What is economic security? Strategies and practical responses that companies should take in the age of geopolitical risk

As the world enters a "more unstable and uncertain era," economic security is no longer just a government Issue; it has become an unavoidable management Issue for all companies. This article focuses on Japan's economic security strategy, which was also discussed in a Keidanren-sponsored webinar held in January 2026 featuring guest speaker Sugawara, Senior Fellow at Owls Consulting Group, Company.:"Accelerating Economic Security Initiatives under the Takaichi Administration and Corporate Responses - How Should Companies Prepare for Geopolitical Risks in 2026?" It provides a clear overview of Japan's economic security strategy, its structure, and its impact on companies.

Why is economic security important now? - Geopolitical risks destabilizing the world and corporate management

Today's business environment is more difficult to predict than ever before. Behind this lies three major "megatrends" that are driving the world. The complex intertwining of these trends is increasing the uncertainty surrounding our businesses.

• The fragmentation of globalization

  • Until now, it was commonplace for supply chains to be spread all over the world, with goods, people, and money moving freely across borders, and for production and procurement to be carried out in the most efficient locations. However, as conflicts between major powers deepen, the risks of relying on specific countries have become apparent, making it difficult to carry out the same kind of free global trade as before. The movement toward "friend-shoring" (building supply chains with trusted countries) is also accelerating.

• Disruption to the international order

  • The end of the post-Cold War period, which lasted for about 30 years, has seen the US-China conflict, Russia's invasion of Ukraine, and military conflicts in the Middle East, causing major disruptions to the US-led liberal international order. The existing rules-based order has been severely eroded by naked "power," and major powers are strengthening their "nationalism" stance.

• A clash of values

  • Conflicts over "values" such as the environment (E), society (S), governance (G), human rights, and AI governance are creating new business risks. For example, when it comes to "decarbonization," business rules differ significantly between Europe, which is promoting it, and the United States, which calls climate change a "scam."*1 These differences in values ​​are creating business obstacles, forcing companies operating globally to comply with different regulations in each country.

In response to these global changes, the Japanese government is also stepping up its efforts to ensure economic security.

Japanese Government Initiatives: Overall Economic Security Strategy and Its Impact on Businesses

The goals of the Japanese government's economic security strategy are very clear.

Establish a foundation for activity that will enable Japan's Industry and social activity to continue and develop stably, even if globalization experiences a major setback, leading to turmoil in international markets and the disruption of supply chains.

To achieve this goal, the government is focusing on two main pillars.

The specific framework for implementing this strategy is the "three Ps" and the "intelligence" that supports them.

• Protection: Industry defense measures

  • This is an effort to protect Japan's important technologies and Industry from external threats. Specifically, it includes export controls on technologies important to national security and a system for strict screening of investments by foreign companies in domestic companies.

• Promotion: Industry promotion measures

  • This initiative aims to enhance Japan's Industry competitiveness and ensure its "strategic vitality." It supports research and development (R&D) in cutting-edge technologies and strengthens the domestic production base.

• Partnership: International and public-private collaboration

  • These efforts involve working with trusted countries (like-minded nations) to build stable supply chains, and governments and private companies working together to share risk information.

• Intelligence: Information gathering and analysis

  • In order to implement these policies appropriately, it is necessary to accurately understand what is happening in the world and what risks exist, and for this reason, it is considered essential to strengthen information gathering and analysis capabilities.

Based on this strategy, specific laws and systems have been put in place, with the Foreign Exchange and Foreign Trade Act (Foreign Exchange Act) and the Economic Security Promotion Act at their core.

What are the specific policies? The four pillars of the Economic Security Promotion Act and the new system

The Economic Security Promotion Act is the foundation of Japan's economic security policy and is composed of four main pillars.

1. Ensuring a stable supply of essential materials

• This system aims to strengthen the domestic production base and strengthen the supply chain for "specified important materials" that are essential to people's lives and economic activity, such as semiconductors, storage batteries, and pharmaceuticals. The aim is to reduce excessive dependence on overseas sources by having the government subsidize corporate capital investment.

• Implications for companies: This system could be a good opportunity for companies considering returning to domestic production or diversifying their supply chains to receive large-scale financial support. Companies should always keep an eye on the latest developments to see if their products and materials are included in the eligible areas.

2. Ensuring stable provision of specific social infrastructure Service

• This is a system to protect critical infrastructure (specific social infrastructure businesses) that form the foundation of society, such as electricity, gas, communications, and finance. When these businesses install important equipment, the government has introduced a system to screen them in advance to ensure there are no security risks.

• Implications for businesses: Infrastructure operators and businesses doing business with them may find that procurement processes become more complex and lead times longer. They will need to review their procurement strategies, taking security into account when selecting suppliers.

3. Supporting the development of cutting-edge key technologies

• This system promotes public-private collaboration in research and development of "designated important technologies" that will determine future national competitiveness, such as AI, quantum, space, and biotechnology. The government provides funding and comprehensive support up to the practical application of these technologies.

• Implications for companies: Your company's cutting-edge technologies may be eligible for government support. Active participation in government research and development programs can be a major advantage not only in Funding but also in establishing the core technologies for your future business.

4. Non-publication of patent applications

• This is a system that keeps information confidential when patent applications are filed for inventions that are considered particularly important from a national security perspective (e.g., nuclear technology or advanced encryption technology). This prevents important technical information from being leaked outside the country unintentionally.

• Implications for companies: This means that companies dealing with sensitive technologies will need to reconsider their international joint research and development and technology alliances, as well as their global intellectual property strategies.

The newly introduced "security clearance system"

In addition to the four pillars above, a "security clearance system" has been introduced. This is a system in which the government reviews and certifies individuals and companies that can access important information related to economic security held by the government (critical economic security information). For companies, receiving this certification has the advantage of making it easier to participate in joint development projects related to cutting-edge technology with the government or other countries.

The government's goals of ensuring "strategic autonomy" and "strategic indispensability" and its policy of "Industry" are not mere slogans. Based on the Economic Security Promotion Act, funds on a scale that will determine the future of the nation are expected to be actually invested in areas designated as "specified important materials," in particular.

What impact will this have on businesses? Notable "specified important supplies" and large-scale support

The policy regarding "designated important materials" has the most direct impact on corporate business activity. Under this system, large-scale financial support is provided to strengthen domestic production of materials designated by the government. The designated fields continue to expand, and in December 2025, unmanned aerial vehicles (drones) and rocket parts will be added, bringing the total to 16 fields.

In particular, significant support has been recognized in the following two areas:

(Source: Cabinet Office and Ministry of Economy, Trade and Industry documents (as of February 17, 2026))

Semiconductor Support as a National Project: The Case of Rapidus

Particularly noteworthy is the support for Rapidus, which aims to domestically produce next-generation semiconductors. The company has already received more than 1.7 trillion yen in subsidies outside of the framework of the Economic Security Promotion Act, and is expected to receive an additional 1 trillion yen.

This is not just support for a single company, but a national project that is betting on the future of Japan. With such a huge investment, it is expected that major business opportunities will be created for peripheral Industry such as semiconductor Manufacturing equipment and materials manufacturers.

How should companies respond to economic and security risks? Practical steps in the age of geopolitical risk

Amid the major changes brought about by the "megatrends" that are driving the world, how should companies take concrete action? Here, we will explain the most important measures that companies can take.

For a company to respond to economic and security risks, simply setting up a department and Create rules is not enough; a company-wide change in awareness and efforts, from management to the workplace, is required. We will introduce a specific approach to this in three steps.

1. A shift in mindset: Viewing economic security responses as an investment, not a cost

The first step for Top management is to change this mindset. As long as companies view economic security responses as simply a cost of complying with regulations, they will be forced to play catch-up. The first step is to redefine it as a strategic investment to increase business resilience and build a medium- to long-term competitive advantage, and to strongly communicate that vision within the company.

Reviewing supply chains and strengthening security measures may put pressure on profits in the short term and may seem counter-economic. However, they are essential for business continuity in an unstable world. This is why Top management must demonstrate strong leadership and lead the entire company, rather than leaving it up to the field staff, sending a clear message that "this is an investment in the future."

2. Risk classification and classification: Don't treat all risks the same

Even experts find it difficult to accurately predict specific geopolitical Events, such as "where the next conflict will occur." However, it is possible to categorize to some extent the risks of "how such Events will affect your business."

This is where risk "categorization" becomes important. It is inefficient to respond to all risks in the same way. Classify risks into four quadrants using the following two axes and prioritize your responses.

Source: Owls Consulting CreateFor example, for risks that have a large impact on business and a high probability of occurrence (top right of the diagram), careful preparations such as securing alternative suppliers and conducting simulations should be made, even if it means incurring costs. On the other hand, for risks that have a low impact and a low probability of occurrence (bottom left of the diagram), it is important to accept that you will respond after the fact (post-event response). This is how well-balanced risk management is required.

3. Three practical steps

So, where exactly should you start? Let's take practical action in the following three steps.

1. Visualization of your business and supply chain

The first step is to accurately understand the overall picture of where, who, and what are used to make your company's products and Service. In particular, it is important to identify whether the procurement of raw materials and parts is concentrated in certain countries or companies (so-called "choke points"). This "visualization" is the starting point for all risk management.

2. "Risk classification" for each product and technology

Once the supply chain is visualized, the next step is to categorize risks by product and technology. For example, the type and magnitude of risk can be classified as follows: "This part is highly dependent on a specific country, and a supply interruption would affect the entire production," or "This technology contains sensitive information, and there is a risk of it being leaked if it is managed at an overseas location."

3. "Business strategy decisions"

Finally, specific business strategies are determined based on the identified risks. For example, management-level decisions are made such as "For this high-risk business, we will scale back production in China and establish an alternative location in Southeast Asia," or "For this cutting-edge technology, we will switch to domestic development to prevent technology outflow." This does not necessarily mean "a complete withdrawal from China." Rather, calm and strategic judgment is required to determine how to engage with China based on the nature of the business and technology, such as keeping cutting-edge fields with a high risk of technology outflow domestically while continuing the production and sales of general-purpose products.

Summary: What should companies think about now in an era of economic security and geopolitical risks?

Finally, let me summarise the main points of this article in three points.

• Economic security is no longer someone else's concern. It is a business Issue for all companies to continue doing business in a volatile and uncertain world.

• The Japanese government is expected to accelerate its efforts in both legal reform and large-scale financial support, which poses a "risk" for companies in the form of regulations, but also an "opportunity" in the form of subsidies and new business opportunities.

• What companies need now is a change in mindset to view risk response as an "investment" rather than a "cost," and practical supply chain management based on "visualizing and classifying risks."

Addressing economic security is not a defensive obligation. It is about managing risks and strengthening business resilience in an era of change. This will be the source of competitiveness needed to thrive in the coming era.

How to view geopolitical risks as a management decision-making topic

As we have seen in this article, geopolitical risks and economic security should not be viewed as individual issues such as specific countries, conflicts, or regulations, but as "structural risks" that affect corporate value and business continuity in the medium term.

On the other hand, in the field of practice,

• Information is fragmented and limited to responding to news reports

• ESG, human rights, supply chains, and business strategies are disconnected

• There is no common framework between management and the field, and decisions are made by individuals

There are many cases where companies are faced with such Issue.

In the following white paper:
Geopolitical risks: "Risk type x ESG/management impact"
The explanation is based on the following organizational axis.

If you would like to organize your company's risks and how they will affect management decisions, rather than relying on fragmented information, please take a look.

Useful material: Geopolitical Risk and Economic Security - Intelligence Required by Japanese Companies, Supervised by Owls

If you would like to know more about the Service, click here

This useful resource focuses on explaining how geopolitical risks should be organized and perceived.

on the other hand,

• How can you understand your company's response status?

• How is it doing compared to other companies?

• How to explain this to management

For these reasons, a system is needed to continuously identify and organize risks.

"Geopolitical Risk Watch" is a service that regularly answers questions supervised by experts.
This Service visualizes your company's geopolitical risks and management structure, providing insights that can be used in management decisions and business strategies.

Geopolitical Risk Watch Service Site

reference:

*1) Reuters | Trump criticizes the UN in speech, opposes Palestinian recognition, calls climate change a "scam"
https://jp.reuters.com/world/security/EVOW66ZD4FJLXIHVRFKPIWGZEM-2025-09-23/