Why Japan will have a significant role to play in 2021

But a decade later, Japan’s sun ceased rising so steeply. The nation entered a prolonged period of economic stagnation from which it is yet to fully emerge and was replaced in fearful imaginations by its old East Asian rival, China.

As with the earlier world-domination hyperbole, the doom about Japan’s supposed demise is exaggerated. Japan is a stable, prosperous democracy and a positive international influence. Its importance is growing as the world’s geopolitical centre of gravity shifts towards Asia.

Even so, Japan does still have some significant issues to solve. As Mireya Solís, the leading Japan expert at the Brookings Institution think-tank, put it recently, many Japanese are concerned “that their country depends too much on China for its prosperity and too much on the United States for its security”.

Japan’s lingering economic problems date back to its boom years. Land and stock prices trebled during the 1980s. But too much of this asset price bubble was fuelled by an unsustainable lending spree. This left many so-called ‘zombie’ firms burdened by loans they could not repay and a banking system drowning in bad debts. The outcome was an early 1990s crash followed by 20 years of low growth and deflation known as the “lost decades”.

Japan partially tackled these troubles by becoming a strong advocate for free trade. This role is now even more noteworthy in an era when some of the biggest champions of openness are going wobbly.

Japan took the lead in salvaging the Trans-Pacific Partnership that Trump’s America reneged on in 2017 and has recently brokered two huge trade deals, one with the EU and the other with 14 Asia-Pacific countries.

This approach is reflected in the UN statistics, which show that Japan still outranks China as an outward investor around the world, including in Southeast Asia, the region where Beijing is throwing its political and economic weight around most aggressively.

Japan remains a major provider of aid and development finance too. Its huge $200billion ‘Partnership for Quality Infrastructure’ receives far less publicity than China’s ‘Belt and Road Initiative’. But this Japanese programme is transparent in its finances and aims only to strengthen the countries it supports. Unlike ‘Belt and Road’, it does not involve economic or security quid-pro-quos, or create debt traps for the recipients that can later be turned to the donor’s advantage.

On the purely commercial front, Japan’s more successful firms retain many strengths, including a substantial global market share for high-tech products that bodes well for the future.

Their export profits have been increased over recent years by the government’s efforts to damp down the value of the yen. Japanese firms capitalised early and heavily on the rise of China, both as a lower-cost manufacturing base and an export market.

This shift is now seen as having gone too far and Japan is discreetly attempting to diversify some of its economy away from China (currently about 20-25% of Japan’s total trade).

Maintaining Japan’s economic influence will depend on the government led by new prime minister, Yoshihide Suga’s, ability to improve on the patchy “Abenomics” reforms of his long-serving predecessor, Shinzo Abe.

Low growth, debt burdens and a lack of wage increases for workers are still acting as brakes on the economy that discourage risk-taking entrepreneurship. In particular, young people see too few prospects for career advancement.

Demographic decline is another particularly acute problem in Japan, with a growing number of pensions to pay and a lack of working age people to fund them. In part, this is the price of Japan’s success in building a high-quality medical system, leading to long lives for its citizens.

But low birth rates are a major factor too and one that is unlikely to change anytime soon. Japan is attempting to tackle the demographic problem by encouraging greater participation in the workforce by under-represented segments of society– in its case, women.

This remains a work in progress. But a silver-lining of having a greying population is that the shortage of workers has at least helped to keep unemployment low. Japan has seen little of the backlash against globalisation’s alleged role in sending jobs overseas.

These circumstances have helped Japan to become a little more comfortable with immigration than has previously been the case. The number of foreign workers in the country has doubled over the past decade without prompting significant disruption by xenophobic political parties.

Continuing this controlled influx is essential to care for Japan’s ageing population, both directly and by injecting fresh dynamism into the economy.

Japan’s emergence as a leading advocate of free trade gives it a crucial role in creating a healthy counterbalance to an increasingly belligerent Beijing. Becoming such a bulwark is equally important in the security sphere too.

Former PM Abe is amongst those on the more nationalist wing of the political spectrum who believe Japan’s post-Second World War constitution inhibits the country. In order to restore confidence amongst its neighbours after its wartime abuses and to end its culture of militarism, Japan was compelled to adopt a ‘pacifist’ clause. This renounces the right to wage war or possess armed forces beyond those required for purely self-defensive purposes.

Abe and his acolytes see these constitutional restrictions as an outdated constraint on Japan’s ability to play a full role on the international stage, including deterring Chinese aggression.

The conundrum that these conservatives have repeatedly failed to solve is that their nationalist instincts often alarm the neighbours Japan once brutally occupied. It needs some of these countries, such as South Korea, as allies to counterbalance the Chinese colossus effectively. The nationalists’ problematic conduct includes bestowing favour on the Yasukuni Shrine to Japan’s war dead, which houses the graves of 14 ‘Class A’ war criminals convicted of committing atrocities in occupied countries, and failing to resolve completely the issue of the ‘comfort women’, who were forced into sex slavery by the Japanese army during the occupations.

New PM Suga may be better placed to smooth over these prickly relationships. Suga served loyally as Abe’s cabinet secretary throughout his eight years in office. He is credited with steering Abe to tone down his assertively nationalist impulses and to focus on the economy instead. Although relatively inexperienced in international affairs, Suga’s more emollient style may be better suited to expanding Japan’s security role in the region.

This approach already made some progress during Abe’s term. A subtle reinterpretation of the constitution permitted Japan’s self-defence forces to help defend allies, without going through the political upheaval of a head-on campaign to change its wording. This redefinition allows Japan to participate in military exercises with the increasingly important ‘quad’ alliance with Australia, India and the US. Although it is left unstated, this informal alliance is clearly focused on defence against China.

If Japan could overcome the deep historical sensitivities and achieve greater coordination with its neighbours, it would be a boon to regional security. Even allowing for the welcome arrival of the Biden administration, the US’s ongoing political precariousness diminishes its long-term reliability as a security partner.

The Asian powers must do more collectively for themselves to deter the wilder impulses of authoritarian China and the grave threat posed by North Korea’s nuclear armed dictatorship.

In common with most of the world’s developed democracies, Japan is currently facing some challenges. But, with good leadership, solutions to most of them are available and their existence should not overshadow the many assets Japan brings to the international community.

Our attention is often absorbed by the activities of those major powers who are most dramatically rising and falling. But we should also recognise the positive impact of stable, mature democracies like Japan. Japan continues to offer its people freedom and a generally high standard of living. Now and in the future, the world needs more places like that.

Belated Olympic hosts

This year is due to see Japan finally host the Olympic Games scheduled for last summer but delayed due to the pandemic. It is the first time the games have been postponed rather than cancelled. (Tokyo was also due to host the 1940 games, which never took place, although it had forfeited the event in 1938).

For marketing and branding purposes, this year’s games have retained the “Tokyo 2020” name. The cost of the delay has been estimated at 640 billion yen ($5.8 billion)

The Japanese capital will become the first Asian city to host the summer Olympics twice, the first being in 1964.