Having ruled Japan for the better half of a century, it is no surprise that the Liberal Democratic Party (LDP) has found it difficult to adapt to its role as Japan’s major opposition party.

But with the prospect of further political gridlock, it may be time for the LDP to reconsider its strategy.

At the LDP National Convention last month, Sadakazu Tanigaki, the party’s president, criticised Prime Minister Yoshihiko Noda and his Democratic Party of Japan (DPJ) for their handling of the Fukushima nuclear disaster, and labelled the proposed increase in Japan’s consumption tax rate ‘an empty cheat’. In order to return the LDP to power, Tanigaki has also vowed to pressure Noda to dissolve the lower house and call a snap election.

This uncompromising stance is largely in line with the obstructionist attitude adopted by the LDP when Noda’s predecessor, Naoto Kan, was in power, and is likely to continue throughout Noda’s term. Given that the government lacks an upper-house majority, the LDP can effectively block any of the government’s bills, but there are several reasons why this strategy is unlikely to pay strong electoral dividends in the long run.

First, Noda’s major policy agenda is ambitious in scope. He has proposed bills to raise the consumption tax rate from 5 per cent to 10 per cent by 2015, reform independent administrative institutions, reduce the salaries of government employees and advance Japan’s position in the Trans-Pacific Partnership (TPP) negotiations. Regardless of whether it can be achieved, Noda’s vow to break with ‘the politics that can’t decide’ and push forward with reform clearly puts the LDP on the defensive. Tanigaki has repeatedly warned that ‘Japan could experience an irreversible national crisis’ in pursuing Noda’s policies. But his party’s unwillingness to reach a compromise with the government exposes the LDP to criticisms of not acting in the national interest. If the prospect of a national crisis does not spur the LDP to enter negotiations with the government over the consumption tax, then what will?

Second, a number of Noda’s policies were either previously supported by the LDP, or overlap with the party’s traditional support base. Tanigaki has rejected talks with the ruling party on the grounds that there is no mention of the proposed consumption tax increase in the DPJ’s 2009 manifesto, but the LDP strongly pushed for the very same proposal in the 2010 House of Councillors election. Further, the DPJ’s support for Japan’s entry into the TPP negotiations, comprehensive reform of the social security system and the reduction of government employees’ wages leaves little room for the LDP to carve out a viable policy alternative. If the DPJ now represents the party of fiscal austerity, trade liberalisation and administrative reform, where exactly does the LDP fit into Japan’s party system, and how can it distinguish itself from the ruling party?

Third, despite declining electoral support for Noda’s cabinet, the LDP has failed to make the most of recent political events and increase its own standing. According to a recent Yomiuri Shimbun poll, support for the DPJ has risen from 22 per cent to 25 per cent, while the LDP’s popularity fell from 19 per cent to 17 per cent. Although one would expect the opposition to benefit in light of the planned austerity measures, this has not been the case; however unpopular a tax increase might be, 73 per cent of respondents still agree that the LDP-Komeito coalition should participate in policy deliberations with the government. It might seem obvious, but opposition for opposition’s sake is unlikely to return the LDP to power.

But with Tanigaki at the helm, the LDP’s current strategy of obstruction may be the best the party can hope for. Tanigaki’s term as LDP president expires in September (while Noda can delay calling an election until August next year). So failure to force an early election may seriously undermine Tanigaki’s prospects for re-election as party president, particularly as the current LDP secretary-general, Nobuteru Ishihara, has expressed interest in replacing Tanigaki.

Failure to match Noda’s policy agenda with sensible counter-proposals, added to the LDP’s refusal to debate the government’s key initiatives, may only further weaken the LDP’s electoral position at a time when smaller opposition parties are merging and forging new cooperative strategies in order to court the conservative vote. The People’s New Party and Stand Up Japan! have agreed to launch a new political party in March with Tokyo’s governor, Shintaro Ishihara. And Your Party, a centre-right party made up of former LDP members, also announced that it will be cooperating with Osaka’s increasingly popular mayor, Toru Hashimoto, and his party (Osaka Restoration Association) in the next election.

Still, a much larger problem is that for the LDP to only engage in policy-based discussions once in power belies the opposition’s role in a parliamentary system. It also offers little hope for the majority of Japan’s independent voters that the current LDP would govern any differently from the LDP that lost in the general election of 2009.

Kevin Placek is a recent graduate of the University of Melbourne, where he completed a Master of International Relations specialising in Japanese prime-ministerial politics.

1. The next Democratic Party of Japan prime minister
2. The Democratic Party of Japan’s credibility crisis
3. Japan must support liberal international order

After North Korea tested its Taepodong I missile in 1998 over Japanese airspace, Japan made the decision to develop its ballistic missile defence (BMD) system in cooperation with the US.

The system comprises a mid-course phase (upper-tier) Standard Missile 3 Bloc IA system loaded onto four Aegis ships, and a 16-unit terminal phase (lower-tier) Patriot PAC-3 defence system, which has been deployed to four sites on Japanese soil.

The Japanese government has put forward several reasons for establishing its own missile defence system. First, the significant international proliferation of ballistic missiles and weapons of mass destruction (WMD) represents an emerging threat. Second, Japan currently has no system that can defend its territory and people in the case of a ballistic missile attack, and there is currently no viable alternative to missile shield systems such as the BMD system. Third, the government has claimed that Japan’s missile program is purely for defensive purposes, emphasising that the BMD system will not pose any threat to other states due to its defensive posture in line with Japan’s senshu boei (exclusively defence-oriented defence) policy.

Aside from these three considerations, some have argued that the development of a BMD system will promote defence and security cooperation with the US, while others contend the system’s development will have positive spin-off effects for the Japanese economy.

Whatever the justifications, Japan’s strong bureaucracy is the most significant factor promoting the country’s BMD program. It has played a key role in maintaining the long-term consistency of the government’s policy toward BMD throughout Japan’s frequent regime transitions. More specifically, the government’s long-term position on the BMD program can be attributed to Japan’s security policy-making process, in which bureaucrats from the Ministry of Defence (MOD) and Ministry of Foreign Affairs take charge in making concrete decisions and crafting policy. The government maintains that the missile defence issue is an operational-level matter in the MOD and Self-Defence Forces, and thus claims it is not necessary to consult the Diet or seek its approval.

Still, there are numerous debates in Japan centring on the BMD program. The first debate focuses on interpretations of the Japanese constitution’s article 9 peace clause. The Japanese government currently interprets the constitution as prohibiting Japan’s participation in ‘collective self-defence’ and justifies the maintenance of the Self-Defence Forces by limiting their mandate to ‘individual self-defence’. The most obvious scenario of ‘collective self-defence’ would be Japan participating in US military operations abroad as an ally. The second debate centres on the possibility of Japan transferring its BMD technology to South Korea or Taiwan, potentially violating the Three Principles on Arms Export, which prohibits the export of weapons. And the third debate centres on the deployment of an upper-tier defence system and its potential to violate the 1969 Diet resolution on the peaceful use of outer space.

In any case, these inhibiting factors will not slow down the momentum toward building missile shields, especially with Japan’s formidable bureaucracy throwing its weight behind the project. Developing the cutting-edge technology necessary for the BMD program also requires significant financial resources, and it appears that not even the economy’s long-term stagnation or the 2011 disasters are stalling the development of Japan’s BMD program.

Despite the government’s claim to possess only self-defence-oriented intentions, its BMD program could be considered an offensive ‘double-edged sword’. That is, the development of Japan’s BMD program may still be seen as a threat to neighbouring states and cause a regional arms race that could lead to conflict. Also, because Japan and the US are close allies, critics may connect Japan’s BMD system with the offensive capabilities of the US, thus building on the impression that combined Japanese and US forces could constitute a significant war-fighting capability in the region. The Chinese government has repeatedly objected to the BMD program, which it regards as a revival of Japanese militarism and as part of the strategic enlargement of US forces in East Asia.

But Japan’s BMD system could potentially lead to regional arms control and possibly nuclear disarmament if neighbouring states trust that it is a logical continuation of Japan’s senshu boei (exclusively defence-oriented defence) policy. To promote this perception, Japan must make a careful distinction between offence and defence, and clearly emphasise the program’s defence-oriented intentions. Japan should also promote its cooperation with the US as a means to move toward a global reduction of offensive weapons, including nuclear weapons. And finally, Japan should take the lead in establishing a global arms control regime that emphasises defence. Australia should be a significant partner in this, as it too is an important ally of both the US and Japan, having cooperated with the US in its missile defence program and deepened its security cooperation with Japan.

Norifumi Namatame is Visiting Fellow at the Australian National University, and Associate Professor at Tohoku Fukushi University, Japan.

1. Japan eventually gets its wish on NK missile launch
2. China’s new anti-ship missile: a Pacific nightmare for the US?
3. What the new Hatoyama government means for the US-Japan alliance

Japanese Prime Minister Yoshihiko Noda reshuffled his cabinet on 13 January, prior to the 24 January opening of the Diet’s regular session.

The reshuffle was preordained; the opposition-dominated House of Councillors censured two of Noda’s cabinet ministers on the last day of the extraordinary session last year. But the Prime Minister went beyond the replacement of these two ministers by adding three new faces to his cabinet — presumably in order to strengthen it in advance of what will be an extremely fractious session of the Diet.

At the heart of the coming battle are bills to raise Japan’s consumption tax from its current level of 5 per cent to 10 per cent by 2015. This move is widely viewed as an economic hammer blow to the Japanese economy and is likely to send retail sales plummeting and worsen Japan’s deflation. It is also seen as pure electoral poison. Each time the consumption tax comes up as an election issue, the ruling party is severely punished at the following election. Rank-and-file members of the ruling Democratic Party of Japan (DPJ) are understandably sceptical of Prime Minister Noda’s conviction that the Japanese public will appreciate the need for an increased consumption tax. Noda sees it as necessary to prepare for the immense social welfare costs associated with the coming massive increase in the number of retirees and the elderly over the next few decades.

In order to provide a spokesman for the government’s tax reform plans and to establish a go-between with the opposition Liberal Democratic Party (LDP), the Prime Minister named Katsuya Okada, a former leader of the DPJ, as his Deputy Prime Minister and state minister for tax reform and government revitalisation. That Okada was named the point man on tax reform, and given the rarely bestowed title of Deputy Prime Minister, makes explicit the Prime Minister’s doubts as to the ability of the current chief cabinet secretary, Osamu Fujimura, to defend the Noda government’s plans. But Okada is already ruffling feathers by announcing, without prior consultation with the DPJ leadership, a plan to reduce legislators’ stipends by 8 per cent to make the proposed rise in the consumption tax more palatable.

In addition to causing confusion as to who is the real spokesman for the government, the Okada appointment is also failing to provide a bridge to the opposition. One of the supposed advantages to having Okada as a part of the government is his ability to call upon a pre-existing working relationship with LDP Secretary-General Nobuteru Ishihara and New Komeito Secretary-General, Yoshihisa Inoue.  But Ishihara and New Komeito’s leader, Natsuo Yamaguchi, are refusing to accept the idea of a rapprochement on a point of protocol: that as a member of the cabinet rather than the DPJ secretary-general, Okada is no longer the proper interlocutor for Ishihara and Inoue. It is a petty, artificial barrier to communication between the ruling party and the main opposition parties on the tax issue. But as the opposition holds a majority of seats in the House of Councillors and can stymie the passage of any legislation save the national budget, the LDP and the New Komeito leaderships feel comfortable in rebuffing government overtures, no matter who the messenger may be.

The other appointments in the cabinet reshuffle are not nearly so portentous as the Okada appointment. Naoki Tanaka replaced Yasuo Ichikawa as Minister of Defence, with the appointment being solely attributed to his seniority in the House of Councillors. But Tanaka has already stumbled in his comments about the contentious plan to construct a replacement facility for the US Marines Corps Air Station Futenma. Tanaka’s statement that his ministry will definitely move forward on constructing a replacement facility at Henoko in northern Okinawa — a plan the Okinawan people and prefectural government oppose — comes just as portions of the US suddenly seem to be wavering in their support for the rebasing plan.

Meanwhile, Jin Matsubara was appointed Chairman of the National Public Safety Commission and state minister for dealing with the 1970s North Korean abduction issues, and Hirofumi Hirano was appointed Minister of Education, Culture, Sports, Science and Technology.

The reshuffled cabinet has no members in it closely associated with Ichiro Ozawa, the DPJ’s former leader and a major power broker. This is an ominous state of affairs given Ozawa’s considerable pull among a significant fraction of the DPJ Diet membership. Loyalists to Ozawa and Yukio Hatoyama — a former DPJ prime minister — nearly joined hands with the opposition in a no-confidence motion that would have unseated Prime Minister Naoto Kan in June of last year. Kan was only able to parry this attack through an unprecedented promise made to Hatoyama to step down from the premiership ‘after a certain interval’.

With an uncertain standing within his own party, a stonewalling opposition and an economic program featuring painful and controversial tax increases, Prime Minister Noda faces a very severe test of his power and popularity in the upcoming Diet session. A passing glance at his recent cabinet reshuffle does not inspire confidence that the Prime Minister will be able to pass this test.

Michael Cucek is a Research Associate at the MIT Centre for International Studies and the author of the Shisaku blog on Japanese politics and society.

1. Japan’s cabinet reshuffle: a futile gesture?
2. Indonesia’s cabinet reshuffle: how low can it go?
3. The Aso cabinet is in free fall

Still months out from Russia’s March 2012 presidential election and it is virtually certain that Vladimir Putin will return to the presidency.

Significantly for Asia, Putin called for the creation of a Eurasian Union shortly after announcing his intention to run. The plan, unveiled in a newspaper article on 4 October, is to achieve EU-style economic integration based on Russia’s customs union with Kazakhstan and Belarus that would eventually encompass the whole Commonwealth of Independent States (CIS).

But it must be noted that Russia is currently experiencing conflict, mistrust or friction in its relations with Ukraine, Uzbekistan, Tajikistan and Moldova. Georgia withdrew from the CIS after fighting a war against Russia; Azerbaijan and Turkmenistan are increasingly taking independent stances from Russia. Putin’s recent remarks, which suggest his intention to annex South Ossetia and establish a Soviet-style alliance with Belarus, provoked a local backlash. Given the current state of affairs, Putin’s plan for the Eurasian Union should be taken more as a reflection of his political ambition to re-establish Russia’s leadership in the former Soviet Union region than as a realistic economic objective. It is also an expression of his wish to revive the Russian-led CIS as a potential rival to the EU and China. That is why Russia’s move is being criticised as imperialistic both within and outside the country.

How will all this affect Putin’s policy toward Asia, particularly Japan and the rest of the Far East? The most pressing issues facing Russia’s Asia policy are the following: first, restoring Russia’s political, economic and military presence in the Asia Pacific, which was lost after the collapse the Soviet Union; second, building cooperative relations with China while hedging against future threats; and third, making effective use of a ‘US card’ to play against China’s military build-up and aggressive maritime moves, while countering the deployment of US missile defence systems. Stemming from these strategic calculations is a cautious view within Russia about America’s declining presence in the Asia Pacific region.

Also notable is Medvedev’s effort to improve economic and military relations with North Korea. Through a trilateral project to construct a gas pipeline that would pass through North Korea to South Korea, Russia is determined to reinforce its presence on the Korean Peninsula and in East Asia on the back of energy resources. The project also serves Russia’s efforts to manipulate China, where talks on gas prices are stalled. But whether the project will come to fruition remains to be seen, given that it entails similar risks to those exposed in the Russia–Ukraine gas disputes. North Korea is counting on the Russian-led project to reduce dependence on China — thus the project is a way for North Korea to manipulate China as well.

Putin tried to redress the balance against China by emphasising the progress made in bilateral political and economic cooperation when he visited Beijing on 11–12 October. It was his way of using the ‘China card’ against the West. But neither does Moscow conceal its vigilance against China, as was demonstrated by Russia’s announcement several days prior to Putin’s visit that a Chinese spy had been arrested. Russia’s military build-up in Asia is evidently targeted at the US, but it has increasingly taken on a counter-China aspect in recent years as well. If China continues its expansionism and military build-up, there will come a time when Japan and the US seriously consider making use of the ‘Russia card’.

As for relations with Japan, Medvedev has taken a hardline stance on the Northern Territories despite reputedly being on the liberal side of the political spectrum. The Japanese government was baffled when its optimistic expectations were betrayed. In an effort to erase his negative image as a ‘weak leader’, Medvedev sometimes resorts to tough measures to court the Silovik (politicians from the security or military services). This has given rise to an optimistic view within Japan that the dispute over the Northern Territories will develop to Japan’s advantage if Putin replaces Medvedev.

This is nonsense.

It should not be forgotten that Putin rejected traditional peace treaty negotiations in 2005 by stating that the Southern Kuril Islands had become Russian territories as a result of World War II and that this was recognised under international law. When it comes to dealing with issues pertaining to national sovereignty, Japan needs to be prepared to fight a long battle. But it is still highly likely that Putin will choose to visit Japan soon after the presidential election next spring, in order to turn around soured Japanese public opinion for the sake of advancing bilateral economic cooperation.

Shigeki Hakamada is Professor of Russian Studies at Aoyama Gakuin University, Tokyo.

A version of this article first appeared here on the Association of Japanese Institutes of Strategic Studies website.

1. Fukushima’s implications for Korea’s nuclear dilemmas
2. Russia’s strategic objectives in Asia
3. Implications for Asia in Japan’s economic decline

China’s spectacular industrial growth has been associated with equally spectacular growth in Chinese energy and resource consumption.

While Chinese energy efficiency (the amount of GDP produced per unit of energy consumed) has risen steadily, except for a few years early this decade, aggregate energy consumption has been lifted by a hugely energy-intensive phase of industrialisation and the spread of motorised transportation on a scale and at a speed that is unprecedented anywhere. China’s economic growth and the demographics will continue to underpin massive growth in energy demand.

China now consumes 47 per cent of the world’s coal, 19 per cent of its hydroelectric power, and 10 per cent of its oil. According to the International Energy Agency (IEA), China surpassed the US as the world’s largest energy consumer in 2009.

China’s dramatic change in status in global energy markets has not only surprised the rest of the world but has caught Chinese policy makers and analysts off-guard as well.

Thirty years ago, China was energy and resource self-sufficient. Indeed, on opening up to international engagement at the end of the 1970s, China was an exporter of coal and other resources, not an importer. But China’s soaring appetite for energy has driven Chinese energy users to international markets to satisfy a growth in demand that has outstripped the capacity to procure increased supplies domestically. In the meantime, some in the policy community have become nervous about growing import-dependence and ‘energy security’.

To some, who are not used to dealing in reliable international markets, any measure of import dependence appears to risk energy security. But many large resource-deficient economies, like Japan, have become used to depending on international markets for the overwhelming proportion of energy supplies to serve their industrial base. Japan relies on imports for 99.6 per cent of its oil imports at last count.

‘Energy security’ can be seen as the ability of a country to procure sufficient, affordable and reliable energy supplies. International supplies are a critical component of affordable and reliable energy for import-dependent economies, and no country is insulated from developments in international energy markets in an open global economy. But the sudden rise in energy imports and reliance on the international energy market has landed China in unfamiliar territory. ‘Energy security’ (nengyuan anquan) was a term that appeared only once in the People’s Daily in the year 2000; in the two years following 2008 the paper published 476 different articles using the term. For many Chinese observers, mounting reliance on energy imports implies external vulnerability and is a worry on both political and economic grounds. For others, the challenge is to lift national energy efficiency and ease back from over-reliance on coal with its associated environmental problems. China produces most of the coal it consumes but now draws over half of its oil supplies from overseas. The IEA projects that, by 2035, China will import nearly 12.8 million barrels per day, or 84 per cent of its total supply.

As Andy Kennedy points out in this week’s lead essay, China has adopted a variety of supply-side policies to ensure its access to oil supplies over the next several decades. Most, he concludes, have been ineffective, wrongly directed, or are under-developed.

The Chinese government ‘has encouraged its national oil companies (NOCs) and other state-owned enterprises to ‘go out’ — to invest overseas and gain greater access to resources abroad’. At the beginning of last year, the NOCs had equity in overseas production of 1.36 million barrels per day — nearly one-third of China’s net imports in the previous year. But has this has enhanced China’s energy security?

The NOCs don’t necessarily send the oil they produce overseas back to China. Nor is it reasonable to assume that oil produced by the NOCs would somehow be cheaper or more readily available to China in a supply crisis. Physical disruptions that impede the flow of oil to China will affect foreign and Chinese firms alike, and the NOCs, seeking profits in the international market as they are, have shown little inclination to give Chinese customers a discount when prices are high.

‘China is also diversifying the sources of its oil imports away from Middle Eastern suppliers’, says Kennedy, ‘its ‘loans for oil’ deals in recent years have facilitated long-term contracts with a range of oil-producing countries in other parts of the world — including Russia, Brazil and Venezuela’. Yet this has had a marginal effect on reliance on supplies from the Persian Gulf.

China is also building its naval capabilities to secure its sea lanes, although it is doubtful that anything other than an anti-piracy capability is a sound investment in the relevant timeframe.

And China is building its Strategic Petroleum Reserve to cover 63 days worth of net imports in an emergency at levels projected in 2020. To be effective, Chinese reserve strategies will have to be coordinated with those of other major importers.

China’s growing position in the international market makes reliance on unilateral and bilateral measures to reduce its vulnerability to oil-supply shocks a doubtful strategy. China will need to pursue greater coordination with other major oil importers through the IEA and develop the multilateral side of its approach to energy security. China is not yet a member of the IEA: it needs to be. Multilateral engagement would provide Beijing with more information and greater influence in the event of future supply shocks — a danger that faces other oil importers as much as it faces China, around uncertainties in the Middle East. ‘Greater multilateral engagement would also demonstrate that Beijing is looking for ways to cooperate with the international community as the story of China’s rise continues to unfold’, as Kennedy argues.

Yet there is no global regime that protects importer interests in reliable energy supply as there is for reliable market access under the WTO. That was one dream in the Atlantic Charter never realised in the Bretton Woods architecture after the Second World War. What there is by way of substitute is a complex surrogate of understandings and agreements, bilateral and global, that work to project the same effect. This is why for big (non-oil) energy exporters, like Australia, assurances of reliable energy and resource supply to major importers such as Japan, China and Korea are important to confidence in international resource markets. It is also why China, the United States, Japan and other major oil importers understandably expend as much diplomatic effort and good will as they do in the Middle East.

Peter Drysdale is the Editor of the East Asia Forum.

1. What does the Middle East situation mean for energy supplies?
2. China’s petroleum predicament
3. Dealing with China’s energy and resource insecurities – Weekly editorial

East Asia’s pursuit of policy strategies of openness to trade and investment have resulted in its being economically one of the world’s most internationally-integrated regions — both intraregionally and towards the rest of the world.

South Asia, on the other hand, is one of the world’s least integrated regions and, measured in terms of intraregional trade as a share of total trade, is the region with the lowest integration globally. Intraregional trade in South Asia was 3.5 per cent of total South Asian trade in 2009, up from a low of 2 per cent in 1967 but significantly lower than the 19 per cent in 1948. Intraregional trade in East Asia was 40 per cent in 2009.

The differences in regional economic integration mean that the effect of political tensions between countries on trade is more pronounced for South Asia than it is in East Asia.

Trading partnerships between open economies are determined by comparative advantage and market forces, and the advantages of proximity are also important. A region with low economic integration is likely to be losing out on the benefits that flow from trade due to economic proximity. But additionally, because political interactions tend to occur much more frequently between neighbours, higher economic interdependence can ameliorate the adverse effects of political tensions that may arise between neighbouring countries.

Political tensions can, of course, act as a barrier to economic integration; and lack of economic integration and interdependence can constrain improving political relations. The relationship between India and Pakistan is an obvious example of the latter. The East Asian case is very different, where the region’s economies enjoy high levels of trade and economic integration, despite unresolved historical issues and long-standing political mistrust in some of the region’s bilateral relationships.

Political tensions between Japan and China from 2001 to 2006, for example, rose to a level where leadership visits between the two countries were suspended and there were large protests in China against Japan and boycotts aimed at Japanese goods. Yet these political tensions did not derail economic relations, nor significantly affect the continued growth of Sino-Japanese trade. The start of this period of political tension coincided with China’s accession to the World Trade Organisation (WTO) in December 2001.

It was not simply the increased trade and positive news from China joining the WTO that offset the conflict and tension between Japan and China. But it was China’s commitment to the global trading system after 1986, with rapid trade liberalisation and economic reform, that gave Japanese firms confidence in dealing with Chinese counterparts. China steadily adopted, and constrained itself to, global trading rules and norms through its 15-year accession march towards membership of the GATT and later the WTO. The experience of the Japan-China relationship shows the importance of countries’ integrating into the global economy and being part of the global trading system for bilateral relationships to prosper.

The experience of the cross-Straits (China-Taiwan) relationship highlights the importance of intraregional economic integration in improving bilateral economic relations. Political relations between Beijing and Taipei have been even more difficult than Japan-China relations. Taiwan had banned imports from China up until the early 1990s for political reasons. In the 1990s, these bans were lifted gradually, and then more rapidly after both China’s and Taiwan’s accession to the WTO in 2001. Taiwan and China have become increasingly integrated into the complex production networks in East Asia. As their economies’ integration into the regional economy deepened, indirect interdependence increased and the indirect as well as the direct costs of Taiwan’s discrimination against mainland Chinese imports became more apparent. The trading relationship is now more ‘normal’ despite the residual trade bans that are still in place. Deep integration into the regional economy has carried the bilateral Taiwan-China economic relationship beyond being simply bilateral in nature.

In contrast, the non-integrating East Asian economies of North Korea and Myanmar are important examples of closed economies whose bilateral relations with their neighbours and beyond are dominated by political conflict.

Unlike Taiwan-China relations, where impediments to trade were reduced over time as the regional economy became more integrated around them, the under-development of South Asian economic integration and interdependence means there is less incentive to reduce barriers to trade or improve poor infrastructure, lift bans on investment and ease people movement across borders.

Pakistan has only recently reciprocated most favoured nation (MFN) status in trade with India and maintains a narrow positive list (786 items) of goods that India may export to Pakistan. At the same time, India’s tariff rates remain high, especially for goods of particular interest to Pakistan, such as textiles, leather and onyx, and non-tariff barriers are substantial. The relationship between India and Pakistan is not nested in robust regional cooperation, so bilateral economic dealings are swamped by bilateral political dealings and negative-sum or zero-sum security issues.

East Asia’s experience suggests that bilateral economic relations nested in a highly integrated region that is outward-looking and globally oriented helps to dampen, and even reverse, the effects of political conflict on trade. Thus political problems that limit economic integration in South Asia are likely to become more tractable if the whole region is tied more closely into positive trade and economic relations, trans-regionally and globally, and committed to full observance of the global rules of trade.

Shiro Armstrong is a research fellow at the Crawford School of Economics and Government at the Australian National University and is co-editor of the East Asia Forum. He is also editor of the new book The Politics and the Economics of Integration in Asia and the Pacific, Routledge.

This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘Asia’s global impact‘.

1. India, China and Asian economic integration
2. Asian economic integration and cooperation- Challenges and way forward
3. North-East Asian economic integration: APEC or FTA games?

Geopolitical tensions continue to simmer in the South China Sea after the Obama administration’s declaration last year of a US ‘return to Asia’ stirred up regional dynamics.

Now, non-claimant states India and Japan are entering into the fray. There are various reasons for this activity.

First, the South China Sea is home to some of the world’s busiest sea lines of communication (SLOCs), which would be disrupted should an armed conflict break out. Second, there is the potential for non-claimant states to get involved in the exploration of oil and gas in the region through joint ventures with claimant states. Third, having a voice in a major regional security issue confers prestige commensurate with regional power status. And last, involvement in the South China Sea issue could have implications on other territorial disputes.

For India and Japan, the South China Sea dispute provides additional indicators to gauge the assertiveness of China’s foreign policy. India and Japan have unsettled borders with China in the Himalayas and the East China Sea, respectively. India also has territorial disputes with Pakistan, who in turn is supported by China. To Japan, the safety of its SLOCs are a vital security interest, and over 80 per cent of her oil imports from the Middle East pass through the South China Sea.

The ‘rise of China’ is also bringing India and Japan closer together. The two countries signed the ‘Joint Statement Vision for Japan-India Strategic and Global Partnership in the Next Decade’ and a ‘Comprehensive Economic Partnership Agreement’ in October 2010. No doubt India’s naval presence in the Indian Ocean, from the Strait of Hormuz to the Strait of Malacca, will also provide an important component for Indo-Japanese maritime cooperation.

Security interests opposite China are also leading the two countries to more strategic engagement with ASEAN states.

Recently, India’s state-run Oil and Natural Gas Corporation (ONGC) signed a deal with Vietnam’s PetroVietnam to purchase BP’s stakes in oil and gas development in waters off the Vietnamese coast (following a naval confrontation between India and China in the area). While China protests the deal as violating its sovereignty, ONGC and PetroVietnam claim the area in question is within Vietnamese territorial waters. And on 12 October this year, Vietnamese President Truong Tan Sang met Indian Prime Minister Manmohan Singh in New Delhi, with both sides pledging to maintain peace and security in the South China Sea while expanding the contents of their strategic partnership.

As for Japan, it held talks in September with Filipino diplomats on resolving the disputes peacefully in accordance with international law. It was proposed that the two countries set up a ‘permanent working group’ to regularly tackle disputes and other Asian maritime issues. Even more importantly, military and security ties were tightened with the elevation of the relationship to a ‘strategic partnership’. Japan also signalled its willingness to play a bigger role in regional security issues when the Japanese Vice Minister of Defence met with senior defence officials from the Philippines, Vietnam, Indonesia and Thailand in late September.

The Philippines will also be putting forward a proposal for avoiding future conflicts in the Sea at the upcoming ASEAN summit. This would see claimant countries determine which areas are in dispute and which are not so as to allow for the exploration and exploitation of resources, potentially in joint ventures.

But while outside involvement can guarantee some degree of protection for ASEAN states against China, this could be a dangerous game to play — one that risks a strong reaction from Beijing. Indeed, Chinese media are already calling for such a reaction following Philippine President Aquino’s recent talks with the US and Japan on the one hand and China on the other. These talks secured US$60 billion of infrastructure investment from China but also the purchase of two Hamilton class cutters from the US.

It would be easy for China to interpret the events over the last year as tantamount to a strategic encirclement by the US, India and Japan. And this will only make the disputes more complicated than ever. Now that ASEAN claimant states have a more favourable strategic position vis-à-vis China, all the states involved should turn their attention to the negotiating table, adding substantive content to the agreement reached at this July’s ASEAN Regional Forum to resolve the dispute peacefully. The 12 October signing of a six-point agreement between China and Vietnam to contain the South China Sea dispute, including the opening of a hotline to deal with potential conflicts and the promise of holding border negotiations twice a year, is one welcome development toward this.

Andy Yee is a writer and translator based in Hong Kong. He has worked at the Political Section of the EU Delegation to China in Beijing and blogs at Global Voices Online and China Geeks. 

1. 
South China Sea disputes: 
ASEAN and China
2. China and its territorial disputes: One approach does not fit all
3. Territorial disputes in East Asia: Proxies for China-US strategic competition?

Public debate surrounding Japan’s proposed entry into the Trans-Pacific Partnership (TPP) remains as heated and confused as ever.

The rhetoric is far-ranging: while some maintain that Japan risks being permanently left behind economically should it fail to negotiate entry into the TPP, others suggest that Japan’s government is agreeing to effectively cede sovereignty and sacrifice its agricultural sector for the sake of diplomatic cordiality. No one really knows what the TPP will mean for Japan, but little recognition is given to this fact.

Despite this, anti-TPP rhetoric in particular has been problematic. It has been trading on a subtle implication that Japan will be forced to make concessions while other nations maintain their respective status quo(s?). This ignores the fact that the TPP will involve multilateral negotiations where Japan is likely to find many willing partners to balance against the potentially more intrusive aspects of this ‘comprehensive’ partnership.

There is also little awareness that the country’s main sponsor, the US, may well be the biggest obstacle to any eventual TPP deal. The US has traditionally been committed to a certain kind of liberal trade order, but many see it as having a chequered history in its commitment to the liberal political and trade order in general. In fact, there are numerous countries involved in negotiations that are extremely sceptical about any deal negotiated by an American administration.

It is important to remember in this context that Australia signed an FTA with the US which did not liberalise the US agricultural market nearly as much as Australia originally hoped. And due to the same range of interests and stakeholders, a NZ-US FTA is not even a realistic consideration.

Some countries face the additional problem of potentially aggravating their own key political constituencies while trying to meet US requirements. For instance, a wide range of agricultural interests and service-industry associations came out against the TPP in Japan over the last fortnight. And it is not just these sectors that remain unconvinced. Japanese officials beyond the immediate environs of the Ministry of Foreign Affairs, while supportive of TPP negotiations in principle, find the urgency and black-and-white rhetoric of the TPP debate at home, and from abroad, somewhat disconcerting.

Perhaps a cause of such unease is the lack of discussion about the need for rhetorical balance in the broader diplomatic context. Nagashima Akihisa’s comment to the effect that a positive of the TPP would be that China would see the strategic environment aligning against it, are precisely the kind of comments that confuse Japan’s economic and security interests. Australia and New Zealand have already felt the need to caution against such ‘confusion’ in their own cases. In fact top Australian and New Zealand political figures concerned at some of the external rhetoric floating around the TPP in Washington have had to communicate to key figures supporting the TPP in no uncertain terms that the moment NZ and Australia smell a China containment policy, they are ‘gone’ from the negotiations.

What does this all mean for Japan? The signals emanating from the Noda government about the exact meaning of the TPP are somewhat curious. In one simplistic sense, Japan has little to lose from joining negotiations; if it withdraws because the negotiations ultimately conflict with the country’s national interest, it is very unlikely the Japanese will be the only country with such problems. The time scales are also of the order that Japanese agriculture and the government would have ample time to respond to any changes. These sorts of dynamics and time scales have not been well communicated in the Japanese media. Rather, the narrative started with Kan’s concept of a ‘third opening’ for Japan — which now looks to be a somewhat unhelpful over-exaggeration — and the TPP has thus taken on more symbolism in Japan than it perhaps deserves. The partnership could be especially significant for Japan, but there is a long way to go — and the ‘opening’ of Japan will be about much more than the TPP.

There is also the question of whether the TPP’s importance matches that of various other developments in global finance, investment and trade. It has not escaped Japan’s attention that South Korea has already signed an FTA with Europe — and bilateral agreements with the US and Australia appear to be just around the corner. Consequently, South Korea seems only somewhat interested in the TPP.

But for Japan, the negotiations may be a good way to diplomatically placate the US and relieve pressure over the Futenma military-base disagreement. It may also be a valuable way to draw domestic fire away from Japan’s other trade projects, namely, the already signed agreement with India, continued and redoubled trade agreement efforts with the EU and Australia, and the start of discussions with China and South Korea about trade liberalisation. Activities surrounding these trade initiatives have caused almost no ripples of controversy in Japan over the last year or two.

The Japanese concern with China’s rising power as a military actor has certainly become more palpable in the last two years. But ultimately it is important to remember that Japan also fundamentally shares concerns along with New Zealand, Australia and likely many others about the TPP turning into not just an economic hedge against China, but into a larger piece of an explicit and comprehensive ‘anti-Chinese’ project. Trade diversification east and west makes great strategic sense, for different reasons, for Japan. A pragmatic appraisal of Japan’s national economic and security interests should however lead the US to be feel secure enough in its relationship with Japan and recognize that the pursuit of simultaneous trade agreements with key Asian neighbours is actually a very good idea for Japan in terms of how it affects its long-term ability to manage diplomatic, economic and security tensions in East Asia. Japan faces several challenges with regards to the TPP negotiations. Its relationship with the US is under scrutiny, while Japan is also well aware of China’s rising influence and is attempting to determine how it should respond. Ultimately, it appears Japan needs more certainty from its TPP negotiations regarding the nature and effects of such a partnership, and a clearer idea of the role it wants to play within the East Asia region going into the future.

Corey Wallace is a PhD candidate at the Department of Political Science, the University of Auckland.

An earlier version of this appeared here on σ1.

1. Industry versus agriculture in Japan’s TPP debate
2. No breakthroughs in the Australia-Japan EPA negotiations
3. Competing visions: EAS in the regional architecture debate

Japan received bids from Boeing, Lockheed Martin and BAE Systems to replace its outdated F-4 fighter jets on 27 September 2011, as part of a plan to buy 40–50 fighter jets in a deal worth more than US$6 billion.

Japan intends to add the new aircraft to its fleet by 2016.

Currently, the Japan Air Self-Defence Force (JASDF) has a fleet of 350 combat aircraft, which incorporates 260 fighter aircraft. But the Japanese Ministry of Defence (MoD) was forced to scrap 12 out of 18 damaged F-2s after the March 11 tsunami, which hit the JASDF Matsushima Air Base in Miyagi prefecture. Additionally, the existing fleet of F-4EJ Phantom II and F-15J Eagles are of older generation and also need to be replaced.

Apart from these domestic obligations, there are pressing external concerns, too. Chinese and Russian aircraft are often detected flying over Japan’s air space illegally and JASDF has taken immediate action to either warn or intercept them. According to the MoD, intercepts of Chinese planes almost tripled last year, and Russia also recently sent two bombers into Japanese airspace. Taking into account the contestation over remote islands such as the Kuril islands (between Japan and Russia) and the Senkaku islands (contested by China), as well as the rapid modernisation of its neighbours’ fighter aircraft, the time is now ripe for Japan to augment its fighter fleet.

With Russia developing a fifth-generation fighter and China developing its own new fifth-generation multi-purpose fighter, Japan also has plans for a next-generation aircraft. The Society of Japanese Aerospace Companies (SJAC) has proposed producing a next-generation air-superiority fighter until 2028, and to have 100–120 planes replace existing F-15Js. This would then be superseded by a Japanese fighter design, to begin development by 2017. Japan hopes to fly a Mitsubishi ATD-X by 2014–2016, and the SJAC’s idea is that its successor could enter production around 2028, as the foreign-designed F-X fighter line closes down.

The MoD has identified four selection criteria for the next fighter jets: the performance of the aircraft and its weapons, maintenance costs, the level of participation of domestic firms, and after-sales support. Regarding performance criteria, the MoD is focusing on stealth, kinematic performance and information-processing capabilities.

If stealth is desired, then Lockheed Martin’s F-35 Joint Strike Fighter conventional takeoff and landing variant is considered the second best after F-22 Raptors. The radar signature of the F-35 is far ahead of its competitors, and Lockheed Martin has also offered to exchange the F-35’s transfer of final assembly to Japanese firms. But they are hugely expensive — each jet may cost over US$100 million, and it may not even be available until 2016.

If a good price is desired, Boeing’s F/A-18E/F Super Hornet is less expensive, with each plane set at approximately US$60 million and it is readily available. Japan’s partner, the US Navy, also uses F-18s, but its technology is considered to be outdated.

The Eurofighter Typhoon, built by an EU consortium, provides opportunities both diplomatically and technologically for Japan, the UK and the rest of Europe to work together. The Eurofighter Typhoon has very limited ground attack capabilities that would satisfy Japan’s ‘defence only’ criteria. And in an interview with the Financial Times, Japanese Defence Minister Yasuo Ichikawa said Japan’s alliance with the US would not be a ‘major criterion’ in deciding between the Eurofighter Typhoon, Boeing’s F/A-18 Super Hornet and Lockheed’s F-35 Joint Strike Fighter.

Meanwhile, all three bidders have pledged to allow fighters to be built under licence in Japan. The question is how much production they will allow.

There will be a lot of meetings and deliberations both inside and outside Japan’s Ministry of Defence until the final decision is taken by December 2011. It is speculated that Japan will plump for its traditional partner, namely the US. But Ichikawa has insisted that the Japanese selection process would be ‘rigorous and fair’, and waved aside suggestions that spurning the US could cause strains with Washington. In the Financial Times, Kunihiko Miyake, a security expert at the Canon Global Institute, said that the technical and tactical issues should be given more importance than procurement diplomacy.

Meanwhile, India has opted for a technologically better Eurofighter Typhoon along with France’s Dassault Rafale jets — and this did not result in a dip in Indo-US relations. It remains to be seen what Japan opts for and its possible ramifications. Buying a European fighter may have a ‘big political impact’ on Japan-US relations. Japan should take into account its air power requirements and capabilities rather than procurement diplomacy. Japan must weigh up its final decision carefully.

Jithin S. George is a Research Associate at the National Maritime Foundation, New Delhi, India. An earlier version of this article was first published on the website of the Centre for Land Warfare Studies, New Delhi, India.

1. Reassessing Australia’s commitment to the F-35
2. China’s J-20: Challenger or pretender?
3. Japan should resuscitate its feeble diplomacy

The Japanese government’s new policy reform plan, Basic Policy and Action Plan for the Revitalisation of Our Country’s Food and Agriculture, Forestry and Fisheries, (published 25 October) does little to promote agricultural trade liberalisation.

While containing a number of reform proposals designed to expand the scale of farming and facilitate agricultural land transfers, the plan fails to address the most important issue of all: reducing direct income subsidies to small-scale farms.

The current program of universal farm-income support preserves the existing structure of agriculture by providing incentives to keep inefficient small-scale farms in business. So if the government avoids the politically difficult decision to cut this program, the existing and new policy will be in conflict. But if the government were to use farm-income support as an instrument of structural reform, by providing subsidies only to larger-scale farms, then this would be a powerful step in the right direction.

So far, direct income subsidies for farmers have been a baramaki (pork barrelling) policy to win the votes of farmers, the majority being small-scale producers, with 80 per cent managing two hectares or less. This is unlikely to change, particularly with former LDP nōrin zoku Michihiko Kano in charge of the Ministry of Agriculture, Forestry and Fisheries (MAFF). His political instincts are perfectly attuned with those of the MAFF — maximise government spending on agriculture and preserve the handout mentality of subsidy-dependent farmers that pervades the industry. These attitudes and associated policies ensure that Japanese agriculture — in the hands of an aging workforce cultivating tiny plots — continues to decline and exhibit very low productivity and international competitiveness. Moreover, the government continues to confuse industry policy for agriculture with social policy for the aged and rural dwellers.

Retaining the current income-support program while liberalising agricultural imports will have serious budgetary implications. Dealing with the consequences of agricultural tariff reductions by supplementing farmers’ incomes will push up the cost of farm-income compensation to enormous levels, adding massively to the fiscal burden on the government — which currently pays about ¥1 trillion (US$12.8 billion) per year in subsidies to farm households.

There are also timing issues. Revitalisation of Japan’s farming sector, the plan’s central theme, is a long-term project. It will take years for the reform measures it advocates — hobbled as they are by internal contradictions in government policy — to work their way through Japan’s farming economy. In the meantime, Prime Minister Noda must deal with the immediate issue of whether or not Japan will join the Trans-Pacific Partnership (TPP) negotiations and the agricultural trade liberalisation implications of any subsequent decision to join the TPP itself. Noda cannot approach urgent policy decisions that demand radical short-term action by offering long-term ‘pie-in-the-sky’, ‘hope-for-the-best’ reform programs that could take years to yield results. Even five years seems too optimistic a timeframe for the reform plan.

The usual suspects are also campaigning against the TPP. The Japan Agricultural Cooperatives’ (JA) vociferous anti-TPP campaign is all about protecting the organisation’s own interests — not the farmers. Its profits on high-priced farm inputs such as fertilisers and pesticides are at stake, as are its marketing commissions on high-priced agricultural products (which are a percentage of the selling price). JA represents yet another layer of expensive agricultural bureaucracy in Japan, financially burdening the agricultural sector and blocking all kinds of economic efficiencies for producers.

Moreover, anti-TPP groups are mounting a campaign of disinformation, taking advantage of widespread ignorance and uncertainty about what might be required of Japan if it did join the free trade group. Scare-mongering and extremist rhetoric is common. The Vice-Chairman of JA-Zenchu, Mitsuo Murakami, recently argued that participating in the TPP would lead to people committing suicide. Kano’s predecessor as MAFF Minister, Masahiko Yamada, now chairman of the anti-TPP DPJ Diet members’ league, has also proclaimed he is putting his life on the line to prevent Japan from participating in the TPP. And the rhetoric is getting through: 97 DPJ Diet members signed a petition against joining the TPP, including the DPJ’s first MAFF Minister, Hirotaka Akamatsu. More than two-thirds are first-term Diet members whose electoral prospects are the shakiest.

On top of this, Noda has given a stronger voice to TPP opposition in his own party by strengthening the role of the DPJ’s (anti-TPP) Policy Affairs Research Council and separating it from the executive. This has allowed the group to become the same kind of ‘veto point’ that the internal LDP agricultural lobby used to be. The key difference between Japan’s current and earlier debates on trade liberalisation is that the voice of corporate Japan — which in the past, fearful of challenging the sacred cow of agriculture, went unheard or muted — is now loud and forceful. Whether it will predominate remains to be seen.

Aurelia George Mulgan is Professor at the University of New South Wales, Australian Defence Force Academy, Canberra.

1. Japan’s agricultural politics, the DPJ and the prospect of trade reform
2. Is Japan’s DPJ a party of reform on agriculture and agricultural trade?
3. Can Kan deliver a breakthrough on Japan’s agricultural trade policy?