Japan after the Cold War

Makoto Iokibe
June 1997

The views of prominent Japanese thinkers on current policy issues, which are not normally accessible to an international audience because of the language barrier, have been translated and made available through JCIE’s Global Thinknet Insights. This piece is by Professor Makoto Iokibe of Kobe University.

Japan has played a not inconsiderable role in the modern history of the world. In the nineteenth century, the nations of the West were the main actors, and Asia, a poor and stagnant region, was little more than the location for various activities of the Western powers. But in the twentieth century, along with the emergence of the United States as a global power, Japan alone in the non-Western world succeeded in modernizing, itself becoming a world power. In addition to achieving status in the early decades of the century as one of the world’s three great naval powers, Japan was able to participate in the affluence that up until then had been the monopoly of the West. In this way, Japan realized the dream of becoming a wealthy nation with a strong military. But Japan wasn’t able to become a world leader. In 1945, Japan again fell to the bottom of the international scale with the defeat that ended the Pacific War.

Under the free-trade system after the war, a crippled Japan was able to achieve a dramatic level of economic development, and by the end of the 1960s Japan’s gross national product was the second largest among the Western nations. It could be said that in the nineteenth century world history was the history of the West, but for the twentieth century in its entirety world history had become the three-sided history of Europe, the United States, and Japan.

The decision to participate in the free-trade system and to leave the issue of national security to the United States was that of Prime Minister Shigeru Yoshida. Of course, in one sense the decision was merely a concession to the superiority of the victor. But in another sense, it reflected resistance to the pressure of the victor. In 1950 at the outbreak of the Korean War, John Foster Dulles, foreign policy advisor to the U.S. secretary of state and a negotiator of the U.S.-Japan San Francisco Peace Treaty, strongly urged Yoshida to rearm Japan so as to make a contribution to the world community. Yoshida stuck to the principle of giving economic development priority, and thus Japan became a country only lightly armed but protected under the U.S.-Japan Security Treaty.

Without sole responsibility for its own national security and because of a lack of petroleum and other energy resources, Japan single-mindedly pursued economic growth. Achieving it was possible as long as the U.S.-Japan security agreement and the free-trade system remained unimpaired. Should those two factors be shaken, then the lack of a domestic security force and of energy resources could well become fatal weaknesses for Japan.

Japan’s Boom Period: 1978–1990

The first oil crisis in 1973 showed how serious an effect the collapse of the free-trade system would have on Japan. At the time, it was thought the limit of Japan’s prosperity had been reached. But to everyone’s surprise, Japan overcame the damage from the first oil crisis in only four years, by 1978, exhibiting the most brilliant recovery of any of the developed countries. Reasons for this included appropriate economic policies, the rebirth of the national spirit of diligence in the interest of economic efficiency, and the development of energy-saving technologies. The important point is that the recovery was engineered on the basis of qualitative improvements in the Japanese economy. From 1978 on, the international competitiveness of Japan in important manufacturing sectors, including electronics and automobiles, exceeded that of Europe and the United States; Japan was the strongest goods manufacturer in the world. This was to last until 1990.

The sharp growth in competitive exports from Japan naturally brought about not only recognition of the high quality of Japanese goods but also growing criticism from importing countries about Japan’s single-minded, aggressive export drive. Trade friction became particularly serious with the United States, which was Japan’s largest export market. This resulted in Japan’s agreeing to voluntarily limit exports of major products to the United States. Japanese companies increased production operations in the United States, and there were also moves to open the domestic Japanese market to foreign goods and to expand imports of foreign goods.

But from the end of the 1970s to the mid 1980s, the Japan-U.S. trade imbalance continued to grow. That is how competitive Japanese goods were. As a result of the Plaza Accord in 1985, the yen appreciated rapidly, eventually tripling in value against the dollar compared to the ¥360 to the dollar era. The fact that the Japanese export surplus continued in the face of this led to the popularity in the United States of the revisionists’ “Japan is different” thesis. The revisionists argued that since the Japanese economy is a disrupting force in the free-trade system, Japan ought not to be treated like other nations. They called for the bureaucracy’s control of the Japanese corporate structure, the keiretsu (corporate-group) system, and other perceived ills of the Japanese economy to be corrected. If these practices and structures aren’t corrected, then managed trade vis-à-vis Japan isn’t unfair, they claimed. These and similar arguments were the core of the “Japan is different” thesis.

Economic Consequences of the End of the Cold War

The New Economic Policy of the Clinton Administration: 1993–1995

Despite the continuing bilateral trade friction and the vigorous attacks from the private sector, the U.S. government never took preventive or reprisal measures against Japan to an extent that would have a decisive effect. For example, many of the voluntary restraint agreements merely involved limiting the growth of Japanese exports to the United States. In the cases of textiles and automobiles, the actual exports from Japan to the United States never reached the upper limits set in the agreements.

To some extent, this reflected the fact that the United States, as the leader of the free-trade system, found it difficult to take measures that would show its leadership to be a mere facade. Also, the United States found itself in a position of mutual reliance vis-à-vis Japan: reprisals against the partner would result in damage to itself as well. Japanese exports to the United States were a nuisance to the U.S. manufacturing sector, but they were a boon to U.S. consumers. And Japanese parts and technology were needed by U.S. companies to enhance manufacturing quality. This type of interdependence had become characteristic of the period.

There was also a noneconomic reason. In the cold war framework, the United States was obliged to treat Japan as one of its Western partners, along with Europe, and this meant that the United States was unable to let trade friction with Japan grow to a point where it might threaten the cooperative relationship at the basis of the Security Treaty.

Bill Clinton was the first U.S. president since the Korean War to take office free from this constraint. During its first three years, the Clinton administration, in a change from the policies of preceding administrations, showed a determination to achieve some real results from Japan. The Clinton administration tried to orchestrate the general surrender of Japan in the trade area, symbolized by the “results-oriented” and “numerical targets” slogans and characterized by an effort so avoid the penchant of previous administrations for halfway compromises. Based on the norms of the cold war period, Prime Ministers Kiichi Miyazawa and Morihiro Hosokawa would count among the sophisticated in terms of U.S.-Japan relations. But in the face of the confrontational stance of the Clinton administration, the summit talks of both of these prime ministers with Clinton ended in failure. This was because Clinton took the position that a breakdown in the talks was better than a halfway compromise.

The End of U.S.-Japan Trade Friction

The turbulent auto-parts negotiations between U.S. Trade Representative Mickey Kantor and Minister of International Trade and Industry Ryutaro Hashimoto in the summer of 1995 marked a watershed in U.S.-Japan trade friction. The Japanese side refused to budge from its position of no numerical targets. Walter Mondale, U.S. ambassador to Japan, then held a round of talks with Japanese auto industry officials, and on this basis both governments indicated they were satisfied. The Clinton administration had returned to the moderate position of agreeing even when the actual contents of an agreement were a halfway compromise. With that, U.S.-Japan trade friction can be said to have entered a new phase.

The semiconductor talks in the summer of 1996 also resulted in the abandonment of U.S.-Japan bilateral targets; both sides agreed to work toward a multilateral solution. What were the reasons for the end of the age of U.S.-Japan trade friction?

First was the necessity for the United States and Japan to avoid a confrontation. Whereas previously maintaining solidarity under the cold war framework had been important for the two allies, now their increasingly interdependent relationship was the impetus for harmonious interaction, particularly because as member countries of the Organization for Economic Cooperative Development, they couldn’t afford to cause the collapse of their cooperative relationship. The Uruguay Round trade negotiations were finally settled at the end of 1993, and the World Trade Organization (WTO) was launched. The WTO would not support the imposition of numerical targets in the bilateral U.S.-Japan trade relationship. Neither would Europe. Nor would the Association of Southeast Asian Nations (ASEAN). And there was even opposition within the United States. All countries supported the United States in its demands for a freer domestic Japanese market, but support for the idea of bilateral numerical targets was practically zero.

The ASEAN reaction left a strong impression on me. In some East Asian countries, Japan has traditionally been criticized for overly prioritizing its relationship with the United States. These people generally say, “Japan is looking only to the United States. It is not treating Asia seriously, and this is a mistake.” But in the summer of 1995, when the economic confrontation between Japan and the United States intensified, these same people said, “We thought maintaining the relationship with the United States was a special expertise of Japan. Japan should make additional efforts at settlement. The U.S.-Japan relationship is important for the Asia Pacific region as a whole, and not just for Japan.” Personally, I felt a sense of relief. International support for the U.S.-Japan Security Treaty has never been as broad as it is now. Many countries favor extending the treaty, not so much for the security of Japan and the United States as for the security of the whole Asia Pacific region.

A second reason for the lessening of trade friction is the decline of Japan bashing in the United States owing to a change in the economic ranking of the two countries. The strong Japanese economy has gone missing in the 1990s since the collapse of the bubble economy. Talk of how the Japanese economic and political systems have lost their sense of direction has become a set theme in international discussions. Top U.S. corporations, feeling a greater sense of self-confidence, have stopped pressing the office of the United States Trade Representative for measures against Japan.

By chance, I was asked to make a speech in Detroit in May 1994. I was concerned and nervous about the reaction to my remarks in this mecca of Japan bashing. But I found that the U.S. auto industry showed a renewed sense of self-confidence and regarded Japan bashing as an old story from the 1980s. Quite apart from the question of whether the stronger U.S. economic position is good for Japan, the fact is that the United States has recovered its competitiveness vis-à-vis Japan, and the revisionists have had the rug pulled out from under them.

In the summer of 1995, the Clinton administration no doubt decided that making a big issue of obtaining real results from Japan on trade was not going to work to its advantage in the fifteen months until the presidential election. And so it came about that the long period of stormy confrontation in the U.S.-Japan economic relationship ended. The wind dropped, and the sea was calm.

Redefinition of the U.S.-Japan Security Treaty

Two types of earthquakes plague the Japanese archipelago. One is the inland or domestic type that results from movements along fault lines directly underlying the areas of damage. It is this type that attacked Kobe in January 1995, completely destroying, incidentally, my own house. The other, offshore type results from movements of the continental plate in the South China Sea, and although these earthquakes originate far off the coast of Japan, they are extremely powerful and their area of damage tends to be very broad.

Immediately following the summer 1995 calm in the U.S.-Japan economic relationship, both types of earthquake attacked the U.S.-Japan Security Treaty. In a domestic incident, the rape of an Okinawan schoolgirl by U.S. military personnel caused doubts that perhaps the U.S.-Japan security arrangement might no longer find adequate support within Japan.

Clinton, a politician trained in the electoral process of a country highly sensitive to popular opinion, quickly showed his sensitivity to this issue by immediately expressing a strong sense of outrage and sympathy. Some people think perhaps this was the first time Clinton thought deeply about the U.S.-Japan security issue. In cases like this, it is important that staff have well-thought-out answers ready when the president asks. Luckily, in this case, there was a good plan.

Defense Secretary Perry had two assistants, both from Harvard University: international affairs critic Joseph Nye and Ezra Vogel, the author in 1978 of Japan as No. 1. The two of them had thoroughly studied the issues connected with post-cold war Asia Pacific security and had already published the “Nye Report” on this. The gist of their thesis was that even though the common enemy, in the form of the Soviet Union, has ceased to exist, there were still a number of threats to the stability of Asia. In order for Asia, in the midst of its strong economic growth, to avoid an armed conflict, the U.S. presence in the region is indispensable. For that reason, they concluded, the U.S.-Japan Security Treaty continues to be of fundamental importance.

Perry and the other Pentagon people were flexible and in fact positive on the issue of returning the Futenma military base property to Okinawan jurisdiction, because they recognized both the strength of public opinion on the issue and the importance of maintaining the security relationship. An earlier staff-level agreement that the return of Futenma was impossible was overturned in talks between Clinton and Prime Minister Ryutaro Hashimoto. For Japan, where the bureaucracy generally wields the power, this was an example of political leadership that had not been seen in a long time. The April 1996 summit meeting in Tokyo was a friendly affair. The image of the two leaders exuding a mood of happiness and satisfaction was also something that had not been seen in a long time, at least since the so-called Ron and Yasu era of the 1980s when Ronald Reagan was president of the United States and Yasuhiro Nakasone was Japan’s prime minister.

The “continental-plate type” earthquake that followed the Okinawan crisis, in the form of the Taiwan Straits crisis, proved the correctness of the idea that the U.S. presence in Asia is necessary for regional security and gave life, so to speak, to the Nye Report thesis. If China were to begin behaving like an imperial power, who but the United States would be in a position to speak out convincingly? Hence the importance of the powerful U.S. presence. But China should not be considered an enemy. On the contrary, one of the main points of the Nye Report was the importance of inviting China into the world community. When Clinton spoke about a redefinition of the U.S.-Japan security relationship on the occasion of his visit to Japan, it was clearly a message to China. But Clinton and Hashimoto avoided any actual expressions of criticism of China, using instead cautionary language only. In this respect, I thought theirs was a particularly good diplomatic performance.

Tasks for Japan

The traditional U.S.-Japan security arrangement was based on the hypothesis of an attack on Japan by the Soviet Union. Japan, in this scenario, would exercise its limited powers of resistance and harass the Soviet army until U.S. assistance arrived. Japanese often expressed skepticism, which reflected something of a victim complex, about the actual extent of U.S. help should this scenario become reality.

The main problem now is quite different. While it is natural to expect a common response by the United States and Japan to a crisis originating in North Korea or in Taiwan, the question now is to what extent would Japan be able to provide military cooperation under the terms of its present Constitution. In the 1978 set of U.S.-Japan Guidelines, the main theme was the defense of Japan. But the main theme in the new Guidelines currently under discussion is the plan for a common response to any crisis by the United States and Japan in the interest of preserving Asia Pacific security.

Until the 1990 Persian Gulf crisis, Japan thought avoidance of participation in war was the correct attitude for a pacifist nation. For that reason, Japan did not participate in the allied forces that invaded Kuwait during Operation Desert Storm. And many Japanese could not understand why this generated a wave of international criticism. The Group of Seven summit has a trilateral structure involving the United States, Europe, and Japan, and these constituent countries have to think about not only the economic system but also the maintenance of international security in general. In other words, Japan was unaware of its place as a structural member. Many Japanese still think that Japan can get by with its defeated-and-weak-country attitude of avoiding conflict and by being a “good boy” internationally.

While Japan did not participate in the Gulf War, it did make an extra-legal contribution of $13 billion, even raising taxes to do so (and received no thanks for it). At the conclusion of the war, Japan sent a minesweeper to the Gulf and enacted the Peacekeeping Operations Bill. These steps were a small start in the direction of playing a role in the preservation of international security.

Following the success of Japan’s participation in the United Nations Transitional authority in Cambodia, the first overseas peacekeeping operation for Japan, Japanese public opinion finally started to change. The majority of Japanese now feel that if cooperation in the maintenance of international security is hindered under the current Constitution, then that part of the Constitution can be amended.

In other words, Japan has become aware of the limits of its strict economic, nonmilitary position and is starting to convert itself into more of an “all round player.” Will this bring about a return to militarism, and with it the entry onto the world stage of Japan as an independent great military power? There is absolutely no reason to think so. That illusion is a thing of the past, and in terms of the current international environment, it is not even an option. Japan is a global civilian power, and there is not even one Japanese who thinks of a Japan that would try to change the international environment to suit itself by force of arms. However, above and beyond the role of an economic power, no doubt the political role for Japan in Asia will broaden, once Japan’s leadership ability is strengthened. Still, Japan’s important resources are overwhelmingly nonmilitary. Even with a bit of a shift to “all round player” status, still Japan’s main role will be that of a civilian power. It is in this role that Japan will make its most forward-looking and proactive contribution.

In conclusion, I would like to summarize Japan!s tasks in the three areas of security, economy, and domestic politics.


Broadly speaking, two big tasks confront Japan in the area of national security. The first will involve wise management of the Asian side of the U.S.-Japan security agreement, to avoid the two extremes of either a U.S. military retrenchment or excessive U.S. intervention in Asia. Asia Pacific stability can be maintained by continuing in a sound manner the U.S. military presence in Asia. Put another way, it is a function of the U.S.-Japan security agreement to demonstrate to all countries in the region that it is impossible to change the status quo by force. In fact, I think the biggest Japanese contribution to the international community will be to continue to make the U.S.-Japan Security Treaty carry out this role. And from this point of view, Japan’s leadership bears the heavy responsibility of exerting every effort to see that Okinawan popular opposition to the U.S. bases does not result in a situation where maintenance of the U.S.-Japan Security Treaty becomes impossible.

Japan’s second task regarding security is to participate in and cooperate in the maintenance of international security. After Cambodia, Japanese peacekeeping forces were sent to Mozambique, Angola, and Rwanda in Africa and then to the Golan Heights in the Middle East. Since Japanese insistence on the prior existence of a domestic cease-fire agreement (and the failure of the “enforced peace” approach in Somalia), international practice has generally moved closer to Japan’s position, and this has made it easier for Japan to participate in peacekeeping operations.

To make peacekeeping operations more effective, the United Nations needs an emergency rapid-deployment force capable of responding quickly in tense situations. This would be something like an advance-troops unit or a surveillance unit, to be dispatched to emergency areas in the immediate period of time before a full-scale response can be decided on. Japan ought to exert every possible effort in the creation and operation of a unit like this. Also, Japan should stop treating local conflicts as someone else’s problem, develop a more immediate consciousness of the problems, and do more to cooperate in the development of solutions. Japan’s presence on the United Nations Security Council could be a significant benefit to international society.


A simple list of the tasks facing Japan in the economic sphere would include the following. First is the question of whether the Japanese economy is going to be able to recover its dynamism. Although it astonished the world between 1978 and 1990, today it lacks the dynamism of the East Asian economies as well as the strengths on the “soft” side and the originality that characterizes the United States and Europe. If Japan proves to be a drop-out in the current megacompetition, then post-cold war Japan will end up like Holland at the end of the Thirty Years War in seventeenth-century Europe, in a state of decline.

Second is the following point. It is not enough for Japan merely to go headlong and blindly in the direction of economic growth. Unless Japan also opens the domestic market and creates a system based on standards that are appropriate and fair from a global point of view, its huge, advanced economy is going to prove to be troublesome to the international economy. Closing the country to foreign commerce and so on is no longer an option. Restoring dynamism to the economy is going to have to be accompanied by deregulation and an overall process of heightening the international affinity of the Japanese system.

Third, it would be desirable for Japan to take a leadership role in the area of economic development for developing countries. In the post-cold war period, the United States and others have been cutting their official development assistance activities and taking a more disinterested attitude to Third World development issues. This is unfortunate. Perhaps the earlier assistance policies were merely on account of the Soviet threat. In any event, if the situation is not changed, the world will be living with misery in the twenty-first century. The emphasis on this issue, particularly by France, at the 1996 Lyon Summit was laudable. Japan should develop a new overall development strategy involving a national policy of support for development of a variety of countries at a variety of economic development levels.

Finally, considering the fact that food, population, natural resources, environment, and other problems of global scope are going to become more serious in the next century, it would be desirable to create a system for making decisions respecting human existence, including not only improvements in the efficiency of the UN Social and Economic Council but also creation of a new Humanity and the Environment Council.

Domestic Politics

For Japan to carry out these roles in international security and in the international economy, it must change its domestic political and social systems. I want to mention two areas where change is necessary.

First is the restructuring and development of the political party system. The new electoral system applied in the October 1996 election in the House of Representatives had two aims. One was to control the money-based corruption of the system. The other was, by introducing the single-seat constituencies, to foster the formation of two major political parties and to in effect double the number of parties capable of forming a government—which up until then was only one, the Liberal Democratic Party—to two. Can this be done? A particularly important issue here is the following: the existing fixed and segmented operations of the bureaucracy have to be controlled and ordered by a political party cabinet capable of having an overall and general national policy point of view. The restoration of “general policy” is going to be a central issue.

Second is the issue of enriching civil society. If Japan lacks an intellectual searchlight for the development of overall policy based particularly on international understanding and sensitivity, then the twenty-first century is going to be a dark time. It would be wrong to rely only on the vast think tank that is the government bureaucracy. I would like to see a wealth of diversified policy plans and visions developed also by private-sector universities and research institutes. Perhaps setting up a kind of APEC university in either Kobe or Okinawa could be a first step.

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