Japan’s other Crisis

(for Newsweek Japan, the week of 25 January 1999)

Gerald Segal

Director of Studies at the International Institute for Strategic Studies in London



By now everyone knows that Japan has an economic crisis that seems to stubbornly defy solution. But to make matters worse, Japan is developing a crisis of foreign policy. Japan faces serious new challenges in defining its role in the world and it has not even begun to think seriously about a strategy.

Some of the origins of Japan’s foreign policy crisis are shared with other powers. The ending of the Cold War melted the adhesive of old alliances and what was revealed is a series of tense regional conflicts. In Japan’s case the Korean and Taiwan problems loom largest.

But in part because of Japan’s domestic problems in the decade since the end of the Cold War, unlike other powers it has been slow in adapting to the new environment. The result is a second wave of the foreign policy crisis where the new post-Cold War policies of other powers are placing Japan in particularly difficult predicaments. The challenge posed to Japan by the rise of China is relatively well understood, but the newest, and in some senses the most surprising challenge to Japan’s foreign policy comes from the fundamental changes being made by the European powers.

Japan faces essentially three choices. The least palatable or likely is for Japan to be the leader of the Asia. Some Japanese used to talk of this option when Japan’s economy was booming and Japan was supposed to be a "soft" "civilian" power that could lead by the force of its economic example and the weight of its aid packages. Japan was said to face no threats and therefore had little need for military power.

This regional option is now shredded. Japan’s economic crisis has ruined the illusion that Japan has the economic capacity or the moral authority to lead the region: witness Tokyo’s failure to organise a regional solution to the regional economic problems. China’s ability to paint Japan as the cause of the economic crisis demonstrated the extent to which Japan has lost the initiative for regional leadership to China. The fact that Japan (and Russia) has been shut out of efforts to resolve the Korean dispute is further evidence of a diminished regional status.

Japan’s second option is closer relations with the US. Although it took nearly a decade after the end of the Cold War for Japan and the United States to agree the terms of a minimally modernised defence relationship including new thinking about Theatre Missile Defence, credit is due for some initiative.

But if Japan had hoped it could shelter, as it has done since 1945, under the US security umbrella, recent events have demonstrated that the hand holding the umbrella is shaky. The US regularly disconcerts Japan by periodically snuggling up to China while brushing off the trepidations of the country that is supposed to be the US’ main Asian ally. President Clinton’s trip to China in 1998 naturally stimulated Japanese doubts about American determination to deter Chinese efforts to change the status quo.

Equally worrying is the seeming American failure to deal with Japan’s particular concern of the moment—North Korea. The apparent ability of Pyongyang to run diplomatic rings around Washington and the US inability to deliver Chinese assistance in pressuring North Korea are all evidence of American weakness. The fact that the US could not distinguish between a North Korean satellite launch or missile test over Japan in August 1998 is further evidence of the leaky American umbrella.

All of which leads some Japanese to increasingly consider a third option—a more independent foreign policy. Recent straws in the wind include Japanese determination to push ahead with its own satellite program that would make Japan less dependent on US intelligence. More serious Japanese discussions of acquiring in-flight refuelling for its military aircraft, ostensibly because of the North Korean challenge, is a break with an important taboo against acquiring offensive military equipment.

Japan’s interest in a more independent position owes most to long-term worries about the rise of China and the unreliability of the US. The proliferation of nuclear weapons in South Asia in May 1998 is a particularly shocking reminder to the only country to have suffered nuclear strikes that the battle against nuclear proliferation is not being won.

Taken together, these factors help explain why Japan so stubbornly refused China’s demands for a deeper apology for its wartime behaviour during President Jiang Zemin’s visit to Tokyo in December 1998. Gradually, Japanese nationalism is becoming more politically correct and indeed Japan was applauded in the non-Chinese world for standing up to the Chinese bully. So you might think, "so far so good", Japan is gradually emerging with a mix of more nationalism and decent relations with the US. But then comes the latest shock to Japan’s foreign policy, and from the most unexpected quarter—Europe.

The launch of the single European currency is not just a major economic challenge for Japan, it also rattles its international political strategy. Japan, perhaps far more than the US, understands the huge significance of the new European project. By creating a single currency Europe is clearly indicating that sooner or later it will create a larger federal United States of Europe. There will be two major foreign policy powers in the West, and with China and perhaps in the long-term Russia, there will be only 3 or 4 major international players. Assuming that the UK eventually joins the inner European core, Japan will left adrift as lonely middle power.

The challenge to Japan is far-reaching. The Europeans are saying in the modern world you cannot stand on your own as a leading power unless you are huge. This is devastating news to a Japan that lives in a hostile region and where its bid for regional leadership has been shattered. Japan has no where to turn and standing on its own against China is too scary to contemplate.

The challenge to Japan is also economic. The creation of the world’s second largest currency means that Japan’s currency is puny, more likely to buffeted by currency storms, and of decreasing concern to those who manage the global economy. When the Yen competed with a range of smaller European currencies, there was always hope that Japanese interests could be guaranteed through complex manoeuvres. The creation of the Euro shatters these hopes and shines a withering spotlight on the fact that Japan has failed to create a Yen bloc of currencies in Asia. There is no prospect of regional economic coordination in Pacific Asia and so Japan is reduced to becoming a minor international actor. Prime Minister Obuchi’s failed attempt to get EU agreement to coordinate international financial strategies in order to persuade the US to accept "target zones" for currency valuations, merely demonstrates how much Japan is a lonesome dove.

And to make matters worse, as Germany contemplates a more common European foreign and security policy in a more federal Europe, it has quietly dropped its campaign for a national seat as a permanent member of the UN Security Council. A by-product of this move is that Japan’s bid for a permanent seat on the Council has also been effectively killed off.

The upshot is a weaker, devalued, Japan now living in a more hostile world where its international stature is much diminished. To make matters worse, Japan has no easy prospects for improving its position. Whether it grows closer to the US or the EU, it will do so as a smaller player. Cuddling up to China in this diminished status seems inconceivable. The temptation must be for Japan to think more seriously about a more independent role backed by stronger military power, but we all know the risks in doing so. Whatever Japan chooses, it can chose nothing until its economy begins to grow.