Industrial espionage that targets dual-use technology presents a severe challenge to governments – as the G7 recognized at its latest leaders’ meeting in Hiroshima last May.
Protecting technology that, by definition, is used in both private and military applications requires a complex regulatory framework. Sensitive information in need of protection is often originally the creation and property of private enterprises, which may not share the same level of awareness and protection against espionage as the government.
This problem of dual-use technology regulation is especially acute in Japan, which not only lacks a centralized agency dedicated to counter industrial espionage but also has a public sentiment environment that is hostile to such institutions.
With both traditional and non-traditional industrial espionage on the rise, Japan needs to enhance its intelligence capability to counter such threats. The Public Security Intelligence Agency (PSIA) is the existing organization that seems most suitable for the role and its capabilities need to be reinforced.
Why PSIA?
There are other Japanese government agencies that have dealt with industrial counterespionage before, notably the National Police Agency (NPA) and the Economic Unit of the National Security Secretariat (NSS).
As for the NPA, while it has the capability and manpower for the role, law enforcement and intelligence gathering need to be separated for fear of creating a police state.
If we look at the NSS and its economic unit, their main mandate is coordinating government security policy and they are not necessarily expected to execute individual operations and policies.
NSS is also staffed by government officials on loan from various other agencies. That means there are a limited number of in-house officials who can continue to work in the NSS for long periods of time – reducing its efficiency as an enforcement agency and setting up a potential obstacle to accumulating know-how on the operation of counter-industrial espionage.
Left standing after this process of elimination, the Public Security Intelligence Agency has features that make it suitable to serve as the chief operating body for industrial counterespionage.
The PSIA was established in 1952 and is responsible for protecting Japan’s public security, with its mandate set under the Subversive Activities Prevention Act and the Act on the Control of Organizations.
Its original focus on combating left-wing rioters gradually evolved to include counterterrorism in the 1990s. And now it recognizes itself as an agency that also collects information on economic security. This shift seems to be in accordance with the trend of security threats surrounding Japan.
However, although the PSIA continues to seek to enhance its role in the field of counter-industrial espionage, its mandate is insufficient because its foundation law has not been revised according to the role it seeks to play.
Its jurisdiction is unchanged since the introduction of the Act on the Control of Organizations of 1999. While building de facto capability is important, shoring up the PSIA’s legal mandate is also essential.
A proper legal mandate would enable the PSIA to conduct systemized self-evaluation of its operations according to the “plan-do-check-act” formula. As intelligence operations are by nature mostly inaccessible to outside regulation, making such a mechanism systematic is essential.
Also, the PSIA operates with the mandate of the Subversive Activities Prevention Act, which does not perfectly suit the nature of industrial counterespionage.
The act came into effect in 1952 and aims to prescribe necessary control measures on any organization that has conducted terroristic subversion as an organizational activity. The act sets penalties for terroristic subversive activities.
One of the limitations of the PSIA’s mandate under the act is that the agency can only monitor and restrict organizational targets. Industrial espionage is not always conducted at an organizational level and individuals are better at concealing their affiliations. The PSIA needs to be given a mandate, preferably in a separate economic security-related law, that includes such individual-level activities.
Finally, information sharing inside the government needs to be systemized. The important information gathered by the PSIA needs to be shared systematically with the policy-making side.
The PSIA’s counter-espionage intelligence can, for example, be used for national security assessments by the Ministry of Finance and other relevant ministries when assessing foreign direct investment cases. FDI is said to be one of the main routes for sensitive technology leakage.
At present systematic information sharing between the PSIA and other ministries such as MoF is not sophisticated. If a sharing scheme is not written into law, if sharing is dependent on mere customs and practices, the legality of information sharing will be unstable. Therefore, institutionalizing such interagency intelligence-sharing cooperation is important.
Reinforcing the PSIA will bring several benefits to Japanese economic security agendas. Firstly, with a more dedicated mandate for the PSIA, cooperation and trust-building with like-minded countries in the counter-industrial espionage field will be facilitated.
It has long been pointed out that Japan is lacking in its counterespionage capabilities, creating obstacles for international information sharing and joint R&D with other states. If Japan can gain the trust of its like-minded countries through the reinforcement of the PSIA, its situation and reputation will be improved, leading to more opportunities for intelligence-sharing.
According to a survey report by KPMG and Thomson Reuters, 7.2% of the companies responding answered that they had established specialized teams dedicated to economic security, nearly half of companies have not taken measures to get themselves ready to defend themselves against economic espionage.
Around 56% of the companies surveyed listed information evaluation and risk assessment as one of their challenges in relation to economic security. This indicates that a majority of Japanese companies require assistance in some form to operate in accordance with the changing legislation.
Fortunately, the PSIA has regional branches across Japan. While such regional offices have long served as information-gathering branches for counterterrorism, they could form a basis for close communication and advice for the business side as well, although it may take time to foster a proper relationship between the two sides due to the image of the PSIA as a counterterrorism agency.
Challenges ahead
The suggested policy change recommendations are likely to encounter some obstacles. Probably the most significant one will be related to whether the Japanese are open to discussing such reinforcement of intelligence capacity.
Compared with the people of many Western industrialized countries, the Japanese population has significantly lower tolerance for the state’s strengthening of public security. That’s partly due to memories of state use of the Special Higher Police and military police to suppress freedom of speech before and during the Second World War.
During the 2013 debate on the Act on the Protection of Specially Designated Secrets, the government faced unprecedented public opposition. The Japanese public and the opposition party focused on concerns regarding the people’s right to know, and very little time was allocated toward debating the specific types and nature of the intelligence that was the object of protection under the Act.
Already there has been a case in which economic security breach investigations have led to false accusations (the case with DeRight Precision Machinery Co, Ltd, also known as Ohkawara Kakohki Company).
The failure of the police in handling this case may actually encourage the government to enhance the capabilities of its intelligence agencies and strengthen coordination with law enforcement to prevent similar cases in the future.
Rei Koga is a PhD candidate in international political economy at the Department of European and International Studies, King’s College London (KCL). She formerly worked for the Cabinet Secretariat of Japan.
This article was first published by the Pacific Forum’s Young Leader program. It is republished here with permission.