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1 JAPAN IN CRISIS

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3 JAPAN IN CRISIS WHAT WILL IT TAKE FOR JAPAN TO RISE AGAIN? Edited by Bong Youngshik and T.J. Pempel

4 JAPAN IN CRISIS Copyright The Asan Institute for Policy Studies, Softcover reprint of the hardcover 1st edition All rights reserved. First published 2012 by The Asan Institute for Policy Studies First Published in the United States in 2013 by PALGRAVE MACMILLAN a division of St. Martin s Press LLC, 175 Fifth Avenue, New York, NY Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave and Macmillan are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN DOI / ISBN (ebook) Library of Congress Cataloging-in-Publication Data is available from the Library of Congress. A catalogue record of the book is available from the British Library. First Palgrave Macmillan edition: September

5 EDITORS Bong Youngshik Bong Youngshik is a Senior Research Fellow and the Director of the Center for Foreign Policy at the Asan Institute for Policy Studies. Before joining the Asan Institute, Dr. Bong was an Assistant Professor at American University s School of International Service in Washington, DC from 2007 to He was also a Freeman Post-Doctoral Fellow at Wellesley College and Assistant Professor of Korean Studies at Williams College in Massachusetts. His research focuses on the interplay between nationalism and security issues including Dokdo and other island disputes in Asia, anti-americanism and ROK-US alliance. He holds a Ph.D. and an M.A. in Political Science from the University of Pennsylvania and a B.A. from Yonsei University. T.J. Pempel T.J. Pempel is the Jack M. Forcey Professor of Political Science at the University of California, Berkeley. He served as the Director of the Institute of East Asian Studies from 2002 until His research focuses on comparative politics, Japanese political economy, and Asian regional issues. His most recent publications include, Security Cooperation in Northeast Asia (New York: Routledge, 2012, Co-editor with Lee Chung Min) and Soft Balancing, Hedging, and institutional Darwinism: The Economic-Security Nexus and East Asian Regionalism (Journal of East Asian Studies, 2010). He received his Ph.D., M.A., and B.S. from Columbia University. Editors 5

6 CONTENTS Preface Hahm Chaibong 8 Introduction T.J. Pempel 10 PART 1 STARTING WITH FUKUSHIMA CHAPTER 1 Masakatsu Ota 31 The Fukushima Nuclear Crisis and Its Political and Social Implications PART 2 THE POLITICAL ECONOMY OF SLOW GROWTH CHAPTER 2 Gregory W. Noble 53 Japan s Economic Crisis: More Chronic than Acute So Far CHAPTER 3 William W. Grimes 81 Japan s Fiscal Challenge: The Political Economy of Reform PART 3 HURDLING POLITICAL OBSTACLES CHAPTER 4 Tetsundo Iwakuni 107 Governance Crisis in Japan: Return to the Basic Building Blocks of Democracy CHAPTER 5 Jun Saito 135 The Ghost of the Second Republic? The Structural Weakness of Parliamentary Bicameralism in Japan

7 PART 4 TOWARD A MULTICULTURAL SOLUTION? CHAPTER 6 Kim Mikyoung 163 Embracing Asia: Japan s Expat Politics PART 5 IMPROVING RELATIONS WITH THE ASIA-PACIFIC NEIGHBORS CHAPTER 7 Kazuhiko Togo 195 What Will It Take for Japan to Rise Again? Vision, Regional Initiative, and Japan-Korea Relations CHAPTER 8 Kim Sok Chul 217 Regional Situation Awareness as a Basis for Northeast Asian Regional Cooperation in Dealing with Transnational Nuclear Disasters CHAPTER 9 Michael Auslin 235 The US-Japan Alliance and Japan s Future CHAPTER 10 T.J. Pempel 255 An Economic Step toward Revitalizing Japan and US-Japan Ties List of Contributors 288 Index 290

8 PREFACE J apan s decline since the economic bubble burst in the early 1990s has been as spectacular and as confounding as its rise during the preceding decades. Once a model of rapid economic development and good corporate governance, Japan has since become a case study on how political and economic missteps and missed opportunities can lead to precipitous national decline. Japan Inc. s inability to re-group after the lost-decade, is a lesson on the importance of sound politics for a sound economy, among other things. The fall from grace of many of Japan s industrial giants such as Sony and Sharp has revealed the limits of Japanese corporate culture and governance structure. The Tohoku earthquake and the Fukushima nuclear disaster revealed not only the vulnerability of some of the most advanced industrial installations to the wrath of nature, but also how much political and bureaucratic ineptitude can add to the people s suffering. For South Korea, its closest neighbor, former colony and one-time would-be emulator, the drama of Japan s triumphs and tribulations have been especially poignant. Ever since its independence from Japan in 1945, catching up with Japan became a national imperative for South Korea. At the same time, Japan became the model as well as a major source of technology transfer and capital investment for the development of South Korean industry. By the middle of the last decade, South Korea succeeded in catching up in certain sectors. By 2009, Samsung Electronics operating profit was more than twice the combined operating profit of Japan s nine largest consumer electronics companies. In 2012, South Korea s credit rating became higher than that of Japan for the first time in history. However, South Korea can hardly rest on its laurels as there are striking similarities between South Korea s growth trajectory and Japan s. South Korea s birth rate is the lowest among the OECD countries 8 Japan in Crisis

9 and its population is ageing at an even faster rate than Japan s. Welfare populism has become a political imperative even as welfare spending is already beginning to skyrocket. South Korean politics is proving to be as divisive and polarizing as Japan s. Learning from Japan has become an imperative, albeit for different reasons than in the past. Japan s decline has profound implications for the region s geopolitics as well. Once the lynchpin of prosperity and security of East Asia, Japan s alliance with the US has begun to fray. It has become an object lesson in alliance (mis)management. More importantly, the relative decline of Japan (and the US) has coincided with the rise of China and North Korea s nuclear armament. That Japan needs to contribute its fair share to the maintenance of peace in this region is obvious. Whether it has the political will and sophistication to overcome historical issues and settle territorial disputes that continue to plague its relations with its neighbors all the while reasserting its role as a major power will prove crucial for the region s power balance. Despite the immediacy as well as the importance of these issues surrounding Japan, they have yet to receive the full treatment that they deserve. The Asan Japan Conference of 2011 was planned to fill this gap. I would like to take this opportunity to thank all the participants to the conference, especially Professor T.J. Pempel for taking on the arduous task of editing the present volume. Most of all, I would like to thank Dr. Bong Youngshik, Director of the Center for Foreign Policy Studies, and Mr. Lee Ji Hyung (John), the center s program officer, for seeing this project through to completion. Hahm Chaibong President, The Asan Institute for Policy Studies Seoul, November 2012 Preface 9