No easy road to recovery

Japan's political structure means that it will be difficult to introduce reforms that facilitate national reconstruction

At the one year anniversary of the Japan earthquake, there are concerns about whether Japan has cast off the shadow of the crisis and whether it can overcome domestic structural contradictions in a transition period to break a new path of national development.

In response to the crisis, the Japanese government enacted the Basic Act on Great East Japan Earthquake Reconstruction, established a reconstruction agency and special zones for reconstruction, issued reconstruction bonds, cut or exempted personal income tax and corporate tax in disaster areas, allocated a supplementary budget of 19 trillion yen ($230 billion) for disaster relief, and set up a new fund to ensure victims of the Fukushima nuclear disaster receive compensation.

In the short term, Japan faces a number of challenges. For example, the permanent relocation of those affected by the nuclear disaster, the burning and landfill of rubble, permanent disposal of garbage and land decontamination, and prolonged compensation disputes concerning nuclear victims.

Japan's economic situation is also not optimistic. The Bank of Japan expects that in the state's fiscal 2011 real GDP will have shrunk by 0.4 percent due to the devastating earthquake and tsunami, the appreciation of the yen and Europe's debt crises. According to the data released by the Japanese Ministry of Finance, Japan's trade balance in 2011 registered a deficit of about 2.49 trillion yen, the first in 31 years.

Pressured by Japan's relatively high wage costs and corporate tax rate, the appreciation of the yen, and the rising cost of electricity caused by the nuclear crisis, Japan's major industries with traditional advantages, such as appliances, IT and shipbuilding, all faced strong external competition. The outbound shift of manufacturing sector will continue to accelerate.

Meanwhile, the long-term structural problems are becoming more serious.

Japan's population structure is the major cause of its creeping economic growth. As of the end of 2011, some 23 percent of the population were already 65 years or older. Japan no longer enjoys a "demographic dividend" and instead bears a "demographic burden".

At the same time the financial structure is deteriorating. The proportion of social security expenditure in fiscal expenditure increased at a rate of 1 trillion yen per year, and has become the largest structural burden in public finance. Till the end of the 2012 fiscal year, the balance of public debt will exceed 1,000 trillion yen. With the balance of public debt gradually approaching the balance of national savings of 1,400 trillion yen, national credit will reach its limit.

And Japan's political structure determines that it is difficult to form a consensus for reform. The conservative tendencies in Japanese politics since the end of the Cold War and its small constituency system have led to Japanese politicians relying heavily on public opinion. Under the current structure any reform initiative will put the incumbent government in jeopardy. Therefore, it is difficult for the current political system to make a difference.

Japan's national orientation and diplomatic strategy have returned to its conservative tradition. To achieve a "normal country" is still Japan's national goal. The path is to adhere to the Japan-US alliance, which is Japan's strategic choice. But there is a structural contradiction between the goal of becoming a "normal country" and this strategic choice. The US' high-profile eastward shift of its strategic center of gravity to contain China's "expansion" has reaffirmed Japan as its primary ally. The two allies' political identity is reinforced. The Japan-US 2+2 meeting mechanism strengthened the strategic position of the Japan-US alliance and its role in regional security.

For its part, Japan has seen the US' strategic shift as a strategic opportunity, and taken advantage of its primary ally status to become actively involved in the strategic actions of the US and be a strategic strong point in the Asia-Pacific region. In the context of the US' declining fiscal performance, Japan obviously is left with more opportunities, accountability and leeway.

With the tacit permission of the US, the Japanese government has amended the "Three Principles of Arms Export" and made a more flexible interpretation of Article 9 of the Constitution, which has not only paved the way for the exercise of collective self-defense, but also created conditions for the Japanese military to get more autonomy.

As Washington's strategic shift and diplomatic adjustments are not designed with the needs of Japan in mind, any action of the US, in particular China-US contacts, is bound to hit a nerve with Tokyo.

On the one hand, Japan participates in the US's strategy to counterbalance China; on the other hand, it wants to seize the opportunity provided by China's rapid economic growth. It is very difficult, but also very important that Japan pinpoint its location between China and the US. This explains why Japan has proposed the establishment of a triangular relationship.

As a trilateral relationship cannot be equivalent to the relationship between China and the US-Japan alliance, so a trilateral relationship framework based on the Japan-US alliance will not materialize. Japan's strategic option in diplomacy and security structurally contradicts its aspirations of pursuing long-term development in the Chinese market. It can be predicted that in 2012 the recovery and construction of the areas affected by the disasters will bring about optimistic growth for the Japanese economy and the rising cost of electricity production will drive the upgrading of Japanese manufacturing technology. But Japan needs an extended period of self-restraint and patience if it wants to overcome its structural contradictions.

The author is director of the Institute of Japanese Studies at the Chinese Academy of Social Sciences.

(China Daily 03/12/2012 page9)