Japan and Australia’s economic security blind spot

Misaligned views could stop one of the region’s most successful partnerships delivering the next step.

David Saultry

3 June 20264 min read

Two-way trade between Australia and Japan reached $107.8 billion in 2024 – a sure sign that the economic relationship is delivering for both countries. Australia is Japan’s primary energy guarantor while total Japanese foreign direct investment in Australia has reached $159.5 billion – the second largest of any country. Annual leaders’ meetings show the partnership is prioritised from the top down, with a swathe of regular economic dialogues between the governments as well as industry leaders.

By almost every measure, this is one of the most developed economic relationships in the Indo-Pacific.

Yet, as China increasingly deploys economic coercion against both Australia and Japan, a vulnerability remains. Respective industries have very different views of what constitutes economic security.

Japanese businesses consider economic security and derisking as their obligation, with companies such as Mitsubishi Electric and Denso establishing dedicated divisions to deal with the challenge.

Australian companies, by contrast, consider economic security to be primarily a political problem for the government and have been slow to diversify.

The partnership does not need more top-down architecture. It needs buy-in from the bottom up.

Economic security depends on trusted networks and the capacity to coordinate rapidly between governments and industries – this misalignment creates a liability. Tensions could creep into the relationship around responsibilities, resource allocation, and trade-offs.

This matters most in the sectors that define the partnership’s strategic ambitions, including critical minerals, clean energy, and advanced manufacturing. Australia’s resources paired with Japan’s processing expertise, capital, and industrial demand, offer an opportunity to diversify critical mineral supply chains, drive the energy transition, and move industries up the value chain. Beyond growth, both governments have been clear that the underlying rationale of their cooperation is to insulate both countries from weaponised economic dependencies.

It is precisely this kind of cooperation that China will seek to prevent by use of its market dominance. This means Japan and Australia will need to quickly adjust policies and shift resources as challenges evolve, all while managing costs across industries. This is difficult to maintain under pressure without a shared understanding of each other’s priorities and approaches.

Japan’s approach offers an opportunity to strengthen the relationship. Japan’s core economic agencies, including the Ministry of Economy, Trade and Industry (METI), are targeting 30% mid-career hires by 2030, while actively engaging industry to build economic intelligence. By circulating technical experts through these agencies, Japan is building a bureaucracy that understands industry’s operational realities, while industry develops an appreciation for the strategic imperatives shaping policy. The result is not just better consultation. It is a public-private partnership that delivers personal knowledge of each other’s competing priorities and reasoning, allowing people to rally around shared objectives.

Exchanges can align views across both industries, drawing the best from each approach (Buddhika Weerasinghe/Getty Images)

Where Japan’s model is building a unified economic agenda domestically, extending it bilaterally would do the same across borders. Japan and Australia should establish a reciprocal professional exchange program that embeds each country’s industry experts into the other’s relevant agencies, METI and the Department of Industry, Science and Resources (DISR). These structured periods would provide direct exposure to each country’s regulatory environment, strategic priorities, and decision-making processes. This immersion would change how professionals see their role and their understanding of their partner’s priorities, making them more receptive to policies that ask something of them, more proactive in managing shared risks, and more capable of identifying where the two sides can move together.

For Australian industry professionals, the experience offers insight into how Japan builds shared industrial responsibility between government and industry, while providing METI advice on Australia’s extractive industries. Japanese counterparts gain exposure to Australian policies that underpin critical inputs to Japan’s economy, while sharing their expertise in upstream processing and manufacturing with DISR. Over time, these exchanges can align views across both industries, drawing the best from each approach. That cannot be replicated by a conference.

A framework for deeper mobility already exists. The Japan-Australia Economic Partnership Agreement, in force since 2015, includes labour mobility provisions covering business visitors, intra-corporate transferees, and contractual services providers. This is inadequate for the challenges the partnership seeks to address. Designed to facilitate movement within existing corporate structures or the provision of a specific service, the agreement does little to build the understanding and trusted connections needed across agencies and industries. Achieving this requires a dedicated program that incentivises exchanges, streamlines visa and government vetting processes, and places professionals in relevant teams.

This year marks the 50th anniversary of the Basic Treaty of Friendship and Cooperation between Australia and Japan. Prime Minister Sanae Takaichi’s visit to Australia in May offered a moment to acknowledge how far the relationship has come and the immense benefits it provides. But the leaders’ Joint Declaration on Economic Security Cooperation also made clear the relationship needed to become even closer to respond to challenges over the next decade. This cannot be achieved without personal connections and a shared understanding. The partnership does not need more top-down architecture. It needs buy-in from the bottom up.

About the author

David Saultry

David Saultry is an independent consultant specialising in economic security and Indo-Pacific strategy.

Topics

Japan Australia Economy