Fumio Kishida’s economic security policy

October 26, 2021 2:51 PM

Despite a loss of some seats, the LDP kept its majority together with the coalition partner, Komeito. Unless he makes a fatal mistake, he will remain in power for another two years, subject to the election in the Upper House of the Diet.

Fumio KishidaFrom the discourses of Kishida and Amari, the Director-General of the LDP and strong promoter of the concept of economic security, we can identify three pillars of the concept. (Photo source: Reuters)

By Kazuto Suzuki

Fumio Kishida, who won the election of the party leadership of Japan’s ruling party, Liberal Democratic Party (LDP), called a snap election to secure his power. Despite a loss of some seats, the LDP kept its majority together with the coalition partner, Komeito. Unless he makes a fatal mistake, he will remain in power for another two years, subject to the election in the Upper House of the Diet.

So, assuming Kishida will be a long serving Prime Minister, what will be his foreign policy? Kishida called Foreign Minister Motegi and Defense Minister Kishi to remain in their positions. This suggests that he will continue the foreign and defense policies of Abe and Suga Administrations. However, there is one distinguished difference from his predecessors. That is the new ministerial post of Economic Security. Takayuki Kobayashi, a young and Harvard-educated politician, was assigned to be in charge of coordinating national policy to secure the economic security of Japan.

The concept of economic security is still ambiguous. The government defines that the economic security is to secure national interest by economic means, but this can be almost all government activities. From the discourses of Kishida and Amari, the Director-General of the LDP and strong promoter of the concept of economic security, we can identify three pillars of the concept. First, because of globalization and the wide-spread global supply chain, Japan depends heavily on a potential adversary, China. China has been the largest trading partner and, at the same time, strategic rival, and party of territorial dispute. If the security situation with regard to Taiwan or Senkaku Islands, China may use trade as its weapon and exercise economic coercion. Reducing dependence on China definitely serves for the economic security of Japan.

Second, the government regards safeguarding Japan’s infrastructure as the key element of economic security. The penetration of Chinese products in critical infrastructure may cause possible disruption in case of conflict with China if Chinese products are embedded with hidden codes for manipulating their operations by Beijing’s command. This was one of the reasons why Japan decided to ban Huawei products to be used for public procurement.

Third, protecting Japanese technological advantages and maintaining economic superiorities in the global supply chain is the key aspect of economic security. In order to avoid the disruption of supply of goods, Japan needs to have outstanding capability to produce critical material and components for strategic items in the Chinese economy. If China depends on Japanese products, it would be hard for China to exercise economic coercion. In this regard, technological superiority would work as deterrence against such economic statecraft. Also, it is critical to protect emerging technologies, such as advanced material and robotics, which may be used for improving Chinese military technologies.

To implement these three pillars as a policy, the new Minister for Economic Security, Kobayashi, needs to establish new laws for strengthening the screening of inward investment for companies in critical technological domains, and improving its intellectual property protection. Furthermore, Kobayashi needs to identify critical items for Japan’s economic security and review the supply chain of them. If Japanese industry depends heavily on the supply from China, the government may need to seek alternative suppliers and support industry to procure from much friendlier suppliers with tax incentives or subsidies.

While implementing economic security policy is important, it is also important to remember that there should be a balance between the cost and the risk. Although depending on supplies from China is a risk, it would be impossible to cut off China from the supply chain. Amari often refers that the dependence of the supply of face masks to China was troublesome in the initial phase of COVID-19 pandemic. However, it is almost impossible to produce low-cost and internationally competitive face masks in Japan, given the high cost of production. The government should make a policy decision on how to mitigate the risk while depending on some supplies from China.

Finally, the government, not just improves the “indispensability” in the global supply, but also uses such “indispensability” as a power to shape international order by promoting Japan’s products and technologies as international standards and defining the international rule. For example, a Japanese commercial space venture, Astroscale, is planning to operate space debris removal activities. This is first of its kind in the world and its activities will set the precedents for space rendezvous and proximity operations (RPO). The Japanese government will set a new regulation for licensing the activities of Astroscale and expect that other countries will follow the practices of the Japanese government and Astroscale. So, Japan can set the precedent by using its technological superiority and improve the rule-making process in space.

(The author teaches at the University of Tokyo. Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited)

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