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Japan needs a real economic security strategy

The government of Prime Minister Fumio Kishida is committed to an expansive conception of national security that focuses on economic issues.
After taking office, Kishida emphasized that economic security would be a top priority of the National Security Strategy that is anticipated to be released this year, created the post of minister for economic security and promised that his administration would submit an economic security promotion bill to this year’s ordinary session of parliament.
Economic security is key to Japan’s national security but it is also an amorphous concept that is easily abused. The challenge for the Japanese government is crafting a strategy that truly advances the nation’s security and isn’t just a fig leaf for protectionism, mercantilism and the expansion of bureaucratic power.
The government’s thinking about economic security has been shaped by the work of the Strategic Headquarters on the Creation of a New International Order, a study group that Kishida chaired as head of the Liberal Democratic Party’s Policy Research Council. It concluded that Japanese national strength and standing in an evolving world order depended on the vitality and innovative capacity of its economy.
Economic security, the study group concluded, rests on two pillars: strategic autonomy and strategic indispensability. The first requires Japan to have the means to ensure the economic well-being of its citizens and national social and economic capacity. This reflects fears of vulnerability created by dependence on other countries for key economic inputs.
Long inchoate, this concern took concrete shape in 2010 when China cut off exports of rare earths to Japan during a confrontation over the Senkaku Islands. Since then, the entire world has awakened to China’s central position in global production chains and the power that bestows upon Beijing in international disputes.
The second pillar demands that Japan have industrial capacity in fields considered important to international society. In other words, Japan should make products that the rest of the world needs so that this country is considered an integral partner. This dovetails nicely with the country’s long-standing preference for self-sufficiency in key technologies, semiconductors among them. It has given policymakers in Tokyo additional impetus to encourage companies to reroute supply chains through Japan.
In addition to a $2.2 billion fund for Japanese companies, the government has also provided enough money to tempt Taiwan Semiconductor Manufacturing Company to construct a semiconductor plant in Kumamoto Prefecture — while spurring the government to set aside funds to develop new technologies and to impose new or tighter controls on existing ones. This last item will include the creation of secret patents to keep especially sensitive new technologies from prying eyes.
In addition to promoting supply chain resilience and developing and protecting new technologies, the new economic security legislation will also protect critical infrastructure. Governments are acutely attuned to threats to the most important elements of social and economic infrastructure, such as financial institutions, telecommunications networks and power grids. Japanese authorities will be working closely with the companies and authorities running these services to ensure that they are safe and secure. Again, there is a fear that Chinese-made components will be vulnerable to espionage or disruption.
A genuine economic security strategy will go beyond those technological components and identify ways that Japan can use its economic power to advance its national interests. For example, there should be discussion of the ways that Tokyo can leverage economic assistance and aid to maximize its influence in other capitals. There should be efforts to modernize international trade and investment regimes to promote the interests and values, such as transparency and economic liberalism, that Japan prioritizes. Energy and attention should also be given to institutions that set standards, especially those dealing with digital technologies and connectivity.
In all those endeavors, Japan should work closely with like-minded governments, such as the United States, Australia, Canada and members of the European Union. In fact, one of the driving forces behind Japan’s emphasis on economic security has been closer alignment with the U.S., which increasingly relies on economic statecraft in its strategic competition with China. Japan created an economic security bureau within the National Security Secretariat to facilitate policy coordination with the U.S.
As an example of such multilateral cooperation, Japan should be leading efforts to forge a broad coalition to combat the uses of economic coercion. Some form of “insurance” or swap arrangement should be considered.
While action is needed, caution is in order, too. Economic security is a pliable concept and there is a desire in parts of the government to control and direct national development and economic activity. There is fear that a national economic security strategy will reinvigorate protectionist and mercantilist impulses. That temptation is evident in the list of businesses originally subject to the enhanced scrutiny of foreign investment in revisions to The Foreign Exchange and Foreign Trade Act. That list includes hot springs operators, pen manufacturers and baseball stadium managers. It is essential then that vital economic interests be defined narrowly.
A final element of the strategy is a conspicuous effort to energize the country’s economy. This is obvious but it is also easily overlooked. Japan needs steady growth to ensure that its citizens are happy and secure in their own lives. By this logic, Prime Minister Kishida’s commitment to “new capitalism” is an integral part of Japan’s economic security. A growing economy whose returns are not enjoyed by all Japanese will not be stable nor will it offer security to the people or the state.
The Japan Times
Jan 24, 2022 12:15
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