Section 3 Economic Diplomacy

1 Overview of Economic Diplomacy

In the international community, as competition among nations arises, the balance of power in the international arena is changing in an increasingly rapid and complex manner, while uncertainty over the existing international order is growing. The COVID-19 pandemic caused a rapid deterioration of the global economy, but with its effects now waning, the global economy as a whole has shown signs of a gradual recovery. However, prices are currently rising sharply due to factors such as a recovery in demand and the impact of the situations in Ukraine and the Middle East. The outlook of the global economy remains uncertain due to volatility in financial and capital markets, ballooning governmental debt arising from COVID-19 countermeasures, rising maritime transport and other logistics costs, and energy and commodity costs that remain elevated.

Against this backdrop, Japan continued its attempts to expand and develop a free and fair economic order. Regarding the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Protocol on the Accession of the United Kingdom (UK), the first economy to join since the agreement entered into force, took effect for 10 countries, including Japan, in December 2024. Approximately two and a half years after the launch of negotiations, the Indo-Pacific Economic Framework for Prosperity (IPEF) has seen the IPEF Supply Chain Agreement, the IPEF Clean Economy Agreement, the IPEF Fair Economy Agreement and the IPEF Agreement enter into force. At the Organisation for Economic Co-operation and Development (OECD), Japan served as the chair of the OECD Ministerial Council Meeting for the first time in 10 years, and led discussions on the role of the OECD in co-creating a better future under the theme of “Co-creating the Flow of Change.” At the World Trade Organization (WTO), the cornerstone of the multilateral trading system, progress was made regarding negotiations on the Agreement on Electronic Commerce among like-minded members, and the text of the Agreement was published.

The Ministry of Foreign Affairs (MOFA) is also focusing more on supporting the overseas expansion of Japanese companies by promoting public-private partnerships, and has appointed “officials in charge of cross-border economic affairs” in several diplomatic missions in order to capture the vitality of the “Global South.”

Japan will continue to advance efforts to promote economic diplomacy, one of the priority areas of its diplomacy, with a focus on: (a) rule-making and efforts in international organizations to expand the free and fair economic order, which includes promoting economic partnership agreements and maintaining and strengthening the multilateral trading system; (b) revitalizing the economy by supporting Japanese companies' overseas business expansion and attracting investment and tourists from overseas; and (c) strengthening economic security.