Japan Inc opposes Koizumi's China
policy By J Sean Curtin
Despite unprecedented levels of bilateral trade
and Japanese investment in China, Japanese business
leaders and media have been riveted to the anemic - some
say abysmal - state of political ties between Beijing
and Tokyo, and its negative implications for business.
Business leaders are deeply unhappy with this situation
and worry that vital economic ties with the Middle
Kingdom may be jeopardized by a sharp deterioration in
political dialogue because of Japan's wartime history in
China.
Some some senior business figures have
begun to put pressure on Japanese Prime Minister
Junichiro Koizumi to moderate what they (and the Chinese
leaders and Chinese public) consider to be his
insensitive China policy, which China calls the major
reason for current political tension. The economic
implications are clear. One very prominent business
figure summed up anxiety about Koizumi's approach,
"There is concern it will hurt business ties between
China and Japan."
In recent meetings with
Chinese President Hu Jintao and Premier Wen Jiabao at
international forums, Koizumi has been warned very
clearly that the major impediment to improved political
relations is his regular visiting of the Yasukuni
Shrine, honoring Japan's war dead, including 14 Class-A
war criminals. Given Japan's invasion of China and its
history of atrocities there, including the Nanjing
Massacre, China considers the continuing visits deeply
offensive.
Since his first encounter with Hu,
who urged him to end his shrine visits, Koizumi has been
forced to soften his position on the shrine pilgrimages
slightly. Instead of declaring he definitely will visit
it each year, he has moderated this to: "I will make an
appropriate judgment in the future." Beijing has
interpreted this as progress, but it is far from clear
whether Koizumi will yield to Beijing's demand to end
the visits.
However, some commentators believe
that even if the political situation does not radically
improve, economic ties will continue to flourish.
Masatoshi Kuratomi, the Development Bank of Japan's
chief representative in London, told Asia Times Online,
"The framework for sustained Sino-Japanese economic
exchanges is now so firmly in place that it seems almost
indestructible."
China's seemingly unquenchable
thirst for imports has largely fueled Japan's nascent
economic recovery. In the first six months of 2004,
China imported an extraordinary 3.8 trillion yen
(US$36.7 billion) in goods from Japan. The Japanese
business community is determined that Koizumi should not
be allowed to threaten this staggering outflow of
exports.
Since Koizumi came to power in April
2001, Sino-Japanese relations have been severely
strained, top-level official visits put on hold, and
summit meetings reduced to brief yearly encounters on
the sidelines of international conferences. Koizumi's
highly controversial annual pilgrimages to the
war-tainted Yasukuni Shrine are almost universally
blamed for this situation. The Shinto shrine honors
Japan's war dead and was the spiritual home of Japan's
wartime regime. China, as well as Japan's neighbors,
consider it a powerful and repugnant symbol of the
country's brutal militaristic past - and continued
visits send a negative message to China, Korea and other
Asian countries.
Since Koizumi's frosty summit
meetings with Chinese President Hu and Premier Wen last
month, prominent business figures for the first time
have begun to publicly voice criticism of Koizumi's
China policy. Kakutaro Kitashiro, head of the Japan
Association of Corporate Executives (Keizai
Doyukai) told a recent press conference, "I hope
that the prime minister refrains from visiting the
Yasukuni Shrine. I think this is a majority opinion in
the business world." He added, "There is concern it will
hurt business ties between China and Japan."
Kitashiro explained that the Yasukuni
pilgrimages generate unnecessary anti-Japanese sentiment
in China, which Beijing finds difficult to control,
since much of the anger is expressed anonymously in
Internet forums. "The Chinese government cannot regulate
ordinary people's sentiments because often they are
using the Internet. I am afraid that eventually a
Yasukuni visit will generate anti-Japan sentiments,
which will adversely affect Japanese companies'
operations [in China]."
Dr Linda Yueh, a highly
regarded China expert at the London School of Economics,
however, does not think that the tense political climate
will adversely affect economic ties; in fact, she
believes the astronomical volume of bilateral commerce
will eventually have a positive impact on the political
equation.
"China and Japan are important trading
partners and leaders in the region, despite being
ambivalent on the political front," she told Asia Times
Online. "With increasing economic ties, there will be
growing impetus to maintain stability in political
relations. A 'thaw' may not happen quickly, though, as
China has a number of strong economic relationships that
can be characterized as being 'chilly' politically.
However, with growing trade and investment between the
two countries, there will be incentives to move toward
better relations overall between these two major players
in the region and the global economy."
Washington also shares this long-term positive
view of Sino-Japanese relations. United States Treasury
Secretary John Snow said economics will eventually
overcome any political difficulties between Beijing and
Tokyo. He told Asia Times Online, "There are always
political issues, but fundamentally people look to their
economic interests, which normally drive relationships.
That is why people want to keep the current economic
framework in place. Trade, capital flows, currencies
will produce growth and growth will lead to more trade.
More trade will lead to more growth, which in turn
creates more prosperity, and so on."
However,
many in the upper echelons of Japanese industry are not
convinced by arguments from Dr Yueh, Secretary Snow and
others. A prominent figure in the Japanese financial
sector, who spoke on condition of anonymity, captured
the prevailing mood. He told Asia Times Online, "To say
that most people in the business world are extremely
unhappy with the way Koizumi has been handling relations
with China is an understatement. I would characterize
his approach as irresponsible, counterproductive and
just plain stupid.
"Over the next decade, our
economic relationship with China will become one of
paramount importance, and in many respects this is
already the case. There is no logic in upsetting one of
our closest business partners and millions of potential
customers." He added, "I think Koizumi is a prime
example of why politicians are never successful in the
business world."
Makoto Sakai, executive
director-general of the Japan-China Friendship
Association, reinforced this view in a recent interview
with the 21st Century Economic Report. He observed, "The
Japan-China political relations today are very
undesirable, and are incompatible with the economic
development of the two countries."
Recently,
Japanese business has been watching with alarm as French
President Jacques Chirac, Russian President Vladimir
Putin, and most recently, German Chancellor Gerhard
Schroeder visited Beijing accompanied by large economic
delegations. There is a real sense that abysmal
political ties could lead to Japan falling behind in an
increasingly competitive market.
The Japanese
public is also waking up to the growing economic power
of China. Attention was most recently captured by the
announcement that the Lenovo Group, China's personal
computer giant, had signed an agreement with IBM to
acquire its Big Blue personal computer business for
US$1.25 billion, and another $500 million for
liabilities and overheads. The acquisition will have a
huge impact on IBM Japan Ltd, which has more than 20,650
employees and sales worth $89.131 billion.
The
increasingly close business links mean that many Chinese
are now working for Japanese companies and a growing
number of Japanese for Chinese companies. This is
raising awareness about the need to resolve the current
political stalemate.
A Chinese national, who
works for a Japanese company, told Asia Times Online, "I
do not understand Mr Koizumi's undiplomatic actions;
previous Japanese prime ministers showed consideration
and respect for Chinese feelings. While I do not think
the current political difficulties will impact on
bilateral commerce - Chinese people are too
business-focused to let that happen - Mr Koizumi's
behavior is certainly not helpful," he said, asking that
he not be identified by name.
On anti-Japanese
sentiment in China, he observed, "There has been a lot
made in the Japanese press about Chinese Internet sites
that are very critical of Japan, but these are not the
views of mainstream people. You can tell from reading
these messages that most of the people who write them
are not the thinking type. If Koizumi moderated his
behavior, interest in such forums would rapidly
diminish. Fundamentally there is no reason why China and
Japan should be enemies."
Dr Ruth Taplin,
director of the London-based Center for Japanese and
East Asian Studies, said that poor Sino-Japanese
political ties are not particularly relevant in the
economic realm. She commented, "China seems to have a
cool relationship with quite a few countries, but it
does not seem to inhibit their business activities. I
think the current situation between China and Japan
illustrates the point. You don't necessarily need warm
political friendships in order to enjoy good economic
ties."
Even so, good political ties would
certainly not harm the situation and would almost
certainly lay the groundwork for better and more stable
bilateral bonds, as well as create new Chinese customers
for Japanese goods.
A Chinese law student, who
studied in Tokyo for over a year, told Asia Times
Online, "There are many things I like about Japan, and I
think many Chinese people find Japanese products and
lifestyles very appealing. However, it is difficult for
us to express these feelings openly because of all the
recent political problems. Prime Minister Koizumi has
upset a lot of people in China, and it makes it hard for
people who want to feel friendly about Japan. I am sure
if the next prime minister conducts himself in a proper
manner and shows understanding and respect towards
China, the situation will improve."
Japanese
business leaders seem determined to ensure this
student's wish comes true by making their views known.
In the coming months and years, the success or failure
of their efforts may well help determine the nature of
ties between the region's two most important economies.
J Sean Curtin is a GLOCOM fellow at
the Tokyo-based Japanese Institute of Global
Communications.
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