NSC change prepares Japan for new global realities

Last year, in an acknowledgment of the growing importance of economic issues in national security thinking, the Japanese government added an economic division to the National Security Secretariat (NSS). On Wednesday, Japan’s newly reorganized National Security Council (NSC) got down to business. It is a smart move, given the new realities of foreign relations and global competition, but it will be a tough job.

The range of concerns is wide and growing, and readying the country for these challenges will require imagination, foresight and mastery of the bureaucracy — skills that are hard to cultivate, especially given the day-to-day demands of the NSC.

Established in 2013, the NSC has been dominated by traditional security concerns. Its four principle members are the prime minister, the chief Cabinet secretary and the foreign and defense ministers. They are supported by the NSS (which has been staffed primarily, but not exclusively, by officials from the foreign and defense ministries).

Today’s great power competition is being contested in other domains, however. The most important is economic. National security now depends on economic success, which requires access to markets around the world, access to cutting edge technologies and access to a rules-based order that adjudicates disputes according to accepted norms, principles and laws, not arbitrary declarations backed by brute force.

“Establishment of the Economic Division is a significant achievement,” says Akira Igata, my colleague at the Center for Rule-making Strategies at Tama University, who works extensively on national economic statecraft. “Numerous countries have realized the need to revamp their government’s capacity to implement smarter economic statecraft, but Japan is the first among industrialized nations to change its core security policymaking apparatus and have it focus exclusively on strategizing and coordinating policies on economic security.”

The new division is intended to better prepare Japan for that world. Officials have been getting ready since last fall. There have been complementary reorganizations in the foreign, defense and economic ministries to support the new division — it has around a dozen officers, so it will need help — and a preparatory office was set up in the NSS as well. A fourth senior director, the head of the new section, has been added to the NSS.

A second consideration also weighed heavily on the decision to establish the division: ensuring that Tokyo was aligned with Washington as it put new emphasis on economic competition with China.

The Trump administration has railed against the unfairness of the international order and, in Washington, Beijing is the greatest offender. It robs the United States of wealth, jobs and ideas. The U.S. has been creating a new legal framework to tackle the China challenge, and its new tools include controls on emerging and foundational technologies, restrictions on foreign investment in the U.S. and aggressive attempts to prosecute theft of intellectual property. The new economic division will focus on those issues as well and closely coordinate with Washington as it addresses them.

One of the bureau’s first tasks is drafting a national economic strategy; originally this assignment was to be finished by the end of this year, but it has been reported that it will be completed by May or June — the deadline moved up as a result of U.S. calls for faster action. That document will have to address traditional national economic security concerns — securing resources, ensuring that Japan’s foreign-bound businesses have accurate assessments of political and economic conditions overseas, and integrating diplomatic strategies across the spectrum of economic initiatives to ensure consistency and maximum effectiveness. But it must do much more than that.

A framework for thinking about national economic statecraft, the essence of what the new division should do, has five broad categories:

• Defensive economic statecraft, or identifying homegrown economic tools to protect the country across a range of economic challenges, both new and conventional. This would include steps Japan can take to protect its telecommunications grid, such as limiting Huawei’s participation in 5G networks, or limits on foreign investments, workers, researchers and students.
• Defensive economic statecraft practiced internationally, or how Japan uses diplomacy to protect or advance its economic interests. This would include standard setting in trade agreements, like Prime Minister Shinzo Abe’s push for “Data free flow with trust” at last year’s Group of 20 summit.
• Offensive economic statecraft, or the “dark arts” of how Japan can use economic instruments to hurt other countries. This starts with sanctions but includes more aggressive measures.
• Wild cards and black swans, or preparing for the unpredictable, such as a deadly pandemic.
• Public diplomacy, or ways to win and sustain support for its initiatives, such as reports, advisory bodies and public events. My earlier column proposed that Japan host an annual international conference that focused on national economic statecraft, modeled after the Shangri-La Dialogue or the Davos meetings of the World Economic Forum.

In 2017, a private sector advisory group was set up to provide guidance on economic security. It finalized its recommendations a few weeks ago. They include: centralizing authority on national economic statecraft (similar to the NSC redesign); writing a national economic security strategy; focusing on cybersecurity as Japan undergoes the “digital transformation” to Society 5.0; identifying and aggressively investing in critical technologies; ensuring that Japanese government procurement aligns with that of the U.S. and other partners; establishing a committee to review foreign direct investment so that national economic interests are not compromised; ensuring coordination with and the transmission of information to the private sector; protecting intellectual property at universities and research institutes; and devising new programs to protect and secure classified information.

The new division’s work is critical, and it will face difficulties from the start. Bureaucratic wrinkles will have to be smoothed out as traditional NSC power holders develop a working relationship with the new player.Public-private coordination must overcome the private sector’s instinctive tendency to shy away from “national security” issues. Promoting cybersecurity — which ultimately depends on sharing information — will be stymied by concerns about reputational damage when companies admit to cyberattacks.

All rules and regulations that protect Japan from potential adversaries must be tailored to ensure that they are not used to shield the domestic market from outside competition, a charge that has been leveled against new FDI regulations. The bottom line is that Japan must strike the right balance between protecting intellectual property and guaranteeing that the country stays open to foreign investment, energy and ideas.

Staying aligned with the U.S. will be harder than it should be. That is not because the two countries’ national interests are divergent — while there will always be differences, both have a deep and abiding stake in a rules-based order that supports free and open markets — but because Japan continues to value multilateral efforts to safeguard its national interests while the administration of U.S. President Donald Trump is deeply suspicious of multilateralism and increasingly favors unilateral initiatives.

Japan’s support for the Trans-Pacific Partnership trade initiative, now the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, is one example of the split in views. Tokyo will encounter similar difficulties with the Trump administration as the two governments tackle the thorny issue of reform of the World Trade Organization.

Fortunately, the U.S. position is likely to change. Either the administration will be replaced or the Trump administration will come to recognize the value of cooperative action at the international level. When it does, Japan should be ready for a creative and strategic partnership.

Brad Glosserman is deputy director of and visiting professor at the Center for Rule Making Strategies at Tama University as well as senior advisor (nonresident) at Pacific Forum. He is the author of “Peak Japan: The End of Great Ambitions.”