Tokyo's Depression Diplomacy

Yoichi Funabashi

From Foreign Affairs, November/December 1998

Article preview: first 500 of 3,482 words total.

Summary:  Japan faces its biggest foreign policy challenges since World War II. Its leaders must snap out of their deep funk to confront a rising China, a nuclear South Asia, a United States increasingly prone to Japan-bashing, and a world in economic free fall. Instead of sulking over the growing closeness of U.S.-China ties, Tokyo should take the initiative and propose trilateral dialogues with Beijing and Washington on a range of issues, especially Asian security, nuclear disarmament, and macroeconomic policy. Japan's pessimism threatens the world's prosperity. If Tokyo stays on the sidelines, the world will pass it by.

Yoichi Funabashi is Chief Diplomatic Correspondent and Columnist at the Tokyo newspaper Asahi Shimbun.

DON'T JAPANIC

During the mid-1980s, when Japan's economic might was reaching its zenith, a French diplomat reportedly declared, "All I wish is that somehow Japan and the Soviet Union would disappear from the earth." On both counts, his dream has almost come true. Japan now confronts the toughest challenges in its foreign relations since World War II. The way it faces up to them will determine whether Japan's meteoric rise to world-power status in the last half-century is transient or sustainable.

Japan is in a deep funk. Its economic debilitation, political gridlock, and rapidly aging population all contribute to a pervasive pessimism and imperil its cherished identity as a nonnuclear, non-weapon-exporting, economically dynamic, democratic, generous, civilian power. And while the Japanese are famed for downplaying future prospects to prepare for a rainy day, this time is different. People genuinely fear the future. Political leaders have consistently failed to lead and the economy has deteriorated for seven years. Increasingly, however, the pessimism is the problem, with far-reaching regional and global implications. Unless the psychological slump reverses, Japan's deflationary cycle will cripple Asian hopes for recovery and destabilize the global economy.

While the world has been collectively keening over the Japanese economy, another death has been in progress -- Japan's diplomacy. Economic and financial failure have exacerbated Japanese insecurity at a time when it must confront a complex of foreign policy concerns -- Asia's economic meltdown, India and Pakistan's nuclear tests, China's emergence as a major power, and most critically, uncertainty over the U.S.-Japan alliance. Japan, historically disposed to a sense of strategic exposure, is again feeling vulnerable about its place in the world.

ISOLATIONIST JAPAN?

Since World War II, Japan has based its diplomacy on economic, not ideological, foundations. But the erosion of those foundations has jolted the belief that economic might would translate into diplomatic influence. Japanese hopes for peace through economic development and integration have been compromised.

Worse, Japan is currently amassing a dismal record as the catalyst for world depression. If Japan allows the hemorrhaging banking system to bleed to death and the public refuses to invest in Japan's future, deflation could bring down the world economy and destabilize the entire international system.

Japanese business has already started to withdraw from the world. Foreign direct investment to Asia is slowing down, and even large corporations in the developed world are following suit. Fujitsu has just closed a semiconductor plant within British Prime Minister Tony Blair's Sedgefield constituency. In Asia, Japan's consumers provided the original stimulus for regional economic growth as countries enthusiastically exported goods to Japan. But this "absorber function" is rapidly diminishing because of Japan's consumer retrenchment. Japan, the locomotive of the regional economy, accounting for about 70 percent of Asia's GDP, has ground to a halt. Depreciation of the yen -- now about 40 percent lower against the dollar since April 1995 -- means that yen loans will shrink in dollar terms. As Japan's economic assistance to its neighbors declines, the couplings between the Japanese ...

End of preview: first 500 of 3,482 words total.