Japan remains a global economic powerhouse and is becoming an ever closer political partner of the West.
People walk at a pedestrian crossing in Ginza shopping district in Tokyo, Japan, 31 March 2023. (AP Photo/Eugene Hoshiko)
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While Japan’s economic growth is at its slowest rate since the early 1990s, the world’s third largest economy — after the United States and China — remains an economic powerhouse.
It is now becoming an important political, and even military player, on the world stage as well. That’s a response, in part, to fear of China’s power in the region and concerns over North Korea’s forays into nuclear weapons and Russia’s invasion of Ukraine.
Back in the 1990s it was struck by a financial crisis. And that’s when the impact of its aging population started to kick in. Many now believe that Japan suffers from economic stagnation and terminal decline.
Those may be misconceptions.
In response to the aging population, growing numbers of women and seniors are now participating in the workforce. In addition, Japan is gradually opening up to immigration, reforming corporate governance and liberalising international trade.
Japan’s economic reinvention
Japan has become a popular destination for international tourism. Its corporate dynamism is reflected in the emergence of new success stories like Uniqlo, Muji, Softbank and Rakuten.
Older companies like Nintendo have reinvented themselves. These companies are building on the record of automobile companies like Toyota and Nissan, and electronics leaders Sony and Panasonic.
Japan is also demonstrating leadership in economic diplomacy. In response to China’s Belt and Road Initiative, Japan launched the Partnership for Quality Infrastructure, and is now a more important investor in infrastructure in the ASEAN group of countries than China.
And when then-President Donald Trump withdrew the United States from the Trans-Pacific Partnership trade talks, former Prime Minister Shinzo Abe resuscitated the deal, which came into force in 2018 as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
The global potential of the Trans-Pacific Partnership has been highlighted by the recent agreement between the UK with Indo-Pacific partners to join it.
Democratic Japan flexes its strategic muscle.
Since World War II, Japan has been a full-fledged liberal democracy. The Economist Intelligence ranks Japan the 17th-most democratic country in the world, ahead of both France and the United States which are considered to have “flawed democracies.”
Japan has long been a de facto member of the Western group of democracies, with its national security substantially ensured by the U.S.-Japan military alliance. Historically, Japan was reluctant to transform its immense economic weight into political power.
However, the past decade has seen a hardening of Japan’s security and defense posture. During the second term of former Prime Minister Shinzo Abe — from 2012 to 2020 — Japan led the West in defining the new era of competition with China.
Former Prime Minister Abe’s administration undertook many initiatives in the security and defense realm.
It secured a new interpretation of Japan’s pacifist constitution, such that Japan could henceforth engage in “collective self-defense,” allowing it to come to the aid of a close ally like the United States under attack.
Abe also advanced the concept of the “Free and Open Indo-Pacific,” to defend maritime space from Chinese hegemony. He promoted the Quadrilateral Security Dialogue involving Australia, India, Japan and the United States. Known as the Quad, it now meets at the leadership level.
Japan’s dangerous strategic environment
Today, Japanese defense planners believe that Japan’s security environment is the worst of any time since World War II and one of the worst of any country in the world.
It is surrounded by China, North Korea and Russia, as well as sitting next door to Taiwan, which is under threat of a Chinese invasion, while joint exercises by the Chinese and Russian militaries near Japan have become more frequent.
China’s military spending has now risen to five times that of Japan’s, while North Korea’s nuclear capabilities have expanded substantially. However, what has changed almost everything has been Russia’s invasion of Ukraine.
The notion that a land war could take place in the 21st century has delivered a great shock to Japan. If it is possible in Europe, it’s also possible in East Asia.
It was against this background that in December 2022, the Japanese government under the leadership of Prime Minister Fumio Kishida announced an unprecedented step-up in Japan’s security and defense strategy.
Japan’s new defense strategy
In Japan’s new National Security Strategy, China was, for the first time ever, identified as “the greatest strategic challenge” facing Japan.
North Korea was labeled “an even more grave and imminent threat to Japan’s national security than ever before.” The Strategy also reiterated Tokyo’s strong stance against Russia’s invasion of Ukraine.
It was also announced that traditionally pacifist Japan plans to double its defense spending, from 1% to 2% of GDP over the next five years. This will lift Japan from ninth to third among the world’s leading countries in terms of military spending.
In short, Japan could become a normal military power for the first time in the post-war period.
NATO and Japan have been engaged in dialogue and cooperation since initial contacts in the early 1990s. But Prime Minister Fumio Kishida’s participation in last year’s NATO summit meeting demonstrated how Japan is moving much closer to NATO. Japan is now in talks regarding the possibility of opening a NATO liaison office, the first of its kind in Asia.
This reflects the global instability caused by Russia’s invasion of Ukraine.
Three questions to consider:
- Why do many people believe Japan is suffering from economic stagnation?
- Is it time for Japan to ditch its postwar pacifism?
- Should NATO, the symbol of the Western group of countries, be expanded to include like-minded countries from Asia, like Japan and South Korea?
John West has been an educator, journalist, researcher and policy-maker. An Australian national, he is the author of "Asian Century … on a Knife-edge" and currently teaches at Tokyo’s Sophia University. He is also executive director of the Asian Century Institute. These positions follow major stints at the Australian Treasury, the Organisation for Economic Co-operation and Development and Asian Development Bank Institute.