Japan’s Use of Economic Power

Balancing Between East Asia and the West

Jens Nasstrom, Hitotsubashi University [About | Email]

Volume 3, Issue 1 (Book review 4 in 2003). First published in ejcjs on 2 July 2003.

Wan, Ming (2001) Japan Between Asia and the West: Economic Power and Strategic Balance, New York: M.E. Sharpe, Paperback, ISBN: 0-7656-0778-6, 240 pages.

Is Japan a reactive state without a strategic vision, adjusting its foreign policy to external, especially American, pressure? Or is this perceived passivity in fact a strategic choice? In Japan between Asia and the West: Economic Power and Strategic Balance, Ming Wan argues that post-war Japan indeed behaves strategically, which is reflected in its two-track foreign policy: one track for the West and one for Asia. The author presents a study of this cleavage in Japan’s foreign policy, focusing on the use of economic power and economic statecraft. In examining how Japan has used its economic power during the post-war period, Wan uses the key concepts of cooperation and conflict.

The level of a country’s cooperation is reflected in its spending choices. There are three ways in which a country can use its economic power: defense spending, consumption, and investment. The book also covers the direct use of economic resources as rewards and punishments, for example the use of aid and sanctions, or what Wan calls “economic statecraft”. Taken together, these four factors are used to measure the degree of cooperation in a country’s foreign policy.

Wan examines three areas of Japan’s foreign relations: its bilateral relations with the United States; its regional relations with the countries of East Asia; and finally, its multilateral relations within the institutional frameworks of the World Bank, the International Monetary Fund, and the Asian Development Bank.

The book argues that, on the one hand, Japan has used cooperative spending to alleviate US criticism and to protect its security environment. In Asia, on the other hand, Japan has used cooperative spending to alleviate historical distrust and to facilitate economic exchange. Balancing between East Asia and the United States has not been easy, however. The two tracks sometimes come into conflict, either when US interests conflict with those of an East Asian state (most notably China), or when Japanese policy towards one party is perceived as uncooperative by the other. Japan’s increasing wealth has also been a source of trouble in its relations with the United States, making these increasingly competitive. Interestingly, the same applies to Japan’s relations with East Asia. These countries have become more competitive as the region has started to catch up with Japan, while Japanese policy has also become less cooperative in recent years.

Three factors explain the varying degrees of cooperation in Japan’s foreign relations: bargaining power, position and roles in international organizations, and finally norms and ideas (page 5 footnote). In the introductory chapter, Wan also lists domestic politics as a fourth explanatory factor, but the book never really deals with this issue. Not until the conclusion does Wan state that other explanations must be placed in a domestic context. Wan makes an interesting observation in connection to these three factors: Japan is, at the same time, a late-coming power, a status quo-power, and a changed power. In terms of bargaining power, Japan is a late-coming power because it enhanced its bargaining position during the post-war era. It is a status-quo power with regard to international organizations, because it has no interest in changing these institutions, but aims to increase its status and prestige within the existing frameworks. Finally, through learning and interaction with other states, Japan has transformed its norms and ideas since World War II, making it a changed power.

The chapter on US-Japan relations shows how, in spite of its growing economic power, Japan has consistently used this power to support rather than confront the United States in non-economic areas. Moreover, it has done so through its own less costly means, instead of those expected or demanded of it by the United States. Japan has preferred economic contributions over security contributions, investment over consumption, and aid over sanctions. Wan describes the Japanese pattern of behaviour towards the US as demonstrating cooperation with the US, but at a minimal cost. This leads him to ask two questions.

First, why has Japan chosen to support the US, in spite of its own growing power? One answer is that Japan’s relationship with the US is in fact the source of its power; hence confrontation would be against Japan’s interests. This is certainly a credible explanation, but it also raises some interesting questions regarding the conceptualization of power. In his analysis, Wan seems to equate power with economic power. For example, the book concludes that Japan wants power, which would be indicated by its obsession with GNP growth rates and ranking in the world (page 190 footnote). But does this really say anything other than that Japan merely wants high growth and a high ranking? How does economic power relate to normal conceptions of power? A discussion of this would have been interesting, not only because the concept of economic power is central to Wan’s argument, but because the Japanese case offers a good example of how power can be understood and used in different ways in different countries and regions.

The second question concerns why Japan so often comes up with less costly substitutes when cooperating with the US and, more importantly, how it gets away with this behaviour. Wan suggests that Japan has a stronger bargaining position, which stems, not from its rising economic power, but from the fact that the two nations have different preferences based on different ideas and norms. Japan still has a strong drive to catch up with the West and to do so through the acquisition of wealth and technology. The United States, on the other hand, wants to maintain its prosperity through a global free trade regime, protected by global security arrangements. It is thus more inclined to accommodate Japanese behaviour. This asymmetry in strategic thinking is attributed to “different understandings of what causes a nation to rise and fall and how a nation should behave” (page 62). A clash of perceptions of power explains the nature of Japan-US relations more than power itself.

Cooperation has been the key theme in Japan’s regional relations. Its strategic goals have been to use its relations with East Asian countries to gain advantages vis-à-vis the West, while maintaining its relative position in the region. Sanctions have been rare, as Japan has worked towards facilitating the developmental goals of its neighbours, while at the same time alleviating fears of Japanese domination. Japan’s behaviour has been cooperative, but selective. It has provided loans and investments, but surprisingly little leadership in the macroeconomic area. Its markets have also been fairly closed to imports from the region, and it has been reluctant to transfer technology and skills to its neighbours. Japan’s relative power does not provide a good explanation of its relations with East Asia. In spite of its economic and technological capabilities, Japan has not acted assertively as a regional hegemon. To a certain extent, Japan’s behaviour can be explained by its historical legacy, as shown by the fact that its relations with Southeast Asia are easier than those with Northeast Asia. Still, Wan treats American and Chinese power, as well as Japan’s historical legacy, not as causative but as constraining factors. To explain Japan’s behaviour, he falls back on norms and ideas. He argues that Japan’s strategic preferences are shaped by identity and norms about proper state behaviour. Again, perceptions seem to clash as Japan fails to understand how its behaviour is understood by the countries in the region, which in turn limits its possibilities for leadership.

Japan’s two-track foreign policy toward Asia and the West is reflected in its policy on the three financial institutions included in the study: the World Bank, the International Monetary Fund (IMF), and the Asian Development Bank (ADB). Japan has used the World Bank and the IMF to demonstrate its contributions to the United States and the rest of the international community, while the ADB has been used to promote regional economic development. In all three institutions, Japan has been cooperative, striving to increase its own position within the existing frameworks, rather than challenging those frameworks. It has also contributed more financially than other countries even though it has received fewer benefits, both in terms of voting shares and economic gains. Whereas Japan has institutional disadvantages in the former two organizations, it enjoys a dominant position in the ADB. Interestingly, it has also been more cooperative in the ADB than it has in the World Bank and the IMF. This clearly goes against conventional realist logic, and Wan looks to the institutional approach for an explanation. Since Japan has a close institutional linkage with the ADB, it also tends to take that institution’s interests as its own. Wan sees this as a broader definition of national interest, brought on by constant interaction between Japanese officials and the ADB. Again, ideational factors are important, as Japanese ideas regarding the role of institutions matter in the formulation of policy towards these institutions. Also, the proposition that national interests can be redefined through social interaction points to the power of ideational factors in explaining state behaviour.

Wan draws an interesting picture of Japan’s post-war foreign relations. He puts the spotlight on the importance of perceptions and how they differ between nations. Japan has managed to achieve its strategic objectives and has successfully used economic power to mitigate conflict. Still, Japanese perceptions of what is appropriate behaviour in the international system are far from always being accepted by other actors — most notably the United States and the West. The Japanese government often seems to perceive itself as being cooperative, but the means chosen are not always appreciated. In all three areas examined, Wan’s three independent variables all show some explanatory value. Bargaining power, position and roles in international organizations, as well as norms and ideas offer partial explanations for Japan’s behavior, that is, how cooperative it has been. A problem occurs, however, when they are merged into what Wan calls “packages of causal factors” (page 16). These “packages” are different depending on region and time period, indicating that different causal factors have different weight according to circumstances. This could be problematic because it implies that the relevance of different theoretical approaches also vary depending on the circumstances. Bargaining power is of course closely associated with realist arguments, while explanations based on position and roles in international organizations stem from institutionalist theories. Although he prefers the term “ideationalist explanations”, Wan’s thinking on norms and ideas are clearly influenced by constructivist thought.

If ideas and norms can be used as causal factors equivalent to bargaining power and institutional roles, does their relevance shift according to circumstances? An alternative would be to treat norms and ideas as acting before the other two factors. Wan uses the idea of “role conception” — conceptions of what is expected of a certain actor in a certain situation — as a way to explain state behaviour. However, the idea of “role conception” suggests a logic of appropriateness, which is different from the logic of expected consequences used by realism and institutionalism. Actors driven by the logic of expected consequences would choose their course of action according to the expected consequences for their personal or collective objectives. In contrast, actors driven by the logic of appropriateness would follow norms associated with particular identities. Once the logic of appropriateness is accepted, it becomes difficult to subscribe to the idea that states are rational actors which respond in similar ways to external circumstances. A debate on the pros and cons of theoretical eclecticism is beyond the scope of a book review, but a discussion on how the three factors relate to each other would have added to the analysis.

A second problem is the issue of “goals and means”. In the introduction, Wan argues that Japan’s strategic objective is the “creation of a situation in which the nation is safe and prosperous” (page 7). It is then rightly pointed out that this goal is not unique to Japan, but that the means chosen to attain this goal are. Such a separation between goals and means is welcome, but unfortunately it does not continue throughout the book. As it stands, there is some confusion between what Japan wants and what it perceives to be the most appropriate method of reaching those goals. The book focuses on Japan’s use of economic power, yet it also concludes that the country’s goal is to gain more power. This is not to say that Wan’s argument is contradictory — perhaps Japanese foreign policy is. Its goal is to achieve power, but there seems to be no consensus on what to do with that power. On page 23, the author states that the basic premise of the book is that countries seek to advance their interests in the world. Although popular in mainstream international relations literature, this proposition is so general that it has little analytical value.

Wan could have asked what constitutes security and prosperity or how much security and how much prosperity are enough. The answers to these questions will differ between countries, and acknowledging this may be the key to understanding any country’s foreign policy. This is why the ideational perspective is so important, and it is good that Wan brings these factors into the analysis — even though he could have taken it further. In the concluding chapter, Wan claims that ideas and norms regarding the “best way to accomplish goals” shape Japan’s strategic considerations, but he also suggests that “one cannot simply assume Japanese interests from a structural or institutional theory” (page 195). But this is what Wan effectively does by assuming that Japan’s strategic objectives are security and prosperity without further analyzing what these concepts mean to Japanese decision-makers.

These theoretical issues aside, Japan between Asia and the West is a book which provides a fresh and interesting perspective on Japanese foreign policy. It has a clear structure, making the argument easy to follow. Wan starts out by telling us what he is about to do and how he is going to do it. Every chapter ends with a conclusion which is clearly connected to the introduction, and the last concluding chapter ties everything together nicely. The book is very informative and anyone who wishes for a detailed introduction to the way Japan uses its economic power as a foreign policy tool is well advised to read it.

About the Author

Jens Nasstrom holds a Master’s degree in political science from Uppsala University, Sweden. He has been a Japanese Ministry of Education research student at Hitotsubashi University's Graduate School of Law since April 2001 and is currently writing a thesis on globalization and security, with a particular focus on the Asia-Pacific region.

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