Description
As the global trade order erodes amid the AI boom, the world is entering a new era of global competition over technological control and state-backed industrial capacity building.
As global attention centers on ambitious subsidy schemes and trade restrictions in the United States and China, Japan — the former pioneer of the developmental state — seems to be witnessing a revival of its successful postwar industrial policy.
Based on vast subsidies, this policy in 2024 reached a total spending into chip-making that amounts to 0,71 percent of its GDP, thus outspending the U.S. and Germany in their efforts to boost their domestic semiconductor manufacturing.
In this paper, I investigate how and why the Japanese government came to usher in this new industrial policy, shedding light on the adoption of the Japanese Economic Security Promotion Act, Japan’s export restrictions on chip-making devices, and the establishment of the state backed semiconductor manufacturer “Rapidus” in 2022. By drawing from Kingdon’s Multiple Streams Framework and contemporary theories on growth strategies, I first theorize how problem, policy and politics streams are shaped by both economic considerations as well as security and foreign policy debates and events. My argument is that Japan’s new industrial policy was prompted by a combination of growth-oriented policy preferences based on public-private coordination, and external dynamics caused by the U.S.-Chinese competition. Conducting several research interviews with Japanese business representatives and government advisors, I try to unravel the process that led to the adoption of Japan’s new industrial policy, providing new empirical insights into Japan’s contemporary economic policy-making and its institutional framework.
Keywords: industrial policy – Japan - Multiple Streams Framework – semiconductor industry.
