TOKYO - Japan is seeking to turn economic security into diplomatic leverage as the United States deepens its America First approach, with policymakers focusing on semiconductors, critical minerals, energy, shipbuilding and advanced technology as areas where Japan can make itself indispensable to Washington.
The strategy comes as the United States marks the 250th anniversary of its founding on July 4, with President Donald Trump using the occasion to emphasize national strength, industrial revival and a more transactional approach to alliances. For Japan, the question is how to maintain a strong relationship with its most important security partner while protecting its own economic interests in an increasingly fragmented global economy.
TV Tokyo’s economic program framed the issue around a new U.S. strategy in which alliances are increasingly judged by practical value. Masahiko Hosokawa, a Meisei University professor and former senior trade and industry official, said Washington is placing greater weight on whether partner countries contribute to U.S. economic security, including supply chains, production capacity and strategic industries.
Hosokawa said Japan’s goal should be to become an “indispensable” partner rather than simply an allied country seeking protection. In semiconductors, that means ensuring that Japanese equipment makers and materials suppliers remain essential to U.S. chip production. Even if the United States builds more advanced semiconductor plants at home, many of those factories still depend on Japanese manufacturing equipment, chemicals and precision materials.
The same logic applies to energy infrastructure. The United States faces rising electricity demand as AI data centers expand, while competition with China over computing power accelerates. Japan sees room to cooperate on next-generation power systems, including small modular reactors, as U.S. technology companies and industrial users seek more stable sources of electricity.
Shipbuilding is another area where Japan may have leverage. The United States is trying to rebuild parts of its industrial base, and Japanese shipbuilding technology, production know-how and supply-chain expertise could become more important as Washington looks to reduce dependence on China and strengthen maritime capacity.
The approach is reflected in Japan’s new growth strategy, which targets more than 370 trillion yen in combined public and private investment by fiscal 2040. The plan identifies 17 strategic sectors, including artificial intelligence, semiconductors, digital technology, cybersecurity, quantum technology, energy security, defense, space and shipbuilding.
The strategy is built around two key ideas: autonomy and indispensability. Autonomy means reducing Japan’s dependence on foreign countries for critical supplies and technologies. Indispensability means making Japan essential to other countries’ economic and security strategies, especially the United States.
The government has also instructed ministries to consider not only domestic investment but also cooperation with like-minded countries. That means Japan’s growth strategy is not simply about building factories at home. It is also about linking Japanese companies, technology and capital to U.S. and allied industrial projects in areas such as chips, energy, pharmaceuticals, shipbuilding and critical minerals.
Rapidus, Japan’s state-backed advanced chip project, is one example. The company’s effort to develop next-generation semiconductors depends heavily on cooperation with U.S. technology partners. Tokyo is positioning the project not only as an industrial revival plan but also as part of a broader economic security framework.
Pharmaceuticals and drug discovery are another area where cooperation with the United States is expected to deepen. Japanese policymakers see the U.S. market, research ecosystem and biotech investment base as essential for scaling Japanese innovation, while also reducing strategic vulnerabilities in medical supply chains.
The push comes after years of weak capital spending left Japan with a lower potential growth rate than many other advanced economies. The government’s growth plan seeks to reverse that trend by encouraging investment in production facilities, advanced technology, labor-saving systems and strategic infrastructure.
Japan’s near-term economic data show both support and risk for that strategy. The services sector returned to growth in June, with the services purchasing managers’ index rising to 52.2 from 50.0 in May. The broader composite PMI also improved, helped by domestic demand, transport activity and events.
However, cost pressures remain severe. Input prices rose at the fastest pace since June 2022, driven by energy, food, oil and labor costs. That pressure is being intensified by the weak yen, which raises the price of imported fuel, raw materials and food.
The yen remains one of Japan’s biggest policy challenges. The currency recently weakened to 162.84 against the dollar, its lowest level in about 40 years, before recovering toward the 161 range. Finance Minister Satsuki Katayama has said Japan is ready to respond appropriately to excessive currency moves and remains in close contact with U.S. authorities.
A weaker yen helps exporters and companies with overseas earnings, but it also hurts households and smaller businesses that depend on imported goods. Reuters reported that bankruptcies linked to yen weakness increased in the first half of 2026, underscoring how currency volatility is becoming a real-economy problem.
The Bank of Japan is therefore caught between competing pressures. Further rate increases could help stabilize the yen and contain inflation, but they could also raise borrowing costs at a time when the government wants companies to invest aggressively. The BOJ raised its policy rate to 1% in June, and markets are watching whether persistent yen weakness forces another move later this year.
Japan’s economic security strategy is also shaped by China. The United States and Japan are trying to reduce dependence on China for critical minerals, rare earths, advanced manufacturing inputs and parts of the energy supply chain. For Tokyo, the challenge is to strengthen resilience without damaging trade links that remain important to Japanese companies.
The global backdrop is becoming more difficult. U.S. policy is increasingly focused on domestic production, tariffs and strategic self-reliance. China is using its scale and control over key supply chains as leverage. Europe is also moving toward industrial policy and economic security. In this environment, Japan can no longer rely only on open trade and low-cost imports.
The main point to watch next is how quickly Japan can turn its growth strategy from a policy document into actual projects. Investors and companies will be looking for concrete road maps, funding mechanisms, tax incentives, regulatory changes and public-private investment plans in each of the 17 strategic sectors.
The second point is whether Japan can coordinate overseas investment with domestic industrial renewal. If Japanese money only flows abroad, the plan may do little to lift Japan’s potential growth. But if overseas partnerships strengthen Japanese technology, supply chains and export capacity, the strategy could reinforce both growth and security.
The third point is whether the weak yen forces a faster policy response. If the yen remains near historic lows, pressure will grow on both the Ministry of Finance and the BOJ, even as the government tries to keep growth and investment momentum intact.
For Japan, the central economic question after July 4 is whether it can adapt to a more transactional United States by making itself strategically indispensable. Semiconductors, critical minerals, energy, shipbuilding and advanced technology are no longer only industrial sectors. They are becoming the core tools of Japan’s economic diplomacy.
