Over the last decade, Japan’s position in Asia and the world has shifted
considerably. On the one hand, the Japanese economy has increasingly
become oriented toward East Asia, with much of the country’s manufacturing
tied up in regional production networks. 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 and longer-range missiles has complicated some
of the basic assumptions of the alliance.
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.
Over the last decade, Japan’s position in Asia and the world has shiftedconsiderably. On the one hand, the Japanese economy has increasinglybecome oriented toward East Asia, with much of the country’s manufacturingtied up in regional production networks. Tokyo hassought to take a leadership position in regional initiatives, including onesthat exclude its security patron, the United States. On the other hand, therise of China has not only made that country an indispensable economicpartner but at the same time has also made it a more formidable competitorin political and military terms. In response, Japan has worked to strengthenthe U.S.-Japan alliance. Meanwhile, North Korea’s apparent determinationto develop nuclear weapons and longer-range missiles has complicated someof the basic assumptions of the alliance.The global financial crisis exacerbates the major challenges facingJapan. The crisis erupted when Japan was in the midst of a long but tepidrecovery from an even longer period of domestic economic stagnation.Given that the weakness of the U.S. economy has significantly reducedexternal demand for Japanese manufactured goods, the crisis has wipedout many of those meager gains. China, alone among the major economies,is growing fairly steadily, accelerating the closure of the relative power gapwith Japan. The crisis has moreover demonstrated the limits not only ofthe global financial architecture but also of the regional architecture Japanhad been trying to establish.This chapter will examine the effects of the global financial crisis on thestrategic challenges that Japan faces now and in the medium-term future.The first section details the general state of the Japanese economy—includingthe principles behind Tokyo’s foreign economic policies—on the eve of therecent global economic crisis. The second section examines both the impactof the global financial crisis on the Japanese economy and the policies, atthe domestic and international levels, that Japan has pursued in order tocontain the crisis. The third section explains how the pressures createdby the economic crisis are interacting with the other medium- and longtermchallenges facing Japan, including the rise of China, the problematicbehavior of North Korea, domestic political shifts, and Japan’s capacity toprovide regional and global public goods. The final section considers theimpact of those factors on Japan’s leadership capacity and U.S. interests, andoffers recommendations for policymakers.
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