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No.12 ,Diplomacy  Nov 08, 2012

Japan’s “Pacific Century”

Photo : Hayashi Yoshimasa

Hayashi Yoshimasa

The Meaning of “Pacific Century”

U.S. Secretary of State Hillary Clinton stressed the importance of the Asia-Pacific region in a speech she delivered under the title of “America’s Pacific Century” at the Asia-Pacific Economic Cooperation (APEC) forum in Hawaii in November last year.

Asia accounts for about half of the world’s population and has several of the world’s largest and fastest-growing economies. It also has the world’s leading ports and seaways. The U.S. Government is aiming to re-strengthen its relationship with the region under President Barack Obama, America’s first “Pacific President.”

We heartily welcome the United States, which was clearly an Atlantic nation in the 20th century, evolving into a Pacific nation in the 21st century.

At the same time, we feel that Japan, as the original Pacific nation, must show its vision for the advent of the Pacific Century.

Unless we proceed on the wrong course, the Asia-Pacific region will continue its smooth economic growth and will create a bulky middle class in the near future. Diverse cultures will flourish and there will be active movement of people, goods and money.

Under such circumstances, the Japanese economy should be able to open a new page for prosperity. We hope that not only products made in Japan but also Japanese intellectual properties, in technological and cultural fields, will be widely accepted as new standards for the Asia-Pacific region.

Today, the gravitational center of the world’s production capacity as well as trade and investment relations is shifting from the Atlantic to the Pacific. But a “Pacific Century” does not necessarily mean a “Peaceful Century” as the word may suggest.

In fact, this region must manage unstable period in the long-term, as it is caught in instability resulting from this power shift accompanied by economic development.

Realizing a “Truly Peaceful Pacific Century” is to Japan’s interest and cannot be replaced by anything else. We want to spare no effort to achieve it and say to our friends overseas, “We are ready for it.”

The following involves my (Yoshimasa Hayashi) personal opinion about the Pacific Century as seen from Japan.

One Strategic Goal: Stability of “Global Highways”

In January, I proposed a “GNI strategy” as a new economic strategy. While the growth of domestic demand is limited in Japan’s economy due to its dwindling birthrate and aging population, its income balance logs a surplus of 10 trillion to 15 trillion yen brought about by economic activities overseas.

The surplus equals 2% to 3% of the nation’s gross domestic product (GDP). In short, Japan is already shifting to an investment-oriented country from a trading nation. It will be important for Japanese people and companies to step up these activities abroad to gain vitality and wealth, but also utilize them domestically.

The proposal is, therefore, an idea to change the framework of Japan’s economic policies by switching the barometer of its economic power from conventional GDP to gross national income (GNI), which adds the income balance to GDP.

But a stable circulation of people, goods and money throughout the world is necessary to realize the GNI strategy. They “flow” in space through sea lanes, cyberspace and satellite circuits.

Strategists all over the world have recently called the areas where people, goods and money flow “global commons” — areas for joint use by international society.

Instead of “areas for joint use,” however, we would like to call them “global highways” because we consider them as an infrastructure for “letting people, goods and money flow.” For Japan to redevelop as an investment nation, it is indispensible that the “global highways” are free of threat from any force and can be used safely by anyone.

The goal of Japan’s security strategy is therefore to stabilize these “global highways.”

Two Realities: Unchanging Japan and Changing World

We would like to clarify how we see current conditions at home and abroad before discussing ways of stabilizing the “global highways.”

It must be pointed out that Japan as a whole has been losing self-confidence somewhat due to its experience of a long-lasting economic slump and the Great East Japan Earthquake. Japan’s international presence is showing signs of a decline and people’s expectation on it has not been as high as before.

But Japan’s international presence in the formation of an international economic order remains rather large as, among other examples, its entering into consultation with relevant parties to join the Trans-Pacific Partnership Agreement negotiations, prompted Canada and Mexico to declare their participation in the TPP negotiations.

In addition, Japan’s decision regarding nuclear power generation will greatly affect the future global energy supply structure. Japan should not forget that there remain opportunities for it to influence the future of international society by its own independent choices.

Japan has lost the familiar identity it had maintained for many years as the world’s second-largest economy. Nevertheless, it still has the third-largest GDP in the world. The resources Japan can use in its foreign policy and security are not as ample as they were in the past but are by no means poor compared with those of other countries.

But Japan’s diplomacy appears dormant nowadays, probably because the people and politicians of Japan have lost confidence. We consider that what Japan lacks are not specific resources but courage and ideas for making change.

In contrast with the dormant domestic situation, big changes are under way internationally.

The United States faltered in the Iraq War and experienced a financial crisis following the collapse of the Lehman Brothers, so called “Lehman shock”. Domestic problems are focal issues for November’s Presidential election and the priority on diplomatic and security issues has declined.

Although a “strategic rebalance” toward the Asia-Pacific region is at the front of current U.S. diplomacy, critical geopolitical risks, which could occur in the Middle East in the future, cannot be ignored. Needless to say, pressure for a cut in the defense budget must also be taken into account.

China, in the meantime, is gaining power at a blistering pace and reasserting itself. We should be prepared for China’s economy to surpass the U.S. economy sometime in the first half of the 21st century. But it is uncertain whether a reversal of the military power will occur. If it does, it should be far in the future. At present, we cannot predict whether the “power transition” from the United States to China will be dramatic or moderate.

The validity of the Group of Two (G2) theory, murmured around 2009, shortly expired. The Obama administration initially appeared to be thinking that China would cooperate with the United States for the stability of the world if its position as a superpower is guaranteed.

Yet China did not pursue the abstract notion of its “status as a responsible superpower” but visible interests such as freehand in policies such as the issue of weapons sales to Taiwan, ethnic issues such as Tibet and the Xinjiang Uygur Autonomous Region, and human-rights questions.

The G2 theory has faded away also due to China’s conflicts with neighboring countries, such as one with Japan over the Senkaku Islands and the South China Sea. As the legitimacy of the current Chinese Communist Party relies on patriotism, it is difficult for Beijing to restrain and punish those who engage in violent acts out of nationalist sentiment rising from frictions with neighboring countries, even if the central government wishes to avoid them. Accordingly, clashes of such a kind are likely to continue to occur.

Since World War II, an “liberal, open, rule-based international order” has been maintained despite various twists and turns. This order has been led by the United States and supported by leading democratic nations such as Japan and European countries. Needless to say, Japan has been one of the biggest beneficiaries of this international order.

Actually, China is also now a beneficiary. Now that China has become the second-largest economic power in the world, it should not remain a “free rider” beneficiary any longer, but pay the costs needed to maintain the international order.

To this end, China must share the international rules which are the very foundation of the order.

Three Strategic Phases: Importance of the Coming Five Years

Taking these situations at home and abroad into account, we need to consider the strategy by dividing it into three phases.

In the first phase (2012-2017), China will continue its rapid economic growth while Japan’s economic power will remain matched with China’s in the coming five-year period. Status quo-oriented powers, such as Japan and the United States, will remain superior during the period, though by a narrow margin, and can offer bargaining chips against the backdrop of military superiority or erect “walls” against unfavorable developments. The period may be further extended if Japan and the United States can successfully reinforce cooperation with countries wishing to maintain the existing international order.

The second phase (2017-2025) is the period when China is expected to continue its economic expansion and outstrip Japan by a wide margin during these 5 years. In this phase, China’s defense budget at least will overwhelm that of Japan, while “power transitions” could occur in both economic and military fields in East Asia.

In the third phase (after 2025), the China’s economic growth rate is expected to refract due to the influence of such developments as the aging of its population. By then, China may have developed a moderate stance on external activities along with the maturation and stabilization of its economy. It is our long-term task to steer China in such a direction.

Japan’s “dynamic defense force” as laid out in its current National Defense Program Guidelines is considered effective to a certain extent in dealing with China’s rising power. But it should be interpreted as a “quick fix” step in the first phase.

As China is expected to be in a much superior military position to Japan in the second phase, Japan will likely find it difficult to protect its national interests with its “dynamic defense force” alone.

It is therefore necessary to steer China onto a course favorable to Japan and the United States during the first phase. In this respect, not much time is left for implementing our security strategy, during which Japan and the United States have to reinforce their alliance and promote cooperation with other nations wishing to maintain the status quo.

At the same time, it is essential to make efforts to stabilize the “global highways” based on international rules agreed upon to date and increase the number of supporters within China.

Four Policy Targets

We would like to offer the following four policy targets to create a security environment as a prerequisite for Japan’s pursuit to become an investment nation and to steer the future of China in a favorable direction:

(1) Japan’s Defense Efforts

The first policy target is Japan’s own defense efforts. While the need for such efforts is self-explanatory, direct discussion on them have tended to be avoided in the Japanese society to date.

But it is a primary responsibility of a government to protect the lives and property of its people as well as its territory. People’s interest in the situation surrounding the Senkaku Islands, for example, has grown so strong because the Japanese people feel greatly threatened, and probably more because they are under the impression that the Government has fallen short of the efforts it should be making to protect the nation’s territory.

The periphery of a country run by a government lacking the will and capacity to defend its territory on its own becomes an easy target of the “impulse” of other nations with expansionist ambitions, so that they may feel encouraged to expand their sphere of influence by taking advantage of the current situation.

Japan needs to reinforce its defense capacity and show a firm national resolve not to tolerate any illegal occupation of its territory.

The illegal occupations of Japanese territory by neighboring countries over half a century do not merely expose the nation’s vulnerability. The illegal occupation of the Takeshima has allowed the accumulation of faits accomplis, ands is showing unfavorable situation along with the continuing illegal occupation of the Northern Territories.

In the past, China clearly supported Japan’s position that the Northern Territories are part of Japanese territory. Recently, however, it seems that China and Russia are starting to take a position of quietly condoning their respective claims over the Senkaku Islands and the Northern Territories. It appears as though these countries are joining hands against Japan.

We would like to emphasize again that Japan needs to make its own defense efforts and should not become reluctant to spend necessary financial resources on them despite its hard fiscal conditions.

The nation’s defense spending had long been on the decline since the government of Prime Minister Junichiro Koizumi. The Mid-Term Defense Program, adopted in 2011, put a brake on the declining trend at last, showing a policy of leveling off the budget for the following five years. But the outlays are still insufficient in view of present security conditions.

While reference to specific figures should be avoided here, we would like to emphasize that putting its defense budget on an upward trend would become a clear message that Japan is earnestly striving to reinforce its defense and contribute to the security of the Asia-Pacific region.

(2) Defense Cooperation Between Japan and the United States

Reinforcement of defense cooperation between Japan and the United States is our second policy target.

The Government of the Democratic Party of Japan initially stressed cooperation between Japan and the United States in the fields of soft power, such as economy, society and energy, while paying little attention to the importance of cooperation in the military field.

The DPJ Government subsequently recognized anew the importance of deterrence and proposed a policy of pursuing “dynamic defense cooperation” between Japan and the United States. But it was extremely regrettable that the DPJ Government impoverished the Japan-U.S. relationship over the question of relocating the U.S. Marine Corps air station in Futenma, Okinawa Prefecture.

There are a considerable number of issues in which Japan and the United States should promote cooperation. In particular, the two countries need to upgrade their capacity to counter China’s anti-access/area denial (A2/AD) strategy. While aircraft carriers, aircraft and the U.S. Marine Corps are expected to remain as the pillars of the U.S. commitment to this region, close collaboration with the Japanese Self-Defense Forces is indispensable to utilize them in an effective manner and allow them exercise their deterrence.

To realize air superiority and maritime control around Japan’s south-western islands (the Nansei Islands), it is essential to organically combine the air defense capacity of the Air Self-Defense Force, the anti-submarine defense capacity of the Maritime SDF and the anti-missile defense capacity of the Air and Maritime SDFs with the presence of the U.S. forces. While studying contingency operation plans, Japan needs to deepen such cooperation with the United States.

As it is deemed difficult for the central government in China to control moves by nationalists and “netizens,” sporadic clashes between Japan and China are likely to continue occurring. To forestall the “impulse” of such people and the government to expand the sphere of Chinese influence, Japan needs to step up its own defense efforts and deepen its defense cooperation with the United States.

Japan needs to promptly draw a conclusion on the question of its exercise of the right of collective self-defense in order to reinforce its defense cooperation with the United States. While all issues related to the question are considered to have come into the open, we would like to call for deliberations so that a bipartisan agreement can be reached.

(3) Relationship Between Japan and China

The third policy target is to create a “mature relationship of big powers” with China.

Various frictions are expected to keep emerging between Japan and China in the future as nationalism in China rises. As discovered by the Obama administration in its first year, China does not make concessions but strengthens its demands when another country makes a concession.

Regrettably, Japan’s policy toward China under the Government of the Democratic Party of Japan over the past three years can be considered unsuccessful in this respect. Avoidance of friction, of course, is important but it should be recognized at the same time that Japan should make its own assertions without fearing friction and take necessary measures.

It is necessary for Japan to adopt a posture of “walking to the right and looking to the left.” In other words, Japan should make it clear to China that its assertions are not a stop-gap step but are based on its own principles before working to reach a compromise with China. Japan must keep asserting calmly that it, like China and other countries, has national interests it cannot concede.

Japan thus needs to develop the “Mutually Beneficial Relationship based on Common Strategic Interests” with China into a practical “win-win” relationship on a deeper and broader basis. The two countries should earnestly exchange views on what Japan is afraid of and what is not regarding China and what China is afraid of and what is not regarding Japan and the United States. Japan and China should exert their wisdom so as to avoid the use of force in seeking a solution by promoting cooperation in areas of shared interest and agreeing on “differences” in areas where they do not share interests. Tough communication of this kind is becoming extremely important.

At the same time, the two countries should be careful enough not to openly damage each other’s honor. It is necessary to create a mature bilateral relationship in which they cooperate with or oppose each other from time to time but strive to prevent their antagonism from becoming uncontrollable.

Especially important are communication channels between Japanese and Chinese politicians. Maintaining mutual trust between politicians is unlikely as long as there are frequent changes at the level of the prime ministers, foreign ministers and defense ministers. As politicians, we would like to keep this point in mind.

(4) Regional Cooperation

The fourth policy target is to create an arena of “regional cooperation.”

Direct confrontation between Japan and the United States on the one hand and China on the other is unfavorable. It is important to create opportunities for cooperation, even if partial, and various channels of dialogue by incorporating “regional frameworks” which serve as intervening variables between the two sides at multiple levels. An example is the establishment of functional frameworks in various forms, such as those among Japan, the United States and Australia and among Japan, the United States and South Korea which are called “mini-lateral” or “sub-regional.”

Head-on clashes between the United States and China, between Japan and China and between the Japan-U.S. alliance and China can be avoided by creating a situation in which costs of breaking down of the frameworks rise in Japan, the United States or China. In addition, such a situation will make it possible to create environments under which the countries, even when their confrontation intensifies over an issue, can promote cooperation in another issue.

It is vital for Japan to keep working together with the United States and other nations in the region to make China recognize that it can benefit more for the sake of securing political and economic security if it plays a constructive role, rather than otherwise, based on its profit-and-loss arithmetic to stabilize the “global highways.”

As a means to accomplish the task, it is necessary to consider venturing into the provision of funds and technological cooperation to help Southeast Asian nations improve their national defense capability and related infrastructure. The Japanese government should step up support for infrastructure improvements that will contribute to the upgrading of Southeast Asian nations’ security capacity by using more flexibly its official development assistance, public infrastructure funds and public-private alliances such as private finance initiative (PFI) and private investment initiative (PII) programs combining public funds with Japanese and local companies.

India, which will have the world’s largest population after 2030, is expected to have great future potential both politically and economically. A tripartite cooperation between Japan, the United States and India can become a strong framework in the future in terms of both economic scale and ideals. The “Pacific Century” we have in mind is a concept that includes the Indian Ocean in its range.

Russia is also a major power in this region. It is a nation Japan should deepen cooperative relations with in energy and other fields despite the territorial dispute between the two countries.

Another point we would like to make is the importance of economic prosperity for promotion of regional cooperation. While Asia is maintaining its high economic growth, it should not be mistakenly perceived that expansion is natural and can be realized on its own. As the Asian economy is traditionally reliant on exports, there is no denying that it may be affected by the current European debt crisis.

In its report “Asia 2050: Realizing the Asian Century,” the Asian Development Bank suggests that Asian economies might get stuck in a “middle-income trap” and see their growth hit the wall. While governance is important for Asian economies’ development into high-income nations, their transparency and political stability are not particularly high. For sustainable growth, Asian economies should be aware of the need to readjust themselves.

Under these circumstances, Japan can play an important role in contributing to the medium- and long-term development of the region by utilizing its past experiences.

Conclusion

In the postwar era, Japan has continued to seek an ideal relationship with the rest of Asia, to which it belongs geographically, while basing its security axis on the Japan-U.S. alliance.

Although the question has yet to draw a conclusion, one thing clear is that Japan has been a Pacific nation since the dawn of time. With the “Pan-Pacific” concept espoused under the leadership of the late Prime Minister Masayoshi Ohira, Japanese diplomacy has been playing a leading role in efforts to achieve order in the region, symbolized by the Asia-Pacific Economic Cooperation forum, and we are very proud of this.

Continuing efforts to create a “truly peaceful Pacific Century” may be the ultimate task of Japanese diplomacy. In the process, we would also like to pursue our prosperity.

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Translation of an article (pages 72 to 79) from Chuo Koron 2012 September issue (Chuokoron-Shinsha Inc.).

Yoshimasa Hayashi was born in Yamaguchi Prefecture in 1961 and joined Mitsui & Co. after graduating from the Faculty of Law at the University of Tokyo in 1984. After leaving the company, he studied at the graduate school of Harvard University. He entered politics as a secretary to the finance minister in 1992 and was elected to the House of Councillors for the first time in 1995. He was appointed as senior vice minister of the Cabinet Office in 2006, before becoming defense minister in 2008 and state minister for economic and fiscal policy in 2009.

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