Five Geopolitical and Geoeconomic Topics for 2023

Carried over from 2022 : Russian invasion of Ukraine

From energy prices to grain supply and demand, the course of the invasion of Ukraine, which began in February 2022, will likely have major implications for 2023. The war ending will be key to global economic recovery. But the Ukrainian government’s draft budget for 2023 ― submitted in September 2022 ― assumes a continuation of the war, and analysts see an early end as unlikely.

According to TAKAHASHI Sugio of the National Institute for Defense Studies, “A new international order will be created with the end of the war. How the war ends will be critical.” Whether the current deadlock continues or the situation escalates is the biggest issue for 2023.

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Industry’s eyes on semiconductors and batteries

JBIC’s AI-based analysis of 4 million news articles from 200 countries and regions around the world, revealed “semiconductor” and “battery” to be important keywords for supply chain resilience. In the U.S., concern over the semiconductor shortage has intensified following the pandemic, as evidenced by semiconductor export restrictions and the August 2022 enactment of the CHIPS Act to support domestic production.

According to the AI analysis, batteries, which are indispensable for electric vehicles, have also grabbed more attention since April 2022 following Russian invasion of Ukraine. Future global trends must be carefully watched in order to revive Japan’s once world-leading semiconductor and lithium battery industries.

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The future and impacts of China’s “post-COVID” economy

China’s “zero-COVID” policy, designed to thoroughly contain the spread of the coronavirus, is significantly impacting the lives of its citizens through strict lockdowns and other restrictions. Strong protests against this policy have been growing more active both within and outside China since November 2022.

This poses huge risks for the Chinese economy and for the global economy as well due to supply chain disruptions. On the other hand, if the Chinese economy recovers rapidly after the end of the zero-COVID policy, this could then lead to global shortages of energy, food, and other commodities. The world needs to prepare for changes in China’s COVID policy and the impacts that will have.

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Climate change and the new issue of “loss and damage”

While climate change response is becoming a priority in developed countries, many developing countries are unable to deal with a rapid transition from fossil fuels to renewable energy. Climate change issues are now inseparable from energy issues.

The most important debate at COP27 in 2022 was “compensation for loss and damage,” with it argued that developed countries, which had emitted huge amounts of greenhouse gases in the past, should provide developing countries with even more relief measures such as financial assistance. North-South conflict is expected to intensify in the run-up to meeting the 1.5˚C target by 2050.

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The geopolitical aspect of the U.S. political divide

Political instability is increasing in the U.S. with the divide between conservative Republicans and liberal Democrats intensifying with each passing year. Take inflation, for example. Republicans say that inflation is due to increased public spending in response to the pandemic, seeing it as the country’s biggest problem. Meanwhile, Democrats argue that the cause of inflation is Russian invasion of Ukraine and that climate change is a much more serious problem.

Inflation in the U.S. and the resulting economic policies affect Japan, too. So, it is important also to understand the background of the political division in the U.S. Geopolitical thinking can also be used to analyze domestic situations and public sentiment.

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