Germany to seek closer ties with Japan amid supply chain tension

Germany to seek closer ties with Japan amid supply chain tension

18 Mar    Finance News, PMN Business, REU

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TOKYO — German Chancellor Olaf Scholz touched down in Japan on Saturday with six of his ministers, looking to strengthen economic ties with Tokyo as he considers reducing German dependence on Chinese raw materials amid global supply chain tensions.

Scholz and Japanese Prime Minister Fumio Kishida kicked off their first “government consultation” involving multiple cabinet members from both countries to discuss ways to secure economic security.

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Germany holds such consultations with a number of countries including France and China, but to hold its first such consultation with Japan is of high political and symbolic importance, German officials say.

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Kishida spoke of the “close and strong relations between our countries that is at a level not reached before,” at the opening of the meeting, while Scholz said he looked forward to discussing issues including global security.

Given Japan’s passing of a bill on economic security, Berlin hopes to learn about its raw material strategy and follow Tokyo’s lead on how to cut dependency on imports, a German government official said of the visit.

In a move primarily focused at China, Japan’s parliament passed an economic security bill last year aimed at guarding technology and reinforcing critical supply chains.

Trade between Germany and China rose to a record level last year, making the Asian country Germany’s most important trading partner for the seventh year in a row despite political warnings in Berlin about excessive dependence.

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Goods worth around 298 billion euros were traded between the two countries in 2022, up around 21% from a year before, according to data from the German statistics office.

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Japan is Germany’s second largest trading partner in Asia behind China, with volumes reaching about 46 billion euros in 2022.

“As democracies and as highly industrialized, export-oriented economies, Japan and Germany face similar challenges in shaping the digital and ecological transformation and strengthening the resilience of their economy in difficult geopolitical times,” Franziska Brantner, state secretary in Germany’s economy ministry, told Reuters.

Worried about Germany’s dependence, the center-left government is now taking a tougher line towards Beijing than its center-right predecessor and is exploring ways to wean itself off China’s economy. (Reporting by Sakura Murakami and Andreas Rinke in Tokyo and Riham Alkousaa in Berlin; Editing by Alex Richardson and Sonali Paul)

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