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How Geopolitics Shapes Policy Preferences of Firms: Experimental evidence from Japan

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  • Megumi NAOI
  • Banri ITO
  • Naoto JINJI

Abstract

We present some of the first evidence on how geopolitics shapes policy preferences of firms from a large-scale firm-level survey and experiment in Japan fielded during Trump’s 2025 tariff negotiations. The experiment varies scenarios of supply-chain disruption of critical goods across different causes (natural disasters vs. geopolitics) and the affected domestic actors (“your firm” vs. “Japanese citizens”) and elicits firms’ preferred policy among diplomatic negotiations, protectionism, and subsidies aimed at promoting diversification and domestic production. We find that geopolitical causes increase support for diplomatic solutions and reduce support for de-risking subsidies relative to the control condition (natural disaster). Contrary to the democratic peace conjecture, businesses support diplomacy regardless of alliance status or whether the disruption originates in the U.S. or China. A small minority (6%) support protectionism, especially when the disruption originates in a non-ally country or China. Overall, Japanese firms are not flag followers.

Suggested Citation

  • Megumi NAOI & Banri ITO & Naoto JINJI, 2026. "How Geopolitics Shapes Policy Preferences of Firms: Experimental evidence from Japan," Discussion papers 26016, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:26016
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