METI Publishes Fifth Report of the Committee on New Direction of Economic and Industrial Policies

1. Outline

Japan’s economy has seen steady growth in domestic investment and wage increases, with nominal GDP surpassing a record high of 660 trillion yen in 2025. Uncertainties, however, remain in reaching a sustainable growth trajectory due to various factors, such as labor shortages and developments in the Middle East.

Based on this recognition, in the Fifth Report, METI has further specified the essential challenges involved in realizing the macroeconomy and industrial structure envisioned for 2040, which were quantitatively presented in the Fourth Report published last year, taking into account discussions in related expert meetings and study groups.

In addition, to contribute to discussions on Japan’s Growth Strategy, the report presents Japan’s winning strategy in industries competing in global markets, including the “17 strategic fields” selected in Japan’s Growth Strategy. Furthermore, it organizes challenges and policy directions that are necessary to realize “A New Kind of Technology-driven Nation and Strengthening Competitiveness,” which is one of the “eight cross-cutting issues” set forth in the same strategy and an issue that has been assigned to the New Direction Committee for discussion, by expanding upon the discussions held to date in the New Direction Committee.

2. Details

(1) Fundamental challenges in realizing the targeted industrial structure

Under the “New Direction of Economic and Industrial Policies,” over the past four years, METI has promoted mission-oriented industrial policy (eight sectors) and updating of socioeconomic operating-system (OS) (four sectors), with the aim of achieving domestic investment, innovation, and wage increase.

In the Fourth Report (June 2025), to enhance predictability for the private sector, METI, in cooperation with the Research Institute of Economy, Trade and Industry (RIETI), provided a quantitative estimation of the macroeconomy and industrial structure targeted for 2040 and indicated that three industrial categories— “Manufacturing Industry X,” “essential services,” and “ICT services”—will be key to realizing this vision.

In the Fifth Report, based on the premise of continuing the new direction of economic and industrial policies pursued to date under the framework of the eight missions and four OSs, METI has further specified the fundamental challenges involved in realizing the macroeconomy and industrial structure envisioned for 2040 as presented in the Fourth Report, through discussions in the New Direction Committee as well as in related expert meetings and study groups.

(2) The Fifth New Direction Report as part of Japan’s Growth Strategy

The content examined in the Fifth Report constitutes part of the discussions in the Council for Japan’s Growth Strategy under the Takaichi Cabinet. Japan’s Growth Strategy aims for the development and domestic and internation dissemination of products and services that contribute to addressing globally common challenges by expanding “strategic investments that enhance resilience against potential crises” and “growth investment” through public-private collaboration. In this respect, it is aligned with the new direction of economic and industrial policies, which positions the resolution of social challenges as a driver of growth.

Under Japan’s Growth Strategy, in order to address challenges faced by Japan’s industrial structure and identify winning strategy that enable the acquisition of added value from global markets, 17 strategic fields have been selected. In this Report, as a premise for discussions on “a roadmap for public-private investment” to be formulated for each of the “key products and technologies” in these fields, “five types of winning strategy” in industries competing in global markets, including the 17 fields they occupy, are presented based on discussions in the “Advisory Council on an Integrated Domestic and International Industrial Strategy.” These “five types of winning strategy” classify approaches to success in global industries into five categories—such as the “global scaler” model, which wins through scale, and the “layer master” model, which secures competitive advantage by controlling specific functional layers—based on the business dynamics of each industry within the 17 sectors, and outline the necessary public-private initiatives.

In addition, to expand the public-private investments and initiatives being advanced in the 17 fields to other sectors and link them to macroeconomic growth, Japan’s Growth Strategy has identified eight cross-cutting issues. Among these, the challenges and policy directions that are necessary to realize “A New Kind of Technology-driven Nation and Strengthening Competitiveness,” which also serves as a nexus among the other cross-cutting issues and has been assigned to the New Direction Committee for discussion, are organized by expanding upon the policy agenda that has been discussed for OSs in the New Direction Committee to date. In particular, the impact of AI on the economy and society is profound, and all OSs need to be restructured with AI at their core. Taking this perspective into account, the challenges and policy directions have been organized and examined along the following three directions (with respect to “(3)-1. Realizing A New Kind of Technology-driven Nation: Lead in Technology and Succeed in Business,” policy directions are discussed separately by the Innovation Subcommittee and compiled accordingly; for details, see Reference Material 2):

• (1) Promotion of AX as a Key Driver of Industrial Competitiveness across All Sectors
  • (1)-1 Changes of Industrial and Employment Structures through Region-driven AX
  • (1)-2 Strengthening Global Competitiveness as a Location Including the Development of a Digital Industrial Infrastructure for AX
• (2) Promotion of "Strategic Investments that enhance Resilience against Potential Crisis" and "Investments that Promote Growth" through "Responsible and Proactive Public Finances"
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• (3) Realizing A New Kind of Technology-driven Nation while Capturing Global Markets and Strengthening Economic Security
  • (3)-1 Realizing A New Kind of Technology-driven Nation: Lead in Technology and Succeed in Business
  • (3)-2 Capturing Global Markets and Strengthening Economic Security

Related Link

• Fifth Report of the Committee on New Direction of Economic and Industrial Policies, Industrial Structure Council

Division in Charge

Industrial Structure Policy Division, Economic and Industrial Policy Bureau