Brookings: Topics - Japan

Mitigating Natural Disasters, Promoting Development: The Sendai Dialogue and Disaster Risk Management in Asia

Fri, 10 May 2013 10:00:00 -0400

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May 10, 2013
10:00 AM - 5:00 PM EDT

Falk Auditorium
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

The Tōhoku earthquake and tsunami of March 11, 2011 (3/11) had both immediate and long-term consequences. Over 20,000 people lost their lives in the triple disaster, hundreds of thousands were displaced and the economic costs were the highest ever to result from a natural disaster. Since the disaster, however, both Japan and the international community have sought to learn from this tragedy by drawing lessons for preventing, responding to, and rebuilding after natural disasters. Specifically, the Government of Japan and the World Bank launched the Sendai Dialogue in October 2012 as a way to re-conceptualize the role of disaster risk management (DRM) in development strategies, emphasizing the importance of building resilience against natural disasters.

On May 10, the Center for Northeast Asian Policy Studies and the Brookings-LSE Project on Internal Displacement co-hosted a discussion featuring experts on natural disasters and disaster risk management from the United States and Asia. Panelists representing the private, public, and international sectors sought to refine some of the topics considered at the Sendai Dialogue. They identified the lessons learned from 3/11; how these lessons can be applied to overseas economic assistance programs, focusing on DRM; the specific challenges of disaster risk management among Asian countries; and how DRM can be integrated and mainstreamed into development assistance across different platforms.

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Economic Growth, Energy, and Economic Partnership: Japan’s Current Obstacles and New Opportunities

Fri, 03 May 2013 15:00:00 -0400

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May 3, 2013
3:00 PM - 3:50 PM EDT

Falk Auditorium
Brookings Institution
1775 Massachusetts Avenue, N.W.
Washington, DC 20036

In the four months since Prime Minister Shinzo Abe was inaugurated in Japan, his Cabinet has pushed forward in rapid succession an unprecedented series of potentially transformational economic policies. On May 3, the Center for Northeast Asian Policy Studies (CNAPS) at Brookings hosted an address by H.E. Toshimitsu Motegi, minister of economy, trade and industry of Japan.

In his address, Minister Motegi described the steps necessary for Japan to continue to move forward. He touched on Japan's growth strategy, membership in the Trans-Pacific Partnership (TPP) and energy policy.

Richard Bush, senior fellow and director of CNAPS, provided a brief introduction. Brookings Senior Fellow Mireya Solís, the Philip Knight Chair in Japan Studies, moderated the discussion.

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Reviewing Ma Ying-jeou’s Strategies for National Security in Taiwan

Richard C. Bush III — Fri, 19 Apr 2013 14:00:00 -0400

Taiwan’s president Ma Ying-jeou spoke Monday evening by video-link to a group of distinguished scholars at Stanford University. Although nothing Mr. Ma said was particularly surprising, his remarks did have three important features.

In the first part of his the speech, the president reviewed the basis for re-engagement with China after his first inauguration in 2008 and the cooperation that has been subsequently forged. This was not, of course, the first time that Ma has reviewed this record, and by now the process is well and widely understood. Yet it is still a story worth re-telling, if only to remind us that nothing about cross-Strait relations after 2008 was fore-ordained. Leaders in both China and Taiwan had to take certain risks for a more stable relationship. They had to find a mutually acceptable premise for interaction (the 1992 consensus). And agree just as clearly on what would be discussed (easy, mainly economic, issues) and what was off the agenda (e.g. independence or unification). What new agreements will be signed and whether the two sides move toward political talks is quite uncertain at this point, but what has already been achieved was neither trivial nor automatic.

Later on, Mr. Ma provided a concise yet clear statement of Taiwan’s national security strategy. To quote him in full: “The first part involves institutionalization of the rapprochement with mainland China so that neither side would ever contemplate resorting to non-peaceful means to settle their differences. The second part involves making Taiwan a model world citizen by upholding the principles of a liberal democracy, championing free trade and providing foreign aid to the international community. The third part involves strengthening national defense capability.” The first of these is particularly interesting, because it expresses an essentially liberal, internationalist approach to ensuring peace and stability: that is, binding a potential adversary to a cooperative relationship so that the stakes of initiating conflict are just too high. But the other two parts of the president’s strategy clearly indicate that he is not placing all his eggs in a Chinese basket.

In discussing Taiwan’s relations with the international community, President Ma properly cites an important, recent achievement. That is the agreement reached between Taiwan and Japan on April 10^th on fisheries. Taiwan fisherman are of course pleased because it clarifies their right in their traditional fishing grounds, but such an accord would not normally command any interest beyond the two countries concerned. But in this case it should. The matter is part of the nexus of issues that include territorial disputes over maritime land forms, the quest for natural resources, the rules of engagement of maritime vessels of contending countries, and coping with popular nationalism. The Japan-Taiwan agreement is important because it does not try to resolve all issues for all time but addresses the most pressing matters in a pragmatic and mutually beneficial way. It offers a way forward for other countries to reduce the temperature on their maritime disputes and reduce the risk of wider conflict through accident and miscalculation. As President Ma said, the pact “sets a good example of how the concerned parties can find ways to settle their dispute and preserve peace and stability in the region at the same time.” He may not have intended to allude in this remark to China, whose maritime vessels have been operating in a rather edgy way of late. But the shoe certainly fits.

Authors

Richard C. Bush III

Image Source: © Pichi Chuang / Reuters

Global Economic Recovery Stuck Below Takeoff Speed

Eswar Prasad and Karim Foda — Sun, 14 Apr 2013 12:17:00 -0400

Editor’s note: This commentary is based on research and analysis from the April 2013 update of Tracking Indexes for the Global Economic Recovery (TIGER) interactive map, which appears on the Financial Times Web site.

The global economic recovery remains stuck below takeoff speed, unable to achieve liftoff and facing the risk of stalling. Half-hearted fiscal austerity measures are proving to be a drag on growth and doing little to rebuild investor and consumer confidence.

Monetary policy continues to shoulder the burden of limiting downside risks and has kept financial markets buoyant even in the face of weak growth prospects.

The Brookings-FT Tiger index shows that growth momentum remains weak in nearly all major advanced and emerging market economies. The best that can be said about the weak pace of economic activity is that it has bottomed out in some key economies. However, prospects of a strong cyclical pickup in growth are likely to be hampered by continued policy uncertainty and concerns about further financial market turbulence, with the simmering euro zone debt crisis once again coming close to boiling over.

The US economy continues to be a relatively bright spot, with economic activity showing modest strength and equity markets booming. Consumer demand continues to prop up the weak recovery, although even that is tenuous as labor market performance remains weak. The Fed’s commitment to maintain easy monetary policy until the unemployment rate falls to 6.5 percent has boosted bond and equity markets. The Fed’s actions have also helped to limit downside risks to growth in the short term but at the cost of creating greater financial system risks. Fiscal policy, both directly and through the uncertainty about its future course, is hampering the recovery.

Growth in the core eurozone economies, including Germany and France, remains weak while the eurozone periphery remains mired in a danger zone.

Growth in the core eurozone economies, including Germany and France, remains weak while the eurozone periphery remains mired in a danger zone. The backstop provided by the ECB’s interventions bought some time for European policymakers, who have been squandering it with political squabbling. There has in fact been some progress on fiscal and structural reforms in countries such as Greece and Spain. However, in general the pace of reforms in the eurozone periphery economies has been far too slow. There are few grounds to anticipate improved growth momentum in these economies, which continue to post shrinking GDP levels. They also have dismal levels of business and consumer confidence, as well as financial systems that are still in distress and unable to provide much credit to finance a recovery. Moreover, recent developments such as the outcome of the Italian elections and the mishandled Cyprus bank rescue plan have raised the risks of an unpleasant end-game to the crisis.

The Bank of Japan’s new leadership has clearly signaled its intention to employ a broad and aggressive set of unconventional monetary policy measures to reverse deflation and support growth. For these measures to gain traction, they need to be supplemented by structural reform measures that are essential to revive the economy’s productivity and competitiveness. Bolstering Japan's productivity and long-term growth prospects requires reforms of the tax system, labor markets, and various aspects of the regulatory regime.

Emerging markets are treading water as their policy space becomes increasingly constrained and they continue to be buffeted by a weak external environment.

Emerging markets are treading water as their policy space becomes increasingly constrained and they continue to be buffeted by a weak external environment.

The outlook for China’s economy is evenly balanced, with some indicators such as industrial production suggesting that growth has stabilized. Inflation appears to have moderated, leaving room for policy stimulus if growth were to slow. The new leadership has hit the ground running in terms of laying out its economic reform agenda and making a series of statements and high-level appointments that bode well for reform prospects. The difficult task of developing specific action plans and implementing them lies ahead. Still, it seems clear that the government is prepared to accept lower growth than in the past decade so long as that growth is more sustainable and increasingly driven by private consumption and productive investment.

In India, the optimism engendered by a wave of modest but important reforms at the end of 2012 has given way to renewed gloom as the February 2013 budget did not sustain the reform momentum. The budget contained some steps to put public finances on a more sustainable path, but even the modest deficit reduction goals may be upended by weak growth. The large current account deficit remains a source of vulnerability and the high level of inflation has constrained monetary policy’s ability to support growth.

Latin American economies have hit a rough patch, with countries like Argentina and Brazil experiencing significant slowdowns. Even Mexico, one of the strongest performers in the region of late, is in danger of losing momentum as export growth has been hit hard by weak external demand.

Politicians around the world continue to avoid tough structural reforms, instead relying on central banks to continue propping up growth. Policy and political uncertainty remain sources of drag that could prevent the world economy from attaining liftoff, raising the risk of a crash.

Authors

Eswar Prasad
Karim Foda

Image Source: © Bobby Yip / Reuters

Currency Wars: This Time, Is It for Real?

Jacques Mistral — Wed, 10 Apr 2013 14:03:00 -0400

In his presidential campaign in 1928, Herbert Hoover promised to help impoverished farmers by increasing tariffs on agricultural products; after the election, he also asked Congress to reduce tariffs on industrial goods. In April 1929, well before Black Thursday, U.S. Representative Reed Smoot, a Republican from Utah, introduced a bill that passed the House in May. The bill increased agricultural and industrial tariffs at levels that had not been seen for a century. This was a relatively benign beginning of what would become one of the most tragic policy measures of the 1930s. Within a few months of the bill being passed in the Senate as the Smoot-Hawley Tariff Act, other countries in response raised their own trade barriers, which started a vicious circle of contracting world trade flows and economic activity, and rising unemployment from 1930 to 1933.

There are three main lessons from the policies mentioned above:

“Beggar-my-neighbor” policies are bad.
Bad policies can have tragic consequences.
Beware of benign measures that can ignite uncontrollable chain reactions.

Indeed, these lessons have been in every policymakers’ mind since the Lehmann Brothers failure. In fact, the creation of the G-20 was a spectacular effort by the major economies of the world to cooperatively answer the challenges raised by the most severe financial crisis since the 1930s. The G-20 coordinated the management of strong macroeconomic policies, including huge deficits and easy monetary policies. These were bold decisions but not radical, and those who condemned government intervention have been rebutted by the urgency of these measures. And it is now widely acknowledged that these unconventional measures successfully avoided the transformation of the Great Recession into another Great Depression.

In the U.S., the recovery is at best shaky, unemployment is artificially reduced by the growing number of discouraged workers who have stopped looking for work, and the median income is dramatically lagging.

Today, there are reasons of hope that have been eloquently described by Roger Altman [1]: it can be argued that in the U.S., and to a lesser degree in Europe, the crisis has inspired significant reforms that have pushed the economy closer to a sound and sustainable growth trajectory. However others rightfull so object that enormous challenges are still facing the populations and their respective governments. The price paid for curing the damages of the global financial crisis is extremely high everywhere. In the U.S., the recovery is at best shaky, unemployment is artificially reduced by the growing number of discouraged workers who have stopped looking for work, and the median income is dramatically lagging. In Europe, austerity is the name of the game in every country except Germany and despair is growing among the populace. Japan has been stuck for two decades in deflation. Many citizens around the world feel that the efforts have gone too far, yet the benefits and retribution have benefitted too few. Electoral frustrations are on the rise as demonstrated in Italy where Mario Monti’s wise policies have been followed by the success of the Five Stars Movement of Beppe Grillo. Italy turning ungovernable is a bad sign for democracies. Could we see a comeback of desperate national policy experiments like the ones that democracies were progressively pushed to adopt after facing insurmountable difficulties in the early 1930s?

Now, a really radical policy experiment is already taking shape in Japan with the introduction of what has been named “Abenomics” after the name of the newly-elected prime minister, Shinzo Abe. It has taken only one election and one nomination at the head of the Bank of Japan to really revolutionize monetary policy. This revolution can be qualified in two ways, one benign, one threatening.

There is first reason to rejoice. After two decades of failed policies, it’s finally good to see bold politicians ready to do whatever it takes to extract Japan from its deflationary trap. Should Mr. Abe succeed, he would unclench the domestic brakes to economic growth, which deflation has so lengthily opposed: declining prices in effect are discouraging consumption (goods will be better and cheaper tomorrow, why spend now?) and investment (facing massive excess capacity of production and weak final demand, why invest now?). The new mission of the governor of the Bank of Japan is to raise inflationary expectations to 2 percent, which would make Japan converge with the world average inflationary trend and monetary policy. Demand would restart and Japan would contribute to an improved global economic outlook. This is the view that the IMF chief recently endorsed. As expected, Mr. Kuroda last week unveiled a much more aggressive package of quantitative easing than what we have previously witnessed, with a view to double the monetary base. Japan’s central bank will buy more long-term government bonds, pushing private investors to invest more in risky assets. Since the election, the Nikkei has risen 34 percent. Different polls and surveys suggest that the public is positively reacting to Mr. Abe’s promises.

Is success already underway? That would be good news for Japan and for the world. But it is clearly too soon to celebrate because this virtuous circle can simply fail to happen. No central bank until now has ever tried to raise inflationary expectations and no one knows if this can turn to be a practical and manageable reality. Inflationary expectations could also easily turn out of control. Before exercising traction on the economy, they could impose higher interest rates that would have devastating consequences for the Japanese Treasury in the management of a huge public debt (more than twice the size of the GDP). But there is something worse than the risk of Abenomics having poor or adverse domestic consequences.

The other side of Abenomics is currency management, a much less propitious theme for a government to communicate in the weeks leading up to the IMF Spring Meetings in Washington. This aspect of the policy is not only bold, it’s actually radical. As a candidate, Mr. Abe made extremely clear that he was willing to help the manufacturing sector by depreciating the yen and that monetary policy would be designed with this goal in mind. Remember that Japan, despite all its woes, remains a formidable exporter with an external surplus close to ¥650 billion in February (approximately $6.5 billion). As my fellow economists at Brookings have recently shown [2], the Japanese bilateral surplus with the U.S., which is $23 billion according to reported trade statistics, would dramatically increase by 60 percent and reach $36 billion if measured in added-value terms. Mr. Abe’s message was well received by investors who quickly after the election started to short the yen. As a result, the yen has slumped 21.5 percent in the past five months— the worst (or the best?) performance among the currencies of the developed economies. Following last week’s announcement that the Bank of Japan was really acting to debase monetary policy, the yen weakened beyond 99 yen per dollar and dropped against 15 major currencies.

A weakening yen also poses challenges for China, complicating the China’s strategy to reach its 8 percent target growth for this year; it could also trigger huge capital flows into China destabilizing the delicate control of financial stability

This is where Mr. Abe and Mr. Smoot cross ways: both are local politicians inspired by the difficulties facing their countries; both are willing to use every available policy tool to soften these difficulties; neither is willing to shock the global economy, which has never been the case when arguing in favor of protectionism or competitive devaluations. But these measures are nonetheless radical because they have the potential to ignite uncontrollable chain reactions. South Korea for one already declared itself very concerned by this aggressive policy, which is totally understandable. For instance, when Toyota and Sony take some advantage of Abe’s policy, the ones that would likely be first to suffer are Hyundai and Samsung. South Korea has vital interests at stake and, over In the last five months, it has been struggling with a pernicious appreciation of its currency. A weakening yen also poses challenges for China, complicating the China’s strategy to reach its 8 percent target growth for this year; it could also trigger huge capital flows into China destabilizing the delicate control of financial stability; SAFE, the financial institution that manages China’s huge official reserves, last week published its yearly report for 2012. Commenting on the global environment, the report emphasized that “a yen’s depreciation can’t solve Japan’s structural problem, … [but] could turn out of control and trigger a suspicion about its sustainability,… and finally have dangerous spill-over-effects”[3]. Chinese officials at the Boao Forum also expressed similar concerns.

We still don’t know the end. Hope is that we could see the positive interpretation of a bold Japanese policy experiment contributing to a better functioning world economy. Experience should nonetheless make us cautious. What the movement by the Bank of Japan does is to increase an already huge excess liquidity, inundating global markets. In addition, the Japanese government has added a dangerous touch of currency manipulation. Both aspects should be alerts for the IMF rather than too quickly fuel the artificial satisfaction of promises regarding higher inflationary expectations and increased domestic demand. In the end, competitive devaluations always prove inefficient and dangerous because they inevitably provoke reactions and retaliations. “Currency wars” have made headlines from time to time in the recent years but these were skirmishes. This time it could be for real, and this should be a major concern for the United States. It is a great thing that Japan recently expressed interest in joining the Trans-Pacific Partnership, but these are words with long delayed potential results. A more constructive and immediate task is to continue the cooperative global approach of exchange rate policies and to strongly discourage any temptation of national radical policy experiments. This should be a central issue next week during the IMF Spring Meetings in Washington.

[1] Roger C. Altman: “The Fall and Rise of the West”, Foreign Affairs, January-February 2013

[2] Kemal Dervis, Joshua Meltzer and Karim Foda: “Value-Added Trade and its Implications for International Trade Policy”, Brookings Opinion, April 2, 2013

[3] http://www.safe.gov.cn/resources/image/076044004f1fb34a9da59ff675a23beb/1365377817854.pdf?MOD=AJPERES&name=2012年中国国际收支报告.pdf

Authors

Jacques Mistral

Image Source: © Issei Kato / Reuters

A Comparative Analysis of U.S. and Japan Foreign Aid Policies for Disaster Reduction

Goshi Tsukamoto — Tue, 09 Apr 2013 00:00:00 -0400

The international community faces a variety of challenges caused by population growth, environmental problems, and an increase in the frequency of natural disasters in the last half century. In many parts of the world, calamities such as earthquakes, floods, landslides, storm surges, and tsunamis have caused a number of tragedies by creating socio-economic disorder, sometimes leading to unprecedented physical and human disruption.

Relatively well-governed countries have sufficient capabilities for rapid reaction and long-term recovery efforts, and are able to build resilience against adverse situations in their societies. Unfortunately, however, in a number of developing countries adequate social institutions and infrastructure have not been established to deal with such situations due to political, economic or historical factors. These regions remain relatively vulnerable to natural catastrophes, and their people are outside the circle of prosperity. [1]

In the global context, as described in 2011 in the initial Policy Framework document from the United States Agency for International Development (USAID), providing assistance in disaster-stricken areas is a fundamental expression of common humanity, representing a visible manifestation of a common belief that is both morally right and strategically sound. [2] While nation states must take the primary responsibility for dealing with their own catastrophes, it is essential for the international community to help others help themselves, based on partnerships.[3] Large-scale disasters in developing countries inevitably cause enormous damage with wide-ranging and long-lasting effects, often eventually resulting in the deterioration of society as a whole. In relation to disaster reduction efforts in developing countries, the significance of international technical and financial cooperation is now shared as a global consensus. In fact, emergency relief and disaster reduction, particularly in developing countries, have become a main focus of international cooperation.[4] Donors have committed themselves to lending life-saving humanitarian assistance through rapid response to emergencies in poorer countries and sharing lessons and technologies to support adequate preparation for disasters. These new techniques and practices are expected to be institutionalized in recipient societies over the long term.

[1] They are more likely to suffer from extremely serious damage from natural disasters and may even be displaced nationally and internationally in some cases. It should also be noted that people in these nations additionally tend to suffer from secondary effects such as a deterioration in sanitary conditions and food shortages, which may last a long time.

[2] United States Agency for International Development, USAID Policy Framework, 2011-2015, p. 2; accessed February 26, 2013, http://transition.usaid.gov/policy/USAID_PolicyFramework.PDF.

[3] Looking at past catastrophic natural disasters, the international community has recognized the importance of disaster reduction and promoted international cooperation in and with vulnerable countries.

[4] In fact, numerous countermeasures against natural phenomena have been designed and implemented.

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Authors

Goshi Tsukamoto

Image Source: © Kena Betancur / Reuters

Tensions on the Korean Peninsula

Evans J.R. Revere — Mon, 01 Apr 2013 00:00:00 -0400

Editor's Note: In an interview with the Voice of America, Evans Revere comments on the escalating tensions on the Korean peninsula, and explains that the U.S., South Korea, and Japan are taking North Korea's threats seriously.

VOICE OF AMERICA: There is a threat from the North to shut down the Kaesong Industrial Complex, which is jointly run by both countries. If that happens, what are the prospects for direct talks between the two Koreas?

EVANS REVERE: I think the prospects would be slim, to say the least. I think that would be an unfortunate step. It would be a signal that an already troubled relationship is going to get worse. Certainly there are some economic benefits that flow to the North from Kaesong – those would obviously stop, but there are also economic benefits that flow to South Korean manufacturers from that project and those would stop as well and I think that would be unfortunate for both sides.

VOICE OF AMERICA: Japan’s Chief Cabinet Secretary Yoshihide Suga, today condemned the North’s recent threats to launch strikes Sunday, saying Japan is on full alert.

REVERE: As is the United States, and as are ROK troops. It’s, I think, important to send very clear and very firm messages to the North Koreans that we’re taking their threats seriously. We don’t want to overreact, obviously, but we do want to make it clear to them that we – the United States, our South Korean ally, as well as Japan are prepared for a whole range of contingencies, and that’s why I think it’s important for President Park to have said the sort of things she is reported to have said today, because I think that does send a clear message to the North Koreans that a provocation will result in a response; therefore do not provoke.

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Authors

Evans J.R. Revere

Publication: Voice of America

Japan’s Big Bet on the Trans-Pacific Partnership: The TPP Nations Should Reciprocate

Mireya Solís — Mon, 25 Mar 2013 14:24:00 -0400

Prime Minister Shinzo Abe announced on March 15th Japan’s bid to enter the Trans-Pacific Partnership (TPP) trade talks. Pending approval by TPP countries, Japan’s participation in this ambitious trade negotiation with 11 other Asia-Pacific nations is a game changer, and one with very positive payoffs for both Japan and the United States.

For Japan, TPP participation puts aside the concern that the third largest economy in the world will play a marginal role in international trade negotiations. Moreover, by providing a focal point for the deregulation and competitiveness measures that Japan’s economy sorely needs, it helps realize the single most important component of Prime Minister Abe’s economic strategy: structural reform.

For the United States, Japan’s TPP membership dramatically increases the economic significance of this agreement, paves the way to build a genuinely Asia-Pacific platform for economic integration by enlisting a major economy in the region (and creating incentives for other countries to follow), and boosts its efforts in the negotiation table in the rules area of the agreement as the United States and Japan share views on disciplines for investment protection and intellectual property, among others.

If TPP participation is a win-win for both countries, why is Japan coming on board so late in the game? For over two years, successive administrations of the Democratic Party of Japan (DPJ) were unable to decide on Japan’s TPP participation given the determined opposition of the agricultural lobby; the campaign to scare the Japanese public (with alarmist charges that the TPP would undermine Japan’s national health care system, the safety of the food supply, and would lead to massive immigration of unskilled foreign workers); a divided parliament, and the lack of party cohesion on this issue. When the Liberal Democratic Party took the reins of government earlier this year, the prospects of moving on the TPP front prior to the Upper House summer election seemed slim, as the LDP’s landslide electoral victory depended heavily on the agricultural vote and the anti-TPP party caucus gathered close to half of its parliamentarians.

Why, then, has PM Abe thus surprised us by acting before the July elections? A number of factors explain the bet of Prime Minister Abe that TPP membership now will not bring an electoral debacle. One, his high approval ratings -product of his focus on economic revitalization- gives him some immunity from TPP foes. Two, the electoral dominance of the LDP (with the decimation of the DPJ last election) has left the agricultural lobby bereft of a large national party that can champion its anti-TPP crusade. Three, LDP party members are less tempted to defect when they expect the Abe government to finally break the cycle of one-year prime ministerships. Fourth, the carefully worded Obama-Abe statement of the February summit (that all goods are subject to negotiation, but the results of tariff elimination are not pre-ordained, and that both Japan and the United States have sensitive sectors), allowed Prime Minister Abe to make the case that TPP participation will not break its party’s stance of rejecting full tariff elimination as a precondition for TPP participation.

Many voices in the LDP are not convinced that the odds of this bet are good, hence the party has demanded continued protection for five agricultural commodities: rice, wheat, sugar, dairy and beef. These “five fingers” guarantee that there will be a ratification showdown down the road, as TPP partners will not agree to such wide ranging sectoral carve-outs. Prime Minister Abe’s announcement is hence a huge step, but only the first of many that will be required to ensure Japan’s meaningful participation in the Trans-Pacific trade talks. Two essential tasks come to mind. One, it is necessary to revamp Japan’s trade negotiation structure. Japan is coming late to the TPP talks, will need to hit the ground running, and its past negotiation style of sending scores of negotiators to represent multiple bureaucratic views, will simply not do. The decision a few days ago by the Abe government to establish a TPP secretariat to streamline the coordination of domestic interests and appoint a chief negotiator is, therefore, a very positive development. Second, Japan should learn the lessons from South Korea of narrowing down the range of its defensive interests significantly (in order to achieve tariff liberalization ratios of around 98%) and offering trade adjustment assistance to obtain farmer acquiescence. And the government should move boldly in the area of agricultural modernization with changes in the income compensation program and land transactions, to name a few.

Japan today has placed a big bet that the Trans-Pacific Partnership can help retool its economy to become more open and competitive, and reconfigure its domestic politics by eroding the clout of protectionist forces. These are the right bets to place and the international community should be supportive. It is time for the TPP nations to reciprocate with their own big bet on Japan, one that acknowledges that this is a critical juncture to support the cause of structural reform and market liberalization, and one that benefits them by making the TPP a far more significant trade agreement.

Authors

Mireya Solís

Image Source: © Toru Hanai / Reuters

What Lies Ahead for Japan and the United States

Fri, 22 Mar 2013 14:00:00 -0400

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March 22, 2013
2:00 PM - 3:00 PM EDT

Falk Auditorium
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

An Address by H.E. Kenichiro Sasae, Ambassador of Japan to the United States

During Prime Minister Shinzo Abe’s recent visit to Washington, DC, he announced that “Japan is back.” Meanwhile, the Obama administration is emphasizing a “rebalancing” of its global posture toward the Asia-Pacific region.

On March 22, the Center for Northeast Asian Policy Studies (CNAPS) at Brookings hosted an address by H.E. Kenichiro Sasae, ambassador of Japan to the United States. Following the productive summit meeting between Prime Minister Abe and President Obama last month, Ambassador Sasae discussed the roles of the two countries in shaping the regional order in East Asia and how they may strengthen the Japan-U.S. alliance. Senior Fellow Richard Bush, director of CNAPS, provided introductory remarks. Senior Fellow Mireya Solís, the Philip Knight Chair in Japan Studies, moderated the discussion.

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What Lies Ahead for Japan and the United States

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20130322_japan_us_transcript

Japan to Join the Trans-Pacific Partnership – Finally!

Joshua Meltzer — Mon, 18 Mar 2013 10:27:00 -0400

Japanese Prime Minister Abe’s statement of his country’s willingness to join the Trans-Pacific Partnership (TPP) negotiations is good for the U.S., Japan and the TPP. It follows former Japanese Prime Minister Noda’s announcement at the Asia-Pacific Economic Cooperation (APEC) in 2011 of Japan’s interest in the TPP negotiations and almost two years of discussions between the Japanese government and the other TPP parties on their expectations should Japan join the trade agreement. The TPP parties currently include the U.S., Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Japan’s participation in the TPP will boost the agreement’s economic and strategic significance. The TPP aims to be the 21^st century trade agreement that sets the rules for trade and investment in the Asia-Pacific region going forward. Achieving this goal will require other major economies in the Asia-Pacific region to join the agreement with the intention of the TPP ultimately becoming a Free Trade Agreement of the Asia-Pacific (FTAAP), and Japan’s participation in the TPP will give added momentum towards this goal. For one, with Japan the TPP will cover 8.6 percent of global trade and almost 40 percent of global GDP. Japan’s entry into the TPP is also likely to give further impetus to other countries joining the TPP. In particular South Korea, which already has an FTA with the U.S., should now see the TPP as a key opportunity to negotiate new market access opportunities with Japan, with which it has a $108 billion trading relationship. Other countries such as Colombia, the Philippines and Thailand are also watching the TPP negotiations careful with an eye to joining.

Japan’s participation in the TPP is also of economic significance for the U.S. Without Japan’s participation in the TPP the market access opportunities for the U.S. are limited because the U.S. has FTAs with six of the 10 TPP parties. Should the TPP lead to new market liberalization beyond what has already been promised in their current FTAs with the U.S., the already significant liberalization committed to under these FTAs means that any new market access gains for the U.S. will be minimal.

In contrast, the U.S. does not have an FTA with Japan, which is the world’s third largest economy with significant tariff and nontariff barriers in areas of key export interest for the U.S., ranging from agriculture to automobiles to financial services. As a result, an ambitious outcome in the TPP could provide the U.S. with important new markets. Its potential economic value is highlighted by the size of total bilateral trade of $220 billion in 2012 and a trade deficit of $80 billion. But this understates the size of the trading relationship as many Japanese goods and services are now inputs into final goods exported from countries such as China and South Korea. Value-added trade data more accurately captures these dimensions, and on a value-added basis the U.S. trade deficit with Japan increases by approximately 60 percent. Additionally, there is a significant bilateral investment relationship, with U.S. foreign direct investment (FDI) in Japan valued at $134 billion in 2010 and Japanese FDI in the U.S. valued at over $240 billion

Japan’s participation in the TPP is also good for Japan. It will provide new market access opportunities for Japanese exporters amongst the TPP parties. But even more significantly, the TPP should become a key driver of domestic economic reform – something the Japanese economy sorely needs. The TPP will lead to economic reform in Japan through a number of channels. For instance, the TPP will lower tariff rates on goods and liberalize Japan’s services sector, which constitutes 72 percent of Japan’s GDP. The TPP will also eliminate many nontariff barriers – behind the border regulations that act as barriers to trade. These measures will lead to greater competition which should increase the productivity of the Japanese economy, improving its competitiveness, including in its export sector and boosting GDP. Additionally, the TPP will include new ambitious market access for investment, rules on intellectual property, competition, telecommunications and regulatory coherence, to name a few. In fact, the TPP is better understood as a comprehensive economic integration agreement that will touch most areas of economic life.

Prime Minster Abe’s decision to commit Japan to joining the TPP should also be understood as a necessary compliment to his efforts to stimulate the Japanese economy with monetary easing and the related depreciation of the Yen. These efforts alone, without the type of economic reform the TPP will lead to, are unlikely to produce long-term improvements in Japan’s growth prospects.

A further consequence for the TPP of Japan’s participation will be a delay in finalizing the agreement. Efforts to conclude the TPP this year were always ambitious given the range of difficult issues still on the table, such as on intellectual property and state-owned enterprises. Following Japan’s announcement of its intention to join the TPP, the Obama administration will now follow a 90 day consultation period with Congress, which means that the September round of TPP negotiations will be the first opportunity for Japan’s formal participation. Irrespective of whether Japan is prepared to simply sign on to progress-to-date in the TPP, the needed new market access negotiations with Japan, combined with the existing challenges outlined above, makes completing the TPP by the end of 2014 a more realistic end date.

Authors

Joshua Meltzer

Image Source: © Toru Hanai / Reuters

Business Advocacy in Asian PTAs: A Model of Selective Corporate Lobbying with Evidence from Japan

Mireya Solís — Fri, 15 Mar 2013 00:00:00 -0400

What explains the pattern of selective business interest in preferential trade agreements (PTAs) with active campaigning for and utilization of tariff preferences for some trade agreements, but not others? Under what conditions can business advocates of PTA policy mount an effective lobbying campaign to influence policy outcomes (i.e., shaping decisions on who to negotiate with and what to negotiate about)? These are important questions given that analyses of Asian PTAs frequently assign a negligible role to business interests either out of apathy or lobbying weakness. To understand the pattern of selective business lobbying for PTAs, I develop a theoretical model with three main independent variables: venue selection, preference intensity, and advocacy effectiveness, and apply it to the case of Japan to test its usefulness. My model shows that the conditions for effective business PTA campaigning are exacting: loss avoidance, high technical expertise, and influence-seeking strategies that maximize access opportunities given institutional constraints. And yet when these factors align, business interests do influence PTA outcomes. My research shows that the current trend to characterize the agency of PTA proliferation as either state-led or business-driven needs to be re-examined as it is more useful to think about state-society constellations in favor or against PTAs.

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Authors

Mireya Solís

Publication: Business and Politics

Energy Security in Northeast Asia: A Pivotal Moment for the U.S.-Japan Alliance

Shoichi Itoh — Tue, 12 Mar 2013 00:00:00 -0400

Two years have passed since the Great East Japan (Tohoku) Earthquake devastated northeastern Japan and the subsequent meltdown of the Fukushima Daiichi nuclear power plant shook the world. The government, then led by the Democratic Party of Japan (DPJ), proved unable to revive the ailing economy (the problems of which pre-dated the earthquake), and also made no clear-cut decision on a new energy policy for Japan. Faced with popular opinion and public demonstrations against nuclear power but faced with a high energy economy, the DPJ administration’s equivocal stance on nuclear power generation remained unchanged. As Japan’s nuclear reactors shut down after Fukushima, Japan once again found itself a resource-poor country whose energy security is seriously affected by international surroundings.

The DPJ suffered its own virtual meltdown in the December 2012 lower house election, suffering incessant intra-party strife and a complete lack of leadership as a ruling party; it won only 57 seats in the election, compared to the 231 it held before. Its ambiguously anti-nuclear stance in the aftermath of the Fukushima disaster did not help it with voters as the more pro-nuclear Liberal Democratic Party (LDP) scored a landslide comeback victory, increasing its seats from 118 to 294 and recapturing the Prime Minister’s office, which it had lost in 2009.

At the U.S.-Japan summit in Washington, D.C. on February 22, 2013, new Prime Minister Shinzo Abe asked President Barack Obama to approve liquefied natural gas (LNG) exports to Japan at an early date, as this is an important way for Japan to reduce fuel costs which increased sharply after the Great East Japan earthquake. According to a press release by the Ministry of Foreign Affairs of Japan, President Obama noted that the export licensing issue was still under review, but he is aware of the importance of Japan as a U.S. ally. Prime Minister Abe also pledged to conduct a zero-based review of the previous administration’s policy of exploring a possible phase-out of all nuclear reactors by 2030, and noted that he intends to formulate responsible energy policies with a view toward working with the United States at various levels in international nuclear cooperation. Besides nuclear power, bilateral cooperation on development of clean energy and climate change issues were highlighted. The two leaders basically agreed that their governments would continue to work on Japan’s prospective participation in the TPP on the condition that they recognized both countries would have bilateral trade sensitivities.

Amid this broad range of issues, energy security is a key issue that the United States and Japan must emphasize in reconsolidating and broadening their alliance beyond mere bilateral issues. The construction of a U.S.-Japan energy security alliance based on the two pillars of nuclear power generation in Japan, and exports of U.S. LNG to Japan, could be used as a model for reducing volatility in energy markets and even helping to ensure geopolitical stability in the Asia-Pacific region.

Nuclear Power as a lynchpin of the alliance

Given rapid changes in the international energy landscape, Tokyo can not waste any more time in clarifying its post-Fukushima energy strategy. Japan is the world’s third biggest oil consumer and tops the list of LNG importers; it depends almost completely on imports to meet its hydrocarbon consumption needs. The rapid increase of LNG imports following the post-Fukushima nuclear reactor shutdowns led to dramatic increases in natural gas prices in Asia. LNG import prices in Asia are indexed to oil prices, but do not benefit from the trend of decreasing prices elsewhere―including North America―that is a feature of the shale gas revolution. Therefore, in Asia imported gas prices basically hover at high rates in accordance with high oil prices while in North America gas prices are set competitively as supplies come from numerous domestic sources.

Therefore, the energy policy choices Tokyo makes will have major consequences not just for the domestic economy, but also for international energy markets. Given its extremely low energy self-sufficiency rate of four percent (without nuclear power), Japan’s policy options for ensuring its future energy security are limited.

Simply put, Japan must restart nuclear reactors, and it must also introduce and enforce stricter safety regulations. In order to do so, the government must make a clear political decision to end the endless ideological and emotional debate about nuclear power. The “mythification” of nuclear safety before Fukushima was an important lesson the whole population obviously learned from the tragedy; people will and should now be more skeptical. Some activists argue that nuclear reactors should restart only after their “perfect safety” can be assured; obviously, it is an illusion to think that humankind could ever create perfect safely in its literal sense. However cautious we may be; complete mastery over nature, science, and the future is not possible. Only strong political leadership can put an end to this pointless debate; the government should identify, at the earliest stage and in light of international experience, a set of yardsticks to satisfy legal requirements for nuclear restarts even if we must recognize that it will be a learn-by-doing process. This is Japan’s inescapable responsibility for its own economic life, the U.S.-Japan alliance, and the international community.

Postponing nuclear reactor restarts have drained Japan’s national wealth considerably. It became a trade-deficit nation for the first time in more than three decades. A major factor in this development is the jump in LNG imports due to replacement of nuclear power generation by gas-fired thermal plants. Imports grew from 70 million tons from 2010 to 78.5 million tons in 2011 and 87.3 million tons in 2012 – an increase of almost 25 percent in two years. However, during the same period, the total value of LNG purchases increased by more than 70 percent from about 3.5 trillion yen in 2010 to 6 trillion yen in 2012 due to the sharp increases in LNG prices per million Btu (British thermal unit) destined for Japan: the average LNG import prices for Japan increased by about 55 percent from approximately $11 per million Btu in 2010 to approximately $17 per million Btu in 2012. The increase in Japan’s LNG imports accounted for the predominant chunk of its trade deficit of about 6.9 trillion yen in 2012. Nuclear restarts would result in huge savings in domestic fuel costs. Moreover, it would help stabilize the global LNG markets; the Northeast Asian natural gas market is most seriously affected with Japan consuming about one-thirds of the world’s LNG demand.

It also must be emphasized that Japan’s nuclear future will directly affect the range of U.S.-Japan cooperation which goes by far beyond mere energy issues. The Japanese and U.S. nuclear industries have developed as “twin brothers” for more than a half century. Today, Hitachi and GE, as well as Toshiba and Westinghouse, have nuclear power joint ventures. Japanese nuclear vendors have made significant contributions to make up for the declining of the nuclear industry in the United States after the Three Mile Island accident in 1979, by developing high-tech nuclear products for civilian use and producing a large number of the world’s top-class engineers.

A phase-out of nuclear power in Japan would also have an adverse impact on the global non-proliferation regime. While shale gas causes natural gas prices to remain low, there is increased uncertainty in the United States about introducing new nuclear power plants. Ironically, this has increased the importance of sustaining high standards for nuclear technologies against the background of diffusion of nuclear power for civilian use in the world. This diffusion is irreversible, regardless of U.S. and Japanese domestic nuclear policies, in order to meet drastic rises in energy demand in emerging economies. The loss of Japanese nuclear vendors’ international competitiveness would jeopardize the bilateral alliance’s presence in global nuclear markets, which would in turn weaken Washington’s and Tokyo’s voices in the future non-proliferation regime. Japan needs to rediscover its role as one of the most serious advocates for reinforcement of global efforts on non-proliferation.

Maintaining a certain amount of nuclear power in the energy mix is also important from a climate change perspective. Tokyo must realistically readjust the over-ambitious target of cutting greenhouse gas (GHG) emissions by 25 percent below 1990 levels that was announced by then-DPJ Prime Minister Hatoyama at the United Nations Summit on Climate Change in September 2009, which received little support from the domestic business community. But Japan should continue to play its own roles to combat climate change as long as a principle of fairness of international burden-sharing is guaranteed. A nuclear restart is an indispensable way to reduce a certain amount of GHG emissions, given that too many uncertainties await dramatic expansion of renewable sources in the energy mix at least in the foreseeable future, due in part to high costs.

LNG as a fuel to increase Japan’s burden-sharing

Increases of LNG exports from the United States to Japan will become a new way to strengthen the alliance, and the impacts extend beyond energy. Undoubtedly, Japan would benefit from prospective participation in the TPP, and co-designing the future framework of economic rules in the Asia-Pacific region would also reinforce the bilateral alliance. TPP membership for Japan would remove a potential obstacle to increase LNG exports from the lower 48 states. According to the U.S. Natural Gas Law, LNG exports to non-FTA trade partners must be authorized by the Department of Energy on a case-by-case basis (Japan has imported LNG from Alaska since 1969.) However, the meaning of increasing LNG supplies to Japan should be emphasized in a wider context, entailing geostrategic importance besides the economic benefits of improving the U.S. international balance of payments. LNG imports from the United States will beef up Japan’s economic muscle, better allowing it to play the role of the main “bridgehead” of the U.S. strategy toward the Asia-Pacific region. With sound economic growth, Japan can be expected to contribute more to burden-sharing as it will be able to increase its budgets for defense, economic aid to developing countries, and many other issues that benefit the U.S.-Japan alliance.

Even if Tokyo decides in principle to restart nuclear reactors, both the political and technical processes will take some time. Public support will have to be nurtured in a step-by-step manner. This means that increased access to economically competitive LNG supplies remains urgent. As late as February 2013, Japan paid approximately five times more than the U.S. Henry Hub price per million Btu (British thermal unit), on average, for LNG purchases. Although of the price of future imports of LNG from North America remains uncertain, it is generally estimated that the final cost of LNG from the lower 48 states―including liquefaction costs, transportation fees, and other costs―are still lower than the average price of Japan’s current LNG imports.

Aside from the price issue, securing new LNG supply routes from North America is also important to ensure the safety of Japan’s seaborne hydrocarbon transportation. Currently, approximately 80 percent of crude oil and 30 percent of LNG destined for Japan cut across the East China Sea, where Sino-Japanese tension is simmering.

Toward a joint architecture for Asian-Pacific energy security

Against the background of the shale revolution, there are rising expectations about “energy independence” in the United States, which is thought not only to boost the domestic economy with cheap energy prices and reduce vulnerability to international oil prices, but also to increase policy options for U.S. diplomacy. The ongoing debate about diplomatic implications of U.S. energy independence within the next decade by and large tends to focus on the question of how it would affect the U.S. military presence in the Middle East. However, a blueprint for placing energy independence in the context of the so-called U.S. “pivot to Asia” has yet to emerge. New roles and functions for the U.S.-Japan alliance should be designed in the context of U.S. energy independence. Today in Northeast Asia, the energy security environment is rapidly changing with impending new challenges for the U.S.-Japan alliance to tackle.

First, the rise of China with its surging energy demand has raised concerns about its impact on the global energy market. According to estimates published by the International Energy Agency in its November 2012 World Energy Outlook 2012, China is forecasted to account for more than half of increases in global oil demand by 2030; its dependence on imported oil will increase from 54 percent in 2011 to 77 percent in 2030. Likewise, China is projected to account for about 28 percent of increases in global demand for natural gas with its import dependence to rise from 14 percent in 2010 to 44 percent in 2030. Its impact on global oil prices and thus on the growth of the world economy would be considerable. Furthermore, Beijing’s anxiety about ensuring stable access to energy resources may stimulate the expansion of Peoples’ Liberation Army Navy’s power projection capabilities, as a means to increase and secure access to overseas oil and natural gas supplies.

The deepening of China’s economic interdependence with both the United States and Japan is unstoppable in the foreseeable future. Steady growth of the Chinese economy, which requires finding a solution to the upsurge in China’s energy demand, is of great significance to the United States and Japan. In this regard, the two allies should explore possibilities for strengthening cooperation with China in a number of areas, especially energy efficiency, clean energy, and nuclear power generation. Outside (or uninformed) observers of Sino-Japanese relations tend to be overwhelmed by the contemporary geopolitical dispute and rising nationalism that fill the headlines, and overlook the fact that Beijing and Tokyo have developed extensive cooperation in the energy sector, including on energy conservation and clean energy technologies, for more than three decades. Japan can share its rich experiences in energy and environmental projects in China with the United States to capitalize on the recent success of Sino-U.S. clean energy cooperation. Beyond the business benefits, such collaboration could have invaluable political implications. If the three biggest energy consumers in the world could find a joint flagship project it could help create a new international framework for engaging China.

From the standpoint of reducing hydrocarbon consumption and carbon dioxide emissions, the U.S.-Japan “nuclear twins” should pursue nuclear cooperation with China, which has 18 nuclear power plants currently in operation. The nuclear stakes in China are about to get much bigger: there are about 30 reactors under construction and more than 50 in the planning stage. This expansion is of global importance. Successful growth in nuclear power generation would reduce China’s hydrocarbon consumption and GHG emissions, and operational safety of the plants amidst such a rush of construction is an obvious concern.

Secondly, Russia has devoted every effort to enhance its presence in the Asia-Pacific region, taking advantage of hosting the 2012 APEC Summit in Vladivostok last September. Moscow is anxious to accelerate the development of untapped hydrocarbon resources in the eastern regions of the country as a way to gain new business opportunities while enhancing its geopolitical influence in Northeast Asia. The 4700 km crude oil pipeline from Eastern Siberia to the Pacific Ocean (ESPO) was completed in December 2012. Russia currently exports about 0.6 million barrels per day by the ESPO pipeline, but aims to increase the volume as much as possible.

The U.S. shale gas revolution came as a harsh blow to Moscow, given that Russia is frustrated by the gradual decreases of its natural gas exports to Europe as consumption there declines and the EU seeks diversification of natural gas supply routes. The Sakhalin-2 is the only LNG project in Russia, as of today, with a maximum capacity of exporting 9.6 million tons per year; a new LNG plant in Vladivostok is in the planning stages. In recent months Russia has aggressively approached Japan, China, and the Republic of Korea to strengthen partnerships in oil and gas sectors.

Meanwhile, the United States already has a bastion in the energy landscape of Northeast Asia, with ExxonMobil as the operator of the Sakhalin-1 project. The destination of natural gas exports from the project has remained undecided due to conflicts of interest between ExxonMobil and Russia’s state-owned gas company, Gazprom, which has monopolized Russia’s natural gas exports to date. Yet, while President Putin has recently disclosed a plan to liberalize the natural gas export market, the state-owned oil company, Rosneft, has galvanized itself to find new foreign partners. It has expanded agreements with ExxonMobil, addressing new oil and gas projects in Russia’s Far Eastern and Arctic regions, and has acquired a stake in Exxon’s gas project in Alaska.

However, Russia does not yet seem to have emerged as a factor in the U.S. pivot to Asia. Especially since the collapse of the former Soviet Union and the demise of the Soviet military threat in the Asia-Pacific, Washington’s approach to Russia has been overwhelmingly Euro-centric. Russia’s aggressive move to the Asia-Pacific region in the energy sector should be taken into account, when we imagine diplomatic implications of U.S. energy independence for this region. Obviously, one of the impetuses of Russia’s rapid move to the east is Moscow’s concern about the rise of China. Notwithstanding the economic benefit of the drastic increase in oil trade volumes with China, voices among the Russian power elite are gradually emerging to alarm that Russia might become a “resource appendage” to its neighboring geopolitical rival. It should be noted, however, that increasing hydrocarbon exports from Russia’s eastern regions would also be one of the ways in which the impact of China’s explosive energy needs upon the global energy market can be reduced peacefully. U.S. and Japanese policymakers should consider this point when they discuss Russia’s role as a big energy supplier in the context of energy security in the Asia-Pacific region.

Energy security in the Asia-Pacific region entails numerous uncertainties in both energy markets and geopolitical dynamism. The robust U.S.-Japan alliance must be anchored in solving energy challenges, but this requires clarification of Tokyo’s post-Fukushima energy policies including an internationally responsible political decision on restarting Japan’s nuclear power plants. Wisdom and long-term perspectives are needed to reduce the economic and security costs of ensuring regional stability in the years to come. It is high time for the United States and Japan to begin to design a roadmap for an international framework of energy security in which other regional key players such as China and Russia are effectively engaged.

The views expressed in this article are those of the author and do not necessarily represent those of the Institute of Energy Economics, Japan, or any other organization.

Authors

Shoichi Itoh

Earthquake, Tsunami, Meltdown - The Triple Disaster's Impact on Japan, Impact on the World

Elizabeth Ferris and Mireya Solís — Mon, 11 Mar 2013 00:00:00 -0400

Two years ago today, a devastating 9.0 earthquake struck Japan’s east coast, followed minutes later by a massive tsunami with 100 foot waves. Japan’s legendary investment in earthquake-resistant design meant that only about 100 people died in the earthquake itself although almost 20,000 people lost their lives in the tsunami. The economic destruction of the "Triple Disaster" was massive: 138,000 buildings were destroyed and $360 billion in economic losses were incurred. This was the most expensive disaster in human history. Japanese response to the earthquake and tsunami was rapid, effective and life-saving. Some 465,000 people were evacuated after the disaster. But it was the meltdowns at the Fukushima nuclear plant – the world’s worst global nuclear crisis since Chernobyl in 1986 – which caused the most fear and provoked the greatest criticism of the Japanese government’s response.

The Triple Disaster had effects on Japan and on the world.

The economic, political, and social consequences of the Triple Disaster have changed Japan in fundamental ways. The uprooting of entire communities and the large infrastructural losses produced immediate disruptions in Japan’s extensive supply networks. These in turn caused dramatic drops in industrial production that imposed a toll not only on Japan’s economy, but also on the many other countries linked through these production networks. While Japanese companies creatively restored the supply chains in just a few months, the shutdown of the nuclear reactors has had far more damaging long-term economic consequences. Since 3/11 only two nuclear reactors have restarted operations, and the Japanese government has had to resort to large increases in oil imports to make for the gap in electricity supply. Consequently, since 3/11 Japan has experienced record trade deficits, in the order of $78 billion in 2012.

The social and political aftereffects of 3/11 are also formidable. A large citizen movement calling for the abolition of nuclear power in Japan developed in the aftermath of the Fukushima disaster. The enactment of more exacting safety standards and the development of new patterns of government regulation and monitoring of the nuclear industry have emerged as key topics in the national political debate. On a more positive note, the Triple Disaster also revealed Japan’s most valuable asset: the strength of its civil society. The world watched in awe as Japanese citizens who had lost everything, immediately sprung to help one another. The dignity, creativity, and orderly response of the Japanese population to this mega disaster is indeed the best measure of Japan’s potential. And just as a previous natural disaster, the Kobe earthquake of 1995, helped spur the NGO movement in Japan, March 11, 2011 has seen has seen the activation of scores of non-profit groups and the consolidation of a culture of volunteerism.

However, the reconstruction challenges remain daunting for Japan. Hundreds of thousands of people are still displaced, the quality of the nuclear cleanup continues to raise concerns, and the financial cost of rebuilding the Tohoku region is staggering (in its latest stimulus budget, the Abe government slated $18 billion dollars for this purpose). Japan’s energy future is also uncertain as the government has yet to issue a long-term strategy that clarifies the role of nuclear power in the country’s energy mix.

The effects of the Japanese disaster went far beyond Japan, of course. It served as a warning that even developed, well-prepared countries are not immune from terrifying disasters. It illustrated the extremely high economic costs of disasters occurring in developed countries and the vulnerabilities that come with urbanization and coastal settlement. It served as a wakeup call to the world that unanticipated disasters (or "black swans") happen and that those engaged in contingency planning need to be prepared for much more devastating disasters. Internationally, the fallout of the Fukushima meltdowns for the future of nuclear energy has been mixed. While immediately after the accident some governments announced plans to phase out of nuclear energy, others have continued their nuclear planning (although it’s probably true that all nuclear plants worldwide looked more seriously at their safeguard mechanisms in light of Fukushima). Japan’s tragedy has also led to a re-energizing of investing in disaster risk reduction strategies.

In October 2012, the Japanese government and the World Bank co-hosted the Sendai Dialogue to highlight the lessons learned from the disasters and to adopt comprehensive guidance for reducing risk in other parts of the world. To continue the learning of lessons from Japan for disaster risk management in Asia, we are organizing a day-long conference at Brookings on May 10, 2013 to examine the lessons from March 11, 2011, the challenges of disaster risk management in Asia and, more broadly, strategies for mainstreaming disaster risk management in development assistance. We hope in a small way to contribute to continued learning from Japan’s tragedy and to prevent further tragedies resulting from similar disasters which occur elsewhere.

Authors

Japan's Big Chance to Contribute

Lex Rieffel — Tue, 05 Mar 2013 10:46:00 -0500

Editor's Note: This piece was originally published in the Financial Times in response to an article titled Bankers Fear Chinese Push to Head ADB, which discusses the departure of Haruhiko Kuroda from the Asian Development Bank.

Sir, The Japanese government has signalled its desire to replace Haruhiko Kuroda as the President of the Asian Development Bank with another Japanese financial figure, thereby maintaining its hold on this position since the bank was established.

If it succeeds in mobilising global support for its candidate, Japan will miss an opportunity to contribute materially both to reform of the international financial system and to regional co-operation in Asia.

The Japanese lock on this position is no more tenable in today’s world than the US lock on the presidency of the World Bank and the European lock on the top job at the International Monetary Fund. The political capital Japan will have to expend to get its candidate selected is unlikely to make the effort pay off.

The best move to advance systemic reform and Asian co-operation is to encourage China to put forward an outstanding candidate and then help to get this candidate approved by the other members. A Chinese president will not be able to “control” the ADB any more than Japanese presidents in the past have been able to. Furthermore, moves of this kind can help China become a more responsible stakeholder in the Asian region and the international financial system.

Authors

Lex Rieffel

Publication: Financial Times

Shinzo Abe's Visit to Washington

Richard C. Bush III — Fri, 22 Feb 2013 17:51:00 -0500

Japan’s prime minister, Shinzo Abe, made the rounds of Washington today (February 22nd). He laid a wreath at Arlington National Cemetery (implicitly honoring those who lost their lives fighting Imperial Japan in World War II). He and President Obama had a full discussion of security and economic ties. And late this afternoon, Abe spoke at the Center for Strategic and International Studies.

President Obama endorsed the U.S.-Japan alliance as “the central foundation for our regional security,” and Prime Minister Abe emphasized later that it worked to mutual benefit of the two countries. Obama told Abe that he would have “a strong partner in the United States throughout your tenure” – a validation that will no doubt enhance his political standing back home. The two leaders were on the same page regarding the need for “strong actions” regarding the recent nuclear test by North Korea, and they specifically discussed financial sanctions.

Obama and Abe discussed the proposal that Japan join the U.S.-led Trans-Pacific Partnership, a major, new rule-setting effort in the field of regional economics and trade. Washington wants Japan to be prepared to include all relevant issues, especially market access for American farm products. The two governments confirmed that understanding, but the United States also reaffirmed that Japan would not have to make fundamental concessions even before the negotiations began. Thus, progress was made, but a lot of work remains to be done.

On recent tensions between China and Japan in the East China Sea, Abe publicly reaffirmed Japan’s adherence to its position that as a matter of history and international law, the Senkaku/Diaoyu Islands are Japan’s sovereign territory. He received from Secretary of State Kerry a reiteration of U.S. statements that those islands are within the territorial scope of the U.S. defense commitment to Japan and that the United States is opposed to unilateral efforts to undermine Japan’s administrative control of the islands. Yet Abe also pledged that Japan would continue to act in a “reserved manner,” that it would not initiate an escalation of the conflict, and that Tokyo was open improving its important relationship with China.

For the short term, U.S. expectations from the summit were probably low. Abe’s Liberal Democratic Party faces elections for half the seats of the Upper House of the Diet (legislature) in July. Winning a majority in that election and so ending divided government in Tokyo is very important for Mr. Abe. He was not about to make bold initiatives in Washington that could hurt him back home (on TPP, for example), but the United States has an interest in a Japanese government that can work to meet the many challenges that faces it.

Over the longer term, the Obama administration expects more than a good set of meetings. It hopes that Japan will bear its part of the burden of preserving peace, stability, and prosperity in East Asia and the world, and that there would be close coordination and cooperation on how to manage China’s rise on issues large and small. In that regard, Abe pledged new action on the security relationship but also a renewed commitment to a positive and constructive global and regional role. Abe’s simple message was that, after several years of uncertainty about Tokyo’s future trajectory, Japan “was back,” and contrary to the doubts of some Americans, it would remain a first-tier country.

Authors

Richard C. Bush III

Brookings: Topics - Japan

Mitigating Natural Disasters, Promoting Development: The Sendai Dialogue and Disaster Risk Management in Asia

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Economic Growth, Energy, and Economic Partnership: Japan’s Current Obstacles and New Opportunities

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Reviewing Ma Ying-jeou’s Strategies for National Security in Taiwan

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Global Economic Recovery Stuck Below Takeoff Speed

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Currency Wars: This Time, Is It for Real?

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A Comparative Analysis of U.S. and Japan Foreign Aid Policies for Disaster Reduction

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Tensions on the Korean Peninsula

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Japan’s Big Bet on the Trans-Pacific Partnership: The TPP Nations Should Reciprocate

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What Lies Ahead for Japan and the United States

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Japan to Join the Trans-Pacific Partnership – Finally!

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Business Advocacy in Asian PTAs: A Model of Selective Corporate Lobbying with Evidence from Japan

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Energy Security in Northeast Asia: A Pivotal Moment for the U.S.-Japan Alliance

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Earthquake, Tsunami, Meltdown - The Triple Disaster's Impact on Japan, Impact on the World

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Japan's Big Chance to Contribute

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Shinzo Abe's Visit to Washington

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