Japan’s chances at regional leadership
The country might be approaching its first opportunity in the 21st century to regain position of regional leader
The war in Ukraine is a timely reminder that no matter what else may be happening in the world, China and Japan, the heavyweights of the Asia-Pacific, cannot be overlooked. They have the region’s largest economies and boast strong, dynamically developing militaries. It’s little wonder, then, that China and Japan are often compared with one another, especially with regard to regional leadership.
About a year and a half ago, most would have cited China as the leader. But power is relative, and history and geopolitics give Japan just as strong a claim. Over the past century, there were several eras in which Japan was categorically stronger. China overtook Japan as the second-largest economy in the world only after Japan’s own economic miracle ended. And considering China’s own economic problems, there’s no reason to think that Japan can’t reclaim the mantle once again.
Both countries started their modern evolution similarly, first by adhering to an isolationist foreign policy that enabled them to develop into thriving, wealthy nations. Then when they opened up to the West, they faced the harsh reality of competing with powers whose interests conflicted with their own, and introduced new challenges at home that would undermine their domestic positions and thus hinder their ability to project power abroad. For China, this culminated in the Opium Wars (1839-42, 1856-60). For Japan, it culminated in World War II. The defeat of both at the hands of the West doused their ambitions, to say the least.
After the initial shock of losing their regional status, both nations had to reckon with their new station in the world. And because both relied heavily on international trade – China imported agricultural products and manufactured goods, while Japan imported raw materials – neither had the luxury of isolationism. Even so, both managed to perform astonishingly quick economic development. China’s unprecedented growth began with Deng Xiaoping’s rise to power in 1978. China harnessed the power of large-scale capital investment from home and abroad, while Japan leveraged foreign capital with strict government economic regulation: increases in capital and labor, reallocation of labor from agriculture, improved technology and economies of scale. In short, they overcame similar obstacles, emerging from historic losses with the ability to amass enough power to solidify their positions as economic, political and military players of the East Asian region.
But the good times were not to last. The kind of miraculous economic growth that Japan and China managed to achieve comes at a cost, and after a few decades, cracks began to form in the foundations of their models. For Japan, it came at the beginning of the 1990s, after nearly 50 years of economic boom. Bubbles burst, the stock market tanked, a debt crisis ensued and the banking system was utterly dysfunctional in what came to be known as the Lost Decade. Bad as the crisis was, it’s impressive in that it wasn’t worse. The economy shrank, and the stimulus policies that followed racked up a ton of debt, but things never got so bad that they were irreversible. And since the 2000s, Tokyo has done well enough to make up for lost time. Take a look at its gross domestic product per working-age adult. (Overall GDP is misleading in Japan, considering its high percentage of elderly citizens.) Judging by those numbers, especially considering the negative effects of the COVID-19 pandemic, we can find another miracle: After some struggle to return consumption to pre-crash levels during the 2010s, the Japanese economy finally managed to return to slow but steady growth starting from 2018. GDP is even expected to grow by an average of 3 percent in 2022.
Overlooked in its success is Japanese society itself. The same monocultural, collectivistic, hard-working society that managed to keep up with Western economies once it was exposed to competition, the society that adopted Western strategies into its economy so well that it soon came out on top, the society that could endure the hardest blow imaginable – Hiroshima – and performed its economic miracle within a few years. An island nation that is organized for collectivism means that any measure that is implemented will be complied with at extraordinary speed. That and the outstanding Japanese work ethic is
the reason why keiretsu, a system that would have led to certain complications and eventual failure in any other country, could become so successful in Japan. Japan is not without constraints.
Its main geopolitical imperative is to always maintain a strong military and economic alliance with the United States, but given this dependence, the East Asian country has not been in the right power position to become a regional leader.
Moreover, Japan has a complex, codependent relationship with the current regional leader, China. They are extremely important economic partners, even as Japan actively works to counter growing Chinese assertiveness. For example, Japan has grown more active within the framework of the Quadrilateral Security Dialogue, an alliance including Japan, the U.S., India and Australia, which has gained new traction as a grouping designed to counter China’s push across the Asia-Pacific.
It’s part of a broader trend of Japan growing more active in international affairs more generally. Tokyo has increased its military budget and often holds drills, usually joint ones with other countries, to show off its dynamically developing Self-Defense Forces. It was among the first non-European countries to join the sanctions imposed on Russia and has also offered to accept people displaced by the Russian invasion in Ukraine. Japan also has good relations with the Association of Southeast Asian Nations as a whole as well as with its member states respectively.
Recently, Japan has been increasingly active in nurturing those bilateral ties, not only increasing their already prosperous trade relations but also strengthening security alliances with the smaller countries of the region.
However, now the situation seems to be changing for both countries. China is facing serious internal structural issues that have already forced it to put its expansionism on hold. Despite the hype about China bouncing back quickly from its lockdown, the pandemic has not helped its economic situation. Like the rest of the world, it has encountered major supply chain disruptions with shortages of electronic chips, coal, steel and shipping capacity causing power shortages and shutdowns. Furthermore, the property sector, which supports around 25 percent of China’s GDP, is still struggling. With major players such as Evergrande overloaded with debt, prices for new homes are falling and construction has slowed significantly. The trade war with the U.S. has shown China that the old export-led growth model is unreliable and that it needs to move up the value chain by focusing more on exports with higher value added. Many low value-added operations have already relocated to Bangladesh, Vietnam and Indonesia.
The wide range of issues has caused China to increasingly focus inward on its national goal of “common prosperity.” Consequently, it has deemphasized the security and military components of its foreign policy and focused on international trade and political policies that directly affect the domestic population. These moves have contributed to rising animosity and trade tensions with the U.S.
Likewise, in stark contrast to Japan, China has moderated its international activity. Its domestic constraints are reducing its ability to project power outward, while Japan is taking advantage of its solid alliance with the U.S. and newfound economic strength to be more open and active, keeping its goals of taking leadership in the Asia-Pacific region in clear sight. Japan has proved its capability of seizing and keeping the position of regional leader, and this might be its first good opportunity in the 21st century to do so again.