Supply Chain Diversification and Industrial Policies to Strengthen Economic Security

ABSTRACT Recently, global supply chains have been disrupted because of geopolitical factors and industrial policies induced by national security concerns. Under these circumstances, creating supply chain resilience and strengthening economic security are of great interest to researchers, policymakers, and business people. This study overviews the growing literature, both theoretically and empirically, on supply chain resilience and industrial policies and provides policy implications from the perspective of Asia, particularly Japan. The major means to create supply chain resilience include diversification of partners across like‐minded countries (friendshoring) and (re)location of production facilities in the domestic economy (onshoring). For effective friendshoring, policies should provide information on foreign risks and markets to the private sector. For effective onshoring, industrial policies should promote competition within, openness of, and knowledge diffusion in the target industry. To further strengthen the effectiveness of these policies for supply chain resilience and economic security, multilateral cooperation among Asian countries is suggested. JEL Classification: F13, F51