Japan Government Plans to Buy Factories in Emergencies To Secure Supply of Products Vital to Economic Security

The Yomiuri Shimbun

2:00 JST, December 24, 2024

The government is making arrangements to temporarily buy companies’ factories in the event of an emergency, to ensure the supply of products that could severely impact society and the economy if their manufacture were halted.

Such purchases would be conducted if the manufacturers of these products agree to the idea. By temporarily possessing such production facilities, the government aims to achieve higher production output without concern for profitability, maintaining production capabilities, and preventing technologies from flowing to other countries.

The Law on the Promotion of Ensuring National Security Through Integrated Implementation of Economic Measures designates 12 kinds of products as “specified critical products” that are essential for people’s daily lives and for which Japan excessively relies on overseas suppliers.

The specified critical products include semiconductors, storage batteries and antimicrobial substances. The government provides financial assistance for stable supplies of the 12 products.

Under the envisioned new system, the government will upgrade the designation of some of the 12 products to “special specified critical products,” if such emergencies occur as the spread of infections, a halt in the imports of raw materials and the leakage of technologies overseas.

If this happens, the government will buy factories of companies manufacturing the products.

Companies may be cautious about making capital investments even if demand for products suddenly surges, because they might predict that demand will decline in the foreseeable future. If the government purchases and owns plant facilities, the companies will be able to produce at the maximum pace.

If procuring materials to manufacture products becomes difficult, as was seen in China’s restrictions on exports of rare metals, companies may stop operations of their plants and get rid of production facilities. In such a case, Japanese companies might lose the capability to manufacture such products. But the government’s planned commitment will enable them to maintain their production capabilities.

Should another country aim to acquire Japanese companies’ technologies by buying those businesses, the technologies can be kept in the nation if the government counters by purchasing the companies itself.

The concept of special specified critical products is stipulated in the law, but it does not describe practical actions to be taken, such as purchases by the government.

The government will present a draft of the new scheme to an expert panel chaired by Keio University Prof. Setsuko Aoki on Tuesday. Based on debates by the panel, the government will compile basic guidelines for the planned system.

The draft of the plan stipulates that as a purchase by the government constitutes an especially strong intervention into supply chains, such a measure should be used sparingly.