Japan’s Search for Strategy Amidst Global High-Tech Competition
Today, the international community faces an inflection point. Russia’s aggression against Ukraine and China’s actions in both the economic and military spheres have called into question the existing international order. Advancements in technology are fundamentally changing the ways in which the world will be dictated in the future.
As U.S. Secretary of State Antony Blinken said in October 2022, “The post-Cold War world has come to an end, and there is an intense competition underway to shape what comes next. And at the heart of that competition is technology.” Advances in areas including 5G, artificial intelligence, and quantum computing will shape the emerging international order and which countries have the capability to secure its strategic interests.
Japan is one of many countries striving to identify a strategy to exist in this reality. To date, especially since the Abe administration, Tokyo has focused on developing defensive measures—preserving its innovative base—and proactive measures—shaping the rules of the game—to better position itself in this global competition for high-tech dominance. These endeavours will become increasingly important as Japan faces economic challenges such as a declining working-age population and as the line between civilian and military technology blurs.
Why Tokyo Needs a Strategy
Japan’s understanding of the international environment has been shaped by three key factors. First is the emergence of advanced technologies that can provide immense power to states both economically and militarily. Second is the risks of globalization resulting in issues with over-reliance on foreign goods and issues with dual-use technologies being taken by foreign countries. Third is the rise of China and the challenge it poses to both Japan and the rest of the international community.
The basic approach was outlined in the shift to focus on economic security. Japan has identified “strategic autonomy” and “strategic indispensability” as vital to its continued presence in the changing world. The former refers to “realizing Japan’s national security objectives of ensuring the livelihoods of Japanese people and the normal functioning of Japanese economy without depending excessively on other countries, under any circumstances,” or defending “strategic infrastructure industries” necessary for autonomy. The latter refers to “making Japan an indispensable country within the entire global industrial structure to ensure Japan’s long-term, sustainable prosperity and national security,” or further developing strengths to ensure the country’s technological and industrial competitiveness in the existing international order.
Tokyo has taken several steps to address the country’s need to stay on top of emerging technologies. These can be categorized as defensive and proactive measures. Defensive measures aim to protect Japan’s existing and emerging technological innovation.
The Act Promoting Economic Security enacted in 2022 is the primary tool for defensive measures. Its four pillars are: bolstering the resilience of supply chains for vital products and raw materials; securing the safety and trustworthiness of core infrastructure functions; a framework for public and private sector to support the development of vital technologies; and preventing leakage of sensitive innovations by making patents non-public. The first two pillars can be considered measures under strategic autonomy, and the latter two under strategic indispensability. These measures promote funding for research in emerging technologies and prevent foreign actors from taking sensitive information from Japan, such as requiring government approval before implementing foreign equipment in key infrastructure.
The government has also issued a semiconductor strategy, perhaps its most visible policy, to nurture and enhance an essential industry. The 2021 strategy focuses particularly on the domestic development of semiconductors, data centres, and clouds to hedge against natural disasters and foreign threats. So far, the government approved a ¥774 billion (around $5.6 billion) package for semiconductor investments in November 2021, including a ¥400 billion (around $2.9 billion) subsidy for Taiwan Semiconductor Manufacturing Company’s (TSMC) new foundry with Sony in Kumamoto prefecture. Most recently, Prime Minister Kishida Fumio announced that attracting foreign investment in the semiconductor industry will be featured in the Basic Policy on Economic and Fiscal Management Reform, the document outlining government priorities in economic policy. Private sector participation, like domestic semiconductor foundry RAPIDUS and increased engagement with foreign partners, including IBM, will prove essential in this space.
Tokyo has also taken proactive steps to shape the external environment in a desirable way that is conducive to its strategy to enhance competitiveness. This comes from a realization that Japan cannot achieve its strategic goals alone.
The foundational concept underlying its actions is the “free and open Indo-Pacific.” Though the focus is on the Indo-Pacific region, at its core, FOIP promotes free and fair global competition through a free and open international order based on the rule of law. Here, Tokyo places a premium on working with like-minded partners, given its understanding of constraints on its ability to shape the international order.
Japan has also utilized multilateral fora such as the G7 to pursue its desired international order. For example, the latest G7 Trade Ministers’ Meeting in April emphasized cooperation on strengthening and enhancing supply chain resiliency based on honouring international norms and obligations and not weaponizing economic interdependence for illegitimate political gains. In a world increasingly driven by competition over advanced technologies, Tokyo prefers a system committed to free, fair, and mutually beneficial economic and trade relationships.
Finally, Japan has promoted the idea of Data Free Flow with Trust (DFFT), first espoused in 2019 at the G20 Osaka Summit by then-Prime Minister Abe Shinzo. The DFFT framework is one way in which Tokyo has signalled its intent to be a rule maker and is part of its drive to shape the regional infrastructure by setting standards for data sharing and cross-border data flows. Most recently, Digital Minister Kono Taro proposed a bottom-up Institutional Arrangement for Partnership to engage private sector partners to realize the free flow of data while addressing privacy, data protection, intellectual property rights, and security concerns. Such actions have proven essential as countries attempt to shield themselves from the leak of sensitive data, which hinders innovation and cooperation in the high-tech sector.
Global instability in recent years has signalled a shift in the international order. Japan is coming to terms with this new reality by improving its strategic autonomy and indispensability through defensive and proactive measures designed to improve domestic development of emerging technologies and craft the rules of the road for decades to come. Its efforts are ever more critical as countries compete over emerging and new technologies that become the building blocks of the new international order.
Going forward, Tokyo will need to balance the preservation of its innovative capacity with active engagement with like-minded partners to avoid falling behind in the technological competition led by the United States and China.
Nishimura Rintaro is an analyst with the Japan practice at The Asia Group