Japan should diversify suppliers and cooperate with the United States and other countries to protect supply chains as a way to improve economic security amid increased U.S.-China competition, Japan said in its annual trade white paper released Tuesday.

The document, authored by the Ministry of Economy, Trade and Industry, also stressed it is "essential" that thorough measures be taken to prevent sensitive technologies from being leaked.

The white paper said countries had been spurred to strengthen economic security after the coronavirus pandemic exposed the fragility of supply chains, citing the disruption of medical supplies as an example.

It further stressed the need to promote research, development and capital investment in technologies of strategic importance with the aim of strengthening domestic production and "securing a competitive edge."

To reduce the country's dependence on foreign manufacturers, the Cabinet approved a growth strategy earlier this month to enhance domestic development and production of cutting-edge semiconductors amid a global chip crunch.

Among international challenges are concerns that protectionist moves such as tariff hikes could become the norm and that countries offering industrial subsidies and other support could impact competition, the document said.

These issues should be addressed through rulemaking at the World Trade Organization and strategic collaboration between the public and private sectors, it added.

Touching on the sharpening focus on human rights and environmental issues in business activities, the white paper argued that "greater consideration will be required than ever before" for labor conditions and environmental pollution at sites where raw materials are sourced.

While warning of the risk of trade restrictions in the case of serious violations, the paper also highlighted that contributing to the resolution of such issues "could present new business opportunities."

Due to increased scrutiny by investors, firms listed on the Tokyo Stock Exchange are now required to adopt higher standards of governance, including addressing human rights and climate change.