Thursday, September 23, 2010

The end of the "strategic, reciprocal" relationship?

Since Abe Shinzō succeeded Koizumi Junichirō in 2006, the focus of Japan's China policy has been the promotion of what has been called in official documents as a "strategic, reciprocal relationship" between Japan and China. Acknowledging the importance of the bilateral relationship for peace and stability in East Asia, the two countries agreed to build a political relationship based on mutual trust, increase cultural and educational exchange, bolster economic cooperation, and collaborate to build an East Asian order founded on openness, transparency, and inclusiveness.

As the showdown between Japan and China over the fate of the Chinese fisherman now in Japanese custody intensifies, it is worth asking what the process of "unfreezing" the Sino-Japanese relationship since 2006 has accomplished, and whether that process will survive this dispute — or whether this standoff marks the beginning of a new, uncertain period in the relationship.

With each passing day it becomes clearer that the answer to the first question is "not much." The two countries' leaders have talked more frequently and exchanged state visits. Japanese leaders have avoided the deliberately provocative actions regarding wartime history that led to the deep freeze in the first place. Chinese leaders have at various times acknowledged and praised Japan for its peaceful development during the postwar period. But arguably no progress has been made to defuse the truly potent issues in the relationship, starting with the Senkakus.

This dispute was a hard test for the "new" Sino-Japanese relationship, as it concerns important symbolic issues — sovereignty over the Senkakus and the incarceration by Japan of a Chinese national, an "abduction" of sorts in Chinese eyes — and is therefore precisely the kind of issue that appeals to Chinese insecurity about its regional and international status, making unlikely to be resolved by Tokyo's appeals to handle the issue calmly and without resorting to nationalistic posturing. Of course the strategic, reciprocal relationship failed the test. China has steadily applied pressure on Japan, canceling cultural and political exchanges and possibly banning the export of rare earth elements (although for the record, the Japanese government has not confirmed whether there is in fact an export ban and the Chinese government has denied that there is any such ban).

As important as the resumption of normal relations between Tokyo and Beijing has been, it is worth asking whether the "strategic, reciprocal" relationship agenda will ever result in the kind of bilateral relationship rooted in trust that would limit the ability of this kind of issue from escalating into a more serious crisis. As long as anti-Japanese sentiment remains widespread, making a hard line towards Japan in disputes politically expedient, as China's policymaking process remains opaque, making it difficult to know how or why decisions are made, and as China remains acutely sensitive to insults to its national pride, it seems unlikely that the underlying dynamics of the political relationship will change. The economic relationship will undoubtedly remain important, but it is unlikely that economic interdependence will spill over into the political relationship — in either country. While Bruce Einhorn argues at Business Week that Japan "can't afford" a fight with China, Daniel Drezner suggests that attempts by China to use economic links to exert pressure on Japan could very well backfire and lead Tokyo to dig in its heels. Contrary to Einhorn's presumption, the impact of economic interdependence on Sino-Japanese political ties is arguably negligible. If anything the impact has been negative, leading China to believe that it has more leverage over Japan than it might otherwise have.

What about the Kan government's response to this dispute? Peter Ennis notes that there has been no sign of disagreement between Kan, Chief Cabinet Secretary Sengoku Yoshito, and the new Foreign Minister Maehara Seiji, all of whom have not responded to Chinese pressure by upping the rhetorical ante or responding in kind. This stance suggests that far from hearing the "wake-up call" that Dan Twining believes China is sending to Japan, the Kan government remains committed to the "strategic, reciprocal" program, persisting in the belief that forbearance by Japan will bear fruit over the long term if it leads China to learn to trust its neighbors.

In other words, in the aftermath of this dispute the Kan government will likely recommit to the pursuit of constructive cooperation with China, however unlikely it is that this approach will produce tangible results in the short run. The DPJ will be criticized by people like Abe for being "not understanding international politics," but it is unlikely that it will change course in foreign policy, and certainly not in the direction favored by hawks in Washington. When considering Japan's approach to China it is necessary to note that while the Japanese public wants their government to stand up for Japan in disputes with China, Japanese citizens are not clamoring for defense spending increases to match China's military modernization program or more assertive diplomacy to contain China's growing influence. As such, the Kan government's response to China's posturing may not be herald a "new realism" in the DPJ's foreign policy thinking but is instead perfectly consistent with its approach since taking power last year. (I've argued repeatedly that, Hatoyama's woolly-headed rhetoric notwithstanding, the DPJ has been remarkably realist in its diplomatic maneuverings since the beginning of its tenure.)

In doing so, the Kan government will be gambling that over the long term engagement will work. Given how little has been accomplished since 2006, it is an unappealing gamble — but the alternatives are worse. Economic interdependence may not make political cooperation inevitable, but it means that the Japanese government has an interest in talking with China regularly. The approach pursued by Japanese governments since 2006 essentially means keeping the Sino-Japanese relationship in a holding pattern, finding areas to cooperate while maintaining the status quo over issues like the East China Sea, perhaps in the hope that over time China will become more satisfied and less predisposed to forcing changes in the status quo. It may be a foolish gamble, but the alternative, the creation of a de facto Asian NATO, would be far worse, providing hardliners in Beijing with signs of encirclement and virtually guaranteeing that China will not limit itself to small maritime "provocations." It would be a fine example of what Bismarck said of preventive war, "committing suicide for fear of death."

Despite being an unsatisfactory option, the "strategic, reciprocal" relationship may well here to stay.

Sunday, September 19, 2010

Kan presses the reset button

Having successfully fended off Ozawa Ichirō's challenge to his leadership of the ruling Democratic Party of Japan — indeed, having defeated Ozawa by an unexpectedly large margin, not only winning the vote among Diet members but also receiving the support of 249 of 300 district-level party chapters and sixty percent of the vote among local representatives — Prime Minister Kan Naoto finally has an opportunity to govern. After all, since succeeding Hatoyama Yukio in June Kan has spent much of his time focused on elections, first with the House of Councillors election in July and then the showdown with Ozawa.

Perhaps it should come as no surprise that within days of his victory Kan reshuffled his cabinet and the DPJ leadership. I am generally skeptical of the efficacy of cabinet reshuffles. Doling out cabinet and sub-cabinet posts is, of course, one of the more important tools in a party leader's toolbox as he tries to induce good behavior on the part of backbenchers. But too much turnover at the head of ministries can stymie policy change. Every change of minister comes with a period of inactivity as the minister learns the job; reshuffle too frequently and by the time the minister is ready to lead, he will be on the way out. This problem was characteristic of LDP rule in particular.

During its first year in power, the DPJ avoided a wholesale reshuffle, despite its declining popularity (the usual time for a reshuffle) — even Kan held off when he took over from Hatoyama. However, having secured his control of the DPJ, giving him a two-year term as party leader during which the government will not have to face the electorate if it doesn't want to, I suppose it is only natural that Kan would want to appoint a cabinet of his own making. And the DPJ certainly benefits from more party members getting experience in government, giving that virtually none had any experience of power before the DPJ won last year.

The new cabinet is being billed as a "non-Ozawa" cabinet. No member of Ozawa's group received a cabinet post, although Kaieda Banri, who, while not being a longtime Ozawa associate, supported Ozawa's challenge, was appointed as economy minister. There will be little turnover in the cabinet's most important positions. Sengoku Yoshito stays on as chief cabinet secretary and Noda Yoshihiko will continue to serve as finance minister. With Okada Katsuya's becoming DPJ secretary-general, Maehara Seiji, formerly responsible for transport and Okinawan affairs, will move over to the foreign ministry. Kitazawa Toshimi stays on as defense minister, ensuring a degree of continuity as far as Futenma is concerned. Renhō and Genba Koichirō will stay on the cabinet's administrative reform posts. The cabinet also includes former Shimane governor (and non-MP) Katayama Yoshiro as minister of internal affairs and communications, with an additional portfolio for regional revitalization and Kano Michihiko as agriculture minister (a post he held in 1989 in the Kaifu government).

Kan has presented his new cabinet as a cabinet that will "make good on its promises." That remains to be seen, as the prime minister has a difficult road ahead.

Kan spent his time on the campaign trail talking about "jobs, jobs, jobs." But talking about employment is one thing — doing something about it is a different matter entirely. The rising yen has triggered more hollowing out in the manufacturing sector, as businesses relocate to cheaper countries within the region. A recent METI survey found, for example, that forty percent of manufacturing sector respondents would move factories overseas were the yen to continue to rise. In the immediate aftermath of the DPJ election the Bank of Japan did intervene in foreign exchange markets, which has at least temporarily halted the yen's rise (although Felix Salmon suggests that since the BoJ did not sterilize its intervention this time, it could have anti-deflationary effects).

But as Richard Katz argues in the Financial Times, intervention to weaken the yen is little more than a temporary fix. He notes that a weak yen does nothing to help wean Japan off export-dependent growth, and cannot reverse the long-term trend towards a stronger yen. (And if Japan's is but the first in a series of competitive devaluations with its trading rivals in the Eurozone, it is hard to see what Japan will gain from intervention.)

The problem for Kan is that the path from short term to long term is perilous. In the short term, economic success will depend on the traditional export-led model, meaning that when a survey reveals that Japan's manufacturers will accelerate offshoring if the yen continues to strengthen, a government focused on economic recovery has little choice but to pressure the BoJ to intervene. But over the longer term, Japan needs to revitalize the service sector to produce a more balanced growth model (while trying to put the government's finances on a healthier trajectory).

This objective, easily the overriding purpose of the Kan government and its successors, would be difficult enough in the best of political circumstances. These are not the best of political circumstances.

First, although Kan has a new mandate as DPJ president, he still has work to do consolidating his control of the party. Whether Okada will be able to help him in the post as secretary-general remains to be seen — as Michael Cucek notes, Okada may not be the ideal man for the job, seeing as how his appointment to the post was not uncontested. The main problem within the party may still be Ozawa. While Kan's margin of victory may silence Ozawa for the moment, it remains to be seen how Ozawa will react to Kan's decision to exclude Ozawa's lieutenants from the cabinet and party leadership. I do not expect Ozawa to leave the party, not least because it is far from certain that he would get many to follow him out, especially now that the Kan government has a bit more buoyancy in the polls. Having failed to unseat Kan, Ozawa may recede into the kind of role I thought he might take earlier, that of an elder statesman, periodically declaiming on or critiquing the government's decisions but not actively organizing an intra-party opposition.

But while Ozawa may be less of a problem, Kan will still have to contend with backbenchers unhappy with the direction taken by the government, as Kan implicitly acknowledged by suggesting that he will have a "cabinet of 412" (referring to the number of DPJ legislators). The inclusion of DPJ MPs in policy deliberations is unavoidable as the Kan government tries to revise or scale back the party's promises in the 2009 manifesto, but it need not be cumbersome if the prime minister is able to take control of the policy agenda.

Whether he is able to will depend on the opposition. Kan still has to find a way to coax the opposition parties to support his proposals, without which they will die in parliamentary proceedings. That the Kan's approval ratings have shot up to the same level as when he took over should help him — if he does not squander public support through indecision or inaction. Arguably the only way Kan can succeed is by doing what Koizumi did: appealing to the public directly in order to break the resistance of opposition parties and opponents within his own party. But to bring the public along Kan has to offer something in the first place. The challenge for Kan, then, is to develop an economic program that includes macro- and microeconomic policies, that attacks wasteful spending, includes deregulation and tax reform, and promises something better for the public. If the government is incapable of developing this program internally, Kan should take a page from the playbook of prime ministers past and convene a blue-ribbon advisory council headed by Kan and composed of prominent figures from business, labor, academia, the bureaucracy, and the political opposition. The commission would have to be as much a public relations exercise as a policymaking exercise, regularly issuing statements and drafts that reveal the emerging program and allowing the process to dominate public discussion.

The turn to advisory-group policymaking would be at odds with the DPJ's professed desire for cabinet-led policymaking, but at this point I'm not sure that the Kan government has much choice. I've lost count of the number of "growth strategies" the DPJ-led government has issued over the past year, but whatever the number, it's too many. The public is willing to give Kan and the DPJ another chance, but it is clear that what they have been doing isn't working. 

If Kan is unable to bring the public along with him, the outcome will be easy enough to predict: low public support, opposition obstructionism, and unrest within the DPJ, the same cycle that has brought low every prime minister since Koizumi.

Tuesday, September 14, 2010

Previewing the DPJ election

I was on CNBC Asia again today to preview the Kan-Ozawa showdown.

In case you're wondering why I've been silent during this campaign, the reason is simple. The DPJ scheduled its election the same week as my doctoral exams (how rude! - ed.) and so I have not been able to follow this electoral campaign to anywhere near the degree I would have liked. Apparently appearing on TV to talk about Japanese politics is how I unwind after a day spent writing.