Friday 17 February 2012

Japan – a Forgotten Asian Partner

James Horrax

Britain's Prime Minister David Cameron shakes hands with Japan's Prime Minister Naoto Kan before their bilateral meeting at the G8 summit on May 27, 2011 in Deauville, France. Pool/Getty Images Europe.
Over the last ten years, attention in Asia has been diverted to the emerging markets of China and India. With predictions that China will become the world’s largest economy between 2020 – 2025, and India the world’s largest democracy (for all it’s faults) in a region where its government is unusual to say the least, it is perhaps not unsurprising that British foreign and trade policy has developed around Asia’s giants. 

Further to the East however, lies an economy which is larger by GDP per capita than both India and China combined – the archipelago of Japan. 
Japan has been thrown into the shade by its own noisy neighbours in China and Korea in recent years – and it was only last year that China replaced Japan as the world’s second largest economy – but it still represents a key and important strategic relationship for Britain and the West over the coming years. 
Since the end of the Second World War, Japan has been a reliable ally for Britain and after Europe, China and the US, the UK has been Japan’s largest export market. However recently its economy - after a relatively successful period from 2000 – 2008 - has begun to struggle. Many will point to one-off mitigating factors including the powerful earthquake and tsunami which struck last March and the subsequent shut down of many nuclear reactors which as a result have helped push the costs of energy higher. But the truth is, Japan’s relative success in the early part of last decade was because of a boom in consumer consumption in its largest export markets – particularly in electronics, cars and financial services. 
Now there is a chance for Britain to return the favour. As was mentioned in my last post, David Cameron and the Coalition Government have made a big play of saying the world doesn’t owe Britain a living and the Japanese present economic malaise could be an opportunity. Despite Japan having a highly developed consumer culture, Britain can export plenty of services and expertise. Japan’s demographic time-bomb which is seeing an increasingly aging population, is increasing the need for pharmaceuticals and medicine which British firms like GlaxoSmithKline and AstraZeneca should be taking advantage of. The effective negative interest rates which Japan’s pension pots have been labouring under also makes financial services another sector where Britain can grow in Japan.
Following the earthquake and tsunami of 2011, David Cameron called on the European Union (EU) to offer a free trade deal to Japan to help recovery. While progress on this appears to have ground to a halt for now, for the benefit of all parties this deal should be resurrected and implemented as soon as possible. However there are some protectionist economic measures (specifically in the agricultural industry on both sides like the Common Agricultural Policy (CAP) and high import tariffs on products to Japan) which appear to be a sticking point. If the rich world is to grow its way out of its present economic funk, ensuring that tariffs and subsidies are removed will help government expenditure in the immediate term and eventually trickle through to the wider market, forcing costs for consumers down. It is only by increasing global trade and removing barriers to entry, that consumer driven economies like Britain and Japan can hope to get back to sustainable long term growth.
Still Japan is not just an economic strategic ally, it is also a regional and geo-strategic one too. As the situation in North Korea continues to unfurl, maintaining military and security intelligence cooperation in the area is vital and this is where Japan, along with South Korea will be of crucial importance. 
UK should be building close intelligence ties with Japan and South Korea in case of a North Korean collapse. Nautilus.
Japan’s relationship with North Korea, and its Chinese paymasters, is often fraught with historical and cultural tension. It is hardly surprising the US maintains a strong military presence on Okinawa given how Japan is a perfect vantage point with which to view the Far East peninsula. Historically, British ties have been less strong in this area, although with the continuing developments in the Middle East and the attention of strategists being held by Iran, it would be dangerous to assume this part of the world will simply sort itself out. As such, Britain should also focus on developing intelligence ties with Japan. This need not be costly but the consequences for failing to do so may be enormous. 
If North Korea is to collapse as reports suggest, Britain and its allies need as much information as possible, particularly since the most valuable assets North Korea will possess upon falling will be its nuclear materials which can be easily siphoned off and smuggled out of the country. While a rising China is unlikely to allow this to happen, their foreign policy is based on a laissez-faire principle of non-interference rather than liberal interventionism and nothing can be assured where projection of Chinese force is concerned.
Japan’s role, alongside its South Korean neighbours, will be of critical importance in the coming years. Britain must develop its ties accordingly. 


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