Japan Flags Vulnerability to China Supply Chain Constraints

(Bloomberg) -- Japan flagged its vulnerability to supply side constraints in China in a report showing that more than 1,000 import items are heavily dependent on its biggest trading partner.

China had a more than 50% share in 1,133 categories of imported goods, or 23% of the value of Japan's imports in 2019, according to a trade analysis by the cabinet office released Thursday.

The level of reliance was about twice as much as U.S. dependence on China, the report said.

The analysis comes as Prime Minister Fumio Kishida's government is expected to introduce an economic security bill later this month. The bill aims to strengthen supply chains, ensure the security of core infrastructure, enhance research and development, and tighten information disclosure on patents, Kishida said Friday in Tokyo.

“We will improve the autonomy of our economic structure and make our technology superior and essential in order to protect our security,” he said. “Economic security is an urgent matter and a key pillar” of the administration's agenda.

Japan's reliance on China was most pronounced in household electronics items such as personal computers, tablets and cellphones, again outweighing the corresponding levels dependence for the U.S. and Germany, the report showed.

“Kishida sees cutting reliance on China as an important theme,” said Koya Miyamae, an economist at SMBC Nikko Securities Inc. “As supply-side crunches continue, I think Japan will be trying to restructure its production capacity among its allies.”

While the report also showed that the overall level of reliance was little changed from a decade earlier, global supply snarls during the coronavirus pandemic have added to calls for more resilient supply lines and less reliance on China.