Published on August 15, 2019.
This essay discusses the issue of Mitsubishi Electric, one of Japan’s major defense-related companies, entering into a strategic partnership with a Chinese government-affiliated research institute to cooperate with “Made in China 2025.”
It criticizes the Ministry of Finance’s demand for drastic cost reductions in Japan’s defense industry, arguing that such policies drive domestic companies toward overseas markets, especially China.
In light of the Trump administration’s sanctions against China and the national-security risks of technology leakage, it calls for either encouraging Japanese high-tech firms to return production to Japan or supporting relocation to countries such as Vietnam in order to build a balanced international division of labor.

August 15, 2019.
Mitsubishi Electric, one of Japan’s major defense industries, on July 9 “entered into a strategic partnership with a Chinese government-affiliated research institute in order to cooperate with China’s long-term strategy for strengthening the competitiveness of its manufacturing industry, ‘Made in China 2025.’”
Japan should explore either supporting relocation to countries such as Vietnam or promoting a balanced system of international division of labor.
This is a chapter I published on August 14, 2018, under that title.
The following is the continuation of the previous chapter.
●The Ministry of Finance is driving the defense industry toward China.
From an economic point of view, deterring China’s military rise is also in Japan’s national interest.
Therefore Japan should cooperate with the Trump administration, but the Japanese government’s actions are inconsistent.
After all, far from taking measures to prevent Japanese companies’ high-tech technologies from flowing out to China, it is promoting the opposite policy.
Mitsubishi Electric, one of Japan’s major defense industries, on July 9 “entered into a strategic partnership with a Chinese government-affiliated research institute in order to cooperate with China’s long-term strategy for strengthening the competitiveness of its manufacturing industry, ‘Made in China 2025.’
Its aim is to participate from the stage of formulating standardization for next-generation technologies and connect this to future market development, but there are also concerns about technology leakage” (Kyodo News, July 9).
Why is Mitsubishi Electric strengthening its partnership with China?
There are various factors, but one of them is probably that the Ministry of Finance is demanding thorough cost-cutting from Japan’s own defense industry.
At the seventh meeting of the Council on Economic and Fiscal Policy held on May 28, 2018, chaired by Prime Minister Abe, Finance Minister Aso made the following proposal.
“Matters to be addressed in major fields: Defense.
In light of the security environment, in order to enhance defense capability under severe fiscal conditions, it is necessary to pursue further efficiency in defense procurement after strategically selecting and concentrating technological capabilities.
(Omitted)
・Regarding procurement reform, it is necessary to thoroughly implement measures before, during, and after the selection of equipment, and to strengthen Japan’s defense industry by securing competition among companies in equipment procurement and through thorough cost reduction.”
Even though the defense industry is already suffering because defense spending does not increase and it cannot secure development costs, the ministry is demanding even more thorough cost reductions.
From the perspective of the defense industry, if it cannot make profits in Japan, it has no choice but to turn its eyes to foreign markets.
In this way, the Ministry of Finance is promoting policies that drive Japan’s defense industry overseas.
Moreover, if Japanese companies continue leaking technology to China, they will eventually be subjected to strict sanctions by the Trump administration.
In fact, the Trump administration has imposed sanctions on the Chinese telecommunications company ZTE from the standpoint of national security.
Incidentally, I have heard that Japanese companies supplying parts to ZTE also suffered major damage because of this measure.
Cooperation with China, especially for companies possessing high-tech technologies, has become a major risk.
If Japan intends to cooperate with the Trump administration and protect its high-tech technologies, it should explore one of two options: encourage high-tech companies that have moved production bases to China to return to Japan, or support relocation to countries such as Vietnam and promote a balanced system of international division of labor.