Japan to fast-track economic security bill amid rising geopolitical tensions

TOKYO – Japan is set to fast-track the Diet’s passage of an economic security bill to bolster the resilience and independence of its supply chains and prevent technology leakage susceptible to hostile forces.

The bill, which is one of Prime Minister Fumio Kishida’s key policy thrusts, comes amid fears that Japan’s dismal safeguards on its strategic research and technology patents could expose it to the theft of intellectual property and even espionage by China, Russia and North Korea.

While the bill targets the country, Japan can still take action against another country for lax controls. In 2019, he abruptly imposed export controls on Seoul, another US security ally, over alleged mishandling of strategic chemicals imported from Japan.

“The bill will eliminate Japan’s inherent weaknesses compared to other nations and ensure its strength in the global community,” Economic Security Minister Takayuki Kobayashi said at a press conference last month.

The legislation will designate semiconductors, storage batteries and rare earths as strategically important because they are not only lifeblood of everyday objects like cars and cellphones, but can also be mined at military purposes.

To better protect core infrastructure from cyberattacks, the bill authorizes wholesale supply chain reviews and requires companies in 14 sectors, including electricity, railroads, communications and finance, to give the government notice on the purchase of new equipment and their suppliers.

Failure to comply is punishable by a prison term of up to two years and a fine of up to one million yen (S$11,850).

The law comes as Japan is at the mercy of intensifying geopolitical rivalry between the United States and China, while the Covid-19 pandemic and a crippling shortage of essential parts like chips have exposed the weaknesses. of Japan’s supply chain.

Its former lack of safeguards for its sensitive technology – including a rule that patents are made available to the public – has been an obstacle to closer collaboration in research and development as well as information sharing with United States and other partners, especially amid the blurred lines between the civilian and military sectors.

“Japanese companies and universities hold a significant number of patents in emerging dual-use technologies, and many people in Japan have expressed concern about the dangers of making this information public,” said Dr Kazuto Suzuki of the University Graduate School of Public Policy. The University of Tokyo wrote in a comment in Jiji News.

“Japan could face strong criticism from its Western partners if a rival or strategic adversary, such as China, North Korea or Russia, appropriates the technology disclosed in Japanese patents and used for military purposes.”

While Japan hasn’t singled out any country behind the push for the legislation, Fitch Ratings economist Maxime Darmet told the Straits Times that if the bill passes Japan will be in line with other regions such as the United States, Australia and the European Union to reduce their supply chain dependence on China.

“Japan’s new economic security legislation will strengthen the screening of Chinese investments in the domestic market. In fact, this means that access to the Japanese market by Chinese entities will be enhanced,” he said.

“In the short term, there is a risk that China will retaliate by targeting Japanese companies operating in China.”

This could hurt Japanese companies in the short term, Darmet added, noting that China accounts for nearly a fifth of Japanese companies’ overseas revenue.

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