EAS321 Unit 8 lecture slides
- 1. Last Unit: Japan-East Asia Political Relations • Structure: The bipolar structure of the Cold War defined Japan’s pre-1990 relations. The US-Japan Security Alliance continues to act as an impediment to deepened relations with China, Korea and the ASEAN states; • Agency: Efforts by pro-China faction within the LDP and the Socialists at establishing relations with China; Post- Cold War: DPJ under Hatoyama attempts recalibration of foreign policy. Unsuccessful. LDP’s Abe reasserts strong stance on territorial issues and close US ties; • Norms: Asianist and Developmental norms have been at the heart of Japan’s post-war attempts to re-connect with East Asia, but are consistently trumped by bilateralism with the United States.
- 2. Unit 8 Japan’s Economic Relations with East Asia Prof. Glenn Hook
- 3. Aim To apply the concepts and theoretical approach introduced to Japan’s economic relations with East Asia.
- 4. Objectives 1) To identify the importance of structure, agency and norms in explaining the bilateral economic relationship with East Asia in the postwar and post-Cold War eras; 2) To demonstrate how structure, agency and norms can be used to explain specific aspects of Japan’s economic relationship with East Asia, focusing on the development of the regional economy in the Cold War and Post-Cold War periods; 3) To illustrate how structure, agency and norms can be used to explain Japan’s role in the East Asian financial and economic crises of 1997 and its subsequent post-crisis strategy
- 5. Introduction • Japan’s economic policy: separating politics from economics and the promotion of the norm of developmentalism; • The economic relationship has become the most developed of the political, economic and security dimensions of Japan’s regional relations. • Three key sites of Japan’s activities and links: (1) Newly Industrialized Economies (2) the ASEAN-4 (3) China
- 6. S.A.N. in Japan’s Economic Relations with East Asia • Structure: 1. Cold War period: • Structural forces: bipolarity; • Important events: Nixon’s visit to China; collapse of the Bretton Woods system; the 1985 Plaza Accord; the inflation of the yen. 2. Post Cold War period: • Structural force: multipolarity; • Important events: flourishing of multilateral institutions in East Asia, rise of China; East Asian Financial Crisis; Japan’s main economic relations remain the NIES, ASEAN 4 and China.
- 7. Structure: Finance Minsters who agreed the 1985 Plaza Accord From left: Gerhard Stoltenberg , West Germany; Pierre Bérégovoy, France; James A. Baker III, United States; Nigel Lawson, Britain; Noboru Takeshita, Japan.
- 8. S.A.N. in Japan’s Economic Relations with East Asia • Agency: (1) Japanese government in building up the economic infrastructure in East Asia through ODA; (2) Japanese corporations/businesses and business associations investments and transfer of production facilities; (3) Japanese prime ministers and politicians from the LDP economic expansion of Japan into East Asia.
- 9. Agency Corporations, PMs and bureaucrats have been key actors in driving Japan’s postwar economic relations with East Asia Fukuda Takeo Hatoyama Yukio
- 10. S.A.N. in Japan’s Economic Relations with East Asia • Norms: Developmentalism, Asianism, Anti-militarism Economism
- 11. Norms Country China Japan Time Change in industry Change in production base Primary Secondary Tertiary High-tech Asianism Antimilitarism Economism Developmentalism
- 12. Japan’s Economic Re-Entry into East Asia • Official Development Assistance (ODA): Increased throughout 1970s, 1980s and 1990s. Helped integrate region economically and politically; ‘tied’ ODA controversial • Foreign Direct Investment (FDI): As with ODA, rebuilt links with East Asian economies. 1950s-60s: Resource Extraction, 1970-80s: Production moving abroad • Trade with East Asian states increased progressively from 1970s on, and continued to increase in post-Cold War period. Apart from China, East Asian states maintain trade deficit with Japan due to exports of manufactured goods and technology.
- 13. Moving Production Abroad: Toyota factories around the world
- 14. FDI Japan’s TNCs have been accused of utilizing FDI as a means to exploit cheap labour in East Asia the so-called ‘race to the bottom’
- 15. Despite recent declines Japan maintains high-levels of FDI to East Asian economies
- 16. ODA Japan’s ODA loans to China halted with the symbolic event of the Beijing Olympics in 2008 – representing China’s full economic development. Grants and technical assistance are under review, as China has now overtaken Japan as the region’s largest economy. Official Development Assistance as a percentage of GNI (2011) UN Goal Per cent Japan
- 17. Japan’s gradual regional economic decline -50 0 50 100 150 200 250 1980 1990 1995 2000 2005 2008 2009 2010 2011 2012 BillionUS$ Year Japan, China, ASEAN balance of trade Japan (export) Japan (import) Japan (balance) China (export) China (import) China (balance) ASEAN (export) ASEAN (import) ASEAN (balance)
- 18. Japan and the economic development of the East Asia region • Developmental Models taken up by East Asia, based on Japanese model: Export-led, close co-op between state and private industry, links between manufacturers, subsidiaries, and subcontractors. – ‘Flying Geese’ model – Japan the ‘lead goose’ • Propagation of Developmental Norms: METI has pushed export-led growth, and state/private sector cooperation, as well as Japan as top of Asian division of labour (against US/World bank orthodoxy) • Criticisms of the Developmental State Model is based on the model of ‘complex production links’. High cost of start-ups and new techonology, leave other East Asian states dependent upon Japan as tech exporter and US as market
- 19. Japan’s Role in the East Asian Financial and Economic Crises of 1997 • Cause: flaws in Japan’s ‘flying geese’ model, and Japan’s actions in undermining regional economies • The Japanese-led model had three weaknesses: – too dependent on the export-led model; post-crash bubble Japan devalues currency, reduction in export markets for Asian economies – too heavily reliant on foreign capital/investment; – over-protection of inefficient and moribund industries based on crony capitalism. • Immediate trigger: flight of capital from Thailand due to failing investor confidence, contagious, spreads to regional economies
- 20. Japan’s Role in the East Asian Financial and Economic Crises of 1997 Map showing the countries which were most affected by the economic crisis
- 21. Japan’s Role in the East Asian Financial and Economic Crises of 1997 Japan’s Response: • Japan supported the IMF rescue package, was largest donor; • A proposal to set up a so-called Asian Monetary Fund (AMF) further relying on the developmental model and stressing the Asianist and internationalist norms – faced down by US and IMF; • Other initiatives: the domestic stimulus plan of Prime Minister Obuchi; export credits; transfer of technology; assistance for small businesses.
- 22. Japan’s Role in the East Asian Financial and Economic Crises of 1997 • Failure: Yen continues to fall (increasing Japan’s competitiveness against regional states), and its failure to establish AMF Malaysian PM Mahathir: Japan no longer the ‘lead goose’; • New Miyazawa Initiative: To reassert leadership. US$30 billion to guarantee sovereign bonds in East Asian states. Not restructuring, but support in a crisis. Basis for currency swaps. • Chiang Mai: May 2000. Based on Miyazawa initiative, pushes swap agreements. Developed into Chiang Mai initiative in 2010, ASEAN plus 3 currency swap, reserves of US$120 billion (some regional leadership competition between Japan and China – both sides try to offer more to the fund, in the end, exact same amount).
- 23. Japan’s regional economic strategy post-Financial Crisis Challenges to Japan’s leadership • Globalization puts pressure on developmental model; • ASEAN seeks access to Japan’s domestic market; • ODA decline: 1980: 71% went to East Asia. 2009: 42%; • China: leading economically, opening parts of its market, driving regional growth (even in Japan, e.g. 2002-3 recovery due to China’s growth); • Attachment to the US – conflict of Asian and US interests; • Damage limitation vis-à-vis nationalist Chinese reaction to Japanese run businesses during Senkaku/Diaoyu dispute.
- 24. Japan’s current regional strategy Response to Challenges • Expansion of FTAs: China takes the advantage in 2000, announcing plans to sign FTA with ASEAN as a group. Japan responds with ‘Koizumi Initiative’, first FTA, 2002 with Singapore. Followed by FTAs with other ASEAN states; • APEC and Trans-Pacific Partnership (TPP): TPP a US initiative, PM Noda has pledged to take Japan in; • East Asia Free Trade Area (EAFTA): Japan favours including the East Asian Summit (EAS) countries (including US, Australia), while China focuses on ASEAN plus 3, smaller group, more influence. China not party to TPP.
- 25. Japan’s regional economic strategy (results) Results • Bilateral FTAs: Enable Japan to control liberalization of its own economy (especially in sensitive areas) – Also builds up links with ASEAN, e.g. through Comprehensive Economic Partnership (CEP), increases opportunities for off-shore production in SEA • Response to China: FTAs, EAS, TPP, contribute to counteracting rise of China as regional competitor. • Chiang Mai Initiative: Helped restore Japan’s standing post- economic crisis.
- 26. Former PM Kan at the TPP Summit in 2010 – PM Abe is stepping up negotiations to join
- 27. Conclusion • East Asian Economic Crisis damaged Japan’s reputation; • China represents challenge to regional economic leadership; • Difficulty in balancing between Asianism, Economism, and Developmentalism on the one hand, and the bilateral relationship with the US on the other; • But . . . The post-crisis strategy has worked to restore Japan’s position to a large extent; • Pressure from China has given Japan impetus to further integrate with East Asian economies, especially ASEAN.