Asia first glimpsed its future in 1997 when Japan and the United States renegotiated their long-standing defense arrangements and China tried to sway Taiwan’s elections by lobbing missiles into the Taiwan Strait. As the US Pacific fleet positioned itself to stop the missile exercises, Beijing realized how much more latitude the new defense arrangements gave Japan. Suddenly, Tokyo factored into China’s calculations. The leadership in Beijing felt it necessary to demand Japanese assurances concerning Taiwan. In a dramatic break with past Japanese passivity, China received an almost challenging response when Prime Minister Ryutaro Hashimoto told Beijing, “This is not the sort of situation where we can draw a line on the globe and say, ‘up to here.’ It is not that simple.”

As this incident demonstrated, a Sino-Japanese rivalry has been building, and it will surely intensify in coming years. Japan’s recent assertiveness is not an aberration. It stems from economic and demographic imperatives that will increasingly force that nation to engage the rest of Asia more fully than at any time since World War II. The contest between these old enemies will confront US policy with new challenges that neither a continuation of the Clinton administration’s laissez-faire approach nor a return to Cold War rigidities can adequately answer.

Japanese Renaissance

Although the pressure on Tokyo to raise its profile elsewhere in Asia will have profound foreign-policy implications, its origins are strictly domestic. One source of pressure lies in Japan’s economic woes. Despite government stimulus efforts, the Japanese economy has been stagnant, growing at less than half the pace set by the United States in recent years. Under this strain, Japanese reformers argue that the country needs a new economic model that is more open to the rest of the world and particularly to Asia.

Reinforcing the impetus for change is Japan’s unfolding demographic problem. The country’s population is aging rapidly, and within 15 years one in four Japanese will be 65 years of age or older; the nation will have fewer than two working people for each dependent retiree. This scenario precludes any return to Japan’s former status as the world’s leading manufacturer and exporter. Under these pressures, Japanese industry will have to move abroad, and with a limited domestic labor force, Japan will become more dependent on imported goods—perhaps from Japanese firms operating in Malaysia, China, Korea, Thailand, the Philippines, Vietnam, and other Asian states. The domestic economy will cease to emphasize manufacturing and exporting and increasingly will become a center for management, design, and finance.

These changes will stretch beyond economics and force an equally radical shift in Japanese diplomacy and foreign policy. Unlike earlier Japanese business expansions into North America and Europe, the expansion into Asia will demand official government support from Asian nations. In the West, well-developed legal structures and respect for contract law have allowed Japanese businesses to protect their interests in local courts with little intervention from Tokyo. But in Asia, where underdeveloped legal structures permit political influence to trump contracts, diplomatic support is essential to secure equitable treatment. The more the nation’s productive power moves abroad, the more vulnerable Japan will become to the economic policies, corruption, incompetence, and expropriation of other countries. No nation can stand by and simply accept such vulnerabilities. Faced with such circumstances, Tokyo will eagerly seek to increase its foreign influence and begin to anticipate extreme situations, enhancing its ability to back diplomacy with the threat of military force.

It will be a wrenching change for both Japan and its neighbors. Since World War II, Tokyo has been content, indeed anxious, to maintain an extremely low diplomatic profile and to stay in the United States’ shadow on most foreign policy issues except for the most straightforward trade issues. Japan has hidden behind the pacifist ninth article of its constitution that forbids it the right to “belligerency” and “war-making potential.” Tokyo has even insisted on calling its armed forces “self-defense forces.” Officially, the nation does not have an army, navy, or air force. The prime minister’s office and the Diet have agonized and equivocated over minor diplomatic problems where most nations would not have hesitated. In 1989, for example, Tokyo could not even bring itself to join most of the world in condemning China over the Tiananmen Square massacre. Tokyo also hesitated to send supply ships to support the allies in the Gulf War, much less ground troops or combat pilots, and it has long refused to contribute military personnel to UN peacekeeping operations.

This pattern of passivity has led Japan, until recently, to rely almost exclusively on aid as a means of foreign influence. Even in the face of Japan’s hard times, Tokyo has spent more than twice as much as Washington on international assistance, especially to Asian countries. Fully one half of China’s foreign aid comes from Japan, as does up to 80 percent of aid to Malaysia and South Korea. Because aid has served as its primary means of influence abroad, Tokyo has seldom made direct grants. Instead, it has favored the increased control of specifically directed subsidized loans. The Organisation of Economic Co-operation and Development, an international economic alliance for highly developed nations, noted recently that of all major donor nations Japan has imposed the most conditions on and offered the least flexibility in giving its aid. Occasionally, these strings have enabled Japanese officials to all but write policies on trade and development for aid recipients in Southeast Asia.

As successful as aid has been, the growth of Japan’s economic power in Asia will render this old and largely low-profile pattern inadequate. To cope with this, Japan has tentatively begun asserting itself as Asia’s spokesman to the rest of the world. Tokyo made an especially dramatic step in this direction during the Asian financial crisis of 1997 when it defied both Washington and the International Monetary Fund to propose a yen-based reserve to stabilize Asian currencies. By asserting itself as Asia’s champion, Japan also has begun to leverage its position as the only fully developed Asian power and the only non-Western state included in the G-7 group of the world’s most powerful economies. To complement this effort, Tokyo has begun to campaign for a permanent seat on the UN Security Council, which would eliminate one diplomatic advantage that China presently enjoys.