Sorimachi Speaks

THE 'SHAPE OF JAPAN IN THE 21st CENTURY' SERIES,
No. 22

After Iraq: The Shape of the World - The Shape of Japan Japan's Self Defense, Economic Recovery & Revitalization

The State of the World after the Attack on Iraq

(1) What the U.S. and the U.K. have to gain

Whilst it is fruitless to investigate the U.S. and U.K. intentions to attack Iraq, consideration of the post war scenario is a fairly simple matter. Firstly, Iraq's underground oil reserves are the second largest in the world after Saudi Arabia. If the major U.S. and U.K oil companies gain control of these reserves, the U.S. and the U.K. will be able to secure a remarkable global superiority in economic strategy. Advances in information technology mean that the location, depth and quantity of oil reserves can be probed with precision and progress in drilling technology means that the world can depend on oil for some time to come. The fact that the U.S. already depends on imports for half its expenditure on oil also means the advantage to the U.S. would be significant. Secondly, end of the Cold War caused a sudden expansion in capitalist markets as socialist nations participated in market-oriented society. For the superpower U.S. this meant an increase in the size of the realm it could control on its own terms. Even recalling the fear of the Soviet nuclear strategy alone, there was a great benefit in being liberated from that fear. The U.S. is enjoying fruits in every corner and this attack on Iraq will be the first step in occupying key locations in the Middle East and planning to expand into further markets in the Muslim nations. Rapid population growth will see the population of Muslim nations, which was close to 300 million as of 1997, exceed 400 million in 2015, a massive market next in size to that of socialist countries. Thirdly, there is the political effect to consider. The U.S. Department of Defence believes there is a possibility that China will become a threat. There is no other country in existence bar China that could become a superpower to rival the U.S. both economically and militarily. China has deep geographical, economic and military ties with the Muslim nations. The U.S. has already borrowed military bases in countries such as Kyrgyz and Uzbekistan to attack Al Qaeda at the time of the Afghanistan War, cutting off the oil pipeline from Russia and building a focus on Central Asia. China is now a major consumer of oil in global terms, having been an importer of crude oil since 1993 and the Chinese economy cannot develop without the import of crude oil. Establishing Anglo-American sovereignty in the Middle East region is effective from a China Policy perspective in terms of sealing China off strategically.

(2) Japan's Response

Mr. Hisahiko Okazaki has stated
To predict the international situation a month ahead, look at the data for the past year. To know about six months ahead, analyze data from that last decade. To predict a decade ahead, research the last several hundred year

and

The Anglo-Saxons have been dominant for the last 4 centuries. When we allied ourselves with this dominance Japan was also secure but when we opposed it, we suffered national defeat.

If we look at Japan's past this is certainly the case. However, even as we say we should learn from the past, it is exactly because our value judgments and view of the world are the foundation from which we do this, that we can extract meaningful history from a sea of facts.

It's obvious that values do not arise from facts. Learning from Mr. Okazaki's maxims and the situation surrounding Japan, it is desirable that Japan should join with Anglo-American alliance and shoulder an appropriate role. The statements of the Minister for Defense, Shigeru Ishiba, as to 'broad revisions of the Mid-term Defense Build-up Plan (2000~2005)' are extremely timely in this context. Further, Japan is dependent on foreign imports for almost all its vital resources, beginning with foodstuffs and oil. Securing our sea-lanes is a national duty for Japan. Current international law is based on the principle of the priority of national interests (each nation shall defend its own national interests). In this context the expansion and enrichment of the jurisdiction of the Maritime Safety Agency is a truly magnificent outcome for the security and lifestyle of the entire Japanese populace (Maritime Safety Agency Law Article 20(2), Self-Defense Forces Law Articles 82 and 93 (3). Maritime security activities.)

The Future of North Korea

Turning to examine Japan's relationship with North Korea, which President Bush identified as country belonging to the 'Axis of Evil', the Korean War, which broke out in 1950 is in a state of suspension following the ceasefire agreement signed by America, North Korea and China at Panmunjon in July 1953 (South Korea was opposed to the ceasefire and refused to sign). This is why North Korea earnestly desires that America sign a non-aggression treaty. It's clear from events following Prime Minister Koizumi's official visit and talks on normalizing diplomatic relations with Pyongyang on 17 September 2002, that Japan broke step with South Korea and the U.S., confusing matters and benefiting Russia and China. The fact that Japan has, in the past, inflicted the losses of war on China and Korea and subjugated them colonies is not erased from a moral and humanitarian standpoint, no matter how many apologies are made. However, the question of what duty these facts impose on Japan must be debated as a question of law. The facts of the past should be interpreted in light of the domestic and international law of the time. They must not be interpreted in light of domestic and international laws that came later (current law). This is the principle of the prohibition on retrospective legislation. It is even less appropriate to judge and criticize past facts by today's humanitarianism and concepts of human rights. An apology on humanitarian grounds is not the same as a duty under international law. Humanitarian theory and legal theory should be kept strictly separate. The Bush administration has made statements to the effect that it does not consider North Korea's development of nuclear weapons and crisis diplomacy problematic and is cooperating with surrounding nations in carrying out a policy of containment. There may be twists and turns from now on, but it is likely that the Koreas will unify and I want to turn here to considering Japan's relationship with the post-unification Korea. Japan will need political, economic and military strategies predicated on Japanese national interests. From the viewpoint of strategic theory that foresees 10 and 20 years from now, the Japan that plays a part in the Anglo-American alliance will have to assume an oppositional relationship with China. The relationship with Korea must be designed with this in mind. Accordingly, Japan's self-defense capability in the Asian region must be stepped up, unlike the situation until now.

Revitalization of the Japanese Economy

The world strategy centered on the U.S and the U.K. is to develop universal capitalism on a global level. I want to turn to considering Japan's economic recovery and industrial restructuring reforms on this basis.

(1)	Questioning the Real Value of Macro-economic Theory
	Japanese politics was, until now, in the hands of the bureaucracy, however since the reform of the Cabinet system, American-style political appointees have flourished. Academics, businessmen, experts and others private citizens are being elevated as Deputy Prime Minister, Ministers and to the Cabinet Office, being involved in making important decisions in national administration. The advice given in the past by Karel van Wolferen in his work published by Madosha in 1995, To Japan's Intellectuals (Nihon no Chishikijin e), that Japan's academics and professors rich in learning should participate more actively in Japanese politics, is now becoming a reality. In particular, since Heizo Takenaka was appointed Minister of Financial Services, Economic and Fiscal Policy, more than 20 elite economic theorists have expounded their own academic theories in magazines, newspapers and on television, debating the effectiveness of the Koizumi Cabinet's economic policies. It is tremendously productive to actually apply the economic theories taught at university to the Japanese economy and test which of the many is authentic. Economics has even been cleared of the past accusation that it was irrelevant to real life.
(2)	The Goal: To Create New Industries that Create Demand
	Both neo-classicists and Keynesian economists set the establishment of new internationally competitive industries that create demand as a goal and are in virtual agreement that maintaining the former industrial structure leads only to the loss of international competitiveness. Further, there is also a consensus on the steps to achieving this goal; abolishing or loosening the regulations prevalent in government and the private sector, privatizing the government undertakings that suppress private enterprise and putting certain laws and tax reforms in place (the Structural Reform Special Zones Law and tax laws designed for economic revitalization and the creation of demand). However views differ as to [1] whether anti-deflationary measures or dealing with non-performing loans should come first and [2] whether the purpose of anti-deflationary measure should be the creation of demand, based on the premise of insufficient demand or whether its main purpose should be fiscal policy and financial action. Methods proposed include the Yoshikawa Theory, where the aim is to produce new assets by innovative demand creation models and the Fukao Theory, where an inflationary target of 2.5%, quantitative deregulation through fiscal policy, the acquisition of land and shares by the Bank of Japan and the taxing of financial assets, a reduction in consumption tax and inducing the depreciation of the yen are proposed. #1
(3)	Pressing Issues: The Unemployed and Measures for SMEs
	No matter what policies are put into effect the matters which must be dealt with by those policies are [1] a safety net for the unemployed and [2] the avoidance of domino effect bankruptcies in micro-businesses and SMEs that accompany the business revitalization and debt restructuring carried out by industrial revitalization and liquidation recovery organizations. In relation to [1] the unemployed must acquire the 'employability' that will enable them to work in the new growth areas created by the upcoming reform of the industrial structure, birthing new industries. Industries that can make use of the current labor force are becoming fewer. The theory of employment mismatching presupposes continuously improving economic conditions, which does not apply to today's middle aged and elderly. In relation to [2], all major businesses started out as micro-businesses. Surely somewhere in Japan's localities the newborn cries of the micro-businesses and SMEs that will support Japanese industry in the future are being heard. We must not throw out a future Toyota with the bath water. The new workplaces are inside industries; we cannot expand new employment unless we expand new industries. Accordingly, the way to resolve the problem is clear. Each and every new industry must be carefully cultivated and supported. Raising up an industry is the same as raising a child. Sure and sound administration is the key. In Hyogo Prefecture, a 'Community Business Support Project" is being planned, which will provide advice from expert businessmen to businesses in the prefecture. #2 This kind of grassroots strategy may be a sober approach but it produces certain results. There is no shortcut to success, only steady hard work on a daily basis, setting one's sights on the crown of the creation of nternationally competitive demand. internationally competitive demand. internationally competitive demand. internationally competitive demand. internationally competitive demand.

#1	The Comprehensive Measures to Accelerate Reforms initiated by Minister of Financial Services, Economic and Fiscal Policy Heizo Takenaka on 30 October 2002 was a blanket policy, including financial stabilization policies, safety nets for employment and the running of SMEs and tax measures. Specific policies included [1] an indication that financial stabilization measures would be taken to tighten asset assessments and assisting the development of self-funded capital, [2] the establishment of a 'Center for Industry, Business and Employment Revitalization Strategy' directly under the Prime Minister in order to mitigate the ill effects of accelerated disposal of non-performing loans and the creation of an 'Industrial Revival Organization' as a financial vehicle for industries that can be revitalized and [3] reduction of the taxes on research and development activities and investments in information technology and re-examination of the tax system as it relates to land, SMEs and the financial system. These policies could be seen as the mid-point between the views of the two theorists mentioned; Professor Hiroshi Yoshikawa of the Graduate School of Economics, Tokyo University and Professor Mitsuhiro Fukao of the Faculty of Business and Commerce, Keio University.
#2	'Community business' means businesses that utilize local resources (such as personnel, technology and capital) to resolve local problems. It is anticipated that they produce the effect of revitalizing the local economy and creating employment. Hyogo Prefecture has made an early start on providing active support for these businesses by means such as assistance with start-up expenses, the dispatch of management consultants and the provision of occupational information to those wishing to work in community businesses.

References:

Brzezinski, Z. Burejinsukii no sekai wa ko ugoku, [Brzezinski's View on Direction of World]. Nihon Keizai Shinbunsha: Tokyo, 1998.
Hidaka, Y. Sekai daihendo ga hajimatta, [The World in Flux]. Tokuma Shoten: Tokyo, 2002.
Komiya, R & Japan Center for Economic Research Kinyu seisaku rongi no soten, [Issues in the Financial Policy Debate]. Nihon Keizai Shinbunsha: Tokyo, 2002.
Yoshikawa, H. Gendai makuro keizaigaku, [Modern Macro-economic Theory]. Sobunsha: Tokyo, 2000.

index

back