Japan caught between two sides

Japan caught between two sides

Japan finds itself walking the tightrope between the United States and the emerging markets of East Asia. Suvendrini Kakuchi of Inter Press Service reports.

TOKYO: In the run-up to the second summit of Pacific Rim countries in Osaka later this year, Japan finds itself caught between its need to keep Washington happy and to woo new trading partners in East Asia.

At issue is the sensitive question of whether the Asia Pacific Economic Cooperation (APEC) forum or the East Asian Economic Caucus (EAEC) should take the lead in representing the interests of East Asia's economic tigers.

Southeast Asia is soon going to overtake the United States as Japan's biggest trading partner, but Japan still needs to appease Washington for security and trade reasons. It was reluctantly that Tokyo seems to have decided not to attend a meeting of the Association of Southeast Asian Nations (ASEAN) in a Thai resort town last month.

That meeting was to have been a precursor to the Malaysian EAEC initiative that was shot down by the United States in favor of the larger Pacific Rim APEC. Japan had to reluctantly go along, although it had earlier voiced support for EAEC.

Some analysts have called the EAEC a "non-Caucasian caucus" because it would exclude the United States, Australia and Canada. Non-ASEAN members and potential EAEC partners, South Korea and China, were invited to the Thailand meeting.

Tokyo had pushed for the inclusion of Australia and New Zealand in the ASEAN guest list to make it look less like an EAEC inauguration, but Thailand rejected the proposal.

Despite the growing importance of Asia's booming economies to Japan, regional experts say security ties with the United States remains a priority for the country which is still greatly dependent on the post-war U.S. defense umbrella.

Although Tokyo has waffled on EAEC before, its rejection of the ASEAN invitation is the first clear rejection of the EAEC. Malaysian Mahathir Mohamad argues that APEC is dominated by western powers and East Asia needs an economic bloc it can call its own.

The United States wants to turn APEC into a free trade area by the year 2020, largely because its manufacturers would benefit from being plugged into the big market of the 21st century. But Southeast Asian leaders fear their independence would be jeopardized and smaller ASEAN countries would be swamped under that arrangement.

At the APEC summit last year in Bogor, APEC members agreed on a phased timetable for trans-Pacific free trade.

"Japan's economy is heavily reliant on its export trade, and the merits of APEC as a free trade bloc is enormous for Japan," says Kunio Igusa of the Institute of Developing Economies in Tokyo. But Japan must take care not to strain its trade ties with its booming Asian neighbors, he warns.

"Japan has indicated it is not going to join the EAEC. By avoiding the (ASEAN) meeting it has shown its disinterest in a symbol of Asian solidarity without the United States," says C.H. Kwan, a senior economist at the Nomura Research Institute.

There is uncertainty about whether the Thailand meeting will go ahead without Japan. South Korea is also expected to follow Japan in rejecting the ASEAN invitation.

Tokyo's decision is likely to anger Southeast Asian leaders, particularly Mahathir. The Malaysian leader has already threatened to boycott the November APEC summit in Osaka.

Japan has officially thrown its support behind APEC, but officials have listened keenly to discussions on the formation of the all-Asian economic grouping, and some Japanese politicians have openly spoken in support of EAEC.

Mahathir has chided Japan for dragging its feet on EAEC. "Japan owes East Asia and Southeast Asia a great debt," he said. "We do not need apologies (for Japan's wartime acts). What we need is your cooperation and your help to develop us."

Trade between Japan and ASEAN's fast-growing economies has expanded steadily in recent years. While many ASEAN countries still have trade deficits with Japan, their exports to the Asian economic giant continue to increase. Thailand's exports to Japan rose 23 percent in 1994, making Japan its biggest export market.

Since 1993 Malaysia has become the second most important country after Singapore for Japanese private investment. Major Japanese companies have moved electronic production bases to Malaysia and have been re-importing the products back to Japan.

The yen's steady rise -- 20 percent since the beginning of the year -- is expected to further boost Japanese trade with ASEAN. Southeast Asia has become a significant production base for Japan and this is the reason why Japan, which has yet to resolve its trade friction with the United States, is keen to maintain close ties with Asia.

Despite years of negotiations, Japan's trade surplus with the United States remains massive -- US$ 54 billion in 1994. Last year, Keidanren, Japan's largest business organization, began openly advocating support for the EAEC. Noting the dynamism of the Asian economy, the business group urged the Japanese government to follow a more practical policy toward the world.

"The merits of merging with China and Southeast Asia which are experiencing double-digit growth in comparison with the United States and Europe is something the Japanese cannot resist," according to Japan expert Robert Orr.

Mahathir has also been receiving wide public attention in Japan. "Mahathir is popular in Japan because he says what most Japanese don't dare to," said a publisher, explaining the recent media rush for interviews with the West-bashing premier.

Tokyo-based analysts say the divergent positions taken by the government and business leaders over the EAEC issue reflect a new and significant trend in Japanese politics.

Noted Kwan: "Up to now Japanese diplomacy was tightly knit with the nation's economic interests. Now we are seeing a split."

-- IPS