In this episode, the nerds return from their brief hiatus to conclude their tour of the Indopacific. Join us for a breakdown of Japan and its geopolitical position. From tensions with China to cooperation with the Quad, Japan is experiencing a period of change that will redefine its role in the region. Learn about the Senkaku islands dispute, the Quad +, and more.
INTRO
HUNTER:
Welcome back to our show! Today we are finishing up our series on the Indo Pacific. Don’t worry though — while these episodes are comprehensive to get everyone up to speed on the region, we will continue tackling the Indo Pacific in future episodes as well.
We’re excited to announce that our show has shot past 5,000 downloads! This show wouldn’t be possible without you, our listeners, and we want to hear from you! If you have ideas for future episodes or comments on the show, visit us at our website www.geopoliticsrundown.com. But let’s get into our show today.
WHY JAPAN?
RYAN:
For our final episode on the Indo Pacific region, we are going to the far east, to the country of Japan. So you might be thinking, why Japan?
Japan is the logical conclusion to our series on the Indo Pacific, and there’s two reasons why.
The first one being that Japan is a part of the informal but significant pact called the Quadrilateral Dialogue with India, Australia and the United States. We’ve talked about the Quad throughout our “Inside the Indo Pacific” series, so if you want to know more about the other parts of this equation, be sure to check those episodes out. In this episode, we’ll find out more about the role Japan plays in the geopolitics of the Indo Pacific.
The second reason is that Japan is a great power, and aside from China, can be considered the most powerful country in Asia. On top of being a democracy, Japan has the 3rd largest economy in the world, is part of almost every well renowned economic organization such as G-7, OECD, an organization with 37 high-income countries, and it’s an important member of the WTO, or the World Trade Organization. Japan is also incredibly influential, as it is the 4th largest donor of development aid in the world, and the largest donor in Asia. Overall, Japan is an economic powerhouse and is looking to stay ahead.
SECURITY
HUNTER:
What does Japan have to deal with in terms of security?
RAMYA:
Japan has two main points of concern: maritime and defense strategy and economic security.
And before we talk about Japan’s security strategies, we need to talk about its security capabilities. You see, Japan is in a bit of a peculiar position due to its constitution.
So the constitution of Japan was constructed with the US after Japan’s defeat in WW2, and heavily limits Japan to just being an economic power. In Article 9 of their constitution, Japan renounces war as a solution for international conflict.
To that end, Japan only has small but state-of-the-art air, ground and naval self defense forces as their military. Here’s the incentive – As long as Article 9 is upheld, the US has pledged to maintain a constant military presence on Japan, and will intervene in a conflict when necessary.
HUNTER:
So what are Japan’s pressing threats in the scope of national security?
RYAN:
Well, the most obvious is the rise of a more aggressive China, whose geopolitical ambitions in the Indo Pacific have put everyone in the region on edge.
So we’ve talked about this in previous episodes, but China has been exerting its influence by claiming the entirety of the South China Sea, trying to control the Malacca Straits, and specific to Japan, China has been pushing harder for control over disputed islands in the East China Sea — which we will cover in this episode.
Another pressing threat to Japan is North Korea’s antics. By antics I mean its pursuit of nuclear weapons and ballistic missile programs, which is made much worse by their provocative behavior. North Korea’s proximity to Japan’s shores makes it a significant and ever present threat. Back in 2017, North Korea was conducting tests for their Hwasong ballistic missiles which can hold nuclear warheads. One of those missiles flew directly over Hokkaido, the second largest Japanese island. Japan’s 2020 Defense White Paper confirms that North Korea has the ability to launch a nuclear warhead at Japan. So Japan will probably always be cautious of North Korea and its weapons programs.
RAMYA:
Japan also sees a security threat in the sheer number of nations in the region that have significant military capabilities and/or nuclear weapons. According to the Ministry of Foreign Affairs of Japan’s website, Japan’s concern is that “regional cooperation frameworks on security are not sufficiently institutionalized.” This would explain current Japanese Prime Minister Shinzo Abe’s efforts to push forward the Quadrilateral Dialogue and the policy of FOIP, or a Free and Open Indo Pacific, and also his efforts to create economic alliances across the region. We’ll get more into all these issues later on.
ECONOMIC SECURITY
HUNTER:
So Ramya, the second half of what you said was economic security. What does that mean, and why is it a concern for Japan?
RAMYA:
I did say economic security, which means a country’s ability to maintain a functioning, stable economy, and it is important to note that it is a pillar of Japan’s national security.
So here’s the deal. Japan may be an economic powerhouse, but Japan’s economy has been struggling for a while. Japan experienced years of unprecedented economic prosperity between 1985 and 1990 as a result of its growing manufacturing sector. However, in these years, a bubble economy was formed.
HUNTER:
How did this bubble economy form? What caused it?
RAMYA:
Well, it started in 1985, when Japan and a few other countries signed what is known as the Plaza Accord. Basically, the idea was to devalue the US dollar against West Germany’s currency, the Deutsche Mark, and the Japanese Yen. This was meant to fix trade imbalances by making US exports cheaper for these countries as their currency would be worth way more than the Dollar.
So, the Yen shot up in value against the US Dollar. Japanese banks started carelessly loaning money to firms and individuals for purchasing assets such as real estate.
This created a cycle where borrowers would buy real estate, which would make the price of real estate go up, and then borrowers would use that same real estate as collateral to borrow more money. Neither the government nor the banks planned for a situation where the loans could not be repaid or if the value of land went down.
HUNTER:
What happened next?
RAMYA:
Well, in 1990, the bubble economy burst. Investments dried up as investors were no longer comfortable, and Japanese consumers stopped spending money. This was, well… not good.
In 1991, Japan entered what is called the “Lost Decade.” Till the 2000s, Japan experienced deflation and very low economic growth. Much of the blame fell on the Bank of Japan, or BOJ, and the Finance Ministry for not acting quickly enough, and there are fears now that, as COVID rages on, Japan might end up in its worst recession since World War II.
HUNTER:
What would you say, Ryan, are the challenges that Japan is facing in terms of its economy structurally?
RYAN:
Structurally, Japan’s economy is also dealing with issues that do not bode well for the future, especially in a post-COVID world which we can’t predict. Japan has, since the mid 2000s, dealt with population decline – and population growth has steadily decreased since then.
Societal aging is another problem for Japan. The dependency ratio, meaning the ratio between the non-working, older population and the young working population, already leans towards the older population, and will become more lopsided over time.
Credit: Voxeu.org
So an aging population means the government will have to increase spending for healthcare, pensions and to create enough safety nets. This means that the young, working population, which is shrinking, will have to pay higher taxes, and there will be fewer of them as time goes on, causing a shortage of workers. The more money that goes to pensions, less money will go to productive investments, which are crucial for economic growth. We are already seeing weaker productivity growth in the Japanese economy, which will make recovering from this Covid shock, which shrunk the economy 4.7% this fiscal year, take until at least 2022.
JAPAN IN THE INDO-PACIFIC
HUNTER:
So let’s shift our focus now to the Indopacific. How would Japan’s current economic fragility affect its role in the region?
RAMYA:
Well for Japan, economics and security are so tightly intertwined, that if Japan wants to expand and revitalize its economy, it needs to do the same with its international political image. Most countries have the ability to fall back on their armed forces to project strength, but Japan doesn’t have that so it needs to rely on its economic strength and political maneuvering.
And the Indo pacific is where Japan needs to expand the most, and it’s where its focus has been for the past decade. Japan has always been invested in the Indo Pacific, and its involvement has been instrumental to how geopolitics have developed in the region. In fact, it was Shinzo Abe who introduced the idea of a Quadrilateral Security Dialogue after the 2004 tsunami crisis, and revived the idea in 2012, coining the term “Indopacific” in the process.
He also created a new Japanese foreign policy called the “Free and Open Indopacific”, shortened to FOIP, which has since become the catchphrase of the Quad. Some say it is an alternative for China’s BRI, and marks the beginning of Japan diversifying its relationships with other countries.
During this time, I would say around 2008, Japan entered negotiations with 11 other countries, including the United States, to create a free trade agreement known as the Trans-Pacific Partnership, or TPP. This agreement would include 40% of the global economy, and Japan had a lot to gain from it. The TPP would allow for Japanese companies to expand overseas, bolster Japan’s auto-industry and make goods cheaper to Japanese consumers.
HUNTER:
Didn’t the TPP collapse?
RAMYA:
In 2017, when the new U.S. President Donald Trump withdrew from the agreement, the TPP fell apart. This caused a temporary issue for Japan, but within a year, all the original countries excluding the United States signed the “2.0” of the TPP, called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP. It involves a few key actors in the Indopacific, including Australia, Vietnam, and Singapore, to name a few. So Japan has been working towards greater Indopacific cooperation for over a decade now.
SINO-JAPANESE RELATIONS, POST COVID ECONOMICS
HUNTER:
So tell us more about the Japanese-Chinese relationship.
RYAN:
Japan and China have historical bad blood between them, which pretty much spans millennia. But, we really only need to delve into their relationship over the past fifty years to understand the current situation. Post WWII Japan’s economy grew exponentially; in the 1980s it was known as one of the Asian tigers, with a tech dominated economy second only to the United States, who has been a formidable ally. Japan provided economic aid for the struggling China throughout the latter half of the 20th century, and by 1999 it totaled over $21 billion. That aid proved crucial for China’s rise to its current status.
HUNTER:
So when did things change between China and Japan?
RAMYA:
So let’s fast forward a decade later.
In 2010, China overtook Japan as the 2nd largest economy in the world. By 2012, when Xi Jinping came to power, China began using that status to impose China-centric policies across the Indopacific.
The two countries have always had their differences. That being said, China’s belligerence and predatory economics in the region, China’s handling of COVID and the toll it took on Japan’s economy, plus China’s increasingly hostile actions in the South and East China Sea have emboldened Abe and Japan to take action. Currently, Japan is interested in decoupling its supply chains from China — but their economic situation is complicated.
Like Australia, Japan’s economy is entangled with China’s, with China being Japan’s second largest trading partner and Japan getting 23% of its imports from China.
HUNTER:
So given the current economic ties between the two, is Japan considering decoupling supply chains with China?
RYAN:
So Japan may want to decouple from China, but that process will take time, and problems with China are escalating. But Japan is moving fast too. A story from July 18th reports that Japan has started subsidizing firms to move manufacturing from China to Japan and other Southeast Asian countries. The first round amounts to about ¥57.4 billion, or $536 million. The total amount of funds allocated in April as a part of the plan to decouple supply chains were ¥243.5 billion or approximately $2.3 billion.
HUNTER:
So Japan is on its way to untangling itself from China. I’m assuming that Japan needs the South China Sea for trade and economic security.
RAMYA:
Exactly. As an island nation, Japan’s economy relies almost entirely on maritime trade, most of which passes through the Indian Ocean and the South China Sea. Japan imports almost 20% of all the oil that flows through the Malacca straits every year, and with no natural reserves of its own, that situation will likely never change.
As we talked about earlier, economic security is of paramount importance to Japan. So if Japan wants to have some semblance of control over how its economy functions, the country needs to remain active in the region and promote policies that it will benefit from. But, like in the SCS, Japan will have to contend with China’s influence, and they’re already dealing with China closer to home in the Senkaku islands.
SINO-JAPANESE TERRITORIAL DISPUTES
HUNTER:
Tell us more about the Senkaku Islands. Why are they so important?
RYAN:
Well let’s start with a simple fact. The islands are called the Senkaku islands by Japan, but are called Diaoyu by China. That’s literally what the dispute is — who these islands belong to.
These uninhabited islands are the flashpoint in the Japan-China rivalry in the East China Sea. They are an island chain southwest of Japan and east of China, near Taiwan — take a look at the map we have provided. After the end of WWII, the US took control of the islands, and in 1972, the US returned the islands to Japan.
Although, China and Taiwan both claim ownership of what they call the Diaoyu or Diaoyutai islands. It is understood that there are oil and natural gas reserves in the ocean area around the islands, and that is a primary reason for all involved to want control of the islands.
RAMYA:
Japan formally put the islands under state control in 2012, during Abe’s first year back as PM since 2007. Following suit, China has used its vast maritime resources to challenge Japan’s hold over these islands.
We’ve mentioned in our episode called Inside the Indo Pacific: South China Sea how China uses its coast guard and maritime militia to harass other countries — and that’s exactly what is happening in the Senkakus.
RYAN:
2016 was a particularly active year, in that almost every day a Chinese fishing boat, coast guard vessel, or submarine would trespass inside Japan’s territory, challenging Japan’s claim to the islands. And as of this July, Chinese ships were spotted in the area for the 100th straight day, the longest streak since these tensions began in 2012.
Like in the SCS, China is trying to extend its borders and increase the resources under its control. But while China can fend off Vietnam or the Philippines with little trouble, Japan is a much stronger and more prepared opponent with powerful allies. Nevertheless, fending off China by itself is not feasible for Japan, especially considering the help that Japan’s economy needs. So, Tokyo is looking to the Quad for both support and opportunities to bolster its economy.
THE QUAD
HUNTER:
So Japan is a huge fan of the Quad Dialogue then, because it provides a counterbalance to China that it can’t build on its own.
RYAN:
Exactly. For a variety of reasons, Japan wants and needs the Quad. The US, and to a lesser extent India and Australia, can cover for Japan’s limited military capabilities if it were ever necessary. We saw this in action from July 19 – 25, when the US Navy conducted two military drills in the Indo Pacific. The first was a US strike group led by the USS Ronald Reagan which was joined by Japan and Australia in the Philippine Sea, and the second was the USS Nimitz with the Indian Navy in the Indian Ocean.
Many people are calling this a demonstration of the Quad’s strength. The situation works to Japan’s favor because it could never pull off these military drills so far from Japanese waters without Quad support. And projecting force is one of the only ways a country can show strength.
HUNTER:
So could the Quad also help Japan’s economy?
RAMYA:
The Quad creates opportunities for enhanced economic cooperation between the members, especially in light of the covid 19 pandemic. The Quad, after all, was initially formed to provide relief in the wake of the 2004 Indian Ocean tsunami crisis. So the pandemic could serve as another chance for the Quad to entrench itself as an influential force in the world for humanitarianism and rule of law, although time is slipping away for the Quad to make a timely response to the pandemic.
Japan has vested interests in what is known as Quad plus, which is the Quad along with Vietnam, South Korea, and New Zealand. The three have been invited to weekly Quad virtual meetings since March this year. Their addition could prove to be incredibly beneficial to Japan in the near future.
In the pursuit of decoupling from China, Vietnam could serve as a replacement for cheap manufacturing, and New Zealand is looking to diversify its trade as its relationship with China sours. Both Vietnam and South Korea are interested in purchasing Japanese military tech and Abe wants to increase defense exports. With this “Quad +” framework in motion, Japan can reinforce its maritime domain and interests in the Indopacific while bolstering its sluggish economy.
DPRK-JAPAN ISSUE
HUNTER:
So let’s get into the North Korean threat for a bit. How is Japan dealing with the threat of its rogue neighbor?
RYAN:
Sure. We can start with the Japanese Defence White Paper (JDWP) that was released this July. This annual report claims that North Korea’s ballistic missile program may have overcome its initial technical difficulties with atmospheric reentry, meaning that North Korean nuclear missiles are now much more capable of attacking Japan. Potentially as a result of North Korea’s recent capabilities, the Abe administration has also delved into developing the means to launch a preemptive first strike against enemy bases. The hope would be to deter any North Korean missiles from launching towards Japan in the first place.
HUNTER:
Is this an area where the Quad could help out as well?
RYAN:
North Korea isn’t really a Quad level issue. India and Australia are more concerned with matters closer to home, so they’re not very invested in North Korea, but the US does often find itself at odds with North Korea. So, America and Japan are aligned in that regard already. The US’s permanent residence at numerous Japanese military bases is a prevailing reason why North Korea does very little to arouse Japanese anger in the first place, so adding India and Australia to that equation does very little to change the outcome.
However, it is worth mentioning that North Korea’s main benefactor is China, who has helped Pyongyang survive the crippling economic sanctions levied against it by the US and others for decades. China keeps North Korea afloat to act as a buffer between South Korea and Japan, both of which are US allies. So could North Korea be a flashpoint between the Quad and China? I’d lean towards no, because I think China would rather cut its losses and lose its buffer than try to defend it, especially because of the unpredictable nature of the North Korean regime. Overall, North Korea is a regional issue for Japan that will likely stay at its current level of tension without increasing.
FINAL TAKES
HUNTER:
So let’s wrap this up with final takes. Guys, what should people remember about this episode if they remember nothing else?
RAMYA:
Japan might be the third largest economy in the world, but its economy is in a precarious position. COVID-19 has worsened a slowing economy which is already battling population decline, societal aging and weak productivity growth. Internationally, it’s facing two outside threats in China and North Korea. China’s territory grabbing in the South China Sea threatens Japan’s economic security, and China is extending its reach towards the Japanese controlled Senkaku islands in the East China Sea. North Korea poses an ever present threat of a nuclear strike on Japanese soil. These are the main problems Japan currently faces.
RYAN:
So how is Japan responding to these problems? It’s turning to the Quad, Quad +, and other international agreements like the CPTPP. The Quad can help shore up Japan’s lack of a strong military to help deal with China, while the Quad + members will aid Japan’s economic decoupling from China. The CPTPP, while lacking the oomph that US presence provides, will still go a long way towards diversifying Japan’s economic interests. So Japan is resting a lot of its hopes on shaping the Indopacific to benefit itself, and only time will tell how successful that strategy will be.
HUNTER:
That’s it for our episode today, and the conclusion of our series “inside the indo pacific”. If you liked this episode don’t forget to rate and subscribe on Itunes, spotify, or however you’re listening. We took a two week hiatus to get back on track with our regular programming, thanks for bearing with us. If you have ideas for future episodes, contact us at www.geopoliticsrundown.com. Thank you for listening, this has been geopolitics rundown.