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September 2020

With the Diet still closed, government work had been slowing to a halt. This is typical of August, which usually sees few significant decisions as the policymaking process pauses. However, Prime Minister Abe Shinzo’s abrupt announcement that he would resign because of health concerns shook up the political world.

PM Abe and his administration faced growing criticism for its pandemic response and the PM’s refusal to call parliament back into session before 2021. PM Abe set a record for the longest uninterrupted term as premier on August 24, but his unpopularity and health issues prevented him from continuing in the position.

Just before his resignation, the Abe Cabinet’s approval rate reached 36% according to an August Kyodo poll, its second lowest point since 2012. Disapproval hit 49.1%. 58.4% of respondents criticized the government’s handling of the new coronavirus pandemic, and 70.8% still want an extra session of the Diet to discuss additional response measures. It will be a challenge for the next premier to regain the trust of the Japanese electorate before calling a snap election.

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PM Abe will stay on as leader until the ruling Liberal Democratic Party chooses his successor in a party election in September. PM Abe avoided designating a successor in the press conference in which he announced his resignation, meaning that a real contest within the party is set to take place. Chief Cabinet Secretary Suga Yoshihide is the apparent frontrunner, with former Defense Minister Ishiba Shigeru and LDP policy chief Kishida Fumio also in the race. Regardless of who wins, the LDP is likely to see a temporary boost in opinion polls.

Any change in leadership after years of stability under PM Abe will shake the political realm. However, it is precisely the shake the LDP needs in the case of an election this fall or next year. A new LDP president could benefit from an electoral honeymoon and win at the polls, despite recent predictions that have the ruling coalition losing many seats to the opposition. The government’s handling of the coronavirus pandemic, cronyism scandals and corruption will be in part forgotten as the transition to the Reiwa era manifests in a new national leader.

Campaigning and politics aside, as the policymaking process starts up again in September, a number of initiatives, such as a possible ban on TikTok and a new national security strategy, will build up in the pipeline. This month’s edition of Policy Radar focuses on developments in Technology, Defense, Finance and Energy.

Technology:

Technology Policy

Group of lawmakers to compile set of proposals on Chinese apps and software

A group of lawmakers led by LDP heavyweight Amari Akira will submit a set of proposals and recommendations to the cabinet regarding the use of Chinese apps and data concerns by September 10. Amari, who leads a group studying the security of Chinese apps and software, said that Japan cannot ignore the data security risks posed by apps like TikTok, especially as other countries become aware of the risks. He also said that Japanese companies must assume that partnerships with companies in China could lead to data being compromised, and that could lead to Japan’s removal from global supply chains that include other democratic countries.

LDP lawmaker Nakayama Norihiro, who is a member of the same group, said that the LDP is unlikely to request a full ban of TikTok. He noted the party may push for extra measures to ensure the safety of users’ data. He also mentioned that a change in ownership of the controlling unit in Japan could alleviate concerns about the app. 

Finance:

Finance Policy

Fintech companies to enter bank transfer system to lower transaction fees

The Japanese Bankers Association (JBA) is planning to open its bank transfer system to fintech companies. Payments and transfers between banking institutions are carried through a system operated by the JBA, meaning access for fintech companies would result in lower transaction fees and greater competition. The system is limited to deposit-taking financial institutions within a strictly regulated framework. The decision came after the Japan Fair Trade Commission criticized the system’s transfer fees and limited access. The JBA will formalize its decision to open access to fintech companies by the end of March 2021, possibly allowing more companies to enter the system as early as April 2021.

Justice Ministry to update English translations of business-related laws

The Ministry of Justice will update and revise the English translations of Japan’s business and finance laws and regulations in a move aimed at attracting foreign investment. More than 700 existing translations will be revised, including the Companies Act and the Regulation for Enforcement of the Insurance Business Act. The ministry will also translate over 300 yet untranslated laws and regulations, including the Amendment of the Foreign Exchange and Foreign Trade Act. The initiative follows a 2019 rules change aimed at updating outdated and unclear expressions. Official English translations can affect legal interpretations in international courts.

A task force composed of experts within the Justice Ministry will consider which items will be prioritised. A short summary will also be provided for each law to help foreign companies and investors understand Japan’s business environment. The ministry is also considering using AI legal translations, as well as getting feedback and help from academics and legal practitioners. The ministry aims to complete the revisions by the end of fiscal 2022.

Langley Insight: Japan has struggled to attract foreign investment and talent in part because of language barriers, a rigid financial system and limits on access to certain industries. This change will make it easier for ambitious foreign workers to start companies and invest in Japan, one of the main goals of the Abe administration. This is also in line with Tokyo’s ambition to become Asia’s next financial hub.

Energy:

Energy Policy

METI to review power transmission lines’ renewable energy share

METI will review the use of power transmission lines to expand the limits on renewable energy power generation. The ministry aims to reduce the reliance on coal power sources and cut carbon dioxide emissions. Under current regulations, coal-fired thermal power is prioritised in power transmission lines while renewable energy has limited access. The move comes after Japan faced a wave of global criticism for its lack of commitment in tackling climate change. METI will allow new connections to power lines when not congested by the end of 2021.

Langley Insight: Japan’s energy production still relies heavily on coal, which generates 32% of total energy production. Renewables cover about 17% of the total mix. As a global push toward decarbonization has taken off, METI wants renewable energy to make up 22-24% of Japan’s energy mix by March 2031. However, renewables taking a greater share means the country will become more dependent on them. This could lead to further regulation of the energy industry to protect the market from foreign players. The government recently banned foreign companies from operating wind farms, for example.

Defense:

Defense Policy

Defense Ministry to establish electronic warfare unit in 2021

The Defense Ministry plans to create a specialized unit within the Self-Defense Forces to increase the country’s electronic warfare capability in fiscal 2021. The unit will be based in the SDF’s Kengun base in Kumamoto prefecture. The mission’s aim will be to jam enemy radars, missile guidance systems and signals, as well as protecting Japan’s internal communications. It will also try to nullify hostile external radio waves by using domestic radio waves on the same frequencies. Additionally, the ministry recently bolstered its efforts to develop a Cyber Defense Unit (CDU). The Ministry will expand the number of personnel in the CDU by 30% to reach 300 by April 2021, and by 2024 the CDU is expected to have 500 members.

Langley Insight: The Ministry of Defense is enhancing its technological, electronic and cybersecurity capabilities in response to advances made by Russia and China in electronic warfare. The ministry and the SDF are well behind the U.S.’ and China’s respective 6,000 and 100,000 dedicated cyberwarfare personnel. By the start of fiscal 2023, the Defense Ministry plans to have just over 1,000 dedicated personnel. Tokyo is also allocating ¥15 billion ($141.6 million) in its 2020 budget to developing an aircraft capable of jamming enemy radio waves from long distances. With the growing importance of cyberwarfare and technologically advanced military equipment, Tokyo will continue to make significant investments to keep up with the capabilities of foreign powers.

Japan, ASEAN and others to conduct joint cybersecurity exercise

The Japanese government has announced that it will coordinate an international cyber-defense drill that will include the U.S., several European countries and all of ASEAN. The training exercise will focus on information-sharing protocols among countries to protect critical public infrastructure. The new coronavirus pandemic has exacerbated the risk of multinational cyberattacks by exposing vulnerabilities in the cybersecurity environments of Japan and its allies. Japan’s National Center of Incident Readiness and Strategy for Cybersecurity (NISC) has organized similar drills over the past 15 years, but this will be the first time the agency has led an exercise of this scale.

Langley Insight: The perpetual threat of Chinese- and North Korean-linked cyberattacks has prompted Japan to ramp up its cybersecurity efforts, both in the private and public sectors. Japan’s prominent role in this inaugural exercise and the participation of ASEAN countries reflect a recognition that countries vulnerable to Chinese aggression in Asia need to take a more proactive approach to shoring up their digital defenses.

Japan to broaden “Five Eyes” intelligence-sharing network

In a clear articulation of government policy, Defense Minister Kono Taro indicated that Japan is seeking to broaden its relationship with the “Five Eyes” intelligence-sharing network. As separate countries the U.S., Canada, U.K., Australia, and New Zealand have strong, existing defense relationships with Japan through various treaties, organizations and agreements. Japan also has experience sharing intelligence with the member countries, especially regarding China’s activities in the region. Closer cooperation between Japan and Five Eyes would enable a more coordinated, China-targeted approach to intelligence-gathering in Asia and across the globe.

 Langley InsightJapan’s potential membership in the Five Eyes does not require official codification or accession as it is not a formal organization, but rather involves Japan making an effort to gain the trust of its current members. Japan’s relatively outdated technical infrastructure, in addition to the lack of more robust security regulations, like a clearance system, have been a significant obstacle to closer ties. Japan’s potential membership is also contingent to some degree on its ability to assimilate the norms and procedures of the Five Eyes members, which are all Anglophone countries with shared cultural values.

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

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