Meeting

Japan After Abe: Kishida’s Challenges

Friday, January 13, 2023
Speakers

Vice Chairman, Securities Investor Protection Corporation; Senior Fellow, Center for American Progress; CFR Member 

Deputy Director and Senior Fellow, Asia Program, German Marshall Fund of the United States; CFR Term Member

John E. Merow Senior Fellow for Asia-Pacific Studies, Council on Foreign Relations; @SheilaSmithCFR

Presider

Senior Correspondent, Wall Street Journal; CFR Member 

Panelists discuss Japan under Prime Minister Fumio Kishida’s leadership and examine Japan’s domestic challenges, security posture in the face of escalating geopolitical tensions, and regional economic goals. 

 

SCHLESINGER: Thank you so much, Kayla, and thanks to all of you for joining us early in the morning and/or late at night, wherever you are. Welcome to today’s Council on Foreign Relations virtual meeting “Japan After Abe: Kishida’s Challenges.” I’m Jake Schlesinger, senior correspondent at the Wall Street Journal, and I’ll be presiding over today’s discussion.

As you all probably know, this is an incredibly timely conversation, with Japanese Prime Minister Fumio Kishida in Washington today. He’ll be meeting with President Biden just a little over three hours from now.

To help set the scene, we’re privileged to have with us three of the most knowledgeable American thinkers on Japan today.

First, from Tokyo, Glen Fukushima, whom I was honored to first meet in the late 1980s when he was at the U.S. Trade Representative’s office negotiating with Japan during the height of bilateral trade tensions. Glen is now vice chairman of the Securities Investor Protection Corporation and a senior fellow for—at the Center for American Progress.

In Washington we have Tobias Harris, deputy director of the Asia Program of the German Marshall Fund of the United States and author of the defining book on modern Japanese politics, The Iconoclast: Shinzo Abe and the New Japan.

And last but not least, our own John E. Merow senior fellow for Asia-Pacific studies here at the Council on Foreign Relations and most recently for the incredibly timely and prescient book Japan Rearmed: The Politics of Military Power, Sheila Smith.

We’re going to hear brief opening remarks from each of our distinguished speakers and then chat amongst the four of us until 8:30 a.m. Eastern. We’ll then open it up to questions to all of you before wrapping up at nine a.m.

We’re going to start with Tobias to set the table on the current state of Japanese politics. Tobias, take it away.

HARRIS: Sure. Thank you, Jake. It’s really great to be here for what’s basically a conversation among friends. So it’s great to see you all. Thank you to the Council for hosting this extremely timely discussion.

I just—I will be brief and say that when Kishida came out of the upper house elections last year, the discussion, of course, was supposed to be that this was going to be the start of three golden years—that we had three years to move an agenda forward without having to face a national election, that it was this perfect moment for him as prime minister to cement his status and maybe even to secure his position for the long term. It has not worked out like that. His first six months have been certainly preoccupied with the fallout from the late Prime Minister Abe’s assassination and the revelations that followed that about the links between the LDP and the former Unification Church. That has, I think, dragged down Kishida’s approval ratings. He’s still in negative territory as the year starts. And in general, it has, I think, dented his reputation for competent and clear leadership. And so one could be forgiven for thinking that he might not be long for the premiership, that things really are not in good shape as he’s starting the year.

But I would suggestion that as he starts the year his situation might not be as dire as it seemed maybe a few months ago. Clearly, you know, his approval ratings, I think, have stabilized. They might be bouncing back up a little bit. And maybe even more important than that, I think one of the most important factors that enabled Abe to last as long as he did is the opposition has shown no ability to connect with the public. They were given—I mean, this scandal was about as perfect an opportunity for the opposition to show the problems with LDP leadership and LDP governance, and they have made absolutely no headway at all. And so if there were a

general election tomorrow, it’s hard to think that it would look very different than the last several general elections where the public stays home, there’s a lot of disillusionment, and the LDP would maybe turn out its supporters and you’d end up with a majority that looked somewhat similar to what you have now.

Nevertheless, I mean, I think there’s a major difference, I think, as we stand right now between Abe and what enabled him to last for a record-setting almost eight years and Kishida, and that is this question of authority. And I think Abe had firm control of the LDP. He made—the LDP was his instrument. He had a majority and he had a number of source of authority that enabled him to wield power effectively. You know, he had a number of ideological compatriots who—many of them who were younger LDP members who depended on his coattails. He was basically the de facto leader of the party’s largest faction, so he could count on the party’s factional math. He had, I think, an ability to communicate a vision. And really, actually, in the end his public approval ended up being fairly stable over time and, I think, had a very hard floor, and was able, I think, to wield an ability to serve as a global statesman to his advantage and to really make the case for why he was necessary as the head of the LDP and as the head of Japan.

Kishida, I think, has question marks around a lot of those things. I don’t think the public has any great affection or any portion of the public really has much great affection for him. You know, certainly I don’t know if in the LDP grassroots they have much affection for him. He is, I think, distrusted by the party’s—by the LDP’s largest ideological affinity. He’s not a conservative. If you look at the conservative press, a lot of times they’re asking questions about how reliable he is when it comes to doing the things that he wants—they want him to do. He comes from one of the party’s smallest factions, which means to govern he really needs to assemble a coalition of factions and to some extent is dependent on what is still the Abe faction, which has its own challenges. And you know, of course, we’re now watching him try to develop this reputation as a global statesman that might serve him in good stead as he tries to solidify his leadership. But so far, I don’t know if we can say that that’s really necessarily going to be an asset that enables him to serve.

So, you know, whether he’s able to impose his vision on the party, his leadership on the party, unite his party, I mean, there’s some major policy question that—we’re starting to see that there’s a lot of dissent and there’s a lot of disagreement in the party. And so that really is going to be the key to his longevity going forward.

SCHLESINGER: Great. Thanks, Tobias. That’s a great way of segueing into Sheila.

Sheila, Tobias mentioned Kishida’s ambitions to be the global statesman. He’s here in your town today. Tell us a little bit about Japan’s foreign policy under Kishida, and his goals, and where he’s heading there.

SMITH: Great. Thank you, Jake.

So I’m going to just emphasize two big projects that have been undertaken under Prime Minister Kishida, and with the caveat that we look at these projects largely as being part of Abe’s legacy. We praised Abe for his statesmanship. We praised Abe for his ability to implement security reforms. But in fact, Kishida Fumio has undertaken two of the largest transformations, I think, in Japanese security and diplomacy in this last year.

One he intended, and that was the security review that he did—he announced last December, a year ago last December, and—of 2021. And in that instance, he began a process within the LDP, within the party, of thinking through how Japan needed to rethink its military—its both force posture, its capabilities—and also this larger question of what role the military should be playing in Japan’s larger strategy. So that was one. That was a slow process. We all watched over the course of twelve months or so as details came out in the media. But the conclusion was the announcement of three strategic documents last December.

One was a new national security strategy, the second that Japan has drafted—the first, of course, being under Abe in 2013. This was a sort of whole-of-government approach, so the entire Cabinet had a hand in this. But it really emphasized the change and the shift in the balance of power in Asia, and the way in which it affected

Japanese security. It talked a lot about Japan’s diplomatic needs to engage not only with other partners in the Indo-Pacific, but also with the United States, obviously, but also with European partners. So it was a very ambitious redrafting of how Japan should move forward as it tries to cope with this much more volatile world.

The other parts of it were economic security, but what got all the headlines, of course, was the military dimension. And a ten-year defense plan came alongside that that had two elements that captured the headlines.

One, of course, was the Kishida Cabinet’s decision to double or at least the ambition to double the percentage of GDP Japan would be spending on its security. And this would be largely to the Defense Ministry, but not exclusively. It includes a boost for the coast guard, a boost for technological innovation and other categories as well. But that decision to go from 1 percent of GDP—which has always been a symbolic marker of Japan’s limited ambition in the military realm, right—to a 2 percent of GDP goal, which looks a lot like what our NATO allies envision for their defense investments, their military investments. So that was a striking headline.

There’s a little politics around that. We can talk more about that later. But how he’s—how the government’s going to pay for that remains an open question. And Kishida, of course, drew some attention to himself and some opposition from within the party, interestingly enough, when he said he wanted to impose a new defense tax.

But the second headline is really about the bombs and bullets side of things, and that is the counterstrike capability. Japan will, for the first time, have missile or would like to have missile capabilities that allow it to reach out and touch its neighbors. To date, Japan has very strongly kept its military limited in geographical scope but also kept its capabilities on the sort of border of Japanese territory, what the Japanese call the standoff capability. But what it wants to do now is invest in missiles that will allow it to threaten either North Korea or China, and so be able to deter aggression. This is a big headline. I expect this to draw in the implementation phase also some domestic opposition and criticism. But it is a significant thing that the prime minister who’s largely known as the dove or the diplomat, the former minister of foreign affairs from Hiroshima, has really presided over a significant doubling down on Japanese defense capability.

So the second—

SCHLESINGER: Great. Oh, go ahead. Go ahead.

SMITH: If I have one minute, I—

SCHLESINGER: We’ll give you one more minute. Go ahead.

SMITH: One more minute. Sorry.

So the second piece is the diplomacy, of course, and Russia’s invasion of Ukraine. And so Kishida has also stood up there to say that Japan opposed the Russian invasion, supports a rules-based order, sanctioned Russia immediately alongside the G-7, has been very active in G-7 diplomacy. And in fact, Kishida’s traveling on a G-7 junket, so to speak, to line up support among the G-7 countries, including the United States. So this will be—the May G-7 meeting will be hosted by him in Hiroshima this year.

SCHLESINGER: Great. Thank you so much.

So, Glen, you arrived—we were talking beforehand—in Tokyo a little over a week ago.

FUKUSHIMA: Right.

SCHLESINGER: And you said things are looking very different from there than before. Tell us a little bit about the perspective where you are.

FUKUSHIMA: Sure. Well, first of all, I’d like to thank Sheila and the Council on Foreign Relations for inviting me to join this discussion. It’s great to see all of you and especially Jake, who I’ve known for more than thirty years as was mentioned in the opening.

I’d like to mention three things very briefly.

First, I agree with what’s been said by both Sheila and by Tobias about the foreign policy and domestic political situation. I think the defense policy announced changes, including the doubling of defense expenditures in five years, is a major change from ten years ago when Shinzo Abe took office again as prime minister in December of 2012. And historians, I think, looking back on postwar Japan will probably point to 2022 as the kind of inflection point—seventy-seven years out from the end of World War II—when the government of Japan decided to boost its defense spending to jump from number nine in world spending to number three, after only the United States and China.

But as I—as Jake alluded, being here in Japan, the situation isn’t quite as celebratory, I guess I would say, as things seem to be in Washington. Reading the commentary here in Tokyo from Washington, whether it’s the Wall Street Journal, the New York Times, the Washington Post, there is so much celebration and congratulations about these changes in Japan. And I’ll just say in my—in my later point in more detail that the situation, as seen here on the ground in Japan, is quite different.

Secondly, I think it is important to step back and to understand really the factors behind this change in the defense policy direction. And I think there are actually six factors. Three of them are very obvious. Three are less obvious.

The first is North Korea, obviously with nuclear weapons, missiles, so forth. Secondly is China. Thirdly is Russia and Ukraine.

But my own view, being here in Japan, is another factor is South Korea and the tensions between South Korea and Japan—although recently are trending in a more positive direction, still just within the last week the president of South Korea, President Yoon, announced the possibility of South Korea going nuclear, which has been an issue in discussion for quite some time in South Korea. And so I think Japan sensed not only with North Korea, China, and Russia, but also with South Korea that Japan really doesn’t have any friends close by. The closest friend Japan has is far away, in the United States. And so I think the need for Japan to fend for itself I think has become much more evident in the last ten—within the last five to ten years.

The second less-obvious factor, I think, looking at it from the United States, is the perceived unreliability of the United States as viewed from Japan. I think especially since 2016 and the—and the debates in 2016, and the Trump administration, and Trump’s denigration of partners and allies and of NATO, and of saying that the allies are ripping us off, all of that I think has led Japan to a reassessment of its need to fend for itself because they may not necessarily be able to depend on the United States in the long term.

And then the last factor is something that Sheila touched upon, which is that although this is a legacy of Abe, that actually the fact that Mr. Kishida is prime minister probably makes it easier in Japan to make these changes because many people—some people in Japan were concerned that Abe was a nationalist and would take Japan in the wrong direction; whereas Kishida, being from the Kochikai, the dovish faction of the LDP—the Ikeda-Miyazawa-Ōhira-Katō-Koichi faction—and Hayashi, the foreign minister, also—that they’re considered to be actually very moderate, very dovish. And in that sense, it may make it easier for the public especially to, or even the neighboring countries, to accept and even in some cases to welcome this change.

So these six—these six, I think, planets have all been aligned.

The third point I’d like to make is domestically within Japan I think there is much more of a complicated assessment of the situation in the sense that certainly Sankei Shimbun, Yomiuri Shimbun, Nihon Keizai Shimbun—the conservative and moderate newspapers—have editorials praising this change. But if you look at the Asahi, Mainichi, and Tokyo Shimbun, as usual they’re very skeptical and very concerned about what all this means for Japan.

For instance, just recently there was an announcement in Japan, the reporting about the CSIS report about a possible Taiwan contingency and what that might mean for Japan’s involvement, and how many thousands of deaths this would result in Japan. And so the notion of Japan increasing defense capability is something that is still, I think, not fully accepted by the population in Japan. And certainly, the view here is that not enough debate, not enough discussion has taken place either in the general community or especially in the Diet to assess the merits of the increase; the content of the increase; how they’re going to increase the defense—the Self-Defense Force; the personnel issue, which is a real issue, shortage of personnel; the equipment; the procurement; and how the funds are going to be raised. So all of those are still—and the implementation and operationalization of all this with combined forces with the United States is something that’s going to be—have to be worked out over the next several years. So this is really a statement of policy decision, but with regard to the actual implementation it’s going to take some time and some effort. So I think some of the congratulatory views in Washington may be a little premature.

And then, finally, I would say that this particular meeting today between the prime minister and the president is interesting in that I think, precisely because as Tobias mentioned, Kishida’s political support in Japan right now is not that strong. I think Kishida wants to use this opportunity to kind of bolster his position in Japan politically by showing just how much he has a close relationship with the United States and with President Biden. And I think from President Biden’s point of view he wants to show especially the Republicans that he’s being tough on China, he’s got Japan on our side, that we’re working together to form this coalition against China, and North Korea as well, and Russia with regard to Ukraine. So I think both leaders have an investment in this meeting to make each other look good.

Thank you.

SCHLESINGER: Great. Thanks, Glen. That was—and to all of you for the fabulous overview.

I first wanted to just say, Glen, I think that you made an excellent point. I mean, we’re focused on Japanese politics and Kishida’s challenges, but as you note America has its own challenges. And it’s interesting that Kishida’s arriving here, you know, as Biden is wrestling with his own potentially emerging scandal over the classified documents, and so there’s weakness and uncertainty on both sides.

I’d like to actually take what you said last and then turn it over to Sheila, and Tobias if he wants to also weigh in, to root this more into the summit today and talk about specifically what is each leader looking for. A lot of it’s going to be happy talk, as these things usually are, but what are they—what tension points, if any, are there? And what do you think we’re—help us sort of read between the lines of what’s likely to come out and the messages that maybe aren’t being said but that—the most interesting things to watch for. Sheila, you want to start?

SMITH: Sure. I think, you know, I’ll start where I ended off, which is I think the G-7 is really high on Kishida’s mind, and that host—again, that’s coming to Japan in May. But I feel that the Ukraine situation is something that, you know, the Biden administration is grappling with. We have a new Congress, many of which the members—many of the Republican members are questioning whether or not we should be giving such aid to Ukraine. And so I think there will be a pretty deep conversation about where American politics are headed and

what the American commitment to Ukraine is, and of course that’s not something Japan can necessarily shape but it will be something that Kishida will want to hear a lot more about.

The one topic—you know, obviously, the strategic documents and Japan’s reorientation will be—there’s a congratulatory tone already.

But I think the other thing we’re not talking about and might be useful to remember is North Korea. We’re still grappling with whether or not there’s a seventh nuclear test about to arrive to shake things up. But I think the one piece of the puzzle that’s different now in the wake of Russia’s invasion of Ukraine is the Security Council and how Japan, the United States, and South Korea, and other allies and partners could effectively work through the Security Council to sanction North Korea, and this time it’ll be different. Japan, however—and you saw yesterday the foreign minister of Japan up at the United Nations presiding over a conversation at the Security Council. Japan has—is a non-permanent member, but is going to be the chair of the U.N. Security Council for the next couple of years.

So this’ll be a place, too, where, as you know, Kishida has his very focused—a very strong focus on nuclear disarmament and eliminating nuclear risk. I suspect this will be also a topic for President Biden and Prime Minister Kishida to double down a little bit on.

SCHLESINGER: Tobias, do you want to weigh in on that?

HARRIS: I mean, I would just say—and I mean, you know, to some extent we’ve all kind of touched on this, but I mean, in some ways the important thing for Kishida was coming here. Of course, he hasn’t. Last year his first meeting with Biden was virtual, so he hasn’t really had this opportunity to have a—you know, a photo op at the White House. I mean, this is—this is, I think, part of a reset from Kishida. You know, he really needs to change the narrative about his government. And so laying the groundwork for a successful G-7, you know, showing that he’s an agenda-setter, you know, and of course getting the public approval from the United States president for what he announced and how important this was.

In terms of substance, though, I mean, I think the real substance this week was what we saw at the 2+2 meeting of foreign and defense ministers this week on Wednesday.

That was—you know, we’ll see what the joint statement ends up looking like. You know, in 2021, when Suga met with Biden, we had a very important joint statement in terms of the language about China, so we’ll see what we end up seeing this time around. So that could matter as a marker.

But as far as Kishida’s need for this summit, I mean, I think the fact that he’s going to be here; he’ll get the affirmation from the president of the United States about what he announced—you know, his government—last month; and that maybe he can start changing the story of his government, I think that’s what we should be looking at.

SCHLESINGER: I’d like to raise something that, remarkably, twenty-three minutes into this conversation, a topic that has not come up, which is economics and trade. And you know, Tobias, as you know—I mean, and we all know that, you know, Abe was known for reorienting Japan’s military policy, but another one of his incredibly bold and innovative moves was for Japan to join the Trans-Pacific Partnership, which is something that Japan had great difficulty doing, and then after the U.S. pulled out to show the leadership to keep that alive. And Japan has continually sort of asked the U.S. to rejoin, and as a lot of people have argued that sort of setting the economic architecture for Asia is every bit as important as the military and diplomatic architecture. Glen, is that at all on the table, or has Japan sort of given up on the U.S. playing any role in economic leadership in the region?

FUKUSHIMA: I’ve been told by Japanese officials that on every occasion that senior officials meet with their American counterparts they make a point to raise TPP. I assume the prime minister will raise it with the—with the president. I think your newspaper in the editorial—(laughs)—mentioned—maybe you work there—

SCHLESINGER: Just to be clear, I’m not on the editorial staff. (Laughter.)

FUKUSHIMA: OK. Made the very important point that it’s fine and good to talk about military security, but in Asia the economic policy—economic security is central. And I personally believe in dealing with China in particular trade, investment, technology, and finance are so important; that the U.S. has not devoted sufficient attention, the Biden administration hasn’t devoted sufficient attention.

I think the Japanese are very well aware of this. And in fact, I think in one of the—I think it was a Josh Rogin interview that—in the Washington Post where Kishida made it a point to say, you know, I hope you guys in Washington will pay more attention to us in Japan and what’s happening in Asia because I think the perception still is that, on the economic side, despite the fact that IPEF—the Indo-Pacific Economic Framework—has been announced by Biden in May of last year when he visited Japan and met with Kishida and the Quad, that, from the Asian point of view, is very insufficient, very inadequate. It doesn’t even come close to doing what the TPP would have done, which is to really engage the United States in Asia and also allow for market access in the United States, which would in turn allow for more access by the United States into Asia.

So I think there continues to be interest on the part of the Japanese to get the U.S. back into TPP. I can talk for quite a while as to why I don’t think that’ll happen in this Biden administration, but I think that the desire and hope is still there on the Japanese side.

SCHLESINGER: And for Glen or both of our friends who are in Washington, I mean, what is going on, if anything, in the U.S. side on that issue? Or is it sort of a dead letter? (Laughter.)

SMITH: I don’t see—I don’t see any signs, Jake, that there is energy behind trade agreements at the moment. And I think the one piece where I think it’s interesting to watch is not Japan; it may be the U.S.-Taiwan conversation, because that will be—that has obvious significance. But that also is going to be an important indicator about just how much we can rally support around a new trade agreement.

FUKUSHIMA: It will be interesting to see, though, once the U.K. joins, and then China and Taiwan are on the agenda as well as other Asian countries, as these other countries join TPP and as it gains momentum, whether it’s this administration or the next administration, at some point I think some people in the U.S. will recognize and understand that maybe the lessons drawn from the 2016 election from the four Rust Belt states of Ohio, Pennsylvania, Wisconsin, and Michigan, that they drew the wrong lesson, and that in fact the U.S. needs to be engaged economically in Asia. But we’ll see.

SCHLESINGER: So, actually, we have three minutes left before we’re going to turn it over to the audience. And Tobias, I wanted to turn it back to you to talk a little bit more broadly about the domestic political situation in Japan. I mean, one of the things I think that made Abe remarkable is, as you chose to write about him, is that he was prime minster for eight years. We’re now on our second post-Abe prime ministership and one, as you say, that’s troubled and may no last. Why has Japan reverted to that kind of, you know, carousel of prime ministers situation? And how does that affect the ability of Japan to deliver all these bold promises that it’s making to the U.S.? And again, keep it brief because we’re got two minutes here.

HARRIS: Yeah. Sure.

I mean, I’m not sure that it has reverted. I mean, I think there was something—you know, Suga lasted a year, but I think some of that might have had to do with just sort of the uniqueness of COVID-era politics, and that we might be seeing a reversion to something else where actually Kishida might be able to last despite some of

the weakness, that it might not be fatal. And you know, for all the sort of glow around Abe, I mean, his last several years were scandal-plagued and his numbers were lower than they had been for a long time, and yet he endured, you know, right up until COVID and sort of got struck by kind of the exceptional period that was COVID. So, I mean, clearly—I’m not sure it’s a new era.

I mean, you know, LDP sort of dominance does not look any—you know, we’re not going to be in an era of new two-party competition; you know, that none of the opposition parties have shown any strength. You know, during the Abe years it was the one strong, LDP, and the many weak. That is still prevailing. It really is this question of LDP internal dynamics. I mean, that is much more important. And that—again, as I flagged, that is the difference, you know, that Abe really controlled the party in a way that I’m not sure—you know, Suga maybe had marginally more success. Kishida has now shown that he’s got that authority yet. It’s not impossible, but the LDP’s internal dynamics—and some of that is that they’re not disciplined because they have no real opposition. And so there’s sort of a slackness that I think is resulting in some unruliness within the party and the question is: Does Kishida have a path to reassert his authority? And that will, I think, determine whether we see him at least, you know, certainly last to the end of his leadership term next year, but then maybe beyond that for a second.

SCHLESINGER: Great.

All right. Well, it is now 8:30 Eastern and we are going to open this up to Q&A, inviting members to join our conversation with their questions. A reminder that this meeting is on the record, and the operator will remind you how to join the queue.

Kayla, do we have any questions waiting for us?

OPERATOR: Thank you. Yes.

(Gives queuing instructions.)

We’ll take the first question from Chris Thomas.

Q: Hi. Chris Thomas from Brookings, and formerly led Intel’s operations in Asia.

High tech—the U.S. and Japan are highly complementary. Japan is great at really boring engineering stuff. They’re good at manufacturing. They’re good at building stuff in Southeast Asia but they’re terrible at scale, commercialization, and global companies, which is exactly what the United States is good at.

U.S. and Japan need to team up together to win the future. So far, our policy with Japan seems to be don’t sell stuff to China, which is a negative policy.

What would the Japanese want or what would the Japanese accept to sort of co-build future semiconductor processes, which are battery processes, create a common Japan-U.S. technology access which is going to be twice as strong as what we have today? How could that work from the Japanese side?

SCHLESINGER: Glen, I’m going to throw that one that you as someone whose worked in some of those areas.

FUKUSHIMA: Sure. Well, you know, back in the 1980s I was the U.S. chair negotiating the U.S.-Japan semiconductor agreement ’85-’86, and from 2000 to 2004 I worked at Cadence Design Systems, at that time the largest leader in the world in electronic design automation software to design semiconductors. So I’ve had considerable contact with American and Japanese semiconductor companies.

I think you’re right. There’s a tremendous amount of complementarity between the U.S. and Japan. I think that—one of the problems I see right now is that because so much of the discussion over the last couple years has been government led and there hasn’t been sufficient private sector involvement in this discussion, and to be able to fully maximize the potential for cooperation between the U.S. and Japanese companies it does require the private sector to have those discussions.

And so, you know, I am not aware at this point of any kind of a council of American and Japanese companies and government officials—government officials taking a back seat—in order to find ways in which cooperation can be done, and right now, as you say, much of it is very negative, although there are some positive developments like Japanese investment in the United States and Taiwanese investment in United States and Japan, and there are areas in which they are trying to find cooperation. But I do think it really requires the leadership of the private sector.

And so getting—engaging the private sector in this is extremely important. But I think there is tremendous potential in this.

SCHLESINGER: Next question, Kayla.

OPERATOR: We’ll take the next question from Daniel Mandell.

Q: Hi. Good evening from Tokyo. I’m Daniel Mandell. I’m actually a CFR international affairs fellow currently based in Tokyo at the Japan Institute of International Affairs, and I was hoping to offer an observation that I’ve had while I’m here.

And it’s, you know, all politics are local and that’s the same in the U.S. and Japan, and although the doubling of the defense budget was mentioned, one thing that hasn’t been mentioned is a recently announced significant increase in child-related services including payments to people to take their children out of Tokyo to help repopulate the more rural areas.

So the question now being asked is how is that plus the doubling of the defense budget going to be paid for, which leads to the question of raising taxes. And, of course, you already have a(n) inflation rate that’s at a historic high of 4 percent right now. You’ve got a GDP which is, you know, fairly stagnant, income levels that haven’t risen, although they’re expected to be increased after the negotiations that go on later this year. The yen is at historic lows.

So just, you know, economically things are not great and it looks like the government is about to raise taxes on people. I think the NHK released a poll yesterday showing that Kishida’s approval actually went down another point or two.

But that poll also showed that there just was no one else. You know, people supported him because they didn’t think there was anyone else who could do the job, which kind of goes to one of the other points that was made.

So, you know, from where I’m standing, which is really as an outsider in Tokyo, it looks like Kishida might be able to survive but only because there’s nobody else. There’s no organized opposition and there’s not even a challenger within the LDP, which has a supermajority in the Diet that could, you know, take his place.

So that’s domestically. But that might enable him to continue on what he’s been doing internationally, which has been not just with the U.S. but to really bolster ties with Australia as well as with some other countries there. Japan is now developing a joint fighter with—a new joint fighter with India—with Italy and the U.K.

So, you know, Japan—there’s a lot of activity going on. Kishida is historically weak but may survive just because there’s no one else. Sorry it’s a bit long, but I just wanted to offer that observation from on the ground here in Tokyo.

SCHLESINGER: Thanks, Daniel. That’s helpful.

And, Daniel, you raised an interesting point, which we also haven’t really touched on and really like to ask Tobias to weigh in a little bit, which is economic policy and the state of that.

I mean, we’ve talked about it in the context of how you’re going to pay for the defense increase. But, broadly, you know, Japan does have a lot of economic challenges right now and unclear how they’re getting themselves out of the box.

And, Tobias, do you want to touch on that a bit?

HARRIS: Yeah. I mean, it’s—I mean, when we talk about sort of the problems of maybe dissent and disagreement within the LDP, I mean, I think it’s probably the biggest question, going forward. You know, Abe—you know, one of his legacies appeared to be making the LDP a party that was going to be much more comfortable with deficit spending.

You know, yes, he, you know, raised the consumption tax twice. But in some ways, it was only after several delays in the case of the second one and, in general, the orientation of the LDP was to be just much more tolerant of deficits. And by the time Abe was assassinated, I mean, he had spent the months ahead of that, basically, making modern monetary theory arguments about that deficits don’t really matter—that about a year ago there was, like, an open dispute with the Ministry of Finance, which, you know, the lead bureaucrat in the Ministry of Finance was criticizing irresponsible politicians for creating a fiscal Titanic. And Abe and some other people on the right of the LDP were saying: No, doesn’t matter. You know, we have a lot more room to spend.

And so we’re seeing maybe a slight shift in that direction that the LDP may be—you know, someone like Kishida is leaving a little more room open for deficit—for opposing deficit spending and for raising taxes again.

We’ve seen actually a suggestion of a possibility of a consumption tax hike. Sorry, I have a child at home. A possibility for a consumption tax hike, Kishida, of course, alluding to the possibility of defense tax increases over the course of—you know, to pay for the defense spending increases.

So, I mean, there’s, clearly, I think, a shift and the question is how much room does Kishida have to run with that because right now the right wing is being very aggressive about saying, no, deficits are OK. And I’m going to pause there for a second and try to get the door closed. Thank you.

SCHLESINGER: Great. Thanks, Tobias.

Kayla, what’s our next question, please? The next member?

FUKUSHIMA: Well, let me just add that 65 (percent)—

SCHLESINGER: Oh, yeah. Please go ahead.

FUKUSHIMA: According to the news, 65 percent in a poll oppose a tax increase to cover defense increases.

SMITH: Jake, can I also point out one thing we haven’t mentioned—

SCHLESINGER: Please. Of course. Go ahead.

SMITH: —and that is, certainly, Japanese debt overall.

You know, when you look at the budget, and Daniel was right to point us in the direction of new promises of the Kishida cabinet for demographic change and for incentives for raising—changing the way Tokyo is populated—but there’s also the debt servicing piece, which is about 30 percent of the annual budget of Japan.

And so this fight between—Tobias characterized it as the right wing—this is people like Hagiuda, Sanae Takaichi, Abe fans really taking on the prime minister on this question, and it’s central to the politics inside the party, which is new for the LDP, I think.

SCHLESINGER: And I guess sort of spinning it forward, another issue which I know that you’re all familiar with is is where the Bank of Japan fits in that—

SMITH: Right. Yeah.

SCHLESINGER: —and the notion that the debt was sustainable and could go on forever was rooted in an assumption of low inflation and low—or low interest rates, and that’s now, obviously, a changing scenario and with Kuroda, I guess his term ends next spring or this spring—

SMITH: This spring.

SCHLESINGER: —you know, questions about who’s going to be named, whether that’s a political football as well. So another interesting thing to watch.

All right. We have—Krishna Guha, I think, is in the queue and has the hand raised. So, Krishna?

Q: Thank you very much indeed.

Krishna Guha with Evercore Partners.

So I actually wanted to pick up on the very topic that you had just raised and invite the panelists to talk a little bit more about what Kishidanomics is really going to look like both in terms of his, you know, fiscal plans and fiscal priorities but also how that dovetails with what he’s going to look for in the next Bank of Japan governor because, of course, Kurodanomics and YCC was part and parcel of the larger Abenomics—you know, a hyper aggressive fiscal effort to overcome deflation.

So what do we think is coming next?

SCHLESINGER: Well, who wants to take on?

HARRIS: I mean, I can—I’ll start because, I mean, I think—you know, I think what’s clear at this point is that there’s just—there’s not a lot of substance to what he called a new form of Japanese capitalism. You know, that—you know, and maybe that will come down the road if he’s given enough time.

But, you know, certainly, you know, a year or so, you know, a year plus into the prime minister’s tenure that, you know, this is still a to be decided later project, and then at least until now it was very much bringing Abenomics forward. I mean, there wasn’t really a whole lot of deviation from the policy mix that we saw during the Abe years.

Clearly, though, the Bank of Japan question is, I think, you know, at the heart of a possible reorientation—that, you know, clearly, they’re not going to be able to rely on unconventional monetary policy in quite the same way, going forward. That will clearly, as noted, have implications for fiscal policy.

In terms of the choice and the sort of personnel choice, I mean, I—my guess is that it’s going to be just thinking about Kishida as a kind of safe driving kind of politician and someone who’s not necessarily inclined to take big swings for the fences—you know, that we’re going to see maybe a safe choice.

You know, I’m guessing the money is probably on someone like Deputy Governor Amamiya, who—you know, in part, too, that you have to think that there’s, you know, a history, of course, of alternating between governors of the bank who have come from the finance ministry versus who have a background within the bank itself.

And so having someone with a background in the bank who’s maybe trusted by the bank staff, you know, particularly given sort of the challenges of normalization, going forward, that a safe—someone who’s a safe, familiar figure is probably going to be the direction Kishida goes.

He doesn’t exactly have, you know, a coterie of kind of radical economic thinkers around him that he’s going to be drawing from or could flirt with like what Abe did when he was considering his choice for leadership at the Bank of Japan ten years ago.

So I would guess you’re going to see a safer pick, I think, in that vein. I don’t know if Glen or Sheila have different thoughts on that but that’s my inclination.

SCHLESINGER: Glen or Sheila, you can go in. Yeah, go ahead.

FUKUSHIMA: Well, on the new capitalism, I think it started when Kishida was running for the LDP prime ministership and he tried to distance himself from Abenomics by focusing on reducing income inequality, for instance, or focusing on climate change or women and entrepreneurs and innovation and the localities—the regions.

And then when he got criticized for what some of what he was saying then he kind of shifted, and then it started sounding more like Abenomics. And it kind of shifts from time to time and so nobody has really pinned it down to be able to say precisely what it is.

But I think it’s a work in progress and I assume that now that people like Suga and Ishiba within the last couple of days have come out criticizing Kishida and I think that there is a move underway among some within the LDP to, perhaps, shorten Kishida’s tenure as the prime minister, I think Kishida is going to start focusing—now that he gets the security side and U.S. relations side kind of taking care of by this visit, I think he’s going to now then—and with the G-7 coming up he’ll have to continue that.

But he will also try to work on economic policy and the energy issue as well as social welfare policy. Those are some of the things, I think, he will start focusing on because he needs to in order to get the domestic support.

I think with regard to Bank of Japan my bet would be on Nakaso. But I think he’s probably not going to get someone who’s way out in left field. I agree with Tobias on that. But I think Nakaso, in my understanding, has more experience and credibility in the international community and so I think he may be the choice.

SCHLESINGER: Sheila, do you want to weigh in at all on Kishidanomics and—

SMITH: Not so much. But I just wanted to flag one thing for people to keep an eye on and that is that there are going to be local elections in April. There are two sets of local elections, and both the Unification Church issue

and the public’s generally unsettled view of Kishida, I think the LDP is going to have a run for its money and I think that’s the worry.

So I think if we come out of those elections and we get past the May G-7 summit, the people that Glen alluded to inside the party are willing to say maybe the time for Kishida to step down has come. So I think there’s some indicators ahead that he’s going to have a little bit of a battle ahead of him.

FUKUSHIMA: But it is interesting, you know, that among the G-7 countries, you know, Japan is by far the most stable—

SMITH: Yes. (Laughs.)

FUKUSHIMA: —and all the ruckus—all the ruckus is within the LDP.

SMITH: Yes.

FUKUSHIMA: There’s no chance—there’s no chance—as Tobias said, there’s no chance that the opposition is going to take over—

SMITH: Right.

FUKUSHIMA: —and we’re going to, you know, see a big change. So, in that sense, it’s extremely stable and predictable in some—in many ways.

SMITH: Yeah. And there are a couple people waiting in the wings who wouldn’t mind—

FUKUSHIMA: Oh, yeah.

SMITH: —stepping up. (Laughter.)

SCHLESINGER: Right. So, Sheila, that was my question for you, which is, you know, who might be successors and why should we care. Like, is there anyone who would come in and do anything different or is it just another, you know, face that pops up on the mugs that we buy in the basement of the Diet and could possibly be the same?

SMITH: I have many of those mugs. (Laughter.)

FUKUSHIMA: Just going to be one last mug. (Laughter.)

SMITH: So I think the person who has the most ambition is sitting in as the secretary general of the party and that’s Mr. Motegi and, you know, this is—I would like to hear what Glen and Tobias think about that proposition.

But I think he’s also one of these technocratic economic experts who would actually bring some specific ideas to the table on how to rejuvenate the Japanese economy or at least navigate the difficult circumstance of an aging society with a massive amount of public debt and the inheritance of the Strategic Review. But I think Motegi would love the job, honestly.

Now, would the Abe or the former Abe faction align themselves behind him? If the time was right, possibly. The reality is—and Tobias alluded to this—is that the Abe faction doesn’t have a leader. But Mr. Hagiuda has

not gone away from the spotlight. You know, he’s the head of the party Policy Research Council, and if he is still as feisty as he is now, I expect he’ll put his hat in the ring as well.

But love to hear Tobias’ and Glen’s point of view on that.

HARRIS: What I will say—I mean, I think you’re right about Motegi is sort of the most likely at this point and, certainly, someone who has—you know, he’s had sort of every—there aren’t a lot of people who’ve had as many kind of high-level cabinet posts, right. He’s been a foreign minister. He was, you know, METI minister. I mean, he’s had party posts. I mean, he has the right resume.

The problem, I think, with all of the sort of likelies is that it’s a lot easier to think of reasons why they’d have a hard time winning than winning. I mean, and this might be to Daniel’s point, in a way, that, you know, it’s—you know, sort of Kishida is sort of the easiest—you know, well, once you’ve eliminated all the other options he’s what you’re left with.

I mean, Motegi, you know, certainly, has a reputation in the party as being someone not—that people can’t get along with. So that’s going to be an issue. You know, Kono Taro, of course, really wants it. I don’t know if he could even get his own faction’s support, let alone the support of other factions.

I think Foreign Minister Hayashi would like it. I don’t think you’re going to get another prime minister from the Kochikai anytime soon, and as much as the right wing didn’t like Kono, I mean, they’ve—you know, they’ve been training their fire on Hayashi as too soft on China, you know, ever since his name was first suggested as the foreign minister.

So, I mean, you know, there’s talk maybe Suga finds his way back in. I don’t think he runs again but maybe he has someone he ends up backing. I mean, so it’s—I mean, yes, there are people there who want it. It’s just who puts together that coalition, and with the Abe faction I will say too, you know, there’s been a lot of discontent that they haven’t had a candidate from the faction in the last two leadership elections.

And so the question are they—you know, if they enter a third leadership election and don’t have that person is the faction going to hold together. And, of course, you know, you mentioned Hagiuda as someone who might like to be that person. METI Minister Nishimura is also an Abe faction. He maybe is a possibility and I think, again, as someone who has sort of the right policy resume to potentially do that. Seko has to find a way to the lower house. I think he also would like to.

So you have these—and it shows—you know, one of kind of the problems with Abe as a leader was that he was good at attracting, I think, loyalists. I think he had, you know, a very strong group of people, of lieutenants, of people who supported him but never really cultivated an obvious successor, someone who was going to really be able to step in and lead his faction but then also lead sort of this right-wing bloc within the party, and I think that vacuum remains and is a source of instability in the LDP.

SCHLESINGER: Thanks.

FUKUSHIMA: So I think the reason that—

SCHLESINGER: Glen, sorry, I wanted to get another couple questions in—sorry—

FUKUSHIMA: Fine.

SCHLESINGER: —before we—Kayla, who’s next in the queue?

OPERATOR: We’ll take the next question from Philip Dur.

SCHLESINGER: Philip, you’re up. Maybe muted?

OPERATOR: Philip, please accept the unmute now prompt.

OK. Oh, Philip?

Q: Rear Admiral Philip Dur, U.S. Navy, retired.

One of the things that’s come out of recent discussions between the defense secretary and the secretary of state is the notion of a joint command arrangement or combined command arrangement for Japanese and U.S. forces coincident with the movement of what’s now called a littoral combat regiment of the Marine Corps to work the Southern Island Chain in the event of a crisis with China.

The question I ask is the bounds or the parameters of the mutual security pacts are clearly defense of Japan, and one has to ask to what extent would the Japanese public accept a new arrangement where a joint command sort of explicitly allows for actions way beyond the defense of Japan proper.

SCHLESINGER: Sheila, that’s got your name written all over it.

SMITH: (Laughs.) Thank you, Jake. I’ll try to be brief so you can get to the other questions as well.

Philip, there’s a couple of things that were discussed in the December documents that are important here. One is the Self-Defense Forces themselves are going to now organize a permanent operational headquarters, which for the first time puts the three Japanese services together in an operational command.

I think you referenced Commandant Berger’s notion of reorganizing Marine capability to make them more mobile and flexible. The Japanese are thinking along the same lines. And so I think, at least on the marine side of things, you’re going to see integration of operations in Japan’s Southwestern Islands.

The 2015 security laws that were passed by the Abe cabinet allow for some elasticity in conceptualizing what the Self-Defense Force can do for Japan’s security. So if a contingency is deemed to influence Japan’s security it will be part of the defense of Japan operations that we’ve historically seen the SDF committed to.

But I think you’re watching the evolution of Japanese operational command structures, which will then, ultimately, hopefully, feed into the American Indo-Pacific Command in a more timely way.

SCHLESINGER: Thanks. Kayla, who’s next up?

OPERATOR: We’ll take the next question from Christopher Woody.

Q: Hi. Christopher Woody from Business Insider. Thank you for your time today.

Another defense and security question. So, this week, obviously, you’ve seen U.S.-Japan security announcements where there was also a U.S. or, excuse me, U.K.-Japan defense pact. Japan has a reciprocal access agreement with Australia recently as well as what seems like increasing military exchanges with India and the Philippines.

So I wonder what all these developments say about Japan’s evolving views as—of its role as a security actor or security provider in the region and how uniform are those views within Japan.

SCHLESINGER: So, Sheila, why don’t you lead off? But then I would like to actually get the views of Glen and Tobias on that as well.

SMITH: Sure. This is—Christopher, my sense is this is the pulling together the idea that you need a coalition of like-minded countries that are willing to engage should there be a Taiwan contingency or scenario.

I think it’s under the guise of maritime security across the Indo-Pacific. But these are technical arrangements that will allow each other’s militaries to exercise together in each other’s territories and to be able to support each other at least notionally should there be a coalition operation.

So this is getting ready for the potential for a larger conflict. But it’s really the mechanical piece, I think, that’s most important right now.

FUKUSHIMA: I agree with Sheila on this. But I think—as I mentioned in my opening comments, I think that behind all of this is the notion that up till now Japan has relied primarily on the United States. But the United States is not as reliable as it seemed to be pre-2016 and, therefore, Japan needs to diversify its portfolio of allies and partners.

And so I think, certainly, the Taiwan contingency and China are the immediate issues but I think the broader background is that, I think, Japan feels the need to diversify its portfolio of allies and partners, and, certainly, you know, the Quad and NATO is, certainly, a part of that. And also the Italy-U.K. fighter interceptor consortium, that’s, I think, also an indication of Japan’s eagerness to diversify.

SCHLESINGER: Tobias, do you want to weigh in?

HARRIS: You know, I just—quickly. Just, you know, look, this was a long—this has been a long-term process, you know, that when you look at sort of how, you know, the Abe doctrine was, it was strengthening ties with the United States, sort of recognizing that Japan had no alternative.

But it was this sort of, you know, diplomacy that looks in all directions. I think that was the kind of phrase they used. And so it really was about strengthening ties with like-minded countries around the world—of course, you know, within the region, but also Abe worked really hard on strategic ties with Europe.

And I think so Kishida is picking up a lot of this, you know, and, you know, in many ways, of course, the war in Ukraine has been an accelerant in this process, you know, and really kind of the awareness that Japan’s partners in Europe and partners in the G-7 and Japan sort of have, you know, fundamentally similar strategic concerns and sort of using that as an opportunity to strengthen these ties.

And so I think, you know, this didn’t come out of nowhere. I mean, this really was—you know, this has been a long-term process that has now, I think—that is now accelerating and being pushed forward.

SCHLESINGER: OK. I think we have another question in the queue and I’d like to try and squeeze in one last question before we go.

So, Kayla, why don’t you queue up the next one and we’ll try and get everything in quickly in the next couple minutes.

OPERATOR: We’ll take the last question from Bhavna Agnihotri.

SCHLESINGER: Bhavna, you need to accept and unmute.

Q: (Off mic)—because I didn’t have a question. I’m not sure what happened here.

SCHLESINGER: Ahh. OK. All right.

Well, listen, why don’t we, rather than try and get another question, just sort of review. I’d like to sort of step back from that last one and, you know, take a look at, you know, where we started, which was sort of Kishida’s challenges in a post-Abe Japan.

As you said, Japan has made a lot of bold statements in terms of promises. There’s questions about its ability to deliver, and would just like you each to go through maybe in the reverse order that we opened so sort of Glen, Sheila, and then Tobias closing out, on, you know, whether we are seeing a changed Japan that really is up to playing a much bigger role or a Japan whose rhetoric and ambitions far exceed its ability to deliver.

FUKUSHIMA: Well, I think it’s somewhere in between. I think that it, obviously, feels the need, the necessity, to play a bigger role, in part because they feel the U.S. is not going to be able to play as big a role but also because of the challenges that Japan faces in the immediate environment: Russia, North Korea, China, South Korea.

I don’t think that Japan’s capabilities in the next year or two are going to meet the expectations of a lot of people outside, especially in Washington. But I think it’s, certainly, stepping up much more than it had, say, five to ten years ago.

SCHLESINGER: Sheila?

SMITH: I think the language that you’re starting to see Japan use, and that means the ministry of foreign affairs, the ministry of defense, it’s just much more direct and straightforward than we’ve heard in the past and that reflects the politics, right. The opposition parties are very quiet at the moment.

But it also reflects, I think, the idea that there’s been a sort of normalization of this idea that Japan needs a strategy and needs a military component to its diplomatic and economic instruments of statecraft.

The politics are going to depend on whether the LDP can get its act together and the remnants of the Abe faction will determine how they disperse or coalesce, will determine, I think, the future of not only Kishida but future prime ministers as well.

SCHLESINGER: Tobias, you have the last word.

HARRIS: Sure. I mean, you know, I think I’ll just say that we’re really seeing that institutionally Japan, I think, remains capable of playing a global leadership role and that is, you know, clearly, not just a part of Abe’s legacy but the legacy of several decades of reforms.

And I think even with some of the uncertainties about the LDP, you know, and Kishida’s authority and his leadership, Japan’s ability to make the kind of policy decisions that we saw last month and to really be a global agenda setter and a global thinker about some of the challenges that the world is facing, I think it’s capable of playing that role in a way that maybe many other democracies aren’t quite able to because of their domestic political situations and that, I think, is new and unique and, I think, important to recognize.

And, you know, I think maybe even more than anything Japan really thinking about are we in an age of deglobalization, what that means, what sort of the new economic rules of the road are, Japan seems to be in a better place, a better situation, to really see that clearly and to really think about what that means.

And so, I mean, I guess I’m slightly—I’m cautiously optimistic that Japan is capable now of exercising leadership—intellectual leadership, political leadership—globally in a way that just even, you know, a decade ago I don’t think we would have thought about.

SCHLESINGER: Thank you, Tobias.

And I know we could keep going. We’ve got a lot more questions from the audience and from myself. But we are now at 9:00 Eastern, 11:00 p.m. Tokyo time. So we’re going to have to wrap up.

Please join me in thanking our speakers for a very informative and lively conversation. Thanks to the members who joined us. Note that the video and transcript of today’s meeting will be posted on the Council on Foreign Relations website.

Thank you all and wishing you all a happy Friday the 13th.

(END)

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