On
April 26, maverick politician Junichiro Koizumi rode a wave of
popular discontent to become Japan's new prime minister, initiating
what may become a period of lasting economic and political reform
of a sort not seen since the 1873 revolution known as the Meiji
Restoration. That year, a group of young samurai embarked on the
revolutionary reform of the ruling government, the Tokugawa
Shogunate, which had ossified under a century of stagnation. The
reformers succeeded in creating an economic revolution by
enlivening the long-dormant economic spirit of the Japanese people,
melding their traditional values of hard work, enterprise, and
social cohesion with Western entrepreneurial institutions and
practices.
Since the 1990s, Japan's economy has once
again fallen into stagnation. However, the reforms the new prime
minister advocates to purge Japan of years of misguided policies
and inefficient business practices are likely to meet with strong
opposition from vested economic and political interests.
Nevertheless, as the popular support for Koizumi's leadership
shows, the people of this important U.S. ally seem to want to be
ready for reform. Because Japan is the basis of economic stability
in the Asia-Pacific region and the key to future growth there, the
United States should encourage this desire for economic and
political restructuring.
Therefore, at the upcoming summit with
Prime Minister Koizumi in Washington later this month, President
George Bush should applaud the new Japanese administration's bold
efforts to revitalize the struggling Japanese economy. The
President should also direct his Administration to find ways to
provide Koizumi with the political support necessary to implement
the reforms he seeks, to stabilize Japan's economy, and to
strengthen alliance cooperation with the United States.
JAPAN'S STRUGGLE TO IMPLEMENT REFORMS
For
most of the past decade, the Japanese economy has suffered under
the Keynesian economic policies of the ruling Liberal Democratic
Party (LDP), which led to economic growth rates that hovered around
1 percent throughout this period. As a consequence of
continued deficit spending, Japan's federal budget as a percentage
of output is the largest in the industrialized world. Public debt
at the beginning of 2001 reached 130 percent of gross domestic
product (GDP), totaling more than $5.6 trillion a dangerous
situation for a stagnant economy. Moreover, the
economy is now experiencing a dangerous spiral of deflation.
As
part of his reform agenda, Koizumi, who is also the political head
of the LDP, has pledged to rein in spending and to perform a
comprehensive review of expenditures, "leaving no sacred areas
exempt from these reforms." During a speech
before the Japanese Diet on May 7, 2001, the new prime minister
indicated a desire to "actively promote decentralization" under the
principle that anything that the private sector can accomplish
should not be attempted by government, and anything that can be
delegated to local government should be so delegated. He also announced
plans both to restructure the corporate tax system in order to
stimulate greater participation by individual investors and to
overhaul capital markets, prioritizing the disposal of
non-performing loans. Non-performing
loans by banks and the private sector are perhaps the greatest
threat to revival of the Japanese economy. Since 1997, these
non-performing loans as a percentage of total loans have actually
increased from 4 percent to 6 percent of all loans--roughly $530
billion.
Koizumi's first step toward implementing
his reform agenda was to choose cabinet members who support it. His
Economic Minister, for example, is Heizo Takenaka, who has long
preached the necessity of structural reforms. Takenaka further
advocates policies that may increase deflationary pressure in the
short run and lead to some negative growth, but these policies are
necessary if Japan wants to avert continual economic stagnation and
decline.
Achieving Political Support
Implementing such policies, however, will
require political support. If Koizumi moves too fast or too slow
with his reforms, he risks his very political survival. In the next
parliamentary elections in July, the LDP--which controls 48 percent
of the Japanese Diet --may fare poorly,
and if the election results do not favor the LDP, its factions may
seek Koizumi's ouster. Thus, Koizumi's greatest challenge is to
find some way to work with the factional bosses of the LDP, many of
whom see his reforms as threats to the party's longstanding
reliance on support from unproductive industries like the postal
service and the construction industry, as well as the "mom-and-pop"
retail sector--politically potent forces that employ large numbers
of people and make generous political contributions.
This
means that to implement the much-needed economic reforms, Koizumi
must break apart the political process itself, ending decades of
faction-driven politics that allowed the LDP to enjoy near-total
domination of domestic policy for more than 46 years and
contributed to the nation's economic inertia. One way Koizumi could
override the political objections of the factions and take
advantage of the high level of public support for instituting
dramatic reforms would be by promoting government dialogue with the
people to educate them in the reasons why short-term sacrifices
will reap long-term rewards.
The Issue of Constitutional Reform
In
addition to reforming Japan's economic and political systems,
Koizumi is focusing attention on the country's sacrosanct
Constitution. Japan's self-defense force boasts one of the world's
largest military budgets, but it is limited to defense activities
by Article 9 of the Constitution, which states that "the Japanese
people forever renounce war as a sovereign right of the nation and
the threat or use of force as a means of settling international
disputes," and that "land, sea and air forces, as well as other war
potential" to accomplish such aims "will never be maintained."
While Japan's Constitution does not
explicitly prohibit collective self-defense actions,
non-involvement in such activities has been the accepted
interpretation of Article 9 since its adoption in 1947. However,
this interpretation poses obstacles to Japan's provision of
logistical support for such activities as peacekeeping operations
and maneuvers that involve joint exercises with the United States,
Japan's only treaty ally. For example, if a U.S. warship conducting
exercises in the Sea of Japan were attacked by enemy fire, the
Japanese defense forces would be prohibited, under the current
interpretation of Article 9, from coming to its aid; if the
Japanese ship were attacked by enemy fire, however, the United
States would be obligated under its bilateral treaty alliance to
assist the Japanese. Thus, the so-called Armitage-Nye Report issued
in October 2000 by the Institute for National Strategic Studies
argues that "Japan's prohibition against collective self-defense is
a constraint on alliance cooperation."
Koizumi is intent on revising or at least
reinterpreting Japan's limited role in international efforts under
the Constitution. Indeed, many inside and outside Japan believe
that for the nation to be a more responsible actor in the
international community, it must do more than just send money from
a safe distance. It must, for example, play a more active part in
international peacekeeping operations.
Koizumi's cabinet selections also reflect
his commitment to crafting a new role for Japan's armed forces. For
example, Gen Nakatani, the Director General of Japan's Defense
Agency (JDA), advocates reinforcing the country's defense
capabilities, including participating in collective defense
actions. He believes this will require a revision of the
Constitution.
Reconsideration of the role of Japan's
armed forces could also include recategorization of the JDA as a
Ministry of Defense. Such a recategorization would allow Japan to
take a more active role in the security alliance with America,
including making an explicit commitment to come to America's aid if
U.S. forces in the region were attacked. Nakatani has stated that
"an attack against the US Navy in areas around Japan would be
tantamount to an attack on Japan, and we can defend ourselves."
More
concrete efforts to develop a cooperative missile defense system
with the United States will also require at least a constitutional
reinterpretation. Since 1999, Japan has been conducting a joint
technological study with the United States on the effectiveness of
the theater missile defense (TMD) system. A TMD system would be
used in Japan's defense, while a cooperative missile defense system
would entail capabilities that would also protect the U.S. mainland
from intercontinental ballistic missiles (ICBMs) launched within
interceptor range of Japan.
The
debate over constitutional revision, however, stirs uncomfortable
memories among many of Japan's neighbors. Any attempt to change or
even reinterpret Article 9, for example, will be viewed with
concern by such countries as China and the two Koreas. Efforts to
reform the Constitution will need to be handled with tact and
humility, since coming to terms with their country's history--as
the Germans have done with theirs--has been difficult for the
Japanese. Japan still faces great criticism for its reluctance to
accept full responsibility for its colonial and wartime atrocities
and for not fully acknowledging and educating its youth about
Japan's actions during World War II. Many Asian countries, victims
of Japan's aggressive expansionism during the first half of the
20th century, have vigorously condemned any perceived movement
toward the fielding of a national army, and they watch Japan
closely for any signs of renewed nationalism.
Thus, Japan under Koizumi's leadership
must renew efforts to convince its neighbors of its penance and,
perhaps more important, its commitment to peace by never resorting
to aggression. While mindful of the negative repercussions that
revision of the Constitution would have among its neighbors, the
Japanese government should carefully steer the discussion toward a
healthy debate about Japan's future role in the region.
JAPAN'S PRESSING FOREIGN POLICY
ISSUES
Koizumi is attracting criticism over two
issues: the revision of Japan's history textbooks regarding World
War II and his planned visit to the Yasukuni Shrine honoring
Japan's dead veterans. Both issues threaten Japan's ability to
resolve contentious disputes with its neighbors.
The
Japanese Education Ministry recently approved a revisionist middle
school history textbook that omits significant details of Japan's
imperialistic activities in World War II while at the same time
glorifying Japanese militarism. Japan's recent
efforts to rehabilitate its relations with South Korea were greatly
damaged when it refused to change these texts. China is among those
nations voicing anger over this issue. These concerns fuel
sentiment in South Korea that Japan is not a reliable partner,
further complicating efforts to coordinate policy toward North
Korea.
The Yasukuni Shrine.
Koizumi's planned visit to the Yasukuni Shrine on August 15, the
56th anniversary of Japan's surrender in World War II, angers both
Asians and American veterans. The shrine, founded in 1869, is
perhaps the country's most notorious symbol of its imperialistic
nationalism. While the shrine pays tribute to some 2.5 million
Japanese who died in the service of their country and is not
necessarily a tribute to the Imperial Army alone, what many find
objectionable is that seven people executed as Class A war
criminals for war crimes committed during World War II are
commemorated there.
Koizumi clearly wants to restore national
pride, but Japan's far from clean break with its past and its
altering of history textbooks raise the specter of increased
nationalism and militarism. A symbolic visit to the shrine may
placate some Japanese citizens, but it will also damage or
seriously complicate Japan's relations with its neighbors and
allies.
Koizumi is attempting to reform the way
the country typically conducts foreign relations, but the road is
not smooth. For example, even as Koizumi and President George Bush
were pledging to strengthen the alliance--an important foreign
policy objective for both nations--Koizumi's Minister of Foreign
Affairs, Makiko Tanaka, abruptly canceled an appointment with U.S.
Deputy Secretary of State Richard Armitage to discuss bilateral
security strategies, including missile defense. Tanaka is a fiery
reformer, famous for her forthright and blunt communication style,
and the first woman to hold that post. Her appointment may have
been a signal that the new prime minister was ready to shake up a
ministry that had been rocked by scandal and that he was indeed
serious about reform. But care must be taken by Koizumi to ensure
that consensus exists within his administration on foreign policy
stances such as missile defense.
Kuril Islands Dispute.
Another foreign policy issue Koizumi faces is a dispute with
Russia over the Kuril Islands. In a March meeting in Siberia,
Russia and Japan agreed to continue negotiations on formally ending
their World War II hostilities and resolving the status of the
Kurils. If Koizumi successfully negotiates the return of these
islands to Japan, perhaps in exchange for massive Japanese
investments in Russia's northern maritime region of Vladivostok, he
would boost national pride and set an impressive example of
leadership in Asia.
Currently, numerous disputes exist in Asia
over the sovereignty of minor territories, with no prospect for
compromise or resolution. By settling one of the most contentious
of these disputes, Koizumi would provide a substantive and symbolic
model for how the other disputes could be resolved.
HOW THE U.S. CAN SUPPORT REFORM
Prime Minister Koizumi faces the difficult
task of stimulating an economy in need of massive restructuring
while maintaining a tenuous hold on a government that is likely to
fight the reforms he must implement. Regardless of the political
obstacles, however, Koizumi is on the right track.
The
Bush Administration should seize the opportunity presented by the
election of a new leader in Japan and support Prime Minister
Koizumi's efforts to institute political and economic reforms. A
resurgent Japanese economy will greatly benefit both markets and
regional stability. Successful implementation of reforms in such
areas as collective self-defense and contributing to international
peacekeeping missions and humanitarian relief, as well as economic
reforms, will require the initiative and will of the Japanese
people, but such reforms would provide the necessary underpinnings
for a more mature partnership between Japan and the United
States.
The
priority for President Bush and his Administration should be to
encourage reforms that strengthen the U.S.-Japan alliance by taking
steps to:
- Mend any ill will that Koizumi's visit
to the Yasukuni Shrine may cause, President Bush should invite
Koizumi to visit the Pearl Harbor memorial and lay a wreath at the
Tomb of the Unknown Soldier in Arlington Cemetery when he visits
the United States in June.
- Schedule a presidential visit to Tokyo
in October. Even if President Bush were to cancel his scheduled
trip to Shanghai to attend the summit of the Asia-Pacific Economic
Cooperation (APEC) forum, he should keep his commitment to visit
Japan. While in Tokyo, the President should publicly recognize the
critical role that Japan plays in ensuring peace and stability in
the region and its contribution to the region's economic
vitality.
- Express support for Japan's initiatives
to reexamine its Constitution in order to become a more durable
alliance partner. Reforming the Constitution to strengthen
Japan's ability to come to the aid of its ally and further
democratize the political system would greatly enhance Japan's
position in the region and as an international actor.
- Support and encourage economic
reforms. Treasury Secretary Paul O'Neill should be directed in
his meetings with Finance Minister Shiokawa to encourage immediate
reforms that will reverse Japan's economic slump. At the top of the
agenda should be clean-up of Japan's banking system and improved
governance on bad loans by its banks and corporations. At a time
when the U.S. economy is slowing down, reviving the Japanese
economy--the world's second largest--is imperative not just in
terms of U.S. interests, but in terms of global economic interests
as well.
- Urge greater coordination of policy in
areas, such as missile defense, that affect both partners.
Secretary of State Colin Powell should be directed to seek a
meeting with Foreign Minister Tanaka as soon as possible to discuss
strengthening the alliance and identifying areas of potential
cooperation, such as missile defense. The Administration should
also encourage Japan to resolve its territorial dispute with Russia
over the Kuril Islands, which would promote stability in the
Northeast Asian region.
- Encourage Members of Congress and the
Japanese Parliament to meet often in bilateral exchanges. The
goal should be to strengthen ties between two countries that
support democracy, international law, human rights, and free trade.
In particular, the dialogue should focus on ways to promote trade
and on the benefits Japan will derive from liberalizing its
economy.
CONCLUSION
The
election of Prime Minister Koizumi provides not only a unique
occasion for Japan to build a bold new future for its people, but
also an opportunity for Washington to encourage Japan to institute
reforms that would strengthen the bilateral alliance. Cultivating a
mature and lasting partnership should be the long-term objective of
U.S. foreign policy.
Balbina
Y. Hwang is a Policy Analyst on Northeast Asia in the Asian
Studies Center at The Heritage Foundation.