China’s Unlikely Rival: Japan
Of
all the nightmares Chinese President Xi Jinping figured he would have
to face, a resurgent Japan Inc. surely wasn’t among them.
A
major
slowdown in the Chinese economy? Yes. Social instability? Absolutely.
Debilitating pollution? Check. Rampant corruption eating away at the
Communist Party’s legitimacy? You bet.
An
economically vibrant Japan emboldened to challenge China for leadership
in Asia? Hardly. With an assertive Shinzo Abe at the helm, though,
Japan may be poised to do just that, in ways that could upend the
dynamics of Asia’s future.
About William Pesek»
William Pesek is based in Tokyo and writes on economics, markets and politics throughout the Asia-Pacific region. ... MORE
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The
emphasis here is on “may.” For all the excitement over “Abenomics,”
it’s still a vague and unimaginative blueprint to end Japan’s 20-year
funk. Still, let’s say the optimists prove right and Abe ends deflation
and restores Japan’s economic clout in the region.
It’s
doubtful that the steady, “peaceful” rise to dominance envisioned by
China
includes sharing power with a renascent Japan. The Japanese recovery
the world has long sought could well make Asia a much more dangerous
place.
This
is the minefield into which John Kerry will wander as he embarks on his
maiden trip to Asia as U.S. secretary of state. In Seoul today, Kerry
will grapple with North Korea’s threats and try to reassure a key U.S.
ally. In Beijing and Tokyo after that, he will encounter Asia’s budding
Cold War firsthand.
Love Fest
Kerry’s Beijing stop will be contentious as he prods Chinese officials to rein in North Korea’s Kim Jong Un, revise currency
policies that Washington deems unfair, and shut down an army of hackers attacking computer networks around the globe.
Tokyo
will be a love fest, with Abe keen on strengthening the U.S.-Japan
alliance. The contrast won’t be lost on Xi, who just began his 10-year
term as Chinese leader.
The
yen’s 22 percent plunge against the U.S. dollar over the past six
months, a drop that began with Abe’s candidacy, is bad news for Chinese
exporters. While China’s economy is bigger, Japan’s still generates $5.9
trillion worth of output and features a stable of globally active
technology, transport and pharmaceutical companies.
Amid
weak global growth and rising Chinese wages, a more competitive Japan
could reclaim the export-market share that China now takes for granted.
By
opening the monetary floodgates as never before, Abe’s new Bank of
Japan chief, Haruhiko Kuroda, could push the yen much lower still. China
might even feel compelled to devalue theyuan, which would enrage the U.S.
Even
more than Japan’s gross domestic product, though, the confidence that a
recovery would lend to Abe, who has never forgotten his nationalist
roots, is something that Xi should fear. The optimism the Japanese
prime minister has managed to generate with his policies has driven his
approval ratings into the 70 percent range. His Liberal Democratic
Party seems headed for a big win in upper-house elections in July.
Once
secure in his premiership, Abe may well rediscover his obsession with
creating a “Beautiful Japan.” That’s the catchall phrase that Abe
trotted out early in his first stint as prime minister in 2006. The
euphemism encompasses a wide range of controversial policies -- from
downplaying or denying Japan’s atrocities during World War II, to
inserting more patriotism into school curriculums, rewriting Japan’s
pacifist postwar constitution and generally flexing muscles in Asia.
Stiffening Spine
It’s
hard to exaggerate how devastated the political establishment in Tokyo
was to see China’s economy surpass Japan’s in 2010. That Japan shares
the same credit rating as China is a deeply sore point for the
conservative lawmakers who make up Abe’s LDP.
Abe
is anxious to restore the pride drained by two decades of economic
stagnation, and in the postwar period before that. Visiting Washington
in February, he pledged to “bring back a strong Japan.” He went even
further in a speech to the U.S. foreign-policy establishment: “Japan is
not, and will never be, a tier-two country,” he declared ominously.
Anyone
who thinks this process
will go smoothly is dreaming. “This could be destabilizing in the
region and further undermine prospects for improving relations,” says
Jeff Kingston, the head of Asian studies at the Tokyo campus of Temple
University.
It also would complicate U.S. President Barack Obama’s
pivot toward Asia. No economic relationship is more important than that
between the U.S. and China, the “Group of Two.” Yet no friendship in
the region matters more to Washington than its bond with Tokyo.
A sustained period of heightened acrimony between China and Japan, already at odds over disputed islands, means
even less cooperation on trade, currencies and security. An
emboldened Japan would be more prickly about outside advice, including
from the U.S. Worse, it could overplay its hand, nudging its American
ally into a confrontation with nuclear- armed China.
There’s plenty of blame to go around, of course.
China’s periodic displays of great-power vanity raise hackles
throughout Asia. Its heavy-handed approach to territorial disputes and
trade has undercut efforts to develop a more stable regional consensus
and institutions like those that ended conflict in Europe after World
War II. If a crisis develops in Asia, leaders really have nowhere to go to settle disputes and step back from the brink.
Even if China’s new
leader wanted to strengthen ties with Japan, a plethora of domestic
challenges may limit his maneuvering room. Xi must address
official corruption, a widening gap between rich and poor, an
increasingly activist media and pollution that’s choking Beijing.
As
problems mount, there will be a natural inclination to lash out
internationally. Japan, China’s wartime colonizer, is an obvious target.
Ceding ground to Tokyo would be devastating for Xi’s standing in
Beijing.
Truce Time
China
and Japan must be careful not to back each other into a corner. Both
nations
should keep economics and politics as separate as possible. They should
agree to regularly scheduled summit meetings, as do Beijing and
Washington.
Pledging
to increase bilateral financial and trade ties would help ensure
economic interests survive any geopolitical differences. Also,
it’s time to decide on a framework to negotiate a truce involving a
group of islands that Japan calls Senkaku and China calls Diaoyu.
As
Kerry traverses the region this weekend, he’s sure to seek some kind of
diplomatic mechanism for scaling down tensions on the Korean Peninsula.
He should worry just as much about reconciling
the ambitions of North Asia’s two giants, before the region faces a true
nightmare.
(William Pesek is a Bloomberg View columnist. The opinions expressed are his own.)
To contact the writer of this article: William Pesek in Tokyo atwpesek@bloomberg.net
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