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In the vibrant Monori Center of Budapest—an unofficial Chinatown teeming with Beijing’s electronics stores, Korean beauty boutiques, and the sounds of K-pop—Japan’s absence is stark. While South Korea and China have carved out deep economic and cultural footprints in Central Europe, Japan remains largely invisible. This is more than a missed commercial opportunity; it reflects a broader strategic miscalculation, writes Stephen R. Nagy in The Japan Times.
Japan’s long-standing foreign policy doctrine of seikei bunri—separating politics from economics—helped Tokyo navigate the U.S.-China balance for decades. Japan maintained strong trade with China while securing its defense through a U.S. alliance. But in an era of intensifying Sino-American rivalry, this approach is rapidly becoming obsolete.
FM Péter Szijjártó announcing the investment of the Japanese Nissin Foods Group in February 2025. Photo: MTI/Purger Tamás
China is Japan’s top trading partner, with $350 billion in annual trade, making Tokyo highly vulnerable to Beijing’s political retaliation. Simultaneously, a more transactional Washington, especially under a second Trump administration, treats allies like business accounts—demanding more defense spending and threatening tariffs.
Mount Fuji in Japan. Photo: Pixabay
Amid this pressure, Central Europe offers Japan an overlooked third path. Countries like Hungary, Poland, and Romania present open markets, technical talent, and welcoming political environments for Asian investment—without the geopolitical strings attached.
Yet, despite favorable policies and incentives, Japan’s presence is minimal compared to China and South Korea’s expansive economic, technological, and cultural engagements.
China has invested over €10 billion in the region, notably with CATL’s €7.3 billion battery plant in Hungary. Chinese influence also extends into academia via think tanks and Confucius Institutes. South Korea boasts major industrial operations and cultural dominance, evident in sold-out K-pop concerts and manufacturing plants.
Japan? Beyond legacy automotive firms and a few restaurants (often not Japanese-run), Tokyo’s engagement is negligible.
says Prof. Nagy.
This silence is baffling, given that Central European governments offer the same incentives to Japanese firms as to Chinese or Korean ones: generous tax holidays, infrastructure support, and fast-track permitting.
Strategically, Japan has much to gain. A stronger Central European presence would reduce Japan’s economic dependence on China, improve leverage with the U.S., and embed Japanese firms in resilient, EU-integrated supply chains. It would also support Tokyo’s push for greater strategic autonomy—something increasingly urgent in today’s geopolitical climate.
Cultural unfamiliarity, corporate risk aversion, and a lack of government-driven strategy explain Tokyo’s lag. Japanese companies often prefer familiar Asian or Western markets.
Unlike China’s Belt and Road or South Korea’s focused regional policies, Japan lacks a coordinated approach to emerging regions like Central Europe.
To remedy this, Professor Nagy proposes five initiatives:
Central Europe Investment Fund: A €5 billion government-backed fund to help Japanese firms enter the region, covering risks, research, and co-investments—especially in sectors like green tech and advanced manufacturing.
Innovation Hubs: Establish centers in Warsaw, Budapest, and Prague that combine business incubation, technology showcases, and cultural programming, staffed by bilingual experts and hosting 50+ events per year.
Strategic Dialogue: Launch a dedicated high-level forum between Tokyo and Central European capitals to foster long-term cooperation in technology, security, and economic policy.
Integrated Supply Chains: Go beyond basic investment by embedding Japanese technologies into full European production ecosystems, especially in EV batteries, semiconductors, and medical devices.
Strategic Think Tank: Fund a €50 million research institute in Budapest or Warsaw focused on connectivity, resilience, and innovation—staffed jointly by Japanese and Central European scholars.
Engaging Central Europe is not just good policy—it is a strategic necessity. Deepening ties there would enhance Japan’s global influence and reduce its vulnerability to both Washington’s whims and Beijing’s pressure. It would also affirm Japan’s role as a proactive, globally engaged power in the middle.
For Central Europe, Japan offers an appealing alternative: high-quality investment, advanced technology, and no political baggage. As U.S.-China tensions mount and third countries are forced to choose sides, the window for Japan to act is closing.
If Tokyo truly seeks strategic autonomy, it must make deliberate choices—and Central Europe may be its most overlooked yet valuable one, writes Prof. Nagy in The Japanese Times.
Via The Japanese Times; Featured image: Miniszterelnöki Sajtóiroda/Benko Vivien Cher