Our Cold Peace With Japan : An Adversarial Relationship is Developing, to the Benefit of Both

Japan is rapidly becoming America’s new Soviet Union. The Cold Peace with Japan is replacing the Cold War with the Soviet Union. Economic policy is replacing foreign policy as the most critical determinant of national security; political allies are becoming economic adversaries. And this sudden new circumstance, so unpleasant for economists and politicians on both sides of the Pacific, is inevitable and beneficial for both the United States and Japan.

The collapse of the Soviet Union has shifted America’s attention from geopolitics to geoeconomics. In this realm, honest American observers recognize a discontinuity of historic proportions: Economic power and world leadership have come uncoupled. Japan’s dynamic economy has seized the momentum and propelled the nation into the first position of global wealth; but Japan has no view of its role in the world, no mission or purpose for its new-found economic power. Indeed, most Japanese leaders associate the idea of a mission with the rise of nationalism and the rise of nationalism with militarism and the folly of World War II.

America retains its sense of mission, its moral vision and global purpose. But its weakened economic vitality undermines both its credibility and effectiveness as hegemonic world leader. The United States and Japan today divide the four functions of world leadership: The United States is providing global security and the key currency; Japan is assuming technological leadership and global financial dominance. The two functions that Japan has assumed directly threaten U.S. economic interests, making the current tensions inevitable.

But why are these tensions beneficial for each side and the long-term relationship? First, it is clear that Japan needs to change and cannot without gaiatsu --external pressure from the United States. So rapid has been Japan’s advance from ashes to affluence that virtually every institutional dimension in its way of life desperately needs reform, or risk ending up an anachronistic victim of Japan’s economic success. For example, the Recruit Scandal pointed out the need for political reform, not only to purge “money-politicb” from the system but also to deal with a democracy in which only one party holds power and rural voters have four votes for every one urban vote.

Land reform is essential, particularly in light of the 200% increase in Tokyo land prices in the last three years. This land bubble has financed much of Japan’s push into foreign direct investments and created a whole new class of Japanese millionaires. But it has also doubled the cost of buying a home--from the equivalent of 6 years of a worker’s salary to 12 years.

Social reform is on the agenda, for women, immigrant workers, and other minorities, as is the need for a new Japanese consumerism. The Japanese themselves talk about educational reform, by which they mean less rote learning and more academic creativity. But a far more essential educational reform would be to break the rigid dominance of the elite universities--Tokyo University in particular--as the key determinant of ultimate career success. A more pluralistic Japan would accept diplomas from a diverse set of universities, including non-Japanese schools. And there is the issue of regional economic development. While Japan boasts the highest per-capita gross national product in the world, the figure, as an average, is misleading. Tokyo is rich. But there are major regions of Japan that the economic miracle has left behind.

The need for these basic reforms suggests that Japan’s new wealth has created a new question: What is the purpose of economic growth in the 21st Century for Japan? For the past 40 years, the purpose has been clear: to catch up. Now Japan has caught up--and more. And so the purpose of economic growth today is more economic growth. Adversarial pressure from the United States is the only way to interrupt this circularity and help the Japanese bring about the reforms that they need.

What about the United States? If the U.S.-Soviet contest teaches anything, it is the importance to the United States of a clear adversary. For Americans to mobilize as a nation, there must be an “enemy at the gates”--whether in the form of a challenge from a Soviet Sputnik or a Japanese semiconductor. The kinds of changes that America must make are as fundamental and far-reaching as those facing Japan: educational reform, particularly in elementary and high schools; worker training and retraining; technological reinvestment; restructuring the federal government, and more, including an honest effort to address the twin deficits that continue to plague the American economy.

And just as Japan faces new questions about its future, so does the United States: What is America for in the 21st Century? America needs a refresher course in its own national values and purposes, and a rededication to those values in the context of a new world order. In the past, when faced with a clear external adversary, the United States has proved its capacity for self-rediscovery. Japan now offers America a chance for a new rebirth.

Ironically, the worsening of U.S.-Japanese relations will also prove beneficial to the long-term relationship between the two countries. In some respects, the two nations are only now coming to discover each other. Gone is the false glow of early romance, replaced by a harsher but more accurate perception of reality. The United States is seeing Japan as it is--not as a clone of itself, but as a distinct country with its own systems where even such familiar terms as “democracy” and “capitalism” are put into practice in wholly unfamiliar ways. And Japan is seeing the frailties of the United States, also for the first time. The United States is hardly the invulnerable hero that the Japanese have so greatly admired for the past 45 years. Nor is it a bottomless market, capable of absorbing virtually any volume of Japanese exports. The benefit of the Cold Peace is the chance for each side to correct its false impression of the other and emerge from a period of greater hostility with a relationship based on greater understanding.

Undoubtedly the next 5 to 10 years will witness a worsening of U.S.-Japanese relations. Competition for the high-tech, high value-added industries of the future will escalate; the Japanese will move aggressively into basic research, further threatening American interests; Japan’s industrial structure will facilitate techno-fusion, the joining of divergent technologies into whole new industries. But what will necessarily emerge from this heightened conflict is a U.S. strategy for its relationship with Japan--the first time the United States has had such a strategy since World War II. And just as America’s strategy for dealing with the Soviet Union provided a global framework for the period between 1945 and 1990, so America’s strategy for dealing with Japan will create a new framework for geoeconomics in the 21st Century.