On October 12th, the Australian East Asia Forum website published an article titled "Kishida Diplomacy Resists the Principle of Political and Economic Separation". The author is Stephen Nagi, a professor at the International Christian University of Japan. The full text is excerpted as follows:
The deep economic cooperation in the fields of manufacturing, technology, and finance coexists awkwardly with decades of political and territorial disputes between Japan and China. This prompted Japan to develop economic relations with China using the principle of "political and economic separation".
Considering the intensifying strategic competition between the United States and China, as well as Japan's long-term goal of ensuring its own "core interests," Japan is increasingly concerned about its economic dependence on China.
The principle of "political and economic separation" in economic contact with China is giving way to the new "economic realism" diplomacy of Japanese Prime Minister Fumio Kishida.
To address concerns about the impact of political factors on Japan's economic security, policy measures include selectively diversifying the supply chain away from China, returning companies, outsourcing to friendly banks, and national technology research and development.
The gradual abandonment of "political and economic separation" has led Tokyo to worry that Japan will find it difficult to resist the impact of economic coercion and supply chain weaponization.
Japan's political leaders have invested a significant amount of strategic and financial resources to strengthen economic security by selectively diversifying supply chains and reducing dependence on China. The plan includes the use of supplementary budgets for economic and security aspects, such as building a domestic production base for advanced semiconductors. The focus of the supplementary budget is to promote domestic investment to support the supply chain and encourage its diversification.
Despite the complex political and security factors, interdependent economic relationships remain largely unaffected, constantly deepening, and highly complementary. China, as the main market for Japanese goods and services, is irreplaceable. Japanese companies have made significant investments in China, especially in the fields of automobiles, electronics, and machinery; China is also the main source of low-cost goods and components for Japanese enterprises, which has kept prices low and enhanced the competitiveness of Japanese products in the global market.
China holds a dominant position in the mining and export of rare earths. Like energy and other mineral resources, Japan lacks domestic rare earth metal resources and relies on imports. Developing new mines is both difficult and expensive, and there are almost no viable alternative suppliers outside of China. The recent plan with Canada is not financially feasible.
Developing alternative sources of rare earths not only requires mining and processing of ores, but also the development of downstream industries that can use these raw materials in products. Although Japan has a strong high-tech industry, developing new industries using rare earths requires time and significant investment, which may not meet the current market demand.
Strengthening economic security and developing resilience to resist economic coercion and other forms of economic turbulence will be difficult. It will require Kishida and future governments to develop new rare earth mines and processing facilities, while meeting a series of environmental standards to ensure the safety and sustainability of activities.