Japan passes law aimed at China guarding economic security, technology, supply chains

The law imposes tighter oversight of Japanese firms working in sensitive sectors or in critical infrastructure, and calls for more protection against hacking
It comes after the United States imposed restrictions on technology imports, such as semiconductors, amid growing tension with Beijing

Japan

Reutersin Tokyo

Published: 1:45pm, 11 May, 2022

Why you can trust SCMP

Japan’s parliament on Wednesday passed an economic security bill aimed at guarding technology and reinforcing critical supply chains, while also imposing tighter oversight of Japanese firms working in sensitive sectors or in critical infrastructure.

Measures in the legislation, which is primarily aimed at China, will be implemented over two years once it is enacted, according to the bill. It comes after United States imposed restrictions on technology imports, such as semiconductors, amid growing tension with Beijing.

The new law also arrives as Russia’s invasion of Ukraine – Moscow calls its actions “a special operation” – adds pressure on Japan to do more to protect supply chains and infrastructure from hacking and cyberattacks, and ensure that technology critical to national security is not stolen.

A Japanese container ship is seen docked at Shanghai’s Yangshan Port last month. The new law adds pressure on Japan to do more to protect supply chains. Photo: Xinhua

It will give Japan’s government the power to order companies to notify it of software updates and vet some equipment procurement in 14 industries, including energy, water supply, information technology, finance and transport.

The legislation also provides subsidies for companies to help them strengthen supply chains against disruption such as shortages of components shipped from overseas. It further establishes a system for government officials to make on-site inspections at firms.

Australia, Japan universities ‘targeting Chinese students’ over spying fears

The new security mechanism it sets out promises government money for research and development into key technologies deemed important for economic security.

It also establishes a system of secret patents kept in Japan to ensure technological breakthroughs are not used by other countries to development nuclear weapons or other military equipment.

The measures will take effect in steps starting next spring, Kyodo reported.

It said associations were to be set up for each field of research, such as artificial intelligence, with government-backed think tanks providing information on overseas development.

A moon exploration robot that was jointly developed by Japanese toymaker Tomy Company and the Japan Aerospace Exploration Agency. The law aims to ensure that Japanese technological breakthroughs are not used by other countries. Photo: Reuters

The law stipulates that Japan’s government will designate goods such as chips, pharmaceutical products and rare minerals as critical items to be closely monitored, and extend financial support to suppliers to help with procurement.

Under the new law, anyone who leaks undisclosed patent information is subject to imprisonment for up to two years or a maximum fine of 1 million yen (US$7,680).

Some businesses have raised concerns about the law’s ambiguities, as well as increased government interference in their activities, as details of the items to be screened under the bill will be separately set by ordinances that do not require deliberations in the Diet, Japan’s parliament.

A nonbinding resolution was added to the bill before it was passed stating that the independence of business activities shall be respected.

Additional reporting by Kyodo