japan travel program for us future leaders 2009 yearbook

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JAPAN TRAVEL PROGRAM FOR U.S. FUTURE LEADERS

2 0 0 9 R E P O R T

Association of Professional

Schools in International Affairs


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Table of Contents

Participants! ! ! ! ! ! ! ! ! !2Executive Summary! ! ! ! ! ! ! !5Subgroup Sections! ! ! ! ! ! ! !7! Environment! ! ! ! ! 7! Domestic Economy! ! ! ! ! 14! International Economy!! ! ! ! 18! International Development! ! ! ! 23! Diplomacy!! ! ! ! ! ! 27! Security! ! ! ! ! ! ! 30Photo Gallery ! ! ! ! ! ! ! ! 35Acknowledgements ! ! ! ! ! ! ! 38

! 2 0 0 9 J a p a n T r a v e l P r o g r a m f o r U . S . F u t u r e L e a d e r s

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Participants

Theodore (Ted) AlcornTed Alcorn is a joint MA/MHS candidate at the Johns Hopkins School for Advanced International Studies(SAIS) and Bloomberg School of Public Health. His academic focus is on systems-design for the provision

of social services such as health care and water supply. He has a BFA in Film and Television Productionfrom the New York Universitys Tisch School of the Arts, and previous to his current studies, he workedon Ken Burns documentary miniseries, The War, which tells the story of the American experience duringthe Second World War.

Harvey BeasleyHarvey Beasley is currently pursuing his Masters degree at The Fletcher School of Law and Diplomacy.His studies focus on the diplomatic relationships between the United States and East Asia. Aftergraduating from Fletcher, he will work as a U.S. Foreign Service Officer in the Department of Statefocusing on Public Diplomacy. He plans to spend the majority of his career working in East Asia. Harveyattended Indiana University Bloomington for his undergraduate studies in Japanese and InformationTechnology. He also spent one year studying Japanese at Nanzan University in Nagoya, Japan during his

junior year. After graduating from Indiana University, Harvey worked for GE Japan for 4 years splittinghis time between Tokyo and Osaka. He later spent one year studying intensive Japanese at IUCYokohama, and then worked for one year as a technical translator in Osaka.

Sarah BerkeSarah Berke is a Master of Public Policy student at the University of Minnesota's Humphrey Institute ofPublic Affairs, concentrating in economic and community development. Originally from Nebraska, shegraduated from St. Olaf College in Minnesota with a BA in political science and Russian in 2003. Shestudied in Velikiy Novgorod, Russia, as a Fulbright student fellow in 2004-2005. Berke has five years ofprofessional experience in community economic development and access to financial services. She hasmanaged communications and fundraising at the Chicago Community Loan Fund, served on thesupervisory committee of the North Side Community Credit Union and volunteered as a tax preparer forlow-income Chicago residents. She is now a consultant for the Center for Financial Services Innovation(an affiliate of ShoreBank Corp.) and the Native American Community Development Institute. Berke hasacademic and professional interests in public-private-nonprofit collaboration, access to credit andfinancial services for low-income communities and households, and comparative international learning.

Scott HartleyScott Hartley is a joint-degree policy and business graduate student at Columbia University, holds a BA inPolitical Science from Stanford University where he served as a Director of Stanford in Government, andearned fellowships to Ecuador and Japan. A former Google employee, he launched global products,spent a year in India founding a team, and lectured on entrepreneurship as a Google.org businessdevelopment consultant in East Africa. He has held research positions at Stanford Medical, Columbia

Business, and Harvard Law Schools Berkman Center, and interned in the U.S. Department of State inGeneva, Switzerland, the United Nations Development Program (UNDP), and the White House NationalEconomic Council. He is a participant in the Young Leaders program at Pacific Forum CSIS on US-ChinaTrade, has co-authored a report under sub-contract to the Defense Advanced Research Projects Agency(DARPA), and has published at Stanford, Harvard, Yale, Columbia, and in Foreign Policy. Interested insports and travel, he competes in Ironman 70.3 triathlons and has visited over 50 countries.

Samuel Lederer

Originally from New York City, Samuel Lederer graduated from Dartmouth College in 2005 with a Bache-


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lor of Arts Degree in Art History and English. After graduation, he taught English in Kawane Town, Shi-

zuoka Prefecture on The Japan Exchange & Teaching (JET) Program for two years. He is currently a Japan

Studies Master of Arts in International Studies candidate at the Henry M. Jackson School of International

Studies at the University of Washington (Seattle). His research interests include Japan's renewable energy

technology industries, Japan's geothermal power plant industry, Japanese colonial government policy

during the occupation of Korea, local level international environmental cooperation, and general Japaneseart history. He is also pursuing a certificate in Global Trade, Transportation, and Logistics (GTTL) at the

University of Washington. In his free time, he enjoys traveling, hiking, live music and art.

Timothy Little

After graduating high school in Deltona, FL, Tim enlisted in the Army and was stationed in South Korea.It was here where his interest in Asia began. After getting out the Army, Tim attended Florida State Uni-versity receiving his BA in International Affairs with a minor in Mandarin Chinese. Upon graduation hewas commissioned as an officer in the Army where he was once again stationed in Korea before doing 2deployments to Iraq. Currently Tim is attending the Josef Korbel School of International Studies at theUniversity of Denver. He is working on his MA in Global Finance, Trade and Economic Integration and is

expected to graduate June of 2010. Following graduation Tim plans on working living and working inChina.

Ross Matzkin-BridgerRoss Matzkin-Bridger is a Master's student at Georgetown University's School of Foreign Service,studying international affairs and security. As an undergraduate student he studied at GeorgeWashington University, receiving a Bachelor's degree in Asian Studies and Japanese Language andLiterature. He spent four years living in Japan, two as a student and two working for a local government.He speaks, reads and writes Japanese. After graduating from Georgetown, he hopes to work in the publicsector promoting further partnership between the U.S. and Japan.

Nicole Nakagawa

Nicole is a Masters candidate at UC San Diegos School of International Relations and Pacific Studies(IR/PS) specializing in International Environmental Policy with a regional focus on Japan. Prior toIR/PS, Nicole was a research assistant in the Environmental Studies Department at UC Santa Cruz. Sheworked on several projects that analyzed the effectiveness of local-level initiatives to promoteconservation and made policy recommendations on open space, sustainability and environmental justiceissues. In 2008, she received her BA in Environmental Studies and Biology from UC Santa Cruz. Nicolebelieves that there is a large disconnect between the science that identifies environmental problems andthe policies that are intended to remedy them. She hopes to use her background in both biology andenvironmental policy to bridge this gap, particularly in international conservation efforts. Over thesummer, she worked as a field biologist for the U.S. Fish and Wildlife Service and, currently, is MarketingDirector for the student-run organization Strategic Community Consulting.

Kevin ODriscollKevin ODriscoll is a graduate of New York University and is currently a second-year student atGeorgetown University pursuing a Masters degree in security studies with a certificate in Asian studies.Academically, he is interested in the security of Northeast Asia, particularly U.S. alliances and troopdeployments. The son of an Army officer, he has travelled extensively throughout the United States andthe world. He previously spent three years in Asia; two years teaching English in South Korea and oneyear studying at Nagoya University, Japan. He is conversationally proficient in both Japanese andKorean, though admittedly a little rusty. He enjoys soccer, skiing, hiking, video games and travelling.


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Luke SchoenLuke Schoen is pursuing a Master's degree at The Fletcher School of Law and Diplomacy, focusing onInternational Environmental Policy, Sustainable Development Economics, and East Asia. He is currentlyresearching international collaboration on renewable energy projects in China for his thesis, and interna-tional energy policy as a Research Associate at the Fletcher Schools Center for International Environment

and Resource Policy. Previously, as a Fellow at the U.S Environmental Protection Agency, he analyzedregional air quality management systems and environmental diplomacy in China and the United States.Before returning to academia, Luke taught English in Yamagata Prefecture for three years with the JapanExchange and Teaching (JET) Program, worked for CNN's Beijing bureau, and spent a year in Germanywith the Congress-Bundestag Youth Exchange Program. He holds a BA in Anthropology and Asian Lan-guages and Literature from Dartmouth College.

Karen Hoiyan TamKaren Tam is a joint-degree Business Administration and Public Policy graduate student at the Universityof Michigan. She graduated from the University of Chicago in 2006 where she pursued a curriculum inpre-medicine and a degree in Comparative Human Development. After graduation, she worked for a

healthcare consulting company, helping hospital executives understand the changing economic andpolitical influences that affect the finances and welfare of their services in the U.S. and abroad. She hasacademic and professional interests in issues of access to quality healthcare in low-income communitiesand emerging markets. Her career goal is to research, develop, and implement solutions for globalchallenges by engaging businesses, policy makers, and recipient communities. During the summer of2009, she interned for the Access Project Rwanda to improve the access and quality of healthcare byteaching business management skills to health providers in rural Rwanda. Currently, she is a communityconsultant for the Detroit Partnership in their 501c3 application and board development. Outside ofschool and work, she is an avid traveler and has visited 21 countries and worked/lived in five of those.

Michael VerbaMichael Verba was born in Ukraine and grew up in Colorado. He entered the world of public policy after

graduating from Cornell University with a Bachelor of Arts in Economics and Government. He firstworked for a nonprofit organization assisting the homeless population of New York. More recently he hasworked as an Assistant Economist in the Regional Affairs Department of the Federal Reserve Bank ofKansas City. He is currently a student at the Woodrow Wilson School for Public and International Affairsat Princeton University, where he is a candidate for a Masters degree in the Economics and Public PolicyProgram. This past summer, he worked on a project for the National Planning Department of theRepublic of Colombia, the aim of which is to inform government policy in the area of technology andinnovation.

Lisa Vura-WeisLisa is currently a Master of Public Affairs student at Princeton University, where she is focusing onEconomics and Public Policy, with a Certificate in Science, Technology, and Environmental Policy. She

was born and raised in Southern California, and left her home state to attend Harvard University, whereshe graduated with an AB in Economics. After graduation, Lisa worked for the New York AttorneyGenerals Office, where she calculated economic damages in financial wrongdoing, antitrust, healthcare,and civil rights cases. She spent a year conducting health and development economic research atPrinceton University then moved back to New York State government. At the New York State InsuranceDepartment, she worked on health, workers compensation, and medical malpractice reform.


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Executive Summary

As the parliamentary election campaign season got underway and cicadas buzzed in the streets of Tokyoin mid-August 2009, our group of thirteen graduate students comprising the inaugural cohort of the Japan Travel Program for U.S. Future Leaders immersed ourselves in Japans contemporary politics,

economics, security debates, diplomacy issues, environmental policy, and international developmentstrategies. The program provided us with incomparable opportunities to meet with Japanese leaders,engage in dialogue about the relationship between our two countries, and learn from each others sharedexperiences in meeting local and global challenges.

This report is a set of six policy briefs, documenting and analyzing what we have learned about Japan, itsrole in the world, its relationship with the U.S., and some common issues both countries face.

Environment. Japan is an undisputed leader in environmental technology and policy. Japans best practices in research and development, cross-sector industry-governmentcollaboration, and international work to combat climate change represent a series ofexamples on which the U.S. can draw as it works to meet its own obligations to reduce

carbon emissions and develop its own green economy. We believe that the environmentsector represents many promising opportunities for more U.S.-Japan collaboration.

Domestic Economy. Japan faces a number of key challenges in its domestic economy.Among those we researched are the aging of the population, financial regulation forconsumer protection, and promoting entrepreneurship. Viewing these issues incomparative perspective with the U.S., we found several examples through which thetwo countries could learn from each others successes and failures in policy making andpolicy implementation.

International Economy. Japans economy faces challenges related to the role of exports in adynamic world economy, the degree of engagement it should have with the rest of theworld, and productive transformation in the manufacturing sector. We discovered thatthe Japanese government is working to address these challenges through smartinvestments in the short-term to respond to the global economic crisis and strategicpositioning for future growth in the long-run. Specific programs that help foreign and Japanese firms to work together are being implemented to support economic growthpriorities.

International Development. Japan and the U.S. have a long history as bilateral partners ininternational development work. The U.S.-Japan Partnership for Global Health is aparticularly important current effort. Japan is well known for its expertise in planningand implementation of development projects. There are still many opportunities for theU.S. and Japan to learn mutually from each others approaches to development, and tostrengthen their cooperative work.Diplomacy. U.S.-Japan diplomatic relations are closely tied to the bilateral securityalliance. Diplomatic issues include the U.S. military presence, evolving relationshipswith China on both the U.S. and Japanese side, and North Korea and its nuclear weaponsprogram. It will be a challenge to define the U.S.-Japan relationship in a new Japanesepolitical environment led by the Democratic Party of Japan (DPJ). Another challenge forJapan is to turn the significant soft power it wields into real political power. We believe


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that doing so effectively has the potential to benefit Japan directly and the U.S. indirectly.

Security. The U.S.-Japan alliance has been essential to both nations for more than 50years, serving as a pillar of stability in East Asia. This alliance, while strong, isundergoing a phase of transition and evolution. The foundation of our securitycooperation remains the defense of Japan, however new opportunities for partnership

continue to develop. Challenges ahead will require both countries to work together totackle issues such as nuclear nonproliferation, global stability in an age of terrorism,North Korea, and the rise of China. These challenges exist in the context of continuingdebate about the Japanese constitutions pacifist Article 9.

Through the program, we have gained a better appreciation of the common interests that our two coun-tries have, and of the common challenges that face us. This new understanding will inform our futurecareers in international affairs and public policy. With our peers in Japan, we will work together to main-tain the U.S.-Japan relationship as both a strong security alliance and a fruitful partnership for mutuallearning and cooperation on global and local issues.


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Kinkakuji, Kyoto


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Subgroup Sections

ENVIRONMENTJapans Environmental Leadership

Samuel LedererNicole Nakagawa

Luke Schoen

Japan has been revered as an environmental leader, not only forproducing some of the most advanced technology in the world, but for implementing effective policies that curtail environ-mental degradation both at home and abroad. How can one ex-plain this success? To help answer this question, the Environ-ment subgroup of the Japan Travel Program for Future U.S.Leaders met with Japans Ministry of the Environment, the NewEnergy and Industrial Technology Development Organization,the Institute for Global Environmental Strategies, and ToyotaMotor Corporation in August 2009. Each provided insights intohow Japan has crafted effective environmental policies. An ex-amination of Japans technology and industry sectors, as well as

its climate change policies, identifies lessons that the U.S. can learn from Japans policymaking and im-plementation processes.TechnologyJapans national program of new energy technology research and development began as a response to the

1973 oil shock, which exposed the countrys energy dependence. With the start of the Sunshine Project in1974, Japan initiated a commitment to the research, development, and deployment of renewable energytechnologies such as solar photovoltaic (PV) cells and wind turbines. Although the percentage of Japanstotal primary energy supply derived from renewable sources remains low (around 3.2% in 2006),government agencies and corporations are working to overcome economic and technological obstacles toencourage further diffusion.1 By undertaking research into a variety of materials and technologyapplications, Japanese companies maximize learning and avoid concentrating financial and humanresources in losing technologies, or path dependence. Government agencies have supported the diffusionof renewable energy technologies through subsidy programs and cooperation with local and foreigngovernments. U.S. stakeholders stand to gain valuable insights from their Japanese counterpartsattitudes towards learning and policy coordination.

In the realm of solar power, the New Energy and Industrial Technology Development Organization(NEDO) has supported research into a variety of materials such as silicon thin-film and organic filmphotovoltaic. With the aim of decreasing the power generation cost of solar photovoltaic cells from thecurrent 26 yen/kWh to 7 yen/kWh (equivalent to the current cost of electricity for industrial customers) by the year 2030, NEDO subsidizes research targeted at increasing the efficiency and lowering theproduction cost of photovoltaic cells.2 Aided by NEDOs flexible and sustained support, Japanesescientists have maximized their learning through hands-on experiences assessing, testing, andovercoming challenges in different photovoltaic materials. To encourage the diffusion of photovoltaic


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Toyota Motor Corporation, Head Office, Tokyo


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industry. Take, for example, the 2009 tax incentives to promote the use of fuel-efficient and low-emissionvehicles. This tax incentive, which will be in effect from April 1, 2009 until March 31, 2012, will reduceboth the tonnage tax and acquisition tax of vehicles that meet certain environmental criteria (see Figure 1below).

Figure 1: Acquisition and Tonnage Tax Reductions/Exemptions7

Additionally, each vehicle is awarded a certification sticker that reflects the vehicles performance interms of fuel efficiency and emissions reduction. Stickers fall into the following three categories, eachwith its own ranking system: (1) Advanced Fuel Efficiency Certification, (2) Environmental PerformanceCertification for Vehicles with Low Emissions and (3) Low Nitrogen Oxides and Particulate EmissionsCertification for Trucks and Buses. These tax incentives and certification schemes are an ingenious way of benefiting the consumer and improving sales for the producer, all the while helping to curtailenvironmental degradation.

Japans 2015 Fuel Economy Standards provide further evidence of the success of collaboration betweengovernment and industry. Implemented with the goal of improving passenger vehicle efficiency by 24%,from 32 miles per gallon (mpg) to 39.5 mpg, the target has already been met with Toyotas developmentof the iQ and Prius.8,9,10 Compare this with the U.S.s current standard of 27.5 mpg, set in 1985, for thesame types of passenger vehicles. The U.S. 2015 Corporate Average Fuel Economy (CAFE) Standardsimprove upon this current standard and are set at 35.7 mpg. However, as one can see, this is well belowwhat is already being accomplished in Japan. But how is the same company, with the same resources,

using the same technology, able to achieve such high standards in one country but not another?

Toyota explains that, in addition to differences in consumer behavior, there is a strong emphasis on rawnumbers in the U.S. (units of benefit) as opposed to the margin (units of benefit for every unit of input),making it very difficult to meet ambitious targets.11 This, in turn, leads to inflexibility on the part ofgovernment to compromise on a set of standards realistically achievable by industry. Therefore, insteadof first working with industry to establish a goal, the U.S. government often sets a standard and expectsindustry to be able to reach it. Such is the case in California, a state that, in March of 2008, was denied arequest to set its own limits on greenhouse gas emissions but continues to pressure the government to


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improve CAFE Standards nonetheless. The political clout surrounding this issue continues to be achallenge for companies like Toyota and reveals quite a contrast to the government-industry relationshipin Japan.

In a society that is extremely sensitive to rising fuel prices and becoming keenly aware of mankindsimpacts on the natural world, there are many opportunities for the U.S. to improve. Toyotas production

of small, fuel-efficient vehicles for the U.S. market appropriately reflects these changes in consumerpreferences. However, the U.S. Big Three automakers have been slow to react and, consequently, havesuffered with slumped sales and government intervention. For decades, U.S. automakers have possessedthe technology and capability to improve their vehicles, but have failed to do so in a timely manner. Theoil shock of the 1970s and subsequent spike in gasoline prices allowed Toyota to enter the U.S. marketand take advantage of the niche ignored by the Big Three automakers. The current economic andenvironmental conditions warrant the need not only for innovation, but improvement ofgovernment-industry relationships. Although there has been a dramatic shift on the part of U.S.automakers towards fuel efficiency, there has been little change on the part of government to decouplepolitics from industry standards.

International/Climate ChangeJapan has long been recognized as a world leader in the energy efficient technologies that help mitigateclimate change, and as a source of innovative policies and programs that help facilitate internationalcooperation on many other environmental issues. The U.S. could stand to benefit both economically andin improving its international reputation by learning from Japan's stance in international climate changenegotiations and its collaborative projects with rapidly developing nations like China.

Recent political developments have reinforced Japan's commitment to international environmentalcooperation. Just four months before the United Nations Climate Change Conference in Copenhagen, theDemocratic Party of Japan (DPJ) unseated the incumbent Liberal Democratic Party (LDP) that had been inpower for the past 55 years. During the campaign, one component of the DPJ's platform was a promise tocommit Japan to reducing its greenhouse gas emissions to 25% below 1990 levels by 2020, while the LDP

advocated only an 8% reduction. With the DPJ now in control of the Diet, the party is faced with makinggood on its campaign promises. Prime Minister Yukio Hatoyama reaffirmed his party's intention touphold the 25% reduction commitment at the G20 Pittsburgh Summit in September, eliciting widespreadapproval from the international environmental community.12 This could be an important source ofmomentum going into the negotiations in December.

As a nation that has achieved a high level of energy efficiency, Japan recognizes the necessity ofcollaborating with developing nations on environmental protection initiatives. China has emerged as amajor actor in international environmental issues, recently surpassing the U.S. as the largest emitter ofCO2. To help China protect its own environment and the global climate, the Japanese Ministry of theEnvironment (MOE) initiates annual policy dialogs with China's Ministry of Environmental Protection,provides technical assistance to China directly through the Japan International Cooperation Agency

(JICA) and promotes environmental collaboration through sister-city partnerships.13

The U.S. already collaborates with China on many environmental issues, but it could increase its portfolioof activities by looking to Japanese examples. Most urgently, in international climate change negotiations,the U.S. has stalled on making serious commitments to emissions reductions targets due to China'sreluctance to do the same, often citing the fear of losing economic competitive advantage. But as theworld's second largest economy with one of the highest energy efficiencies among OECD nations, Japanhas shown that economic success and environmental stewardship can be achieved simultaneously. In the


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weeks preceding the climate change negotiations in Copenhagen, the U.S. and China released a jointstatement affirming their intentions to work together on climate change through many collaborativeefforts, including the establishment of a joint Clean Energy Research Center, carbon capture andsequestration (CCS) demonstration projects, and an Electric Vehicles Initiative. However, the documentstill lacked any emissions reductions commitments from either side, perpetuating the ambiguouscommon but differentiated responsibilities principle.14 The U.S. has the opportunity to break this

bilateral stalemate by proposing an emissions reduction commitment going into Copenhagen, as Japanhas already done, an act that could lend momentum to the negotiations and facilitate the construction of ameaningful agreement.

Although it has an exemplary environmental record, one that it continues to improve upon, severalchallenges remain for Japan. Some within Japanese environmental circles fear that the reductions targetset by the DPJ may be too ambitious to be economically feasible. As a country that is already highlyenergy efficient, marginal abatement costs are much higher than in other nations, a fact that Japan's MOEand Japanese industries continuously struggle to clarify during negotiations. Many of the cheapestcontrol measures have already been implemented, and further improvements will come at a higher costthan comparable gains in other countries. The U.S. has a much higher energy intensity (7,796 btu per

dollar of GDP) compared to Japan (4724 btu per dollar of GDP), yet both nations spend approximately thesame amount on environmental protection efforts as a proportion of GDP (1.6%).15 Therefore, a bilateralpolicy dialog on best practices with Japan may be a fruitful area for improving U.S. energy efficiencywithout requiring additional expense. Similar policy dialogs with developing nations that result inquantifiable energy efficiency improvements may be one avenue for Japan to achieve its ambitious 25%emissions reduction goal if given credit under the Clean Development Mechanism.

ConclusionThe sections above have highlighted the key explanations for Japans success and leadership inenvironmental policy. A recurring theme is the Japanese governments proactive support of andreceptiveness to industry-led initiatives, market-based incentives, and the pursuit of policy coordination both at home and abroad. Other possible explanations are industrys investment in research anddevelopment for diverse technologies, its collaborative efforts with various government agencies andcompetitors, and its pragmatic approach to learning. Taken together, these policies provide excellentsources of inspiration for the U.S. As a country that is responsible for the second largest carbon footprintin the world, the U.S. is obliged to contribute to global efforts to curb environmental degradation. Byadopting or learning from some of the practices set forth by Japan, the U.S. can take a more proactivestance on environmental issues, all the while realizing the economic and social benefits associated withsuch practices.

Japans Best Practices By undertaking research into a variety of materials and technology applications, Japanese

companies maximize learning and avoid path dependence in losing technologies. Through these policies, NEDO takes a pragmatic approach to improve both the

production and consumption environments in which Japanese solar photovoltaicmanufacturers operate.

Japans strong government-industry relationship leads to the establishment of realisticfuel efficiency and emissions standards, and spur innovation.

The Japanese government is receptive to policy mechanisms developed by industry. Thisis demonstrated by certification schemes, labeling of environmentally friendlytechnology, and tax incentives.


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In developing industrial policies and setting standards, there is a strong emphasis onmarginal improvements rather than raw numbers.

Japan supports environmental initiatives in developing nations like China throughministerial-level policy dialogs and sister-city partnerships, and development assistancefrom JICA.

Japan has pledged ambitious greenhouse gas emissions reductions despite having one of

the highest energy efficiencies among OECD nations.

Policy Recommendations for the United States U.S. government agencies can aid the diffusion of renewable energy applications by

increasing coordination between national policymaking bodies and local governments.In both of these areas, corporate strategy and government policy, stakeholders shouldconsider the characteristics of the U.S. market, such as the range of state governmentpreferences toward renewable energy.

The U.S. should strive to improve government-industry relationships (i.e. morebottom-up as opposed to top-down control).

The U.S. should adopt incentive programs to promote the use of more fuel-efficient

vehicles or alternative modes of transportation. These incentives might include carpoollane exemptions for hybrid vehicles, tax breaks for the purchase of fuel-efficient vehicles,and pay-as-you-drive car insurance (i.e. individuals who drive less are rewarded withlower car insurance premiums).

The U.S. government should attenuate political influence in the establishment of fuelefficiency and emissions standards.

The U.S. should join Japan in stating national emissions reductions targets before the nextround of climate change negotiations. This will lend momentum to the effort and maydraw in China.

The U.S. should hold a joint energy efficiency expenditure audit with Japan to identifyhow the U.S. can maximize the effectiveness of its investments in environmentalprotection.


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1 International Energy Agency, Energy Policies of IEA Countries: Japan, 2008 Review (Paris: OECD/IEA, 2008) 148.

2 Hidenori Yonekura (New Energy and Industrial Technology Development Organization), personal interview, 20 August 2009.

3 Sakae Fujisaki (New Energy and Industrial Technology Development Organization), email to the author, 27 Sept. 2009.

4 Fujisaki, email to the author, 27 Sept. 2009.

5 Satoshi Kato (Toyota Motor Corporation). Personal interview, 20 August 2009.


7 Japan Automobile Manufacturers Association, Inc. (JAMA), The Motor Industry of Japan 2009 (Tokyo: JAMA, 2009) 48.

8 All New Fuel Economy Standards Completed toward Fiscal 2015, 2008, Japan for Sustainability, 19 Aug. 2009

.

9 Toyota to Launch Ultra-compact iQ in Japan, News Release, 2008, Toyota Motor Corporation, 19 Aug. 2009

.
http://www.japanfs.org/en/pages/026901.htmlhttp://www.japanfs.org/en/pages/026901.htmlhttp://www.japanfs.org/en/pages/026901.html


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10 Gas Mileage of 2009 Vehicles by Toyota, 2009, U.S. Department of Energy (USDOE), 19 Aug. 2009 .


12 PM Hatoyama in Pittsburgh, 9 Sept. 2009, Consulate-General of Japan in New York, 10 Oct. 2009.

.

13 Taku Ohmura (Ministry of the Environment), personal interview, 20 August 2009.

14The White House, Office of the Press Secretary. U.S.-China Joint Statement, November 17, 2009. 71 Nov. 2009..

15 Environment Statistics, 2009, Nationmaster, 13 Sept. 2009 .
http://beijing.usembassy-china.org.cn/111709.htmlhttp://beijing.usembassy-china.org.cn/111709.htmlhttp://beijing.usembassy-china.org.cn/111709.html


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DOMESTIC ECONOMYJapanese Challenges in Comparative Perspective

Sarah BerkeTim Little

Lisa Vura-Weis

This section turns towards Japans domestic economy and the keychallenges it faces. Although Japan has been hit hard by the globalfinancial crisis, it also has many home-grown challenges that need to be addressed. These include access to finance, promotingentrepreneurship, and a rapidly aging population. Interestingly, Japans policymakers are wrestling with the some of the samequestions that are being addressed in the United States. How can anaging population sustain itself? How can consumer protection beenhanced? What are the best ways to ensure competitiveness in the

future? How can small business be encouraged?

Japans Aging Population Japans population is rapidly aging due to declining birth rates. While roughly 22% of the populationwas over 65 in 2008, 39% of the population is expected to be over 65 in 2050. In fact, while the aging trendcan be seen in many developed countries, including the U.S., Japan has the highest proportion of elderlypeople of any country in the world, and its population has already started to shrink1.

The effects of an aging population may be devastating for Japan. With fewer working-age people forevery elderly person, the GDP per capita of Japan is likely to fall. In addition, financing pensions andhealth benefits will be increasingly difficult as the tax base shrinks. On a personal level, the elderly maybe neglected due to a lack of resources, and young Japanese may be crushed by debt as they attempt to

care for their parents and grandparents. Many raised the issue of providing support for the increasingelderly population while not over-burdening the productive economy.

Output per worker, which can also be thought of as a countrys standard of living, will shrink unless Ja-pan increases its productivity. GDP per capita is a function of labor productivity and the labor participa-tion rate. As the population ages and the labor participation rate falls, each Japanese worker will need toproduce more to maintain a constant GDP/capita. Morgan Stanley Japan estimates that in a compla-cency scenario, in which worker productivity increases by 1%, the growth rate of GDP/capital will fall. 2

Other than substantially increasing productivity, Japan has two policy instruments that can help it dealwith the aging population: increasing the birth rate or allowing more immigration.

In terms of increasing the birth rate, Japan can take either financial steps, structural steps or both. Forexample, one type of financial incentive can be providing subsidies or tax credits to families withchildren. Japans new government is considering providing families with roughly $3,300 per year forevery child until age 15.3

Financial incentives may not be sufficient to increase the birth rate. A number of structural features of the Japanese economy discourage both marriage and fertility rates. First, young people often do not feelfinancially secure enough to start a family or get married. High real estate prices contribute to this


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Yokohama Womens Citizen Credit Coo erative


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problem, as young adults are unable to leave their parents homes and branch out on their own. Second,there is a serious lack of child-care resources in Japan. Mothers have traditionally provided the bulk ofchild-care services. However, many young women understandably do not want leave their careers to bestay-at-home mothers. Taking time off for the birth of a child is often also seen as detrimental to awomans career, even if a relative can provide child-care later on.

Japanese policymakers can address these structural issues by investing in public child-care centers,creating maternity and paternity leave policies that protect parents from repercussions at work, andencouraging family-friendly flexible work schedules.

The second policy instrument that Japan can use to counter its rapidly aging population is to allow moreimmigration. Although it does allow some temporary migrant workers in seasonal and serviceindustries, Japan has a notoriously strict immigration policy. Japan is even paying some immigrants to gohome, including ethnically Japanese Brazilians. Conversations with policymakers indicate that Japan isunlikely to increase immigration anytime soon, despite the urgency of its aging demographic, because itis such a culturally explosive topic.

Innovation PolicyFor decades, Japan was known as a leader in innovation. Companies like Sony invented technology likethe Walkman, only to see its legacy eclipsed by the iPod 20 years later. Having previously beenunsurpassed in the technology sector, many looked toward Japan as if to ask, Why didnt you think ofthat? This is not altogether an unreasonable question. Why has Japan begun to fall behind countrieslike the U.S. and Korea in terms of technological innovation? The answer lies not in any one factor, butinstead in several contributing factors.

First, Japan has a very regulated market. There is a general feeling that Japan needs to trim back or reviseits regulatory superstructure. However, throughout our discussions, we did not hear any proposalsintimating the possibility of consensus. In fact, the debate appeared polarized. The mostpro-deregulation business leaders were deeply skeptical of the willingness and ability of either major

political party to pursue deregulatory reforms that would foster more competition, which suggested thatregulatory changes would be slow and partial. At the time of our visit one week prior to the elections,many perceived change in leadership to be at best an alteration from the status quo.

Second, and perhaps due to the highly regulated structure of the Japanese economy, there is a lack ofentrepreneurs within Japan. Because those outside the corporate culture are unwilling or unable to startnew businesses, innovation is left to the R&D sections of large corporations. This is where the viciouscycle begins. While the Japanese Business Federation (Nippon Keidanren) reports that tax incentivesexist for companies to invest in R&D, in harsh economies like the current one, companies are forced tomake cuts and R&D is often one of the first victims. Where credit becomes scarce, companies have aneven tougher time justifying long-term investments like research and development. Without enoughmoney and manpower to put into innovation, it stands to reason that it will continue to stagnate.

The rise of a new group of Japanese entrepreneurs could come to the rescue. The main factors preventingsuch a rise are subject to debate. Many Japanese industry experts would agree that the death ofentrepreneurship originates from two key issues:

1. The real or perceived risk-averse nature of Japanese culture2. Government policies which do not provide the necessary incentives or support


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Japan is understood as an incredibly risk-averse society. In the U.S., failure as an entrepreneur can beseen almost a badge of honor. Failure is an invaluable opportunity to learn from mistakes and do it rightthe second, third, or fourth time. No such concept is present in Japan. To encourage more risk-taking,Japan would need to initiate campaigns to change its business culture.

One effective solution may be an education campaign by the government. The

government has proven its ability to mobilize the Japanese people with successfulcampaigns such as Cool Biz which was recently initiated to reduce energy usageassociated with air conditioning in the summer. The previously conservatively dressedJapanese businessmen, never without a tie, left their ties at home and even undid theirtop buttons at the insistence of the government so that companies would be able to turnup the thermostat by a few degrees in the summer. There is no reason to believe that asimilar campaign to promote the merits of entrepreneurship while promoting itscontribution to Japanese society would not be successful. Only by removing the stigmaassociated with failure can the first hurdle be overcome.

Without the policy changes necessary to provide support for small businesses and ease the challenges of

starting up, any government culture campaign would be irrelevant. The second half of the problem is thelack of support for small and aspiring businesses. The Ministry of Economy, Trade, and Industry (METI)claims that small and medium enterprises make up nearly 95% of Japanese businesses. They also say thatthis is the main source of innovation and increases in employment within Japan.

Still, more start-up friendly policies need to be enacted. Progress has been made in someareas, with the cost of starting a business being reduced from 10 million down to 1 yen.While licenses are no longer prohibitively expensive, there is still a significant need forcapital to start virtually any small business.

Risk aversion is again an issue in acquiring capital as many banks and investors areunwilling to loan to aspiring businessmen and women.

The final aspect of the needed change would be the development of a safety net for those

whose businesses do fail. Liability needs to be limited so that individuals will no longerhave to fear losing not only their business but everything they own.

If the risks associated with starting a new business are reduced, Japanese people will begin to look at newventures as an opportunity as opposed to an all-or-nothing gamble. As these new businesses developfresh ideas, perhaps we will begin to again see the innovation that Japan was known for 20 years ago.Even more likely is that instead of giant corporations, such innovation will come from a new generationof Japanese entrepreneurs, eager to create the next Google or Twitter.

Consumer Financial ProtectionConsumer financial protection policyan area in which the U.S. is currently engaged in its own debateis an example that illustrates some of the tensions between Japan's policy making, structural reforms, and

ability to meet its broader demographic and competitiveness challenges. In recent decades, a largeconsumer money-lending industry, with trillions of yen in loans outstanding, arose in response toconsumer demand for credit. A significant minority of borrowers are unable to repay such loans, whichare loosely underwritten. Approximately 7% of borrowers have become trapped as "multiple debtors"with five or more consumer loans outstanding.

The Financial Services Agency (FSA) of Japan is the first Japanese public institution to have consumerprotection embedded in its mission and has existed for just over ten years as a regulatory body


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independent of the Treasury. In an effort to fulfill its new consumer protection mandate, the FSA hasaggressively targeted the excesses of the money-lending industry by lowering interest rate caps to 20% onan annual basis, requiring income-based underwriting, and strengthening enforcement mechanisms forsuch laws. While this regulatory strengthening is motivated by good intentions to protect consumers andhas already driven several money-lending companies out of business, it also has unintendedconsequences.

Part of what drives demand for consumer loansdespite their usurious interest ratesis the lack ofcapital available to small-dollar borrowers in the formal banking system. Nonprofit grassrootscommunity financial institutions, sometimes known as NGO Banks in Japan, which are working to makecredit available to ordinary citizens for social enterprises, fall under the regulatory rubric of themoney-lending industry. They are therefore facing significant regulatory barriers to continuing theirsocially and economically beneficial work.

One leader in this small, emerging NGO bank sector is the Women's Citizen Credit Cooperative inYokohama, which lends to women-led social enterprises, has with just 124 million yen in total capital and barely enough income to support two staff members. New laws requiring non-bank lendersincluding

NGO banksto hold reserves of 50 million yen in net assets and subscribe at a cost of 300,000 yenannually to a new credit information network would almost certainly drive the Yokohama organizationout of business, if they are not modified.

While the crackdown on abusive and previously unregulated money-lending is well-intended and, infact, necessary in Japan, the unintended consequences of the specific form of the regulation could dounintended harm to a promising new nonprofit sector. The Yokohama credit cooperative finances exactlythe kinds of enterprises that are needed to help the country meet challenges of demographic change andeconomic competitiveness. Nearly one third of the organization's portfolio supports providers ofhealthcare and other social services for the elderly, and another significant portion of the portfoliocomprises women who are self-employed as social entrepreneurs in industries such as childcare andcatering.

Japanese financial regulators must work to mitigate the unintended consequences ofstrict consumer protection regulation, and to improve access to credit for women-ownedsmall businesses and social enterprises.

As the U.S. moves closer to implementing new consumer financial protection regulations,it should be carefuldrawing on the Japanese exampleto ensure that well-intendedpolicies to protect consumers from predatory loans do not have the unintendedconsequence of stifling access to financial services.

ConclusionJapan's domestic economy faces a number of challenges that need to be addressed. Consumer protection,small business promotion, and demographic change are issues that the United States is struggling with as

well, and Japan and the United States should learn from each other's successes and failures in policymaking and policy implementation.


17

1 http://www.stat.go.jp/english/data/handbook/c02cont.htm#cha2_1

2 Feldman, Robert Alan. Lecture. Japan Economics. Maybe We Might: Japan in the Age of Change. August, 2009.

3http://online.wsj.com/article/SB125495746062571927.html
http://online.wsj.com/article/SB125495746062571927.htmlhttp://online.wsj.com/article/SB125495746062571927.htmlhttp://online.wsj.com/article/SB125495746062571927.html


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the United States and other mature global markets. This rotation has left Japan in a tenuous export situa-tion, where its service exports cannot compete on cost with down-market producers such as India, andwhere even high-value modular manufacturing products have become cheaper to produce in China. AsTakahiro Fujimoto, Executive Director of Tokyo Universitys Manufacturing Management Resource Cen-ter (MMRC), argues, Japan retains its ability to export high-value manufactured goods that leverage inte-gral production processes, building upon the Japanese cultural penchant for teamwork.

Japans Technological and Economic Grand StrategyThe Japan Foundation Center for Global Partnership afforded our group the opportunity to meet repre-sentatives from the Ministry of Economy, Trade and Industry (METI). METI is the public agency thatoversees economic and development planning in Japan. At METI, we discussed Japans continuing andforward-looking economic strategy.

Short- to Medium-Term Strategy: Recovery from Recession via Smart InvestmentOver the past decade, Japans exports have shifted sharply toward high value-added goods such asautomobiles, electric machinery and general machinery. However, during the current economic crisis, thedemand for high value-added goods dropped more precipitously than demand for more basic goods.

Highly inelastic goods maintained centrality, as minor fluctuations in price did not erode quantities de-mand, but many higher-value Japanese exports shifted to the margin. Stretched economic resources ne-cessitated prioritization of demand, and more elastic goods were pushed aside. The large share of con-sumer durables in Japanese exports to the U.S. led to a huge decline in Japanese exports. Diminished ex-ports impacted not only the trade balance, but also the current account, putting pressure on the Japaneseto compensate through consumption, investment, and government spending. In contrast, Chinaa coun-try that predominately exports basic, low value-added goods to the U.Scontinues to grow through thecrisis, as demand for the types of goods included in Chinese exports remains robust.

METIs short-term economic program, called the J Recovery Plan, is primarily focused on recoveringfrom the global recession. It is guided by Japans Vision for the Year 2020 which states, inter alia, thefollowing:

Japan will become a nation that plays world-leading roles through low-carbon emission revolu-tion, a nation where all the citizens, irrespective of age and gender, are able to lead an active lifewithout anxiety, and a nation where citizens and local communities are able to fully exercise theirpotentials and attractive characteristics at home and abroad.

Many countries have implemented stimulus measures in response to the global economic crisis. Accord-ing to METI, in Japan the goal of fiscal stimulus measures is more than just government spending to in-crease consumption. The basic principle is to stimulate the economy through smart investment thatwill contribute to long-term growth. The J Recovery Plan consists of three parts:

1) Selecting a project with double-barreled effects: Pulling out from economic recession

in the short run and encouraging sustainable economic growth in the medium- and long-run.

2) Identifying [] potentially competitive sectors [] (underlying strength) that willyield significant positive economic impacts and have great significance [] rather thantaking economic-stimulus measures. Working on concentrated investments and acceler-ated reforms for the next 3 years.

3) Achieving sustainable growth by breaking away from recession, expanding domesticdemand, and drawing on energetic economic performance in Asia and dynamism of the


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world economy. Offering ideal future societal models to Asian nations that are facingconstraints from environmental/resource perspectives.

As such, Japan recognizes that fiscal stimulus is but one part of economic recovery. Detractors of fiscalstimulus argue that under full employment the expectation of future taxation would undermine the will-ingness to consume in the present. However, long-run investment-focused fiscal stimulus that creates

employment and value also generates more sustainable growth that can countermand short-run de-creases in aggregate demand. While the above capital allocation framework identifies the necessary pri-oritization of investments that bolster consumer spending, increase aggregate demand, and lay thegroundwork for sustainable job creation and development, the devil is in the details.

Long-Term Strategy: Positioning for Future GrowthFurthermore, the long-term Global Economic Strategy and Foreign Economic Policy of Japan is basedon four prioritized fields:

1. Domestic and foreign integrated economic measures: Since Japan is a trade-oriented nation itsgrowth depends on growth in foreign demand. Japan is seeking to ride this growth inforeign demand. This principle is based on the following lines of action: 1) deterrence ofprotectionism and 2) international development of infrastructures-related businesses,including electric power supply, transportation, water supply, services, etc. The secondline of action is particularly focused on emerging markets in Asia. According to oneMETI official: [] by developing Asian infrastructure Japan can grow together withAsia.

2. Promotion of innovation in the volume zone: The volume zone refers to the middlesegment of the Emerging Market, consisting of a population of about 880 million. If amarket ranges from the high-end (higher margins) to middle-end to low-end (lower mar-gins), the volume zone is that segment of the market which corresponds to the middle-end of the product market and serves the growing middle class in emerging economies.The volume zone is the segment with high potential for future market growth. METI

believes that Japanese firms are strong in the upper middle-end segment, but the bulk offuture growth is in the middle volume zone. For them, the challenge is to tap into thevolume zone by promoting innovation in this segment and building networks and part-nerships with enterprises in emerging markets.

3. Global development of the low carbon revolution: METI wants Japan to be at the center ofsolutions to problems facing the globe. This involves helping build a foundation forglobal cooperation on the environment and energy conservation and promotion of inter-national energy conservation and overseas market expansion that centers on low carbontechnology. This prioritized field involves foreign affairs action and engagement inforums such as the G8, the International Partnership for Energy Efficiency Cooperation(IPEEC), the Japan-China Energy Conservation and Environmental Forum and Japan-U.Scooperation on leading edge technology in the environmental field. It also involves co-

operation between industries in environmental areas, through organizations such as theWorldwide Japanese Business Alliance for Smart Energy. Another practical aspect of thelow carbon revolution strategy is the setting up of a new generation of energy parks allover Japanfive of which have already opened with eight due to open in the future.

4. Multi-layer cooperation including industrial cooperation with countries rich in natural resources:Because Japan is resource-poor it sees cooperation with resource-rich countries as vital.


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Overall, Japans long-term strategy for economic recovery and growth broadly addresses issues such astrade promotion, focused industry, involvement in the carbon and renewable energy revolution, and in-dustrial cooperation to secure access to vital strategic energy and natural resources.

Japans Technological and Economic Development Ground OperationsThe broader challenge, however, is going from setting strategic economic goals to their execution. While

METI is the main architect of development strategy, there are many agencies involved in its implementa-tion. Although it was not possible for us to review these operations exhaustively, it was possible to get aglimpse of implementation by looking at one public organization charged with economic policy man-agement.

In addition to visiting METI, we also visited the Japan External Trade Organization (JETRO). JETRO has36 offices all over Japan and over 70 offices overseas. JETRO is responsible for the manifold areas of eco-nomic policy implementation. For example, JETRO is responsible for the promotion of FDI and cross- border business into Japan, is involved with assisting Japans small and medium-sized enterprises(SMEs), as well as helping facilitate Japanese business expansion overseas. Within this role, JETRO haswithin its purview the ability to advise foreign companies entering Japan, and Japanese companies look-

ing to expand abroad. Their promotion of cross-border business ties helps facilitate technology transferwhile their understanding of international legal regimes helps home companies protect their intellectualproperty rights abroad. Specifically, JETROs Trade Tie-Up Promotion Program (TTPP) and Invest JapanBusiness Support Center (IJBSC) respectively help Japanese businesses find international partners andhelp foreign companies broaden direct business engagement in Japan. Such proactive engagement accel-erates and facilitates FDI, bringing long-term, sustainable capital inflows to Japan that provide jobs, trans-fer technology, and increase output.

Rising to the ChallengeBased on the above description of Japans economic development strategy and implementation, the fol-lowing assessment can be made about Japans answers to the dilemmas confronting it:

1. Global Engagement: Although there is concern in Japan that their society may pay aprice in the age of globalization for its introversion, it is clear that, economically, Japanhas opted for robust global engagementnot isolation. In fact, global engagement is afundamental pillar of Japans long-term development strategyall four prioritized fieldsspecified in the long-term development plan involve international engagement. Tradeengagement, focus on the value zone, and coordination on the issues of renewable energyand resource acquisition all require collaboration.

2. Regional Integration: Integration of Asian economies and Japans active participation inthe economies of its neighbors are part and parcel of the long-term development plan.Given trade opportunities in other parts of Asia and the need for energy, Japan viewsregional engagement as imperative.

3. Diplomacy: High-level diplomacy plays a pivotal role in Japans economic development

strategy. Deterrence of protectionism, investment in strategic foreign markets such asinfrastructure, maintaining thebusiness environment for licensed production, global co-operation on the environment, technology transfer in the green energy and environ-mental fields, promotion of trade agreements, protection of intellectual property and co-operation with resource-rich countries will all involve concerted diplomatic action.

4. Awareness of Strengths & Trends: The long-term development plan is based on an as-sessment of Japans strengths, as well as projection of global industrial trends. Aware ofits strengths, Japan must also recognize the likelihood of globalizations domestic indus-


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INTERNATIONAL DEVELOPMENTThe U.S.-Japan Bilateral Partnership

Karen Hoiyan Tam

As one of the largest bilateral donors of foreign assistance after theU.S., the U.S.-Japan bilateral partnership in international develop-ment initiatives plays a pivotal role in maintaining Japans securityand prosperity goals. Under the Bush Administration, the U.S. andJapan expanded their cooperation on development issues under theStrategic Development Alliance in 2005 to promote poverty reduc-tion through economic growth, sustainability, capacity building,empowerment, development and security. In 2007, in a summitmeeting between the U.S. and Japan, former President Bush andthen-Prime Minister Fukuda pledged to strengthen cooperation oncritical global trade, energy and environmental challenges.

These goals have since included new challenges from terrorism to issues of global health. In 2002, thetwo countries launched the Clean Water for People Initiative to provide clean water and sanitation for theworlds poor, improve watershed management, and increase the productivity of water. On climatechange, the two countries are working together to accelerate the development and deployment of cleanenergy technologies. In the case of the 2004 tsunamis, Japan and the U.S. acted quickly to jointly providerelief. However, in the second Bush Administration, cooperation took the form of ad hoc initiatives andhas tended to be less coherent, smaller in scale, and lacking the vitality and vibrancy of previous coopera-tion frameworks.1 This has caused Japan to be more and more inward-looking, especially in develop-ment work in Africa.

Japans Policy Framework for International Development

The ODA Charter. The Official Development Assistance (ODA) charter is an integral part of Japans for-eign policy. It aims to meet global challenge through support of capacity development and nation-building efforts in developing countries.2 Japans role in international development is driven by an em-phasis on human security, a concept that emphasizes the individual, building societies that allow eve-ryone to live with dignity, and protecting and empowering individuals and communities that are exposedto actual or potential threats. 3 Japans technical strength in supporting the self-help efforts of developingcountries allows it to exercise its soft power on the world stage through collaboration with interna-tional communities and other stakeholders, including international organizations, other donor nations,non-governmental organizations (NGO), and the private sector.

Policy Planning/Implementation. Several organizations work together to plan and implement Japans for-eign assistance and development plans. The Ministry of Foreign Affairs (MOFA) performs policy plan-

ning and formulation functions. Within the Ministry, the International Cooperation Bureau (ICB) is re-sponsible for planning and drafting policies related to bilateral and multilateral development assistance.In addition, it coordinates the work done by government agencies and ensures that the ODA provided byeach is designed and implemented according to strategic values.4

In October 2008, the former Japan International Cooperation Agency (JICA) was merged with the Over-seas Economic Cooperation within the former Japan Bank for International Cooperation to form the newJICA. This allows New JICA to handle all three instruments of aidtechnical cooperation, grant aid and


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ODA loansin an integrated fashion, enabling it to maximize synergy. Under the New JICA, more thanUS $10.3 billion in financial resources is available.

Foreign Aid. During the 1990s, Japan was the largest donor country in the world. Japans ODA budgetpeaked in fiscal year 1997, and since then, the scale of its assistance has declined steadily. Among OECD-DAC countries, Japans net ODA disbursements in 2002 ranked second behind the U.S.; in 2008, they

ranked fifth. Japans net ODA disbursements in 2008 totaled USD $9.4 billion, compared with USD $7.7billion in 2007, an increase of 8.2% in real terms over 2007.

Perhaps more important than the amount of money being channeled to developing countries, Japans

bottom-up approachpolicy-making influence at a centralized level, with community-based work and

protection and empowerment of peopleis arguably one of its major strengths. Even when Japan doesnot compare with the U.S. in terms of numbers of aid-workers sent abroad, its traditional superiority inplanning and implementation and technological advances leads the way in global development.

USAID-Japan Partnership for Global HealthHealth problems in developing countries are rarely isolated. They are not only threats to individual lives

and human security; they also have global impacts. Infectious diseases can spread easily across nationalborders, posing a common threat to humankind. In June of 2002, the U.S.-Japan Partnership for GlobalHealth was initiated to combat the key health challenges in the dearth of health workers, polio, malaria,and neglected tropical diseases.5

2008 was a critical year in the field of global health as it marked the mid-point for achieving the Millen-nium Development Goals (MDGs) as well as the year of the G8 Hokkaido Toyako Summit and the FourthTokyo International Conference on African Development (TICAD IV). On July 6, 2008, Bush and Fukudapledged to strengthen the U.S.-Japan alliance in tackling critical African health challenges. On February17, 2009, Secretary of State Clinton met with Prime Minister Aso in Tokyo and again agreed to strengthenthis relationship. In addition, on May 5, 2009, President Obama launched a Global Health Initiative thatearmarked $63 billion for health assistance over six years, effectively placing global health among the

Administrations highest foreign aid priorities for 2011. 6

The U.S.-Japan Partnership for Global Health targets five health areas ranging from human capital short-ages to disease burdens:

Health systems/health workers Maternal, newborn and child health Family planning and reproductive health Infectious diseases (e.g. HIV/AIDS, malaria, tuberculosis, polio, NTDs, avian and pan-

demic influenza) Water and sanitation

The strength of the Partnership is that in each of these five strategic areas, it seeks to use the strengths ofboth countries to complement each other and magnify impact. For example, in the area of health systemsand health workers, the U.S. supports health worker training in a number of African countries throughthe Presidents Emergency Plan for AID Relief (PEPFAR) to increase, by at least 140,000, the number offunctional community health workers and volunteers serving at the primary care and community levels. Japan complements this strategy by committing to train 100,000 health workers in Africa, includinghealth professionals and community health workers, over five years. Specifically, Japan focuses on train-ing policy-oriented personnel to make sound national health plans and strategies and to build capacity of


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1 Wakabayashi, Hideki. The US-Japan Alliance: A New Framework for Enhanced Global Security. Oct 2008. CSIS.

2 Takasu, Yukio. UN Economic and Social Council Substantive session for 2009. E/2009/86. May 28 2009.

3 Human Security means protecting individuals from fears and wants, and empowering them so that they can make

choices and take actions for improving the quality of lives against those threats. Health and Development Initiative To-

ward Achieving MDGs by 2015. JODA. Dec 2006.

4 Takasu, Yukio. UN Economic and Social Council Substantive session for 2009. E/2009/86. May 28 2009.

5 USAID-Japan Partnership for Global Health Action Plan for 2009-2010. June 22, 2009.

6 Wakabayashi, Hideki. The US-Japan Alliance: A New Framework for Enhanced Global Security. Oct 2008. CSIS.

7 USAID-Japan Partnership for Global Health Action Plan for 2009-2010. June 22, 2009.


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DIPLOMACYChallengesfortheU.S.JapanRelationship

TedAlcorn

HarveyBeasley

TheU.S.Japanbilateralrelationshipwasbornoutofa tragicwar,

but nevertheless hasbecome the strongest andmost prosperous

EastWest bilateral relationship of our time. The alliance has

endured difficult times, includingJapans economicboom in the

1980s which stirred emotions and fueled years of U.S. Japan

Bashing into the early 1990s, and more recent criticisms of

Americas handling of, andJapans support of, thewar in Iraq.

However,goodrelationshaveenduredandweareoptimistic that

thechallengestherelationshipfacestodaywillalsobeovercome.

ThefollowingwerethemajorreoccurringthemesintheU.S.Japandiplomaticrelationshipthatwere

broughttolightduringourrecentstudytour:

TheRiseofChinaandFearsofJapanPassing

ChinaThreatTheoryRevisited

NorthKorea

JapansSoftPowerPotential

Wewillbrieflyexploreeachandsuggestrecommendationsastohowthesechallengescanbeovercome

forthemutualbenefitofJapanandtheU.S.

PassingJapanforChina?TheincreasinglyimportantrolethatChinaplaysintheU.S.relationshipwithEastAsiaisonefactorthat

hascreatedfears inJapan thatanewageofJapanPassingmaybeapproaching.However,Japanstill

remains the U.S. strongest democratic ally in East Asia and stillboasts theworlds second largest

economy.Japansmilitary potential is great, andU.S.bases located inJapan are key to the enduring

securityoftheregion.ThisisanentrenchedrelationshipthatcannotbelightlytossedasideforChina,the

newcontenderforattentioninAsia.InanattempttoaddressrisingfearsamongJapanesethattheU.S.

maybe on the verge of abandoningJapan forChina, formerU.S.Ambassador toJapanAmbassador

ThomasSchieffersaid,BackinmyhomestateofTexas,wehaveanoldsaying:nevertradeanoldfriend

foranewfriendoryouwillwindupwithnofriends.Indeed,currentU.S.DeputyChiefofMissionJim

ZumwaltalsorelatesthatoneofthemostpersistentaspectsofhisjobistoreaffirmtheU.S.commitment

toJapan.

Although

the

rise

of

China

undoubtedly

unsettles

the

existing

order,

we

can

nevertheless

say

withconfidencethattherelationshipbetweentheU.S.andJapanwillendureovertime.

WehaverecommendationsforbothJapanandtheU.S.toaddressthefearsoftheU.S.neglectingJapanin

favorofChina.

JapanshouldresisttheurgetoseeitsrelationshipwiththeU.S.asazerosumgame.U.S.governmentofficialshaveemphasizedthatanimprovementinSinoU.S.relationsdoes

notimplyaweakeningoftheU.S.Japanrelationship.

2009JapanTravelProgramforFutureU.S.Leaders

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powerroleisnotinitselfadequatetocompensateforitsnonparticipationinothertraditionalhardroles.

The U.S. has also urged that Japan take a more proactive role in hard diplomacy, such as the

controversial refuelingmissions ofU.S. ships operating inAfghanistan.Officials atMOFA said that

Japanese influence engenderedby the popularity ofJapanese language and culture abroad is indeed

significant, and the MOFA is trying to use Japans soft power initiatives as an important public

diplomacytool

to

promote

Japans

national

interests.

Discovering an effectivemethod to convertJapanese soft power into real political power is indeed a

challengethatwillneedtobecarefullystudiedandmanagedoverthelongterm.MOFAofficialspointed

outthatwiththeeconomicdownturn,theMOFAsbudgetforculturalactivitiesisusuallythefirsttarget

ofcuts.Wewouldadvisethat:

The Japanese government should reevaluate the significance of its ministryfundedinitiatives thatcontributetosoftpowerandadjustbudgetallocationsasnecessary.We

suspect thatwith closer examination additional investment into softpower initiatives

and

programming

will

be

found

to

be

justifiable.

TheU.S.andJapanshouldworktogetherindevisingwaystomoreeffectivelyharnessJapanesesoftpowertoachieveinternationalends.DuetotheclosenessoftheU.S.Japan

relationship,agoodglobalperceptionofJapaneseforeignpolicyreflectswellontheU.S.

aswell.Though the challenges facing the U.S.Japan bilateral relationship are formidable, the alliance has

successfully endureddifficult times in thepast.The fresh energy that theDPJwillbring toJapanese

politics, and the comprehensive review of the security aspects of the alliance that Prime Minister

Hatoyamahasplanned,areexpectedtobringanewvitalityandrelevancetothealliance.Itisnotoverly

optimistictoexpectthatastrongU.S.Japanrelationshipwillcontinuetoendureforyearstocome.

2009JapanTravelProgramforFutureU.S.Leaders

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SECURITYThe Future of the U.S.-Japan Alliance

Ross Matzkin-BridgerKevin ODriscoll

For more than fifty years, the U.S.Japansecurity alliance has been a cornerstone forthe defense of both nations, serving as apillar of stability in East Asia. This alliancecalls for the U.S. to use its forces to defend Japan in return for permission to useJapanese land for military bases, as well asthe funding necessary to maintain thoseforces. Furthermore, it calls on both sidesto contribute toward the further

development of peaceful and friendlyinternational relations. While allindications point toward the continuanceof a strong alliance marked by deep cooperation, the relationship between the U.S. and Japan is in a phaseof transition and evolution. Since the fall of the Soviet Union, some have questioned the direction of thealliance. Some ask if it necessary for the U.S. to maintain its current level of nearly 35,000 troops stationedin Japan. Others question whether it is in Japans interest to have such a foreign military presence on itssoil. The threats of the 21st century are much different than the challenges of the Cold War; however, theyare no less grave. The U.S.-Japan alliance has the potential to play a crucial role in promoting peace,prosperity and security across Asia and around the world. To ensure that the alliance remains effective,both countries must identify the specific issues on which the two sides should cooperate and lead. Webelieve that these issues should include:

The security of the Japanese homelandU.S. and Japanese forces must continue to worktogether to secure Japan from potential attacks by both state and non-state actors. Keyissues are threats from North Korea and terrorism.

Global stabilityInstability, poverty and the extremist ideologies that these conditions !breed remain one of the largest security threats to the U.S. and Japan. The two countriesshould work together in both military and civilian capacities to promote stability infragile regions.

Nuclear nonproliferationThe U.S. and Japan are two of the leading countries in promotingnuclear security. Tackling this difficult problem is a unique opportunity for mutualleadership.

In the past, both countries have cooperated on major global issues, but have each played very differentroles. On Japanese homeland security, the U.S. has taken on the brunt of defense responsibilities. On theone hand, this has allowed Japan to keep its defense budget at roughly a modest 1% of GDP, but it hasalso forced it to grant land to 134 U.S. bases that occupy a total land area that is more than one and a halftimes the size of Tokyo. Japan also contributes a significant amount of money to maintain the U.S.presence; however, it is a small sum compared to what they would have to spend on defense in theabsence of U.S. forces.


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Research Institute for Peace and Security (RIPS), Tokyo


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North KoreaThis is the most immediate threat to Japanese security. ChinaJapan and China have greatly improved relations over the last several years and

there is little immediate threat from China to the Japanese homeland. Both sides mustwork hard to continue this trend in order to mitigate future conflicts of interest.

Transnational Security IssuesAs the worlds second largest economy and integral player

in many international organizations, Japan remains a target for extremists. In addition,as an island nation, Japan is particularly affected by piracy in both Southeast Asia and theMiddle East.

North Korea presents the most immediate threat to Japanese territory and U.S. interests in the Asia Pacific.Pyongyang has a number of short-range and medium-range ballistic missiles that are capable of hittingJapan, and they have on multiple occasions taken provocative steps such as test firing these weapons inclose proximity to Japanese territory. Additionally, North Korea has kidnapped dozens of Japanesecitizens, many of whose whereabouts remain unknown. Finally, the regimes nuclear program is also agreat concern, especially if the North were to develop the ability to attach a nuclear warhead to theirexisting missile technology.

The U.S. and Japan should continue a twofold strategy toward North Korea that includes being ready to defend against any potential attack and working together to endPyongyangs nuclear and missile programs through a combination of peacefulnegotiations and economic sanctions.

Proliferation of nuclear technology and materials from North Korea is another greatconcern. The U.S. and Japan should continue to track suspicious North Korean vesselsand gather intelligence on potential proliferation activities.!

China and Japan have built up a great deal of trust since the end of the Koizumi administration. Howeverthere is still much more to be done to strengthen the relationship. China has shown positive signs ofbecoming a responsible international stakeholder on economic issues such as trade and investment. On

other aspects of international relations, there is still a great deal of uncertainty. China maintains a lack oftransparency on military issues, and it is unclear what its long term goals are. Beijings extensiverelations with rogue states such as the Sudan and Burma also calls into question their ultimate motives.Japan is especially worried about China strategic threat to Taiwan and disputed islands in the East ChinaSea.

We are hopeful that more trust can be built with China; however, in the mean time, the U.S. militarypresence in Japan serves as an effective deterrent against any potential Chinese aggression. Furthermore,both the U.S. and Japan need to continue to work together to further promote Chinas emergence as aresponsible stakeholder in the international system. This means urging China to forge policies that are inline its rhetoric of peace and stability. The opaque nature of much of Chinas decision making is ofparticular concern, and the U.S. should work with Japan to urge greater transparency and a gradual shift

towards democracy.

It is in everyones best interest to have a China that is more responsible in theinternational arena. As such responsibility emerges, it would be a welcome developmentfor China take to a larger constructive role in world affairs. It has already demonstratedsome such capabilities with its leadership role in the Six-Party Talks with North Korea.

Transnational Security Issues such as terrorism and piracy are other key threats that Japan now faces.


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Al-Qaeda leaders have communicated direct threats to Japan in the past, actively trying to establishterrorist networks within the country. Piracy affecting international sea lines also threatens to limit to freeflow of goods and energy to and from Japan. We have already seen that in response to these threats, Japan has been more willing to join the U.S. and the world community in security operations abroad,such as the deployment of Japanese troops to Iraq following the 2003 U.S.-led invasion, re-fuelingmissions in the Indian Ocean, and anti-piracy operations in the Gulf of Aden. These actions have sparked

debate as to how much of a military role Japan should play overseas, and this dialogue is a healthy stepin facing the new security realities of the 21st century.

Politics and SecurityOne issue that complicates Japans growing global role is its pacifist constitution. Article 9 of theconstitution renounces war and prohibits an offensive military capability. Current interpretations ofArticle 9 prevent Japan from sending combat forces abroad or from engaging in collective self defensewith its allies. This has turned into a political issue with strong opinions calling for the protection ofArticle 9 on one side and a constitutional revision on the other. Recent changes in Japanese politics mayhave an impact on how this issue plays out.

Several of the previous LDP prime ministers had strongly been in favor of altering Article 9 to allow for Japan to engage in collective security operations, such as UN peacekeeping missions. The DPJ hashistorically taken a less favorable look on constitutional revision, and the current ruling governmentcoalition that includes the Socialist Democratic Party (SDP) will almost certainly reject any such proposal.The short-term impact of the DPJ coming to power is that several of Japans overseas operations will end,as we have already seen with the Self Defense Forces re-fueling mission in the Indian Ocean. In addition, Japanese leaders are attempting to re-negotiate the consolidation of American troops on Okinawa. Thelong-term picture, however, remains much less clear. The DPJ has not been in favor of amending theconstitution; however, they have advocated a greater international role for Japan. This could mean agreater role in non-military realms, or it could also include at least a reinterpretation of Article 9 thatwould allow for collective self defense and limited overseas operations.

Deterring Nuclear ProliferationIn addition to the fight against terrorism, the U.S. and Japan must employ collaborative leadership infighting worldwide nuclear proliferation. Secretary of State Clinton has called nuclear weapons thegravest threat to international security. Both the U.S. and Japan are in unique positions to lead a newnonproliferation campaign. Japan is the only country to ever suffer a nuclear attack, and has longadvocated a world without nuclear weapons. President Barack Obama has notably announced the goalof eventually eliminating all nuclear weapons. The nuclear bombs dropped on Japan at the end of WWIIcaused unspeakable devastation, and both the U.S. and Japan are now ready to develop concrete policiesto prevent any future use of nuclear weapons. Both sides realize that modern nuclear weapons coulddeliver yields more than ten times as powerful as the ones that hit Hiroshima and Nagasaki. Any suchattack would be catastrophic.!There are several steps that the U.S. and Japan should implement together in order to deter nuclearproliferation.

First, both countries should work to prevent new countries and transnationalorganizations from developing nuclear weapons.

Next, they must work to prevent nuclear materials and technology from being tradedand exported. Nascent nuclear programs in North Korea and Iran are of great concern,and the U.S. and Japan should take leading roles in strengthening and enforcing


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international safeguards. Key targets for these goals include looking for ways to improvethe UN Non Proliferation Treaty at next years review and working with theInternational Atomic Energy Agency to bolster the Global Nuclear Energy Partnership.

Finally, the U.S. and Japan should combine their technical expertise and create tougherstandards proliferation resistance in nuclear power plants. As

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