William Chou: Japan's New Era of Economic Security and Alliance Leadership

Japan's first female prime minister, Sanae Takaichi, is stepping into power at a moment of profound change for the Japan–United States alliance. For Dr William Chou, senior fellow and deputy director of the Japan Chair at the Hudson Institute, that relationship is entering what he calls "a new phase of strategic maturity" — one in which economic policy, national defense, and technological innovation are inseparably linked.

In an interview with JAPAN Forward, Dr Chou outlined how Tokyo's new leadership and recent joint initiatives with Washington are reshaping the contours of global economic security.

Beyond Security Alone

Founded by futurist Herman Kahn, Hudson Institute has long been unique among US think tanks for treating Japan not merely as an ally, but as a global power in its own right. "Most people in Washington still look at Japan narrowly, through the lens of security or trade," Chou said. "Hudson's approach has always been to understand Japan holistically, its politics, economy, and culture, as part of a living system of shared democratic values."

That philosophy, he explained, remains vital today. "Japan is deeply embedded in American life," Chou noted. "Our alliance may be the backbone, but economics and commerce are the lifeblood." From automobiles and cameras to semiconductors and supply chains, "you can't separate America's prosperity from Japan's role in it."

Chou's own journey into Japan studies began from curiosity and timing. "I didn't want to work on the Middle East," he laughed. "Everyone was studying China, but I thought: if we want to manage China, we need to understand Japan, because we can't do anything in Asia without our Japanese allies."

*In conversation with Hudson's Dr William Chou (©JAPAN Forward)*

A Bridge for the Next Generation of Leaders

Hudson's Japan Chair, led for two decades by Ken Weinstein, has become a key venue for both established and rising Japanese lawmakers. "We see ourselves as a window between Washington and Tokyo," Chou said. "When figures like (Shinjiro) Koizumi, (Itsunori) Onodera, or (Kimi) Onoda visit, it's not just about policy briefings, it's about mutual understanding. We explain how Washington works, and they explain how Japan sees the world."

He emphasized that Hudson's relationships in Japan transcend party politics, maintaining close ties with anyone who supports the Japan-US alliance and democratic values. Much of that foundation, Chou noted, was built through the institute's long association with Shinzo Abe, whose personal friendship with Ken Weinstein helped transform Japan's strategic outlook and deepen cooperation between Washington and Tokyo at every level.

Takaichi's Policy Vision: Faith, Security, and Growth

With Takaichi now leading Japan, Chou believes her administration will build on Abe's legacy while pursuing a pragmatic, results-driven agenda. He noted that she shares many of the same priorities as Trump: "pro-growth economics, strong defense, economic security, and secure borders." However, she approaches them with a distinctly Japanese sense of discipline and continuity.

Her first challenge, Chou said, is to rebuild public trust in government and the ruling Liberal Democratic Party amid growing frustration over rising costs. People, he explained, "want to see the government solving real problems — wages, prices, quality of life."

The second is to fuse economic and security policy into a coherent strategy. Too often, he said, Japan still treats defense, economy, and technology as separate fields. "That's not how the world works anymore, and Takaichi gets that."

The third and most urgent challenge lies in strengthening Japan's defense posture in an increasingly tense region. "East Asia is a dangerous place," Chou warned, citing the steady military pressure around Taiwan and the Philippines. He described Takaichi's decision to reach the 2% defense spending target two years ahead of schedule as both "realistic and necessary.

Economic Security and the Steel of the Alliance

A major test of Japan–US economic cooperation, Chou noted, is Nippon Steel's $26 billion USD acquisition of US Steel. "It's exactly what a healthy alliance should look like," he argued. "Nippon Steel brings capital and technology that will help revive the American steel industry. It's not about shutting down plants — it's about rebuilding capacity."

Chou argued that critics in the United States who frame the Nippon Steel–US Steel merger as a national security risk are missing the point. The US government's conditions, including the Golden Shield measures, had already been accepted by Nippon Steel in 2024, he noted, emphasizing that "both sides have an interest in a viable American steel sector."

He described the acquisition as a bellwether for future cooperation, particularly in industrial revitalization. Many Japanese firms, Chou explained, had initially worried that Trump might oppose large-scale foreign investment. "But what we've seen instead," he said, "is an administration that actively welcomes it, because Trump understands the US can't rebuild its industries without partners like Japan.

The ¥550 Billion Strategic Investment Fund

Chou has been closely following the ¥550 billion JPY (roughly $3.5 billion) strategic investment fund. This is a joint initiative to support projects in nine critical sectors, from semiconductors and shipbuilding to quantum computing and critical minerals.

Chou described the strategic investment fund as a turning point for the alliance. The initiative, he said, targets "the industries that will define national power for decades," enabling US and Japanese firms to pursue high-risk, high-impact projects that private capital alone would avoid.

He noted that Japan's Japan Bank for International Cooperation guarantees these ventures serve national interests through corporate participation or preferential access to resources. That, he added, explains why Takaichi appointed Minister Ryosei Akazawa, the successor to Yasutoshi Nishimura, to lead the Ministry of Economy Trade and Industry. "He negotiated the original deal," Chou said, "and knows how to defend Japan's interests as the fund expands."

Critical Minerals and a Fair Market Future

The conversation turned to rare earths, a domain where China's dominance gives it leverage over global supply chains. "Mining is one challenge," Chou said. "Processing is another — it's highly regulated at the state level in the US, which slows things down."

He cited promising examples of diversification, including a gallium project in Western Australia involving Sojitz, Alcoa, and Japanese investors. "But until we fix price transparency, with China controlling 90–95% of processing, it's impossible to know real market value," he warned. "We need fair pricing and long-term stability so businesses can plan."

Japan's New Diplomacy and Global Leadership

Finally, Chou described a more confident Japan emerging on the world stage, one that acts decisively rather than waiting for others to lead. He credited former Prime Minister Abe with "changing Japan's foreign policy forever, from passive to proactive." Former PM Fumio Kishida, he added, continued that shift through initiatives like the Asia Zero Emissions Community, which promotes a realistic energy transition built on US natural gas and Japanese technology.

Takaichi's leadership, he said, represents the next phase of that evolution. "Japan doesn't shout," Chou observed, "but it acts. And that quiet effectiveness has earned it enormous respect internationally."

For Washington, he added, the message is unmistakable: Japan is no longer a supporting ally but a co-architect of the free and open order. "The world's getting more dangerous," Chou concluded, "but the US–Japan partnership is becoming stronger, smarter, and more indispensable than ever."

Author: Daniel Manning