Economic Security and the Revival of Industrial Policy in Japan

This paper examines the revival of industrial policy in Japan and its transformation under the pressures of economic security. It argues that the current shift in Japan’s policy draws on elements of its postwar developmental state experience, including state coordination, sectoral targeting and public support for strategic industries, but operates in a fundamentally different economic and geopolitical environment. Whereas earlier industrial policies were aimed at catch-up growth and export competitiveness, today’s agenda is shaped by supply chain vulnerability, US–China strategic rivalry, technological competition, energy insecurity and the weakening of multilateral trade disciplines. The paper traces the shift through Japan’s historical industrial policy experience, the reshaping of economic security as a policy rationale, and the introduction of contemporary policy instruments such as the Economic Security Promotion Act (2022), semiconductor subsidies, critical minerals policy and green transformation initiatives. It argues that Japan’s new industrial policy seeks both strategic autonomy and strategic indispensability, but also creates trade-offs between resilience, efficiency, fiscal sustainability and openness. The paper concludes that Japan offers both a model and a cautionary case: its policies demonstrate how advanced economies are adapting to global disorder, while highlighting the need for stronger international subsidy disciplines to manage cross-border spillovers and fiscal risks, which would be aided by a renewed commitment to the rules-based multilateral trading system.