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Kishida’s ‘economic realism’ selectively de-coupling from China

International Desk

  16 Oct 2023, 15:55

Deep economic cooperation in the areas of manufacturing, technology and finance has coexisted awkwardly with decades-long political and territorial disputes between Japan and China. This has led Japan to develop economic relations with China through a policy that separates politics and economics or seikei bunri.

Amid intensifying US-China strategic competition, China’s track record of economic coercion and its long-term objectives to secure its own “core interests”, Japan has become more concerned about its economic reliance on China.

The seikei bunri principles for engaging with China economically are giving way to Japanese Prime Minister Fumio Kishida’s new “economic realist” diplomacy.

Policy approaches to address concerns about the impact of politics on Japan’s economic security include selective diversification of supply chains away from China, reshoring, friend-shoring and national technological development.

The drift away from seikei bunri has raised concerns in Tokyo about Japan’s vulnerability to economic coercion and the weaponization of supply chains.

Political leaders in Japan have already committed significant strategic and financial resources to enhance economic security through selectively diversifying supply chains and reducing reliance on China.

Initiatives include the adoption of supplementary budgets for economic security, such as securing domestic production bases for advanced semiconductors. Supplementary budgets have focused on promoting domestic investment to support supply chains and encourage their diversification.

Despite the political and security complexities, the mutually dependent economic relationship remains largely intact and is deepening and highly complementary. There is no replacing China as Japan’s major market for goods and services.

Japanese companies have invested heavily in China, particularly in the automobile, electronics and machinery sectors. China is also a major source of low-cost goods and components for Japanese companies. This role has kept prices low and enhanced the competitiveness of Japanese products in global markets.

Source: ASIA TIMES

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