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A little over a year has passed since Russia invaded Ukraine in February 2022. Economic sanctions against Russia by Western countries have once again dealt a blow to the global economy, which was still recovering from the adverse effects of the Corona disaster. In particular, energy and food prices rose sharply, accelerating inflation and hastening monetary tightening in the United States and Europe. As a result, governments and companies in emerging Asian economies that seek funding in foreign currencies such as the U.S. dollar faced an increased burden of interest payments as the Fed raised interest rates, putting the brakes on economic growth and causing some countries and companies to default on their debt.

In addition to problems of the war in Ukraine and inflationary measures restraining economic activity, there are serious concerns that the great power competition between the U.S. and China is accelerating the fragmentation of the global economy.
The trade war that started with the Trump administration has now expanded to a struggle for supremacy over technology and a confrontation over the Taiwan Strait, as trade, economics, and security are now fused together. If the U.S.-China confrontation becomes more serious or China's military and economic ties with Russia deepen further, economic and financial sanctions will be imposed on China in the same manner as against Russia.

However, China's importance to the global economy is far greater than that of Russia, and sanctions against China will inevitably have a fatal impact on the development of the global economy as well as Japan, the U.S., and Europe.

Although economic growth in Europe and the U.S. will slow down significantly this year 23, China is the only country that can be seen as the driving force of the world economy at present, and this is no doubt based on the precedent of China's leading the global economic recovery with a massive fiscal stimulus package during the Lehman Shock that occurred in the U.S. in 2008.

In the event that export controls and other measures are deemed necessary before serious disruption and economic sanctions are imposed, Japan should play a leading role in rulemaking through multilateral forum such as the Group of 20 (G20) to ensure that the targeted areas are limited to cutting-edge high-tech fields directly related to security and do not spread to the economy as a whole. We believe that ongoing dialogue and consultation with China could also reduce the military risks posed by China over the Taiwan Strait. I hope that Japan, as the chairing country, will show its hand at the G7 Hiroshima Summit to be held in May 2023, so that the U.S.-China great power competition will not develop into a decisive divide in trade, finance, investment, and human flows of tourism, academia, and commerce.