Japan-India and Japan-China: Evidence of competition positive but mixed

It is often suggested that Japan's growing relations with India are due in part to a desire to balance China's influence. Specifically, that during the Koizumi administration, failure to secure top level meetings with China's leaders (due to Koizumi's Yasukuni Shrine visits), drove Japan to build up its relationship with India (and Australia).

A close look at high level meetings reveals that this explanation is flawed.

Source: MOFA Homepage, India and China Basic Information (Japanese).



In particular, the years 2005, 2006 and 2007 saw less visits to China than would be expected. These years too also saw Japan and India sign onto a strategic framework with the US and Australia which clearly is driven by concerns at some level about growing Chinese power. To an extent we could characterize these years as the "balancing" years.

But it is also clear that this pattern is a aberration, the correlation between high level visits to China and India is high. And with the exemption of the years cited above, Japan-India and Japan-China high level visits move in virtual lock-step. Indeed, 2008-09 saw both sets of meeting fall back to the pre-Koizumi levels and balance.

This suggests that continual, long term interests, both strategic and economic, is what motivates Japanese top level diplomacy, and that striking a balance between China and India is one of those interests. While the short term of Koizumi is noticable, acting overly interested in one or either party is just not good diplomacy in the long term.

Another transition: China overtakes Japan as ‘more trustworthy’ financially. Another hit for Japanese identity.

According to the Weekly Economist (Japanese publication, not the UK one), Japan’s sovereign risk is now estimated to be higher than that of China. In other words, the financial world trusts China more than Japan. That has to hurt.

The insurance premium on Japanese Government bonds rose to .71% in the CDS market as opposed to China’s (.64%) in Jaruary, reflecting the perceived rise in Japan’s sovereign risk. At the same time, major credit rating agency Standard and Poor’s has reappraised Japan’s long-term government bonds down from stable to negative.

This is yet another blow to Japan’s national identity as economic leader of Asia.

The Japanese, and the rest of the world, are waiting for when, not if, China finally overtakes Japan, (as nearly happened last year). Indeed, as Shirashi Takeshi eloquently points out in January’s Chuo Koron, Japan’s politicians are less and less couching Japan’s role in the world as that of an economic leader.

With the partial exception of Koizumi’s general policy speech (Shoshin Hyomei Ensetsu – a set piece annual speech), the most recent Prime Minister’s of Japan have progressively moved from an economic identity for their nation (Keizai Taikoku). In his general policy speech, Abe studiously avoided the economy, talking about an idealized ‘beautiful’ Japan. This shift is also true of Fukuda and Aso. Hatoyama’s policy speech last year also holds to this trend, starting off by stating that Japan can contribute in more areas than the just the economy – and talking even about how Japan needs Asia (not the other way around). His speech was even titled “Japan as a bridge”, i.e. an (in-itself useless) road connecting two places which are (in themselves) important.

It is clear that the transition with China is impacting on Japan’s identity – make a good thesis topic. Eh, Kai?

Yuan as leader, but a race to the bottom?

If M. Ariff is correct, and Malaysia and Thailand find that they have no choice but to peg their currencies to the RMB in order not to be disadvantaged as the USD falls, then the race to the bottom is on in East Asia. I doubt it comes to that, but in the event that it does, it will be the end of East Asia's chances of financial regionalism. A switch to RMD would be the biggest story in international political economy since the USD took over from the pound Stirling as the world reserve currency.


Pegging to the dollar is simply a "begger-thy-neighbour" policy. It is important to note that these distortions will not just damage the US, but also each countries' regional neighbours. Thus, the pain will be felt door in Indonesia if Malaysia pegs to the RMB, in the form of lost export market share and therefore higher unemployment. If Malaysia or Thailand were to peg to the RMB, it could potentially trigger others to do likewise in order to avoid the pain.


Pegging to the USD is simply opting out of the region, and pegging to the RMB would have similar effect. If more economies start to proxy dollarize via a peg to the RMB, exchange risks would come down and exports would go up. East Asian central banks would lose control of the interest rate lever and the US would start piling on more debt.

Due to this, gone would be the incentive to see financial risks and burdens be distributed throughout the region on market basis, as each country sets about politically manipulating its exposure. Gone too then would be the precious trust which underlies the international economy.

China peg's is simply no longer a domestic concern - as if it ever were. The solution is not for others to peg to China but for China to either move to a basket of currencies that actually includes more than the USD (it current "basket" adopted in 2005 is really all USD) such as the Yen, Euro and etc or to go with a pure float.

To realise the insanity of the situation imagine what would happen if the US started to peg to the RMB as its sovereign right?

Japan’s China policy: No re-adjustment towards Beijing.

Much has been made of late about the possibility of Japan drawing closer to China. I suggest that on the major issues, Japan’s China policy is unchanged under the DPJ, and unlikely to change.

Firstly, on the question of history, Hatoyama is unlikely to make major changes here. According to the Japanese Ministry of Foreign Affairs, Hatoyama has no plans to visit Nanjing this year, and as far as MOFA is aware there is no plan for an apology of any form. Indeed, after rumors broke that there might be a “Hatayama to Nanjing, Hu to Hiroshima” swap this year, the only country not to check-in with the MOFA’s China desk about whether or not it were true was China itself, being aware that this was a dreamt up story by the French but accepted even in Japan. Yet as the recent conclusion of joint historical research by China and Japan reveals, major differences still remain in official interpretation of events. It seems unlikely that Hatoyama would visit Nanjing when the basic question of how many were killed still remains unsettled.

Secondly, on the issue of trade, Hatoyama is little different to the LDP. Hatoyama has proposed further research to be conducted into a Japan, China, Korea trilateral free trade agreement. And while this time it is official government-level research, there are no promises on the Japanese side and not much enthusiasm. No doubt a part of the reason for the elevation to official level is that the academics whom had conducted the informal research since 2001 had simply run out of areas to research.

No surprise that even now Hatoyama appears to looking for wiggle room by suggesting an investment treaty, (although a quick look at the way in which Hatayma handling Futenma suggests that wiggle is Hatoyama’s natural state). Indeed, post-LDP Japan’s real interest remains such an investment protection pact be signed either in addition, or even instead, of an FTA with China.

Of course, in any discussion of Japan’s FTA’s the agricultural issue is important – and the Ministry of Agriculture, Farming and Fishery has hardly changed its position. The MAFF is continuing to oppose any deal with China which includes agriculture (with China being Japan’s second largest supplier of food import, this rather nixes a deal unless the PM comes out clearly in favor). Of course, the establishment within the MOFA of a new FTA promotion facility is viewed generally an attack on the influence of the MAFF in FTA policy making (with the MAFF already on the backfoot) – but the target is more likely to be Australia than China at least for the time being. Indeed, Hatoyama’s administration remains positively appraised of Australia and might well be looking for new ways to further institutionalize the relationship.

Thirdly, in the field of security, Hatoyama has made no major changes. The issue of natural resource exploration by China in the East China Sea remains problematic. Foreign Minister Okada has raised Japan’s concerns with his opposite Yang Jiechi twice already, most recently on January 17th at which time Okada stated that “he would like to enter into negotiations to conclude international agreements promptly, and expressed desire for Minister Yang's cooperation and for him [Jiechi] to issue instructions to enable substantive progress to be made going forward, in contrast with the lack of progress so far.”

From the perspective of the Japanese Ministry of Foreign Affairs, this reflects a continuation of the China policy set out by the LDP in 2008 under “the Mutually Beneficial Relationship Based on Common Strategic Interests" Joint Statement. Under this Joint Statement, a commitment was made to resolve or at least ameliorate the political problems caused by Chinese exploration in East China Sea. Of course, the DPJ is still keen for military exchanges and the like to continue, but Japan’s posture on these core national interests has hardly softened.

Taken together, the Hatoyama administration has thus far changed little in Japan’s policy towards China.

Taiwan: Think further

America's sale of PAC3 Patriot Missiles to Taiwan is stirring up trouble. Excellent article by Leigh Moses here. Highly, highly recommended.

In my mind, I see the decision to go ahead with this sale as a least in part motivated by US concerns about Chinese power. Obama I think has lost patience with the Chinese already, being a liberal (and a socially-conscious lawyer) he seems more concerned about justice than order. The negative position of the Chinese at the COP15 Summit also probably a factor in turning Obama into a China skeptic.

But Obama concerns with justice over order might cause greater injustice still if Moses is correct and the sale of arms to Taiwan tips the domestic balance power away from the CCP towards the PLA in China.

BRICs or briCs: perspective

One of these things is not like others.




China is larger than the other three "BRICs" countries put together.

Can we please just put China in a catagory of its own. It is just not like anything else.