Sanae Takaichi came to power promising a harder edge — on China, on defense, on reviving Japan's industrial base. But her flagship economic strategy reveals a leader who cannot say no. The plan designates 17 sectors as "strategic" and worthy of state support, a number so large it effectively means nothing is strategic at all.
The list reads like a greatest-hits compilation of every industry that has ever lobbied the Ministry of Economy, Trade and Industry: semiconductors, batteries, AI, quantum computing, space, biotech, advanced materials, robotics, and on it goes. Each sector has powerful domestic constituencies. Each can point to a rival nation — usually China, sometimes South Korea, occasionally the United States — that is outspending Japan. And so each made the cut.
The arithmetic of dilution
Japan's supplementary budgets for industrial policy have grown substantially since the pandemic, but they remain modest compared to the scale of American or Chinese state capitalism. Spread across 17 sectors, the money becomes symbolic rather than transformative. Taiwan's TSMC received more government support for a single Arizona fab than Japan is allocating to entire categories of its strategic list.
The contrast with successful industrial policy elsewhere is instructive. South Korea bet heavily on memory chips and displays in the 1980s and 1990s, accepting that other sectors would not receive equivalent attention. China's current semiconductor push, whatever its ultimate success, reflects a willingness to concentrate resources on a single obsession. Even the Biden administration's CHIPS Act, for all its political compromises, maintained a narrow focus on fabrication capacity.
Takaichi's advisers argue that Japan's technological base is broad enough to justify broad support. This is precisely backwards. A broad base is an argument for selectivity — for identifying the few areas where Japan can plausibly achieve global leadership and letting market forces handle the rest.
The Kishida hangover
The 17-sector approach is not entirely new. It extends and formalizes the ad hoc spending patterns of the Kishida years, when supplementary budgets became vehicles for satisfying every coalition partner and industry association. Kishida's "new capitalism" never cohered into a strategy because it was designed to avoid hard choices. Takaichi has inherited that political logic even as she claims to represent a break from her predecessor.
The deeper problem is institutional. METI's influence has waned since its 1980s heyday, but its instinct for comprehensive planning has not. The ministry still believes it can pick winners across the entire economy if given sufficient resources. Three decades of Japanese stagnation have not dislodged this conviction.
Our take
Takaichi has the nationalist credentials to make difficult decisions about where Japan should compete and where it should concede ground. She has chosen not to use them. The 17-sector strategy will produce some successful projects, generate considerable paperwork, and leave Japan's industrial position roughly where it started. Strategic policy requires strategy. This is a budget with a flag on it.
