New Japan export rules: Big shifts for tech & defense trade

Japan’s revised export control laws, effective October 2025, introduce stricter rules for high-risk and dual-use goods under its Foreign Exchange and Foreign Trade Act (FEFTA). Key changes include a new “core items” category, expanded due diligence for exporters, and mandatory licensing based on intent or METI notifications—even for exports to friendly nations.

On April 9, 2025, Japan unveiled a sweeping revision to its Foreign Exchange and Foreign Trade Act (FEFTA). These reforms, effective October 9, 2025, introduce critical changes to how Japanese exporters handle high-risk and dual-use goods, particularly in the technology and defense sectors. The move is widely interpreted as a strategic alignment with allied export control frameworks, particularly to mitigate circumvention by third countries and uphold global security standards.

For Indian exporters, importers, and technology-linked stakeholders, these changes carry deep implications.

 Understanding the amendments

1. “Core Items” Classification Introduced

Japan has introduced a new category of goods termed “core items.” These are:

• High-risk dual-use items not already covered under existing international control regimes.

• Goods that may be indirectly used for military, WMD (weapons of mass destruction), or surveillance purposes.

Exporters are now mandated to conduct due diligence and apply for licenses even if the goods are not explicitly restricted, provided there is suspicion or evidence of end-use misuse.

2. “Know” Condition for conventional weapons

A game-changing clause now requires exporters to obtain licenses if they know that the exported goods may be:

• Used in the development or manufacture of conventional weapons.

• Used in human rights violations or regional destabilization efforts.

This shifts the burden of responsibility to the intent and awareness of exporters, adding a subjective but crucial layer to compliance.

3. “Informed” condition for group A countries

In a notable departure from past practice, Japan now empowers METI (Ministry of Economy, Trade and Industry) to enforce controls even on friendly nations (Group A countries) like:

• South Korea

• EU member states

• Australia, and others

If an exporter is informed by METI that a transaction may result in unauthorized re-export to third-party countries (e.g., Russia, North Korea, or non-cooperative states), a license becomes mandatory—regardless of the country’s usual exemption status.

 Why It matters for global trade

 Impact on technology & semiconductor supply chains

• Japanese firms are major suppliers of chipmaking equipment, rare materials, and industrial machinery.

• These rules may restrict exports to Chinese and third-party firms involved in weapons or surveillance tech.

• Technology intermediaries and logistics providers must now reassess risk, even in transshipment scenarios.

 Extra scrutiny on AI, Quantum & cyber tools

• Although not explicitly named, technologies with dual-use applications (e.g., AI-powered surveillance, cybersecurity software, quantum tools) are likely to face stricter oversight.

 Implications for Indian businesses

 Importers from Japan

• Indian firms sourcing niche components like photomasks, rare earth magnets, sensors, or precision tools could face delays or denials unless end-use certifications are robust.

• Japanese suppliers may request detailed due diligence reports and customer background verification before shipping.

 Exporters to Japan

• If India-based exporters are indirectly part of third-country supply chains involving China, Iran, or North Korea, shipments may face increased scrutiny or blocks.

• Dual-use electronics, cryptographic software, or even drone components may now fall under subjective enforcement.

 Defense-Linked Firms

• Indian startups in aerospace, defense, or AI for border security will need to reassess their Japanese dependencies.

• Stronger documentation of non-military intent will become essential.

How businesses can adapt: Tech-led compliance

To navigate these emerging layers of complexity, firms must move beyond manual paperwork and implement AI-powered compliance infrastructure:

To manage the increasing complexity in export controls, businesses must transition from manual processes to intelligent compliance systems. Tools like dual-use risk engines help flag sensitive items based on HS codes or product descriptions. End-user risk models identify buyers or recipients who may be blacklisted or politically exposed. Dynamic export classifiers automatically categorize goods under evolving regulatory frameworks like Japan’s new “core item” list. Finally, smart license dashboards allow companies to monitor application statuses, compliance alerts, and communications with authorities like METI. Cloud-based integration ensures agility, speed, and proactive risk management.

Action checklist for Indian stakeholders

1. Map all Japanese-origin goods in your import/export portfolio against the new “core items” definition.

2. Request updated declarations and risk disclosures from Japanese partners.

3. Train trade compliance teams on the “know” and “informed” conditions to avoid inadvertent violations.

4. Avoid transshipment dependencies that may trigger suspicion under circumvention rules.

5. Automate documentation processes to ensure audit-readiness and real-time monitoring.

Final word: Security-first is the new trade mantra

Japan’s amendments signal a paradigm shift in export governance—from prescriptive controls to intent- and intelligence-based regulation. This aligns with similar moves by the U.S., Netherlands, and South Korea toward creating resilient and secure global technology supply chains.

For Indian businesses, the message is clear: proactive compliance is no longer optional—it’s strategic.

Whether sourcing chipmaking inputs or exporting software tools, Indian firms must build tech-augmented trade operations to thrive in this fast-evolving regulatory landscape.

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This article is authored by Liquidmind.ai