Daily Archives: February 14, 2013

In 2002, Yoriko Kawaguchi, then Japanese foreign minister, was dispatched to Moscow to discuss ways of improving her country’s relations with Russia. During that visit, she told President Vladimir Putin that Japan and Russia had the most troubled relations of any two Group of eight leading economies, and that it should not be so. She argued that a dispute over a set of Pacific islands claimed by both countries was needlessly blocking potential progress in other areas. Mr Putin agreed. This was a problem that both governments had inherited from decades-old wartime hostilities, he said, and both countries should benefit from improved economic ties.

In the years since that meeting, tensions over the islands have flared from time to time, but they have not prevented the two countries from steady improvements in their commercial relations, particularly on the Japanese import of Russian energy.

This is the approach Japanese Prime Minister Shinzo Abe should now take with China. It is clear that relations between China and Japan, the world’s second and third largest economies respectively, have more tension and less trust than any other in the entire G20. That is not good for China – but it’s much worse for Japan, a country that has not diversified its trade partnerships nearly as effectively as China, and continues to depend heavily on access to China’s consumer market for the buoyancy of its economy and the health of some of its largest companies.

Tokyo’s move in the middle of last year to assert ownership over the Senkaku islands (known in China as the Diaoyu) in the East China Sea predictably triggered anti-Japanese outrage in China, and Beijing allowed popular protests to swell longer than usual. Chinese demonstrators launched boycotts of Japanese companies and badly damaged a number of Japanese stores and products. In September alone, Toyota and Honda’s year-on-year sales in China fell 49 per cent and 41 per cent respectively.

This episode provides yet another reminder for Japan’s new government that it must hedge its bets on trade with China by forging new partnerships elsewhere in Asia. Mr Abe wisely began the year with trips to Singapore, Australia, the Philippines, Brunei, and Myanmar. And, just as South Korea now enjoys free trade agreements with the US, EU and the Association of South East Asian Nations, Japan must develop new trade ties further afield. Joining talks for the trans-Pacific Partnership, a trade pact involving governments in both Asia and the Americas, is a vitally important step in this direction.

But this is not enough. The need for better relations with Beijing can no longer be avoided. In recent days, Japan has dispatched fighter jets to intimidate non-military Chinese planes away from the islands. China has sent fighters of its own to “monitor” the Japanese. While this pointless posturing is bad for both countries and the entire region, it will take a heavier toll on Japan’s economy than any other.

Mr Abe wants to expand US-Japanese security ties, but Washington can’t protect Japanese companies from the fallout that flows from growing friction in Chinese-Japanese relations – a much greater threat to Japan’s future than any posed by the People’s Liberation Army Navy. And the US must safeguard its own relations with China.

To protect its popularity, Japan’s newly elected Liberal Democratic party government wants to project strength by talking and acting tough on China. A significant segment of the public demands it. Yet, there is nothing Japan’s people want more from their elected leaders than the restoration of a dynamic, growing economy, and that’s why picking needless fights with China is such a bad idea. The best way to “project strength” is by actually building the country’s strength – by bolstering its economy – not by sabre-rattling.

This is why Japan should do what it can to rebuild trust with China, not by giving ground on the islands but by agreeing to put the issue on the shelf for the time being. The dispute will not be resolved this year. Better to focus on restoring a relationship that can strengthen both economies – and, by extension, the domestic credibility of both governments.

It won’t be easy. Just as tensions still flare occasionally over Japan’s territorial disputes with Russia, so there will be incidents of various kinds that test the patience and wisdom of leaders in Tokyo and Beijing. But restrained, skilful management of these issues can help accelerate the process of confidence-building between leaders. The challenge will be greater than with Russia, in part because the history of relations between China and Japan are much more troubled and because both governments have new leaders who are only now taking their seats – leaders looking for shortcuts to make themselves more popular. Yet the fact that the task will be difficult does not make it any less important for Japan’s future.

In the meantime, there are specific steps Japan’s leaders can take to start moving things in the right direction. First, there is a series of actions that Japanese leaders know will aggravate tensions in east Asia, such as visits to the Yasukuni shrine, a controversial war memorial that has been the focus of anger in China. Avoiding acts that destroy trust between governments is the bare minimum Tokyo can do to cool the temperature.

In putting the island issue aside to concentrate on other business, Mr Abe could at least acknowledge that there is a dispute over ownership. In admitting Beijing and Tokyo disagree on boundaries, he need not give any ground on Japan’s claim. More constructively, he could offer a plan that extends fishing rights around the islands to Chinese and Taiwanese fishermen – and open talks on joint development of hydrocarbon deposits in the East China Sea.

None of these steps would come without a political price, but in a country that has passed through seven prime ministers in six years, there can be no substitute for restoring economic vigour. That’s not possible if leaders are repeatedly stumbling into confrontation with China.

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