Japan’s Economic Security Strategy and Its Implications for China

On May 11, 2022, the Economic Security Promotion Bill, proposed by the Japanese government led by the Liberal Democratic Party (LDP), was formally passed into law by the House of Councillors and will be implemented in phases starting from 2023. With this legal framework, the economic security strategy of the government of Prime Minister Fumio Kishida, which aims to achieve geopolitical goals through economic and technological means, is expected to be improved and strengthened. Therefore, its future developments and implications deserve close attention. With international politics and the world economy gradually intertwined, and the US imposing more pressure on China in economic and technological fields, it is of great significance to understand the economic security strategy of Japan, which is both a US ally and an economic and technological powerhouse, as well as its impact on China.

Policy Measures of Japan’s Economic Security Strategy

As a country with relatively limited resources and unfavorable geographical conditions, Japan has for a long time developed an outward-oriented model of economic development, which is rather sensitive to external economic environment. Early in the 1930s, economic security, especially the security of transportation corridors, had been a concern of the Japanese government due to sanctions imposed by the United States on its import of steel and other raw materials. In the post-WWII era, as Japan witnessed a rapid rise of its economy,the US has imposed market, financial, industrial and even political restrictions on Japan’s economic and technological capabilities as well as its industrial competitiveness, which triggered another round of Japan’s concern for its economic security. Today, as the US lays out its strategy to counter China on science and technology, Japan’s Kishida government has taken the opportunity to revive the topic of economy security and construct a systematic strategy of economic security based upon established policy practices.

Improving and strengthening economic defense institutions

In recent years, the Japanese government has set out to reform and revamp institutional mechanisms for economic security, enacting specialized laws as political and legal guarantees for its economic security strategy.In April 2020, Japan learned from the organization of the US National Economic Council (NEC) and added an economic division to its National Security Secretariat (NSS) as the “conning tower” to promote the integration of economic and security initiatives, with the aims of overcoming the fragmentation among departments and strengthening the unified leadership on economic security. In this regard, Akira Amari, a key advocate of Japan’s economic security strategy, said that “Japan has finally created a department that formulates policies based on an integrated consideration of economics and intelligence.”1“A New Defensive Force: What Is Economic Security?” NHK Political Magazine, https://www.nhk.or.jp/politics/articles/feature/46667.html.Accordingly, a number of organizational reshuffles were made in other relevant departments: the Ministry of Foreign Affairs (MOFA)upgraded the cyber security policy division under its national security policy division into the emerging security challenges division; the Ministry of Defense created an economic security intelligence planning officer under the investigation section of its Bureau of Defense Policy to collect and analyze information related to economic security. And likewise, the Ministry of Economy, Trade and Industry (METI) established an economic security office. In October 2021, the Kishida government created a cabinetlevel minister for economic security to level up Japan’s economic security institutions. In November, the Council for the Promotion of Economic Security chaired by the Prime Minister was founded and the Office to Prepare Economic Security Legislation was set up in the Cabinet Secretariat to promote related legislative work. The passage of the Economic Security Promotion Bill finally laid a legal foundation for economic security policies and fundamentally prevented policy reversals as a result of government changes.

In the meantime, the Kishida administration actively encourages the establishment of economic security agencies by local governments and corporate entities to facilitate smooth policy coordination and implementation between central and local governments, public and private sectors, as well as officials and the public. Only in this way can economic security policies be communicated and coordinated from top to bottom,thus raising public awareness and earning wide recognition of the sensitivity of economic security issues as necessary steps to build a whole-of-society system for safeguarding economic security. Notably in January 2022, Aichi Prefecture established a specialized task force on economic security measures to share information on industrial espionage with local companies in order to prevent leakage of cutting-edge technologies and confidential information.In April 2022, the NEC Group added a director to its board who is in charge of economic security and set up an economic security office within the corporation. In a similar vein, Hitachi also plans to establish a department to conduct more stringent and precise “prior review” over business dealings involving economic security. The Metropolitan Police Department, under the guidance of the Japanese government, has conducted seminars and other awareness-raising activities for companies on counterespionage, information leakage and protection. At the same time, the Japanese government plans to establish special think tanks on economic security in 2023 which will bring together talents from both economic and academic circles to collect and analyze information on the research and development (R&D) trends of cutting-edge technologies, and provide knowledge support for decisionmaking on economic security.

Enhancing economic and technological capabilities to ensure infrastructure security

Japan’s economic security strategy has set two objectives for technological and industrial policies. One is to ensure “strategic indispensability” as a source of offensive capabilities and “coercive means”against other countries for political purposes. To this end, Japan will continue to double down on cutting-edge technologies to gain an absolute and irreplaceable position of technological superiority that is crucial to the fate of other countries.2Masafumi Kaneko, “Securing ‘Strategic Indispensability,’” https://thinktank.php.co.jp/voice/6226/.The other is to promote the diversification of overseas supply chains while securing the backup of domestic industrial chains, in order to buttress the use of offensive capabilities and reduce potential losses when faced with countermeasures.

It is noteworthy that Japan takes the semiconductor industry as the leverage to drive several other relevant industries for building offensive capabilities in its economic security strategy. In December 2021, the Japanese Diet passed the largest budget to date proposed by the Kishida administration to set up a special fund of 774 billion yen to support production activities of leading semiconductor companies at the local level.At the same time, the Diet passed an amended bill stipulating that the government should deliver financial support to advanced semiconductor factories that establish new data centers or promote automation. It is the first time in Japan’s history that a law was enacted to subsidize the construction of semiconductor factories.3“Amended Bill on Subsidies for Factory Construction Enacted to Ensure Stable Domestic Production of Semiconductors,” https://www3.nhk.or.jp/news/html/20211220/k10013396261000.html.And the JASM, a newly founded subsidiary of the Taiwan Semiconductor Manufacturing Company (TSMC) in Kumamoto Prefecture, became the first project to receive support from the Japanese government. More importantly, the government has also increased its support for talent development to enhance the country’s long-term competitiveness. As Prime Minister Kishida said, “(The government) will reorganize and enhance undergraduate, master’s level, and doctoral programs to promote the cultivation of human resources in science and technology fields. In order to construct research universities at the highest level worldwide, a university fund of ten trillion yen will be created within this fiscal year.”4“Policy Speech by Prime Minister Kishida Fumio to the 205th Session of the Diet,” Prime Minister of Japan and His Cabinet, October 8, 2021, https://japan.kantei.go.jp/100_kishida/statement/202110/_00005.html.To keep the advantage, Japan will scale up protection of patents of some dual-use technologies for both military and civilian purposes and impose greater restrictions when reviewing the eligibility, field of study and even employment opportunities of overseas students to prevent the outflow of advanced technologies.

To reduce the foreign dependence of its key industries, expand backup of domestic production capacity, promote localization of industrial chains and ensure social stability in times of emergency, Japan has introduced a subsidy policy which encourages domestic investments by supporting the diversification of supply chains for products that are highly concentrated in a single country or region and those that are extremely important to the health and livelihood of Japanese nationals, with an aim of reducing the risk of supply disruptions. Galvanized by government policies, Japanese companies including Murata Manufacturing, Mitsubishi Electric, and the TDK Corporation have significantly augmented the proportion of their core components that are made in Japan, and are actively adjusting their supply chains to a Japan-centric operations model.

In addition, Japan has intensified its actions on reviewing the security of infrastructure equipment. To prevent leakage of important information due to cyberattacks, the Economic Security Promotion Bill proposes to regularly review the equipment security of major infrastructure companies in 14 fields including information and communications, transportation, energy,finance and healthcare, to identify their sources of equipment procurement such as servers that hold personal information and management systems of power stations. The legislation also requires regular information sharing regarding the providers of maintenance services. In the reviewing process,the government will guide companies to avoid relying on countries that may pose security risks.

Forging alliances of key technologies and industries

Japan has joined hands with Western countries to forge exclusive alliances of key technologies and industries. The US-Japan alliance is an indispensable pillar of Japan’s economic security strategy. In January 2022,the two countries launched the Economic Policy Consultative Committee,the economic version of their “2+2” mechanism, to promote high-level discussions on a wide range of issues as “economic and foreign policy boundaries are disappearing,” achieve a “synergistic effect with the existing frameworks,” and consolidate their core partnership to cooperate on innovation and climate change countermeasures.5“Press Conference by Minister Hagiuda (Excerpt),” Ministry of Economy, Trade and Industry, January 25, 2022, https://www.meti.go.jp/english/speeches/press_conferences/2022/0125001.html.In April, Japan and the US kick-started their coordination on the draft of the Indo-Pacific Economic Framework (IPEF) that aims at ensuring a stable supply of strategic materials.As a first step, they planned to form a “Chip 4” alliance together with South Korea and China’s Taiwan region with a focus on cooperation in the field of semiconductor supply chains. In May, at the first ministerial meeting of the Japan-US Commercial and Industrial Partnership, a basic consensus was reached on the principle of complementary cooperation in the development of advanced semiconductors.6“Basic Principles on Semiconductor Cooperation,” May 4, 2022, https://www.meti.go.jp/pre ss/2022/05/20220506002/20220506002-3.pdf.

Over the years, Japan has actively been involved in the G7-led process of building a value-based ecosystem of sensitive and critical supply chains. For instance, Japan is a member of the “D10 Club” initiated by the United Kingdom, which is intended to invest in high-tech companies of member countries to pool alternative suppliers of 5G equipment and other technologies and eventually eliminate their technological dependence on China. Some Japanese high-tech companies have also joined the “Next G Alliance,” an initiative proposed by the US Alliance for Telecommunications Industry Solutions (ATIS). In March 2022, the Alliance released a roadmap for 6G development, which centers around the development of a new sustainability-oriented “green generation” of networks and emphasizes standard-setting for multiple key areas including data storage, devices and hardware manufacturing, and next-generation mobile networks.7“Next G Alliance Green G: The Path Toward Sustainable 6G,” March 2022, https://nextgalliance.org/download/2281/?uid=f765ae73cd.Additionally, Japan is an enthusiastic participant of the Global Partnership for Artificial Intelligence, the Artemis Accords and the Climate Action Network led by Western countries. With all these efforts,Japan has integrated itself into a comprehensive and refined ecosystem of key technologies and industrial alliances in the digital space (featured by 5G/6G technologies, artificial intelligence, quantum computing and semiconductors), the extraterrestrial space (featured by the satellite internet, the Moon and deep space), the ecological space (characterized by climate governance, clean energy development and environmental protection), and the development space (featured by infrastructure building).8Tang Xinhua, “Western ‘Technological Alliance’: A Strategic Path to Build a New Technological Hegemony,” Contemporary International Relations, No.1, 2021, p.41.

Diversifying supply chains

Japan is keen on diversifying its supply chains and building resilience of the entire process including R&D, design, and manufacturing. As the white paper “World Economic Trends” released by Japan’s Cabinet Office in February 2022 on the country’s economic environment reveals, of the approximately 5,000 categories of Japanese imports, 1,133 (23.0 percent of the total) are composed of 50 percent or more products of Chinese origins(in terms of total value). The white paper further amplified that “if the trend of depending on specific countries as origins of import intensifies, it will be increasingly hard to tackle supply chain crises, and preventive measures are thus needed to be put in place”9“World Economic Trends 2021 II: China’s Economic Growth and Changes in Trade Structure,” Cabinet Office of Japan, February 2022, https://www5.cao.go.jp/keizai3/2021/sekai221siryou.pdf.to fortify the vulnerable supply chain.Since the outbreak of the COVID-19 pandemic, Japan has accelerated its pace of diversifying supply chains by fiscal means. Concretely, the Japanese government implemented three supply chain adjustment support programs in July, November and December 2020 to subsidize Japanese companies’diversification of their production bases within the Asian industrial network,meanwhile directing the relocation of these production bases to Southeast Asian nations by means of policy guidance, in an attempt to make the region a linchpin for Japanese companies to organize overseas manufacturing activities and seek closer cooperation with regional countries on production capacity and supply chain resilience. Southeast Asian countries such as Vietnam, Thailand and Malaysia have become key destinations for Japanese companies to transfer their industrial chains, and Vietnam, which used to be unattractive, has now become an especially popular choice.10Wang Jian and Diao Peiyao, “Trend and Correlation in Japanese Enterprises’ Cross-Country Transfer R&D Activities and Production Bases,” Contemporary Economy of Japan, No.2, 2022, p.61.According to a survey on overseas Japanese enterprises in Asia and Oceania published by the overseas research department of the Japan External Trade Organization(JETRO) in December 2021, 55.3 percent of Japanese enterprises in Vietnam plan to expand their business in the next 1-2 years, much higher than the percentage (40.9 percent) of Japanese enterprises in China that intend to do the same which is well below the average of 43.6 percent.Likewise, Japanese companies in other Southeast Asian nations such as Cambodia (48.9 percent), Indonesia (45.3 percent), Malaysia (43.2 percent)and Singapore (41.3 percent) have demonstrated stronger willingness to expand their business as compared to those in China11JETRO Overseas Research Department, “2021 JETRO Survey on Business Conditions of Japanese Companies Operating Overseas (Asia and Oceania),” December 7, 2021, https://www.jetro.go.jp/ext_images/en/reports/survey/pdf/EN_Asia_and_Oceania_2021.pdf.which are very likely to curtail their local operations in the long run.

In addition to Southeast Asian nations, India as an emerging economy is another popular destination where the Japanese government encourages companies to shift production capacity and restructure supply chains. At the bilateral level, Japan has been actively forging sound political ties with India to guarantee more robust economic and scientific cooperation. In March 2022, Kishida paid a visit to India on the occasion of the 70th anniversary of the establishment of diplomatic relations between the two countries.During this trip, he proposed the Japan-India Special Strategic and Global Partnership which places the construction of a resilient global supply chain in the post-pandemic era as a significant basis for Japan-India relations.12Fumio Kishida, “India and Japan: A Special Partnership,” Indian Express, March 19, 2022, https://indianexpress.com/article/opinion/columns/fumio-kishida-visit-indo-japanese-ties-covid-russia-ukraineconflict-19-7826160/.In their joint statement “Partnership for a Peaceful, Stable and Prosperous Post-COVID World,” the two leaders outlined the overall direction for enhanced bilateral cooperation. Japan pledged 312.258 million yen for India to facilitate its development in the fields of medical care, infrastructure,climate change, agriculture, etc. This move will not only speed up India’s economic recovery and improve its social and livelihood conditions, but also create a mature, refined and stable environment for Japan to diversify its supply chains. Moreover, Japan has strengthened supply chain cooperation with India in the form of government-civilian collaboration under certain multilateral arrangements including the Japan-Australia-India trilateral framework and the US-Japan-Australia-India quadrilateral framework(QUAD). Thanks to the policy guidance of the Japanese government, the percentage of Japanese companies in India that intend to increase their investments and operations in the next 1-2 years has topped the survey list of Asian countries (70.1 percent), much higher than the average (43.6 percent).13JETRO Overseas Research Department, “2021 JETRO Survey on Business Conditions of Japanese Companies Operating Overseas (Asia and Oceania).”Besides India, other countries in South Asia like Bangladesh and Pakistan have also become attractive places for Japanese companies to restructure and divert their supply chains.

Motivations for Japan’s Economic Security Strategy

Ostensibly as a response to the China-US strategic competition and especially the US-initiated technological competition against China, Japan’s economic security strategy has a more ambitious goal to help the country pursue a favorable position in the new economic, trade and technological order. Judging from relevant policy practices, it can be inferred that the economic security strategy is set to ease the dilemma of reverse dependency between Japan’s security and economy and seek Japan’s great-power status in the changing international dynamics, while safeguarding the “international order” that Japan needs for its national positioning and deterring the rise of China.

Easing the reverse dependency between security and economy

After World War II, Japan is allied with the United States and has been pursuing its great-power status through economic means. However,the reality of a “single-lung state”14Ichiro Ozawa, The Japanese Transformation Plan, Feng Zhenghu and Wang Shaopu, trans., Shanghai Far East Publishing House, 1995, p.67.constrained Japan’s ability to achieve its goal of becoming a political power. Since its economic size was surpassed by China in 2010, Japan has fallen into a nationwide panic and strategic anxiety about its own status. Former Prime Minister Shinzo Abe took advantage of this mood to promote the build-up of defense forces and the reform of defense institutions, which was considered the beginning of the process of reshaping Japan’s major-power status through a combination of defense, political and economic power. During the long years when Abe was in office, Japan’s Self-Defense Force (JSDF) became a modernized military and armed force with impressive combat capabilities. In other words, the Abe administration formally kicked off the process and achieved substantial progress in making Japan a political and military power.

Having inherited Japan’s historical genes and political preference for great-power status, the Kishida administration developed the economic security strategy to continue his predecessor’s pursuit of becoming a major power. And one of Kishida’s diplomatic goals is to “lead the international community.”15“Policy Speech by Prime Minister Kishida Fumio to the 205th Session of the Diet.”Driven by the above goal, Kishida continues to build up the JSDF and innovate defense institutions, claiming that Japan “will not rule out any options to empower the JSDF with capabilities to attack enemy bases”16“Kishida Says Enemy Base Strike Capabilities Are an Option to Boost Defense,” The Japan Times,November 27, 2021, https://www.japantimes.co.jp/news/2021/11/27/national/kishida-base-strike.while revising the National Security Strategy (formulated in 2013),the National Defense Program Guidelines (revised in 2018) and the Medium-Term Defense Program (revised in 2018).

At the same time, the Kishida government is reconfiguring competitive arenas and proposing changes to existing rules to create new strategic domains with which to augment Japan’s discourse power. As a key component of Kishida’s national security strategy, the economic security strategy is upgraded from existing policies and practices with the objective of both highlighting government performance domestically and leveraging economic power internationally to fulfill Japan’s geopolitical ambition of becoming a great power. Japan’s systematic approach to enhance economic security from the perspective of national strategy will inevitably generate a knockon effect throughout the international community, earning itself first-mover advantages and a greater say in the making of relevant “international rules,”and thus enhancing the country’s presence and influence in the field of economic security. With the newly minted economic security strategy, Japan will be able to create an ecosystem of national security strategies that covers the full spectrum of diplomacy, economy and defense, breaks barriers of security discourse among various fields, sets up mechanisms of inter-sectoral coordination to safeguard national security, and resolves the paradox between security and economic dependence. The Japanese model is very likely to be a prototype for future attempts to design the national security framework.

With the economic security strategy, Japan will secure a favorable position in the reconfiguration of supply chains within the US-dominated minilateral system, which can then be translated into a comparative economic advantage in major-power competition that Japan can use to advance its political and security agenda.17Xiao He and Pan Rong, “The Choice Mechanism of Economic Competition Strategies of Great Powers,” Science of International Politics, No.4, 2021, p.25.The disruption of global supply chains due to the globally raging COVID-19 pandemic, which is even likely to be long-term, has triggered concerns among countries over supply chain security. The perception that heavy reliance on foreign suppliers may seriously damage economic and social security during emergencies has compelled relevant countries to securitize their supply chains. With its economic security strategy, Japan intends to take the window of opportunity of the US policy shift on supply chains to reinforce its own industrial supply chain, improve its ability of emergency response, cultivate cutting-edge industries that are “strategically indispensable,” enhance the resilience and toughness of its entire industrial chain, and solidify the material foundation of its great-power status.

Learning from the United States and following suit has been a shortcut for Japan to realize its great-power ambition. In the context of the US technological siege against China, Japan firmly supports and follows the US to hold on to its advantageous position in the hierarchy of the US-led alliance of key technologies and industries, sustain its shared privileges in the global supply chain of key industries, gain greater access to US technologies,and partially mitigate the reverse dependency between its security and economy, thus safeguarding Japan’s national interests to the greatest extent.According to Akira Amari, US sanctions on Chinese firms could bring collateral damages to Japanese companies in the same supply chain. In other words, Japanese companies could run the risk of secondary sanctions by the United States and be denied access to those exclusive supply chains of the US-led alliance of key technologies and industries.18Akira Amari, “Business Owners Unconscious of Economic Security Will Be Vulnerable to Sudden Crisis,” June 15, 2021, https://news.mynavi.jp/article/20210615-1904473.Therefore, Japan’s stance on US sanctions against China is hardly surprising.

Reinforcing US-Japan alliance to safeguard the “international order” with Japanese “superiority”

By linking coordination on economic and technological policies to the operation of the US-Japan alliance, Japan has refreshed the alliance and made it adaptable to the trend of integration of international politics and world economy. Given that the US-Japan alliance is the cornerstone of Japan’s diplomacy and security, the economic security strategy, as a vital component of Japan’s national security strategy, will undoubtedly be set to safeguard and reinforce the alliance. Prime Minister Kishida vowed to “raise to an even greater height the Japan-US alliance, which is the foundation for the peace and prosperity of the Indo-Pacific region and of the world.”19“Policy Speech by Prime Minister Kishida Fumio to the 205th Session of the Diet.”In January20“Japan-U.S. Security Consultative Committee (Japan-U.S. ‘2+2’),” Ministry of Foreign Affairs of Japan, January 7, 2022, https://www.mofa.go.jp/mofaj/na/st/page4_005483.html.22,both the Security Consultative Committee (“2+2”) meeting and the virtual leaders’ summit between the two countries “renewed their commitment to the rules-based international order as well as fundamental values and principles”and committed “to pursue joint investments that accelerate innovation and ensure the Alliance maintains its technological edge in critical and emerging fields, including artificial intelligence, machine learning, directed energy, and quantum computing.”20By deepening cooperation in emerging fields, Japan and the US can jointly sharpen their strengths in cutting-edge technologies,inject new momentum into the alliance, improve cohesion between the two countries and accelerate the modernization of the alliance.

Japan is also dedicated to safeguarding and consolidating the“international order” dominated by the United States. In view of more volatile changes in the international balance of power since the oubreak of the pandemic, Japan believes that “the rules-based liberal international order is seriously at stake” and “authoritarian states have posed mounting challenges to the US-led international order which has long been the foundation of peace and prosperity of the international community.” In Japan’s viewpoint,“the rules-based international order is a matter of life or death that will determine whether Japan could survive and thrive.” Hence, Japan should work hard to ensure “the dominance of liberal democratic forces under the US and Japanese leadership in the future international order.”21Matake Kamiya, “Japan-US Alliance as an “Alliance against China’: What Should Be Done and What Should Be Avoided,” October 21, 2021, https://www.spf.org/iina/articles/kamiya_01.html.In his cabinet resolutions and policy speeches, Kishida put front and center “the determination to uphold universal values such as freedom, democracy, human rights and the rule of law” in his “three-point determination” for foreign and security affairs. Following this path, Japan’s economic security strategy is aimed at strengthening the US-led international order through weakening the capabilities of countries with “dissident values” in the field of advanced technologies and defending the monopoly of countries with “shared values.”In essence, for Japan, which identifies itself as a Western country in terms of values and national psychology, safeguarding the “international order” is also a significant means to secure its vested interests and gain an upper hand in the field of advanced science and technology.

Stifling China’s rise and high-quality development

The aim of Japan’s economic security strategy is subject to the overall objectives of its national security strategy, one of which has been in place since the Abe administration, to deter China’ s rise and secure more shared benefits in the US-led “international order.” Fumio Kishida was Foreign Minister of the Abe administration when it released the first ever National Security Strategy in the post-war era, and also a major participant and actor in the implementation of the strategy. Although Kishida’s policies may differ from those of his predecessor, based upon his election campaign speeches, policy speeches and concrete measures after taking office, and(telephone) meetings with other heads of government, it is clear that the Kishida administration will not give up the objective of deterring China’s rise. As Kishida stated, “Through cooperation with countries with which we share universal values, I will say to China the things that need to be said and strongly urge China to act responsibly.”22“Policy Speech by Prime Minister Kishida Fumio to the 205th Session of the Diet.”In practice, Japan makes use of identity politics to portray China as a country that does not comply with, or even seeks to undermine, the international order. Through political manipulation of mass media and public opinions, Japan intends to smear China’s international image and squeeze the room for China’s voice with concrete economic security measures which could retard or even block the process of China’s rise, locking the Chinese economy into a state of growth without any real development.

The advocates of Japan’s economic security strategy are basically China hawks, which demonstrates that the strategy is clearly designed to contain China. With the widening of US sanctions against China, Akira Amari has repeatedly propagated his obsessive suspicion about China to Japan’s political, business and press communities. He claims that Japan has no choice but to erect a “firewall” against China in tandem with the West since the US-waged trade war with China sees no signs of abating and Japan may be excluded from Western markets if it goes in the opposite direction in seeking closer economic ties with China.23Akira Amari, “Business Owners Unconscious of Economic Security Will Be Vulnerable to Sudden Crisis.”Although Amari Akira resigned from his post as LDP Secretary-General after losing his election in October 2021, the idea of economic security that he actively promotes was officially upgraded into a national strategy. In addition to Amari, former Prime Ministers Aso Taro and Shinzo Abe are also key stakeholders behind the scenes who led to the birth of Japan’s economic security strategy.

Moreover, the content of Japan’s economic security strategy also indicates its aim to balance China’s rise. Over the past years, the Japanese political narratives have been inclined to direct most topics of economic security to China.24Xiang Haoyu, “‘Pan-Securitization’ Cannot Save Japan’s Economy,” Global Times, October 11, 2021,p.15.In October 2021, the Japanese government created a new “minister of economic security” whose mandate is to “secure the supply of significant economic materials such as semiconductors and prevent the outflow of relevant technologies” and “reduce Japan’s over-dependence on China and bring stability to people’s life and economic activities in the event of a drastic change in China-Japan relations.”25“Japanese Media: Japan’s New Cabinet Lineup Determined to Show Distinctive ’Kishida Colors,’”Cankao Xiaoxi, October 4, 2021, http://www.cankaoxiaoxi.com/world/20211004/2455745.shtml.The policies concerning supply chains, science and technology, as well as industrial development announced in the Economic Security Promotion Bill, for example,the reinforcement of domestic supply chains to eliminate asymmetric dependence on specific countries, the improvement of security and reliability of major infrastructure, the advancement of cooperation between public and private sectors in developing cutting-edge technologies to ensure Japan’s technological superiority in the era of Industry 4.0, and keeping confidential specific patented civil-military dual-use technologies to prevent leakage of key technologies, etc., can to some extent be regarded as Japan’s positive response to the US-provoked strategic competition with China. Most evidently, the science and technology policy in the Bill is expected to come into play to ensure Japan’s absolute superiority over China.

The Impact on China and Its Constraints

Admittedly, some policy measures designed in Japan’s economic security strategy will generate negative impact on China, while, in the process of policy implementation, Japan will also be constrained by a variety of factors and can hardly accomplish every strategic goal as expected.

The impact of Japan’s economic security strategy on China

First of all, Japan’s economic security strategy will hinder China’s progress on cutting-edge technologies and squeeze the market share of Chinese companies. In the short term, Japan will take advantage of its“indispensability” to China at the bilateral level to promote “targeted decoupling” in science and technological exchanges with comprehensive measures including direct deterrence. With a technological superiority, Japan is likely to weaponize its asymmetric inter-dependence on supply chains with China and employ non-market vehicles to meet its political ambitions in economic activities. Japanese companies have an enormous competitive stake in robotic technologies, machinery equipment, electronic components,biomedicine, basic chemical materials and related technologies, and they also dominate the design, R&D, and manufacturing of high-end components and other high value-added products and services. Take the semiconductor industry as an example. Semiconductor manufacturing demands the supply of 19 categories of materials, and Japan occupies more than 50 percent of the market share in 14 categories. In particular, Japan controls 52 percent of the global market for silicon wafers, photo-resists, bonding wires, resin molds and lead frames.26Pang Deliang and Bu Rui, “Reflection on the Trend and Development of Sino-Japanese Economic Relations in the Post-Pandemic Era,” Contemporary Economy of Japan, No.1, 2021, p.3.With its monopoly power, Japan’s approach of“targeted decoupling” will inevitably hinder China’s technological innovation and progress, and disrupt the operation of its supply chains. A case in point is the delayed release of Huawei’s high-end smartphones due to chip shortage. At the multilateral level, Japan, together with the United States and European countries, has adopted unilateral measures such as market exclusion, technological blockade and regulatory constraints to collectively encircle and contain Chinese companies, which will add more difficulties to China’s technological development and industrial progress, delay the market expansion of Chinese companies and their moving-up efforts along the global value chains, and largely weaken the scientific, technological and material base for China to build an innovation-oriented society.27Li Shu, “The Impact of Scientific and Technological Competition on National Strategic Layout and China’s Response,” Exploration and Free Views, No.1, 2022, p.33.The most prominent example here is the policy that prohibits the procurement of equipment that could be implanted with malicious malware such as stealing and destroying information or paralyzing information systems under the guise of “national security.”28“Chief Cabinet Secretary Suga Refrains from Commenting on Whether Huawei/ZTE Products to Be Excluded from Government Procurement,” December 6, 2018, https://www.itmedia.co.jp/news/articles/1812/07/news085.html.Though Japan does not specify the target of this policy, products of Huawei and ZTE are excluded from the procurement list of the government and the JSDF. A number of Japanese telecommunications and network operators like Softbank, NTT, Docomo and Rakuten Corporation are taking incremental steps in removing products of Huawei and ZTE, which undoubtedly greatly compresses the market space of Chinese companies.

Secondly, Japan’s economic security strategy will limit China’s discourse power on rules-making in some emerging areas of world economy and technology. Setting its own standards as the benchmark,Japan has been unilaterally peddling different rules to seize the first-mover advantage in emerging fields, combined with its propaganda campaign in the international media and public opinion. In this way, Japan amplifies the “universality” of its rules and transforms these rules into offensive tools to suppress China’s voice. At the same time, Japan has joined forces with countries of “shared values” to form rules-based alliances and develop new rules-based policy tools that reflect their interest preference, in an attempt to deter China at all levels with seemingly legitimate hybrid means and preserve the “center-periphery” pattern in the international division of labor. In the field of infrastructure building, Japan has proposed the Partnership for Quality Infrastructure to set international standards for“new infrastructure,” meanwhile using the narrative of “high-quality” to dwarf China’s push for new infrastructure building in countries along the Belt and Road routes.29Meng Xiaoxu, “Japan’s Adjustment of Partnership for High-Quality Infrastructure and Its Impact on the Belt and Road Initiative,” Journal of Northeast Asia Studies, No.5, 2021, p.44.In the governance of digital economy, Japan has also reiterated the significance of “high-quality” and “high-standard” as a publicity stunt to lay the institutional ground for the digital economy. By emphasizing the principles of liberalization, openness, non-differentiation and trustworthiness,30Chen Youjun, “The Conception and Practice of Japan’s Participation in Global Digital Economic Governance,” Japanese Studies, No.4, 2020, p.40.this could block emerging economies like China and other developing countries from a more prominent position in the global digital economy. In the field of communications, Japan has actively carried out a strategy of cross-generational development. While going beyond 5G to directly conduct R&D on 6G technologies, Japan has proposed some 6G standards in order to grab the rules-making power in relevant fields.

Thirdly, Japan’s economic security strategy will further securitize world economic relations and hinder deep integration of the regional economy. Since the conclusion of the Cold War, economic relations in the international community have been characterized by “weak securitization.”That is to say, economic relations of major powers are less determined by their ideological or security positions.31Guan Chuanjing, “Securitization Practices and Strategic Adjustments in U.S. Policy on Global Supply Chain,” Journal of International Security Studies, No.1, 2022, p.97.However with its economic security strategy, Japan has made security transgress into the economic sphere, to encourage interactions between economy and security, and render economic and trade agreements, science and technological exchanges, as well as investments tools, capable of achieving political goals at the operational level. This may have a negative effect on the process of regional economic integration, institutionalization, and upgrading of relevant rules that has already started under the Regional Comprehensive Economic Partnership (RCEP) Agreement. During the RCEP negotiations,Japan’s political stance after India’s withdrawal reflects its original intention to balance and contain China in the name of economics.32“RCEP Signing Could Increase Dependence on China,” Sankei Biz, November 16, 2020, https://www.sankeibiz.jp/macro/news/201116/mca2011160312003-n1.html.The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), an alternative to the Trans-Pacific Partnership (TPP), has become a policy tool employed by Japan to counter the rise of China. Japan did not show a positive attitude when China signed up for the CPTPP, but explicitly delivered its support after the Taiwan authorities signaled the intention to join the agreement, which demonstrates Japan’s political manipulation of economic and trade issues. Japan’s attempt to force South Korea to make concessions in bilateral disputes by exploiting South Korea’s vulnerability and dependence on Japanese materials is another example of Japan trying to meet its political goals through economic means, which sunk the bilateral relations to the bottom and resulted in the suspension of the China-Japan-ROK leaders’ meeting as well as the interruption of the trilateral cooperation process.

Nonetheless, Japan’s move of “targeted decoupling” or “untangling supply chains” from China will also generate some positive impact for China. Objectively speaking, it will be conducive to overcoming the asymmetric dependence and inertia of some Chinese companies on external supply chains of technology, tapping their fundamental potential for innovation and transformation, and driving China to construct a fully independent system of scientific and technological innovation with greater speed, determination and perseverance, thus buttressing the country’s highquality development.

Constraints to implementation of the economic security strategy

To begin with, the US policy toward China is a key external factor affecting the implementation of Japan’s economic security strategy. In recent years, the United States has taken a series of irresponsible measures that unilaterally undermine the foundation of China-US relations. Since the inauguration of President Joe Biden, the US policy toward China has again taken a pragmatic approach. While keeping the policy of strategic containment in place, the US has backtracked on some measures considering the need to develop its domestic economy. The Biden administration restored high-level contacts and dialogues between the two countries,delineated the spheres and levels of bilateral competition, and explored potential areas of cooperation. More importantly, the US business community has never expressed full support to decouple from China.According to data on bilateral trade, the US remained China’s third largest trading partner in 2021 following ASEAN and the European Union (EU),with bilateral trade volume reaching US$755.6 billion, a year-on-year growth of 28.7 percent.33“Total Value of Imports and Exports in Goods with Major Countries (Regions) in December 2021(USD Value),” General Administration of Customs of China, January 14, 2022, http://www.customs.gov.cn/customs/302249/zfxxgk/2799825/302274/302275/ 4122070/index.html.Faced with external trade realities and domestic economic pressures, the US has to adjust its economic and trade policy toward China. In March 2022, the Office of the US Trade Representative claimed that it had reinstated tariff exemptions for 352 of the 549 products previously pending tariff increases on China under Section 301. In April, US Trade Representative Katherine Tai declared that the US was not seeking a“divorce” from China.34“US Isn’t Looking for a ’Divorce’ from China, Trade Chief Says,” Bloomberg, April 5, 2022, https://www.bloomberg.com/news/articles/2022-04-05/u-s-isn-t-looking-for-a-divorce-from-china-trade-chiefsays.The return of US economic and trade policy toward China to a more pragmatic approach will constrain the China orientation of Japan’s economic security strategy.

Next, the present political and economic relations between China and Japan determines that the implementation of Japan’s economic security strategy can only achieve limited outcomes. Despite the experience of twists and turns since 2017 and especially since 2020,the overall dynamics of China-Japan political relations are still intact.Top leaders of the two countries have maintained their telephone communication, and official dialogues in the fields of diplomacy, trade,and economy as well as in military relations have also continued. In addition, Prime Minister Kishida himself argues, “building a stable relationship with China is critically important for both countries, as well as for the region and the international community,”35“Policy Speech by Prime Minister Kishida Fumio to the 205th Session of the Diet.”and “although there are currently limitations on travel between our countries because of COVID-19, we must not allow business exchanges between Japan and China to dwindle off.”36“Video Message by Prime Minister Kishida Fumio on the Occasion of the Seventh Japan-China Business Leader and Former High-Level Government Official Dialogue (Japan-China CEO Summit),”Prime Minister of Japan and His Cabinet, December 21, 2021, http://www.kantei.go.jp/jp/101_kishida/discourse/20211221message.html.Likewise, some scholars also insist that“a cooperative strategy is required to make the competitive strategy a success.”37Matake Kamiya, “A ‘Cooperative Strategy’ for a ‘Competitive Strategy’: Comples Structure of Japan’s‘Free and Open Indo-Pacific’ Strategy (Concept),” March 2022, http://ssdpaki.la.coocan.jp/proposals/26.html.According to China customs statistics, Japan remained China’s fourth largest trading partner in 2021. And if ASEAN and the EU are categorized as regional organizations, Japan is actually China’s second largest trading country following the United States. The bilateral trade volume hit US$371.4 billion in 2021, achieving a year-on-year growth of 17.1 percent.38“Total Value of Imports and Exports in Goods with Major Countries (Regions) in December 2021(USD Value).”At the regional level, with the RCEP taking effect in early 2022, the proportion of China-Japan trade that enjoys zero tariff will rise from 8 to 86 percent, which will not only boost bilateral economic and trade ties and particularly the scale of trade in goods, but also stimulate a reconfiguration of industrial and supply chains between the two countries.

The tension between Japan’s strategic interests and capital interests is another constraint to the implementation of the economic security strategy.The profit-chasing nature of Japanese enterprises will dilute the political ramifications and weaken the political functions of the economic security strategy, and even slow down or alter its implementation. One focus of Japan’s economic security strategy is supply chain security which is set to promote localization and diversification of industrial and supply chains of key materials. The localization of industrial chains demands investment from multinational capital, and multinational corporations usually select their locations of production based upon market forces, regulatory costs and security risks in order to maximize their profits.39Guan Chuanjing, “Securitization Practices and Strategic Adjustments in U.S. Policy on Global Supply Chain,” p.97.One of Japan’s policy measures for diversifying its supply chains is to subsidize companies to move their production lines to India, ASEAN members and other countries with“shared values.” However, many of these countries have a relatively poor environment for foreign investment because of less skilled workers, outdated infrastructure, a weak awareness by workers of compliance to norms, and low market maturity. In contrast, the lucrative and colossal Chinese market will impede Japan’s progress to diversify supply chains. According to a Sankei Shimbun survey of 118 Japanese companies in January 2022, none of the companies “intended to withdraw from the (Chinese) market.”40“Japanese Media: 70% of Major Japanese Companies to Continue Business in China,” People’s Daily Online, January 7, 2022, http://japan.people.com.cn/n1/2022/0107/c35421-32325912.html.Another survey by the Cabinet Office also unveiled that nearly 70 percent of Japanese manufacturing companies have yet to consider restructuring their supply networks.41“The Prospects of Japan’s Economy Far from Optimistic Despite Improvement of Hardships,” People’s Daily Online, September 26, 2021, http://japan.people.com.cn/n1/2021/0926/c35421-32237136.html.Therefore at least in the short term, Japan’s economic security measures can hardly achieve its goals and objectives.

In addition, the law of technological transfer indicates that while political forces and policy measures may in the short term create man-made barriers to technological development, transfer, and spillover, in the long run, any effort to prevent technological diffusion, whether in the economic or military sphere, will end in failure. In the best case scenario, countries can only slow the spread of technologies but will never stop this process.42Robert Gilpin, War and Change in World Politics, Song Xinning and Du Jianping, trans., Shanghai People’s Publishing House, 2007, p.180.Consequently, Japan’s political attempts to stifle China’s rise by blocking technological transfer and spillover are therefore doomed to fail.

Conclusion

As a politically motivated rhetoric of security, Japan’s economic security strategy has been widely recognized across the whole government and will be built into a powerful pillar of Japan’s “realist diplomacy for a new era”to pool resources and increase national strength. From the perspective of strategic positioning and target setting, the supply chain issue involved in Japan’s current and future economic security will go far beyond the economic level. As a matter of fact, Japan has chosen to intervene in the value-based geopolitical issues through economic means,43Liu Xiangli, “Enhancing the Resilence of the Supply Chain: The Introduction and Direction of Japanese Policy,” Contemporary Economy of Japan, No.6, 2021, p.3.advanced integration of economic and security topics, and introduced values into the discussion of supply chain security, an issue which has taken the features of a global public good. Apparently, the Kishida administration is exploiting the turbulent changes not seen in a century to mobilize existing strategic resources and utilize hybrid policy instruments, in order to maximize Japan’s national security and realize its geopolitical objectives.

The fact that Japan and the United States co-initiated the economic version of the “2+2” consultation mechanism shows that Japan is trying to securitize economic topics and attach them with values. Only in this way can Japan fit its own economy and security into the strategic orbit of the United States, attain more shared privileges in the USdominated hegemonic system, alleviate its anxiety about self-positioning,and mitigate its dilemma of reverse dependence. Consequently, Japan’s bargaining power in the US global strategy and its maneuvering space for strategic autonomy will be largely expanded. Unfortunately, Japan’s selfconceited policy design can help little in solving the dilemma of security and economic dependence. Instead, the policy will only plunge Japan, a country with divergent psychological and geographic affiliations, into more severe anxiety of self-positioning, which goes in the opposite direction of its pursuit for great-power status. As the main target of Japan’s economic security strategy, China needs to maintain its strategic focus internally and enhance its self-restoration capabilities while keeping itself updated about Japan’s policy moves. At the bilateral level, by seizing new opportunities of cooperation from the “New Capitalism” proposed by the Kishida administration, China can proceed with its efforts to stabilize the fundamentals of China-Japan relations in order to balance against Japan’s attempts to decouple from China. At the multilateral level, China can take the initiative to build a new model of multi-tiered and multi-dimensional economic and technological partnership in order to hedge against the negative impact of Japan’s decoupling efforts.