Japan’s Export Control on Quantum Technology

There is no doubt that Quantum technology (QT) has the potential for a transformative impact on international relations. Quantum computing (QC), once developed, will pose a significant threat to all communication through non-quantum methods, and its rapid data processing capabilities will lead to groundbreaking advancements in fields such as artificial intelligence (AI). Quantum sensing enables much more accurate and versatile measurement and detection.U.S. National Security Advisor Jake Sullivan identified quantum information systems as one of “three families of technologies that will be of particular importance over the coming decade.”In addition, export controls that are examined in this paper, represent a critical aspect in this dynamics regarding emerging technology including QT. Several countries have introduced export controls and investment restrictions on emerging technologies. In the U.S., there is a growing possibility of instituting export controls on QT alongside the outbound investment restrictions on QT.Such controls would mirror the measures that restrict Chinese access to U.S. semiconductors, AI, and other super-computer-related technologies.

Japan is a major player in QT because of its technological advancements and active collaboration with other leading countries. According to McKinsey & Company, Japan provides the 4th largest government investment in QT, following China, the U.S., and the E.U., and the 5th most impactful publications in the H-index following the E.U., China, the U.S., and the U.K.The major Japanese companies include Fujitsu, Toshiba, Hitachi, and academic and research institutions such as the University of Tokyo and RIKEN also play an important role in developing QT. For example, Fujitsu reported Fujitsu and RIKEN set an ambitious development goal. Thus, this article explores Japan’s QT policy, especially export controls on QT.

Japan's Current QT Export Controls

In January 2020, Japan released the Quantum Technology Innovation Strategy. Two years later, Japan published its Vision of Quantum Future Society (April 2022) outlining three goals for 2030: reaching 10 million QT users in Japan, achieving 50 trillion yen in QT production, and fostering quantum unicorns. The 2020 Quantum Technology Innovation Strategy proposes two pillars of international collaboration: strategic cooperation over R&D and export controls. Strategic cooperation has been represented in spades via measures such as　“Quantum Innovation for a Better Future” at the 2023 G7 Ministerial Meeting and the launch of a laboratory by the University of Tokyo and IBM for the world's first installation of a commercial quantum computer.

Regarding export controls, at present, only quantum cryptography falls under export license, alongside economic sanctions on Russia and Belarus within export approval. Chart 1 explains the Japanese export control framework. The Foreign Exchange and Foreign Trade Act (the FEFTA) governs both goods exports and technology transfer, aiming for “proper development of foreign transactions and maintain peace and security in Japan and in the international community through the minimum necessary control and coordination of foreign transactions.” The framework compromises two facets: (a) Article 48(1) / 25(1) and (b) Article 48(3) / 25(6). Put simply, Article 48(1)/ 25(1) covers export license for the maintenance of international peace and security such as the export of items under the Wassenaar Arrangement, and Article 48(3)/ 26(6) cover export approval for various domestic and international reasons such as economic sanctions. Exporters of items under designated categories are obligated to obtain permission from the Ministry of Economy, Trade and Industry (METI).

Chart 1 on Japan's Export Control Structure. Source: Author based on METI materials. Image description: A three-tiered triangle at the center focuses on Ministerial Order, Cabinet Order, and the Law. On the left is a text box titled Export License, FEFTA Article 48(1) and 25(1). To the right is a text box titled Export Approval, FEFTA Article 48(3) and 25(6).

1. Article 48(1) and 25(1)- Export license

The FEFTA Article 48(1) stipulates export controls on goods exports, requiring exporters of specific goods to obtain permission from the METI to “maintain international peace and security.” Similarly, the FEFTA Article 25(1) imposes export controls on technology transfer, requiring a resident and a non-resident involved in a transaction to obtain permission. These controls operate through two mechanisms; list controls and catch-all controls. List controls mean that the export and transfer of listed items require a license.  Catch-all controls cover other items if they are likely to be used for the development of weapons of mass destruction (WMD) and conventional weapons. Japan’s catch-all control does not apply to the 27 Group A countries. Countries under the UN Security Council Armed Embargo are subject to stricter license conditions than general countries (Charts 2 and 3).

Chart 2 on List Controls and Catch-all Controls. Source: Author based on METI materials. Image description: Blue-gray table with three columns and four rows. The first untitled column lists: items to be controlled; countries and regions; and license conditions. The second column is titled List Controls and the third is Catch-all Controls, further divided into WMD and Conventional Weapons. 

Chart 3 on Categories of Countries and Regions. Source: Author based on METI materials. Image description: Blue-gray table with three columns and four rows. The first column titled "Category" lists: Group A; Countries under UNSC Armed Embargo; and General Countries. Column 2 is titled "Countries and Areas" and groups lists of countries according to column 1. Column 3 is titled "Control". 

This export license primarily operates as an item-based control to implement multilateral export control regimes (MECR) and does not intend to target any specific country. However, the recent introduction of export controls on semiconductors in July 2023, in coordination with the U.S. and the Netherlands, deviates from traditional practice. Japan designated items related to semiconductors subject to export control without awaiting agreements within MECR. The METI aims to incorporate these controls into the Wassenaar Arrangement although it will not happen soon due to the difficulty in achieving consensus-based progress. At present, only quantum cryptography falls under export control. QT could be indirectly affected by controls on other listed emerging technologies such as laser and optical sensors.

2. Article 48(3) and 25(6)- Export approval

Under the FEFTA Article 48(3), the METI may impose the obligation to obtain approval on exports of goods “to maintain equilibrium in the international balance of trade, achieve the sound development of foreign trade and the national economy, sincerely fulfill obligations under the treaties and other international agreements Japan has signed, allow Japan to contribute to international efforts to achieve international peace.” The FEFTA Article 25(3) outlines the same approval systems for technology transfer. This export approval system serves as a tool to implement economic sanctions including those mandated by UN resolutions, as well as cooperative and unilateral sanctions targeting Russia, Belarus, Syria, and North Korea.  Within this framework, QT is subject to economic sanctions imposed on Russia and Belarus. In May 2023, Japan collaborated with the G7 countries and introduced export restrictions on emerging technologies, aiming to contribute to international efforts for peace. This covers “devices utilizing quantum properties such as quantum computers, as well as their auxiliary devices and components.”

Future Outlook

In light of the ongoing global discourse on QT policy, the Japanese government stands at a critical juncture in formulating the path forward for export controls. This paper’s analysis suggests that the government is not likely to solemnly resort to hard-law export controls until the necessity arises, driven by international cooperation efforts. Simultaneously, Japan needs to prepare for the anticipated implementation of export controls on QT when its necessity arises. The second section suggests a legal framework and the most feasible control out of the four possible options.

1. Japan's General Policy Orientation

Japan’s general policy orientation of QT will not gravitate toward hard-law export control very soon without a sincere necessity of international cooperation. The government would rather facilitate safeguard measures through communicating with companies and will supplementarily use the legal authority to block exports, if necessary. Certain international cooperation is already observable, exemplified by Japan’s collaboration on defense technology under the AUKUS security partnership and the prospective engagement in the Five Eyes.

First of all, it is obvious that inertia is not a viable course of action in light of Japan’s policy objective, “the promotion of national security through integrated implementation of economic measures.” On the other hand, unilateral or limited multilateral export control measures often fall short due to “backfilling,” whereby customers seek alternative suppliers who aren’t subject to export controls. International cooperation that is necessary to prevent backfilling by getting other countries to implement parallel controls takes time to materialize.

This policy orientation is also beneficial in that the nascent and rapidly changing status of QT development presents challenges for regulators in decisively designating or notifying high-risk transactions. For example, the Ohkawara Kakhoki Co. case highlights the limitations of the government's capacity to regulate emerging technology. In this case, the Japanese government and the Tokyo Metropolitan government were ordered to compensate for an unlawful investigation into the alleged illegal export of industrial products. This policy orientation facilitates the government’s understanding of companies’ concerns, helping the development of sound policy. Japan’s QT ecosystem is in its infancy with a limited number of involved companies and academic institutions. The Q-Star, a Japanese version of QED-C established in May 2022, serves as a promising channel between private and public sectors. In fact, Nikkei has just reported the METI is preparing to announce a new regulatory proposal that requires companies to report in advance to the METI on technology transfers in the fields where Japan excels such as power source and optical fibers used for QC.  This new type of framework will enable functional national security measures respecting emerging technology development.  

2. Possible Legal Framework for Export Control on QT

Given Japan’s policy orientation, the government also needs to prepare for the anticipated implementation of export controls on QT to collaborate with like-minded countries. This paper assesses the legal framework ahead of the implementation.

There are four options for implementing export control on QT in the current framework; (1) List control, (2) Catch-all control, (3) METI’s direct reach out under the catch-all control system, and (4) Export approval (Chart 2 and 4). In summary, option (1) is most feasible followed by option (2).

Chart 4 on Policy recommendation - legal framework for QT export control. Source: Author. Image description: Blue-gray chart with four main columns and rows. The columns are titled: Option; Details; Concerns; and Feasibility. 

Option (1) involves a procedure akin to that of semiconductors. It will require the addition of QT to the control list by amending the Ministerial Order under the FEFTA. Designated items would be subjected to an export license. Option (2) requires a more intricate process. The government needs to integrate QT in the Commodity-Watch-List for conventional weapons under the catch-all control, and require exporters to verify end-user and end-use conditions for all exports and transfers to countries, excluding those in Group A. The escalating severity of cyber threats may justify broadening the definition of conventional weapons to encompass QT, but this would necessitate a significant expansion of catch-all controls. Moreover, it will impose additional burdens on exporters. Now exporters are required to verify end-user and end-use conditions regarding non-UNSC (United Nations Security Council) arms embargoed countries which encompass 80% of all countries and are currently exempted unless individually reached out by the METI. Option (3) presents a unique challenge as the METI bears the responsibility of identifying and notifying suspicious transactions and imposing the obligation to obtain approval. Considering the future growth of the QT market, depending solely on the government’s case-by-case outreach may face limitations. Option (4) is deemed impractical due to the necessity for specific country designations. Naming each country will intensify geopolitical tensions and fail to address diverse risks not confined to a single country. Additionally, there may be concerns regarding alignment with existing precedents. Export controls on broader emerging technology may not carry the same level of political and diplomatic significance as economic sanctions in response to Russia’s territorial invasion and the UN resolution on conflict areas.

Conclusion

The advancement of science and technology is the cumulation of collective human endeavor, enriching our lives and shaping our future. Through the course of this paper, I have had the privilege of interviewing Japanese professionals in this field, and I am heartened by their shared dedication to the ultimate goal of enhancing Japan’s security and prosperity. While this paper focuses on export controls, promotion and protection are the two wheels of technology policy. I hope this paper will serve as an insight into Japan’s QT policy and opportunities for those outside of Japan to understand the system and the policy direction.

The views expressed in this article are those of the author and do not represent those of any previous or current employers, the editorial body of SIPR, the Freeman Spogili Institute, or Stanford University.

The author would like to express her gratitude to Professor Andrew Grotto of Stanford University for his guidance and generous advice on this article.