Japan's Economic Security Lacks 'Costs' and 'Scenarios'

Economic security has come to be discussed as a major national priority. Domestic production of advanced semiconductors, diversification of rare earth procurement, and strengthening supply chains for critical materials. These are all necessary discussions. However, this discourse has two significant omissions: 'costs' and 'scenarios'.

The greatest form of economic security is maintaining a strong currency.

Japan relies on imports for all manner of critical materials—energy, food, fertilizer raw materials, rare metals, and semiconductor materials. Under this structure, the purchasing power of the yen is directly linked to resource procurement capacity.

If the dollar-yen rate were to return from 150 to 100, the import cost of all critical materials would drop by about two-thirds. For all items, immediately, and across the board. Deep-sea resource development and rare earth substitute technologies take time to realize and only target limited items. On the other hand, maintaining currency value is the most versatile economic security tool that affects all items.

It might be argued that this is not a matter of cost. However, first of all, if the currency is strong, one will not be outbid in the competition to secure resources. Furthermore, if procurement costs are saved, there is room to divert those funds toward exploring new procurement sources or domestic production. As long as economic security incurs costs, lowering the procurement cost of critical materials is a significant benefit.

Nevertheless, 'currency' is almost never discussed in the context of economic security. The reality that the weak yen, as a side effect of extraordinary monetary easing, continues to drive up the procurement costs of critical materials should have as much impact as measures to secure the supply of individual items.

There may be an argument that a weak yen encourages manufacturing to return to Japan, increasing the domestic production rate. However, it is now impossible to even procure 'labor' domestically. The weak yen is a major problem for continuously securing foreign workers. Due to low wages and the weak yen, even foreign workers no longer want to work in Japan.

Domestic production without cost awareness is unsustainable.

Domestic production projects promoted in the name of economic security share a common problem: the lack of discussion regarding costs.

Take Rapidus, for example. Even if they technically succeed in mass-producing 2nm processes, if they can only manufacture semiconductors at twice the cost of TSMC, the structure will be one where losses grow the more they sell. For instance, if, unfortunately, a cumulative deficit of 5 trillion yen were to arise over 10 years, would the Japanese public be convinced by the explanation that 'it is an insurance premium for security, so it cannot be helped'?

Proponents often explain it as 'preparation for an emergency.' However, insurance only works when premiums and coverage details are clearly stated and subscribers can make rational judgments. What will be the profit and loss for Rapidus? To what extent can self-sufficiency actually be maintained in an emergency? Will the gap with TSMC have narrowed in five years? Without a solid outlook on these questions, is pushing for 'domestic production at any cost' 'domestic production no matter what' actually becoming a risk?

The risk of local optimization without scenarios.

Another omission is scenario-based thinking.

Current economic security policy is structured to set measures by individually designating 'specific critical materials'. Semiconductors are handled by the Ministry of Economy, Trade and Industry (METI), food by the Ministry of Agriculture, Forestry and Fisheries (MAFF), and energy also by METI, but in a different department. However, in an emergency, threats do not arrive individually.

For example, let's consider the scenario where 'trade with China is significantly restricted'. What would happen simultaneously? The cutoff of ammonium phosphate—Japan relies on China for 70-90% of its fertilizer raw materials, especially phosphate-based ones. The cutoff of rare earths. The cutoff of agricultural and marine products for processed foods. The disruption of supply chains for industrial products via China. These would all occur at the same time.

Even if rare earths can be produced domestically, if fertilizer does not come in, food production is impossible. If food production is impossible, society cannot function even if advanced semiconductors can be made. The robustness of security is determined by the weakest link in society.

Learning from the design philosophy of the Zero fighter.

There was a Japanese person who once thoroughly pursued the principle that the 'weakest part' determines the strength of the entire system: Jiro Horikoshi, the designer of the A6M Zero fighter.

In the design of the Zero, what Horikoshi prioritized most was thorough weight reduction. He managed the weight of the equipment down to one-hundred-thousandth of the total and shaved the safety margin of each component to the limit. 'If only one part is excessively sturdy but other parts break first, that strength is just a waste of weight'. Therefore, he shaved the whole thing uniformly to near the limit. The cold rationality that reinforcing anything other than the weakest part is useless is what created that masterpiece.

The same principle applies to economic security. Even if trillions of yen are invested to 'strengthen' semiconductors or rare earths, if the weakest links—food and energy—break, the entire system will collapse. What is needed is not to excessively strengthen specific items, but to define a scenario of 'what we are preparing for,' identify the weakest links, and allocate limited resources available for economic security with overall optimization in mind.

What Japan's economic security truly needs right now is not a 'Project X' for domestic production of individual items. After solidifying the foundation of maintaining currency value, we must conduct bottleneck analysis based on crisis scenarios and build a national consensus on the costs. It may be unglamorous, but that is precisely the design philosophy that determines the resilience of the entire social system to crises.