Why Japan plainly needs an ‘Asia pivot’ in China’s direction
William Pesek says Shinzo Abe’s apparent overture to Xi Jinping over the belt and road plan was the right move, as his Abenomics strategy to revitalise the domestic economy could do with a major boost
Though I strongly doubt Trump will raise my country’s political or economic game, some early missteps are having unintended consequences in North Asia, and perhaps for the better. His threats to attack North Korea, for example, gave Shinzo Abe and Xi Jinping (習近平) common ground for cooperation. Killing the Trans-Pacific Partnership (TPP), meanwhile, left Abe, the first world leader to embrace Trump last November, with buyer’s remorse.
The strongest evidence that the Japanese prime minister is reassessing Tokyo-Beijing ties is a letter – a surprisingly conciliatory one – Abe sent Xi in praise of the Chinese president’s most-cherished initiative, his Belt and Road Initiative. Before Trump scrapped the TPP, before he threatened to lump Japan with China as a currency manipulator, before he ratcheted up tensions on the Korean peninsula, Abe wanted nothing to do with Xi’s dream of recreating the Silk Road, and ignored Xi’s Asian Infrastructure Investment Bank.
Abe’s note was delivered by Toshihiro Nikai at the belt and road forum. Japan had planned to skip the fete until Abe cottoned on to the fact that Trump isn’t his good buddy, and at the 11th hour sent Nikai, secretary general of his ruling Liberal Democratic Party. Abe’s olive branch talked of closer ties, summit meetings and future-oriented cooperation that may include joining the AIIB and playing a role in Xi’s scheme to join Asia, Europe and Africa by land and sea.
What Trump unwittingly sparked, Abe must build upon – and fast. Abe’s rightest policies and long track record of downplaying Japan’s second world war aggression left little room for a détente of the kind that may now be afoot. Neglecting China ties, though, undermined Abe’s five-year effort to end deflation and increase competitiveness. It limited Japan’s access to the world’s fastest-growing economy, the most promising consumer market and mainland capital.
With Trump’s “America first” policy limiting opportunities in the West, Japan would be wise to engineer its own Asia pivot, particularly in China’s direction. That would bring Japan four clear benefits: bolstered relations with Beijing; greater influence on policy and investment decisions in Asia; vast investment opportunities in infrastructure for companies and banks desperate for growth; and, renewed global relevance.
Benefit No 3 alone would breathe new life into “Abenomics”. When Abe returned to the premiership in 2012, he pledged a three-pronged assault on the nation’s lost decades. The monetary expansion part worked well enough, with a weaker yen boosting exports and the Nikkei. Fiscal expansion has helped the economy grow for five straight quarters now, the best run in 11 years. But the vital third phase – deregulation to make Japan more competitive – has been a dud. Chances to bid on the belt and road projects could be just the wake-up call Japan Inc needs.
Watch: President Xi Jinping hosts the belt and road forum
Tokyo needs to tread carefully. Xi, it’s often said, is China’s most powerful leader since Deng Xiaoping (鄧小平), who held that the masses should “maintain a low profile”. So, there was a bit of irony in Xi’s glitzy belt and road launch. By calling it the “project of the century” and declaring a new “golden age” of globalisation with China at its core, Xi forwent all Deng-era modesty.
Or is it hubris? On May 24, Moody’s downgraded China’s credit rating, the first such move since 1989. Amid slowing growth and epic levels of public debt, can Beijing afford to pour hundreds of billions of dollars into projects around the globe? There are valid concerns that it will just export its imbalances, including chronic overcapacity, to poorer nations – what economists call “debt-trap diplomacy”.
As China remakes Asia, though, Japan can have considerably more influence over how things unfold from the inside, and a much greater share of the economic dividends. Xi’s belt and road gambit is an ideal opportunity for Asia’s two biggest economies to join forces and look ahead.
William Pesek is a Tokyo-based journalist and the author of Japanization: What the World Can Learn from Japan’s Lost Decades. Twitter: @williampesek