The Japanese Chamber of Commerce and Industry (JCCI) in Taipei released its annual policy white paper on Wednesday last week, which for the first time referenced cross-strait relations and bluntly pointed out that geopolitical risk factors have become a sticking point for foreign investment.
The paper further expressed concern over Taiwan’s energy transition, investment environment and domestic political instability, and offered concrete policy suggestions. It serves as a reflection of the current climate of unease around Taiwan’s business environment for Japanese companies.
Representing the JCCI, Shinichiro Soma, chairman and general manager of Marubeni Corp’s Taiwan division, presented National Development Council Minister Yeh Chun-hsieh (葉俊顯) with the white paper. With the theme of seamless cooperation and joint economic development, it suggested four major policy directions.
First was to optimize Taiwan’s investment environment and address energy, labor and talent shortages. Second, to protect energy stability and support the significant power demands of artificial intelligence (AI) data centers and semiconductor manufacturing plants. Third, stabilize Taiwan’s domestic and cross-strait situation to lower political risk and create a safe operational environment. Fourth, the paper called on the government to develop market resilience with more openness in trade systems.
The JCCI noted that Taiwan’s establishment of AI research centers is driving up energy requirements. Although decarbonization of energy production is a push in the right direction, it cited the decommissioning of nuclear power plants and insufficient supply from renewables as raising concerns over energy shortages.
Without a coherent policy agenda to address these risks, investor confidence might be seriously impacted.
The white paper did not shy away from addressing rising cross-strait tensions, and China’s increased tariffs and frequency of military exercises in relation to Taiwan. For Japanese companies, the risk of a “Taiwan contingency” is of genuine concern for investment evaluations.
It said the Japan-based parent companies of JCCI member enterprises would make their own calls on the situation in the long term, and hoped that Taiwan’s government would appreciate the uncertainty of this situation.
The JCCI further noted Taiwan’s internal political situation, a minority government without control over the legislature.
The recent wave of recall cases suggests a disconnect between central and local government policy agendas.
For Japanese companies that receive the green light from the top only to hit a wall at the local level, the situation directly impacts decisionmaking and long-term planning abilities. On this, the Ministry of Economic Affairs is yet to respond.
Last year, Taiwanese investment in Japan reached approximately US$5.5 billion, while Japanese investment in Taiwan was at just US$450 million. Although bilateral trade is increasing, it remains far from balanced. The Japanese government’s warning over a “Taiwan contingency” is only likely to cast further doubts for Japanese investors.
For some three years now, Japanese officials have alerted Japanese companies to the fact that they would need to make their own arrangements for the evacuation of personnel in the event of a Chinese strike on Taiwan. Japan’s constitution prevents the overseas deployment of its Self Defense Forces, and a lack of diplomatic relations means that it does not formally recognize the Taiwanese government.
This might complicate a potential evacuation operation. This state of affairs has not been explicitly confirmed by the authorities, but has nevertheless created a chilling effect.
If President William Lai (賴清德) fails to address the compounding challenges represented by the white paper’s warnings on energy, domestic politics and cross-strait relations, it might be difficult for Taiwan and Japan to deepen their economic ties.
This year’s white paper is not just a warning to Lai’s administration from Japanese companies, but a sign that the international business community’s perspective on Taiwan is beginning to take a cautious turn to heightened reservations.
Furthermore, faced with US President Donald Trump’s unpredictable mode of operating, policy blunders in cross-strait relations and energy production, and the opposition’s confrontational maneuvers in the legislature, Lai’s government is in desperate need of a change of course. If it fails to act, Taiwan’s international competitiveness is on the line.
Tang Shao-cheng is president of the Asia Pacific Research Foundation and a research fellow at National Chengchi University’s Institute of International Relations.
Translated by Gilda Knox Streader
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