The Growing Risk for Japan in the US-China Rivalry By Sheila A. Smith

 The Growing Risk for Japan in the US-China Rivalry

By Sheila A. Smith

Japan’s relationship with China has become increasingly troubled. The growing military presence of Chinese PLA naval and air forces in and around Japanese territory has alarmed Japanese defense planners.1 A territorial dispute, once relegated to the background of the relationship, has jumped to the front of the diplomatic queue. While both nations rely heavily on each other economically, the balance of that dependence has changed considerably because China now has far more options from which to choose for trade and foreign direct investment. Finally, Japan and China now look outward and see each other as competitors for leadership in an increasingly fraught Asia. Japan is also looking to others across the Pacific and Indian Oceans to develop strategic ties even as it continues to deepen strategic co-operation with Washington.

At the same time, Japan’s relationship with the United States is less certain than in the past, while Washington’s disputes with China seem impossible to resolve. From the standoff over cybertheft during the Barack Obama years to the trade showdown during the Donald Trump years, Tokyo has watched the US pull back from its traditional leadership of the liberal order and declare its strategic competition with China as the most important priority of national strategy. Nonetheless, the economic impact of the US-China trade dispute was not lost on Japanese business, and Japan’s political leaders have been divided over the imposition of sanctions on Beijing for human rights abuses.

Dependent on US strategic protection, Japan has seen the role of US forces in Japan as a deterrent to the use of force against it. US bases on Japanese soil would be used in battles elsewhere, on the Korean Peninsula or across the Taiwan Strait. Yet the rising tensions in 2012 over the Senkaku/Diaoyu Islands raised the possibility that Japan might be directly threatened by China. The alliance had not confronted this scenario of escalation in the past and was forced to initiate a dialogue on how the two militaries might operate in this new reality. A new Alliance Co-ordination Mechanism was created for managing crises from the moment they begin, and this was first used in 2017 when North Korea escalated tensions with repeated missile launches around and over Japan.2

Military Challenges

But the configuration of US and Japanese capabilities must now consider China’s growing military power. US forces in Japan offer significant fire power for use in a regional contingency, but across the Indo-Pacific the US and Japanese militaries have stepped up their co-operation. Prime Minister Shinzo Abe enhanced the Self Defense Forces’ ability to work with US forces across the Indo-Pacific when he reinterpreted Article 9 of Japan’s constitution to allow for “collective self-defense,” the use of force to help other national militaries if it was in the interests of Japanese security. New laws integrating this interpretation into existing laws governing the SDF went into effect in 2015.3 US and Japanese forces now operate together across the maritime region.

Moreover, Japan’s Self Defense Force plays a far more obvious role in regional coalitions. Japan joined the US and Australia in maritime and other exercises after 2008. Similarly, Japan’s SDF joined the US in the Malabar exercises with Indian forces. The Malabar exercises began in the vicinity of India but eventually took place in waters more proximate to Japan, reflecting India’s own growing commitment to the Indo-Pacific maritime coalition. Alongside the US and other like-minded powers, Japan now can project its military power in ways designed to signal its interest in ensuring a “free and open Indo-Pacific.” As China’s maritime forces challenge transit near disputed islands in the South China Sea, Japan has increasingly seen its strategic interests aligning with other regional powers, as in the Quad configuration with Australia, India and the US.

The more confrontational the relationship between the US and China becomes, however, the more pressure Tokyo will be under. Three sets of changes are already visible. First, Japan will need to increase its military capabilities. Recently, conservative legislators in Japan have shown far greater willingness to argue for an increase in defense spending and to develop capabilities that would allow Japan to strike back at enemy bases if attacked. In the September leadership election for the ruling Liberal Democratic Party, now Prime Minister Fumio Kishida noted early in the race his desire to see Japan acquire more military capability, and he laid out his growing concern over China’s assertive behavior. As foreign minister under Abe for five years, his emphasis was on Japan’s diplomatic influence. As a native of Hiroshima, Kishida also advocated for nuclear disarmament. The LDP party platform now contains a commitment to invest up to 2 percent of gross domestic product in defense.

With the Senkaku crisis in mind, Japan’s military planners have increasingly realized the need for greater joint co-ordination among the three branches of its own military as well as greater efforts to combine the operations of US and Japanese forces. The growing presence of Chinese forces strains the SDF’s ability to defend the far-flung southwestern islands. On Okinawa’s main island, the SDF has increased its air and maritime presence (including coast guard ships), and on the islands closest to the East China Sea, Japan has increased its ground forces as well. The old idea that US forces would provide the “sword” and the Japanese the “shield” has become harder to justify. Technology has blurred the line between offense and defense, while Chinese investment in asymmetric weapons systems has provided an edge that Japan feels it must be able to withstand.

Integration of command will also be important for crisis response in the region. During peacetime, the increased regional presence of Japanese forces alongside US, Australian and Indian forces signals Japan’s interests in maritime stability. But there remains considerable thinking to be done in the alliance about moving from peacetime to wartime operations. Should Japan opt to develop conventional strike capabilities, this will call for far deeper consultations on how to envision a combined war plan but also on how to remove barriers to operating in a combined command should it become necessary. To date, there has been little need for the US and Japan to create such a combined command, nor has there been political support for such an idea in either government. Japanese planners recognize the political constraints of Article 9, and US planners have long sought to avoid becoming bogged down by Japan’s domestic concerns as they seek to ensure readiness for regional contingencies.

Economic Risks

Japan’s economic interests will be just as much at stake in the years ahead should US-China tensions rise. 20 percent of Japan’s overall trade is with China compared to 15 percent with the US. Japan’s foreign direct investment in China has also grown, from US$2.6 billion in 2002 to US$11.3 billion in 2020. It still remains lower than FDI to the US, which increased from US$7.4 billion to US$48.9 billion in that same period.4 Estimates vary on how much Japan’s economic vitality relies on this trade with China, but data from the World Bank puts that share at an estimated 6 percent of GDP in 2019.5 Of course, the impact of the global pandemic on these numbers has yet to be calculated, but Japanese corporations rely heavily on unrestrained access to the China market. When Kishida formed a new cabinet after the October 2021 election, the president of Keidanren, Japan’s powerful business federation, Masakazu Tokura, noted that Japan’s economic interests were global and that “its doors must not be closed.”6

The new Kishida cabinet has announced a significant economic security agenda, and new legislation is expected next spring. A cabinet post was created, and Kobayashi Takayuki will become Japan’s first minister for economic security. On Nov. 19, a cabinet task force was created to prepare this legislation, and its members include an array of cabinet ministers. Kishida himself has emphasized the need for establishing secure supply chains and identifying critical technologies that must be protected. But there are other aspects that might be included. Also advising the prime minister is Gen Nakatani, a former defense minister, who has been asked by Kishida to work on human rights-related initiatives. Nakatani has been an advocate for a Magnitsky-like law that would allow Japan to sanction individuals and corporations violating human rights. Improving and clarifying the economic instruments that the state will develop to ensure Japanese security will undoubtedly be welcomed by the Joe Biden administration, especially as the Quad working groups focus on similar types of issues. Yet Beijing will likely see this as designed to give Tokyo leverage to punish China for policies Japan may disagree with, and it remains to be seen how China might challenge Japan’s economic instruments should it become a target. In his first telephone conversation with Chinese Foreign Minister Wang Yi, Foreign Minister Yoshimasa Hayashi was warned that Japan should concentrate on improving its relations with its neighbors rather than aligning itself with the US.

Economic security has now become a priority for Tokyo, and Kishida has created a new position in his cabinet to address it. As China’s recent sanctions of Australia revealed, the consequences of Chinese power now threaten a longstanding assumption that economic interdependence would protect — and be protected from — the inevitable political ups and downs of the Japan-China relationship. Even during the diplomatic clash over the island dispute, Japan felt vulnerable to China’s slowdown of rare earth materials, a critical import for Japanese manufacturing. But the global pandemic has intensified this sense of vulnerability.

Taiwan

Of course, the hardest choices for Japan may present themselves in the effort to deter Chinese use of force against Taiwan. Japan’s economic and security interests could well become entangled with the growing tensions across the Taiwan Strait. In the past, Japan has noted the importance of peace and stability across the strait but has never assumed a direct role in ensuring deterrence. Today, as Chinese PLA flights across Taiwan’s Air Defense Identification Zone (ADIZ) occur in greater numbers, signals are being sent that Beijing’s military capabilities could easily challenge the Taipei government. Additional cyber and maritime capabilities could also render Taiwan defenseless and imperil its economy even before any military force were necessary. Both the Japanese Minister of Defense, Nobuo Kishi, and the US Indo-Pacific Commander, Admiral John Aquilino, have made a point of visiting Yonaguni Island, the southernmost island in the Ryukyu chain and the closest to Taiwan. Informal meetings between LDP lawmakers and opposition lawmakers have also taken place, suggesting an appetite for further dialogue on how to provide greater Japanese support for Taiwan.

Ever since the imposition of the National Security Law in Hong Kong shut down political freedoms there, Tokyo has become increasingly outspoken about its broader concerns. Former Prime Minister Yoshihide Suga joined President Biden in calling for peaceful resolution of tensions in their summit meeting last spring, and both leaders endorsed a G-7 statement that raised concerns about the Taiwan situation. Japan has taken steps to signal its willingness to support Taiwan’s economy, including discussions over building a factory for TSMC semiconductor production in Japan. Yet how much Japan would be willing to put its own territory in danger, and how much the Japanese people would support an active Japanese military role in planning for a response to Chinese use of force remain to be seen. Alliance discussions will likely focus on two aspects: the use of bases on Japanese territory by US forces and the role the SDF might play. Unlike a contingency on the Korean Peninsula, there is no UN mandate for the use of bases in Japan for a cross-Strait contingency and thus the US would have to detail its base-use needs in case of a Taiwan emergency. Japanese planners will have to consider how a Taiwan scenario would affect Japan’s overall needs as well as missions specifically in support of US operations in and around Taiwan.

Conclusion

Japan’s strategic relationship with the United States suggests that in a world of rising tensions with China, decision-makers in Tokyo will side with Washington. Yet while political elites may increasingly lean towards the security benefits of a strong US-Japan alliance, business elites have a different perspective. The China market offers considerable economic advantage to Japanese companies. Trade and investment with the US is similarly important, but the volatility of US trade policy of late has deepened the sense of caution about Japan’s future economic prosperity.

The Biden administration’s emphasis on the Quad relies heavily on Japan’s co-operation. Sustaining this regional coalition of democratic nations with maritime interests will be important to Japan’s assessment of the US commitment to the region. To be sure, the governments of Japan and the US today share a greater sense of strategic convergence on China. But the agenda of the Quad is ambitious, and the realization of its emphasis on economic security as well as maritime stability will take considerable and consistent effort. Given the differing national priorities and the institutional setting of this foreign policy agenda, Tokyo and Washington will need to be vigilant about their shared effort in keeping all four nations aligned.

The real test for Japan, however, may be in the risks it is being asked to take. Enhancing Tokyo’s instruments of statecraft — including a larger role for its military as well as a more integrated set of economic levers — will be important. So too will be the effort to mitigate risk as Japan aligns itself with the US and other partners in challenging China’s interests. Geographical proximity as well as Japan’s longstanding self-constraint in amassing hard power could create risks for Japan that its citizens may not be willing to take.

About the author

Sheila A. Smith is Senior Fellow for Asia Pacific Studies at the Council on Foreign Relations.

Notes

1 “Defense of Japan 2021,” Japan Ministry of Defense, www.mod.go.jp/en/publ/w_paper/wp2021/DOJ2021_EN_Full.pdf

2 “The Guidelines for Japan-US Defense Co-operation,” Japan Ministry of Foreign Affairs, April 27, 2015, www.mofa.go.jp/files/000078188.pdf

3 “Japan’s Security Policy,” Japan Ministry of Foreign Affairs, April 12, 2016, www.mofa.go.jp/fp/nsp/page1we_000084.html

4 “Japan’s Outward and Inward Foreign Direct Investment,” Japan External Trade Organization, September 2021,www.jetro.go.jp/en/reports/statistics/

5 “Japan top 5 Export and Import Partners 2019,” World Integrated Trade Solution, World Bank, wits.worldbank.org/CountrySnapshot/en/JPN/textview#:~:text=Japan%20top%205%20Export%20and%20Import%20partners%202019&text=Japan%20exports%20to%20United%20States,partner%20share%20of%2019.09%20percent

6 “Keidanren Head Welcomes Election Outcome,” NHK , Nov. 1, 2021, www3.nhk.or.jp/nhkworld/en/news/20211101_29/amp.html