Japan’s Diet passes economic security bill on May,2022

Japan’s parliament Diet passed an economic security bill aiming at guarding technology and reinforcing critical supply chains, while also imposing tighter oversight of Japanese firms working in sensitive sectors or critical infrastructure.

It comes after the United States imposed restrictions on technology imports, such as on semiconductors, amid growing tension with Beijing and  the Russia's invasion of Ukraine . Japan therefore steps up measures to protect supply chains and infrastructure from hacking and cyberattacks, and ensure that technology critical to national security is not stolen. It has increasing concerns about China’s trade obstructionism and economic espionage.

Japan’s economic security bill passed was in May 2022. The bill outlines measures to defend its supply chains, infrastructure and leading technology. Focussing on four areas of economic security —

(i) a system to ensure stable supplies of critical materials,

(ii) a system to ensure stable provision of services using critical infrastructure,

(iii) a system that supports the development of critical technologies and

(iv) a secret patent system.

The Act will enter into force on or before February 18, 2023.

The law encourages Japanese companies to diversify supply chains with critical materials, while the government provides funds for diversification if companies meet certain conditions. If the procurement and supply of basic infrastructure have the potential to facilitate foreign obstruction, the government identifies the sector and orders it to provide a pre-made procurement or supply-planning plan to ensure the safety of their infrastructure. The law lists 14 sectors, including electricity, water supply and information technology, as candidates to become ‘specified social infrastructure businesses’.

The Act establishes several support measures that aim to ensure stable supplies of materials that significantly affect the existence, ordinary lives and economic activities of the Japanese public.

System ensuring stable provision of services using critical infrastructure

First, the government will solicit expert opinions and formulate basic guidelines on ensuring stable supplies of specified critical materials based on the basic policy. Under the Act, “specified critical materials” are defined as “materials indispensable to the existence and relied upon for the lives and economic activities of the Japanese public that are procured, or manufactured from raw materials procured, largely from foreign countries, and with regard to which the government acknowledges that ensuring a stable supply is particularly necessary to prevent the impairment of national security by external activities.

System supporting the development of critical technologies

The government first formulates basic guidelines concerning promotion of the development of specified critical technologies and the appropriate use of outcomes. Specified critical technologies are defined as technologies that may be critical to the maintenance of future public life and economic activity. Where unjustifiable use of said technologies, information used in their development or failure to stably use them, due to external action ,resulting from dependence on goods or services that make use of such technologies obtained from a foreign country could impair national security and public safety. Specifically, the government currently considers space, marine, quantum and  AI- technologies to be ” specified critical technologies.”

Secret patent system

Several restrictions apply to secured inventions.

(i) patent applications for secured inventions cannot be waived or withdrawn,

(ii) applicants must obtain the Cabinet Office’s permission before working the inventions,

(iii) disclosure of the details of the inventions is prohibited,

(iv) applicants are obliged to take necessary and appropriate measures to prevent leakage of information concerning the inventions,

(v) other business operators are required to obtain the Cabinet Office’s approval before handling information concerning the inventions, and

(vi) the submission of patent applications for the inventions in foreign countries is prohibited.

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