Japan to Subsidize Companies Expanding in Global South; AI, Semiconductor Supply Projects to Receive Subsidies

The Yomiuri Shimbun file photo
The Prime Minister’s Office in Tokyo

Japan plans to subsidize a portion of the costs for companies to expand their business in the emerging and developing countries known as the Global South. The government hopes to strengthen the competitiveness of Japanese companies by improving ties with these nations.

Global South nations have been hit by food and fuel shortages as well as rising prices due to the spread of the novel coronavirus and Russia’s aggression against Ukraine, but many of them are expected to show economic growth and are enhancing their presence in international politics.

The Japanese government will provide companies that conduct business or research and development in India, Southeast Asia and Africa with subsidies of about half of the project cost, up to several billion yen. The government also is considering providing greater subsidies to emerging companies as well as small and midsize enterprises.

As a cost for this, the government is currently working to allocate ¥140 billion for the project in the fiscal 2023 supplementary budget.

Specifically, the government would like to contribute to projects that can make use of Japan’s latest technologies, such as artificial intelligence. While helping develop the industries and human resources of partner countries, the government wants the projects to lead to technological innovations for Japanese companies based on expertise and experience gained in the foreign nations.

The government is likely to target with subsidies businesses that are expected to strengthen the supply chain of semiconductors and other items, or that help increase Japan’s exports. The range is wide, from health care to telecommunications and finance.

Other envisioned projects will include the construction of a payment system using blockchain technology, which stores and manages transaction data across a network of computers, and the expansion of manufacturing facilities of strong, yet lightweight carbon fiber.

The enhancing of cooperation with the Global South is becoming increasingly important for Japan. The population of the Global South, which includes India, whose population has overtaken China’s as the world’s largest, is projected to account for two-thirds of the world’s total population in 2050. With their rising gross domestic product, the Global South is becoming increasingly attractive as a market with potential for economic growth.

Countries such as Chile, Indonesia and Vietnam are nations that mine key minerals used in the production of electric vehicles. The benefits of collaborating with them are significant from the perspective of economic security.

While tensions are escalating between advanced democratic countries such as the United States and European nations and authoritarian states such as China and Russia, many emerging countries are trying to maintain a nonaligned position. Japan hopes to build a relationship with the Global South, where both sides can benefit from business, and broaden their understanding of the concept of a free and open Indo-Pacific.