who also advises the Inter-Parliamentary Alliance on China on economic security, points out that the Japanese government’s intense focus on the topic has been progressing over the last few years, with implementation now accelerating. “The awakening began under the Abe administration three years ago,” Igata made the statement, which was confirmed by the Suga administration. Yoshihide Suga’s government identified 16 different areas that Japan needed to work on to improve its economic security. These included Diversifying supply chains, preserving technological advantages and strengthening telecommunications network infrastructure are just some of the things that have been done. Many of these are the main focus of the current Kishida administration.

Its definition can sometimes be vague, however “economic security” It is more than just a buzzword in Japan. It has led the government to reorganize, and even created a minister of economic security At the cabinet level, an economic division of the National Security Secretariat is responsible for planning, coordinating and monitoring economic security policies. There are also dedicated economic security divisions within other ministries or agencies, such as those in foreign affairs, defense and intelligence, financial services, and foreign affairs. These divisions are charged with defensive actions such as tech controls, visa screening, cybersecurity, and more—but also with the enactment of industrial policies to grow critical new industries.

The culmination of Japan’s economic security policies has been the Economic Security Promotion Act (ESPA), which Japan’s parliament passed in May 2022 and will be phased in over the next two years. It has four main themes: security of supply chains for critical materials, nondisclosure patents for security purposes, promotion of advanced technologies and infrastructure security.

Economic security is clearly critical for Japan’s defense industry. “Economic security is welcomed by the Ministry of Defense,” Ryo Sahashi is an associate professor at University of Tokyo and a Japan scholar at Wilson Center. “It will contribute to improving defense capabilities, and it may also help support the production base for defense equipment.”

Economic security also plays a central role in the Kishida government’s plans to revitalize Japan’s economy. Japan has been through many difficulties. “lost decades” There is almost no economic growth. Shihoko Goto, the director for geoeconomics and Indo-Pacific enterprise and deputy director for the Asia Program at the Wilson Center, described Japan’s approach as “two-pronged.” “The bigger issue in economic security is not just about defense,” Goto. “It’s also about economic growth in the future.”

Goto says that the United States’ economic security is about technology rivalry with China. Japan’s concept, while it does include semiconductors in its definition, is much more broad. “In Japan, it is looking at the domestic economy more broadly. It is an opportunity to think about how to make Japan economically competitive and relevant,” Goto.

Subsidy subsidies are used to encourage the private sector to be involved in economic security programs. While these do exist in the United States and most other industrialized countries as well, what is singular about Japan is the flexibility in what can garner a government subsidy—namely, the presence of “specific critical materials.” If at all, these are not clearly defined by the government. Igata said that this is part of the ESPA. “the private sector can submit a plan to the government about diversifying supply chains of ‘critical materials,’ however defined.” Igata stated that if the government considers it important for economic security, they will provide a subsidy.

While Japan has a comprehensive approach to economic security, it’s too early for us to know how effective these policies will actually be in changing corporate behavior, particularly with regard China. China remains Japan’s largest trading partner, and many companies continue to manufacture there. The new ESPA was only very recently enacted, and its subsidies haven’t yet taken full effect.

Still, there has already been one tangible success in Japan’s bid for economic security, in rare earths. Japan has been actively recycling these minerals and investing in new suppliers since before the new law was passed. “Japan used to be over 90 percent dependent on China for rare earths. Now it is under 60 percent,” Igata stated. This was done over the past ten years.

The United States now faces China as a potential competitor. China is also its biggest ally. While the topic of economic security may not have reached the same level of public attention as it did in Japan’s case, the concept is slowly becoming more well-known, at least within the government. 2017 National Security Strategy It is stated that “economic security is national security.” Both the 2022 and 2023 National Security Strategy National Defense Strategy continued with this theme, even if they didn’t use the precise phrase “economic security.”

While the actual implementation may not match the words of these documents yet, the United States is making progress toward economic security in tech competition with China. It has placed tariffs on Chinese products and exported controls on key technologies to China, notably semiconductors. Joe Biden, President of the United States, issued an executive order In September, the United States blocked Chinese investment in technology. discussions We are now addressing outbound investments in sensitive technology in “countries of concern.”

However, this strategic change has not been accompanied with a U.S. government reorganization. “Quite a few of the existing players—Defense, State, Commerce, NSC, NEC—are thinking about economic security, but no one has been given the explicit mandate above all others,” Michael Brown, who led the Defense Innovation Unit at U.S. Defense Department from 2018 to 2022, said. The U.S. government does not have a coordinating agency for its economic security, nor a cabinet minister for economic security like in Japan.

Many legislative attempts have been made to establish new financing mechanisms in order to help scale up and market critical technologies in the United States. However, these efforts have not generally succeeded. languished. The United States does not have the same level of industrial policy expertise as Japan, but the success of Operation Warp Speed Does point to U.S. capability.

Pavneet Sing, who was a member of the National Security Council as well as the National Economic Council under the Obama administration, pointed out that the top economic officials in the United States have historically had a background in finance and not manufacturing. “Basically, everyone in the Clinton and Bush administrations shepherding economic policy hailed from financial markets,” Singh said. “Economic policy was governed by pro-financial market thinking to the detriment of thinking about industrial policy and a manufacturing base to compete.”

There have been significant shifts in policy under Biden’s administration. The CHIPS and Science ActThe executive order on the promotion of biotechnology innovation and biomanufacturing. the Inflation Reduction Act These measures, which include provisions to create an economic clean environment, are all intended to boost domestic and U.S. competition in these industries.

China’s foundational industries—steel, glass, aluminum, cement, chemicals—dwarf those in the United States. China now has a dominant position in advanced industries such as robotics, space and medical devices, high-speed railway, and technologically advanced ships.

Although semiconductors, bio-, and clean technologies have been favored by U.S. policy (all of them with strong domestic lobbies), they are critical technologies. However, so is the hardware sector, where China is rapidly gaining market share. The United States must be competitive in these technologies if it is to ensure its economic security and to develop a strong strategy for advanced manufacturing to rebuild the industrial base. It is necessary to take a broader approach.

The United States uses the expression “The phrase” “economic security” Politically, could be galvanizing in a manner that is similar to but narrower concepts, such as “supply chain resiliency” “economic patriotism” They have not been proven to be. Economic security can be defined in many ways. It can unify China hawks and those whose primary concern is financial security and the need to promote job quality. For those who were on the libertarian left, economic security can provide guidance and cover. skeptical of industrial policy but who realize that today’s geopolitics requires a new approach. And it can help military strategists to more fully consider the Defense Department’s industrial policy potential and ability to shape markets.

“In Japan, the [phrase] ‘economic security’ is a magic word,” Igata stated that such a move leads to immediate government interest and grant applications. The United States requires an economic and political realignment to respond to the challenge from China—so far, this hasn’t happened. “Economic security” They could also be magical words in the United States.

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