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The United States and Japan at 50: Where We Are Today

Panelists: Yoshihide Soeya, Director, Institute of East Asian Studies, and Professor of Political Science, Keio University, Edward Alden, Bernard L. Schwartz Senior Fellow, Council on Foreign Relations, and Sheila A. Smith, Senior Fellow for Japan Studies, Council on Foreign Relations
Presider: Yoichi Kato, National Security Correspondent, The Asahi Shimbun
October 8, 2010
Council on Foreign Relations

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This event was part of the workshop, The United States and Japan at 50: Resilience and Renewal, cosponsored by Council on Foreign Relations (CFR) and the Asahi-Shimbun. This event was also made possible by the generosity of the following corporate sponsors of CFR's Japan program: Canon USA, Mitsui & Company, Mitsubishi Heavy Industries America, Mitsubishi International Corporation, Sony Corporation of America, and Toyota Motor North America.

YOICHI KATO: Let us start the first session. My name is Yoichi Kato. I'm a national security correspondent of Asahi Shimbun, and I'm going to preside over this first session.

And I was given a note to go through some household announcements, but since Dr. Haass kindly did that, so I don't have to do it, I suppose. But just a couple things: to turn off your cell phones, and that this is on the record.

And this session will look into the current status of the bilateral relationship from various perspectives. And Dr. Haass -- in previous session, Dr. Haass and Dr. Funabashi laid out in a broad brush the current situation and the challenges that both countries face right now. And we are -- in this session we're going into a little bit more details of these challenges and problems and opportunities perhaps we face. And I hope we don't become too stunningly parochial -- (laughs) -- as Dr. Haass pointed out.

As we all know, North Korea is now going through a transitional power, and Japan has just faced a tough diplomatic challenge of confronting with China over the Senkaku Islands. And there is a new look at a significance of bilateral alliance on both sides, Japan and United States.

On economic, trade front, trans-Pacific regionalism, TPP, as Dr. Funabashi pointed out, is gaining more attention and interest as the APEC meeting in Yokohama in November is approaching. And today I think this panel, we have the best lineup of panelists to go through those issues and see how we can overcome the parochialism -- (chuckles) -- and show how our bilateral relations can go forward.

And let me briefly introduce our panelists here. And since you have bios in front of you, I don't go into the details. But from -- in the order of presentation, Dr. -- Professor Yoshihide Soeya, professor of political science and international relations at Keio University, and he's known for having a really wide range of academic interests, not limited to the bilateral relations but also regional.

And next, Mr. Ted Alden. He's a former FT bureau chief, Washington, D.C., and he's well known for working on immigration issues and also economics and trade.

And finally, but not least, Dr. Sheila Smith, senior fellow for Japan Studies of Council on Foreign Relations. And she is -- coming from Japan -- she is the most-watched U.S. commentator in Japan, these days, to explain what's going on in Obama administration.

And so, first, I'd like to ask Professor Soeya to start with your opening remarks. Thank you.

YOSHIHIDE SOEYA: Thank you. Thank you very much, Mr. Kato, for five to seven minutes -- (inaudible) --

KATO: (Inaudible.)

SOEYA: -- that I was given. But I will speak for eight minutes.

KATO: (Laughs.)

SOEYA: It's a bit long.

So yesterday I had a chance to address a group of specialists at the Stimson Center, and there I said Prime Minister Kan does not have any foreign policy. But today I will sound different, and talk as if there is a kind of optimal policy which Japan should follow and kind of objective conditions that are actually moving Japan in that direction, pushing Japan in that direction, although there is not necessarily explicit awareness about those conditions.

So on the one hand we talk as if Japan has no policy, sense of direction, of being, you know, drifted. But the other side of the coin is actually Japan is moving in a certain direction, which I think is basically positive and constructive, even though it's not so proactive, it may not look so proactive. So please allow me to be Japanese to that extent. And I'd like to spend the following seven minutes in laying out some of those things along that line of my basic approach to that set of issues.

Well, first of all, of course, we need to talk about the rise of China. And the implications of the rise of China are, of course, genuinely global. It's not -- it's not, of course, only bilateral nor regional. And when it comes to a global order, I think this is a bit irony, that the current rise of China is the product of a liberal international order, if you may, of which Japan and U.S. or the U.S.-Japan alliance have sustained during the last decades.

And this is -- this was the case particularly after Sino-American rapprochement in the early 1970s. And after that, Deng Xiaoping's much -- you know, very courageous reform efforts were possible and in fact, you know, bore fruits, taking advantage of what a liberal international order had to offer for Chinese programs.

But now the result of that with China is increasingly behaving as a potential and sometimes de facto challenger to some of the rules and norms of a liberal international order which it has taken advantage of in the previous cases.

And to the extent Chinese are aware of that, I'm not sure. Maybe not much. But I think that that aspect alone is causing a fundamental structural problem, so to speak, as we go through this very critical time of transformation, transition into a new sort of international order.

And I think the mission of the U.S.-Japan alliance, I think, remains basically still the same. We will need to continue to, you know, restructure and then sustain a kind of liberal international order where, you know, rules of democracy and so forth are -- of course are critical. And economically, we need to sustain open and liberal trading and the financial system, and we have to watch carefully the potential threat to this liberal international order.

And I think those, you know, agenda, sets of agenda, are very obvious for the alliance, and as well as for Japan and the U.S., respectively. And so from that point of view, I think that we need to tackle sets of new issues and challenges, including a variety of issues: environment and, you know, terrorism, and maritime safety, and the so-called global commons, which is an important infrastructure, and liberal international order and so forth.

So we clearly have new frontiers in our cooperation through the alliance mechanism, as we go through this fundamental restructuring of an international order. And that China opposes -- major, I think, problem, I'm afraid, and we have to admit that.

But secondly, regionally speaking, challenges coming from China of both dimensions: traditional security dimensions and sort of nontraditional security dimensions. And the traditional security dimension, I think we don't have to get into this in detail. Chinese preoccupation with traditional values, such as territorial integrity or national sovereignty, just stands out against somewhat post-modern norms and values which people in U.S. and Japan and other parts of the world have already sort of, you know, established as a basic, you know, kind of reference point in talking about regional and global policies. And the extent to which China places a premium on these somewhat old-fashioned, traditional, you know, national interests or values just simply stand out -- from South China Sea and, in the most recent case, arrest of -- the fishing-boat incident in the Senkaku waters.

And so we have to prepare, of course, ourselves for, you know, kind of possible negative developments, in the traditional sense, coming from those Chinese tendencies. And so in that sense, the sovereignty and the territorial integrity of course are important. But here, of course, particularly Japan has fundamental limitations in preparing ourselves for those traditional security issues, because of obvious -- obvious limitations of post-war Japan.

And so the -- it's not a problem, it's an objective -- the illustration for Japan is, even if we come up with some kinds of so-called objective assessment of security environment and security needs, we don't have full independent capacities or capability to deal with those -- you know, so-called objectives of security assessments and challenges and -- in other words, picture is not complete only if we talk about Japan's necessity to prepare itself. I think that's the overall context in which alliance with the U.S. becomes important. In other words, if we don't put the alliance in between Japan and the international security environment, I'll say that the picture is not complete.

But secondly, on top of the alliance, increasingly, cooperation with regional countries. Here, South Korea is primarily -- of primary importance, as far as I'm concerned, and all security cooperation with Australia -- and not in traditional security sense, of course, as far as our military role is concerned, but primarily in nontraditional security domains such as, you know, disaster relief, even the UNPK kind of things, and cooperation for, you know, terrorism, responses to terrorism, or even –human security, regional security building.

And, you know, those sort of issues are terribly important for Japan to engage itself with some other so-called like-minded countries in the region. And if not in the context of, you know, traditional security, you know, sense, in looking at China. We cannot play that game. That's primarily the role for the U.S.-Japan alliance, I think. But anyway, you know, that regional dimension is becoming increasingly important today and in coming years for Japan's coping strategy with kind of rising new security situations and issues.

And, but secondly, about North Korea, I don't spend much time on this because I think things are obvious, in terms of challenges, if not solutions. And short and midterm, of course, the regime -- how North Korea regime is going to transform itself, that is of critical importance, which has a huge ramifications for future possible unification process of the Korean Peninsula. And in short and midterm, of course, six-party talks will continue to remain very important.

But mid to long term, I think it's already high time for us to sort of anticipate or envision the kind of unification scenarios -- these could be -- of course, these could be plural -- and think about the implications of what we do today, you know, from this point of view of Korean Peninsula having to go through some sort of, you know, transitional process.

And the -- and the ending point of that for the moment will be unification. And there, of course, we have to look at both ends. On the one hand, we have to have contingency plannings, anticipating the worst case, which is terribly lacking in the current U.S.-Japan security arrangement and even dialogues, I think. And -- but over the long run we have to think how to create the best scenario possible -- I mean, make best scenario possible, which is peaceful, stable unification.

And maybe for both purposes -- and Japan-South Korea cooperation is critically important, I think, how Japan will engage itself in this unification process as well as a united Korea. I mean, in anticipating such a, you know, development, what Japan does today with South Korea, vis-a-vis South Korea or together, I think that has a huge impact upon the future evolution of the processes in which Japan needs to somehow -- critically involved.

And again, I don't see much of those thinkings unnecessarily in our diplomatic approach toward South Korea, even though there are those thinkings now being discussed among people, and even including bureaucrats.

And looking at those things, let me just conclude by reiterating the -- some of the new trends in terms of four aspects. One is, this is -- to repeat what I said at the outset; that is, the significant of the rise of China is global initially, and we have to take it as such. So China policy is almost equal to regional and global strategy in that sense. So it's not bilateral, you know -- you know, head-to-head confrontational approach to China. It has to be regional and global and comprehensive. I think that's the nature of the -- very important aspect of the nature of China challenge.

And -- but secondly, importance of regional cooperation is increasingly becoming, you know, explicit, and again, it's thanks to Chinese maybe misbehaviors or miscalculations. And there was a mention during the last session of U.S.-Japan alliance maybe being downgraded, at least relatively speaking, in comparison with South Korea and Australia. And I think the U.S. intention could be just political. I mean, intention is to send political signal to the Japanese leadership. Because the phenomena is mostly political, and in terms of actual military operations, I think U.S. is enjoying, you know, previous privileges even under current difficult political situation.

So the U.S.-Japan alliance is very critical. There's no question about that. But I think revitalizing alliance with Japan -- I mean, from the U.S. point of view, in thinking about new sort of developments with other countries, South Korea and Australia -- may not be entirely bad, you know? I mean, Japan, although bearing massive cost, is the background against which, you know, we are being engaged in trivial issues domestically. And there is a sense that we have been bearing, maybe, too much burden. And there may be some truth to that.

And so sharing the burden of the U.S. military presence with other Asian countries may not be a bad thing in -- if we have, you know, 30-, 40-, 50-year time span for this stuff. And my personal dream in talking about Japan-South Korea relations is, after Korea gets united, between Japan and the united Korea, we are going to co-host U.S. military presence in one way or another. And that's one kind of, you know, future ideal sort of form of sustaining American presence, as far as I am concerned. And so, you know, those things need to be discussed openly, I think, under the current circumstances.

So, in talking about more important role of South Korea or other regional countries in sustaining American military presence, it's not entirely bad, in my view. And I'm not saying that's the intention of U.S., just, you know, downgrading Japan as an -- as an ally -- maybe not. But I think those implications are there as we look into longer future, I mean ahead.

And of course the U.S.-Japan alliance needs to be restructured, I think. And in doing so, I think this regional dimension is important; in a way –revitalizing the importance of the alliance with the U.S. in the bigger regional context. And I think that's one way of looking at the kind of new U.S.-Japan alliance.

And lastly, importance of Japan's defense preparedness. I was personally involved in the prime minister's commission on Japan's defense and security -- security and defense capabilities in the new era. And in the report, we made some bold proposals, such as getting rid of the long-sustained concept of basic defense force idea.

And the basic defense force concept has already become an obstacle, in our view, to Japan kind of, you know, reorganizing our defense capabilities along the lines with kind of newly arising challenges and necessities. And so along that line, we were talking about, you know, dynamic deterrence, on top of static deterrence, and seamless responses to, you know, a combination of events which might arise, you know, simultaneously; defense threats, dangers arising simultaneously from different -- you know, different angles, such as terrorism and earthquake may come all together; you know, those things. So we need to prepare ourselves for those, you know, possible combinations of very different, you know, threats coming simultaneously.

So those new things are there, but to what extent the DPJ government will be able to incorporate, I don't know. We have to keep our fingers crossed. But that's how we are engaging in kind of new type of domestic debate, at least among those who are seriously concerned about these issues. And the politicians have yet to (hear their ears ?) to these yet, but hopefully into the future.

Thank you.

KATO: Thank you very much, Professor Soeya. You went a little bit over eight minutes, but a very interesting presentation with lots of interesting ideas.

And before I go to Mr. Alden, I just want to ask you just one question to clarify what you say, and especially for the American audience. The recent Senkaku issue, I think, has an enormous impact on Japan and Japanese policymaking in many ways. And so could you perhaps tell us your views on what's that impact on the threat perception of the Japanese public, and also the possible impact on Japan's national security force?

SOEYA: Well, I think the impact was very much real and significant in the sense that this has created a particular domestic environment and political environment in which, you know, change in defense security policies became easier compared to previous years. Well, this has been the trend since the 1990s in general, in general, but I think that trend has been accelerated. And so I think there is such a general impact.

But when it comes to specific, you know, implications with respect to, you know, concrete policies and strategy, I think the outcome is somewhat vague. On the one hand, there is a possibility that there will be the rise of -- if not typical nationalism, but, you know, anti-China sentiment. And anti-China sentiment could be an obstacle to otherwise more, you know, kind of strategic handling of this issue, could be an obstacle to policymaking process and so forth. But if you, you know, use it somewhat strategically, I think this could be a push for Japan to engage in kind of real, new security debate. So maybe indications may be mixed.

KATO: Okay.

SOEYA: But that's not particularly Japanese, I think. That's happening everywhere, perhaps, in every country. But I think the outcome, final outcome, was I think China would have a second thought of what they have been doing in recent years, in coming years. Chinese are really, you know, a strategic people, and they carefully watch what's happening, you know, in their external environment. And they always adjust themselves to new, you know, developments. So I think they will eventually try to readjust their responses.

And, but I think what was really new today was, normally, when Japan and China fight, the best scenario is for external observers to take a neutral position. (Chuckles.) But this time, I see many of friends are clearly on the side of Japan, and so that's not bad for Japan. So we have to, you know, wisely take advantage of those changing, you know, environments, to come up with a real comprehensive strategic China policy.

KATO: Thank you very much.

Mr. Alden, please.

EDWARD ALDEN: Thank you, Yoichi.

I'm going to talk a little bit about U.S.-Japan trade policy. I want to start by taking us back about 15 years ago, to 1995, in the early years of the Clinton administration. And some of you may recall that when President Clinton came to office, he made trade one of his highest foreign-policy priorities. And at the time, the trade issue meant primarily the United States and Japan, because the U.S. was running a big trade deficit with Japan; there was concern on the part of U.S. companies about their lack of access to the Japanese market.

And in an effort to force open the Japanese market for U.S. cars and U.S. auto parts, the Clinton administration made a huge threat; said that the U.S. was prepared to levy almost $6 million in trade sanctions against the Japanese in the form of 100-percent import tariffs on luxury autos.

And in the middle of this fight, I went up to Whistler, British Columbia, which is near my home town of Vancouver, to cover a meeting of the so-called Quad trade ministers from the EU and Canada, Japan and the United States. And this auto fight was the biggest story at the meeting. And clearly, the discussions had not gone well, because at the end of the meeting, they sat up on the stage for the final press conference. And Mickey Kantor, who was the U.S. trade representative, was off very far on one side of the stage looking glum; and Ryutaro Hashimoto, who was then the MITI administrator, was very much on the other side of the stage, also looking angry.

And as Hashimoto was talking, I'm listening to the translator, and the translator quotes Mr. Hashimoto as saying, "Negotiating with Mickey Kantor is scarier than facing my wife after I come home from a night of drinking." (Laughter.) And I turned to my Japanese reporter friend, I said, "Did he really say that?" (Laughter.) "Yeah." (Laughs.) He really did.

And so that prompted me to ask a question of Kantor and Hashimoto. And I said, "Is this trade dispute getting so serious that it could threaten the U.S.-Japan security relationship?" And it was amazing to see the transformation in the two. I mean, suddenly, you know, the angry looks went off and they're, "No, no, no, no, no, no. This is about trade. The U.S.-Japan security relationship is of primary importance. Nothing on the trade front could threaten that."

The auto trade fight was really the culmination of about 15 years of serious trade tensions between the United States and Japan. And after that, the tensions began to recede quite sharply. The U.S. largely backed down on its demands; Japan made a few concessions. At the end of the day, I think both sides realized that there was a danger here to the security relationship, and they didn't want to go any further down that road.

But in the aftermath of that dispute, the U.S. economy began to grow strongly; the Japanese economy was, of course, limping along. The Japanese market opened a little bit at the margins. And the issue largely went away. By the time the next recession rolled around in the United States in 2001 and U.S. manufacturers again found themselves under great competitive pressure, the issue was really China, rather than Japan, and it's continued to be that way to this day.

So I would say that the U.S.-Japan trade relationship since that time has really receded from the world of high politics, from being a top priority for administrations in both countries, to the world of low politics. There are no big trade problems between the two countries.

But it must also be said that there are no big trade ambitions. And the question, and certainly Richard raised that in his comment, is, "Can we do better?"

And I would say there are some slight encouraging signs that the answer might be yes. Prime Minister Kan's speech of a week ago to the Diet was particularly interesting. According to the official English translation that I read, he talked quite enthusiastically about pursuing regional free-trade agreements, and in particular said, "I want to open our country to the outside world and move forward with concrete steps of negotiations as much as possible."

Now, some of this is probably nice words. Japan, in November, is going to be hosting the APEC Leaders' Meeting. And some of you might remember that this year, 2010, was supposed to be the year in which all trade barriers among all the industrialized countries in the Asia-Pacific region were supposed to be eliminated.

Now clearly that has not happened. But APEC members will solemnly swear that they remain committed to that vision, so it's almost certainly important for Japan to make some noises in that direction.

What I thought was interesting, though, was that the prime minister was a bit more specific, saying that Japan was interested in participating in the new negotiations for a Trans-Pacific Partnership. The TPP, as most of you probably know, is a U.S.-led initiative designed to build freer trade from the ground up rather than from the top down, which was the APEC idea. The APEC idea was, we have this big region-wide negotiation, kind of like a Doha Round. That never happened.

So now we're going to do it from the ground up. And it started with negotiations with some current USFTA partners like Australia and Singapore and is adding in new countries like New Zealand and Vietnam and most recently just this past week Malaysia.

For Japan, I think there are several reasons to want to participate in the TPP. One which was underscored by the recent incident with China is that Japan has a big interest in keeping the United States firmly embedded in Asia. TPP at the moment is largely a Southeast Asia initiative. Japan's participation would broaden its strategic significance considerably.

Secondly, I think the United States and Japan are both becoming more aware of their common interests in trying to manage the economic rise of China. You can certainly see that in the -- in the current dispute over currency, which is going to be discussed more in the next panel. Japanese moved unilaterally to try to stop the yen's appreciation, had no real lasting impact. The U.S. approach of threatening countervailing duties on some small portion of Chinese imports is a pretty small stick; maybe symbolically important but in reality not a very big stick. A cooperative approach between the U.S. and Japan, along with Europe and perhaps Brazil and others I think is more likely to have positive results.

And then finally, as the United States has been preaching for decades without much success, it's in Japan's interest to open its market to investment and to trade. That said, if Japan actually pursues seriously the notion of joining the TPT -- excuse me -- TPP negotiations, it's going to set up two challenges: one for the Japanese government and one for the Obama administration.

For Japan, the challenge will be to move further in the direction of trade liberalization than the country has ever been able to move before. And, you know, as was discussed previously, it's not certain that the Japanese political system is strong enough to do that. But that will be a test thrown up if Japan joins the negotiations.

For the United States, I think, in a way, it's almost more interesting. The challenge is going to be to do some rethinking about our approach to trade agreements. For the last decade or so, the United States, largely for internal political reasons, has settled on a model of how it does free-trade agreements -- the so-called gold standard. And any country that wants to negotiate with the United States has to show its willingness to accept this whole broad package of commitments in areas, you know, everywhere from investment to services to agriculture to intellectual property -- wide-ranging commitments. The result is that, with the single exception of Korea, the United States has only attracted small countries as trading partners. And the Korea deal, of course, as we now know, is going to have to be renegotiated before it's ever going to get through the Congress.

This has not, in contrast, been the approach taken by the European Union, which has been willing to negotiate trade deals on much looser terms, primarily because of its own interests in defending its agriculture sector. Japan and the EU are making noises about launching free-trade talks next year. The EU is currently negotiating a free-trade agreement with India, which is impossible to imagine the United States doing under its current approach.

So I think if there's a realistic possibility of Japan coming into the TPP, the United States is going to have to start thinking a little bit more like the Europeans. Is it really critical, for instance, that Japan fully open up its rice market as a condition of entry? In terms of the larger interests at stake -- U.S. economic interests, U.S.-Japan broader interest in the relationship -- I think the answer's no. But it goes strongly against the approach the United States has taken in trade negotiations for a long time. And it's not clear to me that the U.S. is in a position yet where it can move off of that approach.

To conclude, then, I think there is a possibility that for the first time, the United States and Japan might be able to come together on a more positive, forward-looking trade agenda. And I think, as Richard said, it would be invaluable for the strength of the overall relationship. There are many obstacles to overcome, but perhaps a real opportunity.

So I'll stop there.

KATO: Thank you very much.

Talking about a test for Japanese politics, whether it's strong enough to go through this TPP, I was looking at the Asahi.com news today, and this morning, and I found the news that one of the vice ministers within the cabinet was opposing -- message indicating opposing view, that this is premature and too quick, and not just to say that oppositions -- from opposition parties it's already, you know, presenting lots of challenges to Kan administration.

Just one question to clarify your views on TPP. Do you think TPP can really offer a model for open regionalism?

ALDEN: I go back and forth between being skeptical and thinking it's possible. And I'm skeptical because I think the idea is not fully developed yet and at some level it's just a way for the administration to say, yes, we have a trade policy. You know, everything else is stagnant on the trade front, Doha is dead, the administration has no fast-track trade authority, this is at least something of a trade agenda.

But I do think -- you know, if you look at the evidence from the way international organizations are built, nobody likes to be on the outside. And so, you know, Malaysia joining, that's some good momentum. The Canadians want to join in. The more countries that join in, the more other countries are going to say, we really don't want to be left outside of this, if for no other reason than we want to have a trade relationship with the United States to counterbalance China.

So I do think there is a possibility for this to be a kind of building-block system, not necessarily moving to the APEC ideal of perfect free trade in the region, but certainly to a better web of commercial connections. I mean, one of the things they're talking about in TPP is harmonizing some of the different rules of origin under the different bilateral free trade arrangements, which has been a real problem for years. And the idea is to make it easy for companies to operate across the region without having to follow, you know, six or eight or 10 different sets of trading rules. And the TPP, at least in the early discussions, is trying to take on that problem seriously. So I'm growing more optimistic that it could be that sort of model.

KATO: Thank you very much.

Sheila, please.

SHEILA A. SMITH: Thank you, Yoichi. Thank you very much.

I'm going to try and be very brief, in the interest of having the discussion, with lots of Japanese experts and Japan expertise in the room.

But I wanted to start off by just drawing your attention very quickly to the title of today's symposium. And when (Soeya-san ?) and Kato-san and I were talking about what did we want to talk about at this event today, it was really not just to celebrate a treaty or a document, but to talk about how resilient this relationship has been over an immensely transformative set of external circumstances. And again you can go back to the 1950s, the '60s, the '70s, be it the global economy, be it the Cold War, this is a relationship, a fundamental security bargain, but also a broader partnership, I think, that has sustained itself and re-energized itself at critical moments.

So what we're trying to do here is figure out what those critical -- this is a critical moment, and I think on both sides of the Pacific people recognize that. The question is, how do we mobilize our resources, where do we focus, what is the agenda that we have the most likelihood of achieving success? And I think in the two panels today, we're trying to figure out where that is. And so the conversation, I hope, will help us focus on that.

Let me talk a little bit about Japanese political -- the political transition. All of us know about it. I think it's important because all of us read the headlines, the opinion polls from day to day, what's going on, who's -- you know, who's up, who's down, what's likely to happen next. My sense is, you know, we always ought to stop ourselves and say, you know, this is a political transition that is immense, frankly, in terms of Japanese postwar politics. It is not a moment, last year's election or the Upper House election, but it's a larger-scale structural transformation away from a single party dominant system.

And Japanese policymaking, the organization of Japanese politics and the way that Japan makes policies, domestic and foreign both, were organized around a single-party-dominant system. Moving away from that is going to be painful, it's going to be slow and probably forward-and-three-step-backward kind of a process. But that's the process we should keep our eyes on when we think about the alliance and we think about the realities ahead of us in terms of building blocks for future cooperation.

Last year's election -- we're now one year out from the DPJ's arrival as Japan's ruling party. I think all of us watched the excitement last August as the new party came into power. This party was Japan's postwar liberal voice in many ways. It was the first time it had full -- a full popular mandate. And then we watched the first turbulent year of the DPJ having a tremendously difficult time adjusting to its role as ruling party in Japanese government. But this was not a transition most of us thought was not going to happen at some point. The timing, the scale and the Japanese public reaction to it is something that, as a Japan-watcher, I found immensely interesting.

Clearly the question about Japanese leadership is not just about this new party. It's not just about DPJ. I think Ted took us back to the mid-1990s. I remember being in Washington -- I was a lot younger then -- talking about Ryutaro Hashimoto as the new prime minister of Japan, and is he anti -- is he anti-American, he's going to be here, he's going to be hard on us, the alliance is going to be in trouble because we have this new guy coming.

You know, this has always been part of the chatter here in Washington, is understanding the Japanese leadership, understanding leadership transitions, getting to know who these individuals are and what the goals are and how the alliance is going to be shaped by them. But I think there's a fundamentally larger question in terms of sustained leadership that the DPJ arrival in power really brings to the -- brings to the fore, and that is that those of us over here in Washington don't know the DPJ well. We don't know individuals. We don't know the -- not the -- not the people who are in the headlines, but the people coming up behind them. We haven't had a chance to develop that network of relationships and have the exchanges like this about where the U.S.-Japan relation -- relationship factors into their thinking.

So there's a lot of work to be done, I think, in the U.S.-Japan relationship. It's not just about agenda-setting, what are the issues, but it's also about getting to know this next generation, this next generation of Japanese political leaders.

One thing that has struck me over the last year, watching this process, is -- and again, a lot of us here in Washington focused on the idea of, well, the alliance will come together, we'll be able to do something with Japan once politics stabilizes. And that was the way we all understood the process. And the reality is, parliamentary democracies are never necessarily stable, right? If you go to Australia, Great Britain, Germany, Israel, you could go to a whole bunch of different countries and recognize that politics and parliamentary democracies can be messy, volatile, and not a whole lot of civility there.

But I think what I recognized, though, after watching this bilateral attempt to cope with Japan's political transition, that, in fact, the U.S.-Japan alliance has been a very significant stabilizing factor for the Japanese. And it doesn't mean that everything we do in our policy agenda is positive and can't -- or shouldn't be reformed, but rather the relationship of the last half-century between the United States and Japan has been a fundamental building block of Japanese foreign policy as well as Japanese broader engagement regionally and in the globe. And I think it's in the interest of that relationship that we ought to focus our attention on Japanese political change and how the alliance can continue to play that kind of stabilizing role.

I won't talk too much here about the issue that everybody knows that's on the front burner, which is Futenma. We can certainly talk about it in the Q&A. But I think we got myopically focused on this issue. In some ways it's an instrumentality; it's one base, one set -- one set of issues about force posture. But I think it's also unfair of us to dismiss it as a minor issue. It is central, I think, in many Japanese minds about the postwar arrangement between the United States and Japan. And the relationship between the mainland Japanese and the Okinawans, of course, is also central to how you understand Japan's postwar. So it is fundamentally -- I think it's a deeply embedded issue in Japanese postwar politics, and therefore we can't dismiss it as something that can just be set aside.

How we solve it -- I think we can talk about that, but there will be an election this fall that I think will help us solve the problem one way or the other.

I think one of the things that I would suggest -- and I want to turn now to some of the ideas that both previous speakers have touched upon, but I'm going to focus slightly differently on the security side of it. One of the things that I think we ought to recognize is in the middle of this political adjustment between Washington and Tokyo. We are also not in a terribly forgiving regional environment for the U.S.-Japan relationship. And so I think we ought to be building blocks of cooperation, foundations for broadening the economic component, absolutely. And I think that's going to be essential as we try to work through some of these security issues.

But on the security side, we have some homework to do, and I think the homework is particularly acute because of the transition in government in Japan. We need to make sure that we understand each other and how we approach some of the critical changes that are taking place, especially in the region -- the rise of China, civility on the Korean Peninsula, the two issues -- I think we would benefit from a pretty intense discussion about how we understand those events as well as how we think about what the U.S.-Japan relationship ought to be doing, as well as other regional arrangements and regional partnerships.

On the Korean Peninsula, the idea here is regional crisis management. It is not necessarily an alliance versus what happens on the peninsula, but the region as a whole: the U.S., Japan, South Korea and, of course, China will have to deal with whatever happens on the Korean Peninsula. And therefore, diplomacy, in addition to good old-fashioned defense preparation, is going to be a very significant piece.

And in that sense, the U.S.-Japan-South Korean trilateral is important, the Japan-South Korean bilateral, our bilateral; but so too is the Japan-South Korea-China trilateral; so too are all of the frameworks that we have at our disposal for making sure that we all understand our expectations about what could unfold on the Korean Peninsula and how we might shape it in a direction positive for us.

We've talked a lot about China. But maritime stability in the Asia-Pacific would be the frame that I'd use to talk about the issues that I think all of us are worried about today. It's not just Chinese behavior, but it is our perceptions of how do we adjust to an expanding Chinese military capability, maritime capability, as well as expanding fisheries interests and sea-lanes protection interests that are naturally attending to the rise in Chinese global economic power. We have to be able to talk about these issues.

The framework I would suggest is exactly where Secretary Clinton began the conversation, which is in the ASEAN regional forum. I think it needs to be a region-wide conversation about what constitutes the rules of the road. I may be optimistic here, but there are signs apparently that China might be willing to engage in that conversation with the ASEAN countries and with us, and therefore we ought to do everything possible -- Japan, United States, independently as well as collectively -- to push that effort forward.

Finally, just on the -- on the Senkaku, I think one of the things that I think is very important -- and if you listen to the conversation about what happened outside of Japan and then you read the newspapers and watch TV inside Japan is, inside Japan there has been this very self-reflective conversation about what went wrong, who made the mistakes, we looked weak, we can't have that happen again. And there's also, I think, a very constructive effort to do a case-study analysis of what would we do next time, how do we improve our management of a similar kind of crisis should such a crisis happen.

I think it's very important for many Japanese also to understand, though, that outside the country this was not seen as a bilateral Japanese-Chinese dispute. And it raised flags for just about every country and society, especially democratic societies that are struggling to work with China today. China in a way, in a two-week period, used some pretty blunt instruments in its interaction with Japan. It shut down its minerals, it shut down its export of critical minerals materials that Japan needed, that most of our societies need, frankly. It arrested four people on the ground and did not allow contact with the embassy. It did a number of things that most of us sitting outside China are most nervous about when we think of our -- whether we're corporations, whether we're individuals or whether we're countries, when we think of our interactions with China.

So there's a lot of territory here for us collectively in the region as well as in our bilateral relationships with Beijing to start to engage much more clearly on how we want to improve the kinds of crisis-management techniques that we develop with China going forward, because this is a collective exercise. We can't afford, I think, to allow these kinds of crises with Beijing to be ratcheted up into the realm of potential military force or something unthinkable like that. But we have lots of latitude, I think, here diplomatically with Japan, with other countries in the region, with Europeans as well to explore a little bit better how to work with the Chinese in dealing with problems that erupt and must have a satisfactory diplomatic resolution.

So with those comments, I think I'll stop. Thank you.

KATO: Thank you.

We're behind schedule, but since Sheila is a great student and observer of Japanese politics, I just wanted to invite your view. And you know, I talked with a colleague to update what's going on in Tokyo politics. And I heard that Prime Minister Kan has more confidence now in maintaining his administration, because of the decision to indict Mr. Ozawa, one of the competitors in the party power struggle. You know, there is a -- there is speculation that the Kan administration may have to either resign or dissolve the Diet, because of the problems he is going to face in deliberation of that Diet next spring. But now, it seems to me, with Mr. Ozawa politically virtually dead, there is no danger for Mr. Kan to really go into that kind of impasse.

But if you look at the recent public opinion polls that Asahi Shimbun conducted earlier this week, the approval ratings for Kan administration, Kan cabinet, plunged from 90 -- 90 -- 59 a couple of weeks ago, to 45, more than 10 points -- 10 percentage points. So I was wondering how you see the stability of this administration now. With Ozawa gone, but the approval rating down, do you see Japanese -- Kan administration is strong enough to face all those challenges that we laid out?

SMITH: That's a very good question. We'll be watching to see. (Laughs, laughter.)

I think two things: One specific to the Kan cabinet, I think, is, you know, clearly, when Naoto Kan and his team came in after Hatoyama-san resigned, the public opinion -- and Hatoyama-san and Ozawa-san resigned from their positions, right? Public opinion bumped up to the high 60s, right? Clearly, the Japanese public responded very positively.

Then, you had the Upper House elections. And then there was -- even on the campaign trail, there was this rather visible tension between Mr. Ozawa and Mr. Kan -- on the consumption tax issue specifically, but more broadly as well. So clearly, the DPJ had some homework to do in terms of its own thinking about what its -- what its future goals and how its -- what its priorities ought to be. And we watched that manifest itself in the leadership election.

I know that there was a lot of nervousness about that leadership election. To be honest with you, I was watching, going, "Uh-oh, there goes the DPJ." It was entirely conceivable in my mind that the DPJ may not make it out of this election in one piece. But to give -- to give credit where credit is due, I thought that both the prime minister and Mr. Ozawa handled themselves incredibly well. Ozawa-san came out from behind in that electioneering behind-the-shadows role. He was talking policy for the first time in -- I can't remember when I'd last seen Mr. Ozawa give a policy speech. He was articulate, he was clear. They both stood up on the same platform together and acted like a typical -- you know, two politicians, arguing over policy in an attempt to lead their party. I think that was an incredibly positive step for the -- for the DPJ.

The LDP has since then, you know, continued to focus on the money politics. I think the prosecutor's process has been excruciating to watch for some of us, because we don't understand exactly what all this judicial review means for the future of Mr. Ozawa and the political scene. But to tell you the truth, I think we're back at a moment we were back after the DPJ leadership election where, again, 60 percentile; the support for Mr. Kan bumped -- the Kan cabinet bumped up. And then we had the Senkaku issue, and there it went -- another almost 15, 20 percentage points, depending on whose polls you're reading.

So I think this is just going to be the way the Japanese public interacts, I think, with the DPJ. I think this is a new government, a new set of political leaders. I think there's deep anxiety inside Japan -- be it the private sector, or the public at large, or the chattering classes -- about whether the DPJ can actually pull this off. And so, incident by incident, Diet debate by Diet debate -- the budget is coming up next -- you're going to watch, I think, a rather volatile Japanese public response to the cabinet.

And it's going to be incumbent on the prime minister and his cabinet secretary and his team to forge ahead, frankly, to put their -- to try to reach out to the opposition, to build bipartisanship around the budget and to raise the national interest as the goal of their administration instead of the party interest. And that's a very tough thing to do in Japan right now, but I think that's the way you see a way forward for the Japanese government.

KATO: Thank you very much.

Now, we invite the audience members to join the discussion. And please wait for the microphone, and please keep the comment and question short.

QUESTIONER: Oh, thank you.

You know you can't mention North Korea around me without getting a reaction.

I'm struck by how we talk about the coming, you know, over-the-horizon problem as peaceful unification, and I would just urge, for your studies and for people who are looking at that -- the last thing on God's earth the Chinese want is peaceful unification. Every policy they have is aimed at sustaining the regime one way or the other. To the Chinese, peaceful unification means a U.S./Japan/South Korea-dominated nuclear power right on their border.

Now, we may see it differently, but that's what they see, and I think that really colors everything we do, say and think about it, if we don't realize that that's where they're coming from. And just look back over the years. You know, we've always defined our problem there as proliferation and nukes. The Chinese always define it as stability. And we've never really quite asked ourselves what stability really means to Beijing.

So please forgive that small lecture. And I just wanted to thank Ted for giving me something optimistic to think about for trade for the first time in several years, TPP. Go --

ALDEN: But you'll be disappointed, I'm sure. (Laughs.)

QUESTIONER: -- for it. Yeah, but, you know, theoretically, I'm supposed to write about trade, and it's just depressing as hell. So thank you.

Oh, I did have one question for Sheila. I'm sorry. You said right at the beginning that the temptation to say let's just set Futenma aside and get on with the real stuff is a dangerous temptation, don't do it. You know, flip it around; if we don't resolve it, are you saying that we're really in big trouble and, you know, it's downhill from there?

Thanks.

SMITH: You always make me more articulate than I really am.

I don't know if I said it was -- that setting aside was a dangerous temptation. My point was simply that I'm not sure we're going to be able to set it aside quite so easily, because it's deeply embedded in Japanese domestic politics. And the decision-making is really, at this stage in Japanese domestic politics, a very critical -- at a critical stage, as you know. The gubernatorial election is coming at the end of November.

And I think, frankly, that gubernatorial election will produce one of two results. It will produce a victory for Mr. Nakaima, and he will have to operate now in very constrained political environment. We just saw him, I think last week, say that he thought that the off-prefecture, or out-of-the-prefecture option was the best. He has not said no to the current plan, but he has simply suggested -- and he did it again yesterday in the press -- he said that he didn't think the current plan was workable in Okinawa today.

So you could have a victory for Mr. Nakaima, the conservative current incumbent, and he has got a very, very constrained political environment in Okinawa with which to try to work with Tokyo on this issue, or you could have a victory for the challenging candidate, Mr. Iha, who is the mayor of Ginowan, as you know, and he does not want the current plan and would oppose it strongly.

So I think by the time -- at the end of November we will have a decision in electoral form that will shape our ability to move this issue in a direction that I think the policy teams in both Tokyo and Washington are trying to move it. When that decision is made, then I think it's probably a moment to regroup. And I think that's a pretty obvious moment of choice.

KATO: Please.

QUESTIONER: I'd just like to ask Professor Soeya if you could elaborate a little bit on your discussion of the domestic policy debate going on in Japan, particularly your reaction to Richard Haass's comments that Japan is an underachiever, that it's not on the short list for the calls of the president to the prime minister.

Is there concern that Japan is underachieving, it's not fulfilling the role that many in the world think it should, and what the implications may be? A lot of this has to do with the political will and what's happening in Japanese politics, as has been discussed, but I'd be interested in your views, and perhaps Mr. Kato, too.

SOEYA: Well, I think there are two kind of different perspectives to this. Under kind of normal circumstances when we talk about role of Japan and the security needs, I think Japan, you know, underperformer is perhaps not off the mark.

But in terms of domestic awareness, I think Hatoyama in a way set the stage of domestic discourse somewhat differently. And his is kind of, you know, real detachment between sort of external security, you know, discussions and security -- domestic discussion in Japan. I think -- and here I think it's very important that Hatoyama started with the assumption that Japan has been too much dependent upon the United States.

So reducing the dependence was the goal, rather than, you know, increasing Japan's role in the alliance set up, and that's how set the agenda. And that's how people in Okinawa got excited. You know, "Oh, he understands us," and then so forth.

And I think that still the momentum is there. I mean, it's not really momentum, but, you know, that way of setting agenda for domestic debate, it is still, I mean, strong among Japanese, you know, opinion makers. And so from that perspective (whether Japan, you know, platform's below its expectation or not that's not an issue. That's not an issue.

The issue is whether, you know, dependence from the U.S. could be justified and so forth. So clearly I think the implicit assumption is U.S. has the -- I mean, U.S. is benefitting from having bases in Japan, and at the cost of, you know -- at the unbearable cost on the part of Okinawans under that. So that's the equation which, you know, is raised in the domestic debate. So it's sort of different debate than kind of Japan's role in a regional context and so forth. And so that's how I think our domestic debates do not necessarily contribute to, you know, crafting, you know, a sensible strategy on our part, including the role of the alliance with the United States.

And so our task -- I mean Japanese task is to maybe change the -- you know, the context of our agenda setting so that, you know, our debates would be real in terms of our unique style of policy-making and strategy making. And for my parochial interest, I think we have tried to do that in publishing a report from this council on security and defense capabilities. But domestic responses to our report are still very much old-fashioned, along the line of our sort of typical sort of previous 1955, you know, way of rarely debating issues.

And I'm going to hope -- hopefully as we go through this process -- I mean as Sheila mentioned, I think the change of government was very significant. And I think -- personally think this is an opportune time for us to engage in different type of, you know, security debates around the previous, you know, 1955 style type of debate. And I think politically conditions are there, but, again, it was very unfortunate that Hatoyama -- you know, he tried to do that, but somewhat in an irrelevant way.

And -- but that's how DPJ started its new foreign policy. And so we have to perhaps set the stage back, and then start afresh, I mean, in establishing new type of security debates under the DPJ government, but which has yet to be established.

KATO: We have time for one more question.

QUESTIONER: Good morning. Good morning.

I have a question, probably particularly for Sheila, and Soeya-san and Kato-san, I would very much like your opinions.

We're all talking -- when we talk about Japanese political transition, I often feel like we're assuming that a -- way being going away from LDP dominance into two-party, major-party system. But I'm not quite sure if that might be the ultimate outcome.

And as an interim, Japanese voters seemed to decide that, okay, we don't like LDP dominance, so we're going to put DPJ dominance here, and we'll see what happens. So I just wanted to explore your thoughts. Of course, we don't have any single answers. There are numerous possibilities of what the outcome of this political transition process might look like.

Thank you.

KATO: Ladies first.

SMITH: Thank you. I like that. I think it's just like last year when I watched the August 2009 returns, and I watched the 318, just the large victory, the margin of victory of the DPJ, I thought exactly that.

I thought, oh, we've gone from one single-party dominance into the -- into a different party, but single-party dominance as -- instead.

And I think, you know, the DPJ is going to focus on that upper-house election -- electoral focus on that upper-house election. And a desire for a majority in order to consolidate their win increased, I think, the apprehension about that's really what was going on or what could be going on here.

There's another thing going on. And I think that is -- in -- take us back one lower-house election to 2005, right? And what you get is an LDP plus Komeito two-thirds majority in the lower house, right? So you had a legislative opportunity for the LDP coming out of the 2005 that now everybody would love to have. I'm sure the DPJ would love it, right? But that's not the norm, either. That was an -- that was an unusual circumstance for the -- even for the LDP.

So I think we -- I don't say we're going to a two-party system, because I think the jury's out on whether Japan is headed that way. And I think if Japan is going to get there -- if that's where the Japanese want to take their political system, then they're going to have to deal with the remaining proportional seats. They're going to have to change that last vestige of the 55 system, and they're going to have to really structurally turn themselves into a political system that either side wins -- you know, winner-takes-all kind of a system. And they're not -- they're not there yet.

So I think -- but I think what I was -- the point I was making about the policy implication is, a single-party dominant system has policymaking going on in different places than a contested, alternating system of government, or what we have today, the twisted -- the so-called twisted Diet.

And the implications at least right now for where we are in the process of change is that policy has to come out of the back chambers of party committees. It has to come out of the bureaucracies. It has to now come in at least to the legislative sphere. Now, it may not go anywhere. We may have stalemate -- right? -- we -- depending on how the opposition and the ruling party operate. But at least we have a -- the chance now to have the conversation about the policy options and how to move forward, even if the mechanics for moving policy forward may be somewhat more conflicted.

KATO: Professor Soeya?

SOEYA: Yeah, I think, you know, globally trends are against the two-party system. Maybe -- you know, both are basically saying no to the incumbent government. They are not necessarily saying yes to, you know, some alternative. And maybe that's why U.K. has a hanging parliament, as well as Australia -- you know, two parties in a political system has -- sort of results in sort of a hanging, you know, parliament situation.

And I think that's exactly what happened in case of DPJ's victory last year. Both had said no to LDP, right, rather than yes to DPJ. And after DPJ gained power, we are now beginning to say no to DPJ. (Chuckles.) And -- but that -- that is not turning to "yes" to LDP, of course, because we said no to LDP already, you know? So then, on top of that, we are saying no to DPJ. So -- you know, and so-called third parties are taking advantage of that.

And so if that trend is real, then what we are going to see is, you know, a moving away from the two-party system, I think. (Chuckles.) But into what I don't know. Maybe age of very dynamic coalition politics. And how that will fare in the end I don't know; I have no expertise and no capacity to predict.

KATO: Thank you very much. And that concludes --

SOEYA: (Off mike.)

KATO: -- (chuckles) -- yeah, it's okay -- time -- so this concludes the first session. And please join me in giving a hand to the panelists. Thank you very much.

SMITH: Thank you very much.

KATO: Thank you very much.

ALDEN: Thank you.

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