STRATFOR GLOBAL INTELLIGENCE UPDATE
U.S.-Japan summit:
No substance
Tokyo's economic paralysis kept major issues from being discussed
--------------------------------------------------------------------------------
Editor's note: In partnership with Stratfor, the global intelligence company, WorldNetDaily publishes daily updates on international affairs provided by the respected private research and analysis firm. Look for fresh updates each afternoon, Monday through Friday. In addition, WorldNetDaily invites you to consider STRATFOR membership, entitling you to a wealth of international intelligence reports usually available only to top executives, scholars, academic institutions and press agencies.
© 2001 WorldNetDaily.com
Last weekend's U.S.-Japan summit between President George W. Bush and Prime Minister Junichiro Koizumi -- the first for both leaders since taking office -- should have been a significant event for two reasons: Bush and Koizumi preside over the world's two largest economies, and the Asia-Pacific region is experiencing new volatility in security issues, particularly with respect to China.
But apart from Koizumi's public declaration that he will not oppose Bush's rejection of the Kyoto treaty on global warming, the two leaders sidestepped a number of significant economic and politico-military issues:
The Japanese economy is mired in a decade-long slump, and Tokyo's repeated attempts at recovery have all failed. Meanwhile, the U.S. economy is somewhere between a slowdown and a mild recession.
Relations between the United States and China have deteriorated following the EP-3 incident and since China has detained several U.S.-based scholars and citizens. Bush recently said the United States would support Taiwan militarily in a crisis with the mainland, and U.S. Secretary of Defense Donald Rumsfeld reportedly wants to reorient the U.S. military away from Europe and toward Asia.
Koizumi has become the first Japanese prime minister since World War II to publicly raise the question of amending Article 9 of the Japanese Constitution so as to permit the development of offensive military capabilities. (Currently, the Japanese Self-Defense Force is organized and equipped to wage only defensive operations around the home islands.)
All of these issues directly affect the U.S.-Japanese relationship and should have dominated the agenda. But they went undiscussed; instead a strange silence permeated the summit.
The fact that none these issues came up during the talks at Camp David is significant in and of itself. The sense of ennui in U.S.-Japanese relations stems from a mutual understanding that Japan is incapable of rescuing its economy from depression.
Japan's problems are ultimately social and political -- not economic. Japan's economy soared in the 1980s when the government provided private industries with artificially reduced interest rates that were well below world rates. They were able to do this by forced savings subsequently loaned to Japanese businesses with a tiny markup. Thus, Japan was able to invest in industrial plants at below world-market rates, and its industries were able to undercut other businesses in pricing. At the same time, however, Japan's peculiar dependence on debt (rather than equity financing) led to one of the world's lowest rates of return on capital in the 1990s.
But a crisis was brewing. As high interest rates triggered unemployment, restructuring and austerity elsewhere, Japan experienced none of these developments. As Japanese output expanded and market share increased, profitability fell. The consequence of trading capital formation for market share was the hollowing out of the Japanese financial system. And as the West grew more competitive, the Japanese found themselves stagnating.
In a free-market economy, the result would have been a massive recession that resulted in lower domestic consumption, higher unemployment and corporate bankruptcies and downsizing -- short-term pain that sets the stage for long-term economic recovery. But nothing like that happened in Japan.
That is because Japan's social system is not constructed to absorb the massive instability of genuine economic restructuring. The political system, which reflects the social ethos, is incapable of taking actions that are both necessary and inherently destabilizing. A key component of Japanese culture is a contract that is built on preserving the stability of social relations. Since major recessions rip apart social relations and create new ones, it is easier -- from a social and political standpoint -- for Japan to accept long-term stagnation and economic decline rather than instigate painful reforms.
worldnetdaily.com |
