China’s Sputnik Moment?
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Japan has been delighted with the first months of Joe Biden’s presidency. Unlike his predecessor, whose transactional view of diplomacy rankled many in Tokyo, Biden has been at pains to rekindle the U.S.-Japanese alliance and to emphasize that Japan remains the linchpin of U.S. security policy in Asia. In February, the two nations renewed the agreement under which Japan hosts U.S. troops, and in March, Secretary of State Antony Blinken and Secretary of Defense Lloyd Austin both visited Japan on their first overseas trips. Biden hosted Japanese Prime Minister Suga Yoshihide as his first foreign guest as president.
It will surprise no one that a major focus of these early meetings has been China, whose economic and military rise has unnerved Washington and Tokyo and united them in competition with Beijing. Biden administration officials have repeatedly affirmed their readiness to defend Japan, including its claim to the disputed Senkaku Islands (known in China as the Diaoyu Islands). But in addition to military and diplomatic competition with China, which has long been central to the U.S.-Japanese relationship, both countries have placed a new and important emphasis on economic security. In their first meeting, Biden and Suga discussed ways to protect critical supply chains, intellectual property rights, and sensitive technology that should not pass into Beijing’s hands. At the March meeting of the Quadrilateral Security Dialogue, an informal strategic forum that includes Australia, India, Japan, and the United States, both leaders took a similarly expansive view of the China challenge, leading to the creation of working groups on controlling critical and emerging technologies, among other economic security issues.
That heightened economic competition with China has helped Japan reinvigorate its alliance with the United States is not an accident. Over the last several years, the Japanese government—first under Prime Minister Abe Shinzo and then under Suga—has honed a new brand of economic statecraft designed to protect the country’s economic interests, limit China’s creeping influence in Asia, and bolster Japanese soft power. Through a combination of enhanced economic intelligence, tighter trade restrictions, and better stewardship of data and emerging technologies, Japan has become a force for economic security in Asia and reinforced its position as an indispensable U.S. ally.
Japan has long thought of security in more than military terms. In part because of the military constraints imposed by its pacifist constitution, Tokyo has historically tried to win the trust of other Asian powers through aid, trade, and diplomacy. And it has largely succeeded: public opinion surveys in Southeast Asia consistently show that Japan is the most trusted major power in the region and that it has considerable soft power.
But as China’s foreign policy has grown more aggressive, especially under President Xi Jinping, Japan has had to come up with new ways to preserve its autonomy and regional influence. Beginning in 2013, Abe’s government gradually refurbished the country’s outmoded national security infrastructure, strengthened its defense capabilities, and embraced a more proactive role in maintaining regional security. Abe also launched a series of economic security initiatives that attracted less attention but were arguably as important.
The most consequential of these was a bureaucratic reorganization aimed at improving interagency cooperation and enhancing the government’s ability to respond to new economic security risks. Toward the end of his premiership, Abe restructured Japan’s National Security Secretariat, adding an economic division that officially began operations in April 2020. Already, this new division has grown into the largest of the seven NSS units, prompting other ministries to undertake similar reorganizations: the Ministry of Foreign Affairs; the Ministry of Economy, Trade and Industry; and the Ministry of Defense have all established new divisions or positions focused on technology and economic security.
Abe’s government also strengthened Japan’s economic-security-related intelligence collection and assessment capabilities, giving domestic intelligence agencies funding and directives to focus on threats to sensitive Japanese technologies, among other economic security risks. Japan’s Public Security Intelligence Agency, for instance, has created a team focusing on economic security and has begun outreach programs to raise public awareness of risks and threats posed by illicit technological and data transfers. Other security agencies have also restructured, creating new and better-resourced teams focusing on China.
Japan has sharpened additional tools of economic statecraft through new legislation and policies. Last year, the country’s parliament revised the Foreign Exchange and Foreign Trade Act to expand government jurisdiction over potentially troubling investments—in particular, by decreasing the threshold for regulatory approval of foreign investments from more than ten percent of a company’s shares to more than one percent. Japan has also effectively banned government procurement of information technology equipment from Chinese state vendors such as Huawei and ZTE and has provided subsidies and tax breaks to Japanese companies developing secure 5G networks. Along with Australia and India, it has launched the Supply Chain Resilience Initiative, which encourages Japanese companies and their subsidiaries to reshore operations or diversify and move them out of China to Southeast Asia.
Other economic security initiatives are in the offing. The government plans to create a new think tank that will focus on using emerging technologies such as quantum and artificial intelligence for security purposes. It is also mulling a new security clearance system for the private sector that would facilitate the sharing of threat information between the government and businesses and a system that would conceal from the public patents related to technologies that can be adapted for military use. It will likely designate economic security as one of three thematic pillars in a new National Security Strategy. And it will continue to play a leading role in setting standards for trade and digital commerce, including through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade agreement, which Japan revived and renamed after the United States backed out.
If many of these initiatives look familiar to Americans, that is by design. One of Tokyo’s main objectives is to more closely align its economic security policies with Washington’s and ensure that the two governments coordinate on critical and emerging technology policies. So far, Japan’s approach appears to be working; soon after it launched the new NSS economic security division, the two governments announced that they would start a dialogue on economic security issues. Japan’s mastery of new technologies, its networks and connections throughout the Indo-Pacific, and its prestige and soft power in the region all make it an invaluable economic security partner for the United States.
But there is still more that Japan and the United States can do to address the economic security challenges posed by China. In order to facilitate more regular discussions on economic security, they could create a designated U.S.-Japanese consultative committee for these issues and an economic security version of the Shangri-La Dialogue, Asia’s annual defense summit. They could also expand support for the Blue Dot Network, an infrastructure and development certification initiative launched by Australia, Japan, and the United States that is sometimes compared to China’s Belt and Road Initiative.
Japan and the United States should also pursue economic security cooperation with other democratic countries and, where appropriate, in multilateral settings, as they did at the recent G7 meeting in the United Kingdom and the G20 meeting in Italy. They should identify ways to reduce their economic dependence on China to blunt the effectiveness of Chinese economic statecraft while also identifying China’s economic dependencies on democratic countries to deter and counter Chinese economic coercion. There is still considerable work to be done, but Japan’s recent reforms have prepared it for the economic security challenges ahead—and ensured that it will be closely aligned with the United States.