Diversifying economic risks : Japan’s economic hedging toward China

Abstract

International Relations has traditionally identified balancing and bandwagoningas the two predominant strategies adopted by states in responseto a rising power that threatens the status quo. However,recent academic debates have highlighted the emergence of hedgingas a middle-ground approach adopted by states facing a rising powerwith ambiguous intentions, particularly when the stakes are high.Economic hedging forms a critical element of this strategy, as it allowsstates to maximize economic benefits while minimizing the risks of dependencythrough trade and investment. We present an analyticalframework based on Kuik’s model, which focuses on the concept ofeconomic diversification in trade and investment. We test its validitythrough an analysis of the diversification initiatives of the Abe administrationand our central argument is that Japan’s diversification effort