Japan’s economic troubles may be pushing the country towards free trade negotiations with the U.S., a goal long-sought by American officials who see it as a potential boon to two of the world’s industrial giants and to the U.S. presence in Asia.
New Japanese prime minister Shinzo Abe meets with President Obama on Friday for their first official talks since he took office last year and launched an ambitious program to revive the country’s stalled economy
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Battling to revive a once-dominant economic power, Japan may turn towards U.S. trade pact, and power.
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Much about Abe’s plan is undefined, but it is already controversial. An expected monetary easing has prompted major nations to warn Japan against any moves aimed at devaluing the yen. Details await Abe’s appointment of a new central bank head. Proposals for new government stimulus spending have led the International Monetary Fund to caution that those efforts should be short-lived and quickly give way to a taming of the government’s seemingly runaway debt.
What Abe calls the “third arrow” of his plan involves reviving growth in an economy that is aging and, since the 2011 Fukushima nuclear disaster, confronts both rising energy costs and a potential migration of its industrial base to places less prone to tsunami, earthquake and other calamities. Those pressures, U.S. and Japanese officials and analysts say, have built momentum behind Japan’s joining the 11-nation Transpacific Partnership negotiations – a politically controversial step in which Abe would have to open several highly regulated local markets in return for the prospect of new investment, cheaper food prices and a potential energy lifeline in the form of natural gas imported from the U.S. Nations that have signed a free trade agreement with the U.S. have easier access to its energy exports.
“Everybody was thinking about TPP as a battle between the big companies that want to export, versus farmers,” an influential constituency protected from outside competition, Motoshige Itoh, a Tokyo University economics professor and Abe economic adviser, said at a recent seminar at the Peterson Institute for International Economics. “But increasing numbers of Japanese recognize it is much bigger,” and could have implications for the country’s future energy supplies and the survival of its industrial base.
Abe, in an interview with the Washington Post, said he considered the talks with Obama “important” in determining “whether or not Japan’s participation in the TPP will have a positive effect on the national interests of Japan.”
Trade will be just one part of a dense agenda for Friday’s meeting. Japan is a critical U.S. ally, central to the administration’s effort to counter China with a “pivot” to Asia, part of the work to contain the nuclear ambitions of North Korea and Iran, and the U.S.’s fourth largest trading partner. Japan is a major buyer of U.S. government debt, and its $250 billion of foreign investment in the U.S. includes a massive automobile complex.
But the country’s economic stagnation — deflation, demographic decline, and a collapse of investment — threatens to weaken its influence. One of the 20th century’s defining economic successes, Japan’s industrial might once stoked the sort of anxiety in the U.S. that today is directed towards China — with national champions like Toyota and Honda challenging Detroit and Japanese investors snapping up landmark U.S. real estate. Japan’s roughly $6 trillion economy has now been eclipsed by China as the world’s second largest, and its once leading role in consumer innovation — remember the Walkman? — arguably has been surrendered to the Apples and Samsungs of the world.
