Brother Leader Qathafi: King of Kings (of Africa)

Today, Col. Qathafi of Libya gave a speech at Meiji University over satellite link-up.

It was madness.

I will briefly discuss three different madness's. The Madness of Qathafi (as expected), the Madness of the Japanese (less expected), and a bit of personal Madness.

Qathafi started the satellite lecture by looking bored and reading a report without making eye contact or acknowledging the audience...despite having previously requested (or demanded) "thunderous applause" upon entering the chamber (his personal library). He completely blanked the Prof. Fukuda (more later) during the greeting.

His lecture began by lecturing at the Japanese. Specifically, he queried why does Japan continue to be friends with the US - a country which used nuclear weapons on Japanese nationals not to long ago. Apart from the hypocrisy of his recent reproachment with the US, Libyia's own previous designs on acquiring nuclear weapons ought to have given the audience pause for thought.

But no. The Japanese were also mad, sycophantically so. Prof. Fukuda said "It is great, and so true. America has killed many thousands of Japanese with the nuclear weapon, why are we interested in being friends with them?" Oh dear.

Qudafi continued by presenting his "the future map of the world." Peter Katzenstein's, "A world of regions" ought to include this map for truly - the world had been divided up into five regions; EU, Africa, North America, South America, Russia Plus and a then a scattered few others. It is a well known fact that Quthafi loves regionalism, but even he projected that Japan, China and Korea would remain independent even his future map of the world. If Col Qathafi sees a lack of political regionalism in East Asia - why does Hatoyama proclaim it?

Qathafi also proposed a new country be formed by merging Israel and Palastine. It would be called Isratine. Madness.

Then it was time for questions. Insanely, these questions from the floor were not vetted. Here was a prefect opportunity for a Japanese to ask about nuclear weapons, or Iraq or Afghanistan. Instead we got questions about education, Obama as a Muslim, and from a Malaysian exchange student "why is not the Israel-Palastine problem solved when Africa/Arab Zone has all the oil and manpower?" (Qathadi said, have you considered the role of the US?)

The soft-pitching of questions is unforgivable enough, but as if to make even clearer who was top dog, the Japanese were told to greet the Col. with "Leader Qathadi." Firstly, English is neither the first language of either Libya or Japan so why "Leader"? Secondly, the Japanese put their addresses after the name, meaning that Col. Qathafi was greeted rather cutely as "Qathafi-ReeDaa."

Oh, And then the Japanese at Meiji invited Qathafi to come in person to give a lecture, and offered to set-up an Col. Qathafi Chair at the Peace and Disarmament Center. This was said with straight face. Prof. Fukuda thanked Qathafi for his great words of wisdom and it was over.

The last bit of madness was personal. I really wanted to ask Col. Qathadi a question, a really difficult question. I wonder why, sort of like mountain climbing I guess. In the end, I found watching others much more interesting.

Japan: the DPJ wins as the GRU weakens the LDP machine.

As Michael Cucek wrote last week, Japan has witnessed the subdued brutality of the DPJ’s Government Re-vitalization Unit (GRU) taking back Y1.4 trillion from various extremely unhappy NGOs and bureaucrats. This process of creative destruction is rarely seen in Japan, and while comparisons to the Meiji Restoration by some DPJ politicians are exaggerations, the fact is Japan is witnessing a real shake up in power distribution. And like any such shake up, there are winners and losers.

In this case the winners are the DPJ over the LDP and the Ministry of Finance over the other Ministries. Let me talk about the DPJ first.

Not withstanding the fact that the LDP has fallen of its bicycle since the last election, the GRU process has further benefited the DPJ in its political struggle with the LDP in three ways. Firstly, the GRU process was aimed cleaning up the mess of subsidies that years of LDP administration had built up, in the process airing a laundry list of useless and hopeless projects the LDP had let through at the public’s expense. This was always going to have a positive political windfall for the DPJ, unless very poorly stage managed.

Although the decision to freeze spending on developing “super-computer” technology caused some public concern, the general feeling was that the LDP had acted like a bull in a China shop, wrecking public finances by allowing the “Independent Administrative Organs” (dokuritsu gyousei houjin) to build duplicate building or give themselves repeated pay increases without any oversight. And indeed when pressed, to fail to defend the decisions they had made in a reasonable manner; the Educational Facilities IAO in particular is the stand-out example. The DPJ, by taking this “bull by the horns” as it were, is showing leadership and polls show continued support for GRU process and the DPJ.

Secondly, the GRU has weakened the old sinews of powers which connected the LDP to Ministries. The GRU was aimed at cutting budgetary excesses of IAO, but the effect (and quite deliberately so) is to wipe out bureaucrats’ post-career placement at a related IAO (a phenomena called Ama-kudari). The LDP had allowed bureaucrats to build themselves such golden parachutes as a quid pro quo for ministerial policy support in enacting the LDP’s preferred pork-barrel politics; a sort of you scratch my back and I’ll scratch yours relationship.

However, because the DPJ thinks it can do without the back-scratching (and the associated risk of back-stabbing) the former deal is off. This might drive the ministries to support an early LDP return. But as the LDP is cut off from power, they have nothing to offer the ministries that might induce them to turn against their de jure political masters. As such, the lessening of the ministries’ discretionary funds sees them more dependent on the DPJ politicians than before, if not necessarily more loyal.

Thirdly, the GRU has weakened the LDP’s links to rural voters. The importance of rural voters in the LDP’s election strategy is well known (see Tobias), and the GRU anti-pork barrel politics will no doubt be a threat to the LDP. In the past (paywalled, p48-9), the LDP provided a generous budget for the Ministry of Agriculture, Forestry and Fishery (MAFF). The MAFF supported the IAO Japan Agriculture Association (JA), which in turn provided electoral support to the LDP and provided financial support for farming families, ie LDP voters.

However, due to the GRU process, the JA and morphologically similar IAOs have been dealt a serious blow. The GRU recently seeing through a spate of cuts to the MAFF’s budget, including to the JA‘s education programs. Thus weakened, the JA will be less able to perform its traditional role in the LDP election strategy. As argued in the second point, with the LDP out of power and unable to provide the pork, the JA has little incentive to risk attracting the opprobrium of the DPJ by making a stand just yet; although during an election the JA is expected to be right behind the LDP, even with (or especially because) its feathers have been clipped. Additionally, the DPJ (cynical) policy of cutting out the JA and going “over their heads” to provide farming families with a direct support (via the household income support facility) further erodes the old LDP-JA-Rural voter link.

In conclusion, the GRU has seen the DPJ win large versus its rival the LDP. The GRU only by demonstrated the slipshod political guidance of the LDP as contrasted with the DPJ’s ‘fresh’ approach, but also cut important bonds between LDP and the Ministries, the Independent Administrative Organs and voters. The power shake up is on.

Japan-Thai FTA: "Movement of natural persons"

Earlier today in a bookshop I picked a glossy magazine of conservative news type, it may have been "Will", but in honesty I have forgotten.

One of the stories focused on the "vice industry", prostitution in particular, in Japan being controlled by foreigners. A suggestion was made that the Japan-Thailand FTA had made this easier. Dismissing it as conservatism hype, I put the magazine down and moved, but according to more respectable sources - sex workers may indeed find it easier to move (or be moved) to Japan post-FTA (read here).

Then just now, I thought I would read the text of the Japan-Thailand FTA. Sure enough under the "movement of natural persons" is liberalisation of visa requirement for "Spa services." Apparently there is some traditional Thai Spa services for which only a Thai trained and licenced person will do.

But is this for real? It does not take a lot of imagination to see how this could be abused, a massage parlor would simply notify immigration that they had hired a "Thai Spa service provider" to provide "spa services" and then get the visa. In fact it is almost as if the door was left open on purpose. Odd things, these FTAs.

Hatoyama’s FTA strategy; no strategy at all?

PM Hatoyama has now had several opportunities to put forward his view on a Free Trade Area in East Asia. Thus far his “vision” has proven to be more dependent on the audience, rather than economic or strategic factors. I will discuss the CJK-FTA, or China-Japan-Korea trilateral FTA as it is also known, and then zoom out to the larger issue of US partipation in the East Asian FTA project.

Firstly, with regard to the CJK-FTA, Hatoyama proposed on October 10 Beijing Trilateral (Beijing) that such an FTA be accelerated. At the same time Hatoyama proposed that an investment pact among the three be concluded. China’s position from the outset has been than an investment agreement would not be considered outside of an FTA – on reflection this was an early indication that progress had been made on CJK-FTA.

But while Japan’s interests in an investment agreement (to protect intellectual property, manufacture technique and brand-names), have both been aired and are well understood, Japan’s interests in a trade deal with China are much less clear. Indeed, Koizumi had turned down several requests from the Chinese side that an FTA be formed; in the process willfully ignoring the results of joint research which urged an early conclusion to the trialateral FTA[1].

Just over two weeks later in Hua Hin (Thailand), Hatoyama progressed the CJK-FTA idea with the announcement of working groups to do joint research on the CJK-FTA. While this is the third time research has been commissioned, it is the first time government departments are involved.

Why did Hatoyama reverse the LDP's position? Was it because China was doing something important differently, like its internal politics or trade policy? No. Was it because the World Financial Crisis demanded that Japan export to someone, even China, in order to keep jobs? Perhaps, but an FTA with China could just as easily cause the opposite (more unemployment) in the Japanese economy.[2]

Although it is possible Hatoyama or the Trade Minister Naoshima had talks with the relevant bureau in the Ministry of Foreign Affairs, I am told that the Ministry of Economy, Trade and Industry has not been asked to provide any sort of policy brief as to the implications of a CJK to Hatoyama (or his Office) prior to his announcements at either of the above forums.

This is suggestive of a short-term motivation. Considering the manner in which CEPEA was launched, there exists a precedent for Japanese politicians to just announce an FTA/EPA with shocking little 'nemawashi' or domestic consensus building first. Rather each of these announcements by Hatoyama seems to be made on the moment with the current audience in mind.

The commitment to the CJK-FTA was announced suddenly by Hatoyama at the Trilateral summit, and was warmly welcomed by the PRC. Since Japan's benefits are uncertain, and at any rate little effort was apparently made to understand the possible gains, might this be simply a proposal aimed at warming the relationship with China brought on by the fact of the Summit itself. In other words, no summit - no proposal. Or more precisely, this was a policy spectacle produced with audience in mind rather than specific gains. This commitment was re-affirmed at the APT, and the same can more or less be said there too.

Zooming out from the narrow issue of of CJK-FTA, if policy is being made to suit the audience rather than the national interest, it will be difficult to predict where Japan eventually decides to stand on the 'big' issue of US inclusion in the East Asian FTA project. The trajectory thus far has been towards US inclusion, but Hatoyama temperament and "right" series of events might prompt a surprise another turn-around. For the US, PM Hatoyama is man to checked on more, rather than less, frequently.

Intriguingly, the clear statement by US President Obama about the importance of the Pacific to US strategy and US-Japan relations in Tokyo prior to APEC and Singaporean PM Lee’s appeal that the US be included in any regional trade pact seems to have shifted Hatoyama’s assessment [3]. When commenting on membership at a post-APEC forum, Hatoyama (mindful of his APEC audience) noted membership would be 'open', to any who “shared the dream”[4]. Again, the audience counts significantly. Prehaps at new years APEC which Japan will host Hatoyama will put the US in the picture fully and formally. Then again, perhaps not.

1. Alan jr. Yonan, "Asia Economy Watch; Japan, China, S Korea Mull Trade Pact," Dow Jones International News, 30 Janurary 2004.

2. Baldwin, "Multilateralising Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free Trade."p1491

3. http://www.eastasiaforum.org/2009/10/13/hatoyamas-east-asia-community/

4. http://www.kantei.go.jp/foreign/hatoyama/statement/200911/15singapore_e.html

Obama in Tokyo

On Saturday, Obama delivered a speech in Suntory hall. I had the good luck to attend. I think others can do better justice to what he said that I can, but several points could be noted.

Obama made clear the US sees itself as part of the region. The message was simple, "Hatoyama, do not try to exclude us from the EAc." Previously, Hatoyama had diplomatically 'not included' the US in the EAc idea (to the surprise of the Chinese). But now, if Hatoyama really wants to exclude the US, he will have to come out and say publicly and explicitly. Obama has made it a fact on the ground that US assumes and expects Japan will support its role in the region, clearly raising the political stakes for Hatoyama.

Secondly, "balanced growth" was a key word. Others have discussed this, and believe Obama is referring to the need more US exports to the region. I get the feeling he was referring to more than that, a warning the US might be able import as much as expected. The "balanced growth" sound bite I heard to mean "scale back your expectations, we are."

Lastly, on a personal note, despite the pomp and ceremony and the "historical" nature of Obama as President and his return to this region, he was extra-ordinary capable of being ordinary and humble. I got the feeling that this incredible man is just a man after all - the occasional mispronunciation of Asian words for example, complete with a sheepish yet presidential smile, was the trigger for this.

America, China and Japan; military and monetary networks misaligned?

At this year’s Japanese Association of International Relations conference, Inoguchi Takashi (editor of International Relations of the Asia Pacific) chaired a session entitled “military and monetary networks.” Speakers included, T.J.Pempel, Daniel Drezner, and Chung-in Moon.

The papers themselves were all of a high quality, but it was in the discussion afterwards that the significance of the theme became apparent. Taken together, what these papers suggested to me was that the military and monetary networks in East Asia are no longer neatly aligned with each other.

It is now common knowledge that East Asia played a major role in the current financial crisis. While not dismissing the negligence of the US authorities, the global imbalance which permitted (or even encouraged) bubbles in US economy to emerge had their origin in the post-Asian Financial Crisis decision of East Asian government’s to build up excessive foreign reserves in a bid to ensure that “never again” would they need to go to the IMF.

What is less common knowledge is that this decision to rely on the dollar in Asia, (and thereby to effectively underwrite the US profligacy) has had major political implications. Make no mistake, East Asian states are not choosing to use the dollar (as a reserve currency, and importantly to denominate their trade and credit) out of the kindness of their hearts. Inoguchi called this “the kindness of strangers.” They expect something in return.

In the case of Japan and Korea, part of the kickback is a security guarantee. Japan (and Korea) support the US dollar in part (perhaps large part) because of a political logic. During the Asian Financial Crisis, Japan’s proposal for an Asian Monetary Fund was seen as a sort treachery by the US. Indeed, as Prof. Chung-In noted Korea did not endorse it for fears of US retaliation. Would a movement away from the US dollar really affect the region’s security order? Who can say. But in the minds of decision-makers at the top, clearly a link existed between the military and monetary networks.

But what about China? Now the world’s largest holder of US treasury bonds and the US’s only potential rival, what does China expect from US in return for supporting the dollar’s role until now? Obviously, China does not want any kind of security guarantee, China will provide protection for its own national integrity, national dignity and nationals - Thank-you. What about political favors? Also unlikely, as a permanent member of the UNSC, China is already at the top. The US played that card in 1972. Taiwan? Maybe, but hard to imagine.

In fact, China is most likely after an economic return. This should hardly be surprising, the CCP’s regime legitimacy depends now on being able to deliver economic growth and development – and to do so consistently. The accumulation of US dollars, whether in foreign reserves, treasury bonds or bank accounts, was a function of the decision to maintain a peg (or de facto peg) of the RMB to the USD. As Drezner argues, it was not a deliberate decision – but rather came out of China’s export orientated development strategy, a strategy which had been successfully road tested by both Japan and Korea (both of whom alliance partners of the US!). The fact that China ended up “supporting” the US hegemonic position in finance was neither here nor there.

Until now. Now China has realized that sitting of 2 trillion of USD is not a proposition that carries no costs – quite the opposite, it is risky. China finds itself having effectively bought ‘war bonds’ from the US, a country which - while a largely benevolent hegemon - is nevertheless a hegemon feeling challenged by China’s rise. China’s is now worried that that investment will not be repaid in full. Simple inflation might wipe out significant value, as would appreciation in the RMB versus the dollar – something China is now under pressure to do.

At the same time that China is reconsidering its position in the US’s monetary network, Japan and Korea are reconsidering their position in the so-called “Pax Americana” military network. Indeed, Hatoyama’s administration’s difficulties in negotiating US base arrangements (over the noise of vocal protests in Okinawa) are suggestive of this shift in Japan. Just how this will effect Japan’s orientation towards the monetary network is still unknown, but it is unlikely that Japan is going more interested in supporting the USD in the longer term.

In a related point, Prof. Tadokoro noted that while all eyes are one the big holders of US debt in North-east Asia, ASEAN countries have the possibility of “sneaking out” the US monetary network, evidence for such can be seen in the Chiang-Mai Initiatives (some of which are denominated in Yen and RMB).

The misalignment of the security network which excludes China, and the monetary network in which China and US so close as to be mutually dependent is thrown into sharp relief by the current World Financial Crisis. A crisis with its origin in this region.

(The papers presented at the session should be released in a special issue of IRAP next year.)

Hatoyama is brave, maybe foolhardy

Hatoyama today stood before the Diet and declared that "if the policies contained within the manifesto are not realised, he as PM will take responsibility." When press further, Hatoyama noted that he would likely call an election as a sort of national judgement on his progress. Of course, this leaves the timing up to him but, nevertheless, this is still brave. Maybe foolhardy, as no doubt in four years (the time he allowed his administration to pass into law the manifesto's various policies), he will be called to account by the opposition. Read it here.

The problem is he has now locked himself into delivering (in principle) on all those policies. But I doubt all of his policies (specifically the toll-free highways) are entirely sensible, either politically (public polling on toll-free policy very negative) or economic. A full dicussion of which was in this week's Economist (the Japanese one, not the UK one).

If the future debate is framed about what the DPJ has achieved in terms of its manifesto, then this strategy might pay off. But it runs higher than usual risks.

Unconvinced by Shiraishi’s column (Yomiuri)

I know Shiraishi to be something of a minimalist, and he is true to form here, arguing that the US-alliance and East Asian community building do not run at cross purposes, the reason being that the DPJ is not trying to unwind the alliance relationship.

Specifically, Shiraishi argues that Hatoyama has been criticized because people tend to think about international relations in a zero-sum manner, when in fact it is not true in this case. Shirashi argues that Japan is able to maintain the US-centered alliance hub-and-spokes regional order while also constructing a new regional order which excludes the US. While in theory the two structures could run parallel, in practice it is unlikely to occur. Firstly, there is the problem of Japan’s actual national interests – which does not necessarily correspond to Hatoyama’s rhetoric. And secondly, there is problem of perception gap in the China-America-Japan strategic triangle

One problem is that Japan’s interests lie with both the US security guarantee (chiefly from China) and excellent political relations and integration with East Asia (chiefly with China). As Shiraishi himself has argued previously, East Asian is economic gravity is moving to China even as the US remains at the center of regional security with Japan caught between the two.

What this means is that as long as Japan feels it is necessity to maintain the U.S. alliance, it is unlikely to simultaneously feel that China can be trusted enough for the kind of deep European-style cooperation that Hatoyama has envisioned. The alliance is hedge against a threat, and no state will actually cooperate with a threatening partner – even Japan.

Let it be remembered that each act of East Asia regionalism thus far has occurred due to failings of the United States, and the consequential shift in Japan’s priorities towards Asia. The current financial crisis has been another such example, with calls within Japan (and China) for internal demand driven growth being short-hand for less dependence on the vagaries of the US, thus consequently greater focus on each other and the region. But each time Japan has not liked what it saw in China and has returned to the US fold, will this time be any different?

The second problem with Shiraishi’s argument is that he does not factor in the current perceptions of the other major players – the US and China. Firstly, the US historically has not viewed regionalism in East Asia positively – even APEC is linked closely to global institutions like the WTO. Under the current Obama administration the US has been more positive about East Asian regionalism, on one proviso – that the US be included. If that proviso is not met, there is every reason to believe that the US will return to a negative position on regionalism. In fact, the United States has no reason to provide regional security to East Asia (through the alliance framework) if they are going to be excluded politically from the region, or face additional economic barriers. Is Hatoyama really going to the one to say no to the US?

In the case of China, integration with Japan is not a politically cost-free endeavor. The CCP’s regime legitimacy depends now on continued economic growth to be sure, but historically its mandate is derived from successfully repelling the Japanese invader. Overcoming these political hurdles (presumably from the PLA) is possible, but it is unlikely as long as American troops are based in Japan. Thus, even if Shiraishi was right about Japan being post-strategic, its putative partner in East Asia is clearly not.

Indeed, Shiraishi seems to believe that the U.S.-alliance can be used to stabilize the balance of power while the EAc can be used to sustain economic growth via the creation of shared technical rules; a sort of narrower (“closed”?) APEC perhaps. If that is all there was to it then mutual co-existence is possible between the two structures.

But while the East Asia community (EAc) is currently envisaged as chiefly an economic community, founded on a Free Trade Area and perhaps later a common currency – it is clearly going to also have a political function as well. One would not expect a unified East Asian foreign policy anytime soon, but the EAc would in time demand it have a final say concerning matters within East Asia. This would be problematic for the United States at best.

In short, Shiraishi has tried to strip out the political connotations of the EAc and the U.S.-alliance and just examine the two structures in a minimalistic and functionalist manner. However, this type of analysis fails to appreciate that the political meaning attached to these structures differs in each of the major actors.

Merging Japanese and Australian proposals for East Asian community-building; US participation.

At the fourth East Asian Summit, held on October 25^th in Thailand, the leaders of Japan and Australia had the opportunity to air their views about the future form and function of East Asian regionalism.

As Acharya has noted, these two visions may be in competition with each other. At this stage however little can be known for sure as both proposals share a level of deliberately in-built vagueness. Indeed, Hatoyama’s proposal is seemly contradictory – or at least unsure – on what role the US ought to play in the region.

While Hatoyama’s is still dissimulating about membership, Rudd’s Asia-Pacific community has signposted from the outset US participation. However, it is likely that Japan and Australia will adopt a common position in favor of US participation (i.e. Japan coming out and supporting the Australian position). Indeed, there are signs that the Japanese and Australian positions are already beginning to merge.

In many ways this is only to be expected. Japan and Australia have a record of diplomatic cooperation and joint leadership in the field of regional organization building. That does not necessarily imply that the two will coordinate this time, but there are some structural reasons which suggests that cooperation is more likely.

Specifically, Japan and Australia have common national interests in the management of China and the desire for a US presence in East Asia. Specifically, the logic of China’s rising power necessitates US involvement in Asia if Japan is to preserve its influence, a fact true also for Australia.

However, for the time being Japan has not endorsed US membership. What would bring that about?

Firstly, ASEAN. As Achrya has pointed out, ASEAN is the base on which regionalist projects will be constructed – and proposals from Australia and Japan will have to be mediated by ASEAN. Hatoyama’s rhetoric leading up to the trilateral summit suggests that Hatoyama seems to have believed that Japan could lead the formation of an East Asia community. However, due to the lack of progress at that summit, Hatoyama has likely realized the importance of ASEAN. As it becomes more likely that ASEAN will invite the US into the region, via the Treaty of Amity and Cooperation, Hatoyama may well decide to “go with the flow.”

However, one ASEAN official has noted that ASEAN’s support for US participation is split 50:50; with the archipelagic southeast states in favor and those bordering China more ambivalent. This split in ASEAN is due to China’s rising influence. Indeed, China has pushed forward its credentials as a leader – this year offering Southeast Asian states a 10 billion dollar China-ASEAN investment fund (chiefly for infrastructure building it seems). Under these circumstances, it is unlikely that ASEAN states would push the US issue.

Secondly, China. It is possible that China is backing away from a strong position on US participation. One newspaper reported China’s Ambassador to ASEAN Xue HanQin (薛捍勤) stating that the US could be a participant, although whether this reflects a real change in policy is still uncertain. Has China embraced Tow’s cynical strategy of sinking a proposal by endorsing it? Certainly Chinese foreign policy makers must be aware that a strong move to exclude the US by China might have exactly the opposite effect. This uncertainty on both sides has created a situation in which neither China or Japan is willing to discuss the role of the US in East Asia, for fear of harming their political relationship.

Lastly, Australia. With ASEAN still divided on the issue of US involvement, and China-Japan circling the issue, active Australian diplomacy is more likely to pay off. What it may take is some “double edged diplomacy”, convincing Japan that ASEAN really does support US involvement. Australia has been able to play this middle power role in the past, and is in a good position now to make a valued, and potentially strategically valuable, contribution.

The National Strategy Office: Delays, ambiguity and the real agenda.

Just three days after coming to power, Hatoyama and Kan Naoto (Vice-PM) opened the National Strategy Office. One of the DPJ’s policy pledges had been the creation of such an Office, to provide an overarching “vision for Japan” and policy coordination across departments. Although the terms of reference have since changed, and will likely change again, the NSO potentially a major innovation in how Japanese politics is conducted.

In normal usage, “national strategy” would refer to matters of foreign policy – particularly national defense. That is not what it means here however, as the NSO is currently charged mostly with matters referring to the budget, taxation, and economic management in general. Although, the Minister of Finance Fujii has stated that matters pertaining the budget will be ultimately decided by Ministry of Finance (not the NSO).

In fact, the NSO has been established to win domestic political battles, national security is not specifically mentioned as yet (although it is still early days). The NSO is first and foremost aimed to help the DPJ “defeat” the bureaucracy, which they perceive as an illegitimate shadow government still too strongly attached to the LDP.

This is apparent in having the NSO being headed by Kan Naoto, a politician whose contempt for bureaucrats is (unfortunately) well known. Kan has forced bureaucracies to reveal embarrassing internal reports (in particular, as Welfare Minister in 1996 Kan revealed the extent of Aids contaminated blood for transfusions and slammed the ministry for sitting on its hands). The NSO`s anti-bureaucracy purpose is also apparent in Kan’s desire to, in the manner of Britian’s Policy Office, stock the NSO with politically appointed private persons (i.e. non-politicans/non-bureucrats).

However, Kan’s goals have been dealt a series of setbacks. The most important of which is the “rank” of the NSO – which has not yet had the requisite laws passed to start formally inserting itself into policy. The NSO’s current status also means it has no mandate, no authority and (essentially) no staff. Worse still, the passing of these necessary laws is likely to be put back to when the Diet meets in regular session.

Indeed, Kan currently sits in limbo. This fact is compounded by the winding up of the Policy Research group within the DPJ (which Kan had headed). It is no longer apparent how Kan and the NSO will impact on policy.

Hatoyama remains popular

Yesterday’s Mainichi reported on results of public polling. It found that Japanese public still overwhelming support (72%) Hatoyama’s government. While dipping somewhat from his highest (77%) immediately after forming government one month ago, this is still surprisingly good. The previous three PM each lost 10% in their first month, as did the more historically similar Hosogawa Administration of the mid-nineties.

The honeymoon is clearly still on, but there are some reasons to think that it will last awhile yet. Firstly, Japanese expectations are not very high. Secondly, Hatoyama is proving himself more media savvy than expected. Thirdly, the administration is actually pushing ahead with policy.

With regard to the first point, Japanese are not expecting all that much of the DPJ. If the DPJ can get Japan through the crisis, then that is success. In responding to the question “do you think your living standard will improve due to DPJ policy, 45% said that they do not think it will change. But just on numbers, two thirds of those should be DPJ supporters. In other words, even maintaining the status quo should be enough to satisfy the majority of Japanese a win a second term.

In addition to this, the dominant reason for supporting the DPJ (78%), was “belief that they can change the way politics is done”. This underlies the importance of the DJP’s attempt to shift Japan into a kind of Westminster-type system, at least with regard to government-bureaucrat relations. Even if the DPJ is unable to actually improve the lot of the average Japanese, providing political reform is seen to be progressing then a good deal of its support should stay.

Secondly, Hatoyama is surprisingly media-savvy. Whether through accident or design, Hatoyama has managed to humanize himself very successfully. The relationship with his wife (Miyuki) has clearly played a role here, but his native humor (something suppressed during the elections) also counts. Anecdotally, Hatoyama carried himself much better at the Sumo than Aso did – engaging in light repartee with Asashoryu (Photo in previous post).

Hatoyama’s administration also benefits from the continued wrangling within the LDP. The chairman of the LDP (not quite the Leader of the Opposition) Tanigaki is not very popular, with 55% not expecting he will really do anything. While a fine politician, Tanigaki’s moves to create a shadow cabinet within the LDP are still delayed, and his appeals for new conservative revival are not likely to distinguish him from the “bad, old LDP”.

Thirdly, and perhaps most importantly, Hatoyama’s cabinet is appears to be driving policy along a good clip. Of the 178 policies promised during the election, Hatoyama’s administration already begun implementing half (49%). Admittedly, only three of those policies have advance beyond the initial stage, but still well ahead of the LDP in terms of dynamism. Even contentious policies, such as Yanba Dam, the DJP have pushed along aggressively, trumping local objections by arguing national mandate. Making Expressways toll free may prove a bridge too far.

Of course, the wild card in all this is the World Financial Crisis 2009. Hatoyama has had a pretty good crisis so far - i.e. he was not at the wheel during the crash. And just by luck, his first month has coincided with some not so bad numbers. Consumption is up, Industrial Activity is up, the unemployment rate has stopped hemorrhaging and Japanese exports are recovering slowly. That will all help Hatoyma and it is all true – but only relative to last month; compared to year ago...well, Japan still a long way to go. If the worsening of the people’s livelihood is placed at the DPJ’s door, then Hatoyama’s popularity will crash – along with a chance to push through his promised reforms. Whether he ends up being blamed in anyway is a question of stage management.

An interesting note, more men support the DPJ than women. I wonder why. Maybe men are by nature more willing to take a risk (on the DPJ) or less forgiving (of the LDP’s incompetence). Any cross country studies on gender and voting patterns?

Hatoyama and Asashouryu

This week's post is at the East Asia Forum, here.

I will leave you with a photo I took last week at the Sumo.

Social Constructivists are right.

Theoretical debates in International Relations are interesting, but too often the so-called "great debates" are pathetic spectacles in which each sides advances differing views of human nature. As much as it pains the idealists, the in-group/out-group dichotomy (identity) is a necessary insight into how human in fact behave.

However, getting to these valuable insights requires an inter-disciplinary approach, and a certain adventurousness of the mind. And IR scholars are simply going back to the same material.

I stumbled across this nugget in a neuro-science journal. It establishes that empathic feelings (of pain) are stronger within the same ethnic group, and much weaker across groups. It perhaps provides the best explaination as why a liberal, democratic country such as America would remain in Vietnam, and perhaps now Iraq, for so much longer than expected .

To whit, ethnic out-group apathy in International Relations theory. Social Constructivists got it right.

The Asian Develop Bank’s Regional Cooperation and Integration Strategy: Merits and Issues. Part 3

As outlined last week, the ADB’s RCI strategy confronts two problems which the close country focus does not, specifically coordination problems arising from negotiating with multiple actors at once, and the free rider problem. Today I will address the second of those, the free rider problem. Here, the ADB has sought to resolve regional countries’ concerns about a free rider in two ways.

Firstly, in cases where the client countries’ are unable to reach a consensus on burden sharing, (what this means practically is that the countries’ pledges sum to less that 100% of the expected cost of a projects), the ADB has sought to “pay the difference” from its own pockets. Of course, the ADB is unable to simply provide compensatory cash payments to the “losers” of any project, and so Bank has been required to use a more round-about method for achieving the same. Specifically, the ADB has sought to lengthen the shadow of the future by “bundling” each individual regional project in with other such projects. This bundling allows the ADB to spread out the ‘losses’ over time. Of course, in any one project some country/s might “get” more than others, but with the ADB taking a longer term view and communicating its vision to the client-nations, these individual projects can go ahead with each country feeling that it is being treated fairly. But it is hardly optimal, despite the best of intensions, and may likely create its own set of problems.

Indeed, it is precisely because the ADB is not mandated and equipped to function like the European Commission’s Structural Funds mechanism that the ADB is having difficulty with effectively and efficiently evening out the costs and benefits of regionalism.[1] In the future this might be changed; having the ADB adopt such a role is indeed a logical extension of the RCI, but for the time being the ADB risks institutional overreach in its attempts to help the poor of Asia to help themselves.

The second way the ADB has sought to ameliorate the free rider problem is rather to get someone else to “pay the difference.”[2] Here, however, there are only two candidates; Japan and China. This is because neither the US or Europe are much interested in such schemes, indeed it seems that the US is unfriendly towards the regional cooperation agenda.[3] These two regional powers have both the necessary deep pockets and deep political interests in the region to allow taking on such a role, but of course there are very obvious risks.

The most obvious of these risks is that these Great powers will start to play games in southeast’s backyard. This is precisely what has happened with North-South corridor and the East-West corridor. The North-south corridor (funded by China) links Yunan Province to the Mekong. While the East-West corridor (funded by Japan) opens an better access to the same markets for Japanese goods arriving by sea (likely at the port of Da Neng in Vietnam).

More insidiously, China has become skilled in taping the regional allowances outlined earlier, usually in combination with its own PRC Special Fund, to direct the ADB towards financing regional projects that benefits China. One example involves a project aimed at “facilitating sustainable, environmental-friendly regional power trading in the greater Mekong subregion”, co-financed by the ADB and the PRC Special Fund. The purpose of this project for “developing the hydropower plants for exporting power to Yunan province or other potential hydropower sources for inclusion in the power trade” to the tune of 2mil.[4] Another example involves providing trade negotiation training via Regional Technical Assistance to countries with which the China is in the process of negotiating trade deals. Which ought to raise some eyebrows.

The ADB is risking its reputation by letting, or appearing to let, the big powers influence and direct the RCI. If the RCI is to be “done right”, and to win approval and acceptance which will see it live past the end of Kuroda term, the ADB will need to maintain scrupulous, and unquestioned, ethnical standards. As always it is a question of money however. If the ADB is to undertake such regionalist activities, then it ought to be given the resources to successfully do so.

[1] Giovanni Capannelli, "East Asian and European Economic Integration: A Comparative Analysis," in Working Paper Series on Regional Economic Integration (Manila: Asian Development Bank 2009).
[2] "Regional Cooperation and Intergration Strategy," (Asian Development Bank, 2006). See, Article 94. “Additional financial resources will also be required. Two types of financial resources are needed to implement　the strategy effectively. First, with regard to the lending component of the strategy, for the immediate future, it is　proposed to use existing OCR and ADF resources within available headroom and to catalyze additional public　funding (particularly from larger economies).”
[3] The US is one of the few countries willing to be on record as opposing a proposal at the Board of Directors, for its own reasons the US has consistently voiced its opposition to regionalist approaches. The US opposed the creation of the Regional Cooperation and Integration Fund on the 22 March, 2007. However, US opposition can also look mean-spirited, such as the opposition in November 2005 to a Communicate-able Disease Control Project for the Mekong.
[4] "Indicative Rolling Regional Cooperation Operations Business Plan," (Manila: ADB, 2007). 8, 22

English in Japan

A while ago I heard Eisaku Sakakibara talk about why Japan needs to improve its english competence. I was not totally persuaded because I felt at the top there was enough language competence. But behold the response to Novel Influence! On the GOJ homepage no less!

I hope more serious matters get better proofing.

CMI and IMF, a thought.

Apparently the G20 has made some break-thru with IMF reform.

One idea, which I read here , suggests that the EU should take a single seat at the IMF rather than have country level representation. Doing so would mean that the IMF would have to be based in Europe, as the law establishing the Fund states.

This would be in exchange for the western european powers giving up their over-representation at the Fund, a patently unfair situtation arrising from historical circumstance and now threatening the legitmacy of the Fund as a whole. Of course, the beneficiaries of a redistributation would be Asian nations. And, in the face of the WFC, keeping the Asian countries in, and invovled, at the Fund is very sensible.

A good idea perhaps, and not beyond the bounds of international law. However, the article further suggested that if the Asians did not like this arrangements they could go and formally establish the CMI.

But infact IMF reform would reduce the chances of the CMI ending its 20% link the IMF. In fact, the whole raison d'etre of the CMI comes crashing down if the Asian nations are granted better access to the Fund and its decision making processes. One might even interpret the CMI as a call for precisely such reform, a call for help. (Of course, there is more going on).

The Asian Develop Bank’s Regional Cooperation and Integration Strategy: Merits and Issues. Part 2

As outlined last week, the ADB’s RCI strategy confronts two problems which the close country focus does not, specifically coordination problems arising from negotiating with multiple actors at once, and the free rider problem. Today I will address one those, coordination.

With regard to the issue of coordination, the ADB has sought to resolve the issue by, in most cases, simply taking the initiative itself.[1] Because it can not be expected that the countries of the Mekong sub-region would be able to design and agree upon a project amongst themselves, the ADB designs (in part or in whole) for them a regional project. The ADB of course would also consider proposals from a regional or sub-regional body, such the Pacific Islands Forum (PIF) , Economic Research Innovation Asia (ERIA) or Central Asian Regional Economic Cooperation (CAREC, humorously pronounced Car-wreck), but even here is it likely that these body would refer to documents which the ADB had prepared in their planning.

While smoothing over the coordination problem, this new function of the ADB invites its own set of risks for the region’s development. By both recommending projects and offering to fund them, the ADB creates a situation in which aid clients might find it difficult to refuse, a sort of moral hazard.

This is because the money offered is ostensibly “free.” The funding for regional projects is sourced not from the countries’ national quota (envelop), but rather from a regional “allowance”. This is due to an institutional innovation which created within each regional department of the ADB a regional cooperation envelope independent of the national allotments. It might be difficult for national governments in these still developing to turn down which they may not have the way withal to soundly judge, and even if they believed that the project might not produce any real gain, explaining such refusal is an unwanted domestic political risk, regardless of regime type. On the flipside of this, moral hazard of a sort also arises because, if any one country turns down a project, it means that its neighbors must also go without. Thus there is the potential for external pressures to shape each country’s decisions. (This might be simply called the fear of being a party-pooper).

Thus the balance of power in the relationship in fact lies with the ADB, as the incentives are structured such that agreeing to any project, no matter its actual utility, is seemingly less costly (economically and politically) than refusal – particularly when compared with the balance of power in negotiations and the incentives structure in the country-level approach. The ADB needs to be aware that its client are, under the rubric of the RCI, more likely to accept any regional proposal made. Thus the ADB must be more careful that what it offers is based on sound judgment of the utility of each regional project and not to become memorized by a regional vision of its own creation. One idea might be to have the World Bank invited in review such cross-border projects and to peer review these projects effectiveness, paying close attention to poverty reduction.

Part 3 will be out soon with the last section.

[1] Mid-term Strategy, Article 39 “the rationale for RCI is premised on significant externalities, benefits that transcend national borders. This requires innovative funding arrangement because the distribution of benefits and costs among the partner countries is not always balanced. In the absence of an honest broker/facilitator, individual countries would not bear the cost of providing public goods from which the benefits would primarily flow to other countries.”

The Asian Develop Bank’s Regional Cooperation and Integration Strategy: Merits and Issues. Part 1

In 2006, the Asian Development Bank’s (ADB) president Kuroda announced a new ‘regional’ platform in the Bank’s development strategy. The Regional Cooperation and Integration Strategy (RCI) as it is known, is now three years old. It is time to reflect on the problems it has confronted and managed, successfully or otherwise, and to examine how it might fare from here on.

Of course, some might wonder how significant this new RCI approach is in terms of actual effect on the ADB’s operations and overall development strategy. In fact, the RCI is a very significant departure from the ADB’s prior practice. In the 2012 Strategy paper the ADB declared its intention to have 30% of its operations “regional” in the near future. Since the ADB loaned roughly four and a half billion dollars to East Asia in 2008, nearly twice that of the World Bank, thus we should be expecting at least one billion in regional projects annually. This is a lot of money in both relative and absolute terms for East Asia, and it is important that the regional strategy deliver at least as much as a national strategy, if not more.

Let it also be noted that the RCI is itself a new idea. The World Bank, the basic reference point for economic development thinking and practice, has favored a so-called country-level approach; under which each country has its own development strategy and applies for/receives loans independently of its neighbors. There are benefits to prescribing individual remedies to individual aid clients, and while a great deal of work (especially poverty reduction) can be achieved with such a close-country focus, there are costs. The most obvious cost is that under such an heuristic, cross-border infrastructure or technical assistance, which can have a great (and cost-effective) impact on economic development and living standards might be missed. To see such opportunities a different pair of glasses are needed, specifically those with a ‘regional’ tint.

This is where the RCI approach has its value added. While the World Bank continues to be, rightly so, the leading development bank at the individual country level, the ADB has an opportunity, indeed a responsibility, to find those worthwhile projects hidden in the spaces between its regional member countries. This function is even laid out in the Charter of the ADB, although it has until now played down this role.

However, a regional strategy is by its nature more complicated and difficult to manage than close-country approach such as the WB favors. Whereas a country focus would limit the number of actors at the table to two (ADB and client), a regional strategy necessarily involves bringing more actors to the table. This is a case of “two is company, three is a crowd”, as the addition of even one extra country at the table significantly complicated negotiations.

Let us take the example of a road construction project. If the road were to be country-level project then only the ADB and client would have to agree, for a total of one agreement. If however the road were to link two countries, such as the southern economic corridor from Thailand to Cambodia, then Thailand and Cambodia must agree, Thailand and the ADB must agree and Cambodia and the ADB must agree (total of three agreements). Let us say the project involves another country, the road also passes through Laos say, then the total number of agreements required is six. Thus, each additional country involved exponentially increases the complexity, costs and risks of negotiations. This is a “coordination problem” as it is know in the literature.

Moreover, since each country will benefit to differing degrees, each country wishes only to pay its “fair” share. Or put another way, no country wishes to subsidize others’ costs. In addition to whatever local political problems of distrust that might exist, this fear of a “free rider” (while strictly rational) will likely prevent real cooperation. This is because without some guarantee that any loss incurred in the regional project will be covered (insured?) by the winners, each country is unwilling to commit its resources. Let us not forget that these countries are genuinely poor, and will therefore jealously guard their meager resources, certainly in preference to gambling on the good faith of neighbors. This is a sort of “free rider” problem (or perhaps a “stag hunt”).

So how has the ADB sought to resolve these two issues; coordination problems arising from negotiating with multiple actors at once, and the free rider/stag hunt problem implicit in the new RCI strategy? And how much success has the ADB had? The answers to these questions are to be found in Part II, due Monday.

The ASEAN regional forum is a dead-end, but so what?

I have recently been examining the reports and minutes from the ASEAN Regional Forum’s Inter-Sessional Group on Confidence Building and Preventative Diplomacy, the ISG-CBMs. This group is the litmus test of mutual trust in East Asia. More than that, it is window into the thinking of the members’ nations on the prospect of regional inter-state violence, up to and including, war.

While East Asia’s recent moves towards more and deeper regionalism, driven in part by uneasiness inspired by the Bush administration’s unilateralism and inattention to the region, would suggest a greater level of trust between the regional countries – the results of the ISG-CBMs are less than inspiring. Indeed, on reading what was being claimed as a CBM, I lost some confidence that Asia could learn from Europe and find its way to a true peace predicated on trust rather than a cold, or at least cool, peace based on the US hegemonic stabilizer and functional elite relations overlying popular fear and mistrust.

Indeed, the flurry of regionalism at the economic level is perhaps due in large part to the inability to achieve more difficult political cooperation. This should not be surprising. The rush towards Free Trade Agreements (FTAs) in East Asia is one such example. Greater political cooperation would envisage a single regional FTA, rather than the so-called “noodle bowl” (some say network, others hodge-podge) of bilateral trade agreements now crisscrossing the region. Likewise, I have already discussed trust in regional financial arrangements.

But returning to the ISG-CBMs, I will quote at length from the text of the 2009 report – at which the group discussed the future of the ARF.

“Thailand briefed the Meeting on the development of the draft ARF Vision Statement…Some delegations expressed their view that the Vision Statement should be a strong statement focusing on… concrete initiatives that ARF should undertake…[Other] members noted that the Vision Statement should [be]…a declaration of ARF principles and …not a plan of action.”

There was no agreement reached. Let me repeat, there was no agreement reached on the Vision Statement. That means, there is no shared Vision for the ARF. But with no shared vision there can be no future for the ARF, only an institutional dead-end. Indeed, the fact this is debate is still going on fifteen (15) years after the creation of the ARF, suggests that the ARF has been in arrested development for a while. But so what? Does it matter greatly the ARF has been unable to advance a vision, and in particular to advance its CBMs agenda?

Yes, it matters. The failure of the ARF (and specifically the ISG-CBMs) to progress military transparency in a manner similar to the Helsinki Accords of 1975 is arguably the most important factor driving the Japan into the arms of America, and in projecting itself into the regional by proposing and signing mini-lateral security agreements (such as with Australia and India). These closed shops will do nothing for the Chinese sense of national security; indeed, it is precisely this kind activity which feeds the regional security dilemma. Of course, Chinese resistance within the ARF was a factor no doubt in the inability of the ARF to engender habits of cooperation (ie diffuse reciprocity) and reach common political vision. But once another major regional player, such as Japan, defaults to closed-door, zero-sum type external balancing, then trust, and peace, become increasingly unlikely.

So yes, it matters.

Is the DPJ eating a crazy woman’s breakfast?

Oh dear. The DPJ are in a spot of entirely predictable policy trouble. We were all aware that if the DPJ got in then there would be a “period of adjustment”, in which the DPJ would go from proposing things which might win an election to things which might actually work.

These two things sometimes are at loggerheads. And just now the DPJ finds itself arguing for two contradictory policies; the policy aimed at reducing Greenhouse gas emissions by 30%, and the policy to reduce the toll on freeways to zero. I am not sure how many others have caught onto this one, but at a minimum this is (further) evidence that the DPJ does not yet have a unified vision for the country. Taxing petrol and discouraging private road use is a good way to drive down greenhouse gas emissions, and the link between these two policies is so obvious that one wonders why the DPJ did not detect it themselves.

One only hopes that Kan Naoto as the head so-called “national strategy” will be able to harmonize the DPJ’s disparate policies. If this kind of oversight does not occur then the DPJ will not be able to deliver a better Japan than LDP likely would have, something the voters will punish later on. Indeed, the honeymoon for Hatoyama and the DPJ is fast fading.

Currency Diplomacy, now and then.

Time is like a river, and history repeats. Japan’s ‘novel’ idea of a currency union for Asia, is modelled partly on the experience of the Euro. But in fact a closer match for Asia’s current political-economy might well be Europe of 19th Century, rather than the 20th. Even then, in 1865, the idea of common regional currency was being debated in Europe, and its outcome is instructive for today’s currency politics in Asia.

In mid-1800s, Napoleon III of France launched a project to tie other European currencies to the Franc in what was called the Latin Monetary Union (LMU). At this time, France fixed the Franc to contain a certain quantity of silver (4.5 grams) and proposed that other currencies adopt its standard. Doing so, the French argued, would facilitate international trade by removing risks and transaction costs associated with exchanging one currency for another, or indeed due to movements within the bimetallic exchange rate. Harmonising the currencies of Europe was rational, scientific (metric!) and civilised argued the French. Notwithstanding the limits of the eventual agreement, (private persons/ Banks were not obliged to accept foreign minted but LMU-consistent coinage), the LMU did gather significant support – indeed lasting until the 1920s.

The French were particularly keen for the British to sign onto the scheme. And indeed, although Britain was on the gold standard rather than bimetallism, a minimal adjustment of the quantity of gold within the pound and a (much needed) technical reform (decimalising the currency) and the British could have joined the LMU, if they had wanted to, relatively easily. But here politics got in the way of economics. Britain had little love or trust for the revolutionary French, whatever the potential benefits. In fact, the British believed the LMU was a rouse, a part of the French master strategy to secure its economic hegemony in Europe and to wrestle away from London its status as a financial centre. With Britain refusing to sign on, the LMU was confined to France’s poorer, southern neighbours for whom the marginal cost of aligning their currencies to the French mint’s standards was perceived worthwhile in order to “facilitate international trade, import a better internal currency, acquire monetary credibility and gain access to international [French] financial markets”, see Einaudi.

Now, from Napoleon III’s Paris, we leap forward in time and space, roughly 150 years and more precisely 9738km, to Tokyo in the present. Here we find that, over the years since the Asian Financial Crisis, some within Japan have argued for a regional exchange rate mechanism for Asia.

While not identical to the LMU, the diplomacy surrounding the Asian Monetary Union (AMU) as it might be called does share some similar features. In terms of style, Japan’s Ministry of Finance has argued that it is rational for the nations of Asia to adopt a common currency, and a veritable “.pdf” tidal wave of scientific/economic research has been presented to support this vision - much the same way France postured in the mid-1800s minus the modern software. In terms of membership, like the LMU, the most receptive audience is the smaller, poorer nations to the south – in this case ASEAN states rather than Belgium et al.[1] And like the LMU, at least one major regional power is opposed to the scheme. China.

China has little love or trust for the Japanese, regardless of the possible benefits of a common Asian coin. Indeed, China has dismissed some of the proposed weightings for a future Pan-Asian currency which have been raised in various East Asian multilateral fora. This is because, in the first instance, China believes that the whole scheme is a rouse designed to ensure Japan’s economic hegemony and project its position as a financial centre for Asia; and, in the second instance, that as a matter of national pride the Yuan ought to be the most important currency in any “designer” Asian money. Taking its cue from Japan, China has starting arguing that others, including the ASEAN states should place greater weight on the Chinese Renminbi (RMB). Indeed, already smaller states close to the border of China are using the RMB in settling their international (and indeed some internal) trade. Of course, these are the same target states for Japan’s ‘scientific’ common currency proposals.

Of course, Japan is not France, China is not the UK and the AMU proposal is not the LMU. But if a lesson can be drawn from history it is that without a level of trust and cooperation among the major powers of the region, currency coordination efforts are doomed to become a competitive and futile exercise. Much like France of the 19th Century, Japan has not presented a unified vision. Moreover, Japan has copied some of France’s mistakes, linking membership in the proposed AMU to the political alignment of prospective member countries.[2] It is no surprise then that the plan is viewed suspiciously by Beijing. As Balassa suggests, if Japan and China are not even able to conclude a FTA between themselves, then cooperation in the creation of a regional currency is beyond them.[3]


[1] Italy, Switzerland, Spain, Greece, Romania, Austria-Hungary, Bulgaria, Venezuela, Serbia, Montenegro, San Marino and later the Papal States, although the Papal States were later thrown out due to the practice of debasing their coins.
[2] Smaller German not yet part of Bismark’s second Reich looked to the LMU as a way of gaining French support for the independence. Taiwan and Hong Kong are playing similar games, as are countries such as Laos in the Mekong Delta.
[3] Bela Balassa, The Theory of Economic Integration (Homewood: Irwin, 1961).

Yes We Can't!

Today’s Asahi Shinbun carries the results of its spot opinion polling in the wake of Japan’s recent elections. This might be called the morning after poll. And true to form, some voters are looking across at their newly elected leader (and his party) and are wondering, did I do the right thing?

According to the poll, most voters believe they elected the DPJ in the passion of the historical moment, with 81% saying that the DPJ won because the voters wanted (emotionally) a change. Only 38% believe that the DPJ won because of their superior policy platform. In fact, 52% reported that did not believe that the policy platform came significantly into the voters’ decision one way or another.

Perhaps for the DPJ that is for best. Polling on support for big ticket items in the DPJ’s agenda reveals an underlying negativity. Nearly 49% of respondents were opposed to the Child Support policy (compared to 31% who agreed), presumably due to fears of greater suffering in the 40s and 50s demographic. And there was next to no support for the abolishment of tolls on high speed roadways, 65% against to 20% for. One can only assume that voters were even less taken by the LDP’s offering, the trust in that relationship having been broken by the LDP’s four years of instability and the changing face of the man on top of that political machine.

But despite such voter indifference, or even negativity, towards the DPJ’s actual policies, most (74%) of those responding said they hoped that DPJ would do something good for Japan. A vague hope paired with some doubts, as 46% of respondents believed that the DPJ will not be able to make any significant changes.

This contrasts with recent American and Australian experiences. After the upset elections in both the U.S. and Australia, the voters who had supported the winning party were happy for a week, and for some the joy lasted a month or more. In Japan, it seems, the afterglow does not last even one news cycle.

Should we be optimistic or pessimistic about the new DPJ government? Foreign Policy prognosis.

Last night Japan made history; throwing out the LDP and giving Hatoyama’s DPJ an overwhelming majority in the Diet and clear mandate to pursue his policies.

Before the election, while most observers (myself included) believed that the DPJ would be able make government without a coalition partner. But I was surprised that the DPJ took the 300-plus seats which had been projected by the opinion polls, a landslide.

Make no mistake about it; this is a great result for Japan as a whole. If the DPJ had unexpectedly failed to win government somehow, the subsequent administration would have faced a huge legitimacy deficit, big enough indeed to put Japan national debt in the shade. Or, if the DPJ had won government but needed to form a coalition to do so, it is unlikely that it could aggressively pursue its preferred policies. And that is surely the point; this outcome means that the DPJ has the ability aggressively pursue the kinds of policy shifts that Japan needs, for instance in foreign policy.

But this doesn’t mean the DPJ will. In fact, although the DPJ has displayed a preference to lean away from the US towards Asia, the specifics of such an important strategy move are still undecided, suggesting that little will in fact change. Thus, the DPJ is at risk of drifting with Japan’s foreign policy. This risk, when the rise of China, the re-ordering of the US’s Asian priorities and a financial crisis conspire to make decisiveness more than virtue, but a necessity, needs to be faced head on.

For instance, with regard to the DPJ’s potential drift away from the US; during the election the existence of a secret agreement which undercut Japan’s non-nuclear principles (hikaku gensoku) came to light. The DPJ has promised to investigate whether a secret agreement exists, but has not promised necessarily to report the outcome to the Japanese people. Likewise, although the DPJ had promised to reach a trade deal with the US, promises here have also been diluted. Both trade and security aspects of the US relationship might drift.

On the flip side, the DPJ has declared its interests in Asia. But what precisely they intend to do is still a vague and uncertain. The DPJ has indicated its interest in an FTA with South Korea, but at the same time there remain questions about whether the DPJ will have the spine to take on the domestic agricultural lobby. At the same time, Korea has its own concerns about an FTA with Japan, although agriculture is no longer one of them. Interestingly, the DPJ has proposed a new party level bureau to manage CCP-DPJ exchange, that is to say a direct exchange between the Chinese Communist Party and itself. Apart from the dubious utility of such an arrangement, it is uncertain if the Chinese side will accept such a proposal in any case. Indeed, the DPJ may learn that Asia is not willing to embrace Japan, and Japanese initiatives, quite as eagerly as the DPJ believes.

We will see the DPJ do will foreign policy soon enough, for an early indication of Japan’s orientation looking to FTAs seems a good bet as no doubt there will be a declaration about this soon enough.

Japanese university students and the election; some thoughts channeled.

Being in Japan during this election is an opportunity to write about more than just what is in the papers. Instead, I would like to write about what my Japanese university friends are thinking and feeling about this election. May it be of interest, if not use.

Upfront the results are, DPJ 7, LDP 3, Undecided 3. Survey results not to be extrapolated from as Meiji Uni is noted as left leaning, and disproportionate number surveyed are men (10) and non-scientific methods were used in collection of data (some subjects spoke in the proximity of alcohol). I will talk first about the post-grads, with whom I have more contact and more interesting observations.

Firstly, most post-grads are voting for the DPJ. But despite the fact that most are voting for the DPJ, as expected of young urbanites, none of them are really happy it. Their support for the DPJ is based more on a rejection of the ruling LDP rather than support for the DPJ itself.

This can be seen in how many of them project the outcome of the election. Although recent polling suggests that the DPJ might take as many as 300 of the 480 seats thereby establishing single party government, all post-grad students projected that the DPJ would have to form a coalition. Even those most emotionally interested in the DPJ winning an absolute majority said they could not believe that it would actually occur; this student projecting 220-230 seats for the DPJ. Those declaring an intention to vote for the LDP agreed, believing that the DPJ would win government but fall short of an absolute majority.

I asked what would happen if the DPJ failed to win single party government, one student responded ominously, “if the DPJ forms coalition with the Social Democrats they are finished. If the DPJ forms coalition with the Communists, they are finished. If the DPJ forms coalition with the Kokumin Shin Tou, they are finished. And if they are foolish enough to form coalition with either the LDP or Komeito, then they are finished for good.”

This unhappiness with either the LDP or DPJ is at least a little troubling. It suggests that this, the next generation of voters, have neither loyalty to the LDP or to any other party. I asked some of the post-grads if they are not loyal to party, what are they politically loyal to (ideas? money?) - and got mostly uncomfortable silence. One answered honestly that her vote depended mostly on her parents, and that their decision was in turn based mostly on which of the two parties would provide more for them financially (answer: LDP). Another LDP inclined voter, although extremely unhappy about it, noted that he thought that the DPJ would be even more disorderly that the LDP and in particular their ideas about national defense were idealistic (he means, dangerous). He said he valued stability. That seems to be word which came up often as well.

On the other hand, another of the post-grads told me that he will vote for the DPJ just s to see the mythic seiken kotai, he believed that otherwise the two parties were as bad as each other. Another declared DPJ voter was more firm about in his reasons, stating that while the DPJ is a little idealistic, idealism is what Japan needs now. Most others were vague in the reasons for their support of the DPJ, it is possible they may be being influenced by a zeitgeist of change coming from the US. Indeed, DPJ Hatoyama has deliberately used this English word in order I suspect foment such a mood. The point again to be underlined is that the support for the DPJ is fragile, even among this demographic which ought to be supporting them.

The undergraduates that I have talked were also undecided on the whole about which of the two parties to support (none of them mentioned any of the smaller parties). For these undergraduates, this was their first election and making a decision about which party to support was proving difficult. Although they read the newspaper and knew a few things about the parties, they were less informed (as expected) than the older (more mature?) post grad cohort. I asked why had not they decided, and the answer seems to be that they feel that they just do not “know” which is better. One of them reflected that his parents had not decided yet, so how could he. Most agreed that they would decide on the day.

Interestingly, levels of awareness of the two parties policy platforms (manifestos) is unbalanced. Most are aware (and not enthusiastic) about the DPJ’s policies, but they are not so aware of the LDP’s policy – strange given that the LDP ought be considered the default base from which one compares alternate policies. This probably can be chalked up to the media, which has focused on some of the less well thought out DPJ policies. In particular, problems over funding their child support and highway policies while not at the same time raising the consumption tax. This means that for some of the DPJ they are comparing the policies they know that DPJ is promoting with “nothing.” This stand in contrast with the post-grads who were comparing the two parties manifestoes.

In conclusion, talking to the university students has me a little concerned. A lot of newspapers are already calling the election for the DPJ. Some are suggesting a landslide victory the DPJ propelling them into single party government. But my friends and colleagues at university are less sure. This election holds the promise of change, no doubt, but it also holds the potential wreck Japanese self-confidence if the DPJ unable to do anything either due to its own failings or because they are forced into coalition.

The Ministry of Agriculture, Farming and Fishery; double game.

This is from today’s Sunday Project (Tsuiseki). It is an article of common knowledge that Japanese bureaucracies are able to control indirectly policy output in ways that other governments (such as Australia) simply would not allow. But the Sunday Project today opened my eyes to the extent that one Ministry, the Ministry of Agriculture, Farming and Fishery (MAFF), will go in order to control public discourse (and thus policy) on issues it considers important. Important, that is, to the farm lobby, as the MAFF reports on food self-sufficiency (Jikyuu-ritsu) can not be concerned by a fair and balanced contribution to the public debate.

Anyone who reads the Japanese newspapers regularly would know this term. And some might even remember the number that goes with it, 40%. Jikyuu-ritsu forty percent is almost a mantra for the MAFF, and via their reports it now featured widely in news, commentary and even children’s textbooks (complete with ‘40%, that is low (bad)’ implicit in the text. Indeed, there is a question about whether this figure is indeed low and whether that is ‘bad’, but first a note about the somewhat unusual manner of calculation.

Japan, like Korea (one assumes for similar reasons), uses the calorific method of calculation, rather than the near universal cost-base calculation. This method divides the number of calories an average Japanese consumes by the amount that Japan produces. The reason is simple enough, 40% is lower than 66%, the figure produced if the cost-base calculation were to be used instead. (Another way of saying this would be that the Japanese mostly buy Japanese produce but that the produce bought is mostly low-calorie yielding. Again this is due to the oddity of the calculation method, which factors out meat, milk and eggs that is produced using imported feed.)

But the MAFF has deliberately chosen the calorific method anyhow. Perhaps this is because 66% simply is not sufficiently panic causing. Especially since the MAFF has repeatedly stated that Japan’s self-sufficiently rate is the lowest in the world (they mean lowest in the OECD, but it quickly becomes confused in the media, thanks Chris). This claim would not be true if one were to use the cost method, with the UK scoring much lower in this case. Even the minister in charge, Ishiba noted on the Sunday Project program, that this method of calculation was somehow odd or confusing.

It is clear then that the MAFF is trying to steer Japanese policy toward building up (subsidizing) domestically produced farm produces. While this kind of protectionism might go well over with the agricultural lobby, it is costing Japan – agriculture is after all just 1% of Japan’s GDP (see, Mulgan at the EAF.) Worse still the argument for a high Self-Sufficiency score is itself pretty poor. If one thinks about it, a country only needs high scores on self-sufficiently during a major war. Such a war is not likely any time soon, so Japan should be putting its economic priorities first. Moreover, there is a good argument for liberalizing Japanese agricultural markets for strategic reasons. Signing an FTA with the US, or Australia for that matter, which covered farm products would not just give an Japan’s economy a boost, but would also help to lock-in American (or other 3rd countries) security interests in Japan. While it is true that Chinese farm exports to Japan are growing steeply, if Japan is really worried about this issue as one of national security then supporting domestic farmers is not the answer. Japan is going to have to dependent to some extent on someone for its food security, it will have to make a choice.