U.S. and Japanese Economic Security Policies
Promoting and Protecting Advanced Technologies

Challenges to the global economic system, combined with turbulent geopolitical times, have led to the development of economic security policies around the world. The Covid-19 pandemic, Russia’s invasion of Ukraine, and tensions with China have led the United States, Japan, and other countries to secure supply chains in critical sectors and align the movement of sensitive goods with their strategic interests. Both the United States and Japan view critical and emerging technologies as essential to their global leadership, as they underpin critical infrastructure, defense capabilities, and economic competitiveness. These technologies require both promotion through investment and protection through regulatory measures.

This commentary reviews recent U.S. and Japanese economic security policies, particularly concerning the promotion and protection of advanced technologies. It argues that protection efforts are important to include alongside promotion initiatives, but that governments’ emphasis should be on promotion. U.S. promotion and protection efforts to date have been disjointed, while Japan is trailblazing a cohesive approach. Despite broad strategic agreement, several key friction points must be managed. Policymakers in the United States and Japan will need to ensure that their economic security objectives are both clear and aligned if they are to bolster economic growth alongside security in the Indo-Pacific.

Defining Economic Security

Before reviewing recent initiatives, it is important to establish a working definition of “economic security.” The current use of the term is relatively nascent, and multiple countries are defining the term for themselves in parallel.

Japan was one of the first countries to develop a comprehensive economic security strategy. While its strategy documents do not explicitly define economic security, they emphasize sustainable economic development and the independence and survival of the nation.[1] The European Union published its own Economic Security Strategy in 2023 and refers to a three-pronged approach focused on “promoting the EU’s economic base and competitiveness; protecting against risks; and partnering with the broadest possible range of countries to address shared concerns and interests.”[2] The United States does not have an official strategy but views economic security through the lens of national security and technological leadership, focusing on the protection of supply chains and critical technologies and emphasizing semiconductor manufacturing and critical minerals.[3]

Despite their differing approaches to economic security, advanced countries are incorporating into their thinking on national security the integrity and resiliency of supply chains and the protection of advanced technologies and critical infrastructure.

Promotion: The Legislative Foundations

Economic security has always been an important concept in policymaking for Japan, particularly as an island nation with limited natural resources. Under Prime Minister Shinzo Abe, the concept was recast in 2014 through the formation of the National Security Council. In 2020 the Economic Security Unit of the council was established with three main focuses: technology security, cybersecurity, and international cooperation.[4] That same year, a policy committee for the Liberal Democratic Party (LDP), chaired by Fumio Kishida, published a report that outlined a growing challenge: as economic interdependence increases and becomes more complex, the risks for individual states also increase.[5]

The report identified two fundamental pillars of a proposed economic security strategy to address this challenge—strategic autonomy and strategic indispensability. Strategic autonomy connects Japan’s interests with the goal of avoiding “excessive reliance” on other countries. The concept of strategic indispensability stresses the need for Japan to play a central role in the global community across sectors. Finally, the strategy document identified sixteen strategic focus areas, including food security, renewable energy, cybersecurity, space, supply chains, and critical technologies. Across these areas, there is an emphasis on the need for Japan to be broadly self-reliant while playing a leading role in the world in research, development, and rulemaking.

In 2021, Kishida was elected prime minister and his government set out to legislate economic security. The recommendations in the 2020 report served to underpin the 2022 Economic Security Promotion Act (ESPA) and an array of other pieces of legislation and policy priorities pursued by the LDP government. The focus areas identified in the report have led to ministerial action on foreign investment thresholds, land purchasing, and semiconductor spending.[6]

There are four key components of the ESPA, which is arguably the world’s first cohesive economic security strategy, integrating the promote and protect sides.[7] First, it identifies the need to improve supply chains for key products. The legislation establishes eleven goods to be “designated important supplies.” Second, it addresses the stability of essential infrastructure services by requiring screenings for facilities in critical infrastructure sectors to defend against cyber threats. Third, the government has stepped up support for the development of critical technologies by allocating funding for subsidies and joint ventures. Finally, the law sets stricter patent security measures, particularly for defense-related products and systems.

In the United States, recent promotion and innovation efforts have centered on the CHIPS and Science Act, dedicating $53 billion in public investment aimed at encouraging the private sector to ramp up semiconductor manufacturing.[8] The landmark legislation encouraged increased private-sector investment in semiconductor manufacturing. The Inflation Reduction Act subsequently introduced new federal subsidies for electric vehicles and private-sector incentives for producing critical minerals.[9] Nevertheless, Japan has a head start and has made significantly more progress in adopting cohesive institutional, legal, and policy changes to promote economic security.

The United States and Japan are moving toward coordinated promotion and innovation of critical and advanced technologies as an aspect of economic security, including through the signing of a shared strategy for semiconductors in 2022 focusing on improving supply chain resiliency, diversifying production, and boosting research and development. But it will take a sustained policy commitment to address issues such as workforce development—an investment that could take years to bear fruit.

We have seen the beginnings of such a commitment through the U.S.-Japan Commercial Industrial Partnership (JUCIP), which was launched in 2021. The initiative linked the U.S. Department of Commerce and Japan’s Ministry of Economy, Trade and Industry (METI) to discuss private-sector cooperation, supply chains, and critical technology. Running alongside JUCIP is the Economic “2+2” framework, which includes representatives from the U.S. Departments of State and Commerce, METI, and the Japanese Ministry of Foreign Affairs.

In both Japan and the United States, strategy formation, promotion efforts, and investment funds have proved critical to the economic security agenda—although U.S. efforts are narrower and more siloed than the Japanese approach. Japan is on the bleeding edge of institutional changes, which are enshrined in the ESPA. While promotion is a significant aspect of economic security, export controls and regulatory measures to protect technologies could reinforce or complement these efforts.

Protection: The Role of Export Controls

Export controls are an essential tool of economic security that ideally complement promotion efforts. The United States has established robust export control systems through various treaty obligations, on clear display with AUKUS, a trilateral security partnership between Australia, the United Kingdom, and the United States focused on jointly developing and sharing nuclear submarine and other emerging defense technology between the partners. Discussions of alignment on export controls feature in many of the U.S.-Japan initiatives and frameworks, such as the Economic “2+2.”[10] Japan, the United States, and their like-minded partners should learn from the history of past export control measures to achieve their current economic security goals.

In the wake of China’s failed launch of U.S. intelligence satellites in 1996, the United States moved to classify satellite technology as munitions that require defense export licenses.[11] The United States unilaterally imposed stricter controls, and even European allies importing satellite-related items from the United States faced a stiff compliance burden. As a result, other nations eventually found workarounds for U.S. satellite components, U.S. market share in the satellite industry plummeted, and international manufacturers filled the gap.

The history of export controls on satellites shows why such controls are likely to be effective only if they are short term and constantly updated as technologies advance and diffuse. The effects on domestic industry, innovation, and cooperation should not be ignored. If the exporting countries cannot maintain a technological edge, they risk getting built out of the ecosystem entirely. Thus, governments cannot solely rely on protective measures, particularly unilateral ones.

The Russia-Ukraine war has been a testing ground for the modern iteration of export controls as a tool of economic security. In the months following the Russian invasion, Japan began initiating sanctions with the stated justification of preventing “the strengthening of Russia’s industrial base.”[12] Regarding Russia, Japan has pursued an approach to economic security that encompasses both commodities and critical technologies. In practice, this has occurred through export and import restrictions on special metals, refinery equipment, steel, and aluminum, as well as semiconductors and critical technologies.[13]

The war against Ukraine is still ongoing, and Russia has been able to find technology workarounds using inferior products from China. Nevertheless, after the imposition of sanctions, Russia’s imports of “common high priority” items—items identified as critical to its war effort—dropped by 45%.[14] Sanctions have reduced Russia’s military production capabilities and weakened its defense industrial base.[15] The overall success of these sanctions has been due in large part to the broad international coalition that has adopted them, including the United States, the EU, Australia, and others. As the U.S.-Japan alliance seeks to outcompete and confront China, it should learn from what has worked and what has not in terms of protecting critical technologies from an adversary.

Strategic Agreement and Tactical Divergence

Despite grand strategic commonalities between Japan, the United States, and other like-minded countries regarding economic security and technology strategy, there are still important areas of divergence regarding the implementation of promotion and protection measures.

In December 2023, U.S. Steel announced a $14.1 billion deal to sell itself to Nippon Steel. Immediately after the announcement, political antennae went up across Washington and the organized labor world. Because the deal involved the foreign purchase of a U.S. company, it was subject to approval by the Committee on Foreign Investment in the United States (CFIUS), which passed the decision to the White House. In January 2025, President Joe Biden blocked the merger, arguing that the deal, if approved, would “create risk for our national security and our critical supply chains.”[16]

The decision cuts against the grain of strategic efforts by the United States, Japan, and other U.S. allies over the last four years. The White House’s Indo-Pacific Strategy, launched in 2022, lauded the importance of increasing economic integration, particularly through bolstering supply chain connectivity.[17] Additionally, the rejection of this merger is the first denied acquisition with no connection to China. Japanese investment in the United States has been strong for many years, even in sensitive sectors. During 2022 and 2023, Japanese entities filed a total of 28 requests for the acquisition of critical technologies in the United States.[18]

Following the rejection of the merger, U.S. Steel and Nippon Steel filed a lawsuit alleging political meddling. While steel is a significant industry from an economic security perspective, it is not an advanced technology, making this decision even more incongruous with the general bilateral alignment. While this story is not yet over, it exposes that beneath the larger strategic commonalities between the two countries, divergences lurk just below the surface.

Conclusion

Economic security policies are rising to the fore in an unpredictable global environment. Global economic and political pressures are forcing nations to focus on securing their own position in an increasingly interconnected world. Promotion and protection are essential parts of the pursuit of economic security for both Japan and the United States.

For any strategy to be successful, policymakers must begin with a clear definition of their objective. There is a remarkable amount of agreement between the United States, Japan, and other like-minded countries about the desired strategic outcome: resilient supply chains and stable access to critical technologies, especially semiconductors. Investment and promotion are the primary tools for policymakers to address this challenge, followed by the surgical use of export controls (in coordination with allies whenever possible).

Below high-level strategic similarities, it is important to recognize that domestic politics are an important force. As seen in the case of the attempted merger of U.S. Steel and Nippon Steel, the United States and Japan are faced with a clear challenge of reconciling domestic industrial policy with international economic security. The U.S. government should not lose sight of the greater goals of economic security and can learn from Japan about how to create more cohesive policies to achieve them.

Finally, trust between countries matters. The second Trump administration will test the resilience of existing cooperative initiatives on economic security between the United States, Japan, and other countries. U.S.-Japan bilateral trust has historically allowed for coordination in both economic and security policies, and more recently on economic security priorities. Domestic politics or protectionist inclinations should not be permitted to diminish the long-standing trust between the two countries.

Crystal Pryor is Managing Director of TradeStrategic LLC, a Seattle-based research and consulting firm focused on strategic trade issues in Asia, and a Senior Research Fellow at SUNY Albany.

Endnotes

[1] Shigeaki Shiraishi, “Japan’s Economic Security Policy,” Konrad-Adenauer-Stiftung Association, 2024, https://www.kas.de/en/web/japan/single-title/-/content/japan-s-economic-security-policy-2.

[2] “An EU Approach to Enhance Economic Security,” European Commission, Press Release, June 19, 2023, https://ec.europa.eu/commission/presscorner/detail/en/ip_23_3358.

[3] Emily Benson and Catharine Mouradian, “How Do the United States and Its Partners Approach Economic Security?” Center for Strategic and International Studies (CSIS), November 8, 2023, https://www.csis.org/analysis/how-do-united-states-and-its-partners-approach-economic-security.

[4] Jun Osawa, “How Japan Defines Economic Security,” Wilson Center, July 11, 2023, https://www.wilsoncenter.org/publication/how-japan-defines-economic-security.

[5] LDP Policy Research Council, “Recommendations Toward Developing Japan’s ‘Economic Security Strategy,’” December 16, 2020, https://storage2.jimin.jp/pdf/news/policy/201021_5.pdf.

[6] Osawa, “How Japan Defines Economic Security.”

[7] “Japan’s Economic Security Legislation,” European Parliamentary Research Service, July 2023, https://www.europarl.europa.eu/RegData/etudes/ATAG/2023/751417/EPRS_ATA(2023)751417_EN.pdf.

[8] “Two Years after the CHIPS and Science Act, Biden-Harris Administration Celebrates Historic Achievements in Bringing Semiconductor Supply Chains Home, Creating Jobs, Supporting Innovation, and Protecting National Security,” White House, Fact Sheet, August 9, 2024.

[9] Coalition, “Inflation Reduction Act Impacts on Electric Vehicles,” Electrification Coalition, https://electrificationcoalition.org/work/federal-ev-policy/inflation-reduction-act.

[10] “Second Ministerial Meeting of the Japan-U.S. Economic Policy Consultative Committee (the Economic ‘2+2’),” Ministry of Foreign Affairs (Japan), November 14, 2023, https://www.mofa.go.jp/na/na2/us/page4e_001514.html.

[11] Crystal Pryor, “Forwards and Goalkeepers: Winning (Advanced Technology) Game, or Simply Not Losing?” Sasakawa Peace Foundation USA, US-Japan NEXT Alliance Initiative, October 8, 2024, https://spfusa.org/wp-content/uploads/2024/10/Forwards-and-Goalkeepers-Winning-the-Advanced-Technology-Game-or-Simply-Not-Losing.pdf.

[12] “Russia Sanctions Tracker—Japan,” Ashurst, October 24, 2024, https://www.ashurst.com/en/insights/japan-sanctions.

[13] Ibid.

[14] Nathaniel Sher, “Behind the Scenes: China’s Increasing Role in Russia’s Defense Industry,” Carnegie Endowment for International Peace, May 6, 2024, https://carnegieendowment.org/russia-eurasia/politika/2024/05/behind-the-scenes-chinas-increasing-role-in-russias-defense-industry.

[15] Max Bergmann et al., “Out of Stock? Assessing the Impact of Sanctions on Russia’s Defense Industry,” CSIS, April 2023, https://csis-website-prod.s3.amazonaws.com/s3fs-public/2023-04/230414_Bergmann_Out_Stock.pdf?VersionId=6jfHCP0c13bbmh9bw4Yy2wbpjNnfeJi8.

[16] “Statement from President Joe Biden,” White House, January 3, 2025.

[17] White House, Indo-Pacific Strategy of the United States (Washington, D.C., February 2022).

[19] CFIUS, “Annual Report to Congress,” 2022, https://home.treasury.gov/system/files/206/CFIUS%20-%20Annual%20Report%20to%20Congress%20CY%202022_0.pdf.

[19] Alan Rappeport, “U.S. Steel and Nippon Sue Biden Over Decision to Block Merger,” New York Times, January 6, 2025, https://www.nytimes.com/2025/01/06/business/us-steel-nippon-lawsuit.html.