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Good morning. The US, UK and Australia yesterday said they were considering working with Japan through their Aukus security pact aimed at boosting deterrence against China.
The Aukus nations’ defence ministers said they would consider bringing Japan into Pillar II, the part of the partnership that focuses on advanced technology, ranging from artificial intelligence and quantum computing to undersea capabilities and hypersonic weapons.
“Recognising Japan’s strengths and its close bilateral defence partnerships with all three countries, we are considering co-operation with Japan on Aukus Pillar II advanced capability projects,” the ministers said in a joint statement.
The FT reported over the weekend that the allies would seek a way to recognise Japan’s importance but also take into consideration some reservations about its security and data protection systems.
The three Aukus allies did not invite Japan to join what defence experts had dubbed “Jaukus”. But the statement underscores that the allies hope to work with Japan in the future once Tokyo meets certain conditions.
Demetri Sevastopulo reports on Japan’s possible involvement in the security group — and what to expect when Japanese Prime Minister Fumio Kishida visits Washington this week.
Opinion: The belief in Tokyo is that Japan is living in dangerous times, in a dangerous region and needs to get closer to America in response, writes Gideon Rachman.
Here’s what else I’m keeping tabs on today:
Narendra Modi’s BJP is on track to win a third consecutive term in India’s general election later this month. Join FT journalists and outside experts as they discuss the implications for India and international investors. Register for the free online event here.
Five more top stories
1. Taiwan Semiconductor Manufacturing Co, the world’s largest chipmaker, has agreed to make its most advanced products in Arizona from 2028, a boost to the Biden administration’s efforts to bring semiconductor production on to home soil. The Arizona facility will be TSMC’s second in the US. The chipmaker will also increase its total investment in the US from $40bn to $65bn to build a third plant by 2030.
2. The US relationship with China is “on a stronger footing” than this time last year, Treasury secretary Janet Yellen said as she ended a six-day visit designed to ease tensions with Beijing. Yellen added that officials on both sides would meet in working groups next week in an effort to resolve US concerns about what they see as Chinese industrial oversupply — a charge that Chinese officials have flatly rejected.
3. China Construction Bank has filed a winding-up petition in Hong Kong against property developer Shimao in a rare case of a major state-owned financial institution initiating offshore legal action against a mainland Chinese real estate company. The petition from a prominent state-owned bank signals a new level of impatience among creditors as a cash crunch for property developers continues to worsen.
4. Elon Musk has predicted that new artificial intelligence models will surpass human intelligence by the end of next year, so long as the supply of electricity and hardware can satisfy the demands of the increasingly powerful technology. Read the rest of Musk’s bullish interview on X with Nicolai Tangen, the chief executive of Norges Bank Investment Management.
5. South Korea’s economy needs to adapt urgently to rising competition from China, the country’s finance minister has warned. Choi Sang-mok told the FT that South Korea had gone from being a beneficiary of Chinese growth to an economic rival and that his country needed to diversify its export-led economy.
The Big Read
Prices are rising, workers are demanding higher pay and the stock market is booming. Is Japan finally becoming a “normal” economy? Japan’s central bankers and government officials say it is at a historic inflection point, but the country still has to fix deep-rooted problems.
We’re also reading . . .
Chart of the day
European defence contractors have warned that reliance on Chinese cotton linters — used in gunpowder for ammunition — threatens their ability to expand output as western countries race to bolster Ukraine’s overstretched military. “There is a risk [that China could withhold linters for geopolitical reasons],” said Armin Papperger, chief executive of Rheinmetall, a leading ammunition producer.
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Take a break from the news
FT Magazine has a new advice column, and its agony aunt/uncle is none other than Robert Shrimsley. In a self-referential first instalment, he discusses the popular Reddit staple — “Am I the asshole?” — and offers a definitive answer to the question (spoiler: yes, you are).
Additional contributions from Tee Zhuo and Gordon Smith
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Source: Economy - ft.com
