How Japan Views China's Rise

CFR Senior Fellow Sheila A. Smith joins CFR President Richard N. Haass to introduce her new book, Intimate Rivals: Japanese Domestic Politics and a Rising China. Smith describes the changing perceptions of China in Japan, claiming that "no country feels China's rise more deeply than Japan." She goes on to discuss the influence of Japanese domestic politics on relations between Beijing and Tokyo, referencing the resurgence of Japan's right-wing in recent years and Japanese public opinion. Smith additionally explores the role of the U.S.-Japan alliance in driving Japanese security policy toward China.

The CFR Fellows' Book Launch series highlights new books by CFR fellows. It includes a discussion with the author, cocktail reception, and book signing.

HAASS:  Good evening.  I'm Richard Haass, and welcome to the Council on Foreign Relations.  This has been a day for celebrations at the council.  One of our military fellows received the rank of admiral today and we were thrilled about that.

(APPLAUSE)

And tonight we're here to celebrate the publication of a new book by Sheila Smith, Intimate Rivals: Japanese Domestic Politics and A Rising China.  I want to welcome all of you here. 

Sheila and I are going to talk for a few minutes.  Then I think we'll have a little bit of time certainly for praise, maybe a question or two.  I want to welcome the young man to whom this book is dedicated, Ian Henry Smith (ph), who also happens to be Sheila's son.  We're thrilled to have him. 

When I got to the council nearly 12 years ago, one of the things we decided was to make books a more central part of what it is we do here.  In part because we think that it's important that often have books is the foundation from which one can then produce shorter, more immediate works.  But we wanted just about all of our fellows here to be working on books.  And this is one of the many results.

Sheila, for those of you who don't know, is not simply the council's expert on Japan, but is really one of this country's experts on Japan.  And she and I have been there several times together.  And no, I do not speak more than about three words of Japanese.  Clearly she does.  She does it well from the reactions of our Japanese interlocutors. 

It's an important time to do this.  Indeed it just worked out well for all sorts of things because you still have a relatively new prime minister in Japan who just got I guess should say reelected.  He's about to visit the United States in five or six weeks for an important official visit. 

And while a lot of the foreign policy focus may be on the Middle East, a lot of the history is being written in the Asia-Pacific.  And Japan is one of the central protagonists of that history.  So again, the timing of the book couldn't be better.  And what we will do tonight is talk about it a little bit. 

Why the title, "Intimate Rivals"?  What is—what are you trying to say here?

SMITH:  Thank you, Richard, first of all.  I just wanted to second your remark also about studies and about the expectations of the fellows writing books.  It's one of the great benefits of being at the council that we get to spend time doing the kind of in-depth research and write the kind of analysis that we get to write.  So thank you for that.

"Intimate Rivals," it's a—I get all kinds of feedback on the title.  Either the use of the word intimate I think is what people are giving me a little bit of a ribbing about.  But I wanted to use that word really to convey the fact that the way that the Japanese people experience the rise of China is in an intimate way. 

It's about their daily lives.  It's about their interaction on issues like what kind of food they choose to eat.  Or it's about whether or not the Chinese are going to be hostile to them, if they're going to have to think again about their constitution and their military.  But they think about it in ways that go beyond the way that diplomats talk about it. 

So, Japan for the last decade or more has really been dealing with this phenomenon that we in short hand call the rise of China.  But it's really an expansion of economic, social, political influence.  And the Japanese have been working on this problem for over a decade.  So I wanted the intimacy part to be part of the title. 

But the bottom line is Japan and China have never been powerful countries together at the same time in Asia.  Either China has been in the ascendancy or Japan has been in the ascendancy. 

And today they both are powerful countries.  And they're going to be increasingly rivals and have different competing interests.  So how they navigate those interests is really fundamentally important, not only to the region, but to us as well. 

HAASS:  Over the last couple of decades Japan and China have had fundamentally different experiences.  China, at least until recently, was growing at or close to double digits on an annual basis. 

Japan expression as you know better than I do the last two decades are often referred to as the lost decades.  How has that affected the way the Japanese look at China?

SMITH:  I think for the Japanese public as well as the Japanese elite, the policymaker, their own capacity to deal with China is also being questioned.  So it's not just a question of what kind of behavior China is demonstrating today, what policy they choose.  It's also really about whether or not the Japanese government is well positioned to defend Japanese interests in the face of this new power.

HAASS:  Given that China's population is roughly now 10 times that of Japans.  And Japan, unless something happens awful fast that number's going to get larger as Japan shrinks demographically.  How can they be rivals? 

It seems to me one can sort of say, given their trajectories, given their scales, that increasingly they're simply just that, of different scales.  So why is it that you cast them as rivals?  Or is that—do you think somehow either reality or inevitability?

SMITH:  I guess I don't quite buy into the inevitability of the Japanese decline.  I think we should hold out before we write Japan off.  It is the third largest global economy, it still is. 

It's a vibrant economy, even if it's challenged in some ways.  And organizing its economic competitiveness, Japanese by no means will have it easy in the decades to come.  And I think demography, as you point out, is one of the key factors.

But I think if you look at Japanese history over the last several centuries or so, the Japanese have risen to the occasion.  When they need to change, they do. 

And I think one of the fundamental questions that many Japanese are asking, as well as many of us outside the country, right, is whether or not Japan can really change, how quickly it might be able to reform itself to be competitive.

HAASS:  And what do you think?  I mean the prime minister talks a tremendous amount, and it's a big part of his government, obviously, about the so-called third arrow.  Is that rhetoric or is that really reality?  What's your sense?

SMITH:  The policy is real.  I mean I think they have to.  The third arrow, which is a broad array of structural changes, is going to have to be—it will make or break whether Japan can really be competitive, not only with China.

HAASS:  What's your betting?

SMITH:  I'm betting for it.  It may be because I'm the senior fellow for Japan studies.

(LAUGHTER)

But I just put that out there as a possible explanation.  But I'm betting for Japan.  

But I think it's going to be painful.  And I think that's the part where you're going to need strong political leadership in Japan.  And it's going to have to be not negotiated incrementally over time.  It's going to have to come much, much faster and with much, much more pain for certain sectors of the Japanese society.

HAASS:  One of the big parts of the policy debate in Japan is obviously about their foreign policy, their national security policy, their defense role.  They're now revising the so-called defense guidelines.  There's look at changing the constitution.  How much of that is about China?

SMITH:  Sixty-two percent.

(LAUGHTER)

HAASS:  We like quantitative research here at the council.

(LAUGHTER)

SMITH:  Quantitative methods.  No, a lot of it is it looks like things that the Japanese have been talking about for the last decade. 

And you and I have talked about this a lot, the question of normalizing the Japanese military.  Mr. Abe when he was last in power in 2006 raised this question of collective self-defense, right, relaxing the interpretation of the constitution to allow the military to operate alongside the United States and other militaries. 

So these ideas have been around.  I think it's moving much faster today.  I think there's some incentive in the region.  And North Korea is what its incentive.  But there's also China.

HAASS:  Now, everywhere you go in the region you and I and some other people in this room more recently in South Korea, I've been also recently in China.  The possibility, probability, specter, choose whatever word you want, of a Japan that breaks out of its—some of its shackles, and if you will, it becomes a more normal country or enters the so-called post World War II era. 

Do you think that that can be managed?  And do you think the Japanese are prepared to do what might be necessary to manage it in a way that reassures as well as messages?

SMITH:  I think the challenge today in Asia across not just Japan, but South Korea and China as well.  You have a new generation of younger leaders coming to the floor.  They're not either experienced in the war, by which I mean the mid-20th century, what we call World War II.  They don't have combat experience.  But they also are jostling a little bit for dominance in the region, or at least influence in the region. 

So there's two things going on here I think.  One is with the next generation of Asian leaders think not only about Japan, but about the order in Asia, especially in northeast Asia.  And the second part really is where the history of the 20th century feeds into that debate over national identity. 

And of course today in South Korea and in China what happened in World War II affects deeply the way they talk about their aspirations for the future.  And Japan becomes a focal point.

For Japan it's really this question of the constitution.  I think that's their—that's the real focus of their postwar settlement that they are beginning to ask questions about.  And that of course was imposed under the U.S. occupation.  So Americans are going to have to understand the constitution, I think, and the constitutional debate in Japan as really part of a new generation's thinking about their country's national identity.  It's not just about Article 9.

HAASS:  You just mentioned the United States.  Let me run with that for a second.  This is a book about Japan and to a lesser extent China.  But that's the—their relationship's at the center of it. 

But they're not operating in a vacuum.  We're a big part of that.  And so how do we—to what extent does the future of that relationship depend upon the future of the U.S. relationship with each country?

SMITH:  Absolutely fundamentally.  As you all know, we have a security treaty with Japan.  And the United States and Japan struck a strategic bargain in 1952.  And the basic fundamental terms of that strategic bargain still hold today. 

And that is Japan will have a limited military capability and we will provide the external deterrent that will keep it from having to think about difficult questions such as nuclear weapons or offensive capability. So in terms of Japan's national security, we are fundamentally critical to the way the Japanese approach not only China but the region as well. 

Beyond that, of course, I think it's a deeper question about how we see our priorities in the region.  And I think there's some delicate sentiment in Tokyo, put it that way, at the moment, that we are a little bit more focused on Beijing, a little less focused on our...

(CROSSTALK)

HAASS:  I thought you were going to say...

(CROSSTALK)

SMITH:  ... ally...

HAASS:  ... we're more focused on the Middle East.  I thought you were going...

SMITH:  Well there's also that.  So even just keeping it within Asia, this question of are we actually moving toward this new rising power?  Do we see our interests more associated with Beijing and China, and less so with perhaps a declining Japan?

But then there's the age-old question that you just raised, which is can we stay focused on Asia long enough to continue to make a difference there?

HAASS:  This year is the 70th anniversary of the end of World War II.  What year is the modern Japanese constitution finished?

SMITH:  Our—the current constitution was written in 1947...

HAASS:  OK.

SMITH:  ... under occupation.

HAASS:  Right.  So, here it is again, it's nearly three-quarters of a century since whatever, two-thirds of a century since.  Particularly for the younger generation who didn't experience that. 

To what extent is that increasingly a subject of some resentment that Japanese get up in the morning and say why are we so dependent on the United States?  Why are we still so limited?  To what extent, if you will, do you feel that history's about to start up again?

SMITH:  Well, there's two issues I think you can see some of that sentiment.  The first is, as I mentioned earlier, over the debate over the Japanese constitution. 

If you walk into the Japanese parliament today you will see a pretty vibrant conversation about the origins of this document and why it's time really to give it some more thought and to put a Japanese imprimatur on the document itself.  So that's basically a Japanese desire to have that state-society relationship defined by themselves, not by an occupation power. 

I think the second part, though, is this question of apology, apology diplomacy.  And Japan, not only the young people but some of the older people as well, and we have some Japanese in the room who can hopefully contribute during the discussion.  But they feel that this is 70 years afterwards.  And they feel that the San Francisco Peace Treaty set the stage for the postwar settlement. 

The bilateral negotiation of a peace treaty with South Korea in 1965, again dealt with the war and war issues.  Again with the Chinese in 1978 there was a peace treaty.  So they feel in some way, didn't we solve that already?  Didn't we already have this conversation about our remorse and our postwar settlement? 

But again, the diplomacy is complicated.  And I suspect this year is going to be very complicated because almost every major power is having a commemorative ceremony or statement to talk about the 70th anniversary.

HAASS:  Let me ask one last question and then we'll open it up.  The subtitle of this book is about a rising China. 

This weekend in the Wall Street Journal, David Shambaugh wrote a very interesting piece for the review section who basically said at least as likely if not more likely, his point of view, is a stumbling China.  That for lots of reasons, no need to go into it here, that a lot of the confidence or projections of China's rise are off base.  And we're actually much more likely to face a China that encounters major domestic hurdles. 

Let's just say for a second he's right.  Just how does that change your book?  What happens if China rather than rising has all sorts of domestic friction or worse, slower economy, political battles literally and figuratively, and gets consumed for some period by things internal?  How will Japan see that?  How will that affect Japan's own trajectory?

SMITH:  Can I confess to something...

HAASS:  Yes, ma'am.

SMITH:  ... in terms of the editing of the book?  So Richard and Jim

, our director of studies, very carefully read our manuscripts.  And so we went back and forth, especially with Jim.  If you're listening, Jim, thank you.

On this question of aren't you assuming a straight trajectory of China's rise by using that shorthand?  And so you'll find when you read the book, which I hope you will, I talk about a changing China, a transforming China because I don't have in my mind this trajectory of a straight on rise.

I do think, however, that whichever way China goes, the Japanese will feel the impact.  There's $345 billion annually in trade.  Japan's companies, some of which are represented here tonight, are deeply invested in China and the success of the China market.  Many Japanese companies today make products designed for the Chinese consumer, not just for their own manufacturing interests, but for that large market that they anticipate is coming.

So there will be a lot of economic impact if that stumbling China emerges.  But the less predictable question really is what would a stumbling China look like in terms of its diplomacy, in terms of the way it manages its military and its relationship with its powers, the powers next door.  I don't know if we have an answer to that.

HAASS:  I said that was my last question.  Well, let me just sort of push you on that.  There's two schools. 

As China becomes more—imagine for whatever reason China becomes more assertive, either in reaction to domestic problems or in the absence of that.  For a while in Washington there was often a debate about how Japan would react to it. 

And one school of thought that this would stimulate Japanese nationalism and assertiveness, and the other is just the opposite.  That China would be so strong that Japan would basically see the handwriting on the wall and would accommodate China.  To what extent is that a scenario?

SMITH:  I don't like either of those because I think it's going to be somewhere in the middle and I think it'll be largely dependent on what we do.  It's not going to be Japan deciding all by itself because I think the major concern here would be security, right.  And our reaction to that would be critical.

If you look at the Senkaku, the argument, right, dispute.  And you look at the way the alliances responded, it took time.  But our policy community came around to understanding that the Alliance was actually the vehicle with which Japan wanted to respond to Chinese activities in the East China Sea.

I suspect whatever else may come, the Alliance will be first and foremost, the way the Japanese will approach the problem.  If we don't see the problem in the same way, if we don't understand the consequences for the Alliance in our actions then I think we're going to have some challenges.

HAASS:  OK.  Like I said, I want to open it up to you all.  I've given you 15 minutes in order to cook up really good questions.  Just raise your hand, wait for a microphone and quickly let us know who you are. 

Yes, ma'am?  I see microphones coming to you in about one second.

QUESTION:  My name is Linda Perkin.  I worked for the United Nations and I'm retired from there now.  But I also was an Asian Studies student at Columbia. 

You're assuming a sort of balance between these two that to me seems rather strange because everything that changes for the Japanese side also changes for the Chinese side.  And personally I wonder how anyone thinks the Japanese, who before were predominant against a totally bifurcated at best China, would take China on its own.  To me this is total nonsense.

So Japan can't do anything without its allies.  On the other hand, what makes...

HAASS:  We need a question here.

QUESTION:  You want a quick question.

HAASS:  Yes, ma'am.

QUESTION:  OK.  I'll give you a quick question.  Why do you assume there's any equivalency between the two?  I see none.

SMITH:  I don't think I do assume that.  So if I've—maybe I've not explained myself clearly enough. 

But I do—I don't think that the Japanese and the Chinese are going to take each other on.  And I think even today if you talk to elites and experts in Beijing, you don't get the sense that the Chinese want to take the Japanese on either. 

But I think what has happened over the last decade is some very critical areas.  The two governments have lost capacity to solve their problems bilaterally.  The most conspicuous of course is the island dispute.  And we've all read the newspapers and know they (inaudible). 

But in my book one of the case studies I looked at was food security.  And this is not something that the American audience pays a lot of attention to.  But there was a big poisoning issue with dumplings that came from China.  Japanese corporations are deeply invested in food processing in China. 

So they have built factories there for re-export to Japan.  And the two countries had a very hard time recognizing that they had a regulatory problem.  And so it took years for them to negotiate through the problem. 

I think the end is not a balance in the old sense that you have to have one country equal another.  I didn't mean it in that stark sense at all.  I think depending on the policy issue, they're going to have to find new formulas for navigating and problem solving.  And their capacity to do that will, I think, quiet some of those domestic voices in both countries. 

But I think there's new challenges for them in trying to figure out how to problem solve.  And again, the book deals with four different sets of policy issues. 

HAASS:  Why don't you say very quickly what the four sets of issues are?

SMITH:  So the first chapter is the one that everybody reads about these days, which is the Yasukuni Shrine visits and the—what I call the imperial veterans.  And I talk about the domestic politics of that issue inside Japan to give you a sense of where and when Chinese objections to the Yasukuni Shrine visits have really shaped Japanese policy.

The second is the maritime boundary in the East China Sea.  Even though Japan and China share a maritime boundary, not a land boundary, and it's less than 200 nautical miles from each coast.  Therefore they need to negotiate a common line between them.  And they have failed as of yet to do that.

The third is the food safety issue.  So this is a question of interdependence, deep vulnerability, but also deep economic interdependence between the two countries and the regulatory challenges that that presents.

And the final one is the defense and security side, what I call the island defenses, which is not just about Senkaku, but about the broad Archipelago and how this new standing military is challenging some of the premises of Japan's defense thinking.

HAASS:  Mr. Drucker?

QUESTION:  Thank you.  I'm Richard Drucker.  I'm a partner of Davis Polk.  I ran our Tokyo office for five years, and I was in our Hong Kong office for five years.  But that was a while ago.

HAASS:  This book is made for you.

QUESTION:  I have a couple of questions.  The first is...

HAASS:  Just do one, though.  I apologize.

QUESTION:  OK, one question.  I mean, Japan is a very sophisticated place relative to China.  We're all obsessed with the size of China and the rapid growth. 

But from a technology perspective and from the perspective of the sophistication of the financial markets in mean Japan is miles, light years, ahead of China.  And China, to a large degree is dependent upon Japan for technology in terms of the substantial Japanese investment in China, the largest investor in China. 

Isn't that at all relevant?  I mean could you just comment on that a little bit?  I know it's not a question, but I'm interested in your...

HAASS:  As long as you raise your voice at the end it becomes a question.

(LAUGHTER)

SMITH:  Well, one of the things when I was doing the research for this book that it struck me that we often think of economic interdependence as a result, as an outcome, right.  We are now economically interdependent. 

But in fact, the Japanese pursued—it was a strategy of economic interdependence.  And that was the way that they wanted to allow their two societies to reconcile in the wake of the war. 

That strategy now is being reconsidered in Japan, for obvious reasons, right.  And for some reasons that are not all that different than American investors are thinking carefully about investing in the Chinese market.  But I do think that there is a sophistication in Japan. 

I think the Japanese also have a very deep economic engagement with China that predates actually their peace treaty of 1978.  So there's a lot of knowledge about the China market in the Japanese business and economic elite. 

They know how it works.  They've watched it evolve.  They have partners.  They have people that they can talk to about investment climate and what's going on with the Communist Party reforms and things.  So it's also a very sophisticated China-watching community as well.

HAASS:  Just so I understand, so Japan had a policy, not just an outcome, of interdependence.  That was the idea almost with Kissinger with U.S. and Soviet Union to enmesh them...

SMITH:  Yes.

HASS:  ... so therefore they wouldn't try to turn the table over?

SMITH:  Too I lay it out that also how the Japanese approached the decades afterwards of support for five-year planning, for the market reform that Deng Xiaopeng was so instrumental in moving forward. 

Japan at the beginning said we are your partner.  We are going to help you do this.  In large part because they thought that would facilitate the reconciliation that hadn't really had a chance to happen because of the Cold War until the mid-1970s.  So it was a strategy.

HAASS:  And now they're...

SMITH:  Now...

HAASS:  ... rethinking it because?

SMITH:  They're rethinking it because a, there are some challenges in the China market, first of all.  And second of all because this idea of kind of separating the politics from the economics, being able to do business without thinking about the politics seems no longer able—no longer successful with the Chinese elite.

HAASS:  Is there a concern that they've fueled China's rise and they want to stop doing it?

SMITH:  Well, I'm not sure.  I have never heard a Japanese business leader express that, that bluntly, to me.  But in the 1990s, by the end of the 1990s Japan was ending its ODA. 

And one finance minister said why should we be giving economic assistance to a country that has missiles pointed at us?  So in the 1990s you start to see the policy elite begin to change their...

HAASS:  We do that all the time, by the way.

SMITH:  Yes.

(LAUGHTER)

Not that there's anything wrong with that.  But again, they began to think wait a minute, is this really going to get the outcome that we think we were going to get?  And they were beginning to say no to that question. 

HAASS:  Yes, sir?  Over there.

QUESTION:  David Groupo (ph).  I was wondering if you could comment a little bit on one question relative to the rise as sort of the more conservative part of Japanese society in which case you know in pushing the defense forces to become less defensive and more offensive in nature, does it make that segment of politics become more belligerent and feel like they've won and therefore suddenly becomes harder to control and more of a political issue domestically and with repercussions internationally?

SMITH:  Thank you.  It's a great question.  And it's one I grapple with in the book. 

When I got to the conclusion, one of the things about the case studies that I was looking for was exactly that.  Do you see across these various policy issues interested advocates who are either ideologically motivated against China or ideologically supporting a much more—you used the world belligerent.  I would say assertive Japan.  And I think I didn't find it. 

I found it in two of the case studies, obviously the Yasukuni Shrine visits there's ideological interest behind that of course.  And also on the island military side you have some people who feel that Japan ought to have a much stronger national military response, but not belligerence. 

It's not in the sense that we ought to take on China militarily, to get back to the earlier question.  Nor that they should move expeditiously an offensive strike capability or a nuclear weapon.  It's not that kind of sentiment. 

It's just simply we've allowed our military to not grow for a decade-and-a-half.  And now we have a China next door to us that's a serious concern.  So we have to push harder.  We have to push faster. 

I wouldn't say that that's ideologically driven.  There's some who rally around constitutional revision who are motivated by ideology.  But in large part it's a pretty pragmatic, realist mindset. 

HAASS:  One question I like to ask authors is what in the course of researching and writing this book surprised you?  Here you've been studying Japan for what, 25-30 years?

SMITH:  Mm-hmm.

HAASS:  You know it as well as any American.

SMITH:  Thirty, really?  Hold on.

HAASS:  Fifteen-20 years.

SMITH:  Thank you.

HAASS:  I'll revise my remarks.  I apologize.

SMITH:  That's OK.

HAASS:  I'm just projecting, that's all it is.

(LAUGHTER)

SMITH:  Little bit.

HAASS:  What surprised you?  What did you learn in a sense that you hadn't known or thought?  Or where'd you change?

SMITH:  Two things, actually.  And it actually relates to the last question, which is I was surprised at how open people were about talking about their concerns, first of all, whether it was the right-right or whether it was fishermen and consumer advocates, those who regulated food, Army officers, Navy officers, et cetera. 

So there was a fairly open—there's a fairly open discussion in Japan today, which I'm not sure you—I fully expect it to be the case.  I expected it to be much more step back and maybe at arm's length.  But it wasn't.  It was pretty open.

I also was surprised at the lack of the linkages that I was describing. I actually thought that there was a lot more overlap between, especially some on the right.  You don't have to go all the way out to the fringe, but to the maybe a little bit more articulate, let's put it that way, right.  And there weren't. 

When it came to policymaking there's a lot of noise from the right.  There's a lot, like in China and I guess on our Web you can get all kinds of statements being made.  But in terms of really advocating for policy change there was a real disconnect there. 

So there's a lot of noise, getting louder, perhaps because of the island dispute.  But not really an interfering or getting more engaged in policy advocacy itself.  So that was a surprise to me.  I expected it to be a little bit more rough and tumble. 

I expect the Diet is getting a little bit more like that.  But it's more the rhetoric than the actual well what do you want to do about it.  When you get to the question of what do you want to do about it, well we can reinterpret here. 

And so the changes—even Mr. Abe, who's a strong advocate on sort of a different approach to history, right.  He's a strong advocate on the military.  Even he can't push beyond where many in Japan are hesitant to go.

So I don't know if that part surprised me, but I was surprised by the lack of linkage between some of the rhetoric and the policy—the attempt to influence policy. 

HAASS:  Yes, ma'am?

QUESTION:  Imer Chidani (ph), Williams Street (ph).  Thank you for your comments.

Richard's recent book discussed the possibility of a NATO for Asia.  And there was a Southeast Asia treaty organization in between the 1950s and 1970s that included neither China nor Japan that failed.  I was just wondering your thoughts on kind of things that would enable that formation, and any concerns with its construction.

SMITH:  Thank you.  I think the problems that SEATO had, which is what you referred to right after World War II, or after the U.S. occupation in Japan ended, was largely a problem that nobody wanted to be in a treaty organization with Japan, right. 

I mean that was a large part the concerns.  Our Australian allies, Southeast Asia wasn't really ready for a treaty that solid anyway.  But the idea of, you know, having Japan in the mix was really not possible.

Today I think it's a different story.  And I think what you're starting to see around the region is maybe not a NATO-like yet understanding of where to go, but certainly a reaching out. 

Australia, Japan, for example.  Australia, Japan, India.  I mean there's different sort of geometries going on here.  But I think especially the Japan-Australia conversation has moved far past where I thought it was going to go.  And that's with us and bilaterally as well.

So I think there's networks here of allies with like-minded approaches to security and the future prosperity and order in Asia.  And those are already becoming much more visible.

The multilateral piece of the Asia-Pacific has always been based around ASEAN, as you know, right.  ASEAN has been the foundation of any kind of multilateralism across the region.

And then so the Chinese and the Japanese and us, we've all allowed ASEAN to take this center stage.  I think the question today really is whether or not ASEAN is going to continue to be able to bear that weight, given the intensity.  If we do see an Asia that has more rivalry and more problem-solving challenges then perhaps on top of that you'll need a different web (ph) of relations.

HAASS:  Just thinking about the Japanese-Indian relationship.  Clearly Mr. Modi and Mr. Abe are a little bit of kindred souls.  They have—both fairly forceful individuals with fairly expansive reform agendas.  To what extent do you actually think that Japan and India could grow closer, in part because of that other country called China?

SMITH:  I think there's a demand coming from Delhi in some ways for strategic cooperation or at least strategic dialogue with Japan.  Already the three militaries, the army, navy—the Japanese don't call them army, navy, but the army, navy, air force have strategic dialogue with their Indian counterparts. 

They're not doing exercises together, but they are certainly talking to each other about common perceptions, especially maritime perceptions.  And of course that's a little code for China. 

But I think I went to Delhi three years ago or so and I was astounded by how forward-leaning many Indians are about cooperation with Japan.  And so you get a little bit of economic interest, obviously, to ease the pressures that I think many Indians are feeling for the Chinese investment in their country.  They like to see more Japanese economic presence. 

But also there's an astounding willingness in India to talk about a nuclear Japan, and to say why isn't Japan independent?  Why doesn't Japan take geopolitical advantage of who it is and where it is?

HAASS:  Answer your own question.

SMITH:  Why doesn't it?  Because Japan has a constitution—no, that's not the answer to the question, sorry.  And the Japanese have not interpreted Article 9, by the way, to prohibit nuclear weapons.  They have left that option on the table.

I don't think the Japanese people want a Japan that is a military power.  And I think that you'll see that no matter how much Mr. Abe wants to push forward with making his military a little bit more accessible to other powers, every step of the way I think the parliament and the Japanese public opinion is going to test that premise.

So I don't think the Japanese public yet is ready for a kind of geostrategic Japan.  There may be some Japanese leaders like Mr. Abe who are ready.  But he'll have to persuade his country that that's really going to ensure their safety and not increase the danger to Japan.

HAASS:  I think we have time for one or two other questions.  Yes, sir?

QUESTION:  Thank you.  I'm Charles Heck, the Center for Transatlantic Relations in Washington.

SMITH:  Yes.

QUESTION:  Following up a bit this part of our discussion, could you comment on Japan-South Korea relations?  From our side of the Pacific it would appear that Korea might be a logical partner for a number of the challenges you're talking about.  But there doesn't seem to be a whole lot of progress on that front.

SMITH:  Thank you.  This is not in my book.  So this is a book about Japan-China, so you won't find any South Korea in the book.  But I'm happy to comment.

Japan and Korea have actually found common cause.  And episodically that common cause has even gotten them very close to information sharing agreements bilaterally or what we call acts across servicing agreements where their militaries can understand what their needs are should there be contingency on the peninsula. 

But that—they've backed—the South Korean side has backed away from that now. 

I think that the challenge today is really about the war memory, the issue of war memory and the issue of how to bring the two countries together to some kind of mutually satisfactory resolution of that.  And of course I'm talking here about the comfort women issue.  It has come.  It has ebbed and flowed. 

Japanese government has apologized many times directly and indirectly.  There have been attempts to compensate.  There have been apologies from prime ministers to the individual women who responded to the Asian Women's Fund in the 1990s.  So there has been no absence of Japanese attempt to apologize.

In the South Korean side of course this is an issue that sits deeply with the democratization process of South Korea.  There are a lot of groups in South Korea who did not have a voice in 1965 when they signed their treaty.  And those groups want now to have that voice in the compensation area.

The constitutional court in South Korea has ruled in 2011 that their government must renegotiate with the Japanese compensation and apology for the comfort women.  So I'm not saying that this excuses the issue.  I'm just saying that it has now become deeply embedded in South Korean domestic politics.

The reaction in Japan of late, Lee Myung-Bak (ph) visit to Dokdo Takeshima, statements about the emperor not welcome in Korea, the more recent statements by Madam Pak (ph) I think has fed a little bit of the nationalist sentiment and emotions in Japan. 

And it's not a very pretty picture, I'll be honest with you, on either side.  So I think the diplomacy is going to need a lot of support not only inside the country but also from Washington.  And it's a delicate diplomacy.

HAASS:  And there is a sense in Japan that nothing that Japan could say would ever be enough.

I saw a hand in the back and I can't see it.  Is that Laurie?

QUESTION:  Laurie Garrett from the council.

Last year our colleagues Liz Economy and Mike Levy published a wonderful book about China's soft power engagements, if you will, in Africa.  I've seen really stark differences between how China and Japan views their sort of foreign aid role. 

If you look at Burma, Myanmar, or any place in the neighborhood, if you will, how do you see the difference?  And do you see it as somehow emblematic of the other shades of temperament and difficulty in this relationship?

SMITH:  Great question, Laurie, thank you.  Japan has been an—at one point we called Japan the ODA superpower, right.  Japan has been a very generous country, and has, like many of the northern European countries, seen its ODA as the prime instrument of its foreign policy...

HAASS:  Not everybody will know what ODA...

SMITH:  I'm sorry.  ODA is overseas development assistance.  So it's the official aid budget by the government, right. 

The form of that ODA came in many guises, right, grants, loans, contracts and projects, et cetera.  So at one point in the OECD in the 1980s when Japan emerged as this huge economic superpower, it got a little chastising.  It got a little scolding from OECD to say look, more grants, less commercial interest of your companies.  And Japan stepped up. 

It has a tremendous record, I think, and JICA, the Japan International Cooperation Agency I think is really a remarkable agent of Japan's development assistance expertise, right. 

As you know, it has in the United Nations also moved a project on human security forward, deeply connected to not only Africa, but Latin America and the rest of the developing world in terms of health, in terms of women's empowerment, et cetera. 

So Japan can't be chided for its development assistance.  But the economic situation of the last decade or so has put pressure on that budget.  And so it hasn't been able to sustain the same levels of ODA that it did in the 1980s. 

Today I think Japan sees its ODA as not necessarily going to China, which is more developed now, but has 25 percent of its ODA going to India, back to Mr. Modi.  So it may be redirecting the focus.

You asked specifically about Africa.  Japan has been the head of TICAD, which is the cross-African continent dialogue on development.  And so they have taken a very prominent role there in discussing ways to improve and enhance the quality of development assistance. 

HAASS:  Last question.

QUESTION:  It's a bit of pressure to ask a good question when it's the last question.  My name is Paddy Hogan from Bank of America Merrill Lynch.  I worked in Tokyo for 10 years. 

My question is perhaps driven by a fear of China, is it U.S. foreign policy to have a strong Japanese economy?  And the reason I ask that is the yen has weakened by 50 percent.  And not one senior U.S. trade official has complained.  Whereas perhaps when you started looking at Japan there'd been a lot of rhetoric out of U.S. manufacturing.

SMITH:  Right.  Not everybody is quiet on the value of the yen.  There're some auto companies who are a little bit more...

HAASS:  It'll come up in Congress a lot.  In the TPP, if it gets that far, you're going to hear a lot more about the value of the yen.

SMITH:  Yes.  But I think overall the U.S. administration is very supportive of Mr. Abe's efforts.  You hear various voices of policy, criticism about emphasis on structural reform, et cetera, et cetera.  But I don't—I think a strong Japan economically is good for us, right. 

We have Japanese investors in this country creating upwards of 800,000 jobs, right, or employing 800,000 Americans.  So, Japanese foreign direct investment in this country is critical to our economy. 

So a strong global, vibrant Japan is just out of American interests' sake is very important.  But I think for this larger question of Japanese competence and Japanese global and regional engagement.  I think the Japanese need to feel that their economy is growing, or at least is capable of competing again.  I think that's very important.

HAASS:  A version of that question.  TPP, the trade agreement, is going to come up.  What are the consequences for U.S.-Japanese relations if that happens? And what are the consequences if Congress doesn't support it?

SMITH:  I think in terms of the geostrategic impact that would have, it would be devastating for us...

HAASS:  If it were not passed...

SMITH:  If it were not passed.  And I understand that we're in the final round.  And I understand that this is a multilateral negotiation.  It's not just U.S. and Japan, but there're many other countries at the table.  It's complicated.  I understand.  Bu I think particularly for the U.S.-Japan piece it would be devastating for both of us.

HAASS:  What do—can I—translate the word devastating for us.

SMITH:  Well, I think it would show a lack of American willingness to really push the economic partnership with Japan.  And I think that's the signal it would send, that we don't think it's important enough.

I think in terms of—you know the scholars at the Peterson Institute have done a very numerical calculation from the absolute gains from trade.  And I'm not an economist so I won't go there. 

But I do think that TPP today is not just an economic trade agreement.  It's really an agreement about how to negotiate the future of economic relations in Asia-Pacific, high standards, market access, the kinds of things that are more difficult for Asian countries to negotiate with themselves. 

HAASS:  I'm going to push you one more inch on that. 

So I agree with you 100 percent.  It's not just an economic agreement.  It's a strategic agreement.  The consequences are devastating.  If the TPP is completed and the United States doesn't support it, would that have real implications for Japan's strategic orientation potentially?  Would it change the debate within Japan?

SMITH:  I think it would signal to Tokyo that we really weren't committed to a strong and sustained presence in the Asia-Pacific, absolutely.  It has to be economic.  It can't just be a military presence.  It must be economic. 

HAASS:  The book is called "Intimate Rivals" subtitled "Japanese Domestic Politics and a Rising China".  What you've just heard is a better demonstration than anyone could've talked about of a real authority in this country in the Council on Foreign Relations about not just Japan, but I think Sheila also showed her range in the region and beyond.

So congratulations on finishing this.

SMITH:  Thank you.

(APPLAUSE)

HAASS:  And again...

(APPLAUSE)

SMITH:  Thank you.

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