Geopolitics and Industrial Policy: The Revival of Japan’s Semiconductor Industry

Abstract

This study examines the revival of Japan’s semiconductor industry through a dual analytical framework: domestic supply-side policies and geopolitical strategy informed by game theory. Our study finds that Japan has successfully leveraged substantial subsidies—totaling approximately ¥4 trillion as of 2023, along with large-scale infrastructure upgrades, targeted policy interventions, and extensive international partnerships to reclaim a pivotal role in the global semiconductor supply chain, particularly in upstream segments such as materials and advanced manufacturing equipment. Empirical evidence confirms a net crowding-in effect of subsidies on private research and development (R&D) investment, especially in cutting-edge technologies and among small and medium-sized enterprises (SMEs) that often face financing constraints. Geopolitically, Japan’s strategy fully aligns with the U.S., as illustrated through formal game-theoretic models and comparative strategic assessments, though this stance remains sensitive to external variations and shifting global power dynamics. The research highlights the effectiveness of policies across multiple sectors and underscores the intricate interplay between geopolitical factors, industrial policy design, and long-term semiconductor development strategy.