Photo/Illutration Prime Minister Fumio Kishida, right, and Takayuki Kobayashi, the state minister in charge of economic security, display a sign for the government section preparing economic security legislation. (Asahi Shimbun file photo)

Prime Minister Fumio Kishida’s most pressing task in the current Diet session is to ensure passage of economic security legislation that is already giving business circles and some members of the ruling coalition the jitters.

The legislation would cover four broad areas: strengthening the supply chain for key materials and parts; government assessment prior to the installation of vital equipment and computer systems in core infrastructure; encouraging cooperation in research and development of advanced technology between the private and public sectors; and not disclosing patents for sensitive technological areas.

However, recommendations released Feb. 1 by a panel of experts ahead of the government’s submission of the legislation were already raising concerns due to a provision that uncooperative companies could face penalties.

Any loopholes in the law would render it meaningless, noted a source in the prime minister’s office.

The Kishida administration plans to compile the legislation for submission to the Diet later this month after further discussions within the ruling coalition.

The provision regarding the supply chain is expected to cover vital parts and products, for example, semiconductors, pharmaceuticals, rare earth metals and large-capacity batteries that will be subsequently designated by Cabinet order.

Companies that manufacture, import or sell those products would be obligated to file reports about the companies with which they make direct purchases as well as provide details of the supply chain that extends back from the product acquired.

Penalties are being considered to thwart companies unwilling to submit such reports on grounds it would be tantamount to giving away corporate secrets.

The measure for core infrastructure is designed to ensure against cyberattacks and would cover companies in six key areas: energy, water supply, information communications, finance, transportation and the postal service.

Companies in those sectors planning to install high-tech equipment would be obligated to pass a government evaluation concerning the source of the materials.

This would give the government the authority to recommend that an installation project be canceled if it determined there was a risk of the equipment being targeted for cyberattacks.

Companies that ignore calls to cancel a project would be ordered to do so anyway and those that continue to do so would face penalties.

The administration contends that public-private sector cooperation is essential in the fields of advanced technologies such as space exploration, artificial intelligence, quantum technology and biotechnology.

Under the proposed legislation, public funds would be injected to stimulate research and development. Companies and researchers involved in such projects would be required to sign confidentiality agreements regarding what they learn during the course of their work.

Penalties are also being considered for companies that leak patent applications for sensitive technology to foreign governments. The measure is designed to keep such matters in-house.

One of the primary hurdles facing the government is deciding which products to designate as vital for a stable supply chain. For example, many pharmaceuticals depend on materials from China, so a blanket ban on such purchases of materials could lead to shortages.

(This article was compiled from reports by Ryutaro Abe and Ryo Aibara.)

Related News