Since 2020 Japanese politics has returned to its traditionally high turnover of Prime Ministers with four governments in five years led by Yoshihide Suga, Fumio Kishida, Shigeru Ishiba and now Sanae Takaichi. Japan’s approach to economic security, however, is not in question and is expected to gain greater prominence under the country’s new Prime Minister, Takaichi, for two reasons. Firstly, the 26-year-long coalition agreement between the Liberal Democratic Party (LDP) and the Komeito Party (known for its less-than-hawkish approach towards China) has come to an end, opening up possibilities for further strengthening economic security policies with the LDP’s new right-wing coalition partner, the Japan Innovation Party (Nippon Ishin). Secondly, Takaichi served as Minister of State for Economic Security from August 2022 to October 2024 and is therefore well aware of the challenges that Japan faces in in this sphere. As a business mathematics graduate and a disciple of Konosuke Matsushita (founder of Panasonic), she was particularly committed to securing the enactment of the security clearance act in May 2024. In her inauguration speech on 24 October 2025, Takaichi emphasised that Japan needs to focus on risk management investments and strengthen its economic, food, health and medical care, and energy security as well as its infrastructure resilience.

The specifics of the government’s plans for economic security are not yet fully available, but opportunities are emerging in crucial areas such as critical minerals and rare earths, as well as cooperation in technology production, particularly in the car industry given its importance for employment in both the EU and Japan. The existing instruments for further collaboration (such as the Competitiveness Alliance presented by EU Commission President von der Leyen during her last visit to Japan in July 2025) are an indication of Brussels and Tokyo seeking to move in this direction. However, it will be essential that these agreements are more than mere statements of intent and that they pool the political and business resources needed to move to the implementation phase of the envisioned cooperation.  

The various tariff negotiations that the Trump administration conducted starting in the first half of this year have shown that only very few countries are well equipped to deal with Washington’s trade weaponisation, a crucial aspect of today’s discourse on economic security. Arguably the one country that successfully used a critical supply chain node to its advantage is China, and the question of critical minerals and rare earths has come to the fore everywhere among Western countries. Japan first had direct experience of such practices in the 2010s, following the dispute over the Senkaku Islands in the East China Sea, which led Beijing to halt rare earth shipments to Japan in the third quarter of 2010. While Tokyo has expanded its access to critical minerals by investing through the Sojitz Corporation in Australia’s Lynas Corporation, dependence on Chinese critical mineral supplies is still estimated to exceed 50% of Japanese needs. The first commercial production of heavy rare earths outside China was only achieved in May 2025, in Malaysia.

This once again highlights how critical dependencies are far from being overcome and require cooperation among like-minded partners, such as the EU and Japan. Two crucial issues must be addressed for critical minerals and rare earths: refining capabilities and guarantees for producers in a highly volatile commodity market. Refining capabilities are essential to regain market share in Chinese-controlled industries, but they pose a number of challenges. Firstly,  there are regulatory and environmental issues, which in turn require joint efforts in third countries as well. Japan’s investment in Lynas’s refining plant in Malaysia underlines the importance of avoiding cumbersome and excessively regulated systems that make refining almost impossible. As part of the recently announced EU-Japan Competitiveness Alliance, co-investment and co-development of large-scale refining projects in third countries should become a priority to ensure a stable supply of minerals and rare earths, which could, if restricted, instantly bring production in many industries to a halt, including the defence industry. Effective price competition with Chinese-produced materials will likely take some time to achieve due to perfected Chinese processes, well-integrated production networks, low labour costs and subsidies.  Nevertheless, despite the high costs that the EU and Japan might incur, this is a crucial aspect for maintaining the economic viability of Japanese and European industries.

The second proposal for cooperation is similar to the previous one as it concerns co-financing and co-production, but this time applied to critical industries such as battery production for electric vehicles (EVs). In terms of research into next-generation batteries, Japan has pushed for the local development of new technologies (the so-called “All-Japan” approach), which prioritises supporting Japanese industry in Japan. In May 2025, Japan’s Ministry of Economy, Trade and Industry (METI) renewed its action plan and announced its “run faster partnership”, with the aim of promoting and accelerating cooperation with allies and like-minded countries. This is the third step in METI’s three-stage approach: the first was “reducing foreign dependency and recovering autonomy“, and the second, “preventing leaks and maintaining technological indispensability”. The EU might consider leveraging its capital to co-finance and co-produce next-generation batteries using Japanese technologies. However, Europe may wish to consider producing in either Japan or third countries, given the difficulties of manufacturing in Europe (as the bankruptcy of Northvolt has shown). To achieve economies of scale and increased purchase volumes, battery procurement alliances between European and Japanese car manufacturers could also be considered, with the potential to expand such a scheme to defence industries as well. Despite the expected high initial costs, Japan and the EU might once again regard such investments as essential to ensure their companies remain competitive in fast-developing global markets.

Japan-EU cooperation can no longer take for granted the market and economic security conditions that existed until recently. Indeed, such cooperation must quickly adapt to markets dominated by players that have perfected their ability to exploit market distortions. The creation of the Competitiveness Alliance (along with other initiatives such as the Defence Industry Dialogue) is a welcome step in the right direction, but it must speed up to match the pace of change in international geopolitics and geoeconomics. The Takaichi administration, with its understanding of the realities and dangers of economic security issues in East Asia, makes the Japanese system relatively quick to adapt to change, owing also to the comparative agility of Japanese decision-making. In the absence of much-needed political reform in Europe, as outlined by former Italian Prime Minister Draghi, the EU could speed up coordination with European businesses to build momentum behind co-investments and production with Japanese companies, and to avoid the excessively lengthy discussions that slow down the European decision-making process. In this respect, Japan should help raise awareness and knowledge of economic security through various channels. The Institute of Geoeconomics, for example, has helped and advised European think tanks in launching economic security surveys in Europe.