Nikkei Asia: Taiwan and Japan are rumored to be in talks to sign a trade deal covering five major sectors by the end of the year.

Nikkei Asia quoted two senior sources on the 2nd as saying:Japan and to develop Taiwan comprehensivelytrade Agreement Similar to the “Advanced Trade Partnership Agreement” signed between the UK and Taiwan in 2023, which could be signed by the end of this year. If the Japan-Taiwan agreement is realized, it is expected to provide a strategic pillar for bilateral relations and break the impasse in Taiwan’s trade diplomacy.

One of the sources said: “The UK-Taiwan trade partnership agreement provides a precedent for Japan to follow.” This structure retains flexibility, allowing both sides to sign individual agreements for more sectors or industries in the future, which could not only reduce political sensitivities but also provide a buffer to Tokyo in the event of a strong response from China.

The draft being discussed by Tokyo and Taipei covers five key areas of cooperation: economic resilience and innovation, disaster reduction industry cooperation, digital trade, trade facilitation and sustainable development.

It is understood that disaster mitigation cooperation includes drone cooperation, which is mainly used to respond to natural disasters such as earthquakes, the sources said.

If the agreement is finalized, it will mark the deepening of relations between Taiwan and Japan under pressure from China and will also be a major achievement of President Lai’s administration. According to reports, the Lai government has faced repeated obstacles in trade diplomacy, and this year, a bullying scandal dogged chief negotiator Jenny Yang. One of the sources said the parties hope an agreement with Japan will prompt other countries, particularly Canada and the Philippines, to move forward on their own agreements with Taiwan.

Katsuya Yamamoto, director of strategy and deterrence programs at the Sasakawa Peace Foundation, a Tokyo think tank, said that in the past, Tokyo has been cautious about establishing a comprehensive institutional economic structure with Taiwan, partly due to the overall background of Japan-China relations. “However, the strategic and economic environment has now changed significantly.”

Yamamoto did not target any specific agreements, but pointed to the overall situation: “Economic security has become an important policy priority, and both Japan and Taiwan intend to strengthen the resilience of key supply chains, especially in the fields of advanced technology and semiconductors.” He said the signing of the trade agreement by the two sides can achieve not only practical economic goals, but also broader strategic goals by deepening cooperation between like-minded economies and reducing excessive dependence on any single market or supply chain.

David Parker, managing partner of Kamido Group, an economic risk and corporate advisory firm in Tokyo, said: “There is no doubt that Japan and its senior leaders regard Taiwan as an important economic security partner. This reflects the complementary capabilities of the two sides, and also the growing convergence of each other’s strategic interests and economic security policies.”

Parker said the largest products Japan imports from Taiwan are electronic products, especially integrated circuits; Taiwan imports a large number of integrated circuits, as well as chip manufacturing equipment, precision chemicals and processing materials from Japan.

He said: “These are mainly intermediate goods, and most of them are precision products that are difficult to manufacture, pass certification, and substitute. From this perspective, both Japan and Taiwan play important roles in supporting each other’s competitiveness and overall economic security.”

Yamamoto stressed that the Taiwan-Japan economic partnership is not targeted at any specific country, but is a natural step toward establishing a more resilient, diverse and secure Indo-Pacific economic order.