Kishida doubles down on economic security

Economic security will be a pillar of the Kishida administration and national economic statecraft will be a key feature of its foreign policy.

That makes great sense since economic competition is as important to regional power and influence as military rivalry — and Japan can do more to shape outcomes in this domain than any other. But there is always a temptation to confuse parochial interests with genuine national security concerns and use “economic security” to justify protectionism or other expressions of economic nationalism. The new government in Tokyo (like others) must fight that temptation.

During the campaign for president of the Liberal Democratic Party (LDP), Fumio Kishida pledged to “secure Japan’s ‘strategic autonomy’ and ‘strategic indispensability.’” As Kuni Miyake noted in these pages last week, those phrases come from a report by the Strategic Headquarters on the Creation of a New International Order, a group that Prime Minister Kishida headed as chair of the LDP’s Policy Research Council. The report said that economic security policy is for “ensuring the independence, survival and prosperity of Japan from an economic perspective,” for “securing strategic autonomy” and for “maintaining, strengthening and acquiring strategic indispensability.”

That policy is being pursued through creation of a new minister for economic security. Kobayashi Takayuki, a former Ministry of Finance official who served as a parliamentary vice minister for defense in one of Shinzo Abe’s Cabinets, has been given that post. (He also holds the science and technology policy and space policy portfolios. Given the overlap and importance of those issues, that makes some sense, but he is going to be busy.) Kishida has also said that passage of an “Act for Promoting Economic Security” will be a priority and Kobayashi anticipates it will be tabled in next year’s ordinary Diet session.

That legislation is supposed to provide the legal framework for an economic security agenda. Kobayashi explained that the law will identify, protect and foster sensitive technologies, secure the integrity of fundamental infrastructure and strengthen supply chains.

Akira Amari, the new LDP secretary-general and one of the most powerful members of the party, regardless of title or posts, has said that the need for policy coordination throughout the government will require the new economics minister to have broad powers. “Economic security is a cross-ministry matter,” he mused, concluding that the new minister “should be able to work with every agency, including the (National Security Secretariat).” That translates more bluntly into “needs to be able to give instructions to all ministries,” an inclination that makes sense but is sure to ruffle feathers throughout the bureaucracy.

Kishida’s personality — he prides himself on being a good listener who reconciles competing views and musters consensus — will make his assertion of power difficult. In other words, talk about prioritizing economic security and using it to direct the government only makes sense if other parts of the LDP are behind it. Fortunately for him, they are.

During the campaign, Sanae Takaichi, the most hawkish of the candidates, also pledged to strengthen Japan’s economic security, a process that she framed primarily as stopping the outflow of technologies to China. Her support for this policy, along with that of Amari, signals that it enjoys considerable backing within the party and that there will be little opposition (from within the ruling coalition).

“Strategic autonomy” and “strategic indispensability” are buzzwords, capable of accommodating just about any policy; “strategic autonomy” is particularly pliable. They seem to mean, in practical terms, strengthening cybersecurity, particularly for critical national infrastructure (another flexible concept); building resilient supply chains (which has typically meant reshoring production in Japan and reconstituting domestic semiconductor production); securing telecommunications networks; contingency planning for financial institutions; and better controls on technology to prevent their flow out of the country.

It isn’t clear how Kishida’s desire to reduce and eliminate inequality and redistribute wealth, which has been the main focus of his domestic economic statements, fits into this agenda. In the United States, emphasis on micro-expressions of economic security produced a variety of protectionist measures under President Donald Trump. He reasoned that every job lost or every dollar sent overseas weakened the U.S., a logic that facilitated the expansion (and abuse) of executive power.

Kishida is no Trump. But there are powerful forces in Nagatacho that could use this authority to protect their, rather than the national, interest. There is evidence of that tendency in last year’s revisions to the Foreign Investment Law, which produced an expansive definition of national security, one that included onsen owners and the operators of baseball stadiums. A similar reflex was present in the Toshiba affair, in which the government intervened to fend off activist shareholders.

Reportedly, the Ministry of Economy, Trade and Industry (METI) is flexing its muscles since Kishida has taken office. Current and former METI officials are serving as secretaries and advisers to Kishida — common under Abe, less so under Suga — and there are again whispers that the economic security division of the National Security Secretariat, established last year could be a stalking horse for the ministry. Some see proof in statements suggesting a renewed commitment to nuclear power, a policy pushed by METI (along with other vested interests) that is controversial, but makes sense, as Japan tries to cut greenhouse gas emissions. Even more worrisome are suggestions that the government’s guiding hand is needed to effectively compete with China.

A commitment to economic security doesn’t have to be a fig leaf for self-interest or renewed statism. Japan needs a genuine economic security strategy to guide policy as that legal framework is developed. Currently, the closest thing that Japan has is a chapter in the Integrated Innovation Strategy, published last year.

A real strategy will include defensive and offensive measures. The former includes identifying and tracking new and emerging technologies; finding and plugging national vulnerabilities; and controls on foreign direct investment, among the most obvious steps. Tokyo is doing all those things already, but in an ad hoc and piecemeal fashion. Most importantly, Japan should be working and coordinating with key trade partners through various forums, such as the “Quad,” the alliance with the U.S. or the Group of Seven.

Going on offense, Japan should promote innovation, and Kishida has said that his government will establish a ¥10 trillion university fund to promote research into advanced technologies. The trick is going to be funding technologies rather than companies or industries. There’s no need for heavy-handed guidance since, as Ulrike Schaede persuasively argues in her most recent book, “The Business Reinvention of Japan,” that Japanese companies are great at finding technological niches in global supply chains that allow them to flourish — they just need the resources to do so. (Their success is another reason why Tokyo has to get better at protecting Japanese intellectual property.)

Yes, Tokyo should encourage supply chain resilience — but it should also check the impulse to focus on indigenous production or go too far to “keep important production infrastructure at home” (as set out in the 2021 Growth Strategy). Offshoring was spurred by a perceived sense of vulnerability, either a result of skyrocketing costs in the 1980s or because of natural disasters — businesses remember 3/11. An effective and intelligent supply chain strategy will encourage cooperation among economic and security partners and not merely focus on creating national capacity.

Prime Minister Kishida is right to insist on the “need to think about national security from a variety of perspectives, not just force.” While his predecessors have shared that mindset, there has been a more precise definition of economic security concerns in recent years and an intensification in focus. The new administration is prepared to go still further. Those efforts are to be applauded. But Japan’s new government, like that of like-minded administrations elsewhere in the world, must also remember that there is strength — and security — in numbers. Achieving “strategic indispensability” is only possible in the context of relations with other countries. Excessive nationalism, no matter what the supposed justification, will undermine its security.

Brad Glosserman is deputy director of and visiting professor at the Center for Rule-Making Strategies at Tama University as well as senior adviser (nonresident) at Pacific Forum. He is the author of “Peak Japan: The End of Great Ambitions” (Georgetown University Press, 2019).