Summary
The government of recently inaugurated Japanese Prime Minister Yoshihiko Noda has been under increasing US pressure to join a Pacific Rim-wide free trade agreement known as the Trans-Pacific Partnership (TPP). Noda faces stiff opposition to the initiative, both from domestic lobbies that do not want to see increased foreign competition and a trend in the Japanese population toward an internal focus. Thus, despite its benefits — and a strong push by the United States, which wants Japan’s participation in the TPP as an economic bulwark against China’s growing influence — Tokyo is unlikely to join.
Analysis
The government of recently inaugurated Japanese Prime Minister Yoshihiko Noda has been under increasing U.S. pressure to join a Pacific Rim-wide free trade agreement known as the Trans-Pacific Partnership (TPP) that includes the United States, Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam. Noda has been publicly receptive to the idea, saying in September that he would join TPP negotiations and proceed aggressively with other free trade discussions.
However, Noda has faced stiff opposition to the initiative, both from domestic lobbies that do not want to see increased foreign competition and a trend in the Japanese population toward an internal focus. Thus, despite its benefits — and a strong push by the United States, which has its own reasons for wanting Japanese economic liberalization — Japan is unlikely to join the TPP or any free trade agreement in the near future.
Japanese prime ministers have been unsuccessfully attempting to reform the domestic economy for more than a decade. Noda has pledged to implement fiscally conservative measures, to liberalize Japanese trade and to restructure the bureaucracy in order to rejuvenate the economy. However, his efforts have been hampered by a lack of political authority — he is the sixth Japanese prime minister in five years — and his government must address the aftermath of the March 11 earthquake and subsequent disaster at the Fukushima nuclear power plant.
The TPP would benefit Japan’s economy. The Pacific Rim has some of the world’s most dynamic economies, all of which are trending toward trade liberalization, and Japan stands to lose its economic primacy to other growing economies, including its historical rivals South Korea and China.
Seoul’s industries are eating away at Japanese manufacturers’ market share abroad, and China overtook Japan as the second largest economy in the world in 2010. However, an agricultural lobby resistant to opening agriculture to foreign competition has divided Japanese opinion on the TPP issue and forced Noda to take a cautious position.
The debate over the TPP reflects a general divide, delineated by Japan’s geography, between proponents of opening Japan to the world and those who support closing off foreign influence. The former tend to be younger voters and allies of the competitive manufacturing industry with the latter being older voters and allies of the agricultural lobby. Although Japanese opinions on this debate are complex, several factors have recently contributed to a noticeable shift toward introversion. First, Japan’s population is rapidly aging, with the population of elderly people nearly doubling between 1970 and 1990. Second, Japan’s prolonged economic stagnation has made international study expensive. As gaining international experience became disadvantageous for Japanese youth seeking to enhance their career opportunities, the young increasingly turned their attention away from the international sphere. The Japanese business community is alarmed by this latter trend, afraid it will lead to a lack of human resources capable of dealing in an international setting and able to understand international consumers’ needs. Japan’s economy is mainly driven by a strong, if stagnant, internal market, so it will not go bankrupt in the near future by reducing its international trade. However, such a trend does pose a long-term threat to the country’s international competitiveness.
The main push for the TPP is coming from the United States, where the administration of U.S. President Barack Obama has recently undertaken a policy of re-engagement in East Asia as a means of confronting growing Chinese economic and political clout. To this end, the Obama administration has increased contacts with countries near China and initiated a deeper dialogue with the Association of Southeast Asian Nations, the East Asia Summit and the Asia-Pacific Economic Cooperation Forum.
The inclusion of Japan in the TPP would represent a huge economic enlargement of the agreement; the Japanese and American economies combined would make up 90.4 percent of the TPP’s total gross domestic product. This economic might would both bolster the effectiveness of the treaty as a counterbalance against China and provide a platform for U.S. influence in the region due to Japan’s strategic position off the east coast of Asia, its longstanding alliance with the United States and its rich market economy. Thus, the Japanese trend toward introversion, and specifically its aversion to the TPP, has implications for the U.S. strategy in the region.
Japan is not necessarily retreating from the world, as recent overtures to countries in the region and its increasing involvement in the South China Sea show, and Japan’s geographic position means the United States always will have interests there. However, this reluctance to engage internationally means Japan likely will become less of a factor in U.S. strategic planning for the region.
Republishing of this analysis is with the express permission of STRATFOR. To read the original and view graphics go to http://www.stratfor.com/node/202950/analysis/20111006-trans-pacific-partnership-and-japans-inward-focus. The Manila Times
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