MW-93 -- Can Japan Adapt?

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J@pan Inc Magazine Presents:
M O N E Y W A T C H
Weekly Financial Commentary from Tokyo
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Issue No. 93
Tuesday, September 28, 2004
Tokyo

CONTENTS

@@ VIEWPOINT: Can Japan Adapt?

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@@ VIEWPOINT: Can Japan Adapt?

Since the end of World War II, Japan has pursued a political
strategy of shadowing the US. The extreme manifestation of this is
evident today in Mr. puppy dog -- Junichiro Koizumi. Then there is
the slew of Japanese commentators that often refer to Japan in a
belittling manner as the "51st state."

It is irrefutable that much of Japan's economic progress was
built on postwar American strategy, with expansion into the US
and western markets during the Cold War era of East vs. West.

And apparent to all during this period is the Japanese Ministry of
Foreign Affairs' inability to articulate a foreign policy
independent of nipping on the heals of the US.

However, the global power and prestige of the US, economically and
politically, has declined in the past few years, as witnessed by the
disasterous efforts in Afghanistan and Iraq. (As an aside, please
note that far from being a left-wing liberal, the author
emphatically supported both wars and still believes the latter
was correct and not a violation of international law -- definitely
not one as egregious as the UN's ineptitude to come to grips with
that situation, let alone the one in Sudan today.)

In the changing times of the 21st century, China is now Japan's
top trading partner. The importance of Russia is also growing,
with Japan in a fierce battle with China to secure a contract to
jointly build an oil pipeline with Russia. Japan has also secured
an oil deal in Iran, a project vital to Japanese interests, but
one that the US is pressuring Japan to abandon.

The latter two matters revolve around energy matters, items that
are of national interest and materially important for a nation
with next to nothing in energy resources -- there are
also the gas/oil deposits beneath the ocean floor around
Sakhalin.

Russia, Japan's neighbor, is far and away the biggest energy
producer in the world, and an emerging mass consumption economy.
It is also a country Japan is still technically at war with,
and a country that is showing signs it will not just cuddle
up to the West.

Iran is ... well, if you read the papers you know what it is
posturing about today.

As for China, those of you with any knowledge about the country
know that it literally stands for Middle Kingdom, and the
Chinese religiously believe it is that.

Today many Western publications are lauding the Chinese, but
there are also disturbing developments in China that hint
of a belligerence worthy of a genuine middle kingdom.

Recently, they have begun rewriting their text books,
showing what is widely recognized to be Korean history as a
part of Chinese history -- possibly the first wave in a
series of initial measures to redefine their borders.

Of course, the Chinese are still intent on bringing Taiwan
firmly into the fold. Then there is the quite vocal
dispute over the ownership of islands lying geographically
between the two countries (South Korea also claims the islands),
with Chinese nationalists occasionally landing on the
islands to scream incoherence.

What does all this mean? A glance at the US and Japan reveals
a need to wake up: First, the US is intent on reducing
its presence in Japan, possibly meaning Japan will not be
able to lean on it much anymore, and the US is not exactly
showing great support for Japan's efforts to get a
permanent seat on the UN Security Council, despite
Japan's bankrolling of the institution in recent years
(amounting to 20 percent of the budget -- and Japan
actually pays what it owes!).

So the US is less committed, the Russians control key
energy sources and the Chinese are growing economically
and politically in vigor.

Japan is going to have to learn to juggle its roles better
(and hopefully Koizumi knows this means less Yasukuni visits)
as it maintains the dull neutrality essential to keeping the
economy strong.

Sheer demographics has China and India as the number one
and two economies in the next fifty years, and China will
pass Japan in the next few years.

(Mind you this is not economic quality, but size.
China cannot be ignored, neither can Russia, India,
ASEAN and Korea.)

The changing times are evident in the August trade figures
announced by the Ministry of Finance: Exports to the US
amount to 1,024,133 million yen; exports to China 643,592
million yen; imports from the US 552,019 million yen; and
imports from China 849,612 million yen (the figures for
China are also showing double-digit growth.)

And adding a little more fuel to the fire: exports to China,
Hong Kong and Taiwan (China in the eye of Mainland China)
combined are 1,329,923 million yen, leaving the US
in the dust.

Can Koizumi and the Ministry of Foreign Affairs handle
this reality? And what does this mean for the Japanese,
and for the global economy?

I don't dare to venture a guess. All I can say is
what anyone who watched the Asia Cup soccer games can
tell you.

Japan has lots of work to do before it and China can
ever become friends.

Unfortunately, no one with the "utsuwa" (ability) to
politically handle the situation appears to be on the
horizon.

And as far as I know there is no YON-SAMA in China.

-- John Charles-Decourcy

========= Entrepreneur Association of Tokyo - October Seminar =========

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Language: English http://www.ea-tokyo.com Email: info@ea-tokyo.com
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STAFF
Written by John Charles-Decourcy (jcd@japaninc.com)

Edited by J@pan Inc staff (editors@japaninc.com)

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