Japan continues to lead similar governments in terms of financial protection policy. In Tokyo, subsequent administrations have prioritized financial security by enacting regulations and changing the bureaucracy to achieve those goals. Those work continue.
Governments working with Tokyo to address these issues may conduct research into Japan’s work. Just coordinated efforts by individual nations only and together you guarantee financial security.
Particularly significant are the government’s increasing efforts to communicate economic security to the private sector and develop private businesses ‘ strategies to address this problem. These initiatives are also outpacing the earth.
Japan has been forced to address risks to financial stability, just like other nations. Its understanding of those problems came before that of other countries. After the imprisonment of a Taiwanese angling boat captain who illegally entered the waters surrounding the Senkaku territories in 2010, the nation was content to economic force – a threshold of significant rare earths imports from China. Decision-makers in Japan were shaken by that event.
More importantly, it wasn’t a one-time incident: Beijing began to use economic force more frequently and favorably.
The establishment of an , financial bureau , in the National Security Secretariat in 2020 was the first step in Tokyo’s efforts to promote economic stability. Despite this, many federal ministries set up economic surveillance offices to concentrate their efforts.
During his leadership, Fumio Kishida, the next prime minister, ratcheted up the pace. His severity was apparent in October 2022 when he established the place of , minister in charge of financial security, in his government. He made financial security a pillar of his government’s growth strategy.
The Economic Security Promotion Act ( ESPA ) was passed in Japan the same year in an effort to advance Japan’s economic security by ensuring its strategic autonomy and indispensability. The four pillars of the policy are:
- ensuring a steady source of particular essential components,
- ensuring the availability of essential system in a secure manner,
- supporting the development of particular, crucial solutions, and
- establishing a covert trademark program
Building on the first pillar, manufacturers of some substances are encouraged to submit stable supply ideas to the government because they are considered” important” based on their importance for the survival of the Chinese population, their dependence on foreign suppliers, and the danger of supply chain disruption caused by foreign activities.
A manufacturer’s plan is supported by subsidies to cover some of the costs associated with its application. By June 2024, 85 plans in the fields of semiconductors, batteries, machine tools, fertilizers, and antimicrobial substances had been certified, with subsidies totaling$ 6 billion.
In terms of the second pillar, over 200 businesses in 15 different industries, including finance, logistics, and energy, have been designated as critical infrastructure firms. When implementing crucial information systems, providing detailed supplier information down to the end of the supply chain, and reporting on risk management measures, these companies must go through government review.
The government can then demand changes to suppliers or improvements to risk mitigation strategies. Some regulatory bodies have even requested that Russian and Chinese companies be barred from supply chains.
Regarding the third pillar, Japan has identified 50 commercial technology sectors, including those in the maritime, space, aviation, cyberspace, and biotechnology, and has allocated about$ 3.5 billion for research and development support.
The secret patent system, the last pillar of ESPA, covers fields like aircraft stealth and concealment technologies, attack and defense systems for submarines, and technologies related to the disassembly and reprocessing of spent nuclear fuel and heavy water, which could seriously harm Japan’s public life and economic activities.
Twenty-five technology fields have been identified, and the government has the authority to designate the technical content that needs to be preserved and not used for commercial use in exchange for any losses incurred as a result of the restrictions. Since May 20, 2024, this system has been in operation.
The security clearance system, which is based on the Act on the Protection and Utilization of Critical Economic Security Information, which was passed in May 2024, is another important piece of economic security policy. This system expands the protection of sensitive information beyond the traditional domains of diplomatic and defense, including sensitive information relating to economic security. This will improve Japan’s ability to share and manage sensitive information.
In order to improve economic security, Japan is also actively updating existing laws. The most recent revision of the Foreign Exchange and Foreign Trade Act ( FEFTA ), which now includes new regulations and requirements for reporting certain technology transfers abroad to the Ministry of Economy, Trade and Industry ( METI), is a notable example. This change is in direct response to incidents where Japanese-developed technologies were used in ways that threatened national security.
The Trade and Economic Security Bureau’s Economic Security Policy Division’s recent public tender from METI reflects the Japanese government’s commitment to more fully engaging the private sector in solving economic security issues. An economic security code of conduct for businesses is what the government intends to put in place.
Although the specifics of this code are not yet known, broad guidelines that extend beyond the ESPA may encourage more private sector investments in crucial areas like supply chain resilience, information protection, and open-source intelligence.
Any guidelines published by METI are likely to become the norm for economic security management among Japanese companies given the collaborative culture of Japanese companies ‘ interactions with authorities. In consequence, significant global corporations will likely have to comply with these rules as well as major Japanese multinational corporations.
In consequence, this new Japanese government policy could soon lead to an international” Tokyo effect” in economic security management, which will affect both Japanese multinational corporations and all of their contractors. That would benefit both Japan and the nations that follow it.
Shotaro Nagino, ( s. nagino@aol .jp), is a Young Leader at Pacific Forum and a Senior Manager at a global consulting firm in Tokyo. He collaborates with the world’s business and academic communities on policy research and analysis, corporate strategy formulation, organizational design and reform, and is a senior manager at a global consulting firm in Tokyo.
The Center for Rule-Making Strategies, Tama University, and Pacific Forum’s senior advisor are Brad Glosserman  ( brad@pacforum .org ).