Leveraging Japan’s Appetite for U.S. Investment and Partnership in Pharmaceuticals and Biotechnology

Commentary by Makoto Tsujiguchi

Published January 13, 2026

The United States is the world's largest market for healthcare and pharmaceuticals, and a global leader in biotechnology research and startups. The opportunities and challenges in this sector make it a core area for U.S.-Japan cooperation, particularly on key policy issues related to supply chains and innovation. Some initiatives are already underway. For example, collaboration in securing pharmaceutical and biotechnology supply chains was featured in the Memorandum of Cooperation Regarding the Technology Prosperity Deal Between the Government of the United States of America and the Government of Japan, discussing the Technology Prosperity Deal announced during the U.S.-Japan summit meeting in October 2025. The Japan Bank for International Cooperation has launched the Japan Strategic Investment Facility, including pharmaceuticals alongside other strategic areas, as part of plans to implement the Japanese government's pledge to invest $550 billion in the United States by 2029. Japan's public and private sectors have demonstrated a resilient appetite for collaboration with the United States, responding flexibly to changes in policy and business environments. The two countries can leverage this appetite to jointly strengthen their economic security and competitiveness in three ways: building trusted supply chains, deepening the innovation ecosystem in the United States, and expanding opportunities in the Japanese market.

Trusted Supply Chains

Despite its strength in pharmaceuticals and biotechnology, the United States faces manufacturing challenges, including dependence on China for key inputs, which the National Security Commission on Emerging Biotechnology has identified as a national security risk. In response, the Trump administration has strongly promoted a return of manufacturing through potential tariffs, regulatory streamlining for domestic facilities, and public pressure on pharmaceutical companies to expand production domestically. In addition, the BIOSECURE Act provision was enacted in December 2025 as part of the National Defense Authorization Act. It prohibits the U.S. government from contracting with or procuring from biotechnology companies of concern. Now, companies are under growing pressure to conduct due diligence and restructure research and development (R&D) and manufacturing networks.

Japanese trends align closely with today's U.S. push to realign pharmaceutical supply chains. Since the Covid-19 pandemic, mounting pressure to reassess supply chains has quietly given Japanese companies time to prepare for-and commit to-investment in the United States, both in contract manufacturing of pharmaceuticals and in-house manufacturing capacity.

Regarding contract manufacturing, contract development and manufacturing organizations (CDMOs), specialized manufacturers with dedicated facilities and expertise, present a promising opportunity for Japanese companies. CDMOs play an increasingly important role, especially for smaller players, including startups. As demand grows for antibody drugs, mRNA vaccines, and cell and gene therapies, manufacturing has become more complex. The U.S. pharmaceutical CDMO market is expected to roughly double to around $83 billion over the next decade, driving active participation in the United States by foreign companies.

A flagship example is Fujifilm's $3.2 billion biomanufacturing project in North Carolina, which began operations in September 2025. The company plans to double its capacity by 2028, making it one of the largest biologics CDMO facilities in the country. The facility has already seen robust demand, including a $3 billion contract with Regeneron. It will create 1,400 new, highly skilled local jobs and partner with local community colleges to develop talent. Another example is Ajinomoto's 2025 acquisition of the Ohio-based gene-therapy CDMO Forge Biologics Holdings for about $545 million.

For in-house pharmaceutical production, Japan is also reinforcing U.S. supply chains in advanced modalities, next-generation therapies such as biologics and cell and gene therapies. Kyowa Kirin is investing up to $530 million in a new biologics drug-substance plant in North Carolina, scheduled to start operations in 2027. Takeda is investing $230 million to scale up its plasma-derived therapies facility in Los Angeles, California, and it has also announced plans to invest about $30 billion in its U.S. operations over the next five years.

Japanese companies' appetite for U.S. activity remains high, and trends suggest that U.S. investment will likely continue, reflecting in part the success of state-level promotion. For example, Shionogi has begun considering a new antibiotic manufacturing plant, and other companies are in discussions at the state level about additional CDMO projects. Going forward, the $550 billion U.S.-Japan strategic framework could help accelerate investment in these sectors. However, pharmaceuticals and biotechnology are not among the priority areas listed in the October leaders' fact sheet, which suggests that clarifying access pathways and promoting public-private coordination will be essential for Japanese firms to make effective use of the framework.

Co-Innovation Ecosystem

To accelerate innovation, robust R&D and faster commercialization, and real-world adoption are critical. The U.S. biotech ecosystem faces headwinds: Biotech venture funding is expected to decline sharply in 2025, and it remains hard for biotech startups to go public. Some experts warn of negative longer-term impacts from reduced research funding and lower policy and market predictability. Even so, with average discovery-to-approval timelines often exceeding a decade, companies invest and build pipelines with a long-term view of market dynamics rather than reacting to short-term policy shifts. Japanese capital plays important roles as a funding source and exit pathways for startups, and the Japanese government is also stepping up its efforts to support the expansion of Japanese startups in the United States.

Efforts by Japanese companies to embed themselves in the U.S. innovation ecosystem have remained especially active. In addition to their traditional commercial and clinical footprints, these firms have rapidly established open-innovation front-line bases and joined local communities in hubs such as the West Coast and Boston since 2023. New or additional offices have been established by companies such as Astellas, Meiji Seika Pharma, Kissei, Daiichi Sankyo, and NS Pharma. Incubators such as LabCentral or BioLabs also function as key gateways for them to connect with startups.

Corporate venture capital (CVC) is another tool to connect with the U.S. innovation dynamics. Minority investments through CVC are used not only for financial returns but also for strategic purposes such as deeper intelligence gathering and future partnership building. Takeda and Astellas have operated CVCs since the 2000s. More recently, Eisai and Ono Pharmaceutical established and formalized CVC functions in the early 2020s. In 2023, Chugai Pharmaceutical established the $200 million Chugai Venture Fund, which targets cutting-edge drug-discovery and enabling technologies, from treatments for complex nervous-system diseases to next-generation gene editing.

At the same time, Japan aims to become a source of startups, not just capital. For Japanese startups with groundbreaking early-stage technologies, entering the U.S. ecosystem offers access to a large market, efficient and abundant funding sources, talent and strong networks, and growth opportunities. The Japanese government has shifted course and will actively support Japanese startups moving into the U.S. market until domestic market conditions are fully prepared for startups' scale-up, intending to double private investment in drug-discovery startups and create 10 emerging biotech companies with enterprise values above ¥10 billion ($660 million) by 2028.

Ministry of Health, Labour and Welfare of Japan (MHLW) has extended the Medical Innovation Support Office program, promoting ventures and academia to commercialize pharmaceuticals and related products into a three-year initiative for FY 2025-FY 2027. It will increase its U.S. presence and assist Japanese entrepreneurs and venture capitalists, including by running a newly introduced acceleration program, Direct Flight, in Boston, San Diego, and Philadelphia. In parallel, the Japan External Trade Organization utilizes its existing acceleration program, J-StarX, and the Global Acceleration Hub program to assist drug-discovery startups entering the U.S. market.

The framework may be complex, but MHLW's stronger engagement has broadened support for startups' overseas expansion. Recent examples illustrate the potential:

• RegCell, a Treg-reprogramming startup and a past participant in Direct Flight, relocated its headquarters from Japan to California in March to accelerate U.S. clinical development and fundraising.
• Cellaid Therapeutics, a hematopoietic stem-cell therapy company, plans to begin U.S. clinical trials following a recent $7 million financing round.
• Shinobi Therapeutics, a Kyoto University spinout focused on iPS-cell-based therapies, moved its headquarters to California in 2023 and raised $51 million in Series A funding.

Growing numbers of Japanese startups and entrepreneurs are entering and investing in the U.S. market, broadening and diversifying the bilateral innovation partnership. The policy aim of the Japanese government is to create more of such success stories and transform its own ecosystem, but sustained and sufficient commitment from both the public and private sectors will be essential.

Japan's Domestic Base and Opportunities for U.S. Companies

Like the United States, Japan faces challenges such as dependence on specific countries, including China, for pharmaceutical ingredients and limited domestic manufacturing capacity. Alongside enhancing collaboration with the United States and other partners in joint research, standards-setting, and supply-chain rebuilding, it is also building up its own drug-discovery and manufacturing capabilities to bolster resilience.

The Takaichi administration released its first Comprehensive Economic Measures to Build a "Strong Japanese Economy" in November, setting out policies for urgent supply-chain risk assessments and the establishment of stable domestic supply structures to ensure health and medical security. The government has positioned the pharmaceutical industry as a growth and strategic backbone sector and will mobilize resources to advance R&D and develop domestic manufacturing facilities, including more than \152 billion ($1 billion) in the FY 2025 supplementary budget. Looking ahead, under the Council for Japan's Growth Strategy launched by the Takaichi administration, the government is expected to develop measures to promote public-private investment in strategic areas such as drug discovery and biotechnology this year.

While reflecting a stronger economic-security orientation and a larger budget under the current administration, this approach maintains the direction proposed by the Council of the Concept for Drug Discovery Capabilities established under the Kishida administration in 2024. Concrete policies are already being implemented. The Ministry of Economy, Trade and Industry announced the selected recipients for its regenerative-medicine CDMO subsidy in July. MHLW boosted funding for drug discovery and stable supply through a ¥42 billion supplementary budget in FY 2024. The Pharmaceuticals and Medical Devices Agency (PMDA), Japan's pharmaceutical regulator, has worked to streamline the approval process, and review timelines for new active substances are now among the fastest in advanced economies, though this is not widely recognized.

Japan faces a pivotal moment to maintain and enhance its attractiveness as both a market and a manufacturing base. It is the world's third-largest pharmaceutical market. Although growth is relatively flat due to population decline, its universal health-insurance system provides nationwide access to medicines, resulting in defined daily doses per capita that are among the highest globally. Reflecting Japan's strategic weight, U.S. firms account for about 26 percent of sales of the country's top 20 prescription drugs, and the United States ran a pharmaceutical trade surplus with Japan of about $3 billion in 2024.

To further develop this business relationship, business leaders at the 62nd U.S.-Japan Business Conference in October urged the Japanese government to reform pricing systems that better reflect the value of innovation and to improve the transparency of drug-review processes. A new public-private council to enhance Japan's drug-discovery capability was launched in June and plans to discuss necessary measures. The PMDA opened its second overseas office in Washington, D.C., in November 2024 to promote bilateral and multilateral regulatory harmonization and to help U.S. companies navigate Japan's regulatory system.

Conclusion

Japan's commitment to strengthening onshore capacity in pharmaceuticals and biotechnology, from research through manufacturing, is not accidental; it reflects both a harsher global environment for pharmaceuticals and domestic drivers pushing Japan in this direction. Seizing this moment, sustained bilateral dialogue on regulatory coordination, supply-chain resilience, trade barriers, and startup acceleration efforts will further encourage Japan's private sector to deepen engagement. At the same time, uncertainty in U.S. life sciences policies-including tariffs, procurement restrictions, and shifts in research funding-could dampen corporate investment decisions, making policy predictability and clear implementation pathways even more essential to continue efforts to accelerate and deepen collaboration.

Makoto Tsujiguchi is a visiting fellow with the Japan Chairfrom the Japan Business Federation (Keidanren) at the Center for Strategic and International Studies in Washington, D.C.

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