Japan’s Finance Ministry: Japan’s Spending on Chip Industry Excessive; Economy Ministry Says Spending on Par With U.S., Europe, China

Data presented by Japan's Economy, Trade and Industry Ministry shows that the amount of financing the country has given to its semiconductor industry, in relation to its GDP, is on par with that provided by the US, Europe and China. This contradicts claims from Japan's Finance Ministry that the amount given was excessive. Currently, many governments are offering large investments to secure chipmakers, as they recognise the increasingly important role of semiconductors in technology and innovation. At a meeting of experts to discuss how to vitalise the chip industry, Japan's Economy Ministry presented data showing the percentage of financial assistance given by each country in relation to their GDPs. Japan has provided over ¥3.9tn, accounting for 0.68% of the country’s GDP. China’s spending accounts for 0.79% of its GDP, Germany’s accounts for 0.71% and the United States’ accounts for 0.50%. However, at a meeting in April, the Finance Ministry claimed that Japan had given 0.71% of its GDP, compared to the 0.21% provided by the United States and the 0.41% provided by Germany. The discrepancy in percentages resulted from differences in what was included in the calculations. The Finance Ministry focused on expenses such as plant construction, while the Economy Ministry also included preferential taxation treatments in its calculations. Regarding GDP, the Finance Ministry used the nominal figure, while the Economy Ministry used the real figure, which excludes changes in price fluctuations. Despite the differences, very few have objected to providing financial aid to the semiconductor industry, as the funding is expected to attract capital from the private sector. However, the Finance Ministry insists it is crucial for the government to select which industries and companies are eligible for government backing, and focus its resources accordingly. At the Economy Ministry’s meeting with experts, the panel members confirmed they will consider helping the Japanese chipmaker Rapidus Corp. to secure funds, as the company aims to manufacture the latest semiconductor chips domestically. Although details are still being discussed, the panel presented an option in which the government guarantees loans to Rapidus. Japan's push to revitalise its semiconductor industry comes as governments around the world recognise the importance of this technological sector. Semiconductors are critical for developing new products, from smart devices to autonomous vehicles. As such, many governments have offered financial incentives to attract chipmakers. China, in particular, has heavily invested in its semiconductor industry, as it aims to reduce reliance on foreign technology to fuel its growth. In recent years, Beijing has offered local chipmakers billions of dollars in subsidies and other incentives. However, this has sparked tension with the US, which is wary of China's push towards self-sufficiency and has imposed sanctions on some Chinese firms. The global shortage of semiconductors has also highlighted the need for governments to support the industry. Chipmakers have struggled to keep up with demand, with supply chain issues compounded by the COVID-19 pandemic. The Japanese government's financial support may help to alleviate some of the issues facing the sector, and attract new players to invest in this growing market
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