What role can Japan play in Asean’s future?

[SINGAPORE] Japan has been part of South-east Asia’s economic landscape for so long that its presence can seem almost permanent.

Japanese companies built factories, trained suppliers and helped create manufacturing centres from Thailand to Indonesia. For decades, they have been among the region’s most important investors and employers.

This can sometimes be taken for granted, even if it should not.

A “minus-two” world is emergent, with neither the US nor China able to provide an uncontested organising framework, requiring others to find ways to work with more partners.

At a recent Singapore-Japan forum, I posed the question of what role Japan can play in such a world, especially in relation to Asean.

For countries such as Singapore and for Asean more broadly, the challenge is not simply to choose between the major powers, but to preserve agency and widen the choices available to them. Japan can be an important partner in doing so.

More than a matter for diplomats and defence planners, it is increasingly a business question.

Competition across Asean

Chinese companies are now challenging Japanese companies in ways that would have seemed improbable a decade ago.

Already Asean’s largest trading partner by far, China now leads in investment too. In 2024, Japanese foreign direct investment into Asean was US$17.5 billion but China’s was slightly higher, at US$19.3 billion.

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The rivalry is especially visible in cars. Japanese manufacturers spent decades establishing dominant positions in markets such as Thailand and Indonesia.

Today, Chinese electric-vehicle makers are moving quickly, competing on price, technology and speed, while investing directly in Asean production.

In other sectors too, surveys by the Japan External Trade Organization show Chinese companies becoming increasingly prominent competitors across Asean.

Such competition can work in Asean’s favour, spurring investments that deliver more technology transfer, stronger local suppliers, better jobs, higher standards and deeper participation in regional supply chains.

But there are dangers. Geopolitics is increasingly entering the boardroom. The US is pushing for trusted supply chains in semiconductors and other strategic sectors.

Already a staunch ally, Japan’s current administration is drawing even closer to Washington across technology, energy and economic security.

The Trump administration is also pushing for nations to agree to keep countries out of supply chains if the US demands it – a move seen to be aimed at China, even if it is not explicitly named.

Yet China is already deeply embedded in Asean industries ranging from EVs and batteries to solar panels and digital infrastructure.

If these pressures harden, Asean could find itself divided between competing technological and industrial systems. That would be a poor outcome impacting resilience when countries should aim for more connections and diversification, not division.

Preserving choices in a bifurcated world

Japan can have a distinctive role in helping Asean navigate this new order.

Tokyo’s security alliance with Washington is fundamental, and will remain so. But Japan becomes more valuable to Asean partners when that alliance increases Japanese capabilities without limiting its other relationships in Asia.

Trade already demonstrates that this is possible. Japan has been central to both the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and Regional Comprehensive Economic Partnership.

One emphasises high standards; the other, importantly, includes China. Japan has therefore helped sustain both deeper rules and wider economic inclusion.

Technology will be harder. Japan and Singapore can work together in semiconductors, artificial intelligence, cybersecurity and digital infrastructure, while building deeper supply chains with Malaysia and other Asean economies.

But “trusted” supply chains should not automatically become closed ones. Wherever security permits, networks should remain interoperable rather than splitting Asia between American-compatible and Chinese-compatible systems.

Energy presents a similar test. Japan brings finance and expertise in liquefied natural gas, power grids, storage and new energy technologies. China is deeply embedded in solar equipment, batteries and clean-energy supply chains.

American and European companies have capabilities of their own. Asean needs access to all of them.

A regional power grid could become a practical demonstration of a cooperative and inclusive approach: diversified financing and technology, common safeguards and standards, but an architecture open to different partners.

Singapore has a particular interest in making this work. Singapore is closely connected economically to both China and the US, and will chair Asean in 2027. The Singapore-Japan Strategic Partnership now spans trade, technology, energy and security.

Together, Singapore and Japan can help build arrangements that widen Asean’s choices: regional rather than narrowly national supply chains, common technical standards, cross-border energy connectivity and quality infrastructure, and partnerships that include Asean companies themselves.

The relationship works both ways. Japan also needs South-east Asia as a market, a production base and a source of diversification, especially amid growing uncertainty around both China and the US.

Japan has reason to move quickly. Goodwill towards Japan in South-east Asia has accumulated over generations. But goodwill does not always translate into the choices businesses and consumers make.

A younger Asean consumer choosing an electric car, a digital platform or an employer will not automatically assume that Japanese quality and reliability outweigh Chinese price, speed or technology. Japanese companies will have to compete.

But Japan’s presence and role should not be measured only by market share, investment numbers or defence spending.

While remaining a close ally of the US, Japan can also work with China where interests converge – especially in creating regional public goods.

To help monitor Asian financial stability, Japan and China were once moved to establish the Asean+3 Macroeconomic Research Office.

The Asean Power Grid could be another example. Regional trade and supply-chain architecture can offer further opportunities.

Japan’s distinctive contribution would then be not simply to compete with China, but to help build a region in which competition does not require exclusion.

In a minus-two world, amid growing pressures towards bifurcation, helping Asean preserve more choices would be one of Japan’s most valuable contributions.

The writer is chairman of the Singapore Institute of International Affairs. He was a speaker at the 19th Japan-Singapore Symposium (Sep 10-11), which marked the 60th anniversary of relations between both countries.