TOKYO -- Just days before taking office in December 2012, Shinzo Abe told his close aides to develop a strategy for promoting Japan's infrastructure exports as a key component of his policy agenda.
"In this age of global competition, the government shouldn't hesitate to provide policy support to individual companies," Abe told a group of advisers including Takaya Imai, who now serves as the prime minister's chief secretary.
This marked the launch of Abe's brand of "new mercantilism," whose primary aim is to win contracts for major overseas infrastructure projects through close cooperation between the government and the private sector.
As he talked about the government's support of companies, Abe likely had in mind bitter memories of some of Japan's previous efforts to export its infrastructure technology.
Learning from the past
In December 2009, when the Democratic Party of Japan was in power, a consortium of Japanese and U.S. companies led by Hitachi failed to win a massive contract to build four nuclear power plants in the United Arab Emirates. They lost to a team composed mainly of South Korean companies that had never secured that kind of overseas nuclear power deal before.
While the Japanese government refrained from getting involved in the bidding, the South Korean government provided its full support to the consortium led by Korea Electric Power.
In South Korea, most industries have only one internationally competitive company. Japan, by contrast, has an abundance of strong players in numerous industries.
This is one reason the Japanese government has long been reluctant to focus its policy support on specific companies. Such an attitude, though not unreasonable, likely cost Japan the UAE contract.
This setback prompted the government of then-Prime Minister Yukio Hatoyama to set up a council of ministers to boost Japan's exports of packages of infrastructure and services. The council decided to expand policy support to companies' investments in overseas infrastructure projects, while ministers concerned embarked on overseas sales drives for infrastructure exports.
But these efforts faced pushback from within the party, with some top leaders who had been campaigning for a ban on political donations by businesses and other organizations unwilling to help the DPJ build close relations with specific companies.
The situation changed dramatically when Abe took office.
Tadashi Maeda, senior managing director at the government-affiliated Japan Bank for International Cooperation, has played an important role in translating the prime minister's policy into concrete actions.
"For Japanese infrastructure companies, overseas markets are still unexplored territory," Maeda said. "The government and other public bodies need to get involved in individual projects to promote cooperation between the public and private sectors" to increase infrastructure exports.
To this end, Maeda has been introducing Japanese companies to overseas infrastructure investment opportunities and serving as a mediator to help companies form consortiums to bid for overseas contracts.
Maeda also worked for the DPJ government's infrastructure strategy, but he said he has seen a radical change in the political environment for his mission under the current government.
Japan won 16 trillion yen ($131 billion) worth of overseas infrastructure contracts in 2013, up from about 10 trillion in 2010.
Contracts to build nuclear power plants are particularly lucrative. They are estimated to be worth 500 billion yen per reactor and are usually accompanied by operation and maintenance services. Such deals represent a major opportunity for many of Japan's 500 or so players in the nuclear power industry.
In choosing which companies to support, the government has been taking care to avoid playing favorites.
For nuclear power projects, the government has mainly helped Mitsubishi Heavy Industries in Turkey, Hitachi in Lithuania and Toshiba in Kazakhstan. There have been no concerns about running afoul of rules set by the World Trade Organization.
Abe has made his commitment to his infrastructure export strategy clear. He has held talks or chatted with Indian Prime Minister Narendra Modi five times during the past year. On each of these occasions, Abe pushed India to adopt Japan's shinkansen technology for its high-speed train project.
The prime minister's next target is the U.S. market. The government is supporting Central Japan Railway (JR Tokai) in its bids to build a high-speed train line in Texas and a maglev train line connecting major cities on the East Coast.
But Japan is facing stiff competition in its infrastructure export drive, mainly from China.
In Indonesia, Japan lost to China in bidding for a contract to build a high-speed train line.
The next key train battle between Tokyo and Beijing is likely to be fought over the plan to build a high-speed rail line connecting Malaysia and Singapore.
"A U.S. move to adopt Japanese rail technology would have a great impact on emerging countries' decisions," a close Abe aide said, stressing the importance of supporting JR Tokai's American bids.
With China being Japan's main rival in infrastructure exports, the Abe government's campaign to promote exports of infrastructure technologies and services has serious implications for its diplomatic strategy as well.