The U.S. needs a real partner in the new Japanese prime minister

Japanese prime ministers have come and gone chiefly because of an inability to bring the economy out of its two-decade slumber. Noda has offered encouraging words about general fiscal reform, which is long overdue. He has also generated some political controversy by arguing that higher taxes are inevitable in dealing with Japan’s debt and reconstruction. Raising taxes is controversial for good reason, but it is a point in Noda’s favor that he is willing to propose an alternative to the model of unceasing borrowing, long implemented by the Japanese political and bureaucratic classes.

The key, however, is what specific fiscal reform and tax increases Noda will advocate. The main objective must be to move the Japanese government toward living within its means and accepting that borrowing and spending has utterly failed as stimulus. In light of the necessary spending on earthquake reconstruction, other spending must be cut. Even more important, Japan’s long-term obligations must be kept in check, a fact that Noda has acknowledged in calls for changes to the social security system.

On top of this, tax revenue needs to be increased. Ideally, this would be done through economic growth. In addition, it is possible to have pro-growth tax reform that includes certain tax increases but only if they are carefully designed. Noda has shown early courage on economic issues; he must soon show wisdom.

But neither can Noda ignore Japan’s pressing security issues. China’s growing assertiveness is infringing on Japanese territoriality. Beijing’s heavy-handed actions during the confrontation in the Senkakus last year brought an abrupt end to the DPJ’s original vision of regional harmony and balancing equal relationships with the United States and China. Kan was heavily criticized for his weak response to China’s belligerent stance.

Noda is supportive of the alliance with the United States, describing it as the “very foundation” of Japan’s foreign and security policies. This is welcome news in Washington, which saw relations strained under DPJ Prime Minister Yukio Hatoyama. Noda also seems supportive of the 2006 bilateral Guam Agreement on U.S. military realignment in Japan, including relocating a U.S. Marine Corps air base on Okinawa.

But Noda should move behind mere words of support to actually making progress toward building the Futenma Replacement Facility (FRF) on Okinawa. Failure to do so would make proposed U.S. Senate funding cuts to required construction on Guam more likely, thus jeopardizing the entire Guam Agreement. If that were to happen, the Marine air unit would remain in a heavily populated region of Okinawa, 8,000 Marines would not redeploy to Guam, and no U.S. bases would be vacated and turned over to local control.

Noda must emphasize to Okinawa that Japanese national security and Asian peace and stability must trump local convenience. Tokyo should make clear that Japanese expenditures for Okinawan development (which are up for renewal) are conditional on FRF relocation. Non-compliance by Okinawa could result in reductions in Japanese subsidies.

Recommendations:

• If Japan actually begins to implement fiscal reform, the U.S. should strive to both bolster Noda and encourage the reform process. An offer to start bilateral free trade negotiations or Japan’s participation in the Trans-Pacific Partnership would be appropriate.
• Washington should press Tokyo to fully implement the Guam Agreement. The U.S. should emphasize that redeployment of 8,000 Marines to Guam and return of U.S. bases to local control is dependent on the construction of a replacement airfield on Okinawa.
• The U.S. should urge Japan to begin assuming additional security responsibilities in the long term. Tokyo’s latest defense white paper, issued last December, lays out the need to do so, but little has been done to implement the recommendations.

Japan in decline

Neither the LDP nor the DPJ has displayed the vision or ability to govern Japan effectively. This does not bode well for the country’s future. The two parties are like dazed sumo wrestlers bludgeoning each other but unable to push the other out of the ring. The result is political stalemate and policy gridlock.

Someday, Japan may experience a strategic political realignment that results in parties that offer real choice between opposing political ideologies and policy objectives. In the meantime, the two combatant parties will continue to inflict considerable damage on each other, as well as the country’s hopes of economic revival and international influence.

Here’s hoping that Noda can break the mold and take charge. Otherwise, the Land of the Rising Sun seems doomed to fade into the sunset.