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16 March 2013

Japan - Is it Different This Time?

Tag(s): Foreign Affairs
Last week I visited Japan with the Board of JP Morgan Japanese Investment Trust plc on which I have served for more than ten years. Each year we hold one of our Board meetings at the JP Morgan offices in Tokyo which enables us also to meet the manager and his colleagues, various companies in which the Trust is invested and a number of other economists and analysts who can give us a perspective of how the Japanese economy is developing, or not.

This year the big question for all of us was whether the landslide victory in December of the Liberal Democratic Party and the return to power of Shinzo Abe as Prime Minister has made a real difference. So far the commentators are generally agreed he has not put a foot wrong. This is in sharp contrast to his previous stint as Prime Minister in 2006-7 when the economy was firmly in the doldrums as it has been for much of the last fifteen years.

The Japanese change their Prime Minister with unseemly haste. Since the Second World War the average term of office has been just over 24 months. The Liberal Democrats have been in charge for most of that time but the party is riven with factionalism and it is rare for one politician to command such support that he can keep power for very long. More often than not there has been a new man in charge when our Board visits Japan so why the fuss this time?

Well, first, the Liberal Democratic Party was returning to power after a few years interlude by its opponents the Democratic Party and did so with a comfortable majority. Along with its coalition partner, the New Komeito Party, the LDP secured the two-thirds of seats needed to pass legislation rejected by the House of Councillors, the Japanese Diet’s upper house. Abe’s victory was the result not of his nor his party’s popularity but rather of the electorate’s loss of confidence in the Democratic Party.

Second, the election has given the Japanese a right-leaning government and a prime minister whose goals include scrapping the constitutional restraints on Japan’s military, revising the educational system to instil a greater sense of patriotism in the nation’s youth, and securing for Tokyo a larger leadership role in regional and global affairs. To many observers, Japan seems to be on the cusp of a sharp rightward shift.

Such a change seems unlikely. The Japanese public remains risk averse, and its leaders cautious. Since taking office, Abe has focused his attention on reviving Japan’s stagnant economy. He has signalled his intentions by nominating for the post of Governor of the Bank of Japan an individual who will target an inflation rate for the first time. The yen has dropped sharply against most world currencies restoring the competitiveness of Japan’s famous exporters and stimulating a corresponding rise in the Tokyo Stock Exchange.

Abe has apparently side-lined his hawkish and revisionist views, partly to avoid having to deal with divisive foreign policy issues until after this summer’s elections for the upper house. If the LDP regains a majority in that house as well thus giving Abe full control of Parliament he may then try to press his revisionist views. However, there would be severe consequences both at home and abroad. If for example he were to retract the apologies previously made for Japan’s conduct in the Second World War, as he has often said he would like to do, he would undoubtedly invite a crisis in relations with neighbouring countries like South Korea and China while facing strong criticism from its normally staunch ally, the United States. Relations with China are already tense because of the clumsy dispute over the Senkaku Islands. At home Abe would be roundly criticised in the press, lose his currently very high levels of support among the Japanese voters, and provoke opposition from among his own party.

It probably depends on what Washington does. If it continues to maintain a dominant position in East Asia and if the Japanese continue to believe in the United States commitment to protect Japan then Tokyo will probably maintain its traditional policy. But if Tokyo loses confidence in the US position it may be tempted to strike off on its own.

The US might like to see Japan strengthen its own defence capability just as it does with Europe and thus help with their budget issues. However, this might not go the way the US want as it could spark an arms race in Asia already affected by both the sabre rattling of North Korea and China’s desire to express itself as a superpower. The US need to steer a path between this Scylla and Charybdis, that is to encourage Japan to do more in its own defence but maintain the US position.

For many years pundits have been predicting that Japan would seek to resume its position as a major military power. In 1987 Henry Kissinger saw Tokyo’s decision to breach the ceiling of 1 per cent of GNP for defence spending, which had been its policy since 1976, as making it "inevitable that Japan will emerge as a major military power in the not-too-distant future.” But Japan’s defence spending only reached 1.004% of GNP and fell back the following year. Today the ceiling is no longer official policy but Tokyo still keeps its defence budget at or just below 1% and has reduced it every one of the last eleven years. However, even with its economic stagnation Japan has remained the second or third largest economy in the world and 1% of its GNP positions it as the sixth largest spender on defence in the world.

Article 9 of its constitution renounces the right to wage war but Japan has deployed a ballistic missile defence system, its navy patrols sea-lanes in the East China Sea and helps combat piracy in the Gulf of Aden, while Japanese troops have joined peace-keeping operations from Cambodia to the Golan Heights.

But Tokyo continues to interpret Article 9 as preventing it from the use of force in defence of another country and so it cannot participate more in regional or global affairs. I even met Japanese thinkers who hold it unfair that their treaty with the US obliges the US to defend Japan in the event of attack while imposing no such corresponding obligation on Japan.

Most Japanese are content with the current position. In a recent survey 81.3% expressed support for the alliance with the United States. Only 23.4% said that Japan’s security was threatened by its having insufficient military power of its own and this at a time when China sends its warships into Japanese waters and North Korea flexes its muscles with rockets directed at Japanese airspace.

In assessing the current Japanese political scene and the possible strategic course that Tokyo might follow, it is important to remember that a right-of-centre government and a polarised debate over international relations are nothing new in Japan’s foreign policy. Abe is one of the most ideological of Japan’s post-war prime ministers, but so was his grandfather Nobusuke Kishi, who was a cabinet minister during World War II and prime minister from 1957-60. Kishi wanted to revise the US-imposed constitution and reverse other post-war reforms just as his grandson wants to do over sixty years later.

But Kishi was also a pragmatist who distinguished between the ideologically desirable and the politically possible. As prime minister, he focused his energies on the latter, negotiating with the Eisenhower administration a revised security treaty that remains the framework for the US-Japanese alliance today. I believe that Abe is more likely to favour a policy that prioritises what Japan must do to survive and hopefully thrive in the world in which it finds itself.

There is another practical element that Abe faces. He has suffered from ulcerative colitis for decades which brings on chronic diarrhoea. When his previous administration fell apart from corruption and incompetence and led to the assumption of power by the rival Democratic Party, Abe and his supporters used this illness as the excuse for his needing to step down. In regaining power he credited a new miracle drug, Abacol, for sorting out his problem. To retain power he will need to demonstrate strong leadership and managerial competence in domestic affairs as well as boosting Japan’s image overseas.

My father was also a pragmatist. He fought against the Japanese in Burma and had some very uncomfortable close encounters with them. When I was offered the job of Managing Director of Sony’s Consumer Electronics business in the UK I asked him if he had any objections. He thought for only a few seconds and said that was all long in the past and we needed to look forward to the future and work together with these people. I took his advice, enjoyed ten happy and successful years working with the Japanese, and I hope they can find a peaceful way of regaining their economic dynamism while working well with their neighbours.

Source: Japan’s Cautious Hawks: Why Tokyo is unlikely to pursue an aggressive Foreign Policy. Gerald L. Curtis Foreign Affairs March/April 2013

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