Living with Japan: An Australian Perspective

CHAPTER SEVEN

WHILE much of the world's attention is currently focused on the devastating impact of the new world order on Eastern Europe, pressures are also washing over the Japanese political economy.  Japan is now facing a crisis of confidence at home, and a rush of expectations from abroad.  These are the culmination of a series of major shifts within Japanese society and politics, and fundamental readjustments in the place of Japan in the international community.  These trends can be summarised as follows:

• realignments in Japanese society:  with a changing population structure, serious labour problems, and the need for greater political attention to domestic issues;
• greater pressures for Japanese leadership at a global level, especially on aid and the environment;
• intensive debate over Japanese defence policy;
• renewed Japanese dealings with its neighbours and the possibility of a revival of North-East Asian diplomacy;
• the intensive Japanese regional presence and its policy implications, especially for Australia.

These trends will have specific and significant outcomes.  First, domestic problems will require a substantial commitment of government resources over the next 20 years, and will demand more severe policy choices of the Japanese Government:  the economy versus social infrastructure was the policy choice of the 1960s and 1970s, but now domestic priorities are seriously threatened by international demands on Japanese policy.  Second, global leadership expectations will continue, but problems of implementation will remain.  Third, the domestic political debate over Japan's military role will not abate;  the new Peace-keeping Co-operation Law is not a clearly defined policy stance on Japanese defence, but it is a foot-in-the-door for further options.  Fourth, opportunities are now opening up for new realignments in the North-East Asian area, yet there is no strong political impetus for Japanese regional leadership;  instead, global demands and domestic distractions will persist.  There will be no untrammelled rush to global activism.

A NEW JAPANESE ECONOMIC AND SOCIAL ENVIRONMENT

The current slump in Japanese economic activity is perhaps an inevitable consequence of the property and stock market boom of recent years.  A more critical factor in our assessment of the Japanese regional presence concerns the underlying social structure, notably the ageing of the Japanese population and the pressures on the Japanese labour market.  It is well known that Japan's population is ageing faster than that of any other industrial country.  By 2020, one in four of the Japanese population will be over the age of 65.  This will be comparable with nations such as Sweden and Germany, but it is the speed of this greying which is significant, and unprecedented.  By the year 2007 Japan's total population will begin to decline.  These changes are caused by a very low birth-rate, delayed marriage because of changed social attitudes to work and family life, better medical facilities for the aged, and greater longevity. ⁽⁴⁾

The political and policy impacts of these changes will be significant.  Japan currently spends less than 20 per cent of its budget outlays on social security expenses, whereas European nations with old populations spend from 25 to 40 per cent.  A significant shift in Japanese budgetary priorities may be required to cope with the social demands accompanying a high proportion of aged within the society.  These pressures are already appearing. ⁽⁵⁾  In particular, debate over the role of public versus private welfare services is active, as is speculation about changes to the Japanese domestic savings rate. ⁽⁶⁾

At a time when as much of the budget is devoted to repaying the national debt as is spent on education, a third more than on social welfare, twice as much as on public works, and four times as much as on defence -- and as Japan commits itself to ever larger expenditure on aid, environmental programs, and now public works for economic revival -- the nature of budget priorities is being called into question.  Commentators on the fiscal 1992 budget applauded the increase in government expenditure on global commitments such as ODA, but questioned where the vision was in relation to the domestic priorities.  What about the contribution to the "domestic" rather than "international" society, asked Nakatani Iwao;  "where is the vision about the directions of Japanese society?"  Talk about the shelving of any attempt at fiscal reconstruction hit the headlines. ⁽⁷⁾  This type of public reaction to the costs of international leadership is likely to grow as the impact becomes clearer at home.

Along with the ageing of Japanese society has come a growing labour shortage, due partly to boom times in recent years, but more as a result of a decline in the birth-rate and a falling pool of young workers, exacerbated by the fact that young people are more reluctant to take on lower-paid or physical work.  This is a fascinating social problem in its own right, but the present paper is concerned more with one of the major implications of the labour shortage:  the influx of foreign workers to Japan.

Foreign labour is a growing social problem in Japan, and is likely to worsen considerably as a policy issue over the coming years.  It will affect Japan's immigration policies, its social welfare programs, and its foreign relations.  The growth in the number of illegal workers employed in factories or the construction industries grew tenfold from 1986 to 1990, to a level of 14,000.  Official estimates are of 150,000 illegal foreign workers in Japan (rising to even two million in the next decade or so), although 33,000 were deported in 1991.  Many, such as those from Iran, came to Japan under no-visa arrangements that were recently stopped.  South Asian workers are a major group, as are young women from South-East Asia. ⁽⁸⁾

The figures are significant, but they point to underlying problems:  the reluctance of the government to accept the need for an ordered immigration program based on a changed labour market situation and on the labour needs of small and medium industries in particular;  problems of crime;  access to welfare (such as health services);  the future demands for family reunion.  These all will have an impact on the Japanese approach to social homogeneity;  on debate about the internationalisation of Japan's society;  and on the capacity of Japan to appreciate the benefits, and the problems, of the multiracial societies around the world with which it deals.

PRESSURES FOR LEADERSHIP

Calls for Japan to show more "international leadership" have increased as Japan's economic position has strengthened, its trade surplus has grown and its profile in foreign aid has risen.  What this leadership consists of has never been entirely clear, but it has most frequently been put in terms of Japan's rivalling the United States as the dominant hegemonic power.  Several writers have predicted a Japanese "drive to pre-eminence," although most observers in Japan and elsewhere now agree that there is no aggressive Japanese move towards dominance.  Indeed, others suggest that Japan is already on the path of previous hegemons, providing public goods, running the international system with its own resources, and moving towards "hegemonic decline." ⁽⁹⁾

Japanese leadership is usually taken to mean Japan's speaking up more in international fora, taking greater initiative in multilateral or bilateral relationships, taking more regional responsibility, accepting an increased burden of "cost-sharing" in international collaboration, or providing more intellectual input into international discussions.  Japan's own objectives have been rather different:  to shape an Asian order that accepts Japan as a power without military force, working to set conditions for economic development based on tough parameters for economic aid, and arguing firmly for a process of regional co-operation in régime-building rather than overt domination.  It has sought a limited political role, its bargaining has been at the bilateral level and it has avoided dominance of multilateral fora.  Japan's aspirations towards international leadership have been intent on creating the conditions for a Japanese role consistent with economic strength, political influence but military weakness.  Japan has laid the basis for leadership through a sustained impact on the regional consciousness about the most effective and beneficial limits of Japanese international behaviour, maximising the conditions for effective Japanese action.

A dominantly influential Japan is now accepted and encouraged by the region because of the benefits it brings.  Japan's economic interchange with the region is now inescapable, and its political role is now entrenched.  More than that, the expectations of Japan as the region's major creditor and donor are strong, and have been explicitly encouraged by Japan over the last fifteen years, since it began to implement its aid doubling plans.  But how can leadership best be demonstrated by Japan, and in what areas?  If leadership is to be premised on large outlays in government spending on international co-operation programs (such as the $10 billion promised at the Earth Summit in 1992 for environmental aid over the years 1992-96 and the continuing commitments for its broader aid program), we need to ask whether and to what extent domestic spending priorities will affect those objectives.  The proposal for an "International Contribution Tax" is one response to the potential fiscal impact of leadership.  The Japanese Ministry of Finance feels that the defence budget may not be able to cope with the costs of extensive peace-keeping operations in the future, should Japan's commitments in this area grow significantly. ⁽¹⁰⁾

Japan's leadership status will be based partly on the scale and effectiveness of government financial commitments to its global responsibilities, but it will also be determined by other factors:  Japan's continuing need for resources and raw materials and the attendant demands of maintaining strong bilateral linkages;  the need to maintain good general diplomatic relations with both its immediate neighbours (the Koreas, China and the CIS) and distant trade partners (the US, the EC);  and the exigencies of trade and investment relations with North America, Europe and South-East Asia.  Japanese commentators have certainly identified global environmental policy as an area where Japan can exert "leadership," a trend amply demonstrated in the discussion of Japan's approach to the Earth Summit.  The vision of Japan as a "global green giant" is one that has attracted a favourable press in recent times.  Former Prime Minister Takeshita has picked up this issue as one to run with, and has been a front-line spokesman calling on Japan to give more, to reorganise its environmental administration, and to recognise its global responsibilities as a global citizen. ⁽¹¹⁾  Takeshita declared at the close of the April Environmental Wisemen's meeting in Tokyo that "the pillar of Japan's role in international society is to demonstrate leadership in solving global environmental problems." ⁽¹²⁾

One further criterion of leadership, however, will be the ability of Japan to deliver on such promises and commitments.  A problem area is that of foreign aid, where Japan is placing enormous emphasis in its drive for acceptance as a global leader.  In 1991, for example, it returned to the top of the aid donor table, with expenditure of some US$11 billion. ⁽¹³⁾  It has just released a new policy framework for foreign aid, after a series of reviews of Japan's administrative efficiency in aid and the problems of the aid policy area.  The four main principles of this new approach are:  simultaneous achievement of economic growth and protection of the environment;  prevention of use of aid for military purposes;  monitoring against the development of, or trade in, weapons;  promotion of democratisation and basic human rights in countries to which Japan provides aid.  This set of principles is an elaboration of an earlier set proposed by former Prime Minister Kaifu, and simply adds the environmental criterion as a basis for aid-giving. ⁽¹⁴⁾

The major significance of this policy, which contains a range of other details on implementation, is its endorsement by government as the basis for its major area of international contribution, and a policy area where confusion and lack of direction previously reigned.  There is no clear indication that the new policy will add greatly to the improvement of Japanese aid delivery, or help to solve some of the administrative tangles for which the Japanese aid system is well-known.  Some of these (which are not unique to aid policy) include lack of clear lines of political responsibility for aid, too many agencies cluttering the aid field, complex budget systems, lack of co-ordination between major implementing agencies, and lack of aid-evaluation programs or of integrated country, region or sector aid programming.  The test of the new policy will be its ability to clear up some of the bottle-necks in the delivery of Japan's massive aid commitments.  It is an important statement of principle about Japan's main sphere of international contribution;  indeed one of the few such statements of principle from Japan about its foreign policy.

JAPAN AND DEFENCE

Obviously, the major political event of recent times in Japan is the passing of the UN Peace-keeping Co-operation Law on 15 June 1992.  Quite apart from the domestic political ruckus which this caused -- especially because of the co-operation between the LDP and two of the main opposition parties, the DSP and the Komeito -- the long-term significance for Japanese defence and foreign policy is notable.  Whether it will be of importance to the short-term changes in Japanese defence is questionable.  The most immediate effect is symbolic:  a signal to the world that Japan is at last prepared to stand with its peers in managing world trouble-spots.  This consummates a process that began a decade and a half ago, when the United States started putting pressure on Japan to increase its defence expenditure, pay for the "free ride," and make a greater contribution to what was regarded then as the "Western alliance."  The Gulf War, and Japan's dithering over what should be done to help (despite abortive efforts by Kaifu, then Prime Minister, to enact legislation to allow more direct Japanese participation), gave the domestic political impetus needed for the most recent, and successful, attempt to define new responsibilities for Japan's self-defence forces.

The new law does not of itself encourage or require the Japanese government to change its defence posture.  Contrary to some press speculation, it does not presage an end to the Japanese Constitution and the beginning of a flood of Japanese defence activities throughout the region.  The Constitution remains intact (although there is nonetheless intense debate on whether it has been breached, or will be breached).  Article 9 is reasonably precise about the prohibition on the use of force or threat of force, and the new law prohibits peace-keeping co-operation where force or threat of force exist.  The new law contains clear restrictions on the type of forces to be used, their number, their objectives and the carrying and use of weapons. ⁽¹⁵⁾

There is, therefore, no obvious intention in the new law to establish an outward projection of Japanese armed force.  It provides no more than guidelines for participation in UN peace-keeping activities under strict conditions of approval and operation.  A major point of debate, however, concerns unforeseen circumstances while Japanese troops are stationed overseas on peace-keeping missions, and the possibility of Japanese forces becoming involved in wider conflicts while on US duties.  Japanese participation in a Gulf War type of UN activity is not possible under the law;  indeed, Self-Defence Force participation in peace-keeping operations that might involve military action is frozen until provided for under separate legislation.  This means that participation in Yugoslavia (or at the front line in Cambodia if there is a possibility of renewed conflict) is still not possible.  At present the law simply allows for humanitarian and civil activities relating to peace-keeping.

The approval mechanisms for Japanese peace-keeping activities are rather cumbersome, and local crises could well pre-empt any policy decisions in Tokyo about reacting to changing political or military situations.  Although the opposition parties in Japan delayed this legislation, they demonstrated their own impotence in the way in which they expressed their views, and gained little public support for their actions.  The law and the government policy it represents do exemplify a Japanese attitude to the need to show Japan's willingness to be a responsible world power.  It is a major break with the past, and it may well open the debate to questions of the status of the constitutional restrictions on the use of armed forces, the meaning of defence, and the role of armed forces in the Japan of today.  If nothing else, the peace-keeping law has broken the taboo about the operational movement of Japanese armed forces outside Japanese territory, and their co-operation with other nations.  Indeed, senior LDP figures have already forecast the lifting within two years of the ban on military involvement by Japanese peace-keeping forces. ⁽¹⁶⁾

Australian support for, and co-operation with, Japan in its peace-keeping activities and attendant wider military role, is consistent with the Labor Government's policy first enunciated by Hawke and Hayden in 1983.  Similarly, cautious remarks by South-East Asian, Chinese and Korean governments, which have been repeated frequently over the last fifteen years, are therefore to be expected.  Japan's responsibility now is to persuade its neighbours that its new policy will mean what it says.  Miyazawa was undoubtedly helped in passing this law by the strong pressure from the United States and elsewhere for Japan to be seen to be committed to a global co-operation role;  the harder task for him will be now to ensure that a change to the policy on global military co-operation will not begin a process of wholesale reconsideration of Japan's self-defence policies.  Developments in the region will be the key to whether that occurs.

NEIGHBOURS

Japan's regional role will depend in large measure on the way relations develop with its closest neighbours and closest allies.  The potential is enormous for massive changes in political and diplomatic arrangements within a few years to rival those we have seen in Europe.

Japan's relations with the CIS hinge on economic co-operation, already well advanced.  With Russia, however, the problem of the northern islands figures most in the Japanese approach.  At present, the Japanese Government is sticking closely to a policy of linking large-scale aid to Russia to a resolution of the dispute over the northern islands, despite strong protestations from Moscow.  Japan is also taking the issue outside the bilateral context, saying to its fellow G7 members that, as a legacy of the Stalinist era, the northern islands question is one which involves all G7 countries.  Miyazawa was able to achieve a reference to the issue in the first political declaration ever issued by Summit leaders, following their meeting in Munich in July 1992. ⁽¹⁷⁾

Ultimately, a bilateral deal is likely.  Japan's interests lie in encouraging closer relations with the Russian Republic;  a staged return of the islands in conjunction with a bilateral peace treaty has already been suggested by several unofficial groups, and hinted at also by the Japanese Foreign Minister. ⁽¹⁸⁾  For Japan as well as Russia, the enhancement of relations between the western cities of Japan and the Siberian economy is important, and we may yet see a Japanese-led resurgence of trade and investment across the Sea of Japan. ⁽¹⁹⁾

Japan's tentative contacts with North Korea are more problematic, although they attract far less attention in Japan than the long-standing and politically symbolic northern islands issue.  Japanese and North Korean negotiators have been involved in normalisation discussions since early 1991.  This is an important initiative for Japan, a way of defusing the greatest potential source of instability in the immediate region.  The seventh round of talks in May 1992 bogged down over the question of inspection of North Korean nuclear facilities, while Japan is also concerned at the possible economic and political impact of a reunified Korea. ⁽²⁰⁾

The situation in mainland North-East Asia remains uncertain.  The direction of relations between Russia and China and between Russia and North Korea has yet to be seen.  Japan is playing all sides, pursuing several specific matters without committing itself to new approaches to regional solutions.  Economic relations will not present major difficulties, and regional initiatives such as APEC will provide a forum for greater North-East Asian involvement.  The political and military questions are more problematic, and Japan is not in a strong position to influence events greatly, except in its dealings with Russia.  There is as yet, however, no certainty that Russia is ultimately prepared to negotiate seriously on the islands question.  Japan's standing as a player in North-East Asian regional politics will depend heavily on its ability to forge a favourable outcome on the territorial issue.

The intriguing possibility is there, however, of the strengthening of North-East Asia as a zone of economic and political co-operation over the next decade, as political issues are gradually talked out.  This would place Japan at the centre of a dynamic new regional arrangement, spurred mainly by economic needs in which Japan would be the principal provider and a major beneficiary of the raw materials development associated with more open access to Siberia and North Korea.  Already we see Japan assessing Siberian coal resources. ⁽²¹⁾

JAPAN'S REGIONAL PRESENCE

Japan's broader regional presence is most obvious in its aid and investment links with most, if not all, nations of the Asia-Pacific region.  Living with Japan means living with this fact, despite the reluctance of some in Australia, for example, to accept it.

Japan's regional aid profile is impressive, if not potentially overpowering.  It is the major donor to most of the countries of South-East Asia, South Asia and, increasingly, the South Pacific.  However, about one third of Japan's bilateral aid goes to only three countries (Indonesia, China and the Philippines), and just under half goes to only five countries (the above three plus Bangladesh and Thailand).  Aid to the South Pacific is growing rapidly, although the total volumes are still small by comparison with other regions.  But the potential for Japan's dominance of the economic development priorities of the South Pacific nations, via its aid program, is enormous.

The main question for Japan in its regional aid-giving is how it might influence policy approaches to development and the alleviation of poverty.  Japan's new ODA Charter specifically identifies Asia as the focus of its aid-giving.  It also highlights the central principle of recipient "self-help" as the foundation of Japanese aid support.  This approach to aid as dependent on economic self-reliance and self-help has enabled Japan to maintain (until recently) an approach to development that was largely independent of ideological or political standards about who should receive aid.  This has now changed with the introduction of political principles to Japanese aid policy, but the economic rationale of self-reliance as the basis of growth policies (with its roots in Japan's own development experience) is being firmly argued by Japan in multilateral fora as an alternative to the traditional approaches to development and aid, that emphasised donor-dominated guidance.  Japan has yet to create a new international aid agenda, but it has undoubtedly run up its colours. ⁽²²⁾

Likewise, Japan's investment role in the region is substantial, and Japan is certainly the major creditor across the region.  Asia still trails the US and Europe as a destination for Japanese foreign direct investment (FDI), and 1991 flows into the region are well down on 1990, as is total Japanese FDI.  The ASEAN countries and Hong Kong were still the main destinations in 1991 for Japanese FDI in the region, after Australia, but investment in property, services and banking has declined significantly.  Investment in manufacturing is holding up, such as that to China and Malaysia.  The further decline in Japanese economic indicators will reduce the flows of FDI in 1992. ⁽²³⁾

Our interest is in how Japan deals with this regional presence.  There are several angles to the problem.  What is Japan's public image in the region and how is it changing?  What is the popular representation of Japan in the media, and how is Japanese policy reacting to it?  What is Japan's political role in different countries in the region, and what is its capacity to influence events (the Thai and Burmese situations are interesting here)?  What is its role in regional co-operation (such as through APEC), and how effective does Japan wish to be in fostering such co-operation?  Finally, we need to ask how these issues affect the broader question of Japan's leadership, and how we are to live with Japan into the next century.

Until now, Japan's political profile in the region has been minimal.  It has played an effective part in support for ASEAN and the Pacific economic co-operation process.  It is increasingly interested in a regional debate about security issues, but has not specifically adopted a high-profile stand on initiating such discussions except to suggest using the ASEAN post-ministerial conferences as a forum.  Given Japan's peace-keeping initiatives and regional uncertainty about their implications, it is unlikely to move quickly in sponsoring regional security discussions.

Japan has been more active at the bilateral level.  It was quick to re-establish normal contacts with China after Tiananmen Square, it has tolerated the excesses of the Burmese government while remaining the largest aid donor and foreign investor in that country, and it has given little reaction to problems in Thailand.  It has applied pressure to the Burmese government to modify its ways, and temporarily suspended aid in 1989, but it is the only country with sufficient economic influence over Burma to exert real pressure.  The new political principles for aid that Japan introduced in 1991 have had little apparent impact on aid to Burma, despite the policy's stress on the importance of human rights as a criterion for aid approval. ⁽²⁴⁾

Japan is committed to regional co-operation through APEC.  As Isami Takeda has pointed out, Japan is the only major power that is not a member of a regional co-operation framework, and APEC is therefore the only regional system of which Japan is a member.  Takeda argues that APEC should be upgraded into an Asian-Pacific summit, with a full economic-political-security agenda. ⁽²⁵⁾  Already political issues are being discussed, and economic co-operation is never far from a political dimension.

CONCLUSION

Living with Japan means co-operating with Japan, and for Australia this is one of the fundamental imperatives of our foreign policy.  We are faced with a Japan trying hard to resolve the conflict between growing domestic priorities and the demands of international leadership status.  Japan has not had this challenge before it in the post-war period, where the choice until now has been between economic and social policies.  Now Japanese voters need to decide whether the catch-cry of the last few years, that of "Internationalisation!", is worth pursuing in terms of the domestic sacrifices that will follow.  This is the hegemon's classic dilemma:  faced with severe pressures to support the international system of its own making, while accepting domestic sacrifices to maintain its international influence.  The battle over liberalisation of the Japanese rice market is an example of such a choice, as in the case of previous trade battles before it, and as will happen with the choices to be made between aid and environmental assistance on the one hand, and improved social security programs at home that will be needed over the next 25 years.

Where does Australia fit?  Primarily as a supporter of the Japanese regional system, a beneficiary of Japanese credit flows, and dependent on Japanese trade flows.  We can do little to assist Japan in making the policy choices that will confront it, except to recognise that it is in our interests to see Japan retain its constructive role in the region and not withdraw from taking greater responsibility for maintaining the regional economic and political system that has served Japanese interests so well for so long.  It will also require a sensitive approach by Australia to the domestic Japanese debate about its own priorities as it takes on the 21st century.

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ENDNOTES

4.  The data on these trends are widely available in Japanese Government statistics.  Also see reports in Look Japan, February 1990;  Australia-Japan Economic Institute Newsletter, August 1991;  and The Daily Yomiuri, 31 March 1992.

5.  Responding to the Needs of an Ageing Society (Foreign Press Center, Japan, 1990) has a discussion of the economic implications of the ageing population.

6.  Warren Reed, "Time Runs Out For Age Solution," The Australian, 6 July 1992, p. 8.

7.  Yomiuri shimbun, 29 December 1991.

8.  There is a growing literature on the foreign worker problem.  See Australia-Japan Economic Institute Newsletter, October and December 1991, for a recent survey in English.

9.  For a review of the literature on Japanese international leadership, see "Japan and the Region:  Leading from Behind," in John Ravenhill, Richard Higgott and Richard Leaver (eds.), Pacific Economic Relations in the 1990s:  Conflict or Co-operation?, Allen & Unwin, Sydney, forthcoming.

10.  Yomiuri shimbun, 16 June 1992.

11.  Nihon keizai shimbun, 15 April 1992.

12.  Asahi shimbun, 17 April 1992.

13.  Yomiuri shimbun, 19 June 1991.

14.  Yomiuri shimbun, 16 June 1992.  For a detailed discussion of Japan's recent aid policy, including its administrative reorganisation, aid philosophy and trends in aid policy and programs, see Alan Rix, Japan's Foreign Aid Challenge:  Policy Reform and Aid Leadership, Routledge, London, forthcoming.

15.  For details of the new law, see Yomiuri shimbun, 16 June 1992.

16.  The Australian, 17 June 1992.

17.  Yomiuri shimbun, 8 July 1992.

18.  Daily Yomiuri, 21 April 1992.

19.  Far Eastern Economic Review, 24 October 1991.

20.  Yomiuri shimbun, 16 May 1992.

21.  Courier-Mail, Brisbane, 7 July 1992.

22.  Alan Rix, op. cit.

23.  Australia-Japan Economic Institute Newsletter, January and June 1992.

24.  The human rights issue in aid policy is discussed extensively in Rix, op. cit.  See also Richard McGregor, The Australian, 9 July 1992, p. 10.

25.  Isami Takeda, Three Optimistic Scenarios for the Future of the APEC Process:  A Japanese Point of View, paper given to a workshop on APEC, Griffith University, 12 June 1992.