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The Japanese parliament has enacted the first
comprehensive economic security legislation to enhance Japan’s
national security from an economic activities perspective,
especially focusing on sensitive industry sectors such as rare
earth, semiconductor, and infrastructure, as well as research and
development (“R&D”) of defense and dual-use
technologies.
On May 11, 2022, the Japanese parliament enacted the
groundbreaking “Act on Promotion of Economic Security by
Integrated Implementation of Economic Measures.” The framework
of the legislation has been discussed since late 2021 and finally
settled into the following four domains of economic
security:
- Resilient supply chain for strategic
resources. The government will designate certain strategic
resources that are fundamental to the national economy but heavily
dependent on overseas sources, such as rare earth, semiconductors,
batteries, and pharmaceutical drugs, and it will draw up the basic
policy and individual plans for resilient supply of designated
resources. Suppliers of designated resources may apply for
government certification and financial aid for stable supply. As
for the most critical materials, the government will further
stockpile strategic reserves. - Security of fundamental infrastructure. The
government will designate critical operators of the following
infrastructure services: power supply, gas supply, oil and gas
refinery and import, water supply, railroad transport, road
transport, maritime transport, air transport, operation of
airports, telecommunication and broadcasting, mail services,
financing, and payment card services. The designated operators will
be required to make prior filings when introducing or commissioning
maintenance of important facilities affecting the security of
infrastructure, and the government may issue an order (preceded by
recommendation) to take security measures to prevent disturbance to
such facilities from outside of Japan (including cancellation of
contemplated activities). - R&D aid for advanced technologies. The
government will initiate public-private partnerships and funding
for R&D of advanced technologies that are strategically
important in terms of national security (such as aerospace,
maritime, quantum mechanics, and artificial intelligence
technologies). - Nondisclosure of sensitive patents. Patent
applications for inventions regarding certain designated
technologies (designation will be made to limited nuclear
technologies and high-tech weapons, but not to dual-use
technologies) will be subject to the national security test and may
be subject to nondisclosure measures, including restrictions on
licensing and overseas applications. Such patent applications for
inventions developed in Japan must be first filed in Japan, unless
governmental clearance is given.
The law will come into effect in several phases beginning in
2023, and it is expected to have a substantial impact on a broad
range of industry sectors. Designation of regulated areas and
detailed requirements will be prepared by coming ordinances of
relevant supervising authorities. We will continue to monitor
regulatory developments and provide timely advice to clients on
steps to be taken.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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