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S uppor ti ngYour Gl obal Cha llen g es

FEBRUARY
2023

THE WORLD FROM THE PERSPECTIVE OFGEOPOLITICSANDGEOECONOMICSS P E C I A L F E AT U R E

GEOPOLITICS & GEOECONOMICS

The World from the Perspective of

Geopolitics andGeoeconomics

What are geopolitics and geoeconomics? How can we understand the world through these two concepts?
Guided by Japan Bank for International Cooperation (JBIC) experts, this issue’s special feature looks at noteworthy
topics for 2023 to provide a perspective on the world that is useful at work and in daily life: the relation between
conflict and interdependence, Japan’s position in the world, and geoeconomic risks in the energy sector.

presented a paper on Japan’s economic
and security policies. According to
AMANO, the 19th-century geographer
and biologist Friedrich Ratzel is considered the father of geopolitics. Ratzel saw
the state as a physical organism with its
territory, its “body.”
As this was associated with Nazi
Germany’s expansionism, use of theterm “geopolitics” was avoided afterWorld War II. “That is why it has not been
established as a discipline in Japanese
universities, despite the fact that ‘study’is inferred in the Japanese word for geopolitics,” explains AMANO.
However, in the 1970s, geopolitics reemerged as a term to describe
relations among states. According to
AMANO, “You could say that contemporary geopolitics is almost synonymouswith ‘realism’ in international politics.”

Interdependence prevents conflict?
That illusion has been shattered
Along with geopolitics, recent years
have seen growing interest in “geoeconomics.” A portmanteau of geography
and economics, this word has no established definition. According to AMANO,“Geoeconomics is often used in thesense of ‘using the economy for geopolitical aims,’ with more emphasis on
policy implementation than analysisof the current situation.” Economic

Illustration by OKUBO Naoto

Geopolitics is “realism.” Geoeconomics is its “economic means.”
Understanding the complexity of the world
The dangers of the “fragility” that lies in economic interdependence. AMANO Tatsushi,
Director General of the Strategic Research Department at JBIC, shares his “realistic” worldview.

As did the old Cold War between the U.S.
and the Soviet Union, the current “New
Cold War” between the U.S. and China
is dividing the world. Then in February2022, Russia invaded Ukraine, a conflictthat is also having major impacts on the
global economy.
Against this backdrop, “geopolitics” is attracting renewed attention.
Geopolitics is the analysis and study ofrelations between countries and national
strategies that centers on geographical2

JBIC TODAYFEBRUARY 2023

conditions. For example, landlocked
countries such as those in Europe areeasily affected by bordering countries,
while island nations such as Japan focus
on maritime trade.
Such global trends cannot be ignored
now by Japanese executives, businesspeople, consumers, or students, as thesituation in Ukraine, more than 8,000
kilometers away, is impacting household
utility bills.
JBIC conducts an annual survey on
Japanese companies with operations
overseas. In the latest edition, releasedin December 2022, 85 percent of companies said geopolitical risks weresignificant (see the graph on the following page). Some 90 percent of companies
responded that the invasion of Ukraine
had a negative impact, despite the factthat very few of them operate in Russia
or Ukraine.
To start with, what is geopolitics? And
how does geoeconomics differ fromgeopolitics?
AMANO Tatsushi, Director Generalof the Strategic Research Department
at JBIC, is also engaged in research on
geopolitics. In 2022, he participated in“Strategic Japan,” a research program of
the Center for Strategic and International
Studies (CSIS) U.S. think tank, where he“sensitivity” and “vulnerability.” Evenif a country is heavily dependent onanother for a certain commodity, if it caneasily procure a substitute, it is “sensitive” and not “vulnerable.”“As in the case of China’s restrictions
on Australian wine imports, countries
sometimes implement policies that
exploit vulnerability. When deepening
economic integration, the key point is
how to overcome vulnerabilities caused
by interdependence.”

Globalization and the pandemic
make economic security
Japan’s key challengeThis is precisely the kind of geopoliticalrisk that is of concern to corporate management. In this respect, what cannot be
overlooked is the relation between China
and Taiwan.
China insists Taiwan is part of its
territory — its “One China” policy —while support for independence risesin Taiwan, with the U.S. also involved.
From a geopolitical perspective, thereason China is now adamant on integrating Taiwan, even if it means regional
disruption, lies in Taiwan’s geographicalimportance.
China and Russia can be categorized
as land powers maintaining bordersecurity, while the U.S. and Japan canbe categorized as maritime powers

Importance of geopolitical risks in business strategy

Geopolitical risk factors relevant to business activity

85 percent of companies responded thatgeopolitics is “significant”

Domestic and international politics were consideredhigher risks than non-tariff / tariff barriers

Response to the question“How significant is the concept of geopolitical risk
in your business strategy?”

Response to the question“What are the most relevant geopolitical risks to your business?”(Multiple answers allowed)

Less significant
4 companies

0.8 %Uncertain

32 companies

6.3 %Neither

Domestic politics ofoverseas business location

256 companies
232 companies

International politics

40 companies

The U.S.-China conflict andthe invasion of Ukraine
heightening interest in geopolitics

sanctions against Russia are a case inpoint.
Reflecting on historical experience,
international politics since 1945 had
sought to limit sovereignty and avoid
armed conflict. “Most illustrative of
this trend is the EU. Reflecting on the
numerous wars fought during the 19thand 20th centuries, Europe worked tostrengthen economic interdependence
after World War II.”
But Russian invasion of Ukraine
shattered illusions that economic interdependence would lead to peace. The
economic ties between the two countries
had been extremely strong, and until
Russia’s annexation of Crimea in 2014,
Ukraine’s largest trading partner was
Russia. “Broadening our perspective
even more, do frameworks increasing
economic interdependence, such as the
CPTPP (Comprehensive and Progressive
Agreement for Trans-Pacific Partnership),
RCEP(Regional
Comprehensive
Economic Partnership), and IPEF (IndoPacific Economic Framework), also lead
to less conflict? Not necessarily so.”
Such partnerships naturally have
major economic significance, but whenit comes to conflict prevention, thatcomes down to international realpolitik,
comments AMANO.
He explains that there are two
types of economic interdependence:

7.9 %

Very
significant

Non-Tariff barriers

24.4 %

Tariff barriers

171 companies

Financial sanctions

70 companies

Not fully discussed

63 companies

188 companies

124 companies

Significant
309 companies

No. of companies: 509

60.7 %

3 companies

OthersNo. of companies: 502

0

100

200

300

(companies)

Source : JBIC, “Survey Report on Overseas Business Operations by Japanese Manufacturing Companies — JBIC 34th Survey, 2022”

FEBRUARY 2023

JBIC TODAY

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S P E C I A L F E AT U R E

GEOPOLITICS & GEOECONOMICST O PICS

5

Five Geopolitical and Geoeconomic Topics for 2023

Country relations in the Asia-PacificAmid U.S.-China conflict, expectations toward Japan are rising

Xi Jinping government• Importance on internal balance• Vigilance against “black swan”
and “gray rhino” events*

It’s not easy to predict the near future, but geopolitics and geoeconomics can provide hints.
AMANO explains five key topics in an easy-to-understand way.

U.S.-China conflict

Carried over from 2022 : Russian invasion of Ukraine“China is the world’s
greatest geopolitical test”(Biden administration)

UNITED
STATES

CHINA

Land power

Sea powerJAPAN
Sea power

Alliance

High trust and expectations

SOUTHEASTASIA• Caught between

China and the U.S.

controlling certain areas of the ocean.
According to geopolitical theory, landand sea powers are likely to clash.
“China, which regards itself as being surrounded and threatened by sea powers,
aspires to maritime expansion,” explains
AMANO. “Taiwan of course has historical relevance in the formation of China,
but its strategic importance in access to
the Pacific Ocean cannot be overlooked.”
So how should Japan’s position beconsidered?
Amid the increasingly tense international situation, a key policy of the
KISHIDA cabinet is economic security.
Economic security basically means“protecting the country from what
could be economic existential threats.”
Specifically, securing semiconductors,
food, oil, iron, and other resources
necessary for economic independence.
AMANO points out that economic
security is an important issue because“greater economic interdependence
resulting from globalization after the endof the Cold War has increased vulnerability.”
The U.S.-China struggle for hegemony and the loss of free economic
exchange due to the coronavirus pandemic have undermined the U.S.-ledliberal international order. Japan is now
tasked with bolstering supply chains disrupted by the pandemic and overcoming
economic vulnerability.
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JBIC TODAYFEBRUARY 2023

From energy prices to grain supply anddemand, the course of the invasion of Ukraine,
which began in February 2022, will likely have
major implications for 2023. The war ending
will be key to global economic recovery. But the
Ukrainian government’s draft budget for 2023
— submitted in September 2022 — assumes
a continuation of the war, and analysts see an

Biden administration• Importance on internal balance• Also emphasizes external balance

Industry’s eyes on semiconductors and batteries
JBIC’s AI-based analysis of 4 million news
articles from 200 countries and regions aroundthe world, revealed “semiconductor” and“ battery” to be important keywords for supply
chain resilience. In the U.S., concern overthe semiconductor shortage has intensified
following the pandemic, as evidenced by semiconductor export restrictions and the August2022 enactment of the CHIPS Act to support* “Black swan” refers to an event thatis difficult to foresee and unlikely tooccur, but has extreme consequences
if it happens. “Gray rhino” is a risk thathas a high possibility of creating serious
problems but tends to be neglected.

Southeast Asia, caught between
China and the U.S.,
holds expectations for JapanIn October 2022, the Biden administration’s first National Security Strategy
named China a key competitor.
“I believe that for the time being, U.S.
strategy toward China will be based on
ensuring strategic stability while avoiding unintended and accidental conflicts.
In other words, backed by military power,
the U.S. and China will be antagonistic toeach other, but will not fight,” comments
AMANO.
Meanwhile, Chinese President Xi
Jinping was elected to a third consecutive term at the Communist Party
Congress that same October. China isalso emphasizing the need for economic
resilience. Both the U.S. and China are
placing importance on internal balance,
but the U.S. is also emphasizing cooperation with Japan and other allies.
One of Japan’s strengths is its close
alliance with the U.S., but this is not its
only advantage. According to an opinion
poll conducted on ASEAN member statesby a Singapore-based research institutein 2022, in answer to the question, “Howconfident are you that Japan will ‘do theright thing’ to contribute to global peace,security, prosperity, and governance?”
54 percent answered “very confident” or“confident.” This level of trust surpassed

that for China, the U.S., and the EU.
Since the start of the second ABE
administration in 2012, Japan has been
pursuing unique diplomatic strategies
including “diplomacy that takes a panoramic perspective of the world map”
and “proactive contribution to peace.” It
could be said that these are now being
put to the test.
According to AMANO, “Southeast
Asian countries, caught between China
and the U.S., and unwilling to side witheither, have high expectations for Japan.
Japan’s challenge is whether it can live
up to these expectations and more effectively utilize its economic capabilities.”
Do not think these are matters ofinternational politics of no concern toordinary people. Not only governments,
but also companies and individuals needto take a realistic geopolitical and geoeconomical view of the world.

early end as unlikely.
According to TAKAHASHI Sugio of the
National Institute for Defense Studies, “A newinternational order will be created with the endof the war. How the war ends will be critical.”
Whether the current deadlock continues or thesituation escalates is the biggest issue for 2023.

domestic production.
According to the AI analysis, batteries,
which are indispensable for electric vehicles,
have also grabbed more attention since April
2022 following Russian invasion of Ukraine.
Future global trends must be carefully watchedin order to revive Japan’s once world-leading
semiconductor and lithium battery industries.

The future and impacts of China’s “post-COVID” economy
China’s “zero-COVID” policy, designed to thoroughly contain the spread of the coronavirus,
is significantly impacting the lives of its citizens
through strict lockdowns and other restrictions.
Strong protests against this policy have been
growing more active both within and outside
China since November 2022.
This poses huge risks for the Chinese

economy and for the global economy as well
due to supply chain disruptions. On the other
hand, if the Chinese economy recovers rapidly
after the end of the zero-COVID policy, this
could then lead to global shortages of energy,
food, and other commodities. The world needs
to prepare for changes in China’s COVID policy
and the impacts that will have.

Climate change and the new issue of “loss and damage”
While climate change response is becoming apriority in developed countries, many developing countries are unable to deal with arapid transition from fossil fuels to renewableenergy. Climate change issues are now inseparable from energy issues.
The most important debate at COP27 in
2022 was “compensation for loss and damage,”with it argued that developed countries, which
had emitted huge amounts of greenhousegases in the past, should provide developing
countries with even more relief measures suchas financial assistance. North-South conflict is
expected to intensify in the run-up to meetingthe 1.5˚C target by 2050.

The geopolitical aspect of the U.S. political divide
A N A LY S T ’ S B I O
Director General of the Strategic Research
Department, JBICAMANO Tatsushi
Joined JBIC in 1995. Engaged in researchon industry and participated in a research
program of CSIS. Graduate of the Facultyof Law, University of Tokyo. Graduate of the
University of Pennsylvania Law School. A
New York State registered attorney.

Political instability is increasing in the U.S. withthe divide between conservative Republicans
and liberal Democrats intensifying witheach passing year. Take inflation, for example. Republicans say that inflation is due toincreased public spending in response to thepandemic, seeing it as the country’s biggest
problem. Meanwhile, Democrats argue thatthe cause of inflation is Russian invasion of

Ukraine and that climate change is a much
more serious problem.
Inflation in the U.S. and the resulting
economic policies affect Japan, too. So, it isimportant also to understand the backgroundof the political division in the U.S. Geopoliticalthinking can also be used to analyze domestic
situations and public sentiment.

FEBRUARY 2023

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S P E C I A L F E AT U R E

GEOPOLITICS & GEOECONOMICSThe “energy crisis” current coreof geopolitical and geoeconomic risk

Russia has been making upward revisions since the invasion of Ukraine

Soaring energy prices, the double-edged sword of economic sanctions against Russia, and renewable energy,
explained by KATO Manabu, Director General of the Energy Solutions Finance Department at JBIC, and a Russia expert.

When the West imposed economic sanctions on Russia, it was expected that the Russian economy would suffer a major decline,
but instead, the damage to the world as a whole has been greater than expected.

Revisions of the economic growth rates of key economies

2022

2022

2022

2022

2023

Projections as of January

Projections as of April

Projections as of July

Projections as of October

Projections as of October 2022

WORLD

4.4

3.6 ( − 0.8 )

3.2 ( − 0.4 )

3.2 ( — )2.7

UNITED STATES

4.0

3.7 ( − 0.3 )

2.3 ( − 1.4 )

1.6 ( − 0.7 )1.0EURO AREA

3.9

2.8 ( − 1.1 )

2.6 ( − 0.2 )

3.1 ( + 0.5 )

0.5

JAPAN

3.3

2.4 ( − 0.9 )

1.7 ( − 0.7 )

1.7 ( — )

1.6

CHINA

4.8

4.4 ( − 0.4 )

3.3 ( − 0.9 )

3.2 ( – 0.1 )4.4

RUSSIA

2.8− 8.5 ( − 11.3 )− 6.0 ( + 2.5 )− 3.4 ( + 2.6 )− 2.3
Source : IMF, World Economic Outlook

Fossil fuels such as oil and natural gas are not only finite and distributed unevenly in the world, but there are also risks in their transportation through “chokepoints” andcountries in conflict.

are there high geoeconomic
Q Whyrisks in the energy sector?

A Reserves of fossil fuels such as oil, natural gas, and coal are finite and unevenly
distributed. The major areas supplying
fossil fuels include the Middle East,
North America, Russia, and Australia,
and energy prices are significantly
impacted by the political situation inthese countries and regions. The Middle
East in particular is known for frequent
conflicts and political instability.
Risks also lie in transportation. Whenfossil fuels are transported by ship or
pipeline, they often have to pass throughmaritime chokepoints or countries inconflict, creating challenges around thesafety of sea lanes.
Moreover, energy supply is sometimes used as a means to achievegeopolitical objectives. In a conflict
between countries, the country supplying a resource can stop exports at a levelthat benefits itself; similarly, a purchasing
6

JBIC TODAYFEBRUARY 2023

country can stop imports from a specificcountry as a way to apply pressure. Thisrisk was exposed all too clearly by theenergy crisis that broke out in the wakeof Russian invasion of Ukraine.

are European economies
Q How
affected now?

A Following the invasion of Ukraine,
Western countries imposed measures tosuspend imports from Russia. However,
economic sanctions against Russia,
the world’s largest energy supplier, led
to energy insecurity and are seriously
impacting peoples’ lives. While theshale revolution has enabled the U.S. to
be energy self-sufficient, Europe is at agreater disadvantage because of its highdependence on Russian gas supplied
through pipelines, with this accounting
for nearly 40 percent of its total natural
gas procurements in 2019 (2020 BP statistics).
The average gas bill for a single-family home in Germany has more thandoubled since 2021. In the U.K. as well,electricity and gas bills soared, leading
to frequent protests and deepening
political turmoil.
Economic sanctions can be a double-edged sword as they can also
damage the economy of the imposing
side. Looking at GDP growth rates, forexample, the U.S., Europe, and Japan
have repeatedly made downward revisions after Russian invasion of Ukraine.
There are also fears of stagflation, in
which inflation and recession occur
simultaneously. On the other hand,underpinned by strong Indian andChinese demand for Russian oil, projections for the Russian economy havebeen repeatedly revised upwards (seetable on the following page). Indeed, it
may be that the economic sanctions are
more damaging to the West and othercountries than they are to Russia.
However, sufficient analysis of the
blowback damage from sanctions in theenergy sector has not been made. In

addition, no country has imposed sanctions on Russia for the enriched uranium
necessary to fuel nuclear power plants.
That is because the U.S. and Europe both
depend on Russia for about 20 percent of
their enriched uranium, a supply they do
not wish to see cut. Astute assessmentof the double standards of the West
imposing such sanctions is necessary.

are Japan’s geoeconomic
Q Whatrisks with respect to energy?

A Japan has the world’s third-largest
GDP but an energy self-sufficiency rateof just 12 percent, the lowest among theG7 nations. Japan relies on imports for99.7 percent of its crude oil, 97.7 percent of its liquefied natural gas (LNG),
and 99.6 percent of its coal. Notably,
Japan depends on the Middle East for
about 90 percent of its oil. As an island
nation, Japan cannot import electricity
from other countries through the grid,as can be done in Europe, and so thediversification of import sources is
extremely important from the aspect ofenergy security. JBIC, in collaboration
with the Japanese government, strives
for long-term energy security by maintaining lines of communication withresource-producing countries to gain an
astute understanding of their intentions.
In order to achieve carbon neutrality
by 2050, thermal power generation
using natural gas or LNG is consideredessential for resource-poor countries
like Japan. Because natural gas and

LNG emit less carbon dioxide than oil orcoal, they are expected to play roles as
bridging fuels in the transition to renewables. The invasion of Ukraine disrupted
that scenario, however, and there is now
fierce competition for natural gas and
LNG across the globe. The year 2023 will
indeed be the crucial period for securing a stable, long-term energy supply
system.

you talk about
Q Could
fossil fuel market trends,
particularly around oil?

A The global trend toward decarbonization has led to fossil fuel divestment.
In fact, investment by Big Oil fell by asmuch as 49 percent between 2015 and2021, and this was one of the factors inthe soar in energy prices, spurred further
by the energy crisis following Russian
invasion of Ukraine.
An intense tactical game is being
played out between OPEC+ — made up
of OPEC (Organization of the Petroleum
Exporting Countries) and other oil
producers including Russia — which
is taking actions to maintain prices
through production cuts, and the U.S.,
which wants oil prices to go down whilecurbing Russian oil revenues. Oil prices
are projected to remain high and unstable for some time to come.

the spread of renewable
Q Willenergy reduce geoeconomic risks?

A

Renewables such as solar, wind,hydro, and geothermal energy also carryrisks. That’s because their suitability fora particular area depends on its topography, weather conditions, and otherfactors.
In addition, with 80 percent of thepolysilicon for solar panels said to be
produced in China, solar power is not
immune to geoeconomic risk. As forwind power, China holds about a 70
percent share in the production of rareearths indispensable for wind turbines.
While efforts to become carbon neutral
are urgent tasks for the world to address,
it is important to be aware that as long as
supply chains go beyond national borders, there will always be geoeconomic
risks, even in the case of renewableenergy.

A N A LY S T ’ S B I O
Director General, Energy Solutions Finance
Department, JBIC

KATO Manabu
Joined JBIC in 1996. Was stationed in
Moscow, engaged in Russia’s resource development and export projects, etc., for a total ofeight years. Served as the Special Advisor forgeoeconomic risks and other positions before
assuming his current position. Graduatedfrom the Faculty of Law, Keio University.
Author of “Kotei-CEO Putin no Yukue (Putin,
Emperor and CEO )”.

FEBRUARY 2023

JBIC TODAY

7

Our People and Their WorkJBIC engages in various projects around the world.
Senior JBIC staff on the front line share their thoughts
and stories behind their projects.

Supporting the Indian health sector during the pandemic through Quad collaboration

Supporting COVID-19 measures in India,
experiencing firsthand the unique excitementof policy-based finance
JBIC signed a loan agreement in May 2022, for the improvement of the healthcare sector in India,
as a novel financial outcome of Japan-Australia-India-U.S. (Quad) efforts.
MIKITA Satoshi, the project leader, shares the story.

JBIC’s first loan
for COVID-19 vaccine production“This project epitomizes JBIC ’s vision,‘supporting your global challenges,’”says MIKITA Satoshi, Deputy Director
General of the Social Infrastructure
Finance Department, who shaped
the project into reality. The loan was
extended to the Export-Import Bankof India (EXIM-India) for the purposeof boosting the production of COVID19 vaccines, therapeutic drugs, etc.,
through financial support for local pharmaceuticals and others.
“This financing involved the expansion of medical equipment production
and the development of medical facilities as well as vaccine manufacturers.
Against the backdrop of the pandemic,
this financial support had a meaningful
aim of underpinning India’s economic
development by raising the standardsof the Indian healthcare sector and of
improving the business environment forJapanese companies operating in India.”
India is a global manufacturing
center for vaccines, exporting to countries across Southeast Asia and Africa.
Boosting its vaccine manufacturing
capacity with this loan will therefore
benefit the health of people not only in
India but also far beyond its borders.
“Our role is not only to lend money.
We need to think about what we can do
beyond this, for the economic development of partner countries and theworld, and this project reminded me ofthat. This was JBIC’s first financing for awide range of sectors related to vaccine
production during the pandemic,” adds
MIKITA.
One of the unique features of thisproject was that the diplomatic agendaof strengthening the Japan-AustraliaIndia-U.S. partnership made headway
through this cooperation to support
India’s healthcare sector. This uniqueaspect was perhaps something only
JBIC — Japan’s policy-based financial

institution — could work through.

Five-hour online meetings
were held due topandemic-related travel restrictions
To realize a “free and open Indo-Pacific,”
the Quad partners are committed tocooperating in a wide range of areas
to contribute to the region. At the first
Quad Leaders’ Meeting, held (online) in
March 2021, the four countries identified
the response to the pandemic as “themost urgent of global challenges.” In thiscontext, they agreed to work together tostrengthen India’s vaccine manufacturing capacity and to utilize their financial
institutions including JBIC.
This project was therefore highly
significant
and
involved
political
dynamics in terms of promoting cooperation at the government level, and so
negotiations had to be conducted frommultiple perspectives. “While difficult,the project also allowed us to experience
firsthand the excitement of working as a

MUFG Bank
The Hachijuni BankJapan Bank forInternational Cooperation

The Bank of Kyoto

Loan
The Export-Import
Bank of India

Deputy Director GeneralSocial Infrastructure Finance Department
Infrastructure and Environment Finance GroupMIKITA Satoshi
Joined JBIC in 1997. Served as a senior
representative in Washington, D.C.,
and as a senior researcher at the SI-PI
Promotion Office of the Hitachi ResearchInstitute. Has been involved in projects
in the global market for railroads, urban
transportation, waste power generation,
and water projects, as well as country
assignments in the U.S., Canada, andother countries. Graduated from theFaculty of Law, Hitotsubashi University.

policy-based financial institution.”
In addition to negotiating the detailsof the agreement with EXIM-India, it wasalso essential to discuss the positioningof this loan within the Quad frameworkwith the U.S. Given the travel restrictions
due to the pandemic, online meetings
were held with representatives from
EXIM-India for over five hours each day
in the lead-up to the signing of the loan
agreement. Careful local negotiations
by JBIC representatives working in New
Delhi were also a success, and the contract was concluded in time for the Quad
Leaders’ Meeting in Tokyo in May 2022.

Supporting the overseas expansionof regional banks — toward the
expansion of lending to India
The loan was co-financed by JBIC, MUFG
Bank, The Hachijuni Bank, and The Bankof Kyoto. MIKITA described the role of
JBIC in supporting the overseas expansion of regional banks as follows: “Forregional banks that do not have extensive international operations, there arerisks in developing overseas businesson their own. We would like them to initially partner with government-affiliatedfinancial institutions such as JBIC tofacilitate their overseas expansion
through co-financing arrangements
where we can provide loan guarantees.”
An increasing number of regionalbanks are looking overseas for a variety of reasons, such as to expand theirbusiness or to support the overseas
expansion of local companies. This project provided an opportunity for regionalbanks to expand their business into
India.
While there were few loan projects
to India until about five years ago, thenumber of projects has been increasing
recently, mainly due to strengthened
governance on the Indian side. India
faces a number of challenges, including a disparity between its economic
growth and electricity demand, and its
heavy dependency on coal-fired power
generation. As India moves forward withdecarbonization and other initiatives,
JBIC’s involvement in the telecommunications and agriculture sectors may
increase, as well as in the renewableenergy sector.
This financing project produced arange of results, including stronger

FURUYA Toshihiro, one of the project members.
Under MIKITA’s leadership, FURUYA underwent
tough negotiations with EXIM-India. He recalls, “It
was a significant project that involved both geopolitics and international policy.”

Quad coordination on the diplomatic
front and overseas expansion of Japan’s
regional banks.
“This project has opened up new
avenues for financial support to India,
which has a lot of potential for growth.
With our lending and equity capacity, we
will continue to leverage the strengths ofJapan, such as its technological capabilities, to meet India’s challenges.” MIKITA
believes the future is bright.

Loan

Even today, India’s COVID-19 booster vaccination rate is less than 20%. Continued support isessential.

8

JBIC TODAYFEBRUARY 2023

Vaccine manufacturers and others in
the Indian healthcare sectors

Project Summary

In May 2022, a loan agreement was concluded with EXIM-India, India’s policy-based financial institution, forup to USD100 million (including a USD60 million JBIC loan). JBIC provides guarantees for the portion of theloans from private financial institutions.

Press release on this project
FEBRUARY 2023

JBIC TODAY9

OUR GLOBAL CHALLENGES

Asahi Kinzoku Kogyo Inc.
President and CEO

YAMANAKA
Yasuhiro
Joined the company in
1981, became president in
1989, and has continued tolead the business for morethan 30 years. The company
has thoroughly trained its
employees with a “desire to
make good products without cutting corners” andthis has become part of thecompany’s culture. This attitude will remain unchanged
even in the face of global
expansion.

Asahi Kinzoku Kogyo Inc.

Aircraft parts maker recognized by Boeing
Earning trust and experience for a global push
In addition to a core plant in Gifu Prefecture in Central Japan,
with an eye on the Asian market the company is also focused on a plant in Malaysia.
With strong technical skills and reliability based on “manufacturing products that truly meetthe required specifications,” the company is moving forward with post-COVID global expansion.

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JBIC TODAYFEBRUARY 2023

The Gifu Anpachi Plant, currently thecompany’s main site, consists of threebuildings: the West Plant, the 300-Year
Factory, and the East Plant. In 1992, theWest Plant was established, with roomfor future expansion and good accessto both the Kansai and Kanto regions.
Operations began at the 300-Year
Factory in 2002 and at the East Plant in2011. The total area of the three plants
exceeds 21, 000 m².
The 300-Year Factory, the core of thethree, derives its name from being “astructure that can maintain production
for 300 years.” The structure is pillarlessso that equipment can be replaced andthe layout can be changed according tooperating conditions. By establishing a
production system that integrates the

Asahi Kinzoku Kogyo Inc.
1948

Company founded

1977

Approved as a special
processing plant for Boeing Co.

1988

Kyoto South Plant completed

1992

Gifu Anpachi West Plant
completed2002

Gifu Anpachi 300-Year Factorycompleted

2015

Asahi Aero Malaysia established

2019

Asahi Aero America established

OVE

RSEAS

OP

ER

A

Another characteristic of Asahi Kinzoku
Kogyo is its aggressive stance towardmarket development not only in Japanbut also overseas. In Japan, the aircraft

S

Assets of strong technological capabilities and reliability, at 300-Year Factory in Gifu

A new plant for machining engine
parts, and a “plant that will last 300
years” at the core

“COVID has now subsided, andaircraft deliveries have begun to moveagain. In the future, there will be a growing trend toward decarbonization, suchas increased use of hydrogen and biofuels. And aircraft are being developedwith electric motors, like electric cars.
In the world of aerospace components,
specifications are everything. The key
is how quickly, cheaply and accurately
these specifications can be met. We feelthat the stage is now set for us to demonstrate our strengths because of the trust
we have earned from our customers.”

ON“We have a system in place to transfer
the know-how we have accumulated inJapan on airframe components to overseas markets. India will be the next big
market, followed by Africa.”
YAMANAKA Yasuhiro, President andCEO of Asahi Kinzoku Kogyo, explained
the company’s vision and showed us
around their Gifu plant, which he has
nurtured with his own hands.
The company is known as ajet. Since then, as Boeing developed
new aircraft models such as the 787 and
737, the company has expanded its own
production system.

The aircraft industry makes anotherleap forward — continuing to invest
with confidence

industry is basically structured suchthat large heavy industry companies,
which are contracted by Boeing to
manufacture airframes, outsource theirparts processing and assembly to small
and medium-sized suppliers. Expanding
direct transactions with overseas companies is also important in terms ofdiversifying management risk.
In 2015, in an attempt to gain a foothold in the Asian market, the company
established a subsidiary in Malaysia
in response to the entry of an aircraft
fuselage manufacturer into that country.
The company also took advantage of a
JBIC loan in anticipation of expanding
the plant in 2021. “Malaysia is sure to be
one of the centers of the aircraft industry
going forward. We will continue to makethe necessary investments while keeping a close eye on Boeing.”
The aircraft industry has been struggling in recent years as the pandemic
hit the industry. Cross-border travel was
restricted, and domestic and international airlines were barely operational.
“Although the freighter market was still
moving to some extent, the passenger
aircraft market dropped to about onefifth of its peak, and the company’s sales
were also down.”
Nevertheless, the company has not
stopped making capital investments andexpanding overseas, with reliance on
the technology and trust it has cultivatedand its confidence that the aerospaceindustry will make another leap forward.

TI

From soy sauce brewing
to plating plant
Business expansion withthe development of the aircraft industry

manufacturer that performs surface
treatments such as machining, plating,and coating for aircraft and rocket parts.
The company was the first in Japan toreceive Nadcap accreditation, an international certification for special processcontrol related to the aerospace industry,and has earned the trust of major customers that include the U.S. company
Boeing and Mitsubishi Heavy Industries.
The company has operations in Kyoto,Gifu, Malaysia, and the U.S.
The company is headquartered in
Kyoto, where it was a soy sauce brewery
until World War II, when it was converted
to a plating factory. “We coated soy
sauce barrels with coal tar to makeplating tanks. As the number of jobs
increased to meet the demand for reconstruction, our company was asked toassist the aircraft division of Shimadzu
Corporation, which is also in Kyoto.”
The company supplied parts to theJapan Air Self-Defense Force and built a
new plant in Kyoto to meet the growing
demand for aircraft-related productswith the arrival of the Boeing 747 jumbo

processes of material input, machining,pre-treatment to improve corrosion
resistance, and coating, the company
is working to further shorten delivery
times and lower costs. In addition, afourth plant, which will focus mainly onmachining engine parts, is scheduled to
begin operations in 2023.
The aircraft industry, which involves
cutting-edge technologies and safety
standards on which many lives depend,
would seem to require extraordinary
technological capabilities to win the trustof the public, but YAMANAKA shakes
his head. “It’s not that the standards inthe aircraft industry are unusually high.
Automobiles have automotive quality
requirements, and electronics haveelectronics quality requirements. But wehave built trust and confidence throughour honest efforts to meet the required
specifications, and this has led us towhere we are today.”That said, solid technology is certainly the key to trust. For example, inthe parts inspection system, the useof a special fluorescent solution has
achieved an accuracy that detects microscopic scratches and cracks (measuringin microns) that cannot be seen by the
naked eye. These advanced technological capabilities, which have been
accumulated over the years, are also utilized in the manufacture of rocket partsand medical devices.

The banner of support presented
by Boeing at the time of the Great
East Japan Earthquake was a signof trust. The photo on the left is of
the banner still displayed in theplant / High-quality production ispossible overseas because of thecompany’s thorough knowledge ofaircraft parts (Photo on lower rightof Malaysian subsidiary) .

Loan Summary

In March 2021, a loan agreement was concluded with Asahi Aero Malaysia, a Malaysian subsidiary of Asahi Kinzoku Kogyo, for aloan of up to JPY100 million (JBIC portion). Co-financed with Shiga Bank. This support has contributed toward the maintenanceand improvement of the international competitiveness of Japanese industry.

FEBRUARY 2023

JBIC TODAY

11

JBIC History

1950

vol.1

Postwar reconstruction andthe birth of Japan Export Bank, JBIC’s forerunner
A step toward becoming a trading nation
The origins of JBIC date back to 1950, part of the history of Japan’s postwar foreign monetary policy.
This new series of articles will look back at the history of JBIC, one year at a time.

Discussions between
Joseph Dodge (left), a key
figure in the establishmentof the Export Bank, and
IKEDA Hayato, Minister ofFinance (middle), 1951
© The Asahi Shimbun / amanaimages

Once postwar inflation had settled
down, Japan hit on the idea of
establishing an Export Bank
Five years after the end of World War II,
the Japan Export Bank was establishedin December 1950; the forerunner of
JBIC. The idea of establishing an Export
Bank began with a meeting between
Finance Minister IKEDA Hayato and U.S.
monetary policy advisor Joseph Dodgein May of the same year.
Immediately after the war defeat,all goods were scarce in Japan, andpeople’s lives were poor. However,
GHQ (occupying authorities) severely
restricted trade, forbidding imports
other than items necessary to maintain aminimum standard of living. Eventually,
the U.S. occupation policy toward Japanchanged, in part because of the growing
belief that stronger economies in Asia
and Europe would stop the spread ofcommunism.
In March 1947, the “Japan Economic
Promotion Plan” was formulated,which stated that in order to revive theJapanese economy, it was first necessary for the country to import sufficient
food and raw materials, and use those
raw materials to manufacture goods forexport. In other words, it was believedthat exports could be a catalyst forreconstruction.
At the time, Japan was experiencing
severe inflation, and in 1949 Dodge

February 2023 Edition

implemented a balanced budget
called the Dodge Line. Inflation was
successfully brought under control,
but then dissatisfaction with deflation
began to rise in Japan. So, in May 1950,
Prime Minister YOSHIDA Shigeru
ordered Finance Minister IKEDA to visit
Washington, D.C., where he met with
Dodge. He proposed the idea of establishing an Export Bank.

It was initially established as
Japan Export Bank withno import financing permitted
Finance Minister IKEDA was looking fora way to promote exports to ease deflation, while Dodge hoped that boosting
export financing from Japan would leadto economic recovery in other Asian
countries. But things were not that
simple. GHQ, which had been sidelinedby this meeting between IKEDA andDodge, objected. GHQ was displeased
that Finance Minister IKEDA had consulted directly with Dodge instead ofGHQ, which was supposed to be theofficial channel.
In October, Dodge arrived in Japanas an advisor to General MacArthur, thehead of GHQ, and the idea was realized in
the form of the “Outline for Establishing
the Export Finance Bank.” Fierce bargaining then took place over the next
two months until the Export Bank Billwas passed in December. While Finance
Minister IKEDA had initially pushed for

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the Export-Import Bank proposal, Dodge
did not approve of import financing until
the end. He argued strongly that imports
are the same as domestic consumption,
which Japan should curb and use thoseresources for exports.
The Export Bank was initially limited
to financing the export of equipment
and technologies, but then the Korean
War broke out, and Japan found itself
in the midst of a procurement demandboom. In April 1952, the scope of operations was expanded to include importfinancing needed for the development
and import of natural resources, and thename was changed to the Export-Import
Bank of Japan. Japan had taken a strong
step toward economic recovery as a
trading nation.

Foundation of Japan Export Bank
1945

AugustEnd of World War II

1949

March
April

Dodge Line
Exchange rate of 360 yen to
the dollar is applied

1950

June

1951

September San Francisco Peace Treaty
signed

1952

April

Foreign Exchange and Foreign
Trade Control Order enacted
Outbreak of the Korean War
December Establishment of Japan ExportBank

Name changed to the
Export-Import Bank of Japan

This printed material uses
vegetable oil ink, which
includes soybean oil ink.