Japan-Asia economic relations: Trade, investment, and the economic crisis

Japan has been and will continue to be an important economic player in the Asian region through its internationalization policy involving trade, foreign investments, aid, technical and other forms of economic cooperation. More recently, despite its own domestic problems, Japan has extended financial and other forms of assistance and support to the Asian economies which have been hit by the economic crisis. As it is in its interests that the Asian region survives and recover, Japan will indeed continue to lend a helping hand to Asia, either through unilateral or multilateral forms of assistance or both. Due to growing interdependence, Asia needs Japan and Japan needs Asia. This article analyzes Japan's economic relations with Asia. In particular, it hopes to present an overview of Japan’s involvement in Asia through trade and investments prior to the Asian economic crisis which began in July 1997. Moreover, this article provides an assessment of the crisis and identifies Japan’s responses and involvement towards the economic recovery of the crisis-hit economies in the region. The article draws from earlier versions of various papers presented at conferences and seminars in Washington, D.C. (1997), Japan and Mexico (1998), and Singapore and Thailand (1999).     

Asia's deepening financial crisis: Japan as a critical uncertainty

Japan's response to the economic crisis in East Asia is critical, not only for Japan itself but also for the Asia‐Pacific region and for the world. Kent Calder, Special Advisor to the US Ambassador to Japan, argues that the massive Japanese economy can potentially serve as a locomotive for the region, and as a sturdy fire wall to prevent the crisis from spreading. To do this, Japan must stimulate its economy, open markets further to Asian imports, and strengthen its financial system. If it fails, Japan could become part of the problem, instead of part of the solution.     

Reflections on Japan's past

Fifty years after the devastation of World War II, Japan's remarkable long‐term, export‐driven economic success is known as the East Asian development model and East Asian economies have become the engine for the world's economic growth. Yet the collapse of Japan's 1980s over‐inflated “bubble economy” has created apathy and pessimism, says former Prime Minister Yasuhiro Nakasone. In May 1995, on the occasion of his seventy‐seventh birthday, after more than 45 years in the Diet, IIPS Chairman Nakasone reflects on Japan's modern history and issues a call for renewal in the following speech. Above all, he says, “Japan does have a few mavericks” and “people with true convictions [should] come forward . . . the Japanese are waiting for genuine leadership.”     

The 2008 Financial Crisis and the Flying Geese Model

In the twentieth century Japan embarked on an economic developmental path that came to be known as the Flying Geese Model. The geopolitical milieu after the Second World War provided Japan with favourable conditions for rapid economic growth and industrialization. By the 1950s, many had noticed the success of the model and it was subsequently adopted by other East Asian countries. They too enjoyed decades of remarkable economic growth. An important element of the model is growth driven by export to the USA and Europe. As a result of the 2008 financial crisis, the traditional markets of the geese are shrinking. The new situation poses grave challenges to both the existing flying geese economies and latecomer economies which wish to follow the model. East Asian countries are responding to the situation by broadening and deepening their existing economic linkages and developing new ones. This represents a continuation of East Asian regionalism in the wake of the 1997 financial crisis.     

中日东亚货币合作——国际关系视角的分析

当今国际政治经济格局与美元霸权是东亚货币合作的大背景,在这一背景下,东亚货币合作有着更深刻的国际利益分配的潜在内涵,而不只是单纯的区域货币合作问题.美、日、中三方的利益关切共同推动和影响着东亚货币合作的进程.日元和人民币都不具备独立作为东亚主导货币的条件,东亚各国或地区的经济发展水平差异较大,货币合作的政治基础比较薄弱等现实条件,促使合作成为中日双方的最佳选择,其中,中日双方政治互信的改善对东亚货币合作尤为重要.     

The political economy of the dollar and the yen in East Asia

From the early 1980s until 1997 large amounts of Japan's current account dollar surplus were invested in U.S. Treasury securities. This economic relationship developed into an “alliance” sustained by the economic policies of U.S. and Japanese authorities. The U.S.-Japanese alliance indirectly promoted East Asian export-led growth during 1985–95. However, policies associated with the U.S.-Japanese alliance also contributed significantly to the 1997 Asian financial crisis. During the past years Japan has launched a number of initiatives for aid and regional monetary co-operation with the aim of internationalising the yen and redirecting regional current account surplus flows to go within the region, rather than being invested in the United States. The article assesses the viability of this regional challenge to U.S. monetary hegemony.     

Japan's role in overcoming the Indonesian economic crisis

The prospects for economic recovery in Indonesia depend partly on economic improvement in the other countries of the Asia‐Pacific region, says Sujatmiko, Counsellor of the Indonesian Embassy in Tokyo. If Japan were successful in generating a strong domestic economic recovery, that would in turn help Asia's recovery. The Japanese government's quick and positive response to the financial crisis in Indonesia has been greatly appreciated, although not without its problems. Notably, other major powers have wanted to play a significant role in saving Asia, and some regional rivalry has surfaced. For Japan, Sujatmiko says, the biggest obstacle against taking a leading role has been its closest ally, the United States.     

外部约束与东亚经济结构转型

长久以来,东亚经济增长一直是在供求要素结构不完备的经济体系下实现的,这一内在缺陷决定了东亚需要借助外部力量才能实现经济增长。外部力量既是东亚外向型经济增长的结构基础,也是影响或控制东亚经济增长的主要制约因素。2008年全球金融危机的爆发预示着有利于东亚经济增长的外部环境发生逆转,迫使东亚开始新一轮的结构调整与转型。而此次结构调整与转型将主要通过对过去经济运行体系特别是市场要素缺失的矫正来实现,以尽可能减少外部力量对经济增长的负面影响。     

The Aral sea environmental crisis: problems and a way forward

A relatively small group of Japanese war veterans has played a major part in creating a favourable image of Burma in Japan. In the early 1950s both Japan and Burma needed a swift agreement on reparations, the Japanese because the export markets and natural resources of South East Asia offered a real opportunity to rebuild the Japanese economy, Burma because economic policy was already faltering and financial aid was needed. The Reparations Agreement between Japan and Burma became the model for ODA agreements with other South East Asian nations and the Japanese committed large sums to Burma, yet the Japanese mercantilist approach was never compatible with the Burmese road to Socialism. Since the imprisonment of Aung San Suu Kyi, some in Japan have promoted a policy of solidarity towards Burma, while others, including the new Prime Minister, Hatoyama have advocated an approach based on concern for human rights.     

Development of the Mekong Region as Part of Japan's Diplomatic Strategy for East Asia

Japan's active engagement in the development of the Mekong region since the 1990s needs to be understood not only from an economic but also from a diplomatic perspective. Japan seeks to collaborate with ASEAN in facilitating multilateral “political dialogue” in the Asia-Pacific region and building an East Asian order based on “universal values” such as democracy and the rule of law, and the Mekong region could be the “weakest link” of ASEAN. After outlining Japan's twenty-year undertaking to cultivate Mekong-Japan cooperation, the author suggests that it is time to broaden the scope of the cooperation and accelerate Japan's “proactive contribution to peace” policy to cope with the changing security environment.     

From Ancient to Modern Times: A Retrospective of Japan's Relationship with the Middle East

After the terrorist attacks of 11 September 2001, interest in the Middle East and Islam has surged in Japan as well as the rest of the world. This marks the third time in modern history that there has been such a surge in interest in the region. The first oil crisis in 1973 and the Gulf War in 1991 had prompted the other occasions. On the previous occasions, the interest had been fleeting and had not had any lasting effect on the economic and political trends of Japan. In this article, Akira Mizuguchi, senior research fellow at the Middle East Institute of Japan, reflects on Japan's relationship with Islam. In a world of increasing globalization, the role of the nation state is changing. He considers whether Japanese interests within the framework of the nation state should determine strategies for energy, which has an enormous impact on economic activity. Also, he ponders on the best way to respond to the various social problems arising from the increase in multicultural friction.     

U.S. hegemony and Southeast Asia

The United States has exerted a major influence on Southeast Asia, especially since World War II. As both a promoter of neoliberal reform and as the key strategic actor in the wider East Asian region, the impact of U.S. power has been immense. But both the Asian economic crisis and its aftermath, and the more recent “war on terror,” have highlighted the contradictory impact of evolving U.S. foreign policy and intervention in the region. At both an elite and a mass level there is evidence of resentment about, and hostility toward, U.S. policy and its perceived negative effects. This article outlines how U.S. foreign policy has impacted the region in the economic, political, and security spheres, and argues that not only has it frequently not achieved its goals, but it may in fact be undermining both America's long-term hegemonic position in the region and any prospects for political liberalization.     

Trade and investment in Southeast Asian development

Expansion of foreign trade and investment has been a vital factor underlaying the high economic growth of the Southeast Asian economies over the last ten years. As East and Southeast Asian economies continue to deregulate and prosper, trade and investment flows are becoming increasingly interconnected within the region. The character of this regional economic integration, however, has shifted recently. The role of the Japanese has declined while that of China and the overseas Chinese has boomed. Whereas China has absorbed huge amounts of foreign investment, investment to the Southeast Asian economies appears to be weakening significantly. This weakening of investment is occurring just as many Southeast Asian countries struggle to uppgrade the technical levels of their production of goods and services to accommodate the rising wages and income levels that are fundamental to sustained and broad-based increases in standards of living throughout the region.     

Japanese Foreign Policy in the Middle East: Balancing Economy and Security

Abstract

Although the quest for oil has long been a central concern for resource-poor Japan, its foreign policy in the Middle East does not simply reflect a mercantilist interest in the region's resources. Its desire to remain close to the United States during the North Korea crisis and its nascent competition with China are also critical factors in Japan's Middle East policy. However, Japan lacks an integrated strategy toward the Middle East and as a result the various components of its policy are not always compatible. Hence, while Japan has firmly backed the Bush administration's Iraq policies, and begun discussing a possible free-trade agreement with members of the Gulf Cooperation Council, it has also, until quite recently, simultaneously pursued closer relations with Iran. In lieu of coherent regional strategy, Japan instead possesses a clearly prioritized sense of its interests in the region.     

Challenges for currency cooperation in East Asia

The defects of the current international financial system are creating tremendous distortions in the economies of East Asia. For the time being, most of the developing countries in East Asia have no choice but to adopt some sort of a flexible, wider band system (crawling band) while resorting to capital control when necessary, in order to avoid the recurrence of the Asian currency crisis. Japan's approach to building a stable international financial system in East Asia has gone through several stages since the late 1970s. Though the latest approach of setting up the Asian Bond Fund (ABF) is a step in the right direction, the ABF has severe limitations in reducing the risks for the developing countries in Asia. The ABF needs to be replaced by the Asian Bond Corporation (ABC) in order to develop an international capital market in Asia and use the abundant saving in Asia for financing the growth of Asia. In the process of expanding the activities of the ABC, Asia can adopt the notional common currency based on a basket of major currencies. That notional currency will pave the way toward introducing the Asian common currency, which can be the ultimate goal for the economic cooperation and integration in East Asia. In the meantime, while enhancing currency cooperation, East Asia needs a lender of the last resort in order to keep its economy from collapsing from another currency attack. Japan has been trying to play that role and is poised to take that responsibility as the largest and the most developed economy in the region. International capital markets and a truly international currency must be supported by numerous institutions and intellectual frameworks. Asia is yet to build those institutions. To help build those institutions, we in East Asia need to establish a new international research institution which would coordinate the strenuous intellectual efforts needed for building institutions that bolster the international capital market in Asia. The envisaged new institute can be dubbed the "Asian Monetary Institute," or "AMI."     

The financial crisis in East Asia

The East Asian financial crisis has proved far more contagious than anyone imagined likely when devaluation of the Thai baht in July 1997 gave the first indication that something was wrong, and the implications it could have for the entire world financial system mean that any response must involve more than just the nations affected directly. Nobuyuki Ichikawa says Japan, as the locomotive for the Asia‐Pacific region, must move quickly to achieve an early economic recovery by increasing domestic demand and reforming its financial system, in order to increase imports from East Asia and shore up the weak yen. He suggests that one effective measure might be for the yen to become the key currency for Asia in lieu of the dollar. Ichikawa works for the Bank of Japan and was seconded to IIPS in 1995.     

20世纪初韩国的和平思想——日本的“东洋和平论”批判和韩中日间合作的探索

20世纪初期,在日本帝国主义进行侵略和扩张的过程中,伊藤博文政府为了建立"东洋和平"和西方势力抗衡,主张在韩中日之间开展合作。但事实上这种主张不过是把当时以日本为中心的东北亚地区秩序合法化的说辞。针对这一点,安重根、安昌浩、申采浩等韩国独立运动家指出国家正处于丧失国权的危机之中,在对日本主张的"东洋和平"进行批判的同时,强调只有在韩国等周边国家的独立得到保障的情况下才有可能实现真正意义上的"东洋和平"。1910年日本帝国主义强行合并韩国以后,申采浩、朴殷植等韩国独立运动家在指出日本合并韩国的非法性的同时,还强调韩中日等东北亚地区国家间建立在信任基础上的交流和合作的重要性,主张韩国的独立有利于"东洋和平与世界和平"。尤其值得一提的是,柳麟锡在强调韩中关系在东北亚的重要性及中国作用的同时,还提出了韩中日三国在相互信任的基础上朝着共生关系发展的构想。     

The United States and East Asia in an age of financialization

This article starts from Peter Gowan's notion of a Dollar-Wall Street Regime (DWSR) characterized by financial deregulation, the dollar as the world's currency, large international capital flows, and frequent financial crises. The author argues that the DWSR has relied on a special economic relationship between the United States and East Asia, characterized by large East Asian trade and current account surpluses with the United States and the investment of East Asian dollar holdings in U.S. capital markets. For some time both parties benefited from this relationship, but eventually it gave rise to financial crises in East Asia. Thus, Japan's financial crisis around 1990 and the 1997/98 East Asian financial crisis are both related to economic over-accumulation caused by the buildup of currency reserves through trade with the United States. Attempts at East Asian monetary integration since 1997 are viewed as a potential challenge to the DWSR. These attempts have however been blocked or rendered harmless by regional divisions as well as by U.S. resistance. While an East Asian political challenge to theDWSRis unlikely for the time being, the special U.S.-East Asian economic relationship may become substantially weakened by the growing problems of the U.S. economy.     

APEC labour markets: Structural change and the Asian financial crisis

This study examines the impacts of longer-term structural changes on the labour markets of Asia Pacific Economic Cooperation (APEC) member economies, as well as the short-run labour market consequences of the Asian financial crisis. All APEC economies have experienced significant structural change in the process of development. A major factor in this structural change has been increased trade intensity (increase in exports and imports as a share of GDP) that has occurred over the last 20 years. Because these structural changes have been extensively induced by trade liberalisation, this study provides insights into the likely consequences of the implementation of APEC's agenda on trade and investment liberalisation and facilitation. The impact of structural change is examined using a range of data, such as disaggregated changes in output and employment by industry and occupation over the period 1980 to 1997, and data on changes in trade intensity for each of the APEC nations. Other data, such as changes in rates of urbanization, are also used to indicate the other important concomitant effects of economic transformation. For several Asian economies, the linear path of growth and structural change was severely disrupted by the Asian financial crisis. This article examines the impact of this crisis on Asian labour markets, in general, and those most affected by the crisis, in particular. In many countries within the region, a failure of education and training systems to respond to often rapid shifts in the skill composition of labour demand is leading to industry and occupation specific labour shortages. International labour migration within the APEC region is viewed as a product of these structural changes and a mechanism that assists in filling gaps in the labour markets of the region's economies.     

The Japan‐US alliance and the Asia‐Pacific region

For the past fifty years the Japan‐US alliance has provided the framework for Asia‐Pacific security, says Jusuf Wanandi, Chairman of the Centre for Strategic International Studies in Indonesia and former research fellow at IIPS. The region's political and economic dynamics are changing, Wanandi says, and the Association of South East Asian Nations (ASEAN) supports an increased Japanese security role, with regional organizations acting as a conduit. But before Japan will win the confidence of some Asian neighbors, he says, Japan must open its economy, reform its domestic politics, and come to terms with its militaristic past.