METI Publishes the Interim Report "Report on Strengthening the Manufacturing Base" by the Study Group on Strengthening Manufacturing Bases in Light of Geopolitical Risks

1. Background

The “weaponization of the economy,” including the tightening of export controls on critical minerals, has become increasingly severe, and vulnerabilities surrounding materials, including increasing likelihood of supply disruptions, have become more pronounced. Under these circumstances, the importance of “manufacturing capability” as a source of national strength is growing, as it underpins the supply of goods necessary for people’s lives and economic activities and serves as a foundation for realizing innovation. In fact, most major countries are taking stronger measures to strengthen their manufacturing bases from the perspective of economic security.

Japan continues to maintain competitiveness in certain areas, such as manufacturing equipment and materials, and these strengths are underpinned by its manufacturing infrastructure, including on-site coordination and fine-tuning capabilities. However, in recent years, Japan has lagged behind other countries in both the scale and speed of investment in such infrastructure, and concerns have been raised that Japan may lose its competitive advantages as the technological efforts made by other countries to catch up continue to accelerate. In addition, while responding to next-generation manufacturing and smart manufacturing, which are now at a turning point due to AI Transformation (AX), is effective in terms of improving productivity and addressing population decline, Japan has long focused primarily on replacement investment and its innovation is regarded as lagging behind some other countries. Once domestic manufacturing infrastructures are lost, recovery is difficult. Strengthening them is, therefore, an urgent issue from the perspective of economic security.

In recognition of this issue, METI convened the Study Group on Strengthening Manufacturing Bases in Light of Geopolitical Risks (Chair: Mr. Jimbo Ken, Professor, Faculty of Policy Management, Keio University; Managing Director, International House of Japan, and President, Asia Pacific Initiative) to examine the direction of initiatives to strengthen Japan’s manufacturing infrastructure, and compiled an interim report.

2. Overview of the Interim Report “Report on Strengthening the Manufacturing Base”

This interim report discusses initiatives to ensure “autonomy” in economic security with regard to the manufacturing base, emphasizing the need to shift from “point-based” to “area-based” support. It concludes that strengthening should be pursued from the following four perspectives:

Perspective 1

Expansion of support targets: Support for foundational materials indispensable to the manufacture of critical goods (e.g., general-purpose chemicals) in addition to critical minerals, and support focusing on groups of technological elements that underpin the resilience of the manufacturing base (e.g., casting and forging)

Perspective 2

Unified support across supply chains: Support for circular resources important for economic security; support for materials for critical components necessary for next-generation technology development; demand-side measures; promotion of new forms of strategic international division of labor that can withstand geopolitical risks; and strengthening of the resilience of logistics, including maritime transportation

Perspective 3

Support for ecosystems: Support not only for individual materials and technologies, but also for each element underpinning manufacturing ecosystems, such as promotion of manufacturing AX (data), development of human resources capable of utilizing robots and AI (people), further strengthening of measures to prevent technology leakage (technology), and strengthening of the resilience of supply chains including leading medium-sized enterprises and small and medium-sized enterprises (manufacturing foundations)

Perspective 4

Balancing “self-help,” “mutual assistance,” and “public assistance”: Examination of enhanced government support in areas that are difficult for the private sector to address on its own, and promotion of changes in corporate behavior toward management that incorporates geopolitical risks

Related Materials (in Japanese)

• Interim Report “Report on Strengthening the Manufacturing Base”(PDF:4,773KB)
• Interim Report “Report on Strengthening the Manufacturing Base” (Overview)(PDF:2,256KB)

Related Link (in Japanese)

• Study Group on Strengthening Manufacturing Bases in Light of Geopolitical Risks

Division in Charge

Office of Research and Planning, Economic Security Policy Division, Trade and Economic Security Bureau