Industrial policy is back, not least in the UK, with a new Prime Minister entering office committed to a substantial reboot of the country’s economic model. Across advanced economies, geopolitical uncertainty, supply-chain restructuring, economic security concerns, intensifying technological competition, and the transition to net zero are prompting governments to rethink how economic development is organized. Yet what is striking is not simply the return of industrial policy itself. Increasingly, industrial strategy is becoming territorial.
Governments are no longer concerned solely with which industries to support. They are also asking where growth should occur, how regional assets can be mobilized, and how local institutions can contribute to national competitiveness. Industrial policy is therefore becoming a mechanism for reorganizing the geographical distribution of production, investment, innovation, and skills.
The UK and Japan provide an interesting comparison because both are territorializing industrial policy, but through markedly different governance models.
In the UK, the government’s most recent Industrial Strategy identifies eight priority growth sectors, including advanced manufacturing, clean energy, digital technologies, and life sciences. While these priorities are defined nationally, implementation is intended to be devolved. Through Local Growth Plans, mayoral leadership, and place-based economic governance, local and regional institutions are expected to translate national priorities into local development opportunities.
Industrial policy is therefore closely intertwined with the broader “Devolution” agenda. Strategic authorities, local governments, universities, and business organizations are expected to form local growth coalitions capable of mobilizing investment and coordinating economic development. In this sense, industrial policy is being used not only to support strategic sectors but also to strengthen regional governance capacity.
Japan’s emerging Regional Future Strategy reflects a rather different approach (see Japan FinTech Observer, 2026, for an English overview of the strategy). Policymakers have identified seventeen strategic sectors considered critical to future economic competitiveness, technological leadership, and economic security. These include artificial intelligence and semiconductors, Green Transformation, aerospace, biotechnology, defense industries, advanced mobility, digital infrastructure, and energy systems（see Ministry of Internal Affairs and Communications, 2026). However, the most distinctive feature of the strategy is its territorial dimension.
Rather than focusing primarily on individual sectors, the strategy seeks to organize industrial development through 10 major regional economic blocs (Cabinet Secretariat, 2026a). These are intended to function as economic regions bringing together infrastructure, investment, supply chains, innovation ecosystems, workforce development markets, and industrial assets at a scale that frequently transcends traditional administrative boundaries.
The emerging governance model can be understood as a multi-layered framework linking national industrial priorities with regional and local implementation (Cabinet Secretariat, 2026b):
- Strategic Industrial Cluster Plans (national level)
- Regional Industrial Cluster Plans (regional block and prefectural level)
- Local Industry Growth Plans (municipal and local level)
The objective is not simply regional development in the traditional sense. Rather, the strategy seeks to organize territorial economic assets around nationally significant industrial priorities, including semiconductors, artificial intelligence, Green Transformation, and advanced manufacturing. Regional clusters are intended to function as platforms for globally competitive industrial ecosystems, capable of attracting investment, strengthening economic security, and integrating regional economies into strategic value chains.
Both countries, therefore, recognize that industrial competitiveness depends not only on sectoral priorities but also on the spatial organization of economic activity. Yet the governance logic underpinning each approach differs significantly. The UK model emphasizes governance decentralization, local flexibility, and place-based leadership. National priorities provide a framework, but local institutions retain considerable discretion in determining how those priorities should be interpreted and implemented. Japan’s model places greater emphasis on strategic territorial coordination. Through linkages between national priorities, regional economic blocs, prefectural governments, and municipalities, policymakers seek to align investment, infrastructure, workforce development, innovation systems, and industrial clustering across multiple territorial scales.
Importantly, this should not be read as a straightforward contrast between a decentralized UK and a centralized Japan. In many respects, Japan possesses a more mature and institutionalized system of local autonomy than England. The key difference lies in how those territorial institutions are being used.
Japan is seeking to mobilize its established system of local and regional governance to support industrial transformation and cluster development. The UK, meanwhile, is attempting to strengthen territorial governance and industrial policy at the same time. Industrial strategy, therefore, becomes not only an economic program but also a vehicle for advancing devolution itself.
This comparison highlights a broader international trend. Industrial policy is no longer simply sectoral policy. It is increasingly becoming a form of spatial governance tool through which states seek to shape not only what economies produce, but also where development occurs and how territorial institutions contribute to national competitiveness. The UK is using its industrial strategy to strengthen territorial governance, while Japan is using territorial governance to strengthen its industrial strategy. These represent different institutional pathways toward a common objective. As industrial policy becomes increasingly territorial, will its ultimate success depend less on which industries governments choose to support than on the capacity of territorial governance to translate national priorities into sustainable regional prosperity and competitiveness?
Connect with the Author
Naoki Fujiwara is Vice Dean and Professor in the Faculty of Regional Development Studies at Otemon Gakuin University, Japan. He is also an Associate Researcher at the Institute of Political Economy, Waseda University. His research explores regional development, industrial policy, and place-based innovation. Before entering academia, he spent nearly two decades in the Osaka City Government, where he worked on economic development, urban planning, and international relations. He holds a PhD in Commerce from Osaka City University.
: Naoki Fujiwara 
Andrew Stevens is a Visiting Fellow at the Center for Urban and Regional Development Studies, Newcastle University, previously at University College London. His research specializes in urban and regional development policy within the broader context of politics and international relations, with a particular focus on how city and regional governments operate as political actors in complex multi-level governance systems. He holds an MA in Contemporary British Politics from Goldsmiths College.