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America and Japan: Domestic Politics & Foreign Policy. William H. Overholt. December 2010. Personal background. Academic mentor: Ezra Vogel—”Japan as Number One” Career mentor: Herman Kahn—”The Emerging Japanese Superstate ” 1972 paper: “Rise of the Pacific Basin”

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personal background
Personal background
  • Academic mentor: Ezra Vogel—”Japan as Number One”
  • Career mentor: Herman Kahn—”The Emerging Japanese Superstate”
  • 1972 paper: “Rise of the Pacific Basin”
  • 1993 book: “The Rise of China”
  • 2008 book: “Asia, America & the Transformation of Geopolitics”
saving asia
Saving Asia

U.S.-Japan Alliance

Stabilization of Japan

  • 1940 economic system gave the bureaucracy enormous power independentof politicians
  • 1955 political system stabilized conservative control of the government

Reversion of Okinawa 1972

Pacific Basin economic dynamism

We saved Asia from Soviet domination, communism

  • Created deep personal & institutional bonds
  • Supplemented by ideological compatibility
the asian miracle what japan taught asia
The Asian miracle: What Japan taught Asia

Global search for best practice

Gradual economic opening

Gradual marketization

Ruthless implementation of whatever was necessary for economic efficiency

Economic success generates geopolitical influence even without great military power

Rising domestic & international competition

Emphasize export efficiency rather than import replacement

S Korea, Taiwan, Singapore, Malaysia, Thailand, Indonesia followed

china joins the asian miracle 1979
China joins the Asian miracle, 1979-

Global search for best practice

Gradual economic opening

Focus on export efficiency rather than import substitution

Ruthless implementation of whatever was necessary for economic efficiency:

  • 50 Million SOE jobs, 25M manufacturing jobs lost, 1994-2004

Rising domestic & international competition

Military budget cut from 16% to 3% of GDP

Settled all land borders except India

Curtailed efforts to promote communism abroad

japan s commitment to model decays 1975
Japan’s commitment to model decays, 1975-

Zoku dominance replaces ruthless drive for efficiency

Economy remains more closed than others, including China

Emphasis on Japanese uniqueness replaces emphasis on acquiring global best practice

Roughly coincided with China’s era of reform

Steadily declining productivity & GDP growth

Culminating in bubble crisis & economic stagnation

Worsened by demographic slowdown

Emergence of backward looking politics

  • Contrast Abe & Hatoyama with Tanaka
  • Criticism of globalization, post office efficiency, Postal Savings reform
mobilization system effectiveness
Mobilization system effectiveness

Mobilization system was copied from wartime Germany, USSR

  • Main bank system
  • Convoy system
  • Administrative guidance
  • Bank loans rather than capital markets the key source of funds
  • Highly protected economy

Effective in

  • Preparing for war
  • Recovering for war
  • Initiating development
  • Crisis management

Not a unique cultural tradition

Not effective in advanced economy in normal times

japan in longer term perspective
Japan in longer term perspective
  • Japan 1955-’75 was dynamic, reformist, globalizing
  • Japan 1975-present was dominated by reactionary interest groups, turning inward, rejecting globalization & competition
  • Japanese voted against LDP, not for DPJ
    • DPJ is an incoherent collection of LDP reactionaries, old socialists, religious groups, and idealistic youth
  • DPJ government is a phase of continued decline, not revitalization
  • Scenarios for revival:
    • Youth coup
    • Reorganization into coherent parties
key geopolitical consequences
Key geopolitical consequences

China’s global economic influence came to exceed Japan’s even when economy was far smaller

South Korea rapidly catching up in living standards and competitiveness (numbers from Richard Katz, TOE)

  • In 2011, per capita GDP will equal 88% of Japan’s (PPP)
  • By 2015, per capita GDP will probably exceed Japan’s (PPP basis)
  • Samsung, Hyundai gaining on Sony, Toshiba, Toyota
    • Semiconductor market shares: Intel 14%, Samsung 8%, Toshiba 5%
  • Korean exports have risen from 12% of Japan’s (1980) to 58% (2008)
  • A unified Korea in 2020 could be far more powerful than Japan
u s policies
U.S. policies

Japan becomes very sensitive to “Japan passing”

  • Very angry reaction against President Clinton’s visit to China

Armitage Report 2000: Bipartisan call for return to Cold War relationships

  • U.S. should pay less attention to China
  • Japan should be the cornerstone of all U.S. policy in Asia
  • Japan should be pressured to take stronger defense role
  • Bush strongly implements the recommendations
    • Replaces China experts with Japan experts in key policy roles

“South Korea passing”

  • ROK/Japan not on good terms
  • Roh Moo Hyun a difficult ally/Rumsfeld a difficult ally
results disappoint
Results disappoint

Under Bush, enormous frustration with Japan over

  • Futenma—Pentagon disillusioned
  • North Korea nuclear program—State Dept disillusioned
  • Economic stagnation
  • Alienation of neighbors over Yasukuni, history

Many influential analysts disturbed by:

  • Seeming effort to maintain Japan’s role by keeping China down
    • e.g., emphasis on excluding China from regional security arrangements
  • 2005 “2+2 Agreement” bringing Taiwan under the alliance
    • Fundamentally altered China’s view of U.S. alliances & bases
  • Four power naval exercises
key consequences
Key consequences

Widespread feeling that Japan was not an effective partner

Serious concern about the rise of the far right

  • Koizumi invited to visit Elvis Presley’s memorial rather than to address the U.S. Congress

Concern in some circles that the alliance was becoming an alliance of the right wings of the two countries rather than the peoples

on key issues china became the u s partner
On key issues, China became the U.S. partner

North Korea

War on terror

Regional crime

Regional drugs

Freedom of trade

Freedom of investment

Above all, global financial crisis

Solution of environment & climate change issues seemed to depend largely on whether U.S. & China could agree

Easing of Taiwan-PRC tensions

  • Reduction of U.S. defense budget targeted at China
g2 concept discredited quickly i
G2 concept discredited quickly (I)

Above trends led to emergence of the (never widely accepted) G2 concept, BUT THEN:

U.S. sense of betrayal over Copenhagen conference on climate change

Slow Chinese acceptance of stronger sanctions on Iran

Chinese toughening on FDI—destroyed the pro-China business lobby

Chinese overreaction to Dalai Lama visit with Obama

Chinese overreaction to Taiwan arms sales overshadowed cross-Straits rapprochement

g2 concept discredited quickly ii
G2 concept discredited quickly (II)

Chinese failure to react to Cheonan sinking, North Korean killing of civilians on YongPyeong

Chinese error that financial crisis constituted a permanent, radical reduction of U.S. economic & power position

U.S. insensitivity on tires, currency when China lost 30 million jobs

Anti-China instincts in U.S. Congress & media: Sudan, Africa, energy security

India given a free ride on borders, nuclear, territorial waters

Four power naval exercises

Indian efforts to ally with Japan to dominate South China Sea

current situation
Current situation

Chinese assertiveness has revitalized spirit of US-Japan alliance

U.S.-China relationship successful on most practical issues

US-Japan relationship troubled on key practical issues

Every significant segment of U.S. opinion wants:

  • Japanese economic success
  • An influential Japanese role in Asia
  • A strong U.S.-Japan alliance

Most influential Americans of both parties view Japan as largely weak and ineffectual

  • U.S. leaders now always visit Japan before China, but the important dealings are with China
japanese decline is quiet but very dangerous
Japanese decline is quiet but very dangerous

Thoreau: “Most men lead lives of quiet desperation.”

Real incomes gradually shrink; assets quickly shrink

Permanent employees decline; temporary & overtime rise

People know they won’t get full value of their pensions

Anomie, anxiety, like a U.S. executive who fears being fired

Political alienation; sense that votes don’t matter

  • Approve Kan’s performance: 25% (Yomiuri)
  • Disapprove Kan’s economic management: 84%

Quiet desire for serious leadership; vacuum awaiting charisma

Rise of right wing under Koizumi/Abe/Aso shows dangers

the future japan can revive
The future: Japan can revive

Despite demographic slowdown

Japan is world’s most civilized society

Japanese people are more educated than Americans

Japan has great technology—Hayabusa—& great companies

Japan can lead the world in showing how to manage a mature, graying society

  • We’re all graying, including China

Japanese leaders need to mobilize around a positive vision of the future

  • not rewriting past history
  • not evoking nostalgia for a village past
key elements of a revitalized japan
Key elements of a revitalized Japan
  • More open to trade
  • More open to foreign investment
  • More competition at home
  • More open to foreign labor
  • Accept painful shakeouts for efficiency
    • Post office, Postal Savings Bank, corporations, banks
  • Give women a full role in the economy
  • Free up the property market
  • Shift the balance of income from corporations to consumers
    • Not the opposite
does japan need a crisis
Does Japan need a crisis?

Great periods of globalization, innovation and growth have followed shocks

  • Early Meiji era
  • Post-World War II recovery

Koizumi averted a great shock

  • But saved the1955 system, prolonged Japan’s agony

Everyone hopes Japan can revitalize without a crisis

south korea japan 1998
South Korea & Japan 1998

National financial crisis—worse in Korea

  • Leading companies in trouble—worse in Korea
  • Banks illiquid—worse in South Korea

Security fears over North Korea

  • South Korea’s problem worse

Imminent demographic decline

south korea japan today i
South Korea & Japan today (I)

Korea

Japan

Bank reforms weaker

Economy less open

Labor less globalized

Society less globalized

Women less equal

Political leaders ignore economic reform

Japanese leaders indecisive

E.g., Futenma

  • Bank reforms stronger
  • Economy more open
  • Labor more globalized
  • Society more globalized
  • Women more equal
  • Political leaders prioritize growth
  • Korean leadership decisive
    • E.g., U.S. military control
south korea and japan today ii
South Korea and Japan today (II)

Korea

Japan

Key interests constrain & fund both parties

Growth negligible

Stock market flat

Sony, Toyota weaker, Japan Airlines bankrupt

Declining international influence

  • Democracy provides real policy choices
  • Growth vigorous
  • Stock market bullish
  • Samsung, Hyundai, Korean Airlines stronger
  • Rising international influence

When Korean incomes surpass Japanese incomes in 2015, will that provide the shock that leads to reform?

slide24

Dr. William H. OverholtHarvard Kennedy School79 JFK St., Box 74Cambridge MA 02138617-495-1103 office310-880-2089 cell

central geopolitical lessons of asian miracle
Central geopolitical lessons of Asian Miracle

Economic growth at 7-10% creates domestic cohesion

Economic growth at 7-10% creates geopolitical influence regardless of military power

Foreign policies based on promulgating ideology (communism, democracy) are doomed to failure

  • Different situations require different strategies
  • Ideological imposition creates nationalist backlash
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