Page 2 of 2 Japan stirs Campbell's US 'pivot' soup
By Peter Lee
Why split the anti-China alliance by fussing over the Dokdo Islands, provoking South Korea with unnecessary, symbolic affronts like Abe's offering to the Yasakuni shrine, the visit of almost 200 lawmakers to the shrine, or making statements like this?:
On Tuesday during an Upper House session, Abe was asked to comment on the 1995 statement by then-Prime Minister Tomiichi Murayama, who straightforwardly apologized for Japan's "colonial rule and aggression," which "caused tremendous damage and suffering to the people of many countries."
Abe didn't elaborate, but he did claim that the definition of "aggression" in general has yet to be
"firmly determined" by academic experts or the international community.
What is described as aggression "can be viewed differently" depending on which side you're on, Abe said.
Major South Korean newspapers slammed Abe on their front pages Wednesday. [9]
If Prime Minister Abe is unable to characterize the invasion of Korea and China as "aggression", Japan's neighbors are free to worry about how elastic his definition of "self-defense", collective or otherwise might be, once the constitution is revised.
In some circles, Japan's quantitative easing is seen as little more than a zero-sum game to juice the economy by benefiting Japanese exporters at the expense of their direct rivals in South Korea, pivot be damned:
[T]he Hyundai Research Institute predicted that if the yen reaches 100 or 110 to the dollar, South Korean exports will fall by 3.4% in the first case and 11.4% in the second.
The problem is the large degree of overlap with Japan in terms of major exports, which account for 60% of South Korea's GDP. An analysis by the Korea International Trade Association showed an overlap of about 50% between South Korea's top 100 export items and Japan's.
Indeed, Ministry of Trade, Industry and Energy (MTIE) figures on the first quarter growth rate for export items where South Korea competes with Japan showed an 11.3% drop from the previous quarter for steel and a 3.5% drop for automobiles. With respective ratings of 0.63 and 0.58, they were the second and third most competitive industries behind shipbuilding (0.75). [10]
South Korea experiences a double whammy at the hands of Japanese quantitative easing thanks to the ROK's status as a growing, emerging economy and, therefore, a hot money magnet, as William Pesek wrote for Bloomberg, while chronicling the ROK's $16 billion stimulus counter to the 20% drop in the value of the yen:
Instead of spurring demand, ultra-low rates are creating a flood of hot money. All that cash has to go somewhere, and it's ending up in Chinese junk bonds, Philippine stocks, Australian real estate and the Korean won.
More bold steps may be coming. Korea is considering ways to insulate itself from capital-flow volatility, possibly by imposing taxes on financial transactions. Fifteen years ago, Malaysia became a pariah state when it limited the flow of money. Today, it is common-sense economics to protect your country from being overwhelmed by central-bank largesse.
Developing Asia once spread financial contagion from New York to London and Tokyo. Now, as the world's richest economies return the favor, Asian policymakers are grappling for ways to cope ? [11]
Ironically, one of the best ways for the US to restrain an increasingly independently minded Japan is by cozying up to China and redefining the pivot away from its China-containment (and provocation and destabilization-enabling) roots.
So Kurt Campbell emphasized the distance between Washington and Tokyo on the Senkakus, and - notably for someone who built a diplomatic strategy on confronting China - made the case in an op-ed for the Financial Times for increased cooperation between the US and China:
[T]he world's most important bilateral relationship is the one between the US and China. For that relationship to succeed, it must be embedded in a larger framework of US diplomacy in Asia, stretching from Japan to India, but certainly the US-China piece will be central for the 21st century. With new leadership in Beijing under President Xi Jinping settling in and President Barack Obama starting his second term, this is a defining period for the future of US-China relations. Both countries have challenging domestic agendas, but Washington and Beijing fully recognise the importance of their international interactions. [12]
The US media also made some ridiculous but significant efforts within the context of the North Korean crisis to shoehorn China into the unlikely role of America's pivot "ally". [13]
As part of the China reset, the Obama administration dispatched the chairman of the Joint Chiefs of Staff, General Michael Dempsey, to Beijing, where he labored to redefine the pivot as "not all about China" and, indeed, not even a pivot at all:
Economic, security, and demographic trends all lead to the Asia-Pacific region, he said.
"Furthermore, I tell them this wasn't about them, meaning China. Of course they're a factor, but this wasn't a strategy that was aimed at them in any way," Dempsey said.
The chairman added that military considerations are only part of the broader US regional strategy. "I pointed out to them that among the first visitors who came here after our ? rebalancing initiative was announced was Jack Lew, the secretary of the treasury," he said. [14]
For connoisseurs of government newspeak, it should be pointed out that apparently the "pivot", with its thrusty, aggressive connotations is "out" and the more gentle, conciliatory "rebalancing" is "in" as the description of what the US is trying to do to or with China in Asia.
Speaking of the finance side of "rebalancing", the Department of Treasury also quietly emphasized the implicit gap between Washington and Tokyo on quantitative easing while giving China some modest praise, as the German news outlet MNI reported:
If there was anything mildly unexpected in Lew's post-G20 comments, it was the highlighted praise aimed at China, increasing the emphasis on the positive beyond that of Lew's two most recent predecessors. ?
Lew's silence about Japan in his statement to his counterparts from around the world seemed to soften somewhat the emphasis placed only hours earlier by a senior Treasury official. The official had reiterated in response to a question from MNI that the US. will be watching closely to see if the expansion of quantitative easing in Japan actually does more to boost demand and inflation than it does to depreciate the yen. [15]
In another indication of US establishment umbrage, New York Times also weighed in with an editorial critical of Japan's Yasakuni Shrine antics titled "Japan's Unnecessary Nationalism".
In a significant bit of reframing that probably irked the Japanese government, the New York Times pointed out that the recent heightening of tensions around the Senkakus was a bilateral effort (China was responding to a flotilla of Japanese nationalists), not merely an exercise in Chinese "assertiveness", as the Western media usually presents the issue:
On Monday, South Korea canceled a visit to Japan by its foreign minister and China publicly chastised Japan. On Tuesday, tensions were further fueled when Chinese and Japanese boats converged on disputed islands in the East China Sea.
Japan and China both need to work on a peaceful solution to their territorial issues. But it seems especially foolhardy for Japan to inflame hostilities with China and South Korea when all countries need to be working cooperatively to resolve the problems with North Korea and its nuclear program. [16]
So, from the US perspective, maybe China is not the only big, bad guy in Asia anymore.
Add Japan, with its unilateral, damn the consequences (to others) security and fiscal aggressiveness to the list.
When one considers that the Japanese quantitative easing program could blow up the Asian and world economy in a replay of 1997 - or worse - there's even a case to be made that the genuine near-term threat to the world's well-being from Japan is perhaps greater than that from China.
As one finance guru told CNBC:
There are additional risks, the most glaring being that a big round of quantitative easing in Japan may be no better at stoking growth and the good kind of inflation there than it has been in the US. Despite the Fed's all-out efforts, unemployment remains elevated and inflation subdued, though stocks have soared. ...
"Monetary policy is being used as the policy tool to create demand. The question is, is this going to end in tears?" Prudential's Krosby said. "Is this going to end in worse calamity for the markets than what we had in 2008 and 2009?" [17]
Creating and then managing intractable problems through reshuffled nomenclature may be the ticket to full employment for practitioners of international relations, but for promoters of the US national interest, the realization that we are now wrestling with a second assertive, unpopular, and profoundly destabilizing power in the West Pacific is cause for concern, not celebration.
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