President Bush and Prime Minister Koizumi of Japan will meet in Crawford, Texas May 22-23. Following last week's summit with President Roh Moo-Hyun of South Korea, this meeting with Japan's leader will round out efforts by President Bush to reaffirm cooperation and amity with two of America's most important allies in Northeast Asia, South Korea and Japan.

The discussion in Crawford will likely focus on several key areas:

1. the war on terror and the reconstruction of Iraq;
2. resolution of the North Korean nuclear issue and cooperation on missile defense; and
3. the state of the Japanese economy.

Each poses unique challenges but the summit is likely to produce positive strategies of cooperation.

The War on Terror and Reconstruction of Iraq

For the last half-century, the U.S.-Japan alliance has been the cornerstone for peace and prosperity in Northeast Asia. In the aftermath of September 11, 2001, Japan has shown that this strategic partnership also plays a critical role in promoting stability in other regions around the world. Japan has been a strong support of the war on terrorism. In October 2001, Japan passed a significant Anti-Terrorism Special Measures Law, enabling it to participate as a more active political and military partner of the United States in the global war on terror. This legislation allowed Japan to send naval vessels to the Indian Ocean to provide logistical support for the war effort in Afghanistan.

Japan also pledged its active engagement in Iraqi rehabilitation and reconstruction. Prime Minister Koizumi provided strong political support to President Bush during the war in Iraq, despite strong Japanese public opposition to the war. Japan has already provided approximately $32 million in humanitarian assistance to Iraq, and has announced that it will provide up to $500 million in assistance for the recovery and reconstruction of Iraqi society.

North Korean Nuclear Issue

It is clear that of all the countries in the Northeast Asian region, Japan is one of the most vulnerable to the threats posed by North Korea's missile and nuclear capabilities. North Korea's flagrant violations of United Nations treaties, as well as its agreements with the United States and South Korea, make clear that North Korea's actions to pursue nuclear programs threaten not only peace and stability in Asia but intend to undermine America's bilateral alliance structure in the region. Given North Korea's continued aggressive behavior, development of a missile defense system to defend Japanese territory and the U.S. troops stationed there is imperative.

Thus, any peaceful resolution to the North Korean nuclear issue will require not only Japan's cooperation but also its strong support. Prime Minister Koizumi made clear his intention to take a leadership role in forging a new relationship with North Korea when he visited Pyongyang in September 2002. While North Korea dashed hopes of an immediate turnaround in bilateral relations through its mishandling of the kidnapped Japanese citizens issue, it is evident that Japan will play key role in any future breakthrough in easing diplomatic tensions with Pyongyang.

The Japanese Economy

Concerns about stability and health of the Japanese economy continue to loom large. Japan is now entering its second decade of an ailing economy, remaining mired in deep structural problems that continue to threaten the prosperity and health of the entire regional economy. Japan is now burdened with national debt that has reached nearly 150 percent of its gross domestic product, a figure that is more than double its size in 1991. The government of Japan is also struggling with a banking system that is burdened with as much as $1 trillion in bad loans.

Perhaps the most serious concern facing the U.S. economy is the potential problem of deflation. In Japan, a steady five-year decline in prices has eroded the Japanese economy and it has begun to threaten the American economy as well. As the world's first and second largest economies, the United States and Japan must coordinate aggressive policies to reverse simultaneous slowdowns in their economies. Failure to do so undermines the stability of the global economy.

Recommendations

The Bush-Koizumi summit is likely to be a positive, productive meeting between the two leaders, who have already established a strong and amiable personal relationship. During the meeting, President Bush should pursue the following goals:

• Seek Japan's maximum contribution to the reconstruction of Iraq. Japan is in a particularly strong position to provide the necessary assistance to alleviate humanitarian aid shortages and the loss of basic services due to the lack of governmental functions and services.
• Encourage Japan to host an international conference on Iraqi reconstruction. This conference should focus on plans to fulfill the need to modernize Iraq's economic, social and political systems, as well as its physical infrastructure. Japan has already exhibited a leadership role in this regard by hosting conferences on rebuilding Afghanistan and on resolving the Israeli-Palestinian conflict.
• Reaffirm the critical role of Japan in pursuing a peaceful resolution to the North Korean nuclear issue. Japan should be praised for its recent efforts to begin using its limited economic ties with North Korea as leverage to pressure North Korea. The Japanese Government has begun to tighten restrictions on the transfer of equipment that can be used to develop weapons of mass destruction. Japanese intelligence and financial institutions should also be encouraged to join multilateral efforts to curb illicit North Korean activities such as smuggling, drug trafficking, and counterfeiting which continue to support the regime in Pyongyang.
• Continue to pursue cooperation with the United States on development of a missile defense system. North Korea's threatening and provocative actions demonstrate more than ever the necessity of creating a robust missile defense system.
• Urge Prime Minister Koizumi to implement rigorous reforms necessary to revitalize the Japanese economy. Reform of the Japanese economy is now more than ever a critical priority due to the simultaneous slowdown of the U.S. economy, and vulnerability of the entire global economy. Continued economic prosperity in Asia is dependent on Japan's ability to be the engine of future growth.
• Implement bilateral discussion among economic leaders to tackle economic issues. The economic and finance ministers of both countries should begin a series of talks aimed at addressing both immediate and longer-term issues that threaten the economic health of both Japan and the United States.