Japan’s economic reliance on China is causing concern amid US-China competition and China’s economic coercion. Japan is pursuing policies to diversify supply chains, reshore production, and develop domestic industries to enhance economic security. However, the deep economic relationship between Japan and China remains intact and mutually beneficial, making complete decoupling difficult. Japan is promoting reshoring, diversifying supply chains, and strengthening domestic industries to reduce vulnerability to China.
A New Approach: Japan’s Shift Towards Economic Realism
Deep economic cooperation between Japan and China has long existed alongside political and territorial disputes. To navigate this delicate balance, Japan has implemented a policy of separating politics and economics, known as seikei bunri. However, increasing US-China strategic competition and China’s economic coercion tactics have prompted Japan to reevaluate its economic reliance on China. Prime Minister Fumio Kishida has introduced a new ‘economic realist’ diplomacy, focusing on addressing concerns about the impact of politics on Japan’s economic security.
Policies for Economic Security
In response to these concerns, Japan has adopted various policy approaches. This includes selective diversification of supply chains away from China, reshoring, and friend-shoring. The government is actively supporting companies considering reshoring with subsidies, tax breaks, and regulatory reforms. Japan is also investing in alternative sources of key components and materials, such as rare earth metals. Additionally, Tokyo is promoting collaboration to enhance economic ties in the ‘Free and Open Indo-Pacific’ framework.
Challenges and Future Prospects
While Japan acknowledges the complexity of decoupling its economic relationship with China, it is actively pursuing measures to enhance its economic security and reduce vulnerabilities. This includes strengthening domestic industries and investing in technological advancement, such as semiconductor materials. Japan’s shift towards economic realism signifies a significant departure from the seikei bunri principles and reflects a growing recognition of the need to address the potential risks associated with deep economic ties to China.
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