JPRI Critique Vol. V No. 8 (September 1998)
Pas de Trois
by JPRI Staff

Misplaced Bets on Japan's Leadership
by Steven C. Clemons

Pas de Trois
by JPRI Staff

"With a friendly smile, you have set foot on the soil of China. . . So we are very excited and honored by your presence. What the Chinese people really aspire for is the friendship between China and the United States on the basis of equality. And I know that before your departure from the States, you said that the reason for you to visit China is because China is too important and engagement is better than containment. I'd like to ask you whether this is a kind of commitment you made for your visit, or do you have any other hidden things behind this smile? Do you have any other design to contain China?"

Question put to President Clinton by a Chinese student at Beijing University, June 29, 1998

U.S. Defense Secretary William Cohen, at a joint news conference with his visiting ROK [Republic of Korea] counterpart, Cheon Yong-taek, said that the U.S. expects to maintain combat troops on the Korean Peninsula indefinitely. Cohen stated, "We think that should continue . . . even if there is . . . a unification of the two Koreas." Cohen also defended the continued U.S. troop presence in Japan, saying that any pullout would create a dangerous power "vacuum" that "might be filled in a way that would not enhance stability but detract from it."

Reuters, "U.S. Foresees Combat Presence in Any Future Korea," Washington, July 9, 1998

"I hope we will have not temporary tax cuts, but so-called permanent tax reforms. I think we'll have to move in that direction."

Ryutaro Hashimoto at a campaign rally on July 3, 1998

"I never said permanent tax cuts. I just said we would review the tax system to make permanent reforms. Of course, I don't think as a result of the reforms we would end up with a tax rise, but I can't guarantee a tax cut. It's possible it might also be neutral."

Ryutaro Hashimoto at Television Asahi, July 5, 1998

It has been a strange and disquieting summer insofar as East Asia and the U.S. are concerned. In late June President Clinton paid a 9-day visit to China and made all the right noises, only to be continually undercut back home by anti-abortion groups, who decried China's population policies; civil libertarians, who oppose China's stance on the Tienanmen Incident and internal dissent; and the pro-Taiwan lobby, which disapproved of the President's reavowal that there is only one China and that the U.S. will not interfere in Taiwan's peaceful reunification with the mainland. Only pro-Tibetans seemed pleased with Clinton's remarks about Tibet, although conceding that Tibet is an integral part of China and calling the Dalai Lama a nice man whom Jiang Zemin is sure to like does not strike one as a 'bankable' endorsement.

But perhaps this was precisely what the Clinton administration intended: to walk a rather fine line between, on the one hand, honoring past U.S. agreements with China and not insulting or frightening their Chinese hosts and, on the other hand, sending some subtle signals about what sorts of future Chinese behavior would not be tolerated by the U.S. Perhaps the predictable outcries by opposition groups and Congressional Republicans was even a calculated part of Clinton's message to the Chinese . . . a way of indicating that under different circumstances less cool heads might prevail. Surely this is why that Beijing University student wondered what lay behind Clinton's friendly smile.

What, then, is China (and the rest of Asia) to make of Defense Secretary Cohen's recent remarks that the U.S. intends to keep its troops in South Korea and Japan "indefinitely," even if North and South Korea should once again become a single country like Germany is today? Cohen, too, chose his words carefully, stressing that U.S. troops were there "at the request and with the consent of the host government[s]." But the promise to remain 'indefinitely' seems not to take account of the likelihood that any future government of a reunited Korea would want some sort of 'reconciliation,' rather than keeping American mercenaries based on Korean soil.

A similar caveat applies to Japan, where the long-incumbent LDP government is also undergoing some wrenching soul-searching (see the accompanying article by Steven C. Clemons). "I would find it somewhat surprising," Secretary Cohen opined, "if the Japanese people no longer wanted the United States to maintain a presence." But a May 1996 Asahi shimbun opinion poll found that while 70 percent of the Japanese people supported an alliance with the United States, 67 percent favored a reduction in the number of U.S. military bases on Japanese soil. No less a figure than former Japanese Prime Minister Morihiro Hosokawa, writing in Foreign Affairs (July/August 1998) has called for Japan's abrogation of the agreement that keeps U.S. troops on Japanese soil by the year 2000.

So, like that Beijing student, one can't help wondering what is going on? Is the Clinton administration playing a very devious game in Asia designed to protect and prolong its hegemonic stance? Is Secretary Cohen 'off the reservation' and is the Pentagon out of control because they disrespect Clinton and believe he is powerless to dictate to them? In either case, the U.S. government seems to be in a good deal more trouble and disarray than either China's or Japan's.

Misplaced Bets on Japan's Leadership
by Steven C. Clemons

On Obuchi! On Kajiyama! On Miyazawa and Kono! On Koizumi! On Mori! On Nakasone and....! No, these are not the names of Japanese reindeer. Rather, they were the main rivals vying to become the next prime minister of Japan. The race to fill Prime Minister Ryutaro Hashimoto's position after the humiliating defeat of the governing Liberal Democratic Party (LDP) in parliamentary Upper House elections captured a surprising amount of global attention.

As I walked down K Street in Washington, D.C., not long after the election results were in, I eavesdropped on two people who seemed to be anything but hardcore Japanophiles -- arguing aloud about whether Keizo Obuchi, an excessively undramatic but senior Japanese politician, or Junichiro Koizumi, a darling of the media and Japan's more youthful voters, would be a better choice to resolve the country's economic implosion. Even in Washington, this kind of conversation doesn't happen every day.

This sudden surge of interest in Japanese affairs reflects the way the world has been changing. In many ways, the speculation over the Japanese succession was reminiscent of American obsession with the succession crises that followed Soviet Premier Brezhnev's death. Chernenko came first, caught a cold and died, and then was followed by KGB Chief Yuri Andropov, who later gave way to the ascension of Mikhail Gorbachev and glasnost.

Clearly, Americans believe that Japan's next prime minister matters to their lives (or the American stock market), just as Americans used to feel a sense of consequence about the leader of the Soviet Union. The Soviets could nuke us; Japan can drive down mutual fund returns. In fact, Japan's actions could trigger a massive global crisis.

And of course, much of the political second-guessing stemmed from economic concerns. The black-and-white contrast between Japan's current economic circumstances and those of the United States is not subtle. Right after the Japanese election, NASDAQ and the Dow Jones trading indexes yet again hit all time highs--while across the Pacific, the Japanese got news that their economy was contracting after seven long years of economic stagnation. Meanwhile, the yen has been wallowing at eight-year lows against the dollar, and unemployment levels are hitting highs that most analysts said were impossible.

Americans, who now invest in the stock market, in mutual funds, in bonds, and other commodities in greater numbers than ever, sense that global growth and economic stability depend upon Japan restoring its economic health. Economic convulsions have rocked Asia and multinational balance sheets over the last year, and most investors understand that Thailand, Indonesia, Korea, and Asia as a whole can only slide further if Japan's economy continues to collapse. We resigned ourselves some time ago to financial interdependence with the Japanese. If they go, so do we.

While the foreign financial establishment has been sweating anxiously about Japan's resolve to clean up its banks and stimulate its economy, the Japanese themselves--at least those in power--have seemed relatively calm about their predicament. This outsider's view of Japanese affairs, however, was major misdiagnosis. An unexpectedly high 59% turnout for the Upper House election--which tossed more than one-fourth of the incumbent LDP politicians in contested seats out of their jobs--revealed that the Japanese public was in fact extremely concerned about the future.

The trillion-dollar question now is whether the right people in Japanese government got the message. CNN, Goldman Sachs, and the amateur investors on K Street are making a major mistake in their armchair analyses of Japanese politics. They believe that the prime minister matters. At most, Japan's top politician only matters peripherally in the serious business of running the country. This strikes many Americans as odd, since we place a great deal of power in our own chief executive's hands. Even a scandal-weakened U.S. President whose party controls neither house of Congress has infinitely more power than his counterpart in Japan. The well-trained elite of Japan places most of its interests--and its leaders--within Japan's powerful Ministry of Finance. Lately this office has been distracted by a series of scandals, but it still generates the bulk of Japan's economic policy.

In fact, recent evidence shows that the MoF's leadership has been able to resist and even defy the Hashimoto government and to consolidate its power. It's especially hard to know how closely these state officials will work with the next administration, given the severity of voter resentment of the government.

In truth, Prime Minister Hashimoto and chief aides, LDP Secretary General Koichi Kato and LDP Policy Czar Toru Yamasaki, were probably the best threesome to preside over the political side of financial reform. When it comes to addressing the urgent question of how to address Japan's economic troubles, the new Prime Minister and his cabinet may well be less attractive than those whom the Japanese public just rejected.

Keizo Obuchi is often characterized as unmemorable and the only man in Japanese political circles who has failed to make an enemy since he entered the National Assembly in 1963. However, he is also the kind of person to whom a million favors are owed, and he may surprise the pundits with his ability to calm the waters and pass the controversial legislation needed to fix Japan's banks and deregulate the economy.

Nonetheless, the Japanese are seething at their current government for making so little out of Japan's immense wealth--but they are also eager to make their democracy less of a pretense. Over the past year, in three local referenda, the Japanese public expressed disapproval of current government policy. Alas, Japan's government and central bureaucracy have ignored these votes and steamrolled local governors and their constituents. Okinawa island, which has been struggling to try to off load to the Japanese mainland a portion of the heavy burden of hosting American troops and military installations, has been callously disregarded by the national government.

For the Japanese public to rid itself of LDP rule, which has monopolized Japanese power for all but ten months of the last 43 years, more elections need to be held. And unfortunately, for these to occur, political paralysis will have to increase. The current government's apparent failure to resolve the economic crisis may be what clears the way for a more responsive and representative democracy.

The U.S. markets naively surged upward the day after the election in hopes that Japan would now move swiftly to solve its problems. But fixing Japan over the long term means not only cleaning up the banks and cutting taxes. More important, it means removing the bureaucrats who think that they can outperform market forces--and replacing politicians who squander national wealth on vote buying and pork barrel projects. And that, in turn, means that the Japanese need a true multiparty democracy, in which the contenders for political power compete to put the public welfare first.

Steven C. Clemons is Executive Vice President of the Economic Strategy Institute. He is also Director of JPRI. A version of this article appeared in Newsday, July 19, 1998.

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