Evolving Geopolitics and Japan's Economic Security–Trade Nexus: ‘New Capitalism’ as a Balancing Act?

ABSTRACT Amid intensifying geopolitical tensions, governments increasingly perceive economic interdependence as a strategic vulnerability. Japan, situated geopolitically between two great powers—the United States and China—attempts to navigate geopolitics by prioritising economic security. This paper investigates the major geopolitical factors shaping Japan's economic security strategy and Japan's strategic response. Our analysis finds that the geopolitical factors which influence its economic security concern (i) China's political and economic threats, (ii) the U.S.'s securitised trade policy and (iii) the U.S.–China rivalry. Japan's strategy is grounded in the new policy tenet of ‘New Capitalism’, reflecting a balancing act. On one hand, Japan aligns closely with the United States, particularly in the security domain. It is adopting increased state intervention to safeguard national interests under the banner of economic security. On the other hand, Japan continues to affirm its commitment to a free and rules‐based international trading system, distancing itself from the U.S.'s increasingly protectionist stance. In practice, however, Japan's economic security policy has begun to erode its traditionally neoliberal trade posture. This policy shift—both ideational and operational—is likely to influence other like‐minded middle powers and contribute to the reshaping of trade frameworks across the Indo‐Pacific and beyond.