Analysis of Japan’s Export Control Policy

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This episode of our Policy Deep Dive series is about the new export control policy released by the Ministry of Economy, Trade and Industry (METI) and the anticipated impact it will have.


April 24, 2024: METI Publishes New Interim Report on Export Policy

Let’s first dive into the background of this report and outline why Japan’s industry ministry is shifting its export control policy in the first place. What is going on in the background?

First, the emergence of Military-Civil fusion. We have discussed this before on the Sunday morning briefings. Clearly, there is a movement that is purposefully blurring the lines between the military and civilian sectors. Some countries are intentionally erasing these boundaries, leading to a very distinct trend of integration between the two sectors. But this is Japan, so this blurring is something of great significance.

Second, dual-use technology, which includes technologies that can be used for both civilian and military purposes, is undergoing reclassification. Unlike military technologies like artillery and tank-shells that serve no other purpose than military use, dual-use technologies such as semiconductors can serve both purposes. Similarly, dual-use technologies that are important for security are not necessarily limited to sensitive technologies regulated by international export control regimes. This is because the potential for military use of a broader range of general-purpose items and technologies like helicopters or drones or AI have also been increasing in recent years. Therefore, this growing prevalence of dual-use technology is becoming more important. We also find that  civilian technologies are being used more in the latest development of defense assets.

Third, many countries, including Japan, base their export control systems on what is known as the Wassenaar Arrangement. Most countries in the G-20 have translated and implemented their export control laws to comply with this international standard. The rapidly changing geopolitical landscape, however, has pushed the international system’s ability to adapt quickly enough. 

Fourth, the influence of the United States’ unique export control method, known as the Entity List. This is gaining impact in Japan’s export control policy. America’s Entity List is a distinct system not currently present in Japan but pushed by the United States. The new direction of  METI is from recent Camp David discussions. Clearly, the direction of Japan’s export control policy is undergoing vast change.

Who Will Feel the Impact of the New Policy Decision the Most?

The export control system in Japan will primarily affect exporters from Japan who import or develop goods in Japan and then export those goods or technologies overseas. This is actually what Japan Inc. excels in.

Recent tensions between the U.S. and China have driven export bases to shift back to Japan from countries like China, Vietnam, and elsewhere. In fact, there’s been an increase in non-Japanese companies establishing manufacturing bases in Japan. So beyond the competition for qualified labor, you can imagine that changes to Japan’s export control system will increasingly affect more companies and businesses who have set up their base of operations here. 

On the flip side, companies in Japan that procure goods or technologies from overseas are also likely to be affected. You might recall METI halting semiconductor-related material exports to South Korea recently. This halt caused huge issues and devastated South Korea’s semiconductor industry. Though some of this has been fixed, this is just one example that really illustrates how changes to Japan’s export control system can affect any company doing business with Japan, not just the domestic ones.

From a macro perspective, this is a restructuring of the global supply chain guided by and defined in the changes to export policy. Of course, various companies are already working on managing and adapting to such changes. As time goes by, it is important to know about Japan’s export control capabilities particularly for those responsible for designing supply chains.

Beginner’s Guide: Japan’s Export Control Scheme

Analysis of Japan's Export Control Policy by Langley Esquire, Slide 3

In the slide above you can see the purpose of Japan’s export control system is fundamentally aimed at preventing the proliferation of weapons and military technology. The means to achieve this is through an international agreement called the Wassenaar Arrangement mentioned earlier. Based on the Wassenaar Arrangement, the government decides whether to export to end-users on a case-by-case basis and this forms the basis of this methodology.

In Japan, the primary legislation governing export controls is the Foreign Exchange and Foreign Trade Act (FEFTA). Under this Act, the government has specific regulations and lists to control the export and transfer of sensitive items. The two main regulations that serve as the legal basis for export management are the list control and catch-all control.

Export Security Control Methods

Export Security Control Methods

Take a look at these two circles, starting with the list control method. As the name suggests, METI identifies specific technologies and products. If you want to export items on this list to certain countries, you need prior approval. This sounds simple. However, various interpretations of the listed technologies and products can arise, often leading to interactions with the government. So, it’s not always possible to make a clear-cut judgment just by looking at the list.

The key feature here is that specific items fall under export control. On the other hand, when the situation isn’t as clear, METI relies on the use of the catch-all control method.

The catch-all control applies to items not listed under the list control. If you know your exported items could ultimately be used for military purposes, the exporter should consult with METI beforehand. Although not mandatory, the government requests exporters to consult if they are aware of any potential dual-use. Sometimes that is a tough call. Sometimes it is clearly dual-use but business want to make money. So the tension here is huge.

The catch-all control can potentially apply to any technology if the end-user might use it for military purposes. This broad application is a significant characteristic of the catch-all control method.

Using the list control and catch-all control methods, the Japanese government dominates exports. This approach towards the government being in the driver’s seat with regard to exports is seen in many countries.

Major New Policy Direction: Strengthen Catch All Regulation (1)

METI is shifting focus towards the export control of technology. We’ve talked about how export control covers both goods and technology. However, the spotlight is firmly on technology control.

METI is aiming specifically at technology transfer. Even if the technology you’re planning to transfer isn’t listed under current regulations, METI strongly encourages you to consult with them if there’s a potential military application—though, right now, it’s not yet mandatory. We expect that will come in due course.

Moving forward, the plan is to make prior consultation a requirement. To do that, METI will need to create a new, specific list of regulated technologies. While we don’t know exactly which technologies will be included yet, two points were made clear in the interim report we received so far:

First, METI will be focusing solely on technology for this list, leaving physical goods out.

Second, the focus will be on high-risk transactions. This means technologies where Japan holds global indispensability or superiority. These are the ones to be targeted for regulation.

In a nutshell, if the technology you want to export ends up on this new list, pre-export consultation will be a requirement.

The reasoning here is straightforward. Exporting certain technologies, even if they’re not currently listed, could inadvertently enhance manufacturing capabilities for recipients who shouldn’t have access to them. While goods can always be subjected to stricter export controls if military diversion concerns become apparent over time, technology, once transferred, is difficult to control as it can spread over time. This aspect really sets technology apart from the export of physical goods.

Strengthen Catch All Regulation (2)

In the interim report, METI strongly emphasizes the mutual enhancement of dialogue between the industry and the government as a key component of Japan’s new approach towards export control. The primary objective of mandating consultations on technology exports in the first place is to strengthen this two-way dialogue between the government and industry. Rather than just having export companies approach METI for a “yes” or “no” answer, the idea here is to have both sides discuss and exchange information to push the ball forward. While the government retains the final decision-making authority on export permits, the aim is to encourage information sharing and streamline the export process through an iterative feedback loop.

Therefore, consultations involve a two-way flow of information. One flow is from companies to the government, and the other is from the government to companies. In the latter case, it is possible that very sensitive information could be provided to companies by the government. At that time, there is a possibility that the recently passed Security Clearance Law for the economic sector, which applies to such sensitive information, may be applicable. In that case, it may be possible that companies will soon be required to obtain security clearance as a prerequisite if they are to receive any sort of sensitive information from the government. Therefore, it can be understood that the proposed changes to the export control scheme are linked to this new law on security clearance for the economic sector.

Strengthen Catch All Regulation (3)

We mentioned earlier the limitations of the Wassenaar Arrangement. The international situation is constantly evolving and export control needs to adapt to these changes to the global geopolitical situation. For example, the discussion around export control is currently focused on how to effectively control the export of technologies or goods related to weapon production in the context of the Russia-Ukraine war. And now with the emerging security arrangements between N. Korea and Russia, the traditional approach of waiting for consensus among all participating countries of the Wassenaar Arrangement before incorporating it into export control, such as adding it to the list of controlled items, is clearly not timely enough.

Therefore, even if consensus is not reached among all participating countries of the Wassenaar Arrangement but among several countries, whether it be three or four countries, the premise is that those three or four countries will have a monopoly on the necessary technology or production capacity. Therefore if those countries with specific technologies or production capacities agree, such agreements could lead to further additions to the list of controlled items, as is already happening. It is likely that such agreements will increase in the future, considering the direction of policy.

As many may be aware, all eyes seem to be particularly focused on the semiconductor industry right now; regulations in the semiconductor industry will increase. Of course, this is not limited to just semiconductors, but it serves as an example on what to expect when other pieces of technology in the near future are added on to the list of controlled items.

America’s“Entity List”

The existence of America’s Entity List is a more indirect yet important factor behind Japan’s revision of its own export policy. The U.S. Entity List is a distinctive system that identifies specific companies and essentially prohibits all exports to these companies, whether they involve technology or physical goods. As you know many know, one of the most famous cases is when China’s Huawei was put on the Entity List, effectively banning the export of technology and goods to Huawei. This is a unique approach taken by the United States. 

Another characteristic of the Entity List is its extraterritorial application. Although it is a U.S. law, it applies to goods made overseas using U.S. technology. For example, if a Japanese company manufactures a product in Japan using U.S. technology and intends to export it to Huawei, this export would fall under the restrictions of the Entity List, requiring prior approval from the U.S. Department of Commerce. Therefore, even if a Japanese company manufactures a product in Japan and intends to export it to Huawei, it would still need prior approval from the U.S. Department of Commerce, making it an extremely unusual system.

We think it is unlikely that Japan will implement their own equivalent to the Entity List. However, as I mentioned earlier regarding technology, there is a possibility that specific technologies will be included in a new list, making it mandatory to consult with METI for all such technologies. This could have a similar effect to the Entity List. Of course, it is not yet clear how this new export control system will be implemented, so we must closely monitor its implementation. For example, it may become possible for METI to control all exports to specific companies. This is an intriguing issue, and both exporters and importers should closely watch the development of this policy. 

Future Plans

Here’s how the consultation is proposed to be conducted. First, individuals seeking to export are obligated, as proposed, to consult with METI based on the Foreign Exchange and Foreign Trade Act. This is Step 1.

Step 2 involves dialogue, where both sides engage and METI provides necessary information to the company.

Finally, in Step 3, METI makes its decision based on this interaction.

To establish this new system, revision of the Foreign Exchange and Foreign Trade Act is necessary. It’s not yet clear when a proposal will be submitted, but it’s expected that a new revision of the act may be introduced in the next extraordinary Diet session or in the regular session.


In conclusion, Japan plays a crucial role in the global supply chain. Therefore, Japan’s export controls, even its finer details, can have significant implications for companies around the world. For instance, consider the impact when Japan halted the export of semiconductor materials to South Korea. This highlights the significance of export control policies.

Another example is the U.S. placing Huawei on its Entity List, effectively banning exports to Huawei globally. Reflecting on these impacts underscores the importance of risk management policies. The recent announcement of new policy directions indicates that export control systems will likely be updated frequently as geopolitical dynamics evolve. Some updates may involve major legal revisions, while others may not. Nonetheless, it’s important to understand that export control policies are regularly updated. Therefore, staying informed about the latest export control policies is crucial from a business strategy perspective.

As we are currently in the interim report stage, METI is working on receiving input from various stakeholders like Langley Esquire to finalize Japan’s new export control system.

If you gain insight from these briefings, consider a tailored one for your Executive Team or for passing-through-Tokyo heavyweights.

To learn more about advocacy in Japan, read our article “Understanding the Dynamics of Lobbying in Japan.”

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