New Developments in Geoeconomic Analysis: "Power" and "Fragmentation" are the New Focus

Geoeconomics: An Old Field Finds New Life
Geoeconomics—the study of how economic and geopolitical interests intersect—is not a new concept <1>. As early as 1776, Adam Smith noted in The Wealth of Nations that “defense is of much more importance than opulence.” Between the 1920s and 1970s, many prominent economists laid the groundwork for this field by researching economic coercion, military competition, and critical bottlenecks in manufacturing supply chains (Mohr and Trebesch [2025]). In particular, Albert Hirschman’s 1945 analysis of the interaction between economic and political power is frequently cited in modern research <2>. While geoeconomics took a backseat during the era of liberal globalization, it has returned to the spotlight as a vital, "old yet new" field of study.


Key Issues: National "Power" and Global "Fragmentation"
In April 2026, a Geoeconomics Conference co-hosted by Johns Hopkins University and Georgetown University highlighted new developments in the field <3>. A major takeaway was the shifting role of "power" between nations and the increasing "fragmentation" of the global economy.
One significant shift is that "power"—traditionally a topic for political science—is now becoming a central focus in economics. The role of "Middle Powers"—countries that are not superpowers but still hold significant international influence—was also a major talking point. While there are still many challenges in coordinating these nations toward a rules-based order, they are increasingly seen as a third way to balance the rivalry between the U.S. and China.
Regarding "fragmentation," researchers are analyzing how the shift away from global cooperation toward conflict is affecting the world. Studies on the impact of export controls and tariffs are advancing rapidly. Analysts are now using corporate data and AI (specifically Large Language Models) to analyze text data and track company behavior in detail.


Implications for Japan
To maintain its balance between the U.S. and China, Japan must lead diplomatically as a core "middle power." To do this, Japan needs t to ensure its strategic autonomy and secure international indispensability. However, since it is still unclear exactly how “power” influences the economy, Japan must conduct deeper analyses to decide which sectors (such as specific industries) to prioritize. Furthermore, in a fragmenting global economy, Japan must identify where to reduce dependence and where to maintain mutual ties, all while finding ways to lower supply chain risks. It is essential for Japan to closely monitor research on "power" and "fragmentation" and apply these insights to future policy decisions.


Notes:
<1> Geoeconomics studies how international political rivalry (including war) shapes economic policies and outcomes and vice versa (Mohr and Trebesch [2025]). It can be broadly divided into two approaches: (i) offensive tools (such as economic statecraft and the weaponization of economic relations) and (ii) defensive measures (economic security, etc). These are further applied to areas such as trade and finance. More recently, the scope has expanded to include services and emerging technologies such as AI.
<2>Hirschman [1945] analyzed how economic coercion can serve as a tool of national power, based on the protectionist policies of the 1930s. His framework has also been used to interpret recent U.S. tariff policies (see, for example, “How to Make Sense of Donald Trump’s Tariffs,” Financial Times, April 4, 2025).
<3> Hopkins–Georgetown Geoeconomics Conference (HG2C), April 17–18, 2026: https://mediahost.sais-jhu.edu/saismedia/media/web/geoeconomics-conference-2026/index.html


References:
・Hirschman, Albert O. [1945]. “National Power and the Structure of Foreign Trade,” Berkeley and Los Angeles, Calif.: University of California Press.
・Mohr, Cathrin and Christoph Trebesch [2025]. "Geoeconomics," Annual Review of Economics, Vol. 17 (2025), pp. 563–587

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