The global financial crisis forced East Asian nations to get serious about regional architecture.

As global trade entered a precarious decline during the height of the crisis in 2008–09, one of the obvious areas of focus for East Asia was trade regionalism, aimed at making East Asia a more efficient production network and, over time, a final market in its own right. At last, these initiatives are starting to bear fruit.

This year has seen significant progress in negotiations. This was revealed at the November ASEAN+3 summit which saw the heads of state agree to bureaucrat-level negotiations outlined earlier in the year.

Early indications that agreement on an East Asian trade area might finally be reached occurred in August at the 14th ASEAN Economic Ministers Plus Three (AEM+3) Meeting in Indonesia. The final communication welcomed a joint proposal by China and Japan, declared as the ‘Initiative on Speeding up the Establishment of an East Asia Free Trade Area (EAFTA) and Comprehensive Economic Partnership in East Asia (CEPEA)’.

Until this joint proposal the whole process had been held hostage by Sino–Japanese strategic rivalry. But the deadlock was broken by the worsening global economic situation and Washington’s bid to boost its flagging growth through exports, driving a return to Asia via the under-negotiation Trans-Pacific Partnership (TPP) agreement.

For China, the TPP is a potentially threatening arrangement, as its intellectual property and investment protection requirements will pose formidable barriers to joining. That’s if China was invited — which it has not been. And it seems this reality has been enough to shift China’s priorities towards reaching a regional trade agreement in East Asia, even if it means moving towards Japan’s position on issues of coverage and membership.

The outcome of all this is the joint proposal by China and Japan calling for the East Asian Free Trade Area to cover goods, services and investment — that is, an agreement which brings in Japan’s WTO-plus interests. Since the outset of negotiations on the EAFTA, Japan has focused on the investment-related issues (in contrast to tariff liberalisation). As Japan has few tariffs left to cut — and those that remain are in the politically-sensitive agricultural area — any EAFTA which focuses solely on tariff measures would be of little political interest to Japan.

Japan is also unwilling to enter into agreements with China that fail to address Japanese firms’ concerns about investing in the growing Chinese market. It is partly for this reason that the bilateral China–Japan FTA remains frozen. But outside the bilateral negotiations, and in the context of the EAFTA, China is now willing to discuss Japan’s wider set of economic interests. This year Japan and China have jointly sponsored setting up three working groups to deal with trade in goods, services and investment which will begin work in early 2012.

More importantly, the joint agreement is a promising step toward resolving long-standing disagreement over the grouping’s membership. While China had been adamant about the EAFTA being limited to ASEAN+3 members only (the ASEAN 10 plus Japan, South Korea and China), it appears that the final agreement will be expanded to include the ASEAN+6 grouping, adding Australia, New Zealand and India.

It is likely that these three countries would be brought into the new trade area via the so-called ‘ASEAN + +’ institutional mechanism. The framework is being negotiated at the ASEAN Plus Working Groups, and under consideration are rules of origin, tariff nomenclature, customs procedures and economic cooperation. These will feed into the working groups on trade, services and investment to provide a single template agreement.

Still, there remain hurdles. First, the terminology is not yet settled, with ‘EAFTA’ and ‘CEPEA’ still being bandied around. This suggests there do remain some tussles over membership — with China favouring an East Asia–Southeast Asia-only grouping. Second, while the Japanese and Chinese leaders have directed the bureaucrats to start negotiations, political leadership will be required to sign the agreement into force. However, the Heads of Government only enter the process next year, and in the meantime another flare up in Sino–Japanese relations could put everything back into deep freeze.

Notwithstanding those issues, the halting trend towards the realisation of an EAFTA is progressing. There will no doubt be more setbacks; but an EAFTA now seems more a question of when than if.

Joel Rathus is an EAF postdoctoral scholar and a regular contributor to the East Asia Forum.

1. A closer look at East Asia’s free trade agreements
2. The TPP, APEC and East Asian trade strategies
3. The de facto ‘free trade area’ in East Asia

In early May, the ASEAN +3 Finance Ministers met in Hanoi and reached an agreement on two important issues in the development of the Chiang Mai Initiative (CMI).

Firstly, they appointed Wei Benhua to be the first director of the ASEAN+3 Macroeconomic Research Office (AMRO). Secondly, they decided to double the size of the CMI (to US$240 billion) while electing to leave in place the IMF link which limits the CMI’s independent capacity to act in a crisis. The CMI has seen further institutional progress despite major competition, even rivalry, between the players and now seems on track to emerge as a fully fledged Asian Monetary Fund (AMF) in the not too distant future. Already, it is possible to detect some of key characteristics of this future AMF.

The selection of a Chinese national as the first head of the CMI’s surveillance secretariat of AMRO is no accident — indeed it was a bitterly fought diplomatic battle. Typical of the CMI negotiations thus far, the outcome was a compromise between China and Japan. While Wei Benhua will lead the organisation in its critical first year, he will not see out the full term of three years. Instead, Wei will step down to allow the younger Japanese national Yoichi Nemoto to take over.

Placing Wei as the director is a victory for China. While Japan has pioneered the development of the institution, both the secretariat and the directorship were prizes which the Japanese were not able to win. In addition to the symbolic victory for China of having a Chinese national leading the CMI — marking China’s clear transition to the East Asian leader in terms of the provision of regional public goods — the first director of an international institution sets the tone for future institutional developments. One should therefore expect decisions made this year on personnel and AMRO’s structure to favourably position China institutionally. It is not clear if Nemoto will be able to revise (or reverse) those norms after taking over (even if he were to win a second term).

The most significant area to watch in this regard is the initial set up of the surveillance process. AMRO has been charged to undertake this surveillance function by the APT Finance Ministers, which is recognised formally as ‘an effective tool to prevent a financial crisis in the region’. More importantly, surveillance is also essential if the CMI is to ever deliver in providing a loan to a crisis-struck regional member. While Wei is publicly on record noting that ‘AMRO members [are] more aware of the necessity of stepping up the regional macroeconomic surveillance‘, China is much less interested in surveillance than either the other two bankrollers of the project, Japan or Korea. In fact, China recently watered down attempts at the G20 to formalise benchmarks of international imbalances while Article IV surveillance at the IMF is not providing adequate results. It is likely that the first director will choose not to actively promote surveillance.

Rather, Wei is more likely to focus on the IMF link. Not only is this an area in which China is more interested, but it is also an area in which cooperation (and success) is also more likely. The majority of the Southeast Asian nations are very keen supporters of loosening the IMF link and even Korea is positively disposed towards it.

Indeed this is exactly what China proposed during the latest round of the APT Finance Ministers, suggesting that the CMI should delink 30–40 per cent of its funds from the IMF (rather than the current 20 per cent link). Although Japan and several other actors (including central bankers) in the region remain opposed to making the CMI more than merely a regional supplement of the global institutions, China will keep pressure on (through the position of the Director) to loosen the CMI’s dependence on the Western dominated IMF.

As the CMI emerges as the a major regional institution in its own right it is likely to remain, at least initially, light on surveillance and more focussed on building up its political independence from global institutions. Additionally, the CMI is an institution which is more likely to be aligned with Chinese interests than was anticipated when the AMF idea was floated, and an institution whose development mirrors China’s own rise in the East Asian and Global political-economic order.

Joel Rathus is an EAF postdoctoral scholar and a regular contributor to the East Asia Forum.

1. Affordable delays for the Chiang Mai Initiative?
2. The Chiang Mai Initiative: China, Japan and financial regionalism
3. Are the Philippines equal before the Chiang Mai Initiative?

This weekend (21-22 May) the leaders of China and Korea are hosted by Japan for the Fourth Trilateral Summit, the first such Summit since the triple disaster of 11 March.

As a part of this visit, Wen Jiabao and Lee Myung-bak will travel to Fukushima to demonstrate their nation’s continuing support for the plight of the Japanese quake victims and Japan’s reconstruction.

Both China and South Korea contributed significantly to Japan’s disaster response in the immediate aftermath of the crisis, providing emergency relief teams and the provision of material support. The large (and unprecedented) level of support that China offered, especially the prompt dispatch of a Chinese search and rescue team, has led some to posit that warming relationships between Japan, China and Korea may be the silver-lining to Japan’s national tragedy. For China, with whom Japan’s relationship slumped precariously after a fishing infraction turned into a territorial dispute in November of 2010, the quake presented a circuit-breaker.

Certainly there has been an improvement in the relationship at the people-to-people level. China’s media commented favourably about the Japanese people’s resilience and lawfulness under the extreme duress of the power, food and water shortages and personal devastation. The Chinese media wondered aloud if China could ever reach such levels of civility. That peers in Asia were viewing the response of Japanese society response favourably was a story in turn picked up the Japanese media and became a source of national pride for the many Japanese doing it hard. The empathy and mutual respect between the Japanese and Chinese (and others around the world) was at its zenith.

In the longer term it is unlikely that the earthquake will mark a turning point in the Sino-Japanese relationship. Tensions in the Sino-Japanese relationship are founded on not only societal distrust but also on the different basic strategic interests and perceptions of the two powers.

In the aftermath of the triple disaster China’s full offer of a PLAN hospital ship and expanded rescue team were not accepted by Japan.

This was because of the fundamentally different strategic orientations of the two countries and lack of trust of the Chinese military in Japanese policy circles, not to mention the political implications of inviting Chinese military personal into Japan to work next to the US forces under Operation Tomodachi. Japanese politicians too would have had some difficulty in explaining a major Chinese presence after recent and damaging disputes — especially over the export of rare earths (a subject that Kan has flagged for discussion during the Trilateral Summit). Even the initial warming in the relationship is beginning to abate. The Chinese media is reporting negatively on the choice of Fukushima as the feature of the Trilateral Summit, while discussion in Japan is about China’s increasing influence in the regional order and Japan’s relegation to a junior partner. Opinion within Japan is divided. The influential journalist Yoichi Funabashi argues that Japan must ‘cleave to’ China in the future, while acknowledging that reorientation towards China will require political courage — a commodity in desperately short supply.

Joel Rathus is an EAF postdoctoral scholar and a regular contributor to the East Asia Forum. His other posts can be found here.

1. Opportunity in crisis: Sino-Japanese relations after the earthquake
2. A sea of trouble in Sino-Japanese relations
3. The Prime Ministers Fukuda and Sino-Japan relations

Australian Prime Minister, Julia Gillard, will visit Japan from 20 to 23 April, a visit which includes a summit with her Japanese counterpart, Naoto Kan.

In the aftermath of the earthquake-tsunami-radiation triple disaster faced by Japan, this is not a time for pushing forward particular deals that Australia now seeks in the Japan-Australia relationship.

Instead, the visit is about demonstrating that Australia is a friend of Japan beyond considerations of trade, investment and narrow political interests.

The decision by Ms Gillard to visit the town of Minami-Sanriku, where an Australian search and rescue contingent assisted the Japanese in the days following the tsunami is to be applauded, highlighting as it does the deep personal connections that Australia has with Japan.

The major issue on the agenda before the earthquake set other priorities was the still unconcluded Free Trade Agreement negotiations. The latest round of negotiations, which began in 2007, was held in February and marked a return to the table after nearly a ten months hiatus. Then, officials from Japan and Australia were unable to make a breakthrough, prompting Trade Minister Kaieda Banri to call for the negotiations to be resolved at the political level, around a summit at the head of state level. This is an appropriate response, as the Agreement was initially proposed by Prime Minister Abe Shinzo as part of a political calculus of the benefits of such an agreement to both countries.

Managing the reconstruction effort in Japan has become the all-consuming task for the DPJ leadership, and there is little space or time to pursue selling the merits of trade liberalization when hundreds of thousands, including many farmers, remain in shelters and surviving on government emergency assistance. Trade liberalization has therefore moved from an election issue of some significance to a political footnote. Kan will be judged at the next election on his administration’s management during and after the disaster.

While there is no obvious challenger to leadership of the Party, recent public polling in December showed low support for the Kan administration (at 21 per cent). On the other hand the crisis has helped to take the focus away from a series of financial scandals which threatened to destroy Kan and perhaps the DPJ government not so long ago. Some (less rigorous) polling by Fuji Television shows Kan’s approval jumped up to 35 per cent in the aftermath of the crisis. However, most (60 per cent) of Japanese do not appraise the handling of the crisis by the Kan administration positively and the outlook for the DPJ is grim.

It is unlikely that Kan and the DPJ leadership have the political will or space to meet head-on Australia’s expectations for a political conclusion of the negotiations on liberalization within the FTA, finally breaking through Japanese agricultural protectionism.

The summit between Mr Kan and Ms Gillard is about being there in Japan’s time of need, a reminder of the deep and personal links between the two communities, and putting them on modest display. If Ms Gillard plays it right it will also be a reminder that foreign friends are friends in deed, and that human and food security are bolstered by reliable international partnerships, not weakened by them, in the face of great natural disasters like that which Japan has just suffered.

Joel Rathus is a recent PhD graduate from Adelaide University, an EAF scholar and a regular contributor to the East Asia Forum. His other posts can be found here.

1. America’s frugal superpower headache for Gillard
2. Beyond the devastation in Japan
3. Gillard-Obama meeting gets into alliance management

The emergence of the G20 as the premier body for international economic coordination represents a major challenge for Japan. It was not immediately obvious that Japan would embrace this new forum which calls into question and has officially usurped the role of Japan’s preferred body for economic cooperation, the G8.

Rather, Japan is attempting to keep the G20 as the de facto junior partner to the G8. Japan’s chief but not sole concern is that the G20 will place China in a position which is not just formally equal in terms of status to that of Japan but actually equal in terms of influence too.

The G8 holds a special place in Japan’s international relations in general, and foreign economic policy in particular. Because Japan has not been able to secure a permanent seat on the United Nations Security Council, the premier body for international security cooperation, the G8 was a symbol of Japan’s global leadership (and even rehabilitation in the postwar period). This global leadership role was (and to an extent still is) predicated on Japan’s being a ‘bridge between East and West,’ and its representing Asia at the global level, but how effective Japan played that role remains debatable. Part of this has involved successfully championing Chinese participation (but not membership) in the G8, with the 2008 Toyako summit formalising Outreach-5 (including Chinese) observer status. This system suited Japan as China could be engaged in a way that gave Japan institutional advantage and influence.

The creation of the G20 initially also suited Japan’s basic interests, including with regard to China. At the outset the G20 was very much a creature of the G8, indeed its membership was hand picked by the G7 Finance Ministers in 1999. The expectation was that G20 meetings, at the Finance Minister’s level, would not take major decisions and would for the most part be directed by proposals from the G8. This view is held among Japanese bureaucrats and also by the political leadership, with PM Hatoyama observing after the Pittsburgh Summit that the G8 was still needed because coordination with the expanded membership of the G20 was likely to be difficult.

The G20 has not been useful in Japanese bilateral approaches to China thus far. The territorial dispute which broke out between Japan and China in September of last year might have been an issue which could have been discussed on the sidelines of the G20, but it was not. Although there were bilateral talks at the previous G20 Summits in London and Toronto, the opportunity for a Sino-Japanese informal leader’s summit to deal with this major issue at the G20 Summit in Seoul, November 2010, slipped by. China insisted that talks at the G20 would be too early and instead preferred to meet later in the month in Japan at the APEC Summit — and even then China took pains to emphasise domestically that Japan as APEC host had requested the meeting. As a body focused on economic issues, the G20 is unable to address a major strategic issue amongst its membership in a way that the G8 was able to.

Japan has struggled to carve out a leadership role for itself in the G20. Despite the fact that it has offered to host both the second and third G20 summits, Japan has yet to play anything more than a guest role. This is especially frustrating given the prominent role that Korea has played in the G20 both as host and as co-chair at Toronto.

Japan has therefore moved cautiously on deepening the capacity of the G20. At the Seoul Summit Japan was against the creation of a dedicated G20 Secretariat, at least in the short term. This implies Japan’s negative interest in the G20 becoming more institutionalised, which is all the more remarkable because China came out in support of the proposal. Instead, Japan has been interested in widening the membership of the G20, ostensibly due to concerns about its perceived lack of legitimacy. Japan has been a major supporter of the G20 Outreach program called the ‘Global Governance Group’ (3G). Japan’s interest in expanding the number of voices heard at the G20 through the 3G, viewed cynically, could be seen as an attempt to weaken the G20 as an institution vis-à-vis the G8.

Japan remains deeply ambivalent about the G20. But while this ambivalence might moderately weaken the G20 process, it is unlikely to threaten the G20′s primacy in governance of the global economy. And if Japan wants to recover its influence on the world stage, constructive leadership at the G20 would be the best place to reclaim that.

Joel Rathus holds a PhD from the University of Adelaide and is a member of the East Asia Forum team at the Australian National University.

1. Ambivalence in Japanese sentiment over China
2. Japan’s aid to the South Pacific and the China factor
3. The Trilateral Summit: a new era in China-Japan relations?

While the worst of the Global Financial Crisis may have passed, in East Asia the economic pressures are still mounting. Regional economies are struggling with inflation, asset bubbles and now increasingly volatile exchange rate movements. One mechanism which might aid the regional economies to coordinate their exchange rate policies, to fend off currency speculation and assist with reigning in increasingly problematic ‘hot money’ flows is the Chiang Mai Initiative Multilateralisation (CMIM).

However, getting Japan and China to agree has proven difficult – especially on the issue of contribution and (therefore) voting weight. This is important because these two are both required to effectively bankroll the CMIM.

The most recent addition to this saga of strained Sino-Japanese political relations hampering the development of regional institutions is the contest over who will head the surveillance arm of the CMIM, the so-called ASEAN+3 Macroeconomic Research Office (AMRO). The original schedule, which was accelerated due to the GFC, called for an appointment to be made in November, however Chinese objections to the Japanese candidate have apparently pushed the timetable back until the next ASEAN Plus Three Finance Ministers Meeting in April 2011.

After the ruckus caused by shifting the AMRO office from Thailand to Singapore due to domestic political instability, can the CMIM really afford to have another internal dispute over the AMRO director?

It is clear why such disputes would arise. AMRO’s function of providing regional surveillance is crucial to the utility of the CMIM as a whole. This is because as long as financial policy coordination remains at the level of policy dialogue, CMIM members will be hesitant to allow crisis-stricken countries access to the pooled reserves. Indeed, the fact that only 20 per cent of the funds can be tapped without an IMF agreement in place reflects the fact that the IMF is continuing to lead – this is due to the IMF’s credibility in providing surveillance under both Article IV and in its actual rescue packages and other assistance programs. The massive expansion of the New Arrangements to Borrow at the IMF announced by the 2009 London G20 Leaders Summit, together with a series of other institutional innovations, is slowly reducing the need for the CMIM to develop its own competencies in this regard – indeed, it is worth recalling that an expansion of the NAB was the policy response initially considered by East Asian governments in the face of the Asian Financial Crisis before discussions moved via the shortly lived Asian Monetary Fund proposal to the CMI. Thus a return to the NAB suggests a shifting of focus away from the CMI, even though both mechanisms have been expanded after the outbreak of the Global Financial Crisis.

Crises are crucial inflection points at which policymakers can question the received wisdom and create new solutions. Many questions remain about how the CMIM will operate. Indeed, despite activation, the CMIM was not used during the GFC, regional member countries preferring to use ‘faster’ bilateral swap arrangement among themselves. And while some such as Korea and Singapore were also willing to engage with the US Fed, Asia as a whole continued to shun the IMF and focussed on building up the CMIM. One should never waste a good crisis, and the Global Financial Crisis provided the impetus to override intra-mural tensions in both North-east and Southeast Asia allowing compromise solutions to emerge.

But continued bickering over largely symbolic roles within the CMIM is running the risk that the crisis will have receded before the institutional arrangements are in place and a new solidarity in East Asia has developed. This would a pity because as de Bouwer has noted in his book, Financial Governance in Asia, the CMIM is not in some form of Gresham’s Law-type competition with the IMF, and would supplement rather than weaken global economic management at a time when this is much required.

Joel Rathus is a recent PhD graduate from Adelaide University and a regular contributor to the East Asia Forum. His other posts can be found here.

1. The Chiang Mai Initiative: China, Japan and financial regionalism
2. Chiang Mai Initiative: China takes the leader’s seat
3. Are the Philippines equal before the Chiang Mai Initiative?

Japan’s Foreign Minister Maehara Seiji was in Canberra last week on his first formal visit to Australia. Although only on the ground for 24 hours, Maehara reached two significant understandings with Australia. The first is a commitment from Foreign Minister Rudd on security of supply of so-called ‘rare earth’ metals. The second is an agreement with Trade Minister Emerson to re-vitalise the Free Trade Agreement negotiations which have been struggling for years. Yet Japan’s renewed interest in economic partnerships with Australia reflects more than simply shared values and mature relations. Rather, they are a part of Japan’s diversification strategy targeting China.

That Japan is pursuing Australia as a part of a diversification strategy is most easily seen in the agreement regarding rare earth metals. In the aftermath of the territorial dispute in the East China Sea and China’s subsequent decision to suspend export of rare earth metals to Japan, these metals have taken on renewed significance and Japan has been keen to secure an alternative supplier.

Japan’s export of high tech and energy efficient vehicles and devices makes Japan especially vulnerable to disruption to supply of rare earth, indeed Japanese politicians faced major pressure from industry groups during the dispute with China to either back down or find alternative reasonably priced supply.

Interest in Australian rare earth was piqued when the Foreign Investment Review Board shut down plans by the China Non-Ferrous Metal Mining Group to take a controlling interest in Lynas Corp. Last week this same company concluded an agreement with a Japanese trader Sojitz to supply up to 90,000 tonnes of rare earth to the Japanese economy over the next ten years. While Japan has not sought to acquire the company outright, Sojitz has backing from the Japanese government via the Japan Oil, Gas & Metals National Corp. While the usual commercial interests apply, Australia also is signalling its interest in dealing with Japan over China for these strategically important commodities.

A similar pattern is discernible also in the FTA game. The Australia-Japan Free Trade Agreement has been progressing slowly since negotiations begun in 2007. The Australia-Japan FTA was initially pitched by then Prime Minister Abe for strategic rather than economic reasons. The fact that the proposal for an FTA was followed by a defence agreement and later a military cooperation pact is evidence of this. Compared to Japan’s economic partners in Southeast Asia, Australia’s already low tariff schedule meant that there was little value in a traditional FTA for Japan except as a part of these wider strategic interests. Although Japanese domestic interests groups such as the agricultural lobby have been opposing the FTA and dragging out the negotiations, the fact is that the strategic factors which drove the initial offer are only intensifying over time. Japanese dependence on food imports from China (already its 2^nd largest supplier) is rising, and one possible coping strategy for Japan is to preference Australian farm goods under an FTA.

In this regard, Australia has reason to be hopeful that Japan might conclude an agreement which takes in (to one extent or another) agriculture. The recently released Basic Policy on Comprehensive Economic Partnership identifies Japan’s inefficient agricultural industry as the cause of Japan ‘falling behind’ on FTAs. It also sets up a Coordination [J1] Office which the prime minister will chair to put in place domestic side agricultural reforms necessary for concluding FTAs with countries such as Australia. Of course, there is still every chance that this will either fail or simply take too long (the Action plan is due in October 2011).

Part of Japan’s haste in revitalising the Australia-Japan FTA may also be due to progress on the Australia-China FTA. Like the Australia-Japan FTA, the Australia-China FTA negotiations have been tortured — talks began in 2005 and last year stalling completely. But China’s decision to re-engage with Australia this year on the subject of an FTA maybe feeding into Japan’s calculations about the merits of concluding its own FTA with Australia. It is hard to believe that if one of these negotiations (either the Australia-Japan or the Australia-China FTA) were to succeed that it would not put significant pressure on the other set of negotiations to wrap up as well.

The growing strategic value that Japan is placing on Australia has meant that issues like Australia’s objections to scientific whaling are being isolated from important diplomatic agreements. Both Rudd and Maehara were quick to dismiss this issue in the press conference preferring to talk about the benefits of partnership. While Australia stands to gain from Japan’s renewed interest and ought to pursue cooperation with Japan rigorously, it would not be wise to forget the nature of Japan’s interests and to expect our deepening ties to be cost free.

Joel Rathus is a recent PhD graduate from Adelaide University and a regular contributor to the East Asia Forum. His other posts can be found here.

1. China and the supply chain of rare metals: Table of [dis]contents
2. The new Spice War: China, Japan and rare metals
3. Taking the Australia-Japan FTA negotiations to new levels

Early last Friday morning, the video taken by the Japanese Coast Guard of the 7 September collision between the JCG’s Mizuki and the Yonakuni and a Chinese fishing boat, the Min Jin Yu-5179 was leaked to youtube by a user known only as Sengoku38. There is no doubt that this is the real footage.

It is ironic that the characters forming the name of the Min Jin Yu refers to the start of the Warring States period in Chinese history. This connection has been picked up by the leaker of the footage, whose name ‘Sengoku38′ means ‘Warring States 38’. The 38 in the leaker’s name may refer to events during the Second Sino-Japanese War in 1938, a disturbing suggestion of a neo-nationalist agenda. Indeed, this name seems to symbolize the possibility that this incident will mark the start of an adversarial relationship rather than simply rivalry between China and Japan.

What does it show?

The footage was released in six parts, all up 44minutes (links provided in the footer). The first three parts merely show the JCG warning (in Chinese) the Min Jin Yu that it had entered Japanese territory and to retreat from the area.  A voice is heard giving the time (10:05) and location (N26 01.7, E123.37.1). In the fourth part, the collision occurs. The captain of the fishing boat, Zhan Qixiong, seems to have waited until the Yonakuni has ‘crossed his T’, (that is, was directly in front and perpendicular to the Min Jin Yu) before accelerating suddenly and steering towards the Yonakuni – Captain Zhan could have easily avoided this and there seems no question about the deliberate nature of the first collision.

The fifth section opens with the JCG Mizuki running parallel to the Min Jin Yu. Warnings are issued to ‘Stop Engine’ in Chinese, English and Japanese while a siren sounds. At 10:55am, the Min Jin Yu turns left suddenly and collides with the Mizuki’s mid-section. The sixth section is a view of the same from another JCG cutter, the Hateruma. The footage shows the Min Jin Yu apparently behaving recklessly and causing the second collision.

The location of the first incident places it inside the Provisional Measure Zone of the 1997 Sino-Japanese Fisheries Agreement (discussed here) and therefore outside its provisions for joint use of the area. This means that only the flag-state (in this case China) is permitted to arrest/detain or investigate breaches of the Agreement (although it must respond to notification from the China-Japan Joint Fisheries Committee). Japan is not permitted to take action against a boat which is suspected of a fishery violation.

But is Japan entitled to action against a boat which is behaving aggressively, with whatever provocation?

The answer to this issue is open to debate, but the answer will depend at least in part on whether Japan was acting to protect public safety at sea or to further its own narrow national interest by changing the status quo around the Senkaku/Diaoyutai islands. Clearly what is upsetting to China is that Japan’s act of boarding the Min Jin Yu and arresting Captain Zhan smacks of Japan exercising sovereign rights under Article 73 of the UN Laws of the Sea – even if Japan’s acts were not designed to change the status quo. Moreover, the decision to arrest Captain Zhan occurred nearly 12 hours after the collisions. This suggests that a deliberate decision was made to make an arrest, and that this decision was probably made by Japan’s executive (Kan Naoto and Maehara Seiji) in consultation with Ministry Foreign Affairs. Indeed, China is targeting already the Foreign Minister after his comments at Hanoi.

Although the video footage had been viewed in private by Japanese parliamentarians, the decision to release the video to the public was at the time not only pending but seemed unlikely. The subsequent leakage has left Prime Minister Kan Naoto, Foreign Minister Maehara Seiji and Defence Minister Kitazawa Toshimi to thunder impotently about investigating the source. As noted elsewhere, the effect of Kan’s handling of the issue has cost him much popular support, and this footage will damage him further.

Interestingly, one effect of the incident has not been the abandonment of 1997 Fisheries Agreement, at least not yet. The Agreement can be terminated after six months by either of the party on notice. Sengoku Yoshito has expressed his continued support for the process, and the continued existence of the Agreement provides something of symbol that the two countries still wish to return the situation to the status quo ante and get on with things. There is acknowledgement at the top that the two countries simply cannot afford to be adversaries.

View footage of the collision: 1, 2, 3, 4, 5 and 6.

Joel Rathus is a recent PhD graduate from Adelaide University and a regular contributor to the East Asia Forum.

1. The Senkaku Islands incident and Japan-China relations
2. China-Japan trawler incident: Japan’s unwise – and borderline illegal – detention of the Chinese skipper
3. Japan-China relations stand at ground zero

Sino-Japanese relations have entered a dangerous new era. Previously, Japan was willing to take an unobtrusive and patient approach to China. But last month’s less than diplomatic arm wrestle over the fate of the arrested captain of a Chinese fishing boat in disputed territory in the East China Sea may have effectively ended Japan’s ambivalence toward China.

For better or worse, the only real chance for Sino-Japanese relations to become the fulcrum for a new East Asian century has resided with the DPJ, as opposed to the more almost cynical policy of the LDP which, when in power, promoted an East Asian regionalism excluding China. The DPJ has been much more positive about the prospects of inclusive or cooperative leadership by Tokyo and Beijing in the regional project. This perception was symbolised under the Hatoyama administration through statements at the trilateral summit and by a large-scale official visit of parliamentarians to China.

But the DPJ was not blind to possibilities that a politically cooperative China might prove too difficult. For the DPJ, the East China Sea was seen as a good test case for a new cooperative era in Sino-Japanese relations. This attitude was visible in Hatoyama’s call for the creation of a ‘Sea of Fraternity’ to be created, including the establishment of a hot-line in 2009. At the same time, Foreign Minister Okada maintained Japan’s position toward East China Sea sovereignty during his dealing with China’s Foreign Minister Yang Jiechi – although their relationship was less than warm.

In the aftermath of the foreign policy crisis, the DPJ’s strategic perception of China, as seen in its rhetoric, has shifted from Japan and China ‘together’ in international society (and the US as a destabilising ‘foreign’ force) to one in which Japan and China are on opposite and opposing sides.

Increasingly, the rhetoric from influential figures such as Okada has been to identify that the fundamental difference between Japanese and Chinese society is the main obstacle to cooperation – specifically, the rule of law and existence of democratic institutions. The new Foreign Minister Maehara Seiji, who came into office in the midst of the crisis, has also singled out China’s attitude as ‘excessive’ – although a firm line from Maehara ought to come as no surprise as he already had links to the Coast Guard through his background as the former Transport Minister. Likewise, Defence Minister Kitazawa Toshimi expressed his concern that China was not willing to formally discuss the issues even in mid-October, and carefully pointed out that defensive links between the two countries are still weakening due to the crisis.

While careful not to get drawn into the fray for fear of criticism of his handling of the crisis, PM Kan Naoto has also waded in this debate by identifying fundamental differences between Japanese and Chinese society in last week’s  Diet session. Although his statement was calling for the release of the Nobel Prize winner Liu Xiaobo rather than explicitly linked to the Senkaku islands issue, this link is being made by Japanese media given the PM’s ‘national interest’ phraseology. The strongest critic within the DPJ may well be Cabinet Secretary Sengoku Yoshito, who has linked the Senkaku dispute and the lack of shared values like free speech explicitly and is pushing for universal values to be discussed at the upcoming ASEAN+3 meeting (assuming that the leaders actually meet).

Indeed, many within the DPJ are concerned that their Party does not have sufficiently developed ‘pipes’ to influential members of the Chinese Communist Party. This is especially true with Ozawa Ichiro gone. Certainly there is a view among experts and the media that these informal links are weak. And DPJ party members such as Sengoku Yoshito have also supported that view.

Japan under the DPJ is returning to a position closer to that of the LDP. Despite Japan’s liberal proclivities, diffuse reciprocity as a principle to guide the Sino-Japanese relationship is out and a narrower form of specific reciprocity (or quid pro quo) is back in.

Joel Rathus is a recent PhD graduate from Adelaide University and a regular contributor to the East Asia Forum. His other posts can be found here.

1. The Senkaku Islands incident and Japan-China relations
2. US-Japan alliance the big winner from the Senkaku Islands dispute
3. Japan-China relations stand at ground zero

On August 25, Japan’s Foreign Minister Okada announced the transfer of 100 diplomats from offices and duties in the developed nations to assignments on emerging economies.

The shift in focus away from traditional western powers towards countries like India, South Africa, Brazil and Turkey will be brought about through the creation of an ‘Emerging Countries Bureau’ at the Ministry of Foreign Affairs.

Okada cited the development of the G20 as a forum in which emerging powers are exercising critical influence over the outcomes of discussions. Okada noted that, ‘Ministry of Foreign Affairs staff must respond to the power shift in the world economy. Moving quickly on this is very important.’ Okada also acknowledged that these transfers were not effective immediately and would take several years to complete.

It is not yet certain from where these personnel will be shifted, but there is some indication that Japan’s Europe offices will be subject to reductions in staff. Japan’s embassies in the EU, in particular those focused on economic matters and those responsible for Japan’s policy towards the OECD, are the most likely to have their numbers cut. Perhaps this is because experienced diplomats will be needed to help push Japan’s economic and commercial agenda in emerging markets. Okada identified the particular opportunities in these countries as being the export of Japanese technology, such as high-speed trains and nuclear power plants.

As part of these moves Okada also sign-posted a major shift in the way Japan engages the emerging economies.

Okada proposed bringing in the ‘non-ministerial’, yet powerful, government institutions of JETRO (external trade promotion), JBIC (Bank for International Cooperation), and JICA (international development) under the control of Foreign Affairs by ‘bundling them in’ with other embassy functions. Whether or not this reform will come to fruition is uncertain at this stage.

These changes, together with the creation of a 12 person advisory board to review foreign policy, are not the only innovations that have occurred under Okada’s nearly one year term as Foreign Minister.

He is also responsible for the creation of a bureau to manage Japan’s Free Trade Agreements. The purpose of this was to centralise FTA decision-making in the MOFA rather than allowing Ministries, such as MAFF (Agriculture) and METI (Trade and Industry), to have an effective veto. And while the value of this particular innovation has yet to be demonstrated, Okada’s interest in institutional reform of Japan’s Foreign Ministry seems likely to change the focus and method of Japan’s diplomacy.

Joel Rathus is a recent PhD graduate (Adelaide) and a former Monbusho Scholar (Meiji). He blogs at Eris in Asia.

1. New thinking about foreign policy strategy in Japan
2. Japan: Okada the DPJ’s man on diplomacy
3. Japan, the DPJ and regional financial arrangements