Patricia Cohen and River Akira Davis
China’s enviable success in using industrial policy to expand its economy and fund green manufacturing has helped spark a fierce scramble among nations to develop and protect their own homegrown enterprises.
It has been 40 years since such competitive anxieties about a rising Asian power prompted this kind of acceptance of government intervention among the largest free-market economies.
Only then was it Japan, not China, that was the source of the unrest.
In a 1990 survey, nearly two-thirds of Americans said Japanese investment in the United States posed a threat to the country’s economic independence. Anxiety about Japan, it turned out, peaked just as the country was entering a long economic slump following the collapse of the housing and stock market bubbles.
Now, after a period of stagnation that Japan’s economics ministry refers to as “the lost three decades,” Tokyo is engaged in a multi-billion-dollar industrial policy to revive its lackluster economy and regain its position as a technological innovator.
This time, Japan is working with technology leaders from the United States and other countries, a collaborative approach that would have been unthinkable decades earlier.
But while Tokyo is pursuing less inward-looking policies, the political storm over the Japanese-led takeover of US Steel illustrates how the US is increasingly moving to protect other key industries from foreign influence.
Tokyo’s industrial policy currently focuses on advanced forms of technologies ranging from batteries to solar panels, but the priority is to regain a greater share of the global semiconductor industry, to which the Japanese government has poured more than $27 billion over the past three years.
“In the future, the world will be divided into two groups: those who can supply semiconductors and those who only receive them,” said Akira Amari, a senior official in Japan’s ruling party who previously headed the Ministry of Economy, Trade and Industry.
“Those are the winners and losers.” Based on lessons learned over the past few decades, Japan is trying a new strategy when it comes to chips, Amari said: “Now, we are collaborating with international partners from the beginning.”
While other nations are spending hundreds of billions of dollars to gain an edge, Japan’s efforts stand out because of its history of using industrial policy to develop rapidly after World War II.
“There is no need to start from scratch,” said Alessio Terzi, an economist at the European Commission. “This is already something that sets it apart from other countries.”
The centerpiece of Japan’s new industrial push is taking shape at a year-old construction site on Hokkaido, its northernmost island. The area is best known for powder skiing in winter, lush carpets of flowers in summer and volcanic hot springs.
Across the open pastures and not far from Chitose Airport is the rough outline of Rapidus Corporation’s new semiconductor plant, still surrounded by a sprawling exoskeleton of silver scaffolding.
The factory, partly funded by billions of dollars in government funding, is being developed by an unusual collaboration between Rapidus, a Japanese chip-making startup, and the U.S. technology company IBM. It will produce so-called 2-nanometer chips, a technology IBM pioneered at its lab in Albany, New York.
The idea for the partnership came in the summer of 2020 with a phone call to Rapidus president Tetsuro Higashi from a friend, John E. Kelly III, a former IBM executive.
“I thought maybe he was just calling to catch up,” said Higashi, 75.
Not so. Kelly explained that IBM was developing a new generation of chips and wanted to produce them in Japan.
Pandemic-related shortages of everything from computer chips to Sriracha sauce and skyrocketing energy costs in the wake of Russia’s invasion of Ukraine had once again focused attention in Tokyo and capitals around the world on the importance of resilient and secure supply chains. In 2021, the trade ministry introduced a more aggressive industrial policy. One of the main reasons for Japan’s years of stagnation, the new planning committee concluded, was the government’s overly anti-regulatory, hands-off approach to the economy.
The ministry also looked at what major competitors such as the United States, the European Union and China were doing, and then analyzed Japan’s past industrial and economic policies.
©2024 New York Times News Service
First published: September 6, 2024 | 11:34 PM IS
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