In most respects, Japan has remained a close ally of American efforts against China, both militarily and in trade matters.
Japan has defied China in sovereignty disputes over unoccupied islands in the East China Sea and, if anything, has committed itself more strongly than the United States to the defense of Taiwan. Japanese Prime Minister Fumio Kishida has made efforts to unify the Group of Seven advanced economies of the world to break China’s near monopoly on rare earth elements. Japan has also joined Washington in some of its bans on trading technology with China. Statistics show, however, that Japanese business has stepped into the growing distance between the United States and China to make considerable gains for itself.
Even though Japan’s real gross domestic product (GDP) shrank during the second half of 2023, and its economy fell behind Germany in overall size, the nation’s exports have surged. In January, the most recent month for which data are available, overall exports showed almost 12 percent growth over January 2023 to a level of 7.33 trillion yen ($48.9 billion). Exports to the United States outpaced the average, expanding in January by almost 16 percent over year-ago levels, while exports to China led, rising nearly 30 percent above levels of January 2023. Leading the growth in sales to China were shipments of computer chips, semiconductor components, complete sets of equipment, and transportation machinery, almost precisely the same products that the United States has decided to stop exporting to China.
True, Tokyo bent to pressure from Washington last year to limit technology sales to China. A revision of its Foreign Exchange and Foreign Trade Act proscribed the export of some 23 chipmaking items, including much technology essential to producing cutting-edge chips, such as equipment for cleaning, monitoring, and lithography. But the data add a nuance to the story that despite Tokyo’s seeming compliance, much technology is going to China. The picture is further complicated by a recent survey conducted by the Japanese Chamber of Commerce and Industry in China, showing that more than half the surveyed firms either increased or maintained their investments in China during the past year. Clearly, Japanese business has seen and is taking advantage of an opening left by the China–U.S. split.
Increased exports to the United States also speak to Japanese gains from the growing distance between Washington and Beijing. There is, of course, only so far Japan can go in this regard. Japan does not produce many of the labor-intensive, low-value goods that the United States commonly imports from China. Nor does Japan possess many of the assembly operations that firms, such as Apple, maintain in China.
Nonetheless, it should be clear from the fact that Japanese export growth to the United States has outpaced overall export growth that Japanese producers have managed to substitute for the Chinese products kept away from the United States either by high tariffs or other exclusionary Washington policies or more generally by the efforts of American businesses to diversify supply chains away from China.
There is little sign as yet that Washington has pressured Japan to back away from this opportunity. That may yet come. Whatever technology Japan willingly sells in China thwarts in some way Washington’s efforts to deny China advanced technological products and support. If the scale of such Japanese opportunism grows, Washington will likely apply some kind of pressure to stop the Japanese effort. And if history is any guide, Tokyo will bend to that American pressure. But so far, nothing. Meanwhile, both Japan and China are benefitting at the expense of American business.
