An extended period of quasi-emergency in Japan as it continues to struggle with managing the COVID pandemic has led to log-term strain on its economy, impeding plans for reopening the economy. For Fumio Kishida, domestic handling of the coronavirus threat will hence directly impact Tokyo's international posturing and economic power. His plan to handle the Japanese economy has hence sought to incorporate interventionist policies that generate growth under a form of ‘new capitalism'. A key component of this outlook is the submission of a bill on economic security that is set to be presented by the government not long from now. This economic plan will also be likewise included as a priority in the 2022 National Security Strategy. Amidst such manoeuvring, what promise does Kishida's ‘economic security' hold? How is it different from the earlier economic security strategy that Japan had introduced?
The idea of ‘economic security' emerged from a study by the Strategic Headquarters on the Creation of a New International Order (hereon, SHCNIO) which assessed Japan's power to be subject to the strength, sustainability and inventiveness of its economy. SHCNIO functions as part of the Liberal Democratic Party's (LDP) Policy Research Council, which is tasked with creating the party's policies and draft legislation. The SHCNIO's study concluded that to achieve further growth, Japan should focus on strategic independence and indispensability. Here, strategic autonomy alludes to decreasing Japan's monetary dependence on other nations, while indispensability refers to enhancing and investing into sectors that will make Japan an essential trade partner for the world. Kishida has argued that upgrading the strength of the supply chain through economic security is fundamental for Japan given the weaknesses that have been uncovered such as disturbances to semi-conductor coming from Taiwan and deficiencies of clinical supplies during the pandemic. The new bill is going to empower the authorities to do checks to guarantee that Japanese supply chains are not over-dependent on foreign countries.
Moving forward with Kishida's signature, the new bill is going to look at imposing tighter restrictions on security-sensitive areas. As a proposal prepared more by academics than policymakers, the bill holds immense promise in securing Japan's dwindling economy. Besides, economic security under Kishida will encourage Japanese creation of fundamental merchandise like a USD 4.4 billion investment into the advancement of domestically produced semi-conductors. Finally, there will be an attention on the protection of digital infrastructure and shielding against the perceived dangers of Chinese intellectual property theft.
Ultimately, Kishida's indoctrination of Abenomics (and Suganomics) into his fiscal outlook has begun to shape ‘Kishidanomics' as Kishida's aspiration to have a new economic strategy that leaves behind neo-liberal policies. Being a top leader of the influential Kochikai faction in LDP, he shared the faction's diplomatic philosophy of prioritizing economic recovery over rearmament. Hence, it is not a surprise that Kishida placed “virtuous cycle of growth and redistribution” as the focal point of his economic policies, sticking with Abenomics-Suganomics to fight deflation. Here, it is important to note that while Abenomics and its successor worked well against deflation, they resulted in widened inequality across Japan. Now, Kishida aims to end wage stagnation and improve the economic situation for average Japanese workers.
Nonetheless, his policies are not a far departure from ‘Abenomics' or ‘Suganomics' because Kishida's administration is planning to continue the fundamental parts of ‘Abenomics' known as the ‘three arrows'; bold monetary policy, flexible fiscal policy and growth strategies. Adding to this, ‘economic security' will conform to ‘Kishidanomics' by reducing dependency on supply chains which will clamp down on volatile price changes for Japanese consumers. Moreover, the move to create ‘indispensable' products within Japan, instead of importing them, will create jobs and contribute to economic growth and wage rises.
All in all, it is also important to note that ‘economic security' is not a novel ideation by Kishida; it does ultimately have important links to ‘Abenomics' and ‘Suganomics'. The term was first used in the ‘Basic Policy of Economic and Financial Management and Reform 2020' in July 2020 under Abe, post which a new division of the National Security Secretariat to focus on the intersection between national security and economics was also established. Furthermore, the SHCNIO' also first released its ‘Recommendations toward Developing Japan's ‘Economic Security Strategy'' under Suga's administration in December 2020, outlining policies ranging from supply chain resilience to economic innovation. At this time, especially as the COVID pandemic was first setting in, there were also grander debates to address supply chain relicense, such as the passing of an USD 2.2 billion subsidy to encourage Japanese companies to move their factories out of China to Japan or other ASEAN countries.
Nonetheless, it is not wrong to argue that such dedicated focus on economic security has been promoted largely under the Kishida administration. The prioritisation of this focus is also because it is now regarded as synonymous with national security, as evidenced further by the creation of the position of a Minister for Economic Security, assumed at present by Kobayashi Takayuki. Such focus is a departure from the previous governments: Kishida stated that Kobayashi's role would be to ensure Japan could have “the strategic technology and supplies” to “prevent technologies from flowing out of the country” therein creating a “self-sustaining economy.” Despite Kishida being described as a moderate and ‘dovish' leader, with regards to his foreign policy —which draws from the time and experience of him being the longest serving post-war foreign minister of Japan —Tokyo has taken a harder stand vis-à-vis rising threats from China. Importantly, Kishida won the election by vying for a more assertive approach towards China, which he now needs to deliver on.
Regionally, Kishida's ‘economic security' is a response to the changing global security environment and especially the multifaceted threat of China via supply chain disruptions, cybersecurity threats and feuds over intellectual property. As a concept, it corroborates with Japan's Indo-Pacific Outlook because of the economic consequences for Japan if there was a conflict in the Taiwan Strait or South China Seas. The Free and Open Indo-Pacific (FOIP) concept aims to protect Japan in its security environment, and by creating a more self-sufficient economy, Japan will not be caught in a ‘choke-hold' if there were disruptions. However, it will certainly be a test of Japan's economic diplomacy to balance its important trading relationship with China, whilst developing these protective ‘economic security' policies. Herein, such moves bode well for ensuring Japan's continued dedication to ventures such as the India-Australia-Japan established Supply Chain Resilience Initiative (SCRI), especially as supply chain diversification emerges as the central goal of a stronger economic outlook. Furthermore, as the focus on regional free-trading blocs like Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) grows, the need for Japan –as a key actor in RCEP and leading power in CPTPP –to have a strong economy that is secured from external threats and can serve as both a guide and balancer to other regional powers is critical to Tokyo's power identity in Asia.
Keeping the Quad powers in mind, Japan's emphasis on ‘economic security' is leading to closer alignment with the US especially as their partnership alliance has a shared economic priority to address these issues. The ‘Economic Security' department of the National Security Secretariat is used to facilitate cooperation with the US over this, and there has been progress, such as the Competitiveness and Resilience Partnership signed in April 2021 under Suga's premiership. Concurrently, ‘economic security' also promotes continued investment in South and Southeast Asia to construct ‘trustworthy communication infrastructure in Asia'; as the region's largest official development assistance provider, this ambit merges well with Japan's economic multilateralism. With Quad powers of India and Australia, Japan has already built a strong focus on protecting supply chains via SCRI, while with Quad the focus on critical technologies has grown.
Japanese efforts to engage with its like-minded partners to garner cooperation on such avenues remain a key tenet of its ‘economic diplomacy' that only furthers its importance as a regional actor, if not leader. Under Kishida, Tokyo has a chance to revamp its economic vision under a security framework that promotes the core ideals of Japanese economic policies and adapts them to present day threats in order to sustain in the post-pandemic emerging geopolitical order.
*Dr. Jagannath Panda is a Research Fellow and Centre Coordinator for East Asia at the Manohar Parrikar Institute for Defence Studies and Analyses, New Delhi. Dr. Panda is the Series Editor for Routledge Studies on Think Asia.
