In recent years, industrial policy has been used not only to improve industrial competitiveness but also to enhance economic security.
One factor behind the rise of industrial policy in the United States is concern about the possible leakage of technology and intellectual property to other countries through international trade and investment. There are also concerns that countries dominating the production and supply of certain goods could use their control over those goods as a tool of economic coercion. Japan has also been strengthening its institutional framework for economic security. In 2021, it established a ministerial post responsible for economic security and appointed its first holder.
The semiconductor industry is a prime example of a sector prioritized on economic security grounds. Used across virtually all industries, including automotive manufacturing and home appliance production, semiconductors are known in Japan as the “rice of industry.” As a foundation for technological innovation, semiconductors are critical to national competitiveness, and they are also dual-use technologies with both civilian and military applications.
Until the 1980s, Japan held a dominant share of the global semiconductor market. Japan subsequently lost competitiveness due to factors such as trade friction with the United States, the rise of major semiconductor producers in South Korea and Taiwan, and its slow transition to a fabless-foundry model that separates chip design from manufacturing. Today, Japan is seeking to revive its semiconductor industry through substantial public support for projects such as the Kumamoto plant of Taiwan Semiconductor Manufacturing Company (TSMC), as well as for Rapidus, which aims to produce next-generation semiconductors in Japan.
In recent years, attention has focused on large-scale subsidies to bolster domestic semiconductor production. However, a research team including Professor Pinelopi Goldberg of Yale University argues that semiconductor policy cannot be adequately understood solely in terms of protecting domestic industry.
Governments have historically played an important role in the semiconductor industry, and policymakers have often emphasized the importance of learning-by-doing effects in manufacturing. However, the estimates by Goldberg and her coauthors suggest that productivity gains from learning by doing may be modest, whereas spillovers, including those arising from international technology transfers, may be substantial.
The importance of technology spillovers highlights the limitations of relying solely on the expansion of domestic semiconductor production to enhance economic security. The semiconductor industry is characterized by a highly specialized international division of labor, while the development of cutting-edge technologies involves considerable uncertainty.
Therefore, in addition to supporting domestic industry, semiconductor policy should facilitate the acquisition and effective use of foreign technologies, as well as the diffusion of technology among domestic firms.
>> Original text in Japanese
* Translated by RIETI.
August 13, 2026 - Published in Nihon Keizai Shimbun's " Introduction to Economics—New Trend in Industrial Policy "
