Japan’s Economic Security
Policy—Current status and challenges—
Shigeaki SHIRAISHI

1. Introduction
In recent years Japan has been recognized internationally as a pioneer in the field of economic security
policy. This paper briefly reviews the details and background to Japan’s economic security policy anddiscusses its significance in the current situation, together with some of the challenges being faced.

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Japan’s Economic Security Policy—Current status and challenges—

2. Past developments
Discussion on the issue of “economic security” first started to attract attention in Japan in December
2020, in a policy proposal issued by the Liberal Democratic Party (LDP), titled “Recommendations
Toward Developing Japan’s ‘Economic Security Strategy.’”1 In these recommendations it was noted that
the National Security Strategy of Japan did not clearly address a viewpoint on how Japan would achieve
its national interests from an economic perspective, notwithstanding the fact that economic factors
are now impacting security, including the changing global power balance, the use of relations of
economic dependence for political purposes, the vulnerabilities exposed by the Covid-19 pandemic,
and the spread of digitalization. The recommendations went on to define “economic security” as“ensuring Japan’s independence, survival, and prosperity from an economic perspective,” and set out“strategic autonomy” and “strategic indispensability” as its fundamental principles.
The compilation of these LDP recommendations was, in part, a response to various problems thatcannot be overlooked and have continued since the 2010 arrest of the Chinese captain of a Chinese
vessel that intentionally collided with a Japan Coast Guard patrol vessel, prompting economic coercion
from China in the form of rare-earth export restrictions. The recommendations set out a broad rangeof areas that should be explicitly covered by “economic security” policy, including everything fromresources and energy, ocean development, food security, and financial infrastructure, tocountermeasures to major infectious diseases, infrastructure export, and involvement in rule-making
via international organizations.
Following the issuance of the LDP recommendations, the term “economic security” appeared withincreasing frequency in government documents (including the growth strategy, etc.), but the
government did not explicitly stipulate its own definition. Prime Minister Fumio Kishida, speaking in his
first policy speech upon being appointed Prime Minister (October 8, 2021), positioned “economic
security” as the third pillar of his government’s growth strategy, stating that “Under a newly establishedministerial remit, we will advance our efforts to secure strategic goods and materials and prevent
outflows of technology, while we will materialize an autonomous economic structure. We will build aresilient supply chain and draw up legislative bills that promote Japan’s economic security.” In the same
speech he also separately identified “realizing a science and technology nation” as the first pillar of thegovernment’s growth strategy, indicating an understanding of the funding of “research anddevelopment in advanced science and technology” as something distinct from “economic security,”
which was therefore defined more narrowly than in the LDP recommendations, being focused rather
on (i) securing strategic goods, (ii) preventing outflows of technology, and (iii) building a resilient supply
chain.
Thereafter, the first meeting of the Council for the Promotion of Economic Security, chaired by thePrime Minister was held (November 19, 2021), in which the goals of “economic security” wereenumerated as follows: (i) strengthen the autonomy of Japan’s economic structure by making supply
chains more resilient and ensuring the reliability of key infrastructure; (ii) work to foster criticaltechnologies such as artificial intelligence (AI) and quantum, and ensure the superiority and therefore
indispensability of Japanese technologies; and (iii) aim to maintain and strengthen the international

1

Liberal Democratic Party of Japan, “Recommendations Toward Developing Japan’s ‘Economic Security Strategy,’” December 16,
2020. https://www.jimin.jp/news/policy/201021.html

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Japan’s Economic Security Policy—Current status and challenges—

order based on fundamental values and rules. Assuming that these three broad directions wereconcurred on among the ministers concerned, this would indicate that a slight change in the scope of“economic security” had occurred from the time of the policy speech.
Following the above-mentioned developments, in February 2022 the government’s bill for the Act on
the Promotion of Ensuring National Security through Integrated Implementation of Economic
Measures (hereinafter “Economic Security Promotion Act”) was approved by the Cabinet and submitted
to the Diet. This Act sets out the challenges for economic security into the three following areas: (i)areas where efforts have already been initiated and will be continued and enhanced; (ii) as initiatives
continue to be enhanced, areas that should be addressed as a matter of priority through theformulation of legislative measures; and (iii) ongoing consideration of further issues in anticipation of
future changes in the situation. Applicable to (ii) above were the following four new legislative
measures: “systems for ensuring stable supply of critical products,” “system for ensuring stableprovision of essential infrastructure services,” “system for enhancing development of specified criticaltechnologies,” and “system for non-disclosure of selected patent applications.” The Act was passed andpromulgated in May 2022, with phased entry into force thereafter ranging from within six months towithin two years. The various necessary budgetary allocations were also implemented at the same time.
The Act does not contain a definition of “economic security” and in the course of Diet deliberations the
Minister in charge of Economic Security responded that “ensuring the safety of the nation and its
people from an economic perspective” is the purpose of “economic security.”
In May 2024, another law to be passed was the Act on Protection and Use of Critical Economic Security
Information (hereinafter the “Critical Economic Security Information Act”). This Act institutionalizes theso-called “security clearance” system, which has been identified as being an important aspect of
economic security policy. Under this system, as a part of the nation’s information security measures,the government grants access to those who need access to information designated as critical security
information held by the government, after first investigating and confirming the reliability of such
persons.
In parallel with the above-mentioned development of legislative measures, work was also progressedon the development of economic security policy-related organizations within the government. The
National Security Secretariat (NSS) acts as a coordinating body for the Japanese government’s
diplomatic and security policies, and in April 2020 the NSS newly established an Economic Security Unit
dedicated to economic affairs. Next, in October 2021, Prime Minister Kishida newly established thepost of Minister in charge of Economic Security. Following the partial entry into force of the Economic
Security Promotion Act in August 2022, the Economic Security Promotion Office was established in the
Cabinet Office, and the Minister in charge of Economic Security was positioned as a Minister of Statefor Special Missions. It is anticipated that these organizational developments will help economic
security policies to become more unified and consistent across all government ministries and agencies.

3. Significance of economic security policyin the current situation
Japan’s economic security policy has thus taken shape as described above, but as the process of
formulation of the Economic Security Promotion Act duly demonstrates, its enactment does not in itself

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Japan’s Economic Security Policy—Current status and challenges—

complete Japan’s economic security policy. Areas that need to be covered by economic security policy
are wide-ranging, and review and revision are constantly required in response to the ever-changing
situation.
Although in the first place it is difficult to state that the definition of “economic security” has been set
out unequivocally, the essential challenge for any definition is to strike a balance between “economic
logic” (the logic of seeking economic efficiencies based on market principles) and “political logic” (thelogic of seeking the political value of security, in a dimension distinct from economic efficiencies) fromthe perspective of national interest. In that sense, it could be seen as nothing more than attaching thelabel “economic security” to what has traditionally been implemented previously in individual policy
areas.
For example, the Japanese government has sought to incentivize the Taiwan Semiconductor
Manufacturing Company Limited (TSMC) to establish a presence in Kumamoto Prefecture in order toexpand semiconductor production in Japan and is forecast to provide upward of 1.2 trillion yen in
subsidies for the construction of the first and second plants. In addition, the government has alreadyprovided 330 billion yen in subsidies to Rapidus Corporation, a company newly established with themission to realize domestic production of next-generation semiconductors, with this figure expected
to ultimately reach a total of approximately 920 billion yen. Total government subsidies earmarked forthe support of the semiconductor industry have reached approximately 3.9 trillion yen over the threeyear period from fiscal 2021 to 2023. This policy of injecting massive subsidies could also be viewed as
an attempt to revive in a new form the former “industrial policy” developed and pursued until the 1980s
by the then Ministry of International Trade and Industry (MITI, today’s METI) under the new banner of“economic security.”
Similarly, if looked at with an open mind, many of the policies being advanced as current economic
security policy could be said to in actual fact be extensions of previous policies. However, the fact that
the Japanese government has reiterated “economic security” as an important policy pillar is significant
for three reasons.
First, it is significant as it presents an opportunity to review and restructure conventional policy
development in a way that reflects the latest changes in the current situation. The increasingly
confrontational relations between the U.S. and China of recent years have provided a major stimulus
in this respect. Moreover, it also sends a message internationally that Japan is committed to reviewing
and restructuring such policies. On this point, it would perhaps be appropriate to take an even longer
historical perspective. Following the end of the war, Japan followed what would become known as the“Yoshida Doctrine,” under which Japan was managed by a pragmatic national strategy. Security was
assured on the basis of the Japan-U.S. Security Alliance, and Japan’s national strategy of focusing on
the economy while only lightly armed proved to be an effective strategy for the duration of the Cold
War. However, the upheaval in the international environment following the end of the Cold War
necessitated a review of this national strategy. The aim of the administration of Prime Minister Yasuhiro
Nakasone (1982-1987) was to “advocate a final settlement of postwar politics and the realization ofJapan as an internationally oriented nation that makes an active external contribution to world peace
and prosperity.” This was part of that historical trend. For Japan, it has been a historical necessity totake the initiative in reviewing and restructuring its own policies in the face of the changes in theinternational environment following the end of the Cold War and, more recently, the rise of China andits actions that diverge from accepted norms.

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Second, it is significant as it presents an opportunity to review internal government divisions ofresponsibilities. Each policy area is divided across multiple ministries and agencies, and it is thisdispersed approach that has given rise to inconsistencies and inefficiencies. In particular, in Japan there
have been significant challenges in terms of coordination between the organizations with authority
over security and those responsible for overseeing economic policy. If these separate organizations
could be unified and coordinated under the banner of “economic security,” it could be expected to leadto improved consistency and efficiency in terms of overall policy. This represents a major change when
one considers how Japan’s bureaucracy and administrative structures have long been criticized as
being vertically structured into siloes. Even when considered from an international perspective, it israre for a country to have an administrative organization responsible for overseeing economic security
policy.
Third, it is significant as it presents an opportunity to raise awareness of “economic security” within
private sector companies. Companies are organizations that are essentially profit-seeking in nature,and therefore naturally tend to prioritize “economic logic,” but raising awareness of “economic
security”-related risks is important not only from a national perspective, but also for the managementof risks by companies. In reality, as discussion over “economic security” in Japan has intensified, anincreasing number of companies have newly established a director or department responsible for“economic security.”
By vigorously promoting economic security policies that possess the above-mentioned significancefrom legislative, institutional, and budgetary perspectives, Japan’s economic security policy has alsocome to be recognized internationally as a pioneering initiative.

4. Challenges(1) Essential challenges
As noted above, the essential challenge for “economic security” is to strike a balance between“economic logic” and “political logic” from the perspective of national interest. “Economic logic” is thelogic of seeking economic efficiencies based on market principles, the fundamental idea since the timeof Adam Smith being trusted in market functions. In contrast, “political logic” seeks political value of
security in a dimension distinct from economic efficiencies. Political value includes such things as
security, democracy and human rights.
Although finding a balance is something that can be easily said, “economic logic” essentially pursues
efficiency by assuming a win-win game in which rational actors are the players and, in contrast,“political logic” assumes the existence of values beyond economic rationality and, in some cases, values
based on irrationality. Finding a balance is therefore a challenge fraught with difficulty that involves
fundamental trade-offs.
This is in fact a challenge that has existed for some considerable time. During the U.S.-Soviet Union
Cold War era economic relations between the countries of West and East were so small as to be almost
negligible, with relations being largely a matter of so-called “high politics” that fell under the category

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Japan’s Economic Security Policy—Current status and challenges—of “political logic.” The “containment” policy of the U.S., developed on the theoretical basis of George
Kennan’s “X Article,” was truly a policy in total adherence to “political logic.”
Subsequently, with the end of the Cold War came the assertion that democracy and free-market
economics had triumphed in the international community bringing about the “end of history” (Francis
Fukuyama), and in turn the balance veered sharply towards “economic logic.” This is because theaccession of Russia and China to the World Trade Organization (WTO) was achieved with the supportand encouragement of other countries, with it being assumed that the two would be duly incorporated
into the Western order. Following “political logic,” the costs associated with security were greatly
reduced, instead being enjoyed as economic “fruits.”
However, “history” had not come to an end. Authoritarian states remained essentially unchanged, andas it developed economically, China made no attempt to hide its stance of challenging the existingorder. It was at this point that the balance, which had swung significantly towards “economic logic”
found itself being corrected from the perspective of “political logic,” with “economic security” thus being
propelled to become an urgent agenda item.
As described above, Japan’s pioneering efforts in recent years to bring economic security policy into
the international spotlight can be understood as a move to recalibrate “economic logic” and “political
logic” in a way that responds to changes in the “Grand Narrative.”
Based on such an understanding, it is clear that constant review of economic security policy is required,and such constant review is the essential challenge facing economic security policy. What is more, sucha review would of course be by no means sufficient if Japan were to implement it in isolation. FromJapan’s perspective, working in cooperation with the countries of Europe, the U.S., and the countries ofAsia, the challenge is to ensure that the balance between “economic logic” and “political logic” is always
appropriate and in tune to the international situation at any given time. On the other hand, Japan now
has increasingly interdependent relations with China in economic terms and cannot escape its
geopolitical influence, making it necessary to constantly seek to find a mutually accommodatingbalance with China. One of Japan’s major essential challenges is how accurately and strategically it canadvance such international efforts.
In addition to the above, the challenge ofachieving an appropriate balance while
also improving the optimum point is also
important. If a diagram were to be
drawn of the trade-off relationshipbetween “economic logic” and “political
logic,” the achievable point of balance isshown on the possibility curve below,
but it is also important in policy terms toshift this possibility curve upwards. If it ispossible to effect such a shift, both
economic and security benefits could be
Figure: Compiled by the author

improved.

Konrad-Adenauer-Stiftung e.V.
Japan’s Economic Security Policy—Current status and challenges—(2) Urgent challenges
Although in the above figure the aim should be to shift the possibility curve upwards, in reality there
can be and, in actual fact, are situations where an achievable optimum point on the possibility curve is
not realized, instead remaining inside the possibility curve. From the perspective of at the very least
avoiding such a situation and realizing a point of balance on the possibility curve, the following are
examples of urgent challenges that could be pointed out.
(i) Relationship between the government and private sector companies
Many of the locations most closely related to economic security are the places of business of private
sector companies. It is precisely for this reason that it is essential for the government to share sufficientawareness of the issues with private sector companies if economic security policy is to be implemented
appropriately.
A prerequisite is the mutual sharing of sufficient information between the government and the private
sector, and while there are both formal and informal efforts already being made at public-private
sharing in Japan, there is still room for improvement.
Furthermore, before information can be shared between the government and the private sector,
another challenge is to improve their respective information gathering and analysis capabilities.
Although efforts are being advanced to enhance the “economic intelligence” functions of thegovernment and for companies to gain a fuller awareness of the status of their own businesses,
considerable improvements are presently required on both sides. For example, in the private sector
there are more than a few companies that do not have a full understanding of the actual status of theirown supply chains. On the other hand, there are some cases where various regulatory information
provided by the Japanese government to private companies on the basis of economic security needs,
is not as clear-cut as information provided in the U.S. Entity List. Not only does this have an excessively
constraining effect on private sector companies, but there are also concerns that it could result in thecreation of grey zones that enable lobbying by countries and other entities of concern in terms of
economic security.
(ii) Review of critical products and essential infrastructure
Although Japan’s Economic Security Promotion Act makes provisions relating to critical products andessential infrastructure, these are areas where constant review and revision are required, based on
the latest developments. One example of such a revision being necessitated occurred on July 4, 2023,
when the Nagoya United Terminal System (NUTS), in operation at five container terminals andcentralized control gates at the Port of Nagoya, was subjected to a large-scale cyberattack that resulted
in a three-day stoppage of all operations. In response to the incident at the Port of Nagoya, on January
30, 2024, in the sixth meeting of the Council for Promotion of Economic Security, the Prime Minister
stated, “In terms of essential infrastructure, in light of the incident last year at the Port of Nagoya, it isnecessary to add general port and harbor transportation businesses to the businesses covered by the
Economic Security Promotion Act,” and issued instructions that, “A bill revising the Economic Security
Promotion Act to add general port and harbor transportation businesses to essential infrastructure
should be promptly formulated, and the government should coordinate with the ruling parties toaccelerate preparations to submit the revision bill to the current regular session of the Diet.” As a resultof this process, the Act to Partially Amend the Economic Security Promotion Act was passed in May

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2024, in which “general port and harbor transportation businesses” were added to the businesses
covered by the essential infrastructure system and is scheduled to enter into force within 18 months.
While an ex post facto review of such incidents is unavoidable in practice, an appropriate proactive
review of critical products and essential infrastructure should be conducted in advance as far as it ispossible to do so.
(iii) Non-disclosure of selected patent applications
One of the pillars of the Economic Security Promotion Act is the establishment of a system for nondisclosure of selected patent applications. This is something that has already been introduced in manyother countries and is a system that was also long awaited and anticipated in Japan.
Although the recent establishment of the system represents an important step, it is designed in sucha way that even if an application is recognized as sensitive technical information for national security
purposes, there is still an option for the applicant, a private company, to make a decision to withdraw
the application itself, leaving concerns that this could become a major problem depending on theactual operation of the system. Operational innovations and future amendments to the system also
therefore need to be considered.

5. Conclusion
While Japan’s economic security policy has been pioneering in some respects, even from a global
perspective, issues nonetheless remain and there are areas where improvements are still needed. It
will be necessary for Japan to revise policies accordingly, while also referring to developments andinitiatives in other countries.
For example, in the Republic of Korea (ROK), the Special Act on the Promotion of National Strategic
Technologies was enacted and promulgated on March 21, 2023. It has been observed that efforts tomanage and protect knowledge and information related to the national strategic technologies covered
under the Act are more thoroughly stipulated and effective than Japan’s policy, and there are elementsthat Japan would be well advised to refer to in the future. Furthermore, so-called investment screening
has yet to be introduced in Japan, and although the government is attempting to enhance effectivenessby managing the transfer of technology itself, further study is likely to be required depending on thestatus of other countries’ efforts.
In any event, as long as the essential task of economic security is to realize an appropriate balance
between “economic logic” and “political logic,” it will remain a never-ending policy challenge that could
be likened to the “Rock of Sisyphus” in Greek mythology. It is precisely because these are open-ended
challenges that we must accurately understand their essential nature, and formulate and implement
policies accordingly. Whether or not we can indeed do so is our own fundamental challenge.

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Japan’s Economic Security Policy—Current status and challenges—

About the Author
Shigeaki SHIRAISHI is former Senior Research Fellow and Director of Research Center for Economic Security at Nakasone Peace Institute on loan from the Ministry of Economy, Trade andIndustry.
He graduated from the University of Tokyo with a B.A. in Law in 1988. He completed graduate
studies at Princeton University with a Master in Public Affairs in 1994.
He joined the Ministry of International Trade and Industry (now the Ministry of Economy, Tradeand Industry) in 1988. He has held posts including Director of the Information and Research Division, Trade Policy Bureau; Senior Fellow, Research Institute of Economy, Trade and Industry (concurrently OECD consultant and IEA consultant); Director of the Service Affairs Policy Division, Commerce and Information Policy Bureau; Counsellor, Cabinet Secretariat; and Vice President, National Institute of Advanced Industrial Science and Technology.

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Konrad-Adenauer-Stiftung Japan
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Typesetting: Johanna Bieger, Konrad-Adenauer-Stiftung Japan
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