Japan Focuses on Five Segments in Economic Security Act

The sixteenth review of the trade policies and practices of Japan takes place on 27 and 29 May 2026. The basis for the review is a report by the WTO Secretariat and a report by the Government of Japan.

· Japan remained the world’s fourth-largest economy in 2025 with a highly developed, export-oriented and technology-driven industrial base.

· The economy gradually recovered from the COVID-19 period between 2022 and early 2026, while facing structural issues such as ageing population, labour shortages and weak productivity growth.

· Economic security became a central policy focus, influencing trade, investment, export controls and industrial policy.

· Japan enacted the Economic Security Promotion Act (ESPA) in 2022, fully operational by May 2024, to strengthen supply-chain resilience, protect strategic technologies and secure critical infrastructure.

· Critical goods identified under ESPA include semiconductors, storage batteries, critical minerals, cloud software and natural gas.

· Japan maintained strong support for the WTO-led multilateral trading system, with nearly 80% of imports entering duty-free under MFN treatment.

· Japan actively participated in WTO reforms, fisheries subsidy agreements and electronic commerce initiatives.

· Japan has 20 Regional Trade Agreements (RTAs) covering 24 partners across Asia-Pacific, Europe and the Americas.

· In February 2026, Japan signed a new RTA with Bangladesh and expanded trade cooperation with India and the United States on critical minerals.

· Japan and the United States signed a Framework Agreement in July 2025 under which most Japanese exports to the U.S. face a baseline 15% tariff.

· Merchandise exports reached USD 707.3 billion and imports USD 742.6 billion in 2024.

· The United States and China remained Japan’s major export destinations, while China continued as Japan’s largest import source.

· Japan’s outward FDI stock reached USD 2.1 trillion in 2024, equivalent to nearly 50% of GDP.

· The country continued fiscal stimulus policies, while the Bank of Japan ended negative interest rates in March 2024 and raised policy rates in December 2025.

· Japan’s tariff system remains complex, with more than 270 tariff rates and high protection for agriculture, leather and footwear sectors.

· Average applied MFN tariff stood at 5.4% in FY2025, while agricultural tariffs averaged 14.7%.

· Japan operates a highly digitalized customs system and fully implemented WTO Trade Facilitation Agreement commitments.

· Export controls were expanded to cover semiconductor manufacturing equipment, advanced semiconductors and quantum technologies.

· Japan strengthened foreign investment screening in strategic sectors such as semiconductors, batteries and advanced machinery.

· “Digital Transformation” (DX) and “Green Transformation” (GX) became key pillars of Japan’s economic strategy.

· The Act on Promotion of AI (2025) established an AI Strategic Headquarters and introduced a national AI Basic Plan.

· Japan allocated JPY 2.55 trillion (USD 17 billion) under ESPA to support semiconductors, storage batteries and critical minerals.

· The GX Promotion Act authorized JPY 20 trillion in transition bonds to finance decarbonization technologies.

· Manufacturing remained central to the economy, contributing 20.5% of GDP and 15.4% of employment in 2024.

· The automotive sector remained Japan’s largest export industry, accounting for 17.1% of merchandise exports.

· Semiconductors emerged as a strategic priority, accounting for 5.6% of exports in 2024.

· Japan’s services sector contributed 70.5% of GDP and 72.5% of employment in 2024.

· Financial sector reforms focused on mobilizing household savings, improving transparency and strengthening fintech regulation.

· Japan’s near-term outlook remains positive, with projected GDP growth of 1.3% in FY2026 despite global uncertainty and structural challenges.

[ABS News Service/28.05.2026]

The following documents are available:

Secretariat report

A detailed report written independently by the WTO Secretariat.

Executive summary

Full report

Government report

A policy statement by the government of the member under review.

Full report

Concluding remarks

· Chairperson's concluding remarks (available the day of the second meeting)

From the meeting

The Secretariat and Government reports are discussed by the WTO’s full membership in the Trade Policy Review Body (TPRB).

Background

Trade Policy Reviews are a WTO transparency exercise in which members' trade and related policies and practices are examined at regular intervals. They allow WTO members to ask questions, exchange views, and comment on each other's policies in collective discussions held in the WTO's Trade Policy Review Body.

All WTO members are subject to review. The frequency of each review depends on the member's share of world trade, with the largest traders being reviewed more frequently.