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A Ricoh employee checks a drum unit on the production line at the company's printer components factory in Atsugi, Kanagawa prefecture, Japan, 13 July 2020 (Photo: Reuters/Naomi Tajitsu).

Author: Yasuyuki Todo, Waseda University

Global supply chains are being reorganised as Western countries attempt to decouple from the Chinese economy and firms are increasingly aware of the risks of supply chain disruption after COVID-19-related lockdowns. Many countries have implemented policies to support the restructuring of global supply chains and Japan is no exception.

In 2019, the Japanese government strengthened export controls on military and dual-use products and technologies, following the US lead. Japan also provided subsidies to firms that onshore high-risk digital, green and health-related products. That move attracted a frontier Taiwanese semiconductor producer, TSMC, to Japan drawing subsidies of up to US$4.5 million.

In May 2022, Japan enacted an economic security law. It aimed to construct resilient supply chains of ‘critical products’ by providing financial support to producers of these products and asking them to provide reports about their procurement and production.

One major goal of these policies is to reduce Japan’s reliance on China and construct more resilient and secure supply chains. The Japanese economy appears a little closer to achieving this goal. China’s share of imports of parts to Japan declined from 29.5 per cent in 2015 to 26.1 per cent in 2021. The corresponding share for Australia increased from 23.5 per cent to 29.8 per cent.

But despite the stricter export controls of high-tech products, exports from Japan to China did not decline. Total exports from Japan to China increased from US$132.8 billion in 2017 to US$163.9 billion in 2021. Even exports of semiconductor-related products from Japan to China have shown an increasing trend for the past four years.

Diversifying supply chain partners across countries can increase resilience to foreign shocks due to natural disasters and <a target=_blank …continue reading