Japanese government panel calls for stronger supply chain in economic security proposal

A government panel of experts on Tuesday compiled recommendations for envisaged economic security legislation, calling for the strengthening of supply chains for critical goods and ensuring the security of key infrastructure.

Based on the recommendations, the government plans to introduce an economic security promotion bill to the ongoing regular session of parliament late this month.

Japan is facing an urgent need to beef up its economic security at a time when the United States and China are competing for economic and technological dominance.

The government aims to enhance economic security with the proposed law based on four pillars: strengthening supply chains, ensuring the security of core infrastructure, promoting public-private technical cooperation and keeping secret patents on technologies that could be used for military purposes.

Referring to the coronavirus pandemic and geopolitical tensions as risks in terms of economic security, the panel urged the government to quickly shape the legislation and have it enacted.

It also suggested that all government ministries and agencies work together and that necessary manpower, money and systems be made available to help the law work effectively for the wide-ranging industry sectors involved.

Based on the recommendations, the government will include in the proposed legislation a financial framework to strengthen the supply chains of strategically important items such as semiconductors and pharmaceuticals.

Core infrastructure will be clearly defined, and an advance screening system will be introduced for procurement of facilities and equipment as well as outsourcing management for such infrastructure to block foreign interference.

The government plans to stipulate that energy, water, information and communications, financial, transportation and postal services are key infrastructure sectors, informed sources said.

As for public-private technical cooperation, a think tank will be established in fiscal 2023 to specify cutting-edge technologies that need to be developed and strengthened.

To keep secret patents on sensitive inventions, such as those related to nuclear technologies, the patent office will conduct the first-stage screening of patent applications, and a new section involving the Cabinet Office and the Defense Ministry will conduct the second-stage screening.

The government will compensate the holders of concealed patents for revenues they would have earned, while punishing companies that leak information on sensitive inventions based on the proposed law.

Companies would also be obliged to provide information for the government’s supply chain probe, people familiar with the matter said.

Pointing out that the new legislation will put a heavy burden on companies and researchers involved, the panel called on the government to gain public understanding before implementing measures.

It also called for consideration of further legislation, depending on changes in the international situation.

At a news conference Tuesday, Takayuki Kobayashi, minister in charge of economic security, said, “We will accelerate necessary work while closely discussing with the ruling coalition so we can introduce a bill in late February.”