Latest news with #EconomicSecurityPromotionAct
Asia Times
05-05-2025
- Business
- Asia Times
Japan sets the pace for private sector economic security management
Japan continues to pace like-minded governments when making economic security policy. Successive administrations in Tokyo have made economic security a priority, passing legislation and adjusting the bureaucracy to realize those ambitions. Those efforts continue. Governments concerned about economic security should be studying Japan's efforts and work with Tokyo to address these challenges. Only concerted efforts by countries alone and together can ensure economic security. Of special significance are increasing efforts by the government to work with the private sector to increase awareness of economic security and hone private businesses' response to this challenge. These efforts, too, are pacing the world. Japan, like other countries, has been forced to address threats to economic security. Its consciousness of those dangers preceded that of other governments. The country was subject to economic coercion – a cutoff of important rare earths exports from China – in 2010 after the arrest of a Chinese fishing boat captain who illegally entered the waters surrounding the Senkaku islands. That incident shook Japanese decision-makers. More significantly, it wasn't a one-off: Economic coercion became an increasingly frequent and favored tactic of Beijing. The first step in the promotion of economic security by Tokyo was the creation in 2020 of an economic bureau in the National Security Secretariat. This move prompted ministries throughout the government to prioritize economic security as well; many of them established economic security offices to focus efforts. Fumio Kishida, then the prime minister, picked up the pace during his administration. He made economic security a pillar of his government's growth strategy; his seriousness was clear in October 2022 when he established the position of minister in charge of economic security in his cabinet. The same year, Japan passed the Economic Security Promotion Act (ESPA) with the aim of promoting Japan's economic security by ensuring its strategic autonomy and indispensability. The legislation has four pillars: ensuring a stable supply of specific critical materials, securing the stable provision of critical infrastructure, supporting the development of specific critical technologies, and implementing a secret patent system. Building on the first pillar, manufacturers of certain materials – which have been categorized as 'critical' based on their importance for the survival of the Japanese population, dependence on foreign suppliers and the risks of supply chain disruption due to foreign actions – are encouraged to submit stable supply plans to the government. If a manufacturer's plan is approved, it receives subsidies to offset some of the costs of applying that plan. By June 2024, 85 plans related to semiconductors, batteries, machine tools, fertilizers and antimicrobial substances had been certified, with subsidies totaling $6 billion. As for the second pillar, over 200 companies across 15 sectors, including energy, logistics and finance, have been designated as critical infrastructure companies. These companies must undergo government review when implementing critical information systems, providing detailed supplier information down to the end of the supply chain and reporting on risk management measures. The government can then demand improvements in risk mitigation strategies or changes in suppliers. Some regulatory agencies have even requested the exclusion of Chinese and Russian companies from supply chains. Regarding the third pillar, Japan has identified 50 crtiical technology areas including maritime, space, aviation, cyberspace and biotechnology sectors and has allocated approximately $3.5 billion for research and development support. The last pillar of ESPA, the secret patent system, covers fields such as aircraft stealth and concealment technologies, attack and defense systems for submarines and technologies related to the disassembly and reprocessing of spent nuclear fuel and heavy water, which could cause substantial harm to Japan's public life and economic activities. Twenty-five technology fields have been identified, and when companies or research institutions file for patents in these areas the government can designate the technical content that needs to be preserved and not applied in commercial use, compensating for any losses resulting from the restrictions. This system has been operational since May 2024. Another critical economic security policy is the security clearance system based on the Act on the Protection and Utilization of Critical Economic Security Information, which was passed in May 2024. This system expands the scope of protected information beyond the traditional realms of defense and diplomacy to include economic security-related data. This will strengthen Japan's ability to manage and share sensitive information. Japan is also actively updating existing policies to enhance economic security. A notable example is the recent revision of the Foreign Exchange and Foreign Trade Act (FEFTA), which now includes new regulations requiring certain technology transfers abroad to be reported to the Ministry of Economy, Trade and Industry (METI). This change is a direct response to incidents in which Japanese-developed technologies were utilized in ways that could jeopardize national security. METI's recent public tender from the Economic Security Policy Division of the Trade and Economic Security Bureau reflects the Japanese government's commitment to engaging the private sector more fully to address economic security challenges. The government intends to establish an economic security code of conduct for businesses. While the specifics of this code are not yet available, broad guidelines that extend beyond the ESPA could lead to increased investments among the private sector in critical areas such as supply chain resilience, information protection and open-source intelligence. Given the collaborative culture of Japanese companies' interaction with authorities, any guidelines published by METI are likely to become the standard for economic security management among Japanese firms. As a result, major Japanese global corporations will likely require non-Japanese supply chain partners to adhere to these guidelines as well. Consequently, this new policy from the Japanese government could soon give rise to a 'Tokyo effect' in economic security management within the private sector with international consequences, shaping not only Japanese multinational companies but all their contractors as well. That would be good for Japan and for countries that emulate it. Shotaro Nagino ( is a Young Leader at Pacific Forum and a senior manager at a global consulting firm in Tokyo, where he leads economic security consulting and engages with the global business and academic communities in policy research and assessment, corporate strategy formulation, organizational design and reform. Brad Glosserman (brad@ is deputy director at the Center for Rule-Making Strategies, Tama University and senior advisor at Pacific Forum.
Japan Times
16-04-2025
- Business
- Japan Times
METI may list undersea cables and satellites as critical for economic security
The Ministry of Economy, Trade and Industry plans to add new items, including undersea cables and satellites, to come under the purview of the economic security policy amid an increasingly uncertain geo-economic climate. The ministry's panel of experts discussed these new items as part of its revised economic security strategy on Tuesday. As major global powers — the U.S. and China — become more protectionist, securing resources for key industries has become vital for economic security. Under the Economic Security Promotion Act, the government implements a range of measures to secure vital supply chains, from providing subsidies and low-interest loans to coordinating regulations, stockpiling essential goods, setting up critical infrastructure, and protecting advanced technologies. Among the technologies proposed for inclusion under the policy are rockets, fusion energy and parts and materials used for nuclear power. The ministry plans to incorporate them in a revised action plan after an approval from the expert panel in late May or June. 'We need to make Japanese products, technologies and infrastructure indispensable,' a ministry official who briefed reporters said. 'Japan needs to be an irreplaceable presence to the world.' For certain core industries, the ministry emphasized the need for Japan to be self-sufficient so that it is able to manufacture technologies from start to finish without a dependence on other countries. Citing an example, the trade ministry official stressed the need for Japan to develop the capability to lay undersea cables on its own in addition to manufacturing them. Currently, 99% of Japan's international communications — from wired internet to smartphone networking — rely on undersea cables. Although Japan's NEC is one of the world's top three manufacturers of undersea cables, holding about 30% of market share, Chinese companies have been rapidly growing their influence. In the space sector, Japan has strengths in specific rocket components such as sensors, but still lacks full launch capability. The government aims to secure domestically produced parts and strengthen the country's ability to carry out independent space launches. Taking into consideration the rapid growth of generative artificial intelligence, the government is making an all-out effort to support and advance the AI ecosystem. It also underlined a focus on improving efficiency by bringing power supply sources and AI data centers — which consume large amounts of electricity — closer together. The ministry also plans to draft measures to prevent Japan's core technologies in Japan from leaking to other countries, which can occur through cyberattacks, joint research with foreign facilities and the actions of company executives or departing employees.
Japan Times
19-03-2025
- Business
- Japan Times
Trump's actions and the ‘new national security economy'
Five years ago, I came up with the idea of 'the new national security economy.' That phrase is shorthand for a security environment fundamentally different from that to which we are accustomed and which has, until now, framed security policy and strategy. Adopting my approach demands a transformation in our thinking about security — not only in how we define threats but where we look for them. It focuses greater attention on economics, technology and the ways that tech's ever-deepening integration into daily life poses challenges that we don't fully comprehend. Recent developments have driven home not only the need for this reassessment but, sadly, confirmed its most tentative and troubling element: We must be alert to dangers that emanate not only from adversaries but our supposed 'allies' as well. Traditionally, national security focused on the application of 'hard power," or the ability of governments to force or coerce compliance with its wishes. Some smart folks argue that persuasion and attraction create more durable, enduring and productive relationships; we call this 'soft power.' Soft power is poorly understood and it is no substitute for situations when brute force is required, but it has genuine influence in subtle ways that increasingly matter in a world in which resorting to kinetic means — shooting, bombing, invasion — is ever more problematic. The economic dimension of national security typically concerned the ability of nations to support or sustain the material elements of hard power. Economic policy determines how many assets a country can deploy to the battlefield, along with their quality and the quality of its soldiers. The transition to the postindustrial world and the emergence of new technologies mattered mostly insofar as these developments magnify defense capabilities. This is the first dimension of the new national security economy. Those technologies make weapons more lethal and allow militaries to be more effective. Virtually all restrictions on technology adopted by the U.S. and its allies in recent years have been justified by the claim that access to (for example) semiconductors will make China a more lethal adversary. The penetration of digital technologies into society and our increasing reliance on them for the most elementary and sometimes essential tasks has introduced a new vulnerability which is my second element. Connectivity has created the prospect of large-scale disruption when those technologies are interrupted. Governments are increasingly concerned with critical infrastructure and figuring out how to protect it against attack or breakdown. This has been acknowledged by Japan's Economic Security Promotion Act, which notes that 'stable provision of specified essential infrastructure services (is) fundamental to the daily lives of Japanese people and Japan's economic activities.' The Cabinet in September 2024 identified 15 sectors as critical infrastructure, from electricity to credit cards, but that number can change. Other governments have their own lists. The economic disruption generated by the COVID-19 pandemic hammered home this new sense of vulnerability. Governments were forced to acknowledge that economic and business orthodoxy, which squeezed out every inefficiency in the pursuit of quarterly returns, had failed to pay sufficient attention to resilience. Global supply chains configured for 'just in time' delivery foundered when forced to deal with 'just in case.' These developments underscored the need for a new understanding of the relationship between the public and private sectors and redrawing lines that had divided the two. Neoliberal nostrums crumbled. Economic issues elbowed their way into this new security mindset on another level. Never before had the global economic leadership of the West (and the U.S. more specifically) been challenged. China's rise has thrown that into question as the West's economic model faltered — think global financial crisis — and Beijing stepped up to meet the needs of the developing world through the Belt and Road initiative and other efforts. China's 'hybrid capitalism' was successful — most notably by raising hundreds of millions of people out of poverty — and proved capable of generating national wealth and matching the West in developing technologies. Equally, if not more important, existing tools don't seem capable of checking Chinese misbehavior or keeping pace. This has forced a rethink of industrial policy, competition policy, trade and investment policy and the viability of the global economic order. Free trade is no longer a given and, again, lines dividing the public and private sectors are being redrawn. This brings us to the third key component of the 'new national security economy' and to my mind, the most important one: Leadership in new technologies translates into global leadership. The masters of these domains will write the rules of a new global order. China is matching, if not beating, the West in this race. Its new status and influence are buttressed by the success of the unique brand of capitalism that produced those technologies. The fourth and final element of the new national security economy is the sad, but increasingly evident, recognition that threats can come from allies as well as presumed adversaries, enabled by connectivity and encouraged and fueled by globalization. Central to this threat framework is U.S. behavior that is making it a source of danger and instability. While there is good reason to be concerned about Beijing's efforts to intimidate countries that disagree with it, no serious conversation can ignore Washington's penchant for bending governments to its will. By one count, the U.S. has imposed three times as many sanctions as any other country or international body, with one-third of all nations targeted with some type of financial penalty. Sanctions are 'an almost reflexive weapon ... seemingly irresistible,' concluded the authors of that analysis. Donald Trump and his administration have picked up the pace, announcing a 25% tariff on all steel and aluminum imports, imposing 25% tariffs on other imports from Mexico and Canada — with some exemptions — and levying a 20% tariff on Chinese goods. The U.S. president has also threatened a 200% tariff on alcohol from EU countries unless the bloc scraps its "nasty 50% tariff on whisky." For Trump, the tool is a cudgel to reduce immigration, stop drug flows, change investment, alter trade balances or acquire territory. There have long been trade disputes between the U.S. and its allies and partners. The European Union's Anti-Coercion Instrument was created to counter pressure imposed by the first Trump administration. During the Biden years, alliance cohesion was reprioritized and Europe's focus shifted to China. Washington's readiness to escalate its coercion is a qualitatively new phenomenon. Its leverage is the product of this new connectivity. And the consequences are alarming. In the last week, five governments, four of them NATO allies, have been reported to be reconsidering plans to upgrade their air force inventories with the F-35 fighter (made by the U.S. manufacturer Lockheed Martin) out of concern about continued access to parts and software updates as well as limits on work that can be done on black boxes vital to aircraft operations. Portuguese Defense Minister Nuno Melo was explicit: This ally of ours, which has always been predictable over the decades, could bring limitations to use, maintenance, components and everything that has to do with ensuring that aircraft will be operational and used in all types of scenarios.' This fracturing of the West and the need to consider threats from entirely new directions stems from the failure to fully appreciate the third threat on my list, the challenge to the West's global leadership. Only by assuming that U.S. leadership is a given can Washington discount the value of a united front with allies and like-minded partners. This is a dangerous assumption. And likely wrong. More than ever, concerted, cooperative and coordinated strategy and action is essential. Rarely has it seemed more unlikely. Brad Glosserman is deputy director of and visiting professor at the Center for Rule-Making Strategies at Tama University as well as senior adviser (nonresident) at Pacific Forum. His new book on the geopolitics of high-tech is expected to come out from Hurst Publishers this fall.
