With Tokyo looking to promote economic security by working more closely with allies and like-minded countries, deeper cooperation on critical and emerging technologies faces a daunting hurdle: Japan's shortcomings in handling sensitive data.

Japan’s lack of a comprehensive security clearance system for individuals, including government and private-sector officials eligible for handling sensitive information, is creating headaches.

Tokyo is aiming to change that amid concerns that it could lose important business opportunities, be kept out of crucial research projects or even be blocked from forging closer ties with key security partners such as the “Five Eyes” intelligence grouping.