Embassy of Japan in the United States of America
在米国日本国大使館

Is Everything That Bad?
Changes: Real and Virtual

September 13th, 2010

As young diplomats, regrettably that was some time ago, we were told not to do the following in our reporting:

Easy categorization
Over –simplification
Exaggeration

An example of such, we were told, was to categorize countries as winners and losers and to make analyses based on the premise that current trends would continue for years to come.

By the way, with such an analysis, Japan would have long been the No.1 economy. Pity!

On the contrary, today, the following utterances are often heard.

“Japan has experienced a lost decade, and it still has not fully recovered from it.
Its economy has been surpassed by China.
Its politics are paralyzed, and Japan is not able to make important political decisions.
Issues regarding US bases have soured Japan-US relations for good.

 

Young Japanese are more and more inward-looking.
In short, Japan’s days are over.

 

The US economy is sluggish as well.
There is no sign of a strong recovery.
The EU, too, is having difficulties.

 

On the other hand, the Chinese economy is booming and now has become the engine of the world’s economic growth.
Other emerging countries are following it as well.

 

Thus, Japan will eventually be viewing its partnership with China just as or even more importantly than its partnership with the US.”

Hasn’t this become the standard argument today? Here, I will endeavor to question the validity of such new clichés . I will limit myself only to Japan.

My questions are as follows.

1. Are Japanese politics truly paralyzed ?
2. Why are Japanese asking to move US bases out of Japan?
   Don’t they want them anymore?
3. What kind of relationship does Japan want to establish with the US and with China?
   Will they be equivalent?
4. Is the Japanese economy really hopeless?
   Is it trying to recover its economy through exports ?
5. Are youngsters less ambitious than before?

Let me go one by one.

Politics

Four prime ministers in two years. If you think that is a little too many, I do not disagree with you. But there are reasons for that.

Firstly, there is no fixed term for a prime minister in Japan.

Secondly, most legislation is proposed by the administration.

Thirdly, it is customary for individual representatives to have to vote in accordance with the party line set by party leadership.

So when the administration’s proposed legislation is stonewalled by the opposition, prime ministers are bound to take responsibility; i.e., resigning or dissolving the Diet and holding a general election.

This has not happened too often in our history, only because the administration, the upper house, and the lower house were under one party for decades.

The situation changed in 2006. The ruling party lost control of the upper house. Ever since, successive prime ministers have muddled through a difficult political arena. This is because a prime minister can dissolve the Diet, but only the lower house. So as long as the upper house is not under his control, he cannot fundamentally change the situation.

This is what has happened. But whether this has paralyzed our politics or not is a different story.   

One thing that has to be emphasized is that in spite of such difficulties, the GOJ has taken the lead in many areas.

5 billion dollars of assistance was pledged to Afghanistan in November 2009.

Japan cooperated closely with the ROK and the US to issue a strong UNSC presidential statement regarding the issue of North Korea’s sinking of the ROK naval vessel Cheo-Nan.

Japan has decided to impose important additional measures on top of the UNSCR1929 regarding Iran. This was announced just 10 days ago.

Japan’s gross disbursement of ODA in 2008 amounted up to $17.5 billion, marking the country as the second largest ODA contributor only next to the US.  More recently, Japan decided on August 31 to dispatch a Japan Disaster Relief medical team to Pakistan, which was hard hit by the flood disaster. Japan has so far announced and implemented emergency assistance, including the provision of emergency relief goods, totaling approximately 14.6 million in the fields of food, water, and sanitation. Also, a Self-Dense Force unit of the JDR Team has already been deployed in the affected area.

All of these measures reflect the importance Japan places on working with the international community, and they enjoy bipartisan support. 

So I would say “Paralysis? No.”

Security Issues

This year is the 50th anniversary of the US-Japan Security Treaty.

Frankly speaking, there was less enthusiasm than expected previously because of a pending issue. The issue, of course, is the relocation of a marine air base named
Futenma. It was agreed in 2006 to move this base from a congested city area in southern Okinawa to a less inhabited northern coast. But when Japan’s new administration came to power, with the consent of the US side, a review was conducted on what had been agreed upon.

This took some time, but, as committed by the previous Prime Minister, by the end of May, the GOJ and USG agreed to a site in the vicinity of the one which had been agreed upon before. Just two weeks ago, experts came to an agreement on some concrete options. There will still have to be coordination with the local authorities in Okinawa, and we are moving forward.

Make no mistake about it. Japanese leaders and people continue to appreciate the importance of the US presence in light of the security situation in the Asia Pacific. For example, North Korea alone is enough of a concern to our security.
We are currently engaged in discussions to deepen our alliance. We also appreciate and are grateful for the contributions of American men and women in uniform.

However, it is wrong to liken the bases to oxygen as some scholars do. They naturally bring burdens to people surrounding them. Especially in light of the fact that 75% of US bases are concentrated on the little island of Okinawa, which is less than 1% of the size of mainland Japan, we have to continue to cooperate to alleviate such burdens.

Also, we continue to seek increased discipline in young soldiers. We cannot have accidents and incidents continue.

Economy

It is fashionable to grumble about Japan’s economy.
Some people might refer to the ABCs of the Japanese economy:

Aging society
Bond issuance – In other words, huge government debt
Continuing deflation.

I am not denying any of these.
And it is a fact that the Japanese economy had grown annually at about 2.1 percent in the real term in the five years before 2008, when the so-called Lehman shock hit the world.

Japan was hard hit by the crisis mainly through its impact on the real economy. 
Our real GDP growth in 2009 was minus 5.0%, the lowest since 1956. Japanese exports went down 33% in the same year.  The automobile sector was no exception. Japanese export of automobiles dropped by 42% and the export to the United States dropped by 46% in 2009. The output of the Japanese manufacturing sector as a whole went down by 22% in 2009.

It is true that our GDP will be surpassed this year by China who has ten times our population. But in discussing the economy we have to look at the content as well.

Japan is still No.2 in the following areas.

• UN contribution.
• Gross ODA. 
• FDI to the US (Next only to the UK) :
Japan’s FDI to the US is $260 billion (2008), creating 665,000 jobs for American workers (2007), more than half of which are in the auto industry. Japanese companies are known as good corporate citizens in this country.
• International patent application
• Gross R&D
• Reconstruction contribution to Iraq, Afghanistan, and Pakistan

Japan is not only No.2 but No.1 in some areas.
No.1 in energy efficiency.
In order to produce a dollar of GDP, the US and EU need to produce twice the amount of CO2 as Japan. China needs to produce 9 times as much.

Among IEA countries, Japan’s share of public spending on energy-related R&D is 30% and that of the US is 28%. The two countries have nearly a 60% share amongst member countries.

There are some areas in particular at which Japan excels. 

In the global market of high-tech industry, for instance, Japan holds 60%~80% of the global market share in various products that now play critical roles in industry, including core parts and materials used in LCDs and semiconductors; carbon fiber supply used for making aircrafts; membrane desalination technology; electron microscopes; and forgings that are essential for nuclear power reactors.

As you can see, Japan’s contribution is significant in making essential items which lie at the core of various products. 
That said, there are two issues we need to note. 

First, a country like Japan, with few natural resources, needs to rely heavily on imports from abroad in order to produce goods. 
Rare materials, most of which must be imported from China to produce motors for hybrid vehicles, are a good example of this. 

Second, it is important for Japan to improve its competitiveness at a final-product level. 

It is strongly desired that Japan will nurture its ability not only to work on single products, but also to create a holistic scheme that can be introduced to the world market as one big project.

With this economy and technology, Japan is prepared to cooperate with the US.
Together we can make advances. We have been the world’s leader in energy efficiency for more than two decades.

Last year, Prime Minister Hatoyama and President Obama have agreed to further cooperate in clean energy technologies. They have agreed on various initiatives, including strengthening the relationship between the national laboratories, sharing information and experience on advanced technologies such as the smart grid, electric vehicles or CCS (Carbon Capture and Storage). This is a typical example of two countries cooperating in the advanced technology field.

Furthermore, I will name two examples where we can cooperate and contribute to industry, which are being implemented under President Obama.

High-Speed Railways

“7 E’s”        E for Experience in safety
E for Exactness
E for Economic efficiency
E for Environment friendliness
E for Employment creation
E for Earthquake-proof
E for Effective financial scheme 

Japan has been actively promoting its high speed railway in the United States, as evidenced by two visits by the Minister of Land, Infrastructure, Transport and Tourism, Mr. Maehara, in two months, hoping that it can contribute to employment and economic growth in the United States. 

Nuclear Power Plants
The US has the largest number of nuclear power plants in the world: 104. But since the Three Mile Island accident, no nuclear power plants have been built in the US. During those 30 years, Japan was the world leader and built 29 plants, almost one per year.

Besides, if the Japanese economy is bad, why would people around the world rush to buy yen?
Yen has appreciated by about 30% vis-a-vis the dollar in the last two years.
The Yuan has been pegged to the dollar and the euro has depreciated by more than 10%.

It should be noted that excessive fluctuation of the yen can bring about negative effects on Japan’s financial and economic stability.

However, market experts think that the yen is the “flight-to-quality” currency. Such a phenomenon can be explained in the following ways.

First, Japan still has the largest net external assets in the world.
Following are the figures for countries with the largest net assets and net debts.

              Net Asset                         Net Debt
No.1      Japan 2.9 trillion USD       US 2.7 trillion USD
No.2      China 1.8 trillion USD       France 510 billion USD
No.3      Germany 1.3 trillion USD    Italy  420 billion USD

Second, the stability of Japanese financial institutions is widely recognized. The number of bankruptcies of financial institutions since 2003 is zero. Last week, just one bank went bankrupt. In the last two years, about 250 American financial institutions have gone broke.

Third, the yen is recognized as a key international currency and the amount traded in the world currency market is in the following order: USD, Euro, Yen, Pound, AUD, SFR.

Newsweek’s August 23rd & 30th editions featured the first “Best Countries in the World” ranking. Many of you may have seen this, but let us quickly see how Japan, China and the US did in that list.

I do not know how Newsweek came up with this list so I am in no way attesting to it.

For example, the same article notes the following.
“China and Germany, both great export powers, have thrived economically, many experts note, while the United States faces what some fear could be a Japan-like descent into deflation and long term slow growth.”

However, the list seems to look a little different from what we have been hearing every day, doesn’t it?

China

Today, China is an important partner for Japan. It is the No.1 trading partner for Japan as well as for the US. Many Japanese and American companies are manufacturing in China. We are interdependent with the Chinese economy today.
In order to cope with the Korean Peninsula issue, China’s cooperation is indispensable.

However, three points should be made.
First, China should respect the norms and rules of international society such as those pertaining to intellectual property rights. We should continue to raise these issues with China.

Second, China’s military build-up and its maritime activities are a concern for surrounding countries. It has been reported that China’s military spending has grown 15.7% per annum in the last 20 years. They have been reported to be building two aircraft carriers. It is simply an enigma why they need to spend so much more on defense than most other countries. There are no other countries in Asia whose military spending has grown as fast and as large as China.

Third, Japan, the US, and other like-minded countries should discuss together how to handle these newly emerging situations. To downplay the G7 and G8 as having a secondary role is a little too precipitated in my view.

Our relations with China will become more and more important. However, our relationship with China differs with our relationship with the US.

With the US, we have long established security relations and a global partnership on issues such as non-proliferation and climate change. We share common values such as democracy and freedom of speech. Most importantly, 80% of Japanese like Americans and about the same portion of Americans have affection towards Japan. It is very clear that there are fundamental differences in our partnerships.

Young Japanese and Americans

It is said that fewer Japanese youth are coming to this country as students. Fewer Americans are learning the Japanese language as they are more interested in learning Chinese. It is easy to put the blame on our youth. But we all know that it will get us nowhere.

In short, these youth are smart. If something is good for their career path, they will do it. If not, they simply will not do so.

If major Japanese companies present today were to initiate a policy that at least 10% of newly accepted employees would be foreign college graduates and assure them a similar promotion path as graduates of Japanese top colleges, a lot of youngsters would apply to foreign colleges.

Of course it is the Japanese government’s responsibility to improve the English language level of Japanese students. I personally think that improving the skills of English language teachers by sending them abroad could be one way to do this.

It may be true that American students are shifting to learning the Chinese language. But, if Japan once again offers attractive business opportunities, American students will regain interest in learning the Japanese language. I also think that having JET alumni teach about Japan in schools in their vicinities would be a useful tool in arousing interest in Japan among children who are already interested in Japanese animation. For this, I am proposing that we start a program entitled the “JET Ambassador program.”  Preparations for this program have already begun in various cities across the US and we are very excited to see it implemented.

Exchanges are not limited to human interaction. 2012 is the centennial anniversary of the gift of cherry blossom trees from the people of Japan to the people of the United States. We hope to make the most of this occasion to expand our friendship visibly. We are planning celebrations not only in the capital but also nationwide. As the trees symbolize our deep and wide-scale relations, your contributions to making the centennial a historical event are greatly appreciated. For details, please see the handout being distributed. I hope to see an avalanche of emails rushing into our cherry blossom coordinator Ms. Yoko Anazawa’s inbox.

In Conclusion

There are many problems ahead of us. We have to squarely face them. It is always important to analyze the situation with a cool head and cope with real issues.

But I also believe that we should be careful about painting an overly daunting picture of our future. The silliest thing I heard two years ago was the economic crisis being called a “once-in-a-century tsunami”. It was also rather hasty to have called for a fundamental change in our international scheme.

We all know in our hearts that the economy is nothing but a self-fulfilling prophecy. If people are led to believe that it is going to worsen, no one will invest or consume. The opposite is also true.

Let us work together with high hopes.
Let us make these hopes come true.
Let us pave the way for future generations.
A time of challenges is a time of opportunities.
I thank you.