Simply put, Russia’s invasion of Ukraine on February 24th and the announcement of a Russia-China strategic partnership that preceded it on February 4th have given a sharp and welcome jolt to Japanese politics, and indeed Japanese thinking on security generally. It is not as if new ideas have sprung up, but rather that old ideas, presented as proposals and possibilities for years, have suddenly become mainstream and politically viable. A new realism abounds, about Japan’s weaknesses and strategic vulnerability: in physical defence, in cybersecurity, in intelligence, in energy, even in international relations. Public opinion on defence has shifted from pacifist scepticism towards reluctant acceptance or even urgency. As in Germany, this new realism does not come without dissent or awkward dilemmas, but it is a clear change nonetheless.
Where less has changed, however, is in policy thinking on the economy, and hence on producing the means with which to pay for greater security. Official statements acknowledge the importance of strong “state capacity”, sometimes in language reminiscent of the Meiji era slogan “Fukoku Kyohei” (roughly, rich country, strong army), but without much substance about how to achieve this. In fact, Japan’s quite depressed economy stands as the main reason why the country is not suffering war-driven inflation as severe as are countries in Europe and North America, despite a chronically weak yen which is making prices of imported energy and other commodities even costlier. Such moderate inflation is presented as a virtue but actually reflects a vice.
Here are my notes from what was a 10-day trip.
1. Politics and defence
- Prime Minister Fumio Kishida remains popular and is set fair for a successful set of Upper House elections on July 25th. After this, there need be no further national elections until 2025, when both the Lower and Upper Houses are due to hold polls (unless the PM chooses to end the Lower House’s four-year term early in a snap election). That gives the Kishida administration a fairly clear run in which to fulfil whatever legislative ambitions it has. But NB that as his three-year term as Liberal Democratic Party (LDP) leader began in September 2021, Kishida is due to face a party leadership election in September 2024. So his true political perspective is just over two years. In the LDP’s factional politics, it is more than likely that rivals will spend those two years preparing to challenge him, in case he shows weakness.
- Partly as a result, talk has revived within the party of pressing for constitutional revision, to exploit the tailwinds in public opinion provided by the Ukraine war so as at last to abolish the war-renouncing Article 9 of the country’s 1946 constitution, which the American occupiers imposed. For Kishida, who in LDP terms is a moderate, one merit of trying this would be to keep right-wing factions, notably those led by Shinzo Abe and Taro Aso, the party’s two most prominent political leaders of the past decade, onside. This would however be high risk, given the need for a national referendum, which might have to be held well after public concern consequent on the Ukraine war has faded.
- There is, however, now a solid political consensus favouring a rise in defence spending from the current 1.24% of GDP (on NATO standard measures) to 2%. The period over which this rise would take place remains unclear: many say five years, but others ten. But it would represent a big step forward for Japanese security, giving Japan the world’s third largest defence budget (at US$99 billion on the basis of 2021 GDP), after the United States and Japan. Germany, if it too fulfils its post-invasion 2% pledge, would have the fourth largest.
- These two points may explain why there is also a lot of muttering in LDP circles about the declining value of the coalition formed in 2012 with the centrist, Buddhist-based Komeito which has played such a critical role over the past decade. Komeito, an outgrowth of the big Soka Gakkai sect, is a party that has traditionally stood for pacifism, as well as for some welfare issues, and has been important to the LDP not just (or even mainly) for its Parliamentary support but also for its grassroots organisation and thus “getting out the vote” for LDP candidates in many areas. LDP critics point out that Komeito members are ageing, and that it is not known whether the Soka Gakkai spiritual leader, Daisaku Ikeda, is alive or dead. This talk may reflect concern that Komeito might oppose cherished plans for constitutional revision and/or for defence spending. The muttering inside the LDP is intended to suggest that their support is dispensable. It is true that Osaka-based Ishin-no-Kai, a right-wing group, is on the rise and could offer alternative (or additional) parliamentary support. But they wouldn’t help with getting votes out.
- Public and political opinion is moving back in favour of restarting nuclear power plants in response to the energy crisis. This would be useful though not transformative: of the country’s 54 nuclear reactors, it is thought that only a maximum of about half are capable of being restarted, and 24 reactors are already being decommissioned or scheduled for decommissioning. That means the potential change is from the current nine working reactors to something like 20 in operation. This at least puts Japan ahead of Germany in terms of nuclear realism.
- There is a fairly clear shopping list for what the extra defence budget should be spent on, if it can be agreed. Stronger capacities and institutions for intelligence, cybersecurity and space were said to top the list, followed by increased basing and deterrence in the southern Ryukyu islands near Taiwan, and a much discussed missile strike capability.
- Difficulties in recruiting and retaining personnel both in Japan Self-Defence Force (JSDF) and in intelligence agencies were also widely cited. Note was made of the vastly inferior nature of JSDF facilities and accommodation compared with US bases in Japan. It is all very well having money to spend, but with a declining population this personnel issue matters too.
2. Taiwan, South Korea, the US and China
- TAIWAN: Several influential people, from different backgrounds, voiced strong concern about the fate of the US policy of “strategic ambiguity” over Taiwan following President Biden’s statements about not being willing “to start World War 3” by sending forces into Ukraine. Such Japanese voices stressed, strikingly forthrightly, that the loss of Taiwan would spell the end of the US’s status as the world’s leading power, and that the strategic issues at stake in Taiwan (including for Okinawa) are far higher. President Biden’s comments at his press conference in Tokyo on May 23rd about America’s willingness to fight to defend Taiwan were presumably intended to quell such concern. After years of even greater vagueness on Japan’s part, there is now a clear push from Tokyo for enhanced deterrence. A former MoFA senior official remarked that his ministry had never had a properly worked out plan for Taiwan, while having worked on plenty for North Korea. He acknowledged that it was urgent to develop one, in partnership with allies.
- SOUTH KOREA: It is widely assumed in Tokyo that South Korea’s new conservative President Yoon Seok-youl represents an opportunity for improving relations, albeit from a low level. Although Foreign Minister Hayashi visited Seoul for President Yoon’s inauguration and expresses “cautious optimism”, the prevailing sense is one of waiting for Korea to make the first move, a sentiment reinforced by awareness of the new president’s knife-edge victory and parliamentary weakness.
- UNITED STATES: Repeated reference was made to American political polarisation and perceived political weakness. As was the case in the 1980s, there is a strong Japanese fear of social disorder in the US and consequent unpredictability in US behaviour. It is not so much a matter of whether or not President Trump is re-elected in 2024, but rather a deep concern that the US is politically fragile or volatile and so potentially unreliable.
- President Biden is viewed as positive for his support of the “Quad” and for his administration’s less confrontational approach to allies on trade and status-of-forces-agreements. But his “Indo-Pacific Economic Framework” is seen as disappointingly and unhelpfully empty whatever brave public face is put on it during Biden’s Japan visit.
- There is a strong sense that the Quad needs to be retained and developed, by defining and agreeing new projects the four member countries can implement together. So far, however, it lacks a clear strategic purpose – at least, a purpose shared by all of Japan, US, India and Australia.
- CHINA: One partial comfort about geopolitics appears to arise from perceptions of equivalent weaknesses in China, thanks to a “zero-covid” policy that is seen as failing and a CCP that appears trapped by it as well as by other economic pressures. This is eroding China’s attractiveness to neighbouring countries. That perception has also encouraged more active Japanese diplomacy towards SE Asia.
- The Russia-China strategic partnership is nevertheless viewed with considerable concern. A principal motive for encouraging or allowing Japanese firms to remain in the Sakhalin LNG projects (which Shell and Exxon are withdrawing from) is said to be fear that they would be taken over and exploited by Chinese firms. Some fears – still tentative – were also expressed about China exploiting future Russian dependency by gaining access to Russian military assets surrounding Japan.
- Weakness of household incomes and hence consumption remains the most important issue. This can partly be attributed to higher savings being accumulated during the pandemic, which some say will lead to a temporary burst of higher consumption this year or next.
- Inflation has finally arrived, in Governor Kuroda’s ninth year in office at the Bank of Japan, but it is in his terms the wrong sort: cost-push, imported from abroad, rather than domestically generated through rising incomes and demand. Wages are still showing few signs of rising in the economy as a whole, which implies a real-terms fall in incomes this year and perhaps next. That real-terms fall is likely to be smaller than the falls seen in the UK, Euro area and North America, but will still depress economic activity.
- The continuous weakening of the Yen this year is ascribed in official circles to interest-rate differentials vis a vis the US, now that the Federal Reserve has entered a tightening cycle. Officially, and by mainstream economists, the weak yen is being termed “net positive” for the economy and hence not a concern. This may chiefly reflect a sense of policy impotence, as well as the dominance in stockmarkets of the big exporting firms.
- But there are signs that the consensus may be shifting, as the weak yen compounds the pressure felt by households, SMEs and purely domestic firms thanks to rising commodities, imported food and energy costs. These forces are milder than in Europe. But they are taking hold and may eventually have a political impact.
- Corporate profits are again at record levels. So is tax revenue, in nominal terms. Yet public finances continue to suffer from depressed tax revenues from employment incomes and household consumption. Subsidies to stabilise petrol and other energy prices were noted as an unsustainable and retrograde step.
- Kishida’s slogan about favouring a “new form of capitalism” is now something even LDP critics (such as Heizo Takenaka) are rallying around. Income redistribution and some way to shift the balance between labour and capital do fit the current mood and are a neat differentiator from the Abe premiership. But there is little current sign that measures to implement it will be radical: just tinkering with a few tax incentives here and there, mainly concerning incentives to invest in training. Kishida’s London speech was described by one fund manager as “embarrassing”, and certainly its content was thin. Some more beef might come after the Upper House elections. That was a comment that was heard during my entire trip: wait until after the elections.
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