Japan Becomes More Vulnerable as US-China Tension Worsen


As tensions between the US and China worsen, Japan is becoming more vulnerable. As a result, more and more Japanese companies are getting better at gathering information. Companies in historically less vulnerable sectors, including Suntory and Mitsubishi Chemical, have hired risk executives and established new job titles and specialised teams in recent months, catching up with their counterparts in more politically sensitive areas.

Investors are asking Japanese companies to be more open about how they respond to and prepare for things like the war in Ukraine, problems with the supply chain caused by the pandemic, and rising tensions between the US and China over Taiwan. This is why they are taking steps to improve their risk management capabilities.


Kyohei Yabu, in charge of research at the Japan External Trade Organisation, says that Japanese companies often have trouble keeping up with changing laws in the world’s two largest economies. “The likelihood of Japanese companies getting caught between the two sides is increasing,” he warned.

According to research done by the consulting firm PwC Advisory in September, “geopolitics” was mentioned in the annual reports of nearly a third of Japanese companies with sales of more than $500 billion ($3.9 billion). This is up from 11% the year before.

“Japanese corporations have been slower to respond to economic security and geopolitical issues than US and European companies,” said Kazuhide Ueno, a lawyer at TMI Associates.

“Investors use corporate security measures like they do ESG [environmental, social, and governance] to figure out how much a company is worth,” Ueno said. His research shows that the number of Japanese companies talking about “economic security” in their annual reports has gone from 11 the year before to 27 now.

Suntory hired Go Eguchi, a US-based executive at trading firm Mitsubishi, as its first chief intelligence officer last month. According to a source close to the company, the group, which owns the US maker of Jim Beam bourbon whisky, recognised the need to strengthen its intelligence gathering after being warned of US regulatory challenges if it established a headquarters for a joint venture in a country considered too close to China.

Mitsubishi Chemical, which is Japan’s biggest chemical company, created the job of chief supply chain officer last year to keep an eye on risks in plant management, logistics, purchasing, and climate measures. The company says that part of the job will deal with future geopolitical issues, like China’s invasion of Taiwan.


Mitsubishi Chemical was in talks to buy coal from Russia when Moscow launched its full-fledged invasion of Ukraine last year. Within a few days, it had begun negotiations with Australian suppliers. Analysts said that the change showed how important leadership is when dealing with such risks.

The group also formed a risk management team. “As a worldwide firm, such a framework was always required, but we simply did not have it,” the company explained. Last year, Hitachi made the head of its finance department its chief risk officer. It also established working groups to examine crisis management and regional geopolitical issues.

Even though there isn’t a specific person in charge, the drink company Kirin has started talking about how it would handle a situation like a Chinese invasion of Taiwan. Businesses are paying more attention to geopolitical issues and economic security, which is in line with what the Japanese government is doing. In May, the Japanese government passed a financial security measure to ensure a steady supply of important parts like chips and batteries in the face of threats to the supply chain.


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