Japan’s economic and national security depends on managing its economic, political and security relationships with its security guarantor and ally, the United States, and largest trading partner, China. The rise of China and the America First agenda in the United States, that involves increased strategic competition and the trade war between these world’s two largest economies, has meant a much more uncertain international policy environment for countries like Japan, the world’s third largest economy. In this uncertain external policy environment Japan has shown international leadership in its initiative to conclude the CPTPP after the United States withdrew from the TPP, concluding the Japan-EU EPA and hosted the G20 summit. Japan has also signed a bilateral trade agreement with the United States that is a departure from multilateral rules and norms and introduced ‘economic security’ policies that include export controls and tightening of foreign investment regulations for security reasons.
Some small but potentially significant reforms to machinery of government have taken place in an attempt to better integrate economic policy with national security policy, resulting in the establishment of economic security divisions in key agencies and the Cabinet Office. There does not appear to be a clearly articulated or obvious framework of national security that includes welfare-enhancing economic security guiding policy.
The entanglement of economic and security for Japan has led to a series of policies that appear to promote national security interests over economic prosperity. This paper reviews these developments and raises questions as to whether Japan’s ‘economic security’ policies are welfare enhancing or put national (or political) security interests ahead of welfare considerations. It is not clear that current economic security policies are consistent with Japan’s external economic position and deep interest in the multilateral system that helps manage and support Japan’s economic security interests.