- The Washington Times - Monday, April 19, 2010

ANALYSIS/OPINION:

Japan is dawdling.

That’s bad news for Asia, the world and particularly the United States, which has depended on Japan as the keystone for Asian stability and progress for a half-century. Situated far from most of the world’s other high-income countries, the Japanese through their own ingenuity have made their rocky, resource-poor islands Asia’s brightest spot. But the seeming prosperity and the incredible tidiness and order visitors see — always a shocker for other Asians — mask a deep malaise. And for the moment at least, Tokyo’s political leadership seems stymied.

When a Chinese squadron recently plowed into the Pacific through Japan’s Ryuku archipelago without so much as a salute, Japan got another reminder of its growing vulnerability. That followed an earlier wake-up call when North Korea fired an unannounced missile over the country in 2008.

Japan faces complex issues with both its Chinese and Korean neighbors. China is now Japan’s largest trading partner and a platform for Japanese exporters, exploiting China’s cheap labor costs. Tokyo also still clings to its old dream of one day opening huge Chinese domestic markets to its manufacturers.

But as every Japanese government makes new professions of improving relations, Beijing is ever ready to exploit the long history of Japanese aggression to its advantage, even as China rushes to copy the Japanese modernization model. And hovering over the East Asian landscape is China’s rapidly expanding military and its officers’ increasingly aggressive rhetoric.

While Beijing recently approved $10 billion in credits to Pyongyang, Tokyo has just reimposed sanctions against North Korea. The sanctions are intended to shut down Pyongyang’s organized crime operations in Japan, as well as apply pressure to end North Korea’s weapons programs and force a settlement of the long-standing issue of Japanese nationals kidnapped and still held in the North.

But Japan’s unassimilated 1 million Korean ethnics — some brought as wartime slave labor — bedevil its already tortuous international strategy. Tentative moves to give citizenship to these “Zainichi” runs into flak from Japanese traditionalists. But their isolation produces anomalies such as schools operating on communist North Korean curriculum. It also suggests Tokyo’s already faltering attempts to supplement the diminishing young labor pool through attracting foreign workers will be extremely difficult, if not doomed.

Beijing’s naval foray also dramatized the principal issue now complicating Washington-Tokyo relations. Although both sides continually claim the U.S.-Japan Mutual Defense Treaty as the bedrock of the bilateral relationship, growing collaboration is hindered by failure to implement the contentious 2006 agreement for redeployment of American forces. Reducing U.S. Marines in Okinawa with a buildup on American Guam has stalled because of local political friction that reaches all the way up into Tokyo’s new governing coalition.

That government of Prime Minister Yukio Hatoyama’s Democratic Party of Japan (DPJ) is in trouble. So far, Mr. Hatoyama has not found the mutually acceptable solution for Okinawa he promised by the end of May. With its support dropping despite the DPJ’s landslide electoral victory last fall, Mr. Hatoyama no longer can bank on winning a majority in the upper house in elections this July. That could mean Mr. Hatoyama may have to give way to one of his rivals.

But more important, what some had hoped was a new Japanese political realignment, with two major parties with distinct ideological identities, doesn’t seem to be happening. The long-dominant Liberal Democrat Party is fracturing and the DPJ is no nearer to sorting out its vast internal contradictions.

And all this is being played out in a worsening economy.

Exports have recovered, but domestic consumption stagnates among a population aging more rapidly than anywhere else in the industrial world. Government pump-priming of the economy through infrastructure projects is now being curtailed by plummeting tax revenues and soaring welfare costs. Based on fiscal 2010’s nominal gross domestic product of $5.13 trillion, Japan’s debt is estimated to reach around $81,000 per person.

Standard & Poor’s warned it might cut ratings on Japanese government bonds, which could raise the country’s borrowing costs. That could mean the end of internal borrowing to fund the debt — not exactly Greece, but not good.

This century opened with what seemed a consensus under popular Prime Minister Junichiro Koizumi to abandon “the Japan model.” Mr. Koizumi fought vested interests of the old regime, disbanding the postal savings system, revamping Japanese finance and setting out in the wake of the 1990s real estate bubble to create a modern capital market.

Now old opponents and new voices — inspired by the rising doubts of the “Washington consensus” of privatization, free markets and democracy — are turning the clock back. The DPJ coalition, for example, has put a minister who opposed Mr. Koizumi’s reforms in charge of the partially disassembled postal savings system.

This return to bureaucratic management could undercut the new wave of Japanese investors moving out into international markets. And it could wind up being another example of risky intragovernment borrowing, not unknown in the U.S. and Western Europe, in an attempt to stem the effects of the collapse of credit and the worldwide recession.

Sol Sanders, veteran foreign correspondent and analyst, writes weekly on the convergence of international politics, business and economics.


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