Some Japanese officials, however, are anxious... to cooperate with US restrictions on semiconductor exports of chips to China | Japan

Recently, Japan's export controls on semiconductor manufacturing equipment have officially come into effect. This move is seen as in line with the pace of the United States, suppressing the development of China's chip industry and technology.

However, according to Reuters, some Japanese officials are feeling uneasy about Japan's joint efforts with the United States to restrict exports of products such as chips to China. They are concerned that the aggressive behavior of the United States may create obstacles for allies to coordinate and unnecessarily provoke Beijing, leading to destructive retaliation.

There are also comments pointing out that the Fumio Kishida government supports the United States in restricting the export of chip manufacturing equipment to curb China's ability to produce advanced semiconductors. The concerns of some Japanese officials highlight that this decision has not received full support in Japan.

Worried about intensifying relations with China

Starting from the 23rd of this month, the Japanese government will add export controls on 23 types of advanced semiconductor manufacturing equipment in 6 categories, including cleaning, film deposition, heat treatment, etching, testing, etc.

According to the Nihon Keizai Shimbun, in addition to 42 friendly countries and regions such as the United States, to export the equipment on the control list to other countries, you need to apply to the Ministry of Economy, Trade and Industry for permission, including China.

Japan's move is considered to be in line with the United States tightening its semiconductor exports to China, preventing advanced technology from flowing to China for military purposes.

However, the outside world has also noticed that Japan's approach is not entirely the same as that of the United States.

For example, in the statement of the United States announcing export restrictions on China in October last year, China was mentioned 20 times, while Japan chose to widely implement export controls on 160 countries and regions, without specifically targeting China.

For example, according to a Japanese government official, Japan has not adopted the US's "presumed refusal" licensing review standard and will still allow exports whenever possible.

"We feel a strange unease about the US approach," said an official from the Japanese Ministry of Economy, Trade and Industry. "There is no need to name a country, all you need to do is regulate a certain item.". The official added that Japan cannot sanction other countries unless they are involved in the conflict.

Some Japanese officials are concerned that the aggressive behavior of the United States may further intensify tensions with China.

A Japanese Ministry of Economy, Trade and Industry official revealed that government officials are also concerned that export controls against China will lead to destructive retaliation, such as banning the import of Japanese electric vehicles.

"What are the benefits of making others lose face, unless that's your goal," said the official.

The Chinese Ministry of Foreign Affairs responded to Japan's latest restrictive measures on the 24th, stating that it will closely monitor the impact of regulatory policies and resolutely safeguard its own interests.

China has taken "self-defense" actions against the suppression measures taken by some countries.

Last December, China sued the World Trade Organization for abusing export control measures to restrict the trade of chips and other products. In July this year, China announced that it would implement export controls on two key semiconductor manufacturing raw materials, gallium and germanium, starting from August 1st.

Although Japanese Minister of Economy, Trade and Industry, Yasumi Nishimura, stated that the export controls are aimed at cutting-edge technology, so the impact on domestic companies may be limited; However, according to Japanese media reports, many Japanese semiconductor manufacturing equipment is mainly exported to China, and there is great concern about the impact of policies on future performance.

Officials from the Ministry of Economy, Trade and Industry have revealed that the latest export control measures may involve 10 major Japanese companies, including Tokyo Electronics, Nikon, and Hitachi, after they take effect.

Analysts point out that given the weak demand in Japan's domestic chip market, government measures will have a negative impact on Japanese equipment manufacturers, damage the market development of Japanese companies, and reduce their competitiveness at the regulatory level.

According to Asahi Shimbun, China is the largest exporter of Japan's semiconductor manufacturing equipment industry. In 2022, 30% of Japan's semiconductor equipment exports to the world are to China, and the export value of semiconductor equipment to China far exceeds that of the United States. The report also stated that China is expected to develop its domestic semiconductor industry to compete.

Worried about the unity of allies being tested

Japanese officials are not only uneasy about this, but also concerned that the United States' actions may pose challenges to the unity of allies.

Reuters pointed out that although both the United States and Japan are concerned about China's development of advanced technology, they reached a consensus on "risk reduction" in response to China's so-called "economic coercion" at the G7 summit in May this year; However, in terms of export controls for chip manufacturing equipment, the "temperature difference" between the United States and Japan may test the unity of the two countries. Because if one party allows the export of certain equipment while the other party does not, the party that allows the export may gain a competitive advantage.

In fact, this policy difference has already affected the timely implementation of the established plan.

The United States originally planned to expand restrictions on chip exports to China in July, but now it is expected to have to be postponed until October.

Part of the reason is that the US is still coordinating with Japan to reach an agreement on a broader list of export restrictions.

A person familiar with the situation said that the US is still in negotiations with Japan, and the US needs to ensure that if the US blocks any exports, Japan will also block them.

Jim Lewis, a former official of the US Department of State and Commerce and a researcher at the Center for Strategic and International Studies, said he met with Japanese trade officials and believed Tokyo was committed to restricting the export of certain products.

Compared to bilateral consultations between the United States, Japan, and the Netherlands, it may be more difficult to coordinate among the three parties.

Last October, the United States introduced restrictions on semiconductor exports to China, and subsequently demanded that Japan and the Netherlands follow suit. After Japan, the Netherlands' export control measures will take effect in September.

Unlike Japan and the Netherlands, according to Kevin Wolf, a trade lawyer in Washington, the United States also regulates equipment and services that are not restricted by other countries.

For example, the United States may be able to go further than the Netherlands in restricting the supply of Dutch lithography giant Asma to certain Chinese factories. The United States can directly regulate Asma Company and further restrict its equipment exports, as Asma's lithography machines use American components.

Reuters believes that this difference may create a potential tense atmosphere within allies.

Lewis said that what can be safely exited and what needs to be prevented, each person's boundaries are slightly different. "This is the problem with everything."

Therefore, in order to make the regulatory measures of Japan, the United States, and the Netherlands compatible with each other, close coordination and cooperation among the three parties are needed.