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This is an audio transcript of the FT News Briefing podcast episode: Japan refocuses on semiconductors

Marc Filippino
Good morning from the Financial Times. Today is Tuesday, October 19th, and this is your FT News Briefing.

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Japan doesn’t want to be outmatched by high-tech competitors, so it’s refocusing its semiconductor prowess, and China’s hypersonic missile test has rattled the US.

Demetri Sevastopulo
The Chinese are becoming very, very technologically advanced, and the gap between the US and China is shrinking, and in some cases, China may be a little bit ahead.

Marc Filippino
But first, bitcoin could be coming to a broker near you. I’m Marc Filippino and here’s the news you need to start your day.

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Today on the New York Stock Exchange, we’ll see the first listing of an exchange traded fund linked to bitcoin, ETFs or funds that track an index or some other asset. And today’s listing is expected to be the first of many ETFs linked to cryptocurrency. Steve Johnson covers ETFs for the Financial Times.

Steve Johnson
I think the key thing here is this potentially opens the market up to a lot more investors. At the moment cryptocurrency largely have been bought by younger, more tech-savvy investors who are comfortable with the technology involved, comfortable with maybe the risk involved. This launch brings the accessibility of bitcoin into a regulated structure. For the first time, investors in their 401ks and their IRAs will be able to have an allocation to bitcoin, at least via the futures market, and it will be available. These ETFs will be available via a brokerage account in the same way as any ETF or shares at the present.

Marc Filippino
So, Steve, regulators at the US Securities and Exchange Commission have been, you know, pretty hard on cryptocurrency, but they did not block this listing. Why do you think they are allowing a cryptocurrency ETF?

Steve Johnson
I think they’re very comfortable with this particular structure. The bitcoin futures trade on the Chicago Mercantile Exchange, they’re regulated by the Commodity Futures Trading Commission, and the SEC seems very comfortable. That’s as a regulated product. This is fine. I imagine as well that they have increasingly come under pressure would say ETFs launched in a variety of other countries, including Canada. We’ve seen other vehicles been launched, such as the Grayscale Bitcoin Trust, a private trust. Obviously, a lot of people have invested directly in the cryptos themselves. So I imagine there’s a strand of thought that it’s better to provide a regulated product assuming that some people are going to invest in this whatever they do.

Marc Filippino
Steve Johnson is the FT’s ETF correspondent.

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The US intelligence and military community was stunned to learn about a recent military test by China. This past August, Beijing tested a nuclear-capable hypersonic missile that circled the globe before landing a couple of dozen miles from its target. Demetri Sevastopulo is the FT’s US-China correspondent based in Washington. He broke this story, and he joins me now. Hey, Demetri.

Demetri Sevastopulo
Hi, Marc.

Marc Filippino
So, Demetri, the way I explained it just now: is that more or less what happened or is there more to it?

Demetri Sevastopulo
There’s a little bit more. So basically, they secretly launched a rocket called the Long March, which is the rocket they use for all their space program stuff. But it carried something called a hypersonic glide vehicle into space lower orbit. It went round the Earth. It came down on its target and as you said, it missed. But what’s really interesting is that they seem to have tested two new capabilities. One is called fractional orbital bombardment system, which is very scary. But in a nutshell, what it means is you can send missiles over the South Pole, which is important because most US missile defences are geared towards missiles that come over the North Pole. And then the hypersonic glide vehicle and a way to think about that is almost it kind of flies like a space shuttle and that you can manoeuvre it and fly it and steer around things that then comes down into the Earth’s atmosphere and approaches its target.

Marc Filippino
So this hypersonic glide vehicle you’re talking about, is it a game changer?

Demetri Sevastopulo
Well, it’s not a game changer in the sense that it has pros and cons, but it does two things. First of all, it shows that the Chinese are making faster advancements in hypersonic weapons than the Americans assumed. But, you know, the Americans are also testing and developing hypersonic weapons, as are the Russians and even the North Koreans. So I don’t think it’s a game changer. It’s not a Sputnik moment from history, but it is another sign that the Chinese are becoming very, very technologically advanced and the gap between the US and China is shrinking. And in some cases, China may be a little bit ahead.

Marc Filippino
Demetri, what impact could this have on US policy towards China?

Demetri Sevastopulo
Well, I think first of all, it’s going to strengthen concerns among those in Washington who think that the US needs to do more to make sure that it stays ahead of China. But in the kind of a more broader significance, this technology or capability that they’ve tested means that essentially they can deliver a nuclear-capable missile to anywhere in the world, which means that more of the US is potentially vulnerable to a Chinese attack. Now that’s going to play into a debate that’s happening in Washington at the moment. The Biden administration is conducting what’s called the Nuclear Posture Review, which is something that Congress mandates that all administrations do to work out what its nuclear policy should be, how many nuclear weapons it should have and deploy. And I think that the revelations that China has made more developments in hypersonics is going to play into that debate and probably give more ammunition to those who are arguing that you shouldn’t reduce your nuclear stockpile and that you should actually modernise your nuclear stockpile much more quickly than has been done at the moment.

Marc Filippino
Demetri Sevastopulo is the FT’s US-China correspondent. Thanks, Demetri.

Demetri Sevastopulo
Thank you, Marc.

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Marc Filippino
In Japan, there’s a growing sense of crisis about the country’s vulnerability to competitive threats. Japan used to be the world’s leading microchip manufacturer. Eventually, it was taken over by the US and China. The country’s new prime minister wants to address this concern. So he’s created a new post. The FT’s Tokyo bureau chief Kana Inagaki spoke to Japan’s new Minister for Economic Security. His name is Takayuki Kobayashi.

Kana Inagaki
In our interview, Kobayashi said the economic security measures that he’s going to oversee are not directed specifically at China, but China is clearly relevant to why the role was created, since it is about how Japan will remain globally competitive. As you know, major economies such as Washington and Beijing wage technology wars and compete to build autonomous supply chains and chips and other areas of significance to national security.

Marc Filippino
So what did he say his priorities would be?

Kana Inagaki
He said his main priority is for the government to be able to identify the essential technologies that the country needs to protect and you know promote, to ensure that it remains both relevant and what he called “indispensable” to the international community. He believes that only then can Japan obtain technologies from other friendly nations to build, you know, self-sufficient chip supply chains.

Marc Filippino
And did the supply chain disruptions during the pandemic add to the sense of crisis. Was it like a like a wake-up call for Japan?

Kana Inagaki
Yes, it’s similar to what’s happening in the US and Europe. I mean, the global chip shortage caused by Covid-19 exposed Japan’s vulnerability in securing key technologies. What Japan is trying to do is not just to support the Japanese industries, but it’s trying to invite companies from overseas to help Japan build new supply chains. So in those cases, the government is planning to provide pretty generous subsidies to persuade these companies to come to Japan. But obviously other countries like the US and China are also giving pretty significant sums of money, so it’s going to be very competitive.

Marc Filippino
And one example of Japan working with overseas chipmakers is that big Taiwanese chipmaker TSMC that we’ve talked a lot about on the show, it’s actually planning to build a factory in Japan, right Kana?

Kana Inagaki
Yes. So the Japanese government actually succeeded in persuading TSMC, you know, the world’s largest contract manufacturer, to build a new fab in the country, and it’s considered quite a big coup. But Kobayashi was telling us in the interview that, you know, the success with TSMC is really just the first step, and they really need to keep on doing these kind of strategies.

Marc Filippino
Kana Inagaki is the FT’s Tokyo bureau chief.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

This transcript has been automatically generated. If by any chance there is an error please send the details for a correction to: typo@ft.com. We will do our best to make the amendment as soon as possible.

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