Tokyo has sought to take a leadership position in regional initiatives, including ones
that exclude its security patron, the United States. On the other hand, the
rise of China has not only made that country an indispensable economic
partner but at the same time has also made it a more formidable competitor
in political and military terms. In response, Japan has worked to strengthen
the U.S.-Japan alliance. Meanwhile, North Korea’s apparent determination
to develop nuclear weapons
The global financial crisis exacerbates the major challenges facing
Japan. The crisis erupted when Japan was in the midst of a long but tepid
recovery from an even longer period of domestic economic stagnation.
Given that the weakness of the U.S. economy has significantly reduced
external demand for Japanese manufactured goods, the crisis has wiped
out many of those meager gains. China, alone among the major economies,
is growing fairly steadily, accelerating the closure of the relative power gap
with Japan. The crisis has moreover demonstrated the limits not only of
the global financial architecture but also of the regional architecture Japan
had been trying to establish.
This chapter will examine the effects of the global financial crisis on the
strategic challenges that Japan faces now and in the medium-term future.
The first section details the general state of the Japanese economy—including
the principles behind Tokyo’s foreign economic policies—on the eve of the
recent global economic crisis. The second section examines both the impact
of the global financial crisis on the Japanese economy and the policies, at
the domestic and international levels, that Japan has pursued in order to
contain the crisis. The third section explains how the pressures created
by the economic crisis are interacting with the other medium- and longterm
challenges facing Japan, including the rise of China, the problematic
behavior of North Korea, domestic political shifts, and Japan’s capacity to
provide regional and global public goods. The final section considers the
impact of those factors on Japan’s leadership capacity and U.S. interests, and
offers recommendations for policymakers.