The Prospects of a Japanese Revival

5 MINS READSep 26, 2013 | 00:59 GMT

Great powers die hard. On Sept. 25, Japanese Prime Minister Shinzo Abe became the first non-American to receive the Herman Kahn award from the Hudson Institute. Kahn, a great geopolitical theorist, identified Japan's economic boom in the early 1960s and championed what in 1970 he called the "emerging Japanese superstate." The award thus seems fitting as a way of recognizing Abe's comprehensive plan to revive Japan's global prestige and power, now running full steam ahead.

What is a Geopolitical Diary? George Friedman explains.

So far, Abe's administration has thrived on an initial big dose of fiscal and monetary stimulus, energetic diplomacy and the full might of his Liberal Democratic Party's institutional connections to create a glowing image of national rejuvenation. When Abe stopped in Canada on his way to New York this week, his agreements with Prime Minister Stephen Harper revealed the core interests at stake: securing energy supplies (liquefied natural gas), rebuilding alliances (through logistical cooperation and dialogue) and freeing up trade (via the Trans-Pacific Partnership).

On Thursday, Abe will speak on Wall Street to tout his combination of stimulus policies and structural reforms known popularly as "Abenomics," which has energized the global investor community and Japanese stock market since the middle of 2012. His speech at the U.N. General Assembly will focus on human rights, women's rights and aid to Syrian refugees, possibly including an offer to send Japanese personnel to Syria to help with the mission to destroy chemical weapons. Thus he hopes to receive the blessing of the U.S. intellectual, financial and diplomatic communities as he tries to show the world that, regardless of the past, Japan today plays a leading role in upholding stability and human rights.

Beyond the media blitz, Japan's urgency comes from deep insecurities. The Tohoku earthquake and nuclear crisis marked the latest low-point in national power, which began to decline with the 1990 stock market crash and had already struggled through two "lost decades," global economic crisis, an unprecedented domestic political shakeup, Russian resurgence and, most notably for Tokyo, the economic and military rise of China. The debts Japan has incurred to maintain tranquility throughout this period of stagnation continue to crowd out investment. Beneath all these trends lies the inescapable fact that the country's population is aging and shrinking — a trend that constrains its economy and its international influence more than any other.

Abe's motivation to push ambitious policies stems from growing exasperation with the perceived loss of prosperity and security. Hence a more aggressive monetary policy to break deflation, the return to bigger fiscal stimulus packages despite the debt load, and the renewed efforts to boost military spending and broaden the range of military operations. Hence also the push to compete for market share in every corner of the world, from Southeast Asia and Central Asia to Africa, and the move to renovate old alliances and partnerships, from India to the United Kingdom, even to the point of a seeking rapprochement with historic rivals like Russia, again with China foremost in mind.

Ultimately, however, Abe needs to combine his initial, temporary policy successes, such as lifting growth rates through stimulus, with more difficult and long lasting successes. The "third arrow" of his domestic agenda is structural reform, which his government has not yet launched. When the Diet convenes in October, it will begin voting on several bills meant to shake up the collusive business relationships, excessive regulations and trade protectionism that have shielded Japan from the forces of change.

It remains to be seen whether any of the proposed policies will change the psychology of Japanese businesses and consumers who will naturally respond only when prices and wages rise on a continual basis. At the same time, his Cabinet will set up a National Security Council and revise national security strategy and defense policy in an attempt to normalize the Japanese military more quickly. It will also use diplomacy to form closer security ties with neighbors — with the implicit interest, ultimately, in balancing China while convincing previous victims of Japanese imperialism that Japan's re-militarization will preserve rather than jeopardize global stability.

The life cycle of Japanese administrations is short. Though this administration does not face elections until 2016, it could be taken down suddenly, for instance by mismanaging the Fukushima radiation leaks or by getting embroiled in corruption scandals. It could also fail to maintain growth or public confidence while pursuing controversial structural reforms like consumption tax hikes, corporate tax cuts, privatizations or entitlement cuts. Or it could suffer shocks from the outside — Europe and China both could spoil its plans. Abe has perhaps a year or two to capitalize on the current confluence of government unity, popular support and international buzz to push through his agenda and create a self-reinforcing habit of sustainable growth and the perception of a stronger defense posture. Otherwise, domestic or international resistance may prevent Japan from escaping its familiar cycles.

Still, entirely aside from Abe's fate, this trip to North America has shown that Japan retains latent institutional strengths on a global scale. Emerging markets want Japanese goods and services, and international partners, including its cautiously approving ally the United States, increasingly recognize the need to balance China.

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