The wave of 'leaving China' is given a new wind in Japan

In a phone call with Japanese Prime Minister Shinzo Abe on May 8, U.S. President Donald Trump assured his friend that U.S.-made ventilators would always be available to send to Tokyo.

"We can send you a ventilator at any time," Trump said. The U.S. has started mass production and has succeeded in reducing costs.

For Abe, this is a relief. Japan has struggled to boost domestic production. The country's dependence on China for the majority of its mask supply has made it unable to meet the surge in demand, prompting electronics maker Sharp to even start producing the item.

Economic security

Securing the supply of medical equipment to respond to the pandemic has become a top concern of world leaders.

The shortage has brought back the long-standing debate in Tokyo about shifting production out of China. With the Covid-19 crisis making economic security risks more apparent than ever, the Abe administration has begun to take action.

Japan's cabinet in April set aside 248.6 billion yen ($2.33 billion) to subsidize businesses that bring factories back to the country, covering up to two-thirds of the cost of relocation.

This policy has received enthusiastic support in the United States.

"It's time to boycott China and rebuild factories in America," Senator Tom Cotton wrote on Twitter in mid-April.

"In the context of the coronavirus pandemic, Japanese Prime Minister Abe has proposed a policy of 'leaving China,' building an economy that is less dependent on China," Nikki Haley, a former U.S. ambassador to the United Nations, said on Twitter. said that the US "should make this a priority".

Although it accounts for less than 1% of the 108 trillion yen stimulus package, it has clearly made China wary. Beijing has not only urged Japanese officials to explain the meaning of the measure, but also polled Japanese businesses in China about whether they plan to leave.

The Japanese government has certainly done everything possible to prevent the shortage of masks from repeating.

But $2.33 billion is not enough to drive a meaningful change. A series of Beijing's questions about Tokyo also subsided.

However, the debate was blown into fresh air when Chief Cabinet Secretary Yoshihide Suga, in an interview with Nikkei, emphasized the need for more autonomy.

Chief Cabinet Secretary of Japan Yoshihide Suga. Photo: Nikkei.

"If you look at masks, for example, 70 to 80 percent are made in China," he said. "We must avoid over-dependence on certain countries for products or raw materials and bring home facilities to produce the goods necessary for daily life."

Suga has been Abe's right-hand man and a key figure in the government since Abe's return as prime minister in 2012. Suga's remarks reflect something much broader than an interim policy to respond to the current crisis.

New post-pandemic world order

In April, Japan's National Security Council established a dedicated group of economists. A senior official from the Ministry of Economy, Trade and Industry has been appointed to a new position on the council's leadership, allowing the ministry to be present in an agency previously owned by only the two ministries of foreign affairs and defense.

The new team will lead the drafting of a basic economic security strategy expected to be introduced this year. The group contemplated designating pharmaceuticals and medical devices as strategic commodities — drawing lessons from the mask shortage — and devising measures to boost domestic production and the use of Japanese suppliers.

But this is not the group's only focus.

The Trump administration in late April tightened restrictions on exports to China of products with potential military applications, including equipment that makes chips and sensors. Since part of Japan's economic team's role is to coordinate with U.S. agencies, including the U.S. National Security Council, this measure could shape policy in Japan.

"Tighter control of chip exports may become a topic in the future," said a Japanese government insider.

Container on a cargo ship in Qingdao. Photo: Getty.
Japan is a global leader in chip manufacturing equipment and contrast - a must-have for chip production. The government seems to see restricting exports of these products as a way to force China and other countries to continue cooperation with Tokyo.

For now, dealing with the health crisis is a top priority for both Japan and the US, but once the epidemic is under control, attention will turn to the post-pandemic narrative.

Washington's export restrictions are part of a tough line toward China that the U.S. has pursued since Vice President Mike Pence condemned Beijing in a speech last October. The pandemic supply chain review is consistent with the U.S. long-term goal of limiting technology transfer to China.

And with the two powers bitterly arguing over the origins of the virus, it's hard to predict how the world order will turn after the pandemic. New discussions in Japan about shifting production away from China could become a flashpoint between Tokyo and Beijing.

According to Zing