According to a report by Reuters on October 20th, Japan is making every effort to revive its semiconductor industry. However, its latest investment trends indicate that Tokyo is being forced into the process of assisting the United States in building its own domestic semiconductor industry.
The semiconductor foundry GlobalFoundries, controlled by Abu Dhabi’s sovereign wealth fund Mubadala Investment Co., announced last week that Japan will invest up to $21 billion to build two chip factories in New York State, USA.
This investment is part of Japan’s previously promised $550 billion investment plan in the United States. In July 2025, Japan made a large investment commitment in exchange for reduced tariffs from the United States. According to the agreement between the two parties, the specific investment projects will be determined by Trump, not Japan.
Reuters frankly states that this indicates the costs that Japan is paying in order to maintain trade relations with the world's largest economy and its closest security partner, the United States.
Although Japanese officials have always emphasized that investments in the United States help promote Japan’s economic growth and strengthen the resilience of its supply chain, experts say that this investment commitment by Japan will not be very helpful in revitalizing the country’s chip industry, and its role in enhancing Japan’s supply chain resilience is also limited.
Japan is providing funding to the United States to expand semiconductor production capacity, but it's not guaranteed that they will obtain the advanced chip technology or domestic manufacturing capabilities they desire. Said Nori Chiou, Investment Director at White Oak Capital Partners Singapore.
This is not the first time that Japan has been controlled by the United States in the semiconductor field.
In the 1980s, Japan held a dominant position in the global semiconductor industry, but under pressure from the United States, it agreed to limit semiconductor exports to the US. Reuters pointed out that this period remains a source of pain for Japanese government officials to this day.
A source in the Japanese government said: “Ultimately, investing in the US is a measure taken to deal with Trump. Essentially, it’s a way of spending money to buy time, in order to maintain Japan-US relations.”
However, Japan wants to provide funding for the US chip industry, and it is also facing significant challenges.
The Japanese government needs to arrange financing for these chip factories. Other investment projects announced previously include investments related to oil and natural gas, as well as small nuclear reactor projects.
Japan Government Support International Cooperation Bank (JBIC) and commercial banks will provide loans, while Japan Trade Insurance Corporation (NEXI) will offer guarantees.
However, due to the high costs involved in raising large amounts of dollars, Japanese banks are reluctant to participate. Reuters previously reported that Tokyo is seeking assistance from American banks such as JPMorgan.
On the other hand, Japan itself is not financially wealthy. Japan's government debt as a percentage of GDP is the highest among developed countries. Investors are also worried about Prime Minister Yukio Hatoyama's fiscal expansion plans.
The Gao municipal government also plans to invest approximately 2.3 trillion US dollars in public and private funds in 17 strategic industries such as semiconductors and artificial intelligence, before the fiscal year of 2040.
The semiconductor industry is a sector that Japan focuses on supporting. Japanese chip company Rapidus plans to start mass-producing advanced chips in 2027, but this goal has been widely questioned by the industry. The Japanese government also provides subsidies to companies such as TSMC, Micron Technology, and Kyocera, in order to attract them to establish chip production bases in Japan.
While hoping to regain its native chip manufacturing capabilities, Japan also has to invest in supporting the American semiconductor industry. It seems that the Japanese government is also trying to find a balance between these two aspects.
As previously mentioned by a Japanese government source, if chips produced in the United States can be included in Japan’s semiconductor supply chain, then Japan does not need to insist that all chips must be manufactured domestically.
As for whether this investment in the US is worth it or not, Naito Kōsuke, a professor at Waseda University in Japan, gave a more straightforward assessment:
"Whether (the investment in chip factories) ultimately succeeds or not, Japan can only consider it as a form of taxation."
