COVER STORY • 5Mitigating Geopolitical
Risk – Japan as aStabilizer in Asia

By Céline Pajon

Introduction
In the current tumultuous geopolitical setting, Tokyo may have avery specific, stabilizing role to play. Japan indeed has, at the sametime, very close ties to the United States, due to its long-term
alliance, and very tight economic ties with China, due to geographicalcloseness and a long history of economic and trade relations. As theUS-China rivalry becomes more severe, degrading from a trade warto an ideological confrontation and tensions in the Taiwan Strait,
Tokyo has to find a way to protect both its security and economicinterests.
Tokyo has no choice but to remain pegged to the American camp,while striving to maintain stable and functional relations with Beijing.
It must constantly navigate between cooperation and competition in
an attempt to preserve its interests. Therefore, Japan is striving todefine the conditions for a secured cooperation with its neighbor andto set up, in close coordination with Washington and its otherstrategic partners, a strict framework of engagement with Beijing. It
relies on a heightened deterrence posture in the East China Sea, acounterbalancing policy that also touches geoeconomics, and theimplementation of an economic security strategy aimed at protecting
technologies and critical sectors, to ensure better resilience of its
value chains but also to become an essential center of innovation.
Japan has thus deployed a number of tools to support a positive
regional and international order, and to reinforce deterrence against
China through closer security ties with the US and other key
partners. At the same time, it has tried to mitigate the great powercompetition and build bridges between like-minded partners such as
Europeans and Americans. Finally, it has tried to set up a modus
vivendi to continue to trade with China under more secure conditions
by establishing a pioneer economic security strategy.

Shaping a Positive Regional & International
Environment
Japan has long been described as a US follower in terms offoreign policy in the post-1945 period. While Tokyo’s diplomacy has
certainly been quite low-profile overall, and inclined to endorse US
choices, Japan’s initiatives, especially in the field of economic
diplomacy, have shaped the regional economic integration in EastAsia. More recently, Japan under the lead of the late Prime Minister
https://www.jef.or.jp/journal/Author Céline Pajon

Shinzo Abe, has promoted a strong vision for the broader region –the Free and Open Indo-Pacific Strategy (FOIP) – and has been very
proactive to promote a rules-based order.
FOIP, announced in 2016, takes stock of the economic andstrategic integration of the vast area running from the Eastern coastof Africa to the South Pacific. Japan’s vision for the region has threepillars: the promotion of the rule of law, freedom of circulation andfree trade; the promotion of connectivity to achieve prosperity
through infrastructures; and the contribution to peace and security
through capacity-building, HA/DR and anti-piracy operations.
Importantly, FOIP is a flexible and evolutionary narrative that offers
an alternative to the Chinese Belt and Road Initiative (BRI).
Indeed, Japan’s broad Indo-Pacific approach certainly relies on
multilateral settings to shape China’s choices when possible, andincreasingly to try to influence a more unilateralist US. WhenPresident Donald Trump decided to withdraw from the Trans-PacificPartnership (TPP), Japan took the lead to salvage the deal andadvance negotiations towards a Comprehensive and Progressive TPP(CPTPP). Signed in 2018 by 11 countries, the framework that aims
to set ambitious labor, environmental and other trade-related
standards is attracting attention: the United Kingdom, China andTaiwan have all applied to join. Concluded the same year, theEU-Japan Economic Partnership Agreement (EPA) is also writing
high-level rules of the game, in the hope of encouraging both the USand China to align on them. Japan has a strong record in engaging
with regional ASEAN-led multilateral organizations and thiscommitment to work with ASEAN is even stronger today, as it serves
to mitigate the great-powers competition. Tokyo has been a key
player to advance and sign the Regional Comprehensive EconomicPartnership (RCEP) that promotes free trade in East Asia.
Japan has been striving to support multilateralism as a stabilizing
factor, in Asia and at the international level, and has tried toencourage a convergence of the models by promoting norms for
quality infrastructure funding, digital governance, non-proliferation,oceans and space. It has successfully positioned itself as a“normative entrepreneur” in order to have its infrastructure financing
standards recognized and adopted internationally. Tokyo has worked
with the OECD, World Bank and within the G7 and G20 Summits topromote strict evaluation criteria for investments in quality
infrastructure (transparency, economic, social and environmental
sustainability, etc.). At the Ise-Shima G7 Summit in 2016, Japan
Japan SPOTLIGHT • January / February 2023

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presented its “Extended Partnership for Quality Infrastructure” ($200billion over five years) and proposed the “Principles for Promoting of
Quality Infrastructure Investment”. These principles were adopted by
the 2019 G20 Summit that was held in Osaka – a move that would
have implications for Chinese BRI’s implementation.
Japan has also strived to promote common standards for digital
governance. During the 2019 G20 Summit, the “Osaka track for data
governance” aimed to coordinate the differing approaches to set up
globally accepted norms and avoid a fragmentation of regimes.
Tokyo promoted the concept of “Data Free Flow with Trust” (DFFT)
to try to mitigate the Sino-US rivalry and bridge the gap between theUS and EU approaches on digital governance by promoting a“reasonable regulation”.
Being the only country to have suffered from nuclear weapons,
Japan has long been committed to the non-proliferation of weaponsof mass destruction. It has actively been supporting the NonProliferation Treaty (NPT) regime. For example, in cooperation withAustralia, Japan initiated the International Commission on Nuclear
Non-proliferation and Disarmament (ICNND) in 2008. But Japan also
needs the extended US nuclear deterrence to counter North Koreaand China (and now Russia). The threatening regional security
environment explains why Japan has to make some difficult choices
and has so far not ratified the Treaty on the Prohibition of Nuclear
Weapons (TPNW).
Oceans are critical to Japan, which relies on maritime routes for
its energy and trade supplies, and whose culture is deeply linked tomarine resources. For this reason, Japan has deployed efforts toensure stability, safety and sustainability of the oceans byconsistently supporting the UN Convention of the Law of the Sea.
The Japan Coast Guard has also been playing a key role to build thecapacity of Southeast Asian nations in terms of legal training andmaritime assets to better enforce law at sea. In 2019, Japanlaunched the “G20 Implementation Framework for Actions on Marine
Plastic Litter (MPL)” still supported by the Japanese Ministry for theEnvironment.
Finally, Japan has been engaged to ensure the safety of space
activities, promote sustainable space development and contribute to
the UN Committee on the Peaceful Uses of Outer Space. Japan’sSpace Agency, JAXA, makes proposals on international standards
and policies for debris reduction and is working on a system to trackand safely remove such debris.
28 Japan SPOTLIGHT • January / February 2023

This proactive policy to support multilateralism and a rules-basedorder is accompanied by a strong posture to ensure a credible
deterrence vis à vis China.

Deterring & Counterbalancing China ThroughAlliances & Partnerships
The improvement in Sino-Japanese relations in 2018, based on a
fresh bilateral economic dialogue and permitted by the conciliatory
attitude of Beijing in difficulty in the face of American pressure, istoday largely compromised. In recent years, China has indeed
stepped up its incursions into Japanese waters around the Senkaku
Islands, which Beijing claims as Diaoyu. Beijing has made the almost
permanent presence of its Coast Guard in waters around theSenkakus the new normal and is seeking to exercise maritime
policing rights there. The militarization of the Chinese Coast Guard,
placed in 2018 under the command of the Central MilitaryCommission and authorized, in February 2021, to fire against naval
ships or constabulary forces of third countries is causing great
concern.
In response, in order to protect its territorial integrity anddiscourage any Chinese coup de force, Japan is strengthening its
deterrence posture by increasing its air and maritime surveillance
and intervention capabilities on its southwestern flank. Tokyo andWashington are also organizing joint exercises in order to increase
their coordination in case of a crisis in the East China Sea. At thesame time, Japan is exercising restraint while responding to Chinese
incursions and attempts to develop a functional security cooperation– through a Maritime and Aerial Communication Mechanism – toprevent incidents at sea.
For Tokyo, the expansion of China, which seeks to revise thecurrent world order and replace the US as the hegemon, is adestabilizing factor that poses a systemic risk. To counterbalance
this destabilizing effect, and in the absence of any Asian equivalent to
the North Atlantic Treaty Organization (NATO), Japan has beenpromoting regional security cooperation on several levels, mixing
strategic partnerships, mini-lateralism within the Quadrilateral
Strategic Dialogue (known as the Quad) with the US, India andAustralia, and a more inclusive approach directed towards ASEAN
countries and European partners. Respect for and defense of the lawof the sea and the freedom of navigation are at the heart of thesesecurity partnerships, which together must serve to discourage
Chinese adventurism.
Japan is currently involved in some 30-odd instances of security
cooperation. At one end of the spectrum, there are some modest
schemes that fall under a general framework, whereas at the otherend there are specific cooperation schemes that can entail sharedintelligence, logistic exchanges known as Acquisition and CrossServicing Agreements (ACSA), joint ventures in the defense industry,
and joint military exercises that foster strategic convergence. A
number of these bilateral instances of cooperation have morphed
into a trilateral format (with the US and Australia; the US and India;
Australia and India; and the US and South Korea) and even aquadrilateral format (the Quad). More recently, Tokyo has reached
out to European partners, especially the UK, France and Germany. At
the same time, Tokyo continues to engage with regional security
institutions such as the ASEAN Regional Forum (ARF), the East Asia
Forum, and the ASEAN Defense Ministers Meeting+ (ADMM+), andwith its Southeast Asian partners, especially for non-conventional
security issues such as maritime security and piracy as well as
counterterrorism. The legitimacy of these cooperation schemes rests
on shared liberal values and interests as well as a sharedcommitment to defend a rules-based order. Beyond this normative
framework, there are two concerns that underpin the establishmentof these partnerships: to counterbalance China, and to preserve
American engagement in Asia.
Japan now appears as a legitimate and capable politico-military
actor that benefits from a large network of partners. Beyond security
cooperation, these strategic partnerships also serve to promote morediversified value chains and mitigate the risks of an economic
overdependence on China.

Setting Up an Economic Security Framework toHedge Against China’s Geopolitical Risks
Japan is deploying an economic security strategy that seeks toprotect its critical industries and technologies, become a hub ofinnovation, and increase resilience against Beijing. This framework
should allow Japan to maintain a certain autonomy while the SinoAmerican rivalry strongly constrains its economic relations withChina.
The Japanese position is indeed not completely aligned with its

American ally. If Tokyo recognizes the urgency of protecting its
market and developing alternative technological solutions to reduce
its strategic dependence on China, it does not plead for a complete
economic decoupling. Rather, Japan strives to identify strategic
sectors, and critical, potentially dual-use technologies to protect
them from Chinese interference, invest in them to maintain theadvantage over Beijing, and have the capacity to offer an alternative
to third countries.
Achieving an economy that is less vulnerable and more
independent of China is today a political priority, driven by theNational Security Council Secretariat (NSS) since the creation of a
dedicated economic security team in April 2020. Staffed by around20 agents, its mission is to coordinate the units in charge ofeconomic security set up within the ministries of Foreign Affairs andthe Economy, but also of Defense. In October 2021, Prime Minister
Fumio Kishida created a ministerial position for economic security, aworld first. Economic security will also likely be one of the threemain pillars of the new National Security Strategy to be publishedthis year.
Japan has taken a number of measures to protect its market andtechnologies in strategic sectors. For example, the foreign
investment protection law, passed in the fall of 2019 and targeting
Beijing in particular, lowers the ceiling for foreign equity participationfrom 10% to 1% in companies in sectors considered sensitive. New
cybersecurity standards have also recently been adopted to prevent
attacks and information theft in companies. The academic world has
also been made aware of the conditions of scientific cooperation insensitive sectors and export control sections have been set up toprevent the transfer abroad of nuclear, radar and other technologies
likely to be used in military purposes. In 2018 also Japan banned
suppliers presenting significant security risks for its 5G market andits critical infrastructures, de facto excluding Huawei.
At the same time, Japan is striving to strengthen its
competitiveness and comparative advantages especially forsemiconductors. The country has a competitive edge in chip
manufacturing equipment and materials. Five Japanese companies
are in fact among the top 10 suppliers of chip production equipment,materials and technologies. In this area, Tokyo is positioning itself asa hub of innovation in order to maintain its lead and make itself“strategically essential” for its partners. The government has
succeeded in attracting the world semiconductors leader, theJapan SPOTLIGHT • January / February 2023

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Tawainese TSMC, to set up a chip plant in Kumamoto Prefecture.
A third way to build up its economic and industrial strategic
autonomy vis-à-vis China is for Tokyo to ensure the resilience of its
value chains and its economy. In April 2020, during the first violent
wave of the Covid-19 pandemic, an emergency plan allocated $2.2
billion to encourage the repatriation to Japan of some industries (inparticular in the health sector), or their transfer to Southeast Asiancountries. The search for resilience is set largely in coordination withallies and partners. The Partnership for Competitiveness andResilience, announced at the Biden-Suga Summit on April 16, 2021,
encourages the establishment of an alternative communication
network facing China for 6G, innovation in key sectors such as
semiconductors, and biotechnologies. Japan also joined the US-led
Indo-Pacific Economic Framework (IPEF) with 14 countries thatwould incentivize its members to share information on criticalproducts and exchange inventories in case of a geopolitical crisis inthe region. Tokyo has set up a Supply Chain Resilience Initiative
along with Canberra and New Delhi, in order to diversify and secure
their value chains. This effort is now well deployed within the Quadwith the establishment, in 2021 of a working group on critical andemerging technologies.
This multilevel framework should enable Japan to continue its
economic cooperation with China. As tensions around Taiwan Strait
grow, the issue is no longer for Japanese companies to leave Chinaor stay – they have an interest to stay if they produce and sell in theChinese markets – but how to face the China risk in case of a crisis
or conflict and escape US sanctions. Companies look at splitting
their production, with differentiated value chains to hedge against
geopolitical risks.
The Japanese authorities are worried about the ideological turntaken by the Sino-American confrontation. If Tokyo condemns theexcess of the authoritarian system reinforced under the rule ofPresident Xi Jinping, it is indeed unthinkable for Japan to support
any change of regime that would lead to destabilizing Beijing, orinstigating reprisals which would have potentially very serious
consequences for its interests. For this reason, Japan has sought toexternalize pressure on China, encouraging its American andEuropean partners to maintain a firm line on the issue of values andhuman rights. However, this claimant posture can also come at therisk of peril to Tokyo, which is also expected by its American ally to
be unfailingly supportive of its Chinese policy. Japan therefore found
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itself in an uncomfortable position during the diplomatic sequenceleading up to the Biden-Suga Summit, seeking a balance on the issueof sanctions related to human rights violations in Xinjiang and its
support for Taiwan.

Conclusion
Japan appears as a stabilizing factor in the Indo-Pacific region
because it has every reason to maintain the status quo. Tokyo has
deployed efforts to manage and hedge against risks posed by China,
through a three-pronged approach: deterrence, counterbalancing andconditional engagement. Economic security is therefore at the heartof a Japanese strategy aimed at supervising its economic
cooperation with China as much as possible to ensure its
sustainability and stability. At the same time, it is pursuing a firm lineof deterrence on the security level and strengthening its coordination
with its affinity partners, first and foremost the US, for theestablishment of a favorable regional order, binding andcounterbalancing China, but without increasing frictions. Tokyo has
also to carefully manage its relations with Washington, which ispressing for a total alignment with its decoupling strategy towardChina, without consideration for Japanese economic interests.
This delicate position is in several respects close to that of the EU
in the face of Sino-American rivalry. Japan and the EU thus share alarge range of values and interests, and should step up theircooperation to weigh on the international order as forces forstabilization and moderation.

Céline Pajon has been a research fellow with the Center for Asian Studies ofthe French Institute for International Relations since 2008. She is Head of Japanresearch. She is also Senior Fellow with the Japan Chair at the Brussels Schoolof Governance, VUB, Brussels.