1. Introduction
China has steadily enhanced its technological capabilities in 5th generation (5G) networks, artificial intelligence (AI), and outer space. The USA, which raised strategic concerns about China’s state-led technological development, adopted a series of policies to counter Beijing’s technological challenge. The US government implemented regulations on the operations of Chinese high-tech companies in the US market and imposed controls on the import of Chinese products. It also strengthened partnerships with its allies to promote joint technological development and enhance supply chain resilience and intelligence protection.
Japan, as a key ally of the USA in Asia, formulated policies in anticipation of an escalating technological rivalry between the USA and China. After the late 2010s, the Japanese government adopted industrial and technological policies to respond to complex technological tensions. These policies encompassed the protection of supply chain networks and sensitive technologies, as well as the establishment of external partnerships to advance technological development and resilience. These industrial and technological policies were promoted under the banner of ‘economic security’.
Economic security is an elusive and difficult concept to define in absolute terms. Traditionally, economic security has been understood as the creation of favourable conditions for sustained economic development. From this perspective, economic security refers to a state’s capacity to secure access to the critical resources necessary for sustaining national welfare and power. As Buzan (Reference Buzan1991: 433) conceptualized, economic security ‘concerns access to the resources, finance and markets necessary to sustain acceptable levels of welfare and state power’. Similarly, Dent (Reference Dent2003: 253) defined it as ‘safeguarding the structural integrity and prosperity-generating capabilities and interests of a politico-economic entity in the context of various externalized risks and threats that confront it in the international system’. In the context of intensifying technology competition since the late 2010s, economic security is considered as an element influencing national security in terms of technological development. This is because technologies that handle large data with dual-use applications for both civilian and military purposes have significant impacts on national security. This article defines economic security as a state’s ability to ensure national security through economic means to maintain the structural integrity and capabilities for continued technological development and technology resilience. It investigates Japan’s economic security by considering such a technological development perspective, focusing on industrial strategies to enhance capabilities for critical and emerging technologies and ensure supply chain resilience.
This article examines why and how Japan adopted distinctive strategic approaches to economic security and technology policy. It addresses three core research questions. Firstly, how did the US–China technology competition influence Japan’s economic security strategy? Secondly, how did Japan design and implement technological strategies aimed at enhancing its economic security? Thirdly, what factors constrained Japan’s capacity to advance these strategies? The article argues that the intensifying US–China technological rivalry prompted Japan to recalibrate its technological strategy with the aim of reducing economic dependence on China. It then contends that Japan pursued a dual-track approach: aligning with US policy frameworks while simultaneously seeking to legitimize a revival of industrial policy traditions rooted in earlier developmental practices. These strategic adjustments are conceptualized as a form of policy emulation, characterized by two orientations of rational emulation and symbolic imitation. Furthermore, this article argues that Japan’s policy initiatives were influenced by material interests to maintain stable economic relations with China and past cooperative practices developed under public-private partnerships. Thus, new policy initiatives were constrained by vested interests, leading to path-dependent policy trends.
This article examines Japan’s distinctive approach to economic security and technology policy through an integrated research design that combines externally connected policy emulation, developmentalist industrial policy, and business actor-driven vested interests. While the policy emulation perspective is useful for analysing Japan’s adaptive responses within the context of hegemonic technological rivalry, the analytical lenses of industrial policy and vested interests illuminate the influence of path-dependent policy trajectories and entrenched practices. By employing this integrative explanatory framework, the study contributes to a deeper understanding of how a middle power navigates the pressures of great-power competition in the domains of economic security and technological development.
This article is organized as follows. Following the introduction, the second section presents an analytical framework for the study based on policy emulation and vested interests. The third section overviews US–China technology competition and examines its influence on Japan’s initiatives in economic security and technological development. The fourth section elucidates the key characteristics of Japan’s policy initiatives through the analytical lens of policy emulation and vested interests.
2. Policy emulation and vested interests as analytical frameworks
As Japan strengthened its economic security-oriented policies in response to China’s growing technological power and the resulting Sino–US competition, scholars have increasingly focused on Japan’s economic security and technological development. A substantial body of research has examined the content of Japan’s economic security policies, including the Economic Security Promotion Act, and their political-economic implications (Armstrong and Urata, Reference Armstrong, Urara, Armstrong, Westland and Triggs2023; Igata, Reference Igata2022; Igata and Glosserman, Reference Igata and Glosserman2021; Kawasaki, Reference Kawasaki2023; Shiraishi, Reference Shiraishi2022). Other studies have analysed the strategic responses of Japan (and the USA) – such as the formation of supply chain coalitions – aimed at countering China’s expanding technological capabilities and geoeconomic influence (Gui, Reference Gui2022; Oh et al., Reference Oh, Hildebrand and Lee2021). Furthermore, some research has interpreted Japan’s policy reactions as economic statecraft in the context of US–China trade and technological rivalry, employing comparative perspectives involving countries such as South Korea, Taiwan, and Singapore (Katada et al., Reference Katada, Lim and Wan2023; Kim and Rho, Reference Kim and Rho2024; Lee, Reference Lee2024).
Despite this growing body of literature, a significant gap remains in exploring domestic factors in Japan’s economic security and technology policy amid evolving international technological competition. While numerous studies have analysed the background, specific policy measures, and broader implications of Japan’s economic security strategies, they have tended to underexplore how external developments have influenced Japan’s approach to technology policy. To address this gap, it is important to distinguish between two dimensions of technology policy: technology control policy to protect sensitive or strategic technologies, often with national security implications, defensively to maintain a country’s technological edge; and technology development policy to enhance a country’s technological base proactively through investments in research and development (R&D), innovation systems, and industrial strategy (Malta-Kira, Reference Malta-Kira2023). Conversely, research focusing primarily on technology policy frequently lacks sufficient attention to the domestic policymaking processes and internal interactions that have shaped Japan’s responses to the intensifying Sino–US rivalry since the late 2010s. A notable exception is Park (Reference Park2023), which provides detailed case studies of Japan’s technological strategies in the context of escalating US–China tensions. However, the study’s primary analytical emphasis is on the shift from industrial policy to geostrategy, rather than on the broader and more complex implications of those technological strategies.
This article seeks to contribute to the literature on Japan’s economic security by focusing specifically on initiatives in technology control and development. In doing so, it adopts the conceptual lenses of policy emulation and vested interests. Policy emulation refers to a process in which a state intentionally alters its policies and practices to more closely align with those adopted by another state (Boehmke, Reference Boehmke2009: 1126). The deliberate imitation of existing policies and decisions by another country can lead to policy convergence. Policy emulation often occurs between a dominant power and a follower state due to coercive pressure from the former to adopt its favored policies. However, the state generally retains considerable leeway in developing initiatives, policies, and institutions, considering domestic factors. A crucial question is what motivations a follower state has in pursuing policy emulation.
It is possible to consider two types of policy emulation in terms of motivation. The first is rational emulation, based on knowledge about causal links between policies and outcomes, understanding which policies may lead to specific outcomes (Meseguer, Reference Meseguer2005). Rational emulation assumes that actors with a fixed set of preferences behave instrumentally to maximize the attainment of these preferences, driven by strategic and purposive calculations. These assumptions align with notable features of rational choice institutionalism (Hall and Taylor, Reference Hall and Taylor1996). Given these assumptions, a state is likely to emulate policies and decisions made by a peer state with similar political conditions and ideational values based on a rational calculation to strengthen political and economic ties with the state.
The second is the symbolic imitation of policy ideas, models, and practices, which are developed by other states or multilateral institutions and become international trends. Weyland (Reference Weyland2005) presents symbolic imitation as a state’s willingness to gain social recognition as a legitimate player following international norms and standards. Symbolic imitation also relates to cases when a state seeks to enhance the legitimacy of new policy initiatives or reforms. In some cases, an administrative agency of the state regards an inducement by a partner state or a specific policy trend as a plausible chance to legitimize the return to the policy practice that the agency previously conducted. In this case, symbolic imitation takes place as policy revival.
Even when states seek to introduce new initiatives or programs through policy emulation, such efforts often encounter significant debate or resistance within policy circles. Such resistance is frequently rooted in vested interests, which represent the preferences of actors who benefit from existing institutional arrangements and established policy trajectories. These entrenched interests are embedded within organizational, bureaucratic, and political contexts that incentivize continuity and discourage deviation from the status quo (Moe, Reference Moe2015). The influence of vested interests is closely associated with path dependence, a central concept in historical institutionalism that highlights the enduring effects of historical developments along specific trajectories (Hall and Taylor, Reference Hall and Taylor1996; Heinmiller, Reference Heinmiller2009). Path dependence refers to dynamic processes involving increasing returns, where the costs of switching to some plausible alternative increase over time, often leading to institutional inertia (Mahoney Reference Mahoney2000; Pierson, Reference Pierson2000). Path-dependent historical events or institutional inertia result from self-reinforcing mechanisms that lock actors into particular trajectories, making reversal or deviation increasingly costly. Consequently, rational actors with vested interests in maintaining the status quo often constrain or weaken new initiatives and programs rooted in policy emulation.
A central analytical question, then, concerns how vested interests generate path-dependent policy outcomes. Vested interests are reproduced through mechanisms of positive feedback and increasing returns, whereby the continued operation of existing institutions reinforces the advantage of staying on a particular path. Once historical events take place and resultant processes begin tracking a particular outcome, these processes tend to stay in motion and continue to track this outcome (Mahoney, Reference Mahoney2000: 511). This is because ‘once an initial policy framework is established, there are strong increasing returns involved in the choice of new, supplementary policies within that framework’ (Kay, Reference Kay, Araral, Fritzen, Howlett, Ramesh and Wu2012: 469). These dynamics produce what Pierson (Reference Pierson2000) describes as institutional lock-in, whereby the political, economic, and cognitive costs of shifting to alternative policy frameworks become prohibitively high. Under such conditions, the predominance of vested interests and the cumulative nature of institutional development constrain states’ capacity to fully implement policy emulation, even when external models appear both desirable and necessary.
Thus, this article examines Japan’s strategic approach to economic security and technological development in association with the concepts of policy emulation and vested interests. The timeframe for analysis extends from the late 2010s, when the Japanese government began to formulate new policies and measures in response to the Sino–US technological rivalry, to 2022, when the government introduced comprehensive measures aimed at sustaining critical sectors and enhancing the resilience of supply chains, including the enactment of the Economic Security Promotion Act.
3. US–China technology competition and Japan’s reactions
3.1. Intensifying US–China technology competition
The geoeconomic and technological rivalry between the USA and China intensified after the late 2010s. The USA took concrete initiatives in response to an escalating technological rivalry with China. In August 2018, the National Defense Authorization Act 2019 (2019 NDAA), which included the Export Control Reform Act (ECRA) and the Foreign Risk Review Modernization Act (FIRRMA), came into force. The ECRA, which imposed export controls on emerging and basic technologies, illustrated the Trump administration’s aggressive ‘whole of government’ response to China’s ascent as an economic, military, and geopolitical power (Barkin, Reference Barkin2020). The FIRRMA lowered the threshold for investigating foreign investment to include any ‘non-passive’ investment in companies involved in critical technologies such as AI, robotics, augmented and virtual reality, and new biotechnologies. The act enhanced the authority of the Committee on Foreign Investment (CFIUS) by enabling it to address growing national security concerns over the foreign exploitation of certain investment structures that were previously out of its jurisdiction (Aggarwal and Reddie, Reference Aggarwal, Reddie, Kou, Huang and Job2022). Furthermore, the Trump administration adopted restrictive measures towards Chinese companies and products. While the ‘entity list’ to impose sales bans targeting Chinese companies in information and communications, electronic technology, AI, and other technology fields, import restriction measures covered the banning of the use of communications devices of Huawei and ZTE, the restriction of the use of China-made rail vehicles and buses, and the forbidding of the use of China-made unmanned aerial vehicles (Gui, Reference Gui2022).
The Biden administration, which began in January 2021, adopted more systematic and sequential measures to constrain China’s technological capabilities. It regarded China as ‘the only competitor potentially capable of combining its economic, diplomatic, military, and technological power’ in the Interim National Security Strategic Guidance issued in March 2021 (White House, 2021). The administration continued the previous administration’s policies to prohibit US investment in Chinese high-tech companies and followed the practice of the Entity List by adding seven Chinese companies and institutions in the supercomputing field (Gui, Reference Gui2022). The administration also intensified initiatives to enhance supply chain resilience for critical products. In February 2021, Biden issued an executive order to investigate supply chain vulnerabilities in four areas: semiconductors, high-capacity batteries, critical minerals, including rare earth elements, and pharmaceuticals. Congress sustained the administration’s efforts to enhance US capabilities in science and technology and compete against Chinese technological advances. In July 2022, Congress passed the Chips and Science Act of 2022, allowing the government to offer subsidies worth US$280 billion to support domestic semiconductor manufacturing and invest billions in science and technology innovation.
The policies to restrict Chinese access to US technologies become less effective if similar technologies are available from its allies. Therefore, the US government encouraged its allies to take concerted actions to impose restrictions on Chinese products and companies. The Trump administration waged an international campaign to urge other governments to ban Huawei and ZTE from 5G networks to avoid security risks and vulnerabilities caused by their equipment and systems (Mori, Reference Mori2019: 106). The Biden administration took stricter measures. In October 2022, it adopted a new policy to restrict trade with China in advanced chip technology, manufacturing equipment, and related human resources. The policy aimed at restricting China’s capability to access certain advanced semiconductors that can be used for military applications. The US government agreed with its allies, including Japan and the Netherlands, to restrict exports of some advanced chip manufacturing technologies to Chinese companies.
The Interim National Security Strategic Guidance regarded global alliances and partnerships as ‘America’s greatest strategic asset’ and underscored their reinvigoration to establish effective international rules and discipline China’s behaviour (White House, 2021). Building on this foundation, the Biden administration strengthened partnerships with like-minded democratic countries to enhance technological utility and supply chain resilience. In February 2022, it announced the Indo-Pacific Strategy, which confirmed China’s intent to combine its economic, diplomatic, military, and technological might to pursue a sphere of influence in the Indo-Pacific. The administration then reinforced the Quadrilateral Security Partnership or the Quad among the USA, Japan, Australia, and India to ‘advance work on critical and emerging technologies, driving supply-chain cooperation, joint technology deployments, and advancing common technology principles’ (White House, 2022: 16). During the first Quad summit in March 2021, the four leaders announced the creation of a critical and emerging technology working group to facilitate cooperation on technology standards development, telecommunications deployment, and critical technology supply chains.
Thus, the US government raised strategic concerns about China’s technological advances and their impact on national security. It adopted a wide range of policy measures to restrict Chinese products and companies in the domestic market and encouraged its partner countries to take concerted actions. The Biden administration also intensified coalitions with its allies to enhance technological capabilities and supply chain resilience.
3.2. Japan’s growing interest in economic security
Previously, Japan considered economic security in traditional contexts, safeguarding access to necessities and resources that are indispensable for a nation’s stable life and economic development. For instance, the 2008 edition of the Diplomatic Bluebook used the term ‘economic security’ as one out of five initiatives for the prosperity of Japan and the international community, referring to economic vulnerability, which was dependent on imports of energy resources, mineral resources, fisheries resources, agricultural products as well as many other resources from abroad (Ministry of Foreign Affairs, 2008). However, the intensification of Sino–US strategic competition in the late 2010s marked a critical juncture that reshaped Japan’s conception of economic security. In this new context, economic security came to be understood not only in terms of resource access but also as a dimension of national security closely tied to technology policy.
The new policy trend was driven by ruling party politicians who recognized the escalating US–China technology competition seriously. Amari Akira was the key politician who contributed to enhancing the perception of economic security within policy circles. In April 2017, Amari took the lead in establishing the Parliamentary Association on Rule-Making Strategy. This association aimed at proposing strategies and systems to increase Japan’s presence in the fields of economic security, the information technology industry, and international rule-making, where Western nations and China were leading. Furthermore, Amari took the lead in creating a new deliberative organ within the Liberal Democratic Party (LDP). In June 2020, the party set up the Strategic Headquarters on the Creation of a New International Order under the Policy Research Council. The strategic headquarters, chaired by Amari, aimed at discussing what would be needed to enhance Japan’s national strength in the turbulent international community and to play a part in forming a new international order that serves the national interest. Amri’s initiative in setting up this new organ stemmed from his concern about the escalating US–China competition. In a media interview, Amari mentioned that Japan should play a role in developing links between the USA, Europe, and other countries amid an intensifying struggle for hegemony between the USA and China (Amari, Reference Amari2020).
In December 2020, the strategic headquarters released a policy proposal entitled ‘Recommendations: Toward Developing Japan’s “Economic Security Strategy”’. The proposal outlined the economic security environment surrounding Japan, basic policies for economic security, and priorities and measures to be taken. Particularly important in the economic security environment was the US policy trends, and it presented a policy direction that ‘it should first redouble its own economic efforts, then to strengthen communication and appropriate coordination with the USA, Japan’s ally, so that the two countries can join forces to lead international collaboration’ (Liberal Democratic Party, 2020). It also presented 16 policy agendas, such as diversifying and strengthening supply chains and enhancing innovative capability. In conclusion, the proposal required the government to formulate an economic security strategy swiftly, aiming to enact a law for promoting all forms of economic security measures during the ordinary Diet session in 2022. In May 2021, the strategic headquarters issued an interim recommendation on reforms in economic and fiscal management. The recommendation nominally concerned the 2021 economic and fiscal plan, but the content concentrated on economic security affairs. It outlined concrete means to enhance strategic autonomy and strategic indispensability by identifying five industrial sectors: energy, information and communications, transport and maritime logistics, finance, and medical care (Liberal Democratic Party, 2021).
The Kishida Fumio administration, which began in October 2021, identified economic security as one of its key policy agendas. Kishida set up the state minister for economic security in his cabinet and a new cabinet-level institution, the Council for the Promotion of Economic Security. In February 2022, the administration adopted the cabinet decision on a draft law for boosting economic security. The draft consisted of four pillars: enhancing supply chain resilience; ensuring the reliability of core infrastructure; cultivating and preserving advanced technologies; and non-disclosure of patents. The National Diet passed the Economic Security Promotion Bill in May 2022, and the bill came into force the following month. The administration continued its efforts to elevate the position of economic security further by incorporating the importance of economic security into the new National Security Strategy, adopted in December 2022.
4. Key characteristics of Japan’s policy initiatives
4.1. Policy emulation in technology policy
In the 2020s, Japan strengthened institutional frameworks for economic security. In April 2020, the National Security Secretariat (NSS) within the Cabinet Secretariat established an economic division. This new section, comprising around 20 staff, became the largest among the seven sections within the NSS, which had a total of 90 staff. It was led by Fujii Toshihiko from the Ministry of Economy, Trade and Industry (METI) and supported by four managers from the Ministry of Foreign Affairs (MOFA), the Ministry of Finance (MOF), the Ministry of Internal Affairs and Communications (MIC), and the Police Agency. This indicated the creation of an integrative body to address various aspects of economic security (Goto, Reference Goto2020). The establishment of this framework was significant in that it marked the first time a dedicated governmental body was created to comprehensively coordinate economic, intelligence, and security-related policies. In parallel, other ministries, including METI, MOFA, and the Ministry of Defense (MOD), established their own economic security units. These ministerial-level sections functioned as key sources of policy input for the economic division within the Cabinet Secretariat and facilitated the coordinated implementation of integrated strategies formulated under its leadership.
The initiative to establish an economic division within Japan’s national security apparatus originated with the Parliamentary Association on Rule-Making Strategy, which took the US National Economic Council (NEC) as its reference point. In March 2019, the association issued a recommendation entitled the ‘Creation of a National Economic Council’, urging the government to establish a Japanese version of the NEC. The objective was to advance strategic economic diplomacy and enable Japan to navigate the intensifying economic statecraft competition between the USA and China. In formulating the recommendation, members of the association consulted US policy experts such as Michael Green and Marcus Noland (Parliamentary Association on Rule-Making Strategy, 2019). Taking a realistic approach, they acknowledged that when it would take time to set up a national economic council, functions of the existing NSS would be strengthened (Nihon Keizai Shimbun, 2019). Prior to the establishment of the economic division, Fujii visited Washington in December 2019 to exchange views with executives of the NEC (Nihon Keizai Shimbun, 2020). It is important to note, however, that the NEC – serving as the president’s command centre for economic policy and wielding significant policymaking authority – differs in both scope and institutional power from Japan’s economic division. The latter, as a department within the NSS, primarily performs coordination and directive functions across relevant ministries and agencies. Nonetheless, the Japanese government’s consideration of the NEC reflects a broader recognition of the need for an institutional mechanism to expand the concept of national security beyond traditional domains, incorporating economic, technological, and supply chain risks.
Kishida Fumio won the leadership election of the LDP in September 2021 and formed his first cabinet the following month. Prime Minister Kishida created the state minister for economic security as an independent ministerial post for the first time and appointed Kobayashi Takayuki to this post. Kobayashi, at 46 years old – relatively young to be a minister – had accumulated expertise in geo-economics and economic security as the executive director of the LDP’s Strategic Headquarters on the Creation of a New International Order. Kishida exhibited a firm posture to produce a bill regarding economic security by repeating that ‘economic security is a matter of great urgency’ and encouraged Kobayashi to promote discussions on the legal framework (Prime Minister’s Office of Japan, 2022). In May 2022, the National Diet passed the Economic Security Promotion Bill with approval from both ruling and opposition parties except for the Japanese Communist Party. This legislative process was smooth and rapid. Kishida’s determination and the appointment of Kobayashi, an economic security expert, were key factors in the successful enactment of the promotion bill as planned.
In the process of enacting the promotion bill, the government implemented a set of policies to safeguard critical technologies from potentially adverse countries. The foreign investment review is a notable example. In November 2019, the National Diet passed an amendment of the Foreign Exchange and Foreign Trade Act (FEFTA) to bolster the government’s oversight by lowering the threshold for foreign direct investment (FDI) into designated industries from 10 to 1 percent. The revised rule mandates that any foreign investor must notify the government if it acquires more than 1 percent of the equity or voting rights of listed companies in national security-related industries (Gui, Reference Gui2022). These designated industries, encompassing 155 out of 1,465 sectors, expanded from weapons, aircraft, space, and nuclear energy to include telecommunications, water supply, and railway (Armstrong and Urata, Reference Armstrong, Urara, Armstrong, Westland and Triggs2023). The government also implemented measures to restrict the use of specific Chinese products in the Japanese network. In December 2018, it decided to exclude products from Huawei and ZTE in the procurement of information and communication equipment from public sources, citing national security concerns related to intelligence leaks and cyber-attacks.
Japan’s new regulations to safeguard technologies and intelligence had much to do with policy developments in Western nations. As already explained, the US Congress passed the FIRRMA, which enhanced the authority of the CFIUS by making it a full-fledged and fully funded agency. Meanwhile, the European Union (EU) adopted a revised regulation to establish a coordination mechanism for the screening of FDI between the European Commission and the EU member governments in March 2019. MOF acknowledges that the amendment of the FEFTA aimed to follow global trends to strengthen measures for FDI screening from the national security viewpoint, exemplified by the adoption of FIRRMA in the USA in August 2018 and the new EU regulation in March 2019 (Ministry of Finance, 2020). The Japanese government adopted technology control policies aimed at safeguarding critical and sensitive technologies through close observation of, and alignment with, emerging international policy trends.
Japan adopted a technology development policy to enhance the international competitiveness of strategic sectors and supply chain resilience. In March 2022, the Semiconductor Support Act, designed to assist manufacturers in setting up factories, came into effect. The major target of assistance under the law was Taiwan Semiconductor Manufacturing Co. (TSMC), a representative foundry that produced over 70 percent of the world’s logic semiconductors. The government encouraged TSMC to invest in Japan, and the foundry giant decided in 2021 to establish a plant to manufacture 10-20 nanometer chips in Kumamoto Prefecture. The government committed to providing TSMC with subsidies worth ¥476 billion (US$3.5 billion), although these chips were not considered high-end products. In September 2022, the government also decided to subsidize Micron Technology to support its plan to produce advanced memory chips in Hiroshima Prefecture, offering subsidies of ¥46.5 billion (US$320 million). These public investments in competitive overseas manufacturers were aimed at securing access to cutting-edge logic and memory chips while strengthening the resilience of supply chains.
Japan’s policies to subsidize foreign chip producers were influenced by US policy trends. The US government enticed TSMC to consolidate its operations, resulting in TSMC’s decision to invest US$12 billion in Arizona to operate a foundry plant for manufacturing 5-nanometer chips. Samsung Electronics Co. also planned to invest US$17 billion to establish new foundry chip production lines in Texas as part of a project to address US concerns about semiconductor security. The US government intended to provide public funds to these projects by introducing a new legal framework offering US$52 billion in subsidies to the semiconductor industry. The Japanese government adopted a similar strategy to enhance technological capabilities through partnerships with internationally competitive chip producers.
There were concerns about US industrial policies aimed at gaining advantages for its own companies at the expense of Japanese companies, as well as fears of China’s retaliatory actions against Japan’s restrictive measures (Kwan, Reference Kwan2023). Japan needed to consider such factors when formulating its reactions to the US–China technology competition. Furthermore, the USA and Japan placed differing emphases on the components of economic security. While Washington prioritized technology control policy, focusing on restricting the export of dual-use technologies and preventing technology leakage to China, Tokyo placed greater weight on technology development policy, particularly through the promotion of strategic industries such as semiconductors. Despite these differences, Japan’s adoption of both policy types can be understood as a form of rational emulation, a strategic adaptation to emerging policy trends aimed at countering China’s growing technological capabilities, achieved in large part through the harmonization of its approach with US technology policy.
In addition to rationally emulating US policy decisions, Japan sought to enhance competitive segments of semiconductor production through industrial policy. This policy orientation was pursued by METI. In March 2021, the ministry established the Semiconductor and Digital Industry Strategy Review Conference, comprised of corporate executives and academic experts. Three months later, the Strategy for Semiconductors and the Digital Industry was formulated after three meetings of the conference as the key guidelines for future directions in semiconductors, digital infrastructure, and the digital industry. The strategy raised ‘strengthening the choke point technologies of equipment and materials’ through joint technological development with overseas foundries as a direction for strengthening the semiconductor industry (Ministry of Economy, Trade and Industry, 2021a).
In November 2021, METI formulated the emergency package for strengthening the semiconductor industry infrastructure. The package presented a three-step strategy: securing domestic manufacturing infrastructure; establishing next-generation semiconductor technology; and developing future technologies through global collaboration. The second step presupposed Japan–US collaboration. To substantiate the collaboration, METI assisted a partnership between IBM, a leading US company in semiconductor design and basic research, and Japanese companies with strength in equipment, to develop technologies for manufacturing next-generation semiconductors swiftly (Nihon Keizai Shimbun, 2021). In May 2022, METI Minister Hagiuda Koichi called on the Albany NanoTech Complex in New York State to discuss Japan–US semiconductor cooperation with IBM executives (Ministry of Economy, Trade and Industry, 2022). METI’s efforts led to the establishment of Rapidus Corporation in August 2022, which aims to manufacture 2-nanometer chips in partnership with IBM. METI’s semiconductor strategy followed policy trends in Western countries. In May 2021, the European Commission updated the EU Industrial Strategy to pursue a more sustainable, digital, resilient, and globally competitive economy under new circumstances. The updated strategy aimed to analyse choke points for strategically important commodities such as batteries and semiconductors and reduce dependence on specific countries, becoming more self-reliant (European Commission, 2021). In September 2021, President of the European Commission von der Leyen announced the formulation of the European Chips Act, which would contribute to the EU’s goal to reach at least 20 percent of world production in value of cutting-edge and sustainable semiconductors by 2030 (Zubașcu, Reference Zubașcu2021). As already explained, the US government introduced new legal frameworks to incentivize semiconductor production. METI scrutinized policy developments in the USA and the EU and introduced such developments at the conference meetings (Ministry of Economy, Trade and Industry, 2021b). Thus, the ministry rationally formulated the semiconductor strategy following international trends and concrete policy initiatives adopted by other Western countries.
Japan carefully observed the US and EU’s industrial policies to sustain strategic high-tech sectors represented by semiconductors. It then employed its industrial policies to justify and design its industrial initiatives to enhance international competitiveness. The western policy trends, from a global perspective, imply escalating competition among advanced nations in subsidizing strategic industrial sectors to enhance self-sufficiency. Significantly, METI’s tactic to follow Western policy trends in the semiconductor and digital industry was driven by its aspiration to reengineer industrial policy on a broader scale. The ministry sought to legitimize industrial policy as a key means to revitalize the entire economy and society. In November 2021, METI established the Committee on New Direction of Economic and Industrial Policies within the Industrial Structure Council (ISC). The 11-member committee had a mission to discuss the new axis of economic and industrial policy, mobilizing all policy instruments to overcome the limitations of the past to break out of prolonged stagnation.
Through the new axis of economic and industrial policy, METI aimed at broadening the scope of industrial policy from critical technology areas to the entire economy and society. The document presented at the ISC offered a comprehensive vision to address diversified medium- and long-term social and economic challenges (Ministry of Economy, Trade and Industry, 2021b). METI’s executive contended that ‘the world situation has changed dramatically, and the time is ripe for changing our industrial policy to one that can ensure economic growth and solve the issues facing Japanese society’ (Iida, Reference Iida2021). The agendas of the Committee on New Direction of Economic and Industrial Policies covered issues, including green society, next-generation human resources, and inclusive growth, including cultures and sports. METI underscored substantial financial support to handle these broad policy areas, and the council document used the term ‘large-scale, long-term, and planned’ fiscal mobilization (Ministry of Economy, Trade and Industry, 2021b: 11). This policy orientation to mobilize the large-scale budget provoked conflict with MOF, which pursued the reduction of government deficits that increased through the bold spending of public funds during the COVID-19 pandemic.
In the 1980s, METI examined the prospect of trade and industrial policy from the economic-security perspective. In March 1980, the ISC issued a report entitled the Vision for Trade and Industrial Policy in the 1980s. The report located ‘the establishment of economic security’ as a key challenge for Japan and proposed concrete measures to deepen interdependence with other countries, diversify the sharing of oil, food, and scarce resources, and develop independent technologies (Ministry of International Trade and Industry, 1980: 5). In April 1982, the special sub-committee on economic-security affairs under the ISC issued a report entitled ‘Toward the Establishment of Economic Security’, deepening insights on economic security shown in the 1980 ISC report. The report presented the maintenance of the functioning of the global political and economic system and the building of a technology-based country that can make international contributions, in addition to ensuring a stable supply of critical materials (Ministry of International Trade and Industry, 1982). Compared with outward-oriented policy debates in the 1980s, policy directions shown in the new axis of economic and industrial policy in the 2020s shifted to an inward-looking orientation.
METI aimed to endorse the new axis of economic and industrial policy by drawing on academic research after the 2010s. The council document referenced six academic scholars in the USA and the United Kingdom including Dani Rodrik, Mariana Mazzucato, Joseph Stiglitz, and Robert Wade to introduce the concept of ‘new industrial policy’ in academia (Ministry of Economy, Trade and Industry, 2021b: 9). The table explaining key elements of the new axis of economic and industrial policy outlined objectives, theoretical foundations, policy frameworks, technological development, and so on. In these categories, METI used concepts such as ‘mission-oriented’, ‘entrepreneurial state’, ‘supply and demand sides’, and ‘moon shot’. These terms were adopted from studies of innovation policy by Mazzucato (Reference Mazzucato2018, Reference Mazzucato2021). METI sought to re-establish the value and necessity of industrial policy by borrowing new policy ideas from academic research after the 2010s and to legitimize the reintroduction of industrial policy.
The new policy trend to underscore the government-led technological development under economic security provided METI with a valuable opportunity to revert to previous practices of industrial policy. The new industrial policy differs from the traditional one in the 1950s through the 1970s, where the major objective was to protect and foster specific industrial sectors (Ministry of Economy, Trade and Industry, 2021b: 11). However, a key characteristic that the government aims at developing new industrial segments with specific policy goals in partnership with private actors is similar. METI sought to realize policy revival to introduce industrial policy by authorizing this direction with new policy ideas. It employed the policy trend that major foreign players such as the USA and the EU turned into spending substantial public funds to support strategic sectors under economic security. The introduction of this policy trend functioned as a symbolic imitation, enabling METI to legitimize a renewed emphasis on industrial policy traditions rooted in Japan’s earlier developmental state practices and to secure broader social recognition for this policy direction.
4.2. The influence of vested interests
The Japanese government pursued high-tech decoupling from China by emulating the US policy trends. However, it is essential to consider that Japan has historical, economic, and cultural ties with China that differ from those between the USA and China (Shiraishi, Reference Shiraishi2022: 87). These ties encouraged METI to maintain a stance on maintaining stable industrial connections with China, influenced significantly by substantive material linkages. In 2021, China accounted for 21.6 percent of Japan’s overall exports, compared to the USA’s 17.8 percent. Japan’s FDI in China increased from US$6.2 billion in 2006 to US$12.1 billion in 2021. The figures remained lower than FDI in the USA, which grew from US$9.3 billion to US$81.8 billion in the same period. However, China proved to be a profitable market for Japanese companies. In 2019, Japanese companies gained FDI revenue of ¥2.32 trillion in China, compared with ¥2.91 trillion in the USA, with a rate of return on FDI at 17 percent in China, surpassing 5 percent in the USA (Hosoo, Reference Hosoo2020). According to the survey on Japanese companies’ overseas operations conducted by the Japan Bank for International Cooperation, China held the primary position as a desirable destination in 2020 and 2021 (Japan Bank for International Cooperation, 2020, 2021).
Substantive economic connections with China were sustained by the engagements of Japanese business actors in the Chinese market, even during periods of strained bilateral relations. Amid worsening territorial disputes after 2010, Japanese companies adopted a risk-management strategy to diversify their operations from China to Southeast Asia. Simultaneously, companies with strong market niches in China or those entrenched in tight production networks maintained their existing operations there (Nagy, Reference Nagy2014).
The development of economic relations with China was underpinned by long-term institutional connections fostered by the Japan-China Economic Association (JCEA). The association, which was set up in 1972 when the normalization of diplomatic relations between Japan and China was realized, maintained close institutional mechanisms with the Chinese government. The JCEA, in partnership with Keidanren (Japan Business Federation) and the Japan Chamber of Commerce and Industry, has sent an annual mission to Beijing since 1975. These missions consist of executives from industries and companies looking to develop or maintain close connections with China. During the visits, business executives meet with Chinese presidents or premiers and hold policy talks with government agencies, including the National Development and Reform Commission (NDRC), the Ministry of Commerce, and the Ministry of Industry and Information Technology. The JCEA also formulated recommendations for improving the business environment in China and submitted them to the Ministry of Commerce and other relevant departments of the State Council.
The practice of dispatching an annual mission offered a channel of dialogue between Japanese business groups and Chinese political leaders and government agencies. This channel enabled Japanese business executives to share ideas, exchange information, and strengthen mutual trust with Chinese policymakers. The JCEA’s policy recommendations identified practical hurdles in conducting businesses and provided perspectives on improving economic relations with China. These recommendations continuously contributed to enhancing the business environment in China and fostering deeper and broader partnerships with Chinese counterparts.
The JCEA’s Committee for Prospects of Sino–Japanese Relations in the 21st Century has issued annual reports to improve bilateral relations since 2003 and delivered them to the Chinese government. The reports, which were formulated by business executives and academic experts, showed long-term visions for maintaining stable Japan–China relations by identifying possible areas for cooperation. The government and business actors promoted technological collaboration by following the committee’s reports, which were typical in two policy areas.
The first is energy conservation. The direction to forge a close partnership in energy conservation was shown in the 2005 report, which underscored ‘Take on the challenge of a circular economy’ and suggested using Japan’s expertise in energy conservation (Japan-China Economic Association, 2005). METI and JCEA, in partnership with China’s NDRC and the Ministry of Commerce, sponsored the Japan-China Energy Conservation Forum since 2006. The forum, which collected more than 500 participants every year, offered opportunities to exchange information and expertise about energy conservation and environmental protection (Yoshimatsu Reference Yoshimatsu2010). The continuous holding of the conservation forum led to self-reinforcing reproduction in which business tie-ups for supply chains and new technologies were developed. For instance, Japanese engineering company Hitachi Zosen and China’s Yulin Chemical agreed on a trial project to build a plant that would produce methane from hydrogen and carbon dioxide and be supplied from local factories by Yulin Chemical (Arai, Reference Arai2021).
The government and its affiliated organization extended the scope of bilateral collaboration from energy conservation to carbon neutrality. In August 2021, the Japan External Trade Organization (JETRO), in partnership with the JCEA and China Chamber of Commerce for Import and Export of Machinery and Electronic Products, held the Japan–China exchange meeting on third-country market cooperation in green low-carbon development in Wuhan City, China (Japan External Trade Organization, 2021). Furthermore, METI and NDRC organized the First Japan-China Policy Dialogue on Decarbonization in November 2021, followed by the second dialogue in December 2022. The officials introduced national energy strategies of the governments and exchanged opinions on efforts for carbon neutrality, including the development of hydrogen and ammonia.
The second is innovation collaboration. The Committee for Prospects of Sino–Japanese Relations in the 21st Century underscored the importance of innovation collaboration in its reports in 2015 and 2017. The 2015 report mentioned that ‘looking at the Asian region, the countries concerned are expanding new circles of cooperation, and together they are taking up the challenge of innovation. Japan and China must contribute to deepening that cooperation’ (Japan-China Economic Association, 2015). The report was valuable in timing because the Chinese government revealed a new national strategy of ‘mass entrepreneurship and universal innovation’ in 2015 (Zhong, Reference Zhong and Yuan2019). The reports had to do with a new direction of Japan–China cooperation. When Chinese Premier Li visited Tokyo in May 2018, he proposed Japan–China innovation cooperation and the Japanese government underlined the strength of intellectual property rights protection (Sugita Reference Sugita and Nakagawa2020: 76). During Prime Minister Abe’s visit to Beijing five months later, the two governments signed a Memorandum on the Establishment of the Japan-China Innovation and Cooperation Dialogue, and the First Japan–China Innovation Cooperation Dialogue took place in April 2019. Following the development of the governmental initiative, the JCEA dispatched start-up and venture exchange missions to Shenzhen in March 2018, Hangzhou in March 2019, and Zhongguancun in Beijing in June 2019 (Sugita, Reference Sugita and Nakagawa2020: 77).
Energy conservation and innovation did not have direct connections to critical and emerging technologies and supply chain resilience, in which the USA and Japan had strong interests. However, these fields began to emerge as new industrial challenges involving major business players. For instance, Toyota Motor and five Chinese partners established the United Fuel Cell System R&D in June 2020 as a joint venture to develop commercial fuel cell vehicles (FCVs) (Toyota Motor, 2020). In July 2020, Honda Motor and Contemporary Amperex Technology (CATL), China’s state-backed and largest electric vehicle battery manufacturer, signed an agreement to form a comprehensive strategic alliance on new energy vehicle batteries (Honda Motor, 2020). These moves contradicted a policy direction to promote cooperation for creating international standards under the Japan–US CoRe Partnership, which included efforts ‘to develop international safety standards for electric and hydrogen fuel cell vehicle technologies’ (Ministry of Foreign Affairs, 2022: 3). Given its strong grip on industrial and corporate activities, there was a reasonable risk that the Chinese government would coerce private actors to transfer to the government battery technology that could become the next energy source for fighter aircraft, tanks, and naval vessels (Miura, Reference Miura, Tatsumi and Kennedy2022: 29).
Amid rising concerns over economic security, Japanese business actors likewise began to adjust their organizational and strategic practices to mitigate risks associated with sensitive technologies and products. An increasing number of firms established dedicated units for economic security and risk management, while peak business associations, most notably Keizai Doyukai (Japan Association of Corporate Executives), created a specialized committee to monitor domestic and international policy trends on economic security. Even as such institutional adaptations progressed, Japanese firms with deep commercial ties to China generally adopted prudent and incremental approaches to managing technological collaboration.
Suzuki (Reference Suzuki2022), in his study of the economic statecraft rivalry between Japan and China, contends that economic interdependence and multifaceted interactions between the two countries dissuade Japan from taking a monolithic approach to counter China’s activism in economic statecraft. This study adds a similar view in the realm of technological development. Long-term dialogues based on institutional networks encouraged the Japanese business group and some government agencies to engage in collaboration with China as critical sources of innovation and bases for strengthening Japan’s overall supply chains. They recognized the imperative of Sino–US technology competition but posed a reservation to pursue a monolithic path of decoupling with China. They continuously found interest in technological collaboration with China by following the policy trajectories that they developed through past practical interactions.
5. Conclusion
This article examined why and how Japan adopted specific policies for economic security and technological development under international technology competition by relying on the analytical framework of policy emulation and vested interests. The US–China technology war became a critical juncture to change the Japanese government’s perception of economic security and technological development. The government developed institutional/legal frameworks to enhance economic security for protecting and developing critical and emerging technologies.
In the development of policy initiatives, Japan followed policies and decisions adopted by the USA. This policy trend can be interpreted as rational emulation in that Japanese policymakers recognized intensifying technology competition and chose a policy option to follow the policy initiatives of its ally with similar political conditions and ideational values. In this overall policy trend, a unique factor was METI’s policy preferences. The ministry investigated policy developments in the USA and Europe and set up a strategy for semiconductors and the digital industry. Following the western examples was used to legitimize its policy goal to expand the scope of industrial policy to the entire economy and society. METI’s policy emulation can be regarded as a symbolic imitation to pursue another policy purpose.
This study also examined specific factors that constrained Japan’s technological initiatives for enhancing economic security. The influence of close economic relations with China constituted such a factor. Japan developed dense trade and investment links to the Chinese market, which were underpinned by long-term institutional connections developed by the JCEA. The association dispatched an annual mission to Beijing, delivering recommendations on the Chinese business environment and long-term policy visions for stable Japan–China relations. The policy visions offered concrete ideas to strengthen business tie-ups in energy conservation and innovation. The policy trajectory formed by the business group posed a reservation on the Japanese government’s positive engagements in economic security, emulating the US examples.
Japan’s policy reactions indicated the complicated nature of economic security. Such complexities can be explored as coordination between the logic of politics and the logic of the economy. Japan’s emulation of controls on trade and investment activities tends to lead to managed trade, which runs counter to the free trade principle and the overall market economy. The Japanese government has intensified requirements on private companies to manage intelligence under the banner of economic security. Such policy trends had the risk of weakening private companies’ entrepreneurship. Finding an equilibrium between the logic of politics and the logic of the economy is a significant challenge for Japan amid intensifying technological rivalry.
Acknowledgements
I would like to thank the editor and anonymous reviewers for their helpful comments and suggestions on an earlier draft of this article.
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