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July 2020

With the enactment of its second supplementary budget and the end of the ordinary Diet session on June 17, the government ended a 150-day session centered on coronavirus-related measures. The focus on the pandemic meant that one of the Abe Cabinet’s most-watched ambitions, constitutional reform, fell to the wayside. Nevertheless, the public has been deeply critical of the administration’s COVID-19 response, viewing it as excessively slow. A Jiji Press poll in June showed that 60% of respondents held a poor opinion of the government’s handling of the crisis.

The Cabinet has also been mired in a series of political and legal scandals, and its disapproval rate has shot up to 61.3%. With such low popularity, it is becoming more doubtful that Prime Minister Abe Shinzo can push for constitutional revision. The low support also has senior LDP lawmakers pushing PM Abe to dissolve parliament and call for an early general election this year to keep the party and government united. The LDP’s junior coalition partner Komeito is also in favor of dissolving the lower house early, so that its limited electoral resources are not overwhelmed by next year’s Tokyo Assembly election. If an election comes next year, the administration could face renewed criticism, and ultimately risk its parliamentary dominance should a new wave of infections appear or the Tokyo Olympics be cancelled.

Pandemic aside, the government has moved forward in approving and enacting numerous regulatory changes that were a part of its pre-COVID legislative agenda. This month’s edition of Policy Radar focuses on developments in Data, Finance, Technology and Defense.

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Government to create rules to promote “industrial big data”

The Government of Japan will release a set of rules for the creation of “industrial big data,” which will be gathered from products and services from healthcare, autos, robotics, biotechnology and other industries. The goal is to gather data from these industries to promote more innovation and the creation of new industrial products. However, there are many concerns about the misuse of data by competitors, information leaks and patent and copyright protections. To assuage these worries, a panel promoting innovation strategy will work on rules to safeguard the secure exchange of information through big data. Government officials will begin discussions during July through the panel. A decision resulting from these talks is expected by April 2021, and legislative amendments and ministerial guidelines will follow.

Langley Insight: The government hopes this bill will help it compile data from different industries to create more specialized products and services. But with the growing importance of proprietary data, it is unclear if the private sector will welcome this as companies become more protective of their own information. While businesses worry about the misuse of data and possible leaks to foreign rivals, trials are already underway in urban development projects.

Government working group considers mandatory linkage of My Number with drivers licenses, smartphones and bank accounts

A working group of officials from multiple ministries and agencies is considering linking the My Number personal identification cards with drivers licences. The goal is to facilitate more widespread issuance of the My Number cards. The working group will also discuss integrating My Number cards with smartphones, bank accounts, certificates for national qualifications and residence cards in the case of foreign residents. Officials will also discuss the further digitization and standardization of administrative procedures related to the My Number system. This would enable, for example, faster distribution of cash allowances.

Chief Cabinet Secretary Suga Yoshihide has instructed the working group to come up with a roadmap by the end of 2020 for the proposed integration. The government aims to see all Japanese citizens have a My Number card by April 2023. Currently 16.7% of all citizens have their card. Internal Affairs Minister Takaichi Sanae has revealed that the government plans to introduce legislation in the Diet by early next year.

Communications Ministry forms panel to facilitate identification of online harassers

A panel at the Ministry of Internal Affairs and Communications will discuss measures to help identify cyberbullies. Under current law, internet service providers may be obligated to disclose the name and address of those accused of cyberbullying if certain criteria are met. The panel has proposed increasing the scope of the law to include the disclosure of phone numbers in an effort to more accurately trace the identity of cyberbullies. While many on the panel were in favor of this step, others argued that the information could be misused by those seeking retaliation. The panel is working to produce a summary in July that outlines the ministry’s efforts to address cyberbullying.


Finance Policy in Japan

Bank of Japan expands support to businesses hit by COVID-19

After a biweekly policy meeting on June 16, the Bank of Japan (BOJ) said it will expand its efforts to support businesses hit by the virus. The BOJ will increase corporate support measures to ¥110 trillion ($1 trillion) from ¥75 trillion. The continued support from the BOJ is aimed at preventing companies from running out of cash and keeping regional economies stable. However, there is widespread recognition at the BOJ that economic recovery will take time, meaning the central bank will continue to provide low interest rates and equity purchases. The BOJ also maintained its 2% inflation target, and only one member of the board demanded additional interest rates cuts.

LDP lawmakers propose further restriction of foreign investment in companies struck by COVID-19

Following the introduction of new regulations concerning foreign investment last month, a group of LDP legislators led by party heavyweight Amari Akira have begun discussions focused on safeguarding Japanese companies facing financial difficulties during the coronavirus crisis. Amari, a close ally of Prime Minister Abe and a former minister of state for economic and fiscal policy, noted that the acquisition of Japanese companies involved in defense and similar sectors by foreign investors poses a substantial risk to national security. The group is working toward a proposal that will likely be submitted to the government in July. The move reflects the heightened scrutiny that foreign investment faces in Japan, as the government constructs a more robust regulatory framework aimed at protecting Japanese companies from potentially hostile actors.

Langley Insight: Recent measures aimed at protecting national security provide a greater role for the government in scrutinizing and overseeing foreign investment. However, they may discourage foreign investment in the following sectors: defense, nuclear power, aerospace, utilities, gas, cybersecurity and telecommunications. Pharmaceutical research and production and advanced medical technology were recently added to the list of sectors considered critical to national security. Expanded government control raises questions about whether Tokyo can become Asia’s next financial hub. 


Japan aims to stop leaks of military tech

The Cabinet will strengthen measures to prevent advanced technology research with military applications from being used by foreign countries. The government will oblige universities to reveal their funding for technological research and development when the Japanese government is also a donor. If the government deems that there are risks of technology outflow, it will offer no public financial aid. The new measures will be implemented from April 2022 through its subsidy scheme, which currently provides ¥260 billion. Additionally, the government wants to improve management of foreign researchers and exchange students. Proposals on this issue range from monitoring and observing foreign researchers’ research history to sending notifications about data outflows.

Langley Insight: In line with legislative changes in the United States, the government is enacting measures to make sure its knowledge and know-how in military technology is not exported to other countries. However, the increased academic transparency and tighter control of foreign students in Japan may jeopardize private investment and donations from foreign companies to Japanese universities. They may also deter talented foreign researchers from working in Japan.


Japan ends plan for Aegis Ashore missile defense system

The Japanese government has decided to scrap its plan to deploy an Aegis Ashore missile defense system, citing technical issues and increasing costs. The Defense Ministry argued that it cannot prevent hardware malfunctions that would redirect missiles into non-military land. The two candidate locations, Akita and Yamaguchi, have also been scrapped as possible hosting sites, and the roadmap to have a fully operational installation by 2025 has been abandoned. However, Defense Minister Kono Taro said he will discuss future defense policy in the next National Security Council meeting.

Langley Insight: Japan is backtracking on a hugely expensive deal with the U.S., possibly straining the otherwise good relations with the Trump administration. The Japanese government was divided on the issue, as seen in the varied calls to suspend or continue the Aegis deployment plan. DM Kono has been quick to highlight that it was cancelled and that he is open to new military plans at the next National Security Council meeting.

Defense Ministry inaugurates space operations squadron

The Space Operations Squadron, Japan’s first space force, has been formally inaugurated by Defense Minister Kono Taro. The new unit, which contains 20 members, is part of the Air Self-Defense Force and is located at Fuchu Air Base in Tokyo. Its staff will increase to 100 when it becomes operational in 2023. Its primary objective is to protect the security and operations of Japanese satellites from armed attacks and natural decomposition. It will also cooperate with the U.S.’ Space Command and the Japan Aerospace Exploration Agency.

Langley Insight: Geostrategic considerations are growing more important in the aerospace industry. The Defense Ministry has been working since 2008 to increase its involvement in the field of space because of national security concerns there. The U.S.-Japan Comprehensive Dialogue on Space will be the main forum for bilateral cooperation and the conception of future space policy between the two countries. The framework is expected to bring opportunities for American investment in military and space technology to Japan.

As the outbreak of the COVID-19 pandemic continues to bring unprecedented impact around the world, public and private sectors rush to adapt to a rapidly-changing global environment. While there is uncertainty for what lies ahead, new opportunities emerge for business and government partnerships. Every day brings new insights, opportunities, and technology that affect Japanese politics, business, and society.

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