Japan Breaks Out of U.S. Orbit

Japan Inc. (2009)

It has been said that Japan's only post-war opposition party was the protectionists in the U.S. Congress because of its one-party system. But this week that changed and, arguably, so has the world.

Much attention is always focused on fast-growing, gigantic China, but Japan is the biggest player in the east and has a bigger economy than China's, which is second only to the United States. The U.S. GDP is US $14.2 trillion; Japan is U.S. $4.9 trillion and China, U.S. $4.4 trillion.
This week, the winds of change, Obama-style, have swept across the conservative and implacable Japanese political landscape with the election of a youngish, untried, left-of-center, new leader named Yukio Hatoyama. He also heads the Democratic Party.

He's not an outsider from a minority like Obama. His grandfather was a founder of the ruling party that he defeated in an election with a massive turnout of 70%. But Mr. Hatoyama thinks outside the box, and has a different worldview than Japan's elderly establishment.

His success marks a turning point in Japanese and geopolitical events and is also a symptom of shifts in Japanese society. His team wants to change direction in a country which has lashed itself post-war to the fortunes, and acceptance of, Washington.

Put another way, his victory in part marks a desire on the part of many Japanese voters to move toward Asia and out from under the West's sphere of influence.

The White House was congratulatory even though many worried about a possible "anti-capitalist, anti-American" bias in this new party. Such fears are exaggerated but the status quo is not an option either.

Shifts in the east

One of the upshots from Japan's consistent policies has been that it has failed to punch above its weight, diplomatically or politically, despite its economic heft. This was due to a number of factors. Its talented people put their heads down after the Second World War catastrophe and rebuilt their economy into a powerhouse of competitive excellence. They inspired China and other Asian countries in the region and Japan Inc. pioneered the currency tricks that kept the Yen down so its exports could penetrate the world market readily.

One of the tricks - artificially low interest rates to keep its Yen low in value - led to financial bubbles at home and a collapse of markets in 1989. The country, gradualist by nature, has yet to pull itself out of this mire and the defeat of the ruling party can be partially attributed to their lack of policy courage or success.

New directions

Worried by a rate of unemployment that would be the envy of any other country - of 4.4% - the Japanese voted for a new economic direction. What follows are the salient issues that the socialistic and populist new leader will undertake:

  1. More stimulation despite huge government debts to get the economy going.
  2. Closer ties with the rest of Asia.
  3. Severing certain ties with the United States, including closing some military bases there.
  4. An attempt to make Japan a world leader instead of follower and "shake off US-style globalization", he said. This means increasing military participation in United Nations peacekeeping efforts, something that Japan's (and Germany's) post-war pacifist constitution has forbidden. Japan also needs to pull more weight at the UN in the hopes of getting a permanent seat on the Security Council as China has.
  5. Becoming a leader and influence on environmental matters.
  6. Imposing a social democratic agenda through policies such as higher minimum wages, greater protectionism, more handouts to impoverished citizens or flagging businesses and industries as well as higher taxes on wealth to make environmental improvements. Its slogan was "friendship and love".
  7. Tackling Japan's demographic problem by encouraging more children through provision of monthly allowances.