Japan’s Hunt For Former Glory: Recommendations From A Leading East Asia Expert

Via.

It is hard to imagine that Japan, the nation many look to for cutting edge technology and pop culture coolness, may be waning as a world power. The revolving door of a government saw six different Prime Ministers in five years led to what some view as unstable domestic politics, and the recent natural disasters devastated the northeast coast of the country and caused a major meltdown at the Fukushima nuclear power plant that is still affecting the city. Japan held the distinction of being an economic powerhouse second only to the U.S. for decades until China surpassed them this year, and the country now faces its third “lost decade” its bubble popped. While tensions surrounding the U.S. base in Okinawa eased a bit this year as a result of Operation Tomodachi, some believe South Korea is becoming a more viable strategic ally for the U.S.

In Losing Its Edge? Evans Revere on How Japan Can Remain a Leader & America’s Closest Partner in East Asia, former diplomat and revered East Asia expert Evans Revere tackle these issues. Sitting down with ForeignAffairs.com editor Andrew Bast on December 1 at Japan Society, Revere draws on his experience to offer insights on how Japan can return to its former glory.

Evans J.R. Revere is a Princeton University graduate, a U.S. Air Force veteran and has gone on to become a top foreign affairs specialist, with 35 years of government service under his belt and being fluent in Chinese, Korean, and Japanese. He is currently the Senior Director at the global strategy firm Albright Stonebridge Group and specializes in advising clients concerning Korea, Japan, and China. From 2007 to 2010, he served as the President and CEO of the Korea Society in New York and notably was part of the “New Beginnings” policy study panel that came up with recommendations for improving Korean relations with the U.S. before President Obama met with South Korea President Lee Myung-bak. He has negotiated between the U.S. and North Korea and was responsible for the State Department’s effective response to the tsunami disaster that hit Indonesia and other parts of South Asia in December 2004.

--Sean Tomizawa

Wilbur Ross: Ups From The Market’s Downs?

Wilbur Ross. Via.

Yesterday Wilbur Ross, chairman and CEO of WL Ross & Co. and chairman of Japan Society, sat down with Council on Foreign Relations’ Benn Steil to talk Greed vs. Fear: Making Sense of the Market Crash (watch the full video). The discussion used the August 2011 crash as a springboard to look at the economic situations of the U.S., Europe, China, and Japan, and how they can improve and fix their respective problems.

Reporting from the event, The Wall Street Journal noted that "Ross has to squint to see the bright side":

Wilbur Ross isn’t optimistic. He says he’s not totally pessimistic, but the financier is short on happy thoughts.

Over the course of an hour-long talk Wednesday afternoon at the Japan Society in New York, Mr. Ross voiced just about only one view that was in the not-totally-depressing camp. Stock markets, he says, “have priced in a very bearish scenario. Unless things get truly bad, the worst is probably over for the markets,” he said. 

While WSJ goes in-depth about the more pessimistic points, there were several observations and key takeaways for overall improvement from the discussion:

● The U.S. has gone two years with practically no budget. The lack of Democrat and Republican consensus on what needs to be cut is due to both sides aiming at each other’s "sacred cows". The resulting political inertia is the U.S. economy’s worst enemy. It prevents strong leadership and a lack of bold responses to various crises. The preoccupation with presidential and congressional elections, along with the Tea Party phenomenon, further polarizes the political structure doing little to help the economy.

● Greece has been at the brink of default for some time. The European Union never had preparations if a member leaves voluntarily or is forced to leave, which belies that a single currency means a cohesive political and fiscal union. European nations need to stop applying small fixes to crises and instead apply big changes to the point of overkill as soon as they come up.

● China is doing fairly well for itself despite a major housing shortage. The nation’s recent high economic growth means housing demand can be supplied without too much worry of a crash. Ross said that because of the economic success China is having, he would rather bet on their banks than the European ones.

● The U.S. and Japan both have cash rich economies, but they are not as liquid as they could be. True liquidity should be attained to help stimulate their respective economies.

● Japan, while the response to the recent earthquake was incredibly quick, needs to continue focusing on rebuilding the Tohoku region in order to help revitalize the economy. The cultural avoidance of change is also not helping progress, leading to further depression and low growth. Due to the labor shortage, Japan needs to incorporate more women and immigrants into the workforce.

● It would be most logical for Japanese companies to make more foreign investments especially while the yen is so strong. However, there is seemingly no push for that move, unlike in China where natural resources are in small numbers so they have dipped into Africa, South America, and even the U.S.

● Finally, there is a self-correcting mechanism in the economy that will only activate when governments decide to be more decisive with their actions, be more willing to invest, and generally be much bolder.

--Sean Tomizawa

The East Asia Equation in American Monetary Policy

As developed economies including the United States try to crawl out of the effects of the financial crisis, China’s increasing influence on the global sphere has become a critical consideration in the equations of trade and finance. Daniel Franklin, Editor of The Economist’s World in 2011 opens his editorial with the following:

In a year that will delight numerologists (especially on November 11th, or 11:11:11), the most notable number will in fact be two. It will be a tale of two economies: a rich world struggling with a weak and jobless recovery, and an emerging world growing four times as fast. 

At home in the U.S., the Federal Reserve introduced a monetary policy called QE or quantitative easing in 2008 in an effort to revive the ailing U.S. economy. QE involves the government buying bonds to increase the money supply in the economy in order to stimulate lending and spur economic activity. A second round of pumping money into the U.S. economy ($600 billion), commonly known as QE2, was announced in November 2011. More recently, on January26th of this year, the Federal Open Market Committee (FOMC) reaffirmed its position to continue with the QE2.

While critics of QE2 point toward, among other things, Japan’s experience of implementing quantitative easing from 2001 to 2006 and whether or not it had any impact on the economy, there has also been a build-up of voices from abroad expressing concerns against the policy. Central to the concerns of China and the emerging world is the notion that a policy such as QE2 is an attempt to drive the dollar down.

Depreciation of dollar with respect to floating-rate currencies as a result of increased supply of dollars is a predictable result as the “rise in the volume of dollars [causes] the value of each dollar to fall relative to the floating currencies, whose volume has remained constant or risen more slowly”. Such an outcome worries China which has so far allowed only a slight appreciation of its currency (Renminbi, unit=Yuan) keeping its exports cheaper. The Chinese Prime Minister Wen Jiabao explicitly mentioned that China does not want more rapid appreciation of the Renminbi keeping in mind the potential adverse impact on Chinese exporters.

While the centrality of economic concerns in policy making is of the utmost importance, countries in Asia including Japan face an equally dominant concern. A special report on China’s place in the world published by The Economist links the twin concerns of Asian countries, namely economics and security, to the dual need that many Asian countries face, noting “naturally, Asian countries want to have it both ways: to resist China’s power but to continue trading with it; to benefit from American security but without sacrificing Chinese commerce.” The report also says China has risen as a chief trading partner for most of Asia and in the eyes of the economists and businesspeople, China getting richer means gain for everyone – the rest of Asia finding a bigger market in China and vice versa. However, from a security standpoint, the report states, “In a troubled continent like Asia, countries therefore look to America to save them from an increasingly powerful China—to ‘the water far away’ for protection from ‘the fire nearby’”.

In the specific case of the relations between Japan, China and arguably, the U.S., Professor Hugh Patrick, Director of Columbia’s Center on Japanese Economy and Business, notes that rapid growth in export has played a key role in Japan recovering from recession and that the increase in exports, for the most part, come significantly from “renewed growth and increase in demand of East Asian economies, especially China”. Patrick also notes that one of the major challenges Japan faces is how to deal with China. He states that the “two pressing issues that will define the relationship [between Japan and China] will be “[t]o what extent do Japan’s economic interests align with those of China?” and “[w]ill the two countries be able to agree on a common set of East Asian regional rules for trade, [Federal Direct Investment], or exchange rates?” The above questions, he argues, “raise issues that extend beyond economics, and, inevitably, the United States will be involved in trying to answer them”. On a much broader international level, the interconnectedness and interdependence between currency exchange rate, export and monetary policies such as quantitative easing are now culminating into a fear that a currency war may be imminent.


Akira Kojima, a Senior Fellow at the Japan Center for Economic Research (JCER) and Visiting Professor of National Graduate Institute For Policy Studies (GRIPS) articulates the current tensions and the resulting sentiment in Japan as follows:

In 2010, China overtook Japan as the second largest in the world in terms of total GDP, a position that Japan has held since 1968. How to come to terms with a rising and more demanding China will be an issue of increasing importance in Japan in 2011. Tension on the Korean peninsula is another of Japan’s worries, which, together with the China issue, is forcing Japan to reconsider the nature of its alliance with the United States. 

Echoing the changing dynamics of U.S.-East Asia relations in Davos at the World Economic Forum on 29 January was Prime Minister Naoto Kan of Japan. In his speech, Prime Minister Naoto Kan of Japan welcomed China overtaking Japan as the world’s largest economy and said, “the world faces major changes that can be likened to a tectonic shift both in the national security and economic fields”. Recognizing the importance of Japan’s relationship with China, he also noted that Asia is “the centre of major tectonic changes” and against this background the Japan-U.S. alliance “is becoming even more important” and should continue to play a key role in the Asia-Pacific region.

This Thursday, February 3, Japan Society presents the expert panel What Impact Will Monetary Easing Have on U.S. & Global Economies, featuring Nomura Securities’ top bank researcher Brian Foran and chief U.S. Economist David Resler, Columbia Business School’s Alicia Ogawa, and Financial Times’ U.S. managing editor Gillian Tett, the award-winning author of Fool’s Gold and Saving the Sun. Moderated by Bloomberg News anchor and reporter Kathleen Hays, the event is free to the public with pre-registration required.

A.T.

News Blast: Back to Earth

Soichi Noguchi waves goodbye to space via his Twitpic page.

 

Prime Minister Hatoyama Resigns

Eight months after taking office, Japan's Prime Minister Yukio Hatoyama announced his resignation on Wednesday. When the left-leaning, Hatoyama-led Democratic Party of Japan came into office last September, it was the first time in decades the parliamentary majority didn’t go to the center-right Liberal Democratic Party. He promised large-scale change in Japan’s foreign and domestic policies -- most notably to move a U.S. military base called Futenma  on the southern island of Okinawa. When the debate over the base stalemated, and it was decided to leave it where it was, lawmakers within the Democratic Party as well as the Japanese public called for his resignation. However, because the Democratic Party still has a commanding majority in Parliament, Hatoyama’s resignation won’t force another election. A new prime minister will be announced Friday.

American military presence is concentrated on the southern island of Okinawa where Futenma hosts about 47,000 U.S. troops. The base, a reminder of post-war American occupation, is a controversial topic for many Okinawans. On May 17th, a reported 17,000 protesters formed a human chain around the base. A good overview of the debate, with many interesting testimonials from Okinawans, can be found here, and an American soldier based in Okinawa gives his side here.

Astronaut Returns

Astronaut Soichi Noguchi returned to Earth on Wednesday. He stayed on the International Space Station  for 163 consecutive days -- the longest stint for any Japanese astronaut. "The air on Earth tastes good," he said when he touched down in Kazakhstan. "I can powerfully smell grass and soil." While in space, Noguchi took part in a number of experiments, and built and installed a robotic arm in Japan’s Kibo module. When he had a free moment, he posted incredible images from space on from his Twitter account, @astro_soichi.

Japan at World Cup 2010

Japan World played its penultimate warm-up match for the 2010 World Cup in Austria on May 31. They were defeated by England, 2-1, but remain upbeat for their prospects for the actual thing in South Africa. Goalie Eiji Kawashima said, "Everyone was a bit down in the dressing room but we have another warm-up (against Cote d'Ivoire in Switzerland on Friday) coming up and there is still time to turn things around." Follow Team Japan’s travails at their team blog.

Japanese Summer Blockbusters

The summer blockbuster season is in full swing in Japan as well. Big releases include: Shodo Girls (trailer), about a girls’rural high school calligraphy team; Zebraman 2 (trailer), Takashi Miike’s new movie about a cosplay-superhero in a future totalitarian Japan; and My Darling is a Foreigner (trailer), about a young Japanese woman who finds love with a scruffily bearded American.

Related, Japan's top blockbusters and indie smashes from the last 10 years land in New York City July 1 at Japan Society's fourth annual JAPAN CUTS festival of contemporary Japanese cinema. Tickets go on sale June 10!

Nobuyoshi Araki’s Bday

Bad-boy photographer Nobuyoshi Araki celebrated his koki, or 70th birthday, on May 25th. The Japan Times' Jae Lee sat down with Araki at his favorite Shinjuku bar. Araki speaks about the plastic dinosaurs he considers his alter-egos, the death of his cat, photographing Lady Gaga, and his favorite subject matter: women. Says Araki: "I see women as female gods who protect me from the God of Death." There’s currently an exhibition of Araki’s work at Taka Ishii Gallery in Tokyo -- check out some images here [link contains some explicit material].

N.O.

News Blast

Déjà vu in Japan’s agricultural policymaking

The Hatoyama administration has approved a fiscal 2010 budget containing ¥561.8 billion in expenditure on a new ‘individual household income compensation system’ (kobetsu shotoku hoshō seido) for farmers, to be launched in April. This income subsidy will compensate farming households for losses incurred as a result of higher production costs and lower market prices. The scheme will begin with a ‘model project’ targeting rice farms nationally.

Google's China exit means Asian success hinges on Korea, Japan

Google Inc.'s looming withdrawal from China adds to pressure to expand in South Korea and Japan, where the Web-search company has won a fraction of the popularity it enjoys in the U.S. and Europe. There is little doubt that Google's Chinese search engine will be shut down after a two-month standoff with Chinese authorities. Efforts to gain traction have paid off for Google elsewhere in Asia, including Japan, where it took the top spot from Yahoo Japan Corp. Google had 48 percent of Web searches in Japan in February, up from 40 percent a year earlier, according to ComScore. Yahoo had 43 percent.

S. Korea, Japan inch closer to shared perception of history

History scholars from South Korea and Japan have wrapped up a 30-month study aimed at reconciling widely differing views of their shared past, producing one modest agreement and reconfirming that the formerly bitter rivals have a long way to go before resolving all points of contention, including Japan's colonization of Korea. Still, the study was significant in that the two sides clearly identified their differences and provided the basis for future discussions that the neighboring nations hope will lead to a joint history textbook, South Korean researchers in the joint committee said Tuesday.

Japan-U.S. Security Treaty turns 50 years old!

Japan Society couldn't let such an important date pass by with dedicating an event to it. On January 19th, we hosted an entire panel of experts (including Hugh Patrick, the Director of the Center on Japanese Economy and Business and Ryo Sahashi from the University of Tokyo). The group represented the next generation of Japan-U.S. relationship thinkers, along with U.S. Japan watchers, who shared some really interesting perspectives on the state of the Japan-U.S. Security Treaty.

You can watch the entire event via our webcast.

Tobias Harris of MIT was also supposed to be one of our panelists too but he unfortunately fell ill at the last minute. However, he did write an insightful article on the Japan-U.S. Security Treaty for East Asia Forum, which is definitely worth a read. Here's a short excerpt:

"To a certain extent, the position is the same as it has been for decades and can be summarized in a single word: more. As a superpower that is facing burdens and challenges that will increasingly overwhelm its capabilities, the U.S. needs allies like Japan to share the load now more than yesterday, and tomorrow more than today. More can be greater military spending or new military capabilities, constitution revision or reinterpretation, higher levels of foreign aid, or greater involvement in peacekeeping...Without substantial economic reform Japan may not be able to commit the material resources the U.S. would prefer — and without serious economic reform the Japanese people will continue to have little or no interest in constitution revision."

Japan-China Relations & Japan-US Relations

“For the Japanese, there is a feeling that somehow bilateral problems will be resolved because both sides agree about the importance of a good relationship for their own national interests,and that China will always seek a compromise. The Japanese believe China needs Japan for a number of reasons, be it to protect its foreign image as a peacefully developing country, to maintain its export- and FDI-dependent economy, to cope with its environmental problems, or to reduce its energy consumption. Prime Minister Hatoyama has stated that the creation of a good atmosphere and a strengthening of an East Asian community will allow the solution of even the most difficult problems. But are such views too complacent? Do they actually reduce Japan’s options in the medium and long term while China’s overall power is growing?”

[ A new start for Japan-China relations? on the East Asia Forum ]

This is a really hot topic right now. This Thursday (January 14th), we’re having former Deputy Minister of Foreign Affairs Hitoshi Tanaka shares his view of changes in Japan’s foreign policy since the DPJ came to power last fall and implications for U.S. – Japan relations now that the DPJ is shifting its attentions to its Asian neighbors.

Learn more about the event