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A new bill in Japan aims to protect the country against economic retaliation

ADRIAN FLORIDO, HOST:

President Biden heads to Japan and South Korea this month for his first Asia trip since taking office. One item on his agenda is how the U.S. and its allies can defend themselves against attempts by rival nations to steal information and disrupt supplies of vital materials. As NPR's Anthony Kuhn reports, the name of the game is economic security, and it's the signature policy of Japan's current government.

ANTHONY KUHN, BYLINE: In 2020, one of Japan's biggest electronics companies, Mitsubishi Electric, created its own economic security division. One of division head Takashi Ito's tasks is to help the firm manage political risks. For example, Mitsubishi complies with U.S. regulations banning the sale of some semiconductor technology to China. The problem, he says, is that...

TAKASHI ITO: (Through translator) China introduced a law to sanction companies that obeyed their own country's laws. Japanese companies were caught between the two contradicting regulations.

KUHN: Mitsubishi Electric, which makes radar for Japan's military, was hacked by suspected Chinese hackers in 2019. Ito says his company must protect its technologies. But getting out of the China market is not an option.

ITO: (Through translator) Although we may have specific technologies that we cannot share, on the other hand, I think it's nonsense to limit our business with China. We should push for business in other areas.

KUHN: Ito says his company supports Japan's new economic security law now before Parliament. The law will allocate government funds to develop new technologies. It'll help secure supply chains for semiconductors and rare minerals. And it'll allow the government to keep patents for some technologies with military applications secret. Akira Amari is a former economic minister and architect of Japan's economic security policies. He says Japan needs a legal system to prevent the theft of its advanced technology.

AKIRA AMARI: (Through translator) Japan has long been called a spy's paradise. All sorts of economic spies can hide in Japan, as Japan has no system to protect it from espionage.

KUHN: Japan's new law will also try to prevent rivals from sabotaging critical infrastructure. Amari warns that some Chinese-made equipment could put Japan's telecommunications networks at risk.

AMARI: (Through translator) We can't tell if Chinese 5G base station equipment is a black box or what kind of traps may be installed in it. Chinese companies may deny this, but under China's system, companies can never deny requests from their government.

KUHN: In 2010, Japan learned a lesson when a territorial dispute prompted Beijing to retaliate by economic means.

AKIRA IGATA: During that fiasco, the Chinese government has decided to stop the export of rare earths to Japan. And that was a huge wake-up call.

KUHN: That's Akira Igata, executive director at the Center for Rulemaking Strategies at Tama University in Tokyo. Those rare earths are critical for high-tech products Japan makes. But Igata warns that economic security must not be an excuse for protectionism.

IGATA: If we all start engaging in protectionist policies, then that counteracts everything that we're trying to do. We become the enemy.

KUHN: Indeed, Tokyo used to consider some of the policies it's adopting now, such as making patents secret, pretty distasteful.

SHEILA SMITH: These are things the Japanese government has never wished to really do.

KUHN: Sheila Smith, a Japan expert with the Council on Foreign Relations, says Japan's business lobby was initially skeptical about the new law. Their message to Prime Minister Fumio Kishida was this.

SMITH: Don't shut us off from our export market, our global export markets. So there was a shot across the bow very early on to Prime Minister Kishida about the private sector's concerns.

KUHN: Government reassurances helped to ease those concerns, as did fears about China. The economic security bill smoothly passed the lower house of Parliament last month. It's expected to be enacted during the current session of Parliament, which ends June 15. Anthony Kuhn, NPR News, Seoul.

(SOUNDBITE OF TRIPP JAMES SONG, "HERE WE ARE") Transcript provided by NPR, Copyright NPR.

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Anthony Kuhn is NPR's correspondent based in Seoul, South Korea, reporting on the Korean Peninsula, Japan, and the great diversity of Asia's countries and cultures. Before moving to Seoul in 2018, he traveled to the region to cover major stories including the North Korean nuclear crisis and the Fukushima earthquake and nuclear disaster.