Other Asia-Pacific Countries

Japan Table of Contents

Japan's rapid rise as the dominant economic power in Asia in the 1980s helped to define Japanese policy toward this diverse region, stretching from South Asia to the islands in the South Pacific Ocean. The decline in East-West and Sino-Soviet tensions during the 1980s suggested that economic rather than military power would determine regional leadership. During the decade, Japan displaced the United States as the largest provider of new business investment and economic aid in the region, although the United States market remained a major source of Asia-Pacific dynamism. Especially following the rise in value of the yen relative to the dollar in the late-1980s, Japan's role as a capital and technology exporter and as an increasingly significant importer of Asian manufactured goods made it the core economy of the Asia-Pacific region.

From the mid-1950s to the late 1960s, Japan's relations with the rest of Asia were concerned mainly with promoting its far-flung, multiplying economic interests in the region through trade, technical assistance, and aid. Its main problems were the economic weakness and political instability of its trading partners and the growing apprehension of Asian leaders over Japan's "overpresence" in their region.

Japan began to normalize relations with its neighbors during the 1950s after a series of intermittent negotiations, which led to the payment of war reparations to Burma, Indonesia, the Philippines, and the Republic of Vietnam (South Vietnam). Thailand's reparations claims were not settled until 1963. Japan's reintegration into the Asian scene was also facilitated by its having joined the Colombo Plan for Cooperative Economic and Social Development in Asia and the Pacific in December 1954 and by its attendance at the April 1955 Afro-Asian Conference in Bandung, Indonesia. In the late 1950s, Japan made a limited beginning in its aid program. In 1958 it extended the equivalent of US$50 million in credits to India, the first Japanese loan of its kind in post-World War II years. As in subsequent cases involving India, as well as Sri Lanka, Malaysia, Taiwan, Pakistan, and South Korea, these credits were rigidly bound to projects that promoted plant and equipment purchases from Japan. In 1960 Japan officially established the Institute of Asian Economic Affairs (renamed the Institute of Developing Economies in 1969) as the principal training center for its specialists in economic diplomacy.

In the early 1960s, the government adopted a more forward posture in seeking to establish contacts in Asia. In 1960 the Institute of Asian Economic Affairs was placed under the jurisdiction of the Ministry of International Trade and Industry (MITI). In 1961 the government established the Overseas Economic Cooperation Fund as a new lending agency. The following year the Overseas Technical Cooperation Agency made its debut.

By the mid-1960s, Japan's role had become highly visible in Asia as well as elsewhere in the world. In 1966 Japan became a full member of the Organisation for Economic Co-operation and Development (OECD). As economic and trade expansion burgeoned, leaders began to question the propriety and wisdom of what they variously described as "mere economism," an "export-first policy," and the "commercial motives of aid." They wanted to contribute more to the solution of the North-South problem, as they dubbed the issue--the tenuous relationship between the developed countries and the developing countries.

Efforts since the beginning of the 1970s to assume a leading role in promoting peace and stability in Asia, especially Southeast Asia, by providing economic aid and by offering to serve as a mediator in disputes, faced two constraints. Externally, there was fear in parts of Asia that Japan's systematic economic penetration into the region would eventually lead to something akin to its pre-World War II scheme to exploit Asian markets and materials. Internally, foreign policymakers were apprehensive that Japan's political involvement in the area in whatever capacity would almost certainly precipitate an anti-Japanese backlash and adversely affect its economic position.

After a reassessment of policy, the Japanese leadership appeared to have decided that more emphasis ought to be given to helping the developing countries of the region modernize their industrial bases to increase their self-reliance and economic resilience. In the late 1970s, Japan seemed to have decided that bilateral aid in the form of yen credits, tariff reductions, larger quota incentives for manufactured exports, and investments in processing industries, energy, agriculture, and education would be the focus of its aid programs in Asia.

By 1990 Japan's interaction with the vast majority of AsiaPacific countries, especially its burgeoning economic exchanges, was multifaceted and increasingly important to the recipient countries. The developing countries of ASEAN (Brunei, Indonesia, Malaysia, the Philippines, and Thailand; Singapore was treated as a newly industrialized economy, or NIE) regarded Japan as critical to their development. Japan's aid to the ASEAN countries totaled US$1.9 billion in Japanese fiscal year (FY) 1988 versus about US$333 million for the United States during United States FY 1988. Japan was the number one foreign investor in the ASEAN countries, with cumulative investment as of March 1989 of about US$14.5 billion, more than twice that of the United States. Japan's share of total foreign investment in ASEAN countries in the same period ranged from 70 to 80 percent in Thailand to 20 percent in Indonesia.

In the early 1990s, the Japanese government was making a concerted effort to enhance its diplomatic stature, especially in Asia. Kaifu's much publicized spring 1991 tour of five Southeast Asian nations--Malaysia, Brunei, Thailand, Singapore, and the Philippines--culminated in a May 3 major foreign policy address in Singapore, in which he called for a new partnership with the Association of Southeast Asian Nations (ASEAN) and pledged that Japan would go beyond the purely economic sphere to seek an "appropriate role in the political sphere as a nation of peace." As evidence of this new role, Japan took an active part in promoting negotiations to resolve the Cambodian conflict.

South Asia

In South Asia, Japan's role is mainly that of an aid donor. Japan's aid to seven South Asian countries totaled US$1.1 billion in 1988 and 1989, dropping to just under US$900 million in 1990. Except for Pakistan, which received heavy inputs of aid from the United States, all other South Asian countries receive most of their aid from Japan. Four South Asian nations--India, Pakistan, Bangladesh, and Sri Lanka--are in the top ten list of Tokyo's aid recipients worldwide.

Prime Minister Kaifu signaled a broadening of Japan's interest in South Asia with his swing through the region in April 1990. In an address to the Indian parliament, Kaifu stressed the role of free markets and democracy in bringing about "a new international order," and he emphasized the need for a settlement of the Kashmir territorial dispute between India and Pakistan and for economic liberalization to attract foreign investment and promote dynamic growth. To India, which was very short of hard currency, Kaifu pledged a new concessional loan of 100 billion (about US$650 million) for the coming year.

Newly Industrialized Economies

Japan's relationships with the newly industrialized economies (NIEs) of South Korea, Taiwan, Hong Kong, and Singapore, together often called the Four Tigers, were marked by both cooperation and competition. After the early 1980s, when Tokyo extended a large financial credit to South Korea for essentially political reasons, Japan avoided significant aid relationships with the NIEs. Relations instead involved capital investment, technology transfer, and trade. Increasingly, the NIEs came to be viewed as Japan's rivals in the competition for export markets for manufactured goods, especially the vast United States market.

Australia, New Zealand, and the Pacific Islands

Japan's economic involvement in Australia is heavily tilted toward extraction of natural resources and in-country manufacturing for the Australian domestic market. Japanese investment by 1988 made Australia the single largest source of Japanese regional imports. Japan's trade with New Zealand is a small fraction of its trade with Australia.

Politically, Japan's relations with Australia and New Zealand have elements of tension as well as acknowledged mutuality of interest. Memories of World War II linger among the public, as do a contemporary fear of Japanese economic domination. At the same time, government and business leaders see Japan as a vital export market and an essential element in Australia's and New Zealand's future growth and prosperity.

By 1990 commercial and strategic interests prompted a strong surge in Japanese involvement in the newly independent island nations of the Pacific. Japan's rapidly growing aid to the South Pacific was seen by many as a response to United States calls for greater burden-sharing and to the adoption of the 1982 Convention on the Law of the Sea, which gave states legal control over fishery resources within their 200-nautical-mile exclusive economic zones. The US$98.3 million that Japan provided in aid to the region in 1989 was fourth behind France, Australia and the United States but was significantly more than was provided by New Zealand and Britain. Japanese companies also invested heavily in the tourism industry in the island nations.

The Koreas

Japan's policies toward the two Koreas reflects the importance this area had for Asian stability, which is seen as essential to Japanese peace and prosperity. Japan is one of four major powers (along with the United States, Russia, and China) that have important security interests on the Korean Peninsula. However, Japan's involvement in political and security issues on the Korean Peninsula is more limited than that of the other three powers. Japan's relations with North Korea and South Korea has a legacy of bitterness stemming from harsh Japanese colonial rule over Korea from 1910 to 1945. Polls during the postwar period in Japan and South Korea showed that the people of each nation had a profound dislike of the other country and people.

Article 9 of Japan's constitution is interpreted to bar Japan from entering into security relations with countries other than the United States. Consequently, Japan had no substantive defense relationship with South Korea, and military contacts were infrequent. The Japanese government supported noncommunist South Korea in other ways. It backed United States contingency plans to dispatch United States armed forces in Japan to South Korea in case of a North Korean attack on South Korea. It also acted as an intermediary between South Korea and China. It pressed the Chinese government to open and expand relations with South Korea in the 1980s.

Japan's trade with South Korea was US$29.1 billion in 1991, with a surplus of nearly US$5.8 billion on the Japanese side. Japanese direct private investment in South Korea totaled US$4.4 billion in 1990. Japanese and South Korean firms often had interdependent relations, which gave Japan advantages in South Korea's growing market. Many South Korean products were based on Japanese design and technology. A surge in imports of South Korean products into Japan in 1990 was partly the result of production by Japanese investors in South Korea.

Japan-North Korea relations remained antagonistic in the late 1980s. The two governments did not maintain diplomatic relations and had no substantive contacts. The opposition Japan Socialist Party, however, had cordial relations with the North Korean regime.

Issues in Japan-North Korea relations that produced tensions included North Korean media attacks on Japan, Japan's imposition of economic sanctions on North Korea for terrorist acts against South Korea in the 1980s, and unpaid North Korean debts to Japanese enterprises of about US$50 million. Japan allowed trade with North Korea through unofficial channels. This unofficial trade reportedly came to more than US$200 million annually in the 1980s.

In the early 1990s, Japan continued to conduct lengthy negotiations with North Korea aimed at establishing diplomatic relations with P'yongyang while maintaining its relations with Seoul. In January 1991, Japan began normalization talks with P'yongyang with a formal apology for its 1910-45 colonial rule of the Korean Peninsula. The negotiations were aided by Tokyo's support of a proposal for simultaneous entry to the UN by North Korea and the Republic of Korea (South Korea); the issues of international inspection of North Korean nuclear facilities and the nature and amount of Japanese economic assistance, however, proved more difficult to negotiate.

Vietnam and Cambodia

Stability in Indochina also is very important to Japanese interests. During the Indochina War of the 1960s and 1970s, Japan had consistently encouraged a negotiated settlement at the earliest possible date. Even before the hostilities ended, it had made contact with the Democratic Republic of Vietnam (North Vietnam) government and had reached an agreement to establish diplomatic relations in September 1973. Implementation, however, was delayed by North Vietnamese demands that Japan pay the equivalent of US$45 million in World War II reparations in two yearly installments, in the form of "economic cooperation" grants. Giving in to the Vietnamese demands, Japan paid the money and opened an embassy in Hanoi in October 1975 following the unification of North Vietnam and South Vietnam into the Socialist Republic of Vietnam. Recognition of the communist Khmer Rouge regime in Cambodia came in 1975, and diplomatic relations with that country were established in August 1976.

This Indochina policy was justified at home and to the member countries of ASEAN--some of which were hostile to and suspicious of Vietnam--on the grounds that official contacts and eventually aid to Vietnam would promote the peace and stability of Southeast Asia as a whole. In December 1978, after a visit to Tokyo by Vietnam's minister of foreign affairs, Nguyen Duy Trinh, Japan agreed to give Vietnam US$195 million in grant aid, as well as commodity loans and food shipments. When Vietnam launched its invasion of Cambodia later that same month, Japan was embarrassed and irritated. It joined ASEAN in condemning the invasion, supported the UN resolution calling for immediate withdrawal of Vietnamese forces, and suspended the aid commitments it had made with Hanoi.

Japan and the United States shared common ground in opposing the Soviet-backed Vietnamese invasion of Cambodia in December 1978. Japan's policy of restricting aid and other economic cooperation with Vietnam reinforced international pressures on Hanoi to pull back its forces and seek a comprehensive Cambodian settlement. Faced with international isolation, waning Soviet bloc support, continued armed resistance in Cambodia, and large-scale economic problems at home, Hanoi withdrew most if not all of its combat troops from Cambodia in 1989. It appealed to developed countries to open channels of economic cooperation, trade, and aid. Although some Japanese businesses were interested in investment and trade with Vietnam and Cambodia, the Japanese government still opposed economic cooperation with those countries until there had been a comprehensive settlement in Cambodia. This stand was basically consistent with United States policy of the time.

Meanwhile, Japan gave informal assurances that Tokyo was prepared to bear a large share of the financial burden to help with reconstruction aid to Cambodia, whenever a comprehensive settlement was reached, and to help fund UN or other international peacekeeping forces, should they be required.

Japan carried through on its promises. Following the October 23, 1991 Final Act of the International Paris Conference on Cambodia among the Cambodian parties, Indonesia (as co-chair with France), and the five permanent members of the UN Security Council, Japan promptly established diplomatic relations and ended economic restrictions with Cambodia and Vietnam. In November 1992, Tokyo offered Vietnam US$370 million in aid. Japan also took a leading role in peacekeeping activities in Cambodia. Japan's Akashi Yasushi, UN undersecretary for disarmament, was head of the UN Transitional Authority in Cambodia, and Japan pledged US$3 million and even sent approximately 2,000 personnel, including members of the SDF, to participate directly in maintaining the peace. Despite the loss of a Japanese peacekeeper killed in an ambush, the force remained in Cambodia until the Cambodians were able to elect and install a government.

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Source: U.S. Library of Congress