Comment on “Economic Security and New Industrial Policy”

In an era where trade and investment policies increasingly intersect with national security—especially concerning high-tech products and services—Armstrong et al. (2025) offers a timely analysis of Japan's strategies in navigating this complex landscape. The three authors, based across Australia, the US, and Japan, leverage their diverse perspectives and access to local information, providing a nuanced view of Japan's economic security and industrial policy shifts, particularly within the semiconductor industry. Armstrong et al. succinctly compile various data and present Japan's ongoing challenge of reducing dependence on China for critical products, alongside the ambiguous effects of export controls on trade. They raise concerns about the viability of Japan's industrial policies on semiconductor, citing limited historical cases of successful implementation of industrial policies to achieve the technology frontiers by developed nations. While rich in information, Armstrong et al. lacks a theoretical framework to systematically analyze and evaluate the impacts of Japan's economic security measures. Introducing a framework, such as Kimura's (2025) classification of policy instruments into defensive, offensive, and industrial measures, could enhance the reader's understanding and evaluation. This framework, if extended, would allow for a systematic analysis of both economic welfare and security interests, collectively defined as “national interest.” I would like to make some suggestions for improving Armstrong et al. relating to applying the proposed framework and semiconductor industrial policies. Armstrong et al. should consider utilizing the proposed framework to delineate and scrutinize Japan's strategic measures—reshoring, sourcing diversification and inward foreign direct investment (FDI) screening for defense, export restrictions for offense, and subsidies for industrial policy. This approach could clarify the trade-offs and synergies between economic and security objectives. To effectively analyze these issues, we must move beyond traditional economic frameworks that assume a static, risk-free world where any departure from free-market principles always leads to decreased welfare and focuses solely on economic welfare as the policy goal. In reality, the world is fraught with risks, including security risks and potential disruptions in supply chains. By explicitly accounting for these risks, certain security policies may actually lead to the best possible outcomes. Furthermore, considering the dynamic effects over time, industrial policies that initially diverge from free-market norms could ultimately yield the most favorable results in the long term. Armstrong et al. should enhance its analysis of strategic initiatives within Japan's semiconductor industry, focusing on the relationships and synergies between various projects in Kyushu (TSMC), Hokkaido (Rapidus), Yokohama (Samsung), and Tsukuba (TSMC's R&D). Discussing recent developments and the formation of semiconductor clusters, along with workforce training initiatives like the Kosen scheme in Hokkaido, would provide a clearer picture of the sector's trajectory and its alignment with broader economic security objectives (see NIKKEI Film 2024).