Japan views ASEAN as a potential strategic partner in the crisis-proofing of its economy, whose vulnerabilities such as an over-reliance on Chinese imports and domestic manufacturing were exposed during the Covid-19 pandemic and past natural disasters.

To this end, it will connect funds, technology, know-how and business networks with the increasingly digitalised ASEAN, Japan said in its annual economy and trade white paper released on Tuesday.

A senior official at Japan’s Ministry of Economy, Trade and Industry told The Straits Times: “We must construct a system that is hard to break by precisely locating the choke-points and procuring materials from many countries, while supply chain diversification will also enhance the security of food and energy.”

In the 618-page white paper, Japan said “divisive forces” that have become apparent in the Covid-19 pandemic, such as protectionist emergency measures like trade restrictions, are unproductive to overcoming the worst economic crisis since the Great Depression.

The white paper said: “What is clear is that a pandemic on a global scale cannot be resolved only by protectionist measures in one’s own country, despite the growing distrust of the existing multilateral framework.”

Japan, in its report, urged greater international cooperation to overcome a growing distrust of global agreements and institutions, as the crisis has made abundantly clear the vulnerability of international supply chains and the lack of resources to deal with a major health crisis.

It has encouraged Japanese companies to diversify their supply chains from China back home and to ASEAN, after a breakdown in its manufacturing lines when China enacted a wide shutdown in February, choking imports from China by 47 per cent from last year.

The ministry official said the policy was not born out of an anti-China response but that of a need for more flexibility in times of crises.

He added that it was unwise for Japanese companies to have manufacturing lines only in Japan, given how vulnerable the country is to natural disasters, citing the shock to supply chains during the Great East Japan Earthquake in 2011.

Thus, there needs to be a shift from a system that prides economic efficacy to one that is more crisis-proof, to avoid situations where a missing cog in the machine freezes entire industries like electronics and automobiles, the official said.

The white paper noted that Japanese affiliates procure over 75 per cent of vehicle parts from Chinese suppliers, while more than one third of its parts for ICT (information and communications technology) electronics equipment is also from its neighbour.

While admitting that its investment on the digital front was still inadequate, Japan said the Covid-19 pandemic provides an opportunity to ramp up investment in such assets.

With the value of ASEAN’s digital economy projected to surge with a rising middle class, Japan should work closely with the region to promote rules-based trade in the digital sphere, the white paper said.

More dangerously, amid an explosive demand for medical supplies, many countries had imposed export restrictions on items such as personal protective equipment and surgical masks.

At least 80 countries and regions had implemented export restrictions of some kind as of April, World Trade Organisation figures show.

This could widen a rich-poor divide and potentially worsen a crisis, with medical systems in the developing world much less ready to cope.

And without extending any help to such countries to control the spread of the coronavirus, any easing of travel restrictions in future could well lead to Covid-19 being again spread in countries that have already put a lid on the crisis.

The report also said it was not feasible for countries to maintain a full capacity of medical supplies for an emergency during normal times, but there has to be a business continuity plan to ensure stable supply that is not affected by international politics.

The ministry official suggested that an international inventory of such items could be set up.

THE STRAITS TIMES (SINGAPORE)/ASIA NEWS NETWORK