The Latest Economic Security Trends 2026: U.S.-China Rivalry and Strategies for Japanese Companies

The Latest Economic Security Trends 2026: U.S.-China Rivalry and Strategies for Japanese Companies

Hello, this is Hamamoto from TIMEWELL. Today I want to talk about "economic security" — the new management challenge that Japanese companies are facing as we enter 2026.

"What specifically should we be doing about economic security?" "How is it different from FEFTA export control?" "Does it apply to a mid-sized company like ours?"

We hear these kinds of questions from many companies. While the term "economic security" has become widely known, not many people accurately understand its substance and its impact on companies. This article provides a comprehensive explanation of the latest trends and corporate response strategies.

Chapter 1: What Is Economic Security?

The Convergence of Economics and Security

Economic security is a policy domain that sits at the intersection of economic activity and national security. As globalization has advanced, supply chain disruptions and the leakage of critical technology have come to be recognized as risks that directly connect to national security.

Traditionally, security was understood as a "military" matter. However, in the 21st century, we have entered an era where superiority in advanced technologies such as semiconductors, AI, and quantum computing determines national power. Economic tools becoming instruments of security, and security considerations influencing economic policy — this mutual interaction is the essence of "economic security."

The Four Pillars of the Economic Security Promotion Act

The Economic Security Promotion Act, enacted in May 2022, is structured around four pillars:

Pillar	Content
Stable supply of critical goods	Strengthening supply chain resilience for critical goods such as semiconductors, pharmaceuticals, and rare earths
Safety of critical infrastructure	Prior screening for equipment introduction by operators in electricity, telecommunications, finance, and other sectors
Support for advanced technology development	Promotion of public-private collaborative research in AI, quantum technology, and similar fields
Non-disclosure of patent applications	Keeping patent applications involving security-sensitive inventions non-public for a certain period

Table 1: The Four Pillars of the Economic Security Promotion Act

As of 2026, all four of these pillars have entered full operation, and their impact on companies has become concrete.

Chapter 2: The International Environment in 2026

Intensification of the U.S.-China Technology Hegemony Competition

U.S. technology export controls on China were further tightened from 2025 through 2026. The scope of regulation continues to expand, covering semiconductor manufacturing equipment, advanced AI chips, and quantum computing-related technology.

Of particular note is the growing pressure on "allied nations to comply with regulations." The United States is asking countries with semiconductor-related technology — such as Japan, the Netherlands, and South Korea — to align their regulations. Japanese companies must comply with both Japanese and U.S. regulations.

China's Countermeasures

In response to U.S. regulatory tightening, China has also taken countermeasures. Export controls on critical minerals such as rare earths, restrictions on transactions with foreign companies in specific fields — business risks in the Chinese market are rising.

For Japanese companies, China remains an important market. However, balancing "earning from China" with "managing security risks" has become more difficult than ever before.

The Reality of Decoupling

Economic decoupling between the U.S. and China is steadily progressing. Particularly in certain high-tech fields, a situation is beginning to emerge where U.S.-led supply chains and China-led supply chains exist in parallel.

Japanese companies are being pressed to make strategic decisions about how to engage with both supply chains. The domains where "dealing with both" becomes difficult are expanding.

Chapter 3: Concrete Impact on Japanese Companies

Supply Chain Risk Becoming Visible

From an economic security perspective, many companies are being forced to re-examine their supply chains.

Points to confirm:

• Is there excessive dependence on specific countries or regions?
• Are alternative procurement sources secured?
• Is there a risk that critical component suppliers could be subject to sanctions?
• If procurement sources need to change, what are the switching costs?

In fact, cases are occurring where specific components become difficult to procure due to regulatory tightening, and where counterparties are added to sanctions lists. The perception of "we've been fine so far, so we're okay" no longer holds.

Obligations for Critical Infrastructure Operators

Operators of critical infrastructure in 14 sectors — including electricity, gas, petroleum, water, railways, aviation, telecommunications, and finance — must undergo prior screening when introducing or commissioning maintenance of important equipment.

The screening results may require changes to equipment or reviews of procurement sources. This may also have indirect effects for companies that transact with these operators.

Increasing Compliance Costs

Responding to increasingly complex regulations is a significant cost burden for companies.

Cost item	Overview
Personnel costs	Adding export management and security personnel
System costs	Implementing screening tools and management systems
Consulting costs	Consulting with and seeking advice from external specialists
Education costs	Employee training and education
Opportunity cost	Delays in business decisions due to regulatory compliance

Table 2: Breakdown of compliance costs

However, these costs should be understood as "insurance." Considering the losses that would result if a regulatory violation is discovered, the upfront investment is well worth it.

Chapter 4: Response Strategies Companies Should Adopt

Step 1: Visualize Risks

First, it is important to visualize your company's economic security risks.

Areas to analyze:

• Regulatory risk of products and technology handled (list controls, EAR coverage, etc.)
• Geopolitical risk in the supply chain (degree of dependence on specific countries)
• Sanctions risk of counterparties (Foreign User List, SDN List)
• Personnel and technology leak risk (deemed export regulations)

Using tools like TRAFEED to quantitatively assess counterparty risk is also effective.

Step 2: Build Your Framework

Establish an internal framework for addressing economic security.

Elements to establish:

• Dedicated department or responsible officer
• Coordination rules among relevant departments (export control, legal, procurement, business divisions)
• Reporting lines to senior management
• Decision-making process for contingency events

Management commitment is essential. Recognizing economic security as a "management issue" rather than "work for the responsible department" is the prerequisite for allocating the necessary resources.

Step 3: Continuous Monitoring

The environment surrounding economic security is always changing. It is not a matter of responding once and being done — continuous monitoring is necessary.

What to monitor:

• Regulatory amendment trends
• Sanctions list updates
• Changes in the international situation
• Movements of peers in the industry

Use multiple information sources: government agency announcements, industry association information, expert reports, and more.

Step 4: Scenario Planning

Conduct scenario planning to prepare for future uncertainties.

Examples of scenarios to consider:

• If U.S.-China rivalry intensifies further and exports of specific products to China are completely banned
• If a major supplier is added to a sanctions list
• If the supply chain is disrupted by geopolitical risk
• If a technology leak is discovered and you come under government investigation

Having considered response measures in advance enables rapid judgment in contingency events.

Chapter 5: Economic Security Support with TRAFEED

Counterparty Risk Assessment

TRAFEED provides cross-referencing not only against FEFTA-related sanctions lists but also against multiple sanctions lists such as the U.S. Entity List, SDN List, and EU sanctions lists.

From an economic security perspective, comprehensive risk assessment is important — not just cross-referencing against sanctions lists, but also considering the risk associated with the counterparty's country of operation and industry.

Continuous Monitoring

With TRAFEED, registering counterparty information enables continuous monitoring to be automated. When there are updates to sanctions lists or changes in risk information, alerts are issued.

This reduces the risk of "unknowingly having continued transacting with a party that has been added to a sanctions list" and enables management based always on the latest risk information.

Conclusion: The Ability to Adapt to Change

The economic security environment in 2026 is, in a word, "uncertain." There are many elements that are difficult to predict: the trajectory of U.S.-China relations, the direction of regulations, the evolution of geopolitical risks.

What is important in this kind of environment is "the ability to adapt to change." Visualize risks, build frameworks, gather information, prepare scenarios. Continuously doing these things develops the organizational capability to respond to any change.

Economic security is not a temporary trend. It will continue to be an important consideration in corporate management for the long term going forward. Building frameworks now is what will lead to competitive advantage in the future.

If you are troubled about how to respond to economic security, please feel free to reach out to us at TIMEWELL. We can provide support tailored to your company's challenges, from risk management using TRAFEED to framework-building assistance.

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References [1] Cabinet Office, "Overview of the Economic Security Promotion Act," 2025 [2] METI, "Trends in Security Trade Control," 2026 [3] CSIS, "U.S.-China Technology Competition," 2026

If you are reviewing export-control operations or classification workflows, download the TRAFEED product catalog (PDF) or contact us.

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