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Obama may press Japan

by Robert Dujarric

Japan’s ruling establishment hoped that John McCain, surrounded by “friends of Japan,” would win the race to the White House. Conservative commentators fear that President-elect Barack Obama will neglect Japan while paying too much attention to China.

These concerns are unfounded. There is no evidence that the Japan-U.S. alliance fares better under Republicans than Democrats. Although there are real reasons for Tokyo to worry about relations with the United States, they are different from the apprehension about “panda-huggers” taking America away from Japan. The cause for alarm is the global recession, not the switch of the party in power in Washington.

Barack Obama will not assume the presidency until Jan. 20. We cannot predict the exact nature of the economic situation he will face, but we know it will be very bad. We can also already see fault lines developing over the handling of the global recession.

The United States, Britain, France and several other countries are adopting a Keynesian approach — hiking government deficit spending to compensate for the decline in the consumer and business sectors. In an era of relatively free trade, Keynesianism works best if all major economies follow this course of action. If not, the approach could lead to larger current account deficits for nations that do follow it, thus worsening financial imbalances.

Germany’s opposition to these expansionary measures is causing tensions within the European Union, as its partners argue that it will get a “free ride” with others’ money if it doesn’t contribute its fair share to the recovery.

The U.S. will want countries that run current-account surpluses and have high savings rates to boost their own demand, by increasing government outlays and by lowering trade barriers and fostering currency appreciation against the U.S. dollar. The three major economies in this category are Germany, China and Japan.

Washington is unlikely to focus on Germany, thinking that this is a matter best handled by the Europeans themselves. Moreover, Germany does not have a national currency (the euro is shared by 15 countries); nor does it control its trade policy (EU’s 27 members act as a single unit).

China will feel American pressure, but U.S. officials may conclude that convincing — or coercing — Beijing is not only difficult but counterproductive, given the complex nature of Sino- American relations and China’s fragile socio-political equilibrium. Congress could still take matters into its own hands, especially on the currency question.

Japan, however, is an ally, a country America is used to dealing with, and politically stable. There is much less downside risk in a heavy-handed approach toward Japan than China. Obama has pledged to eschew unilateralism in favor of consensus, but at the day’s end, he knows it was American voters and taxpayers who elected him. So, the next U.S. administration might make very strong demands on Japan to stimulate its economy, remove more trade barriers and keep the yen high. On these issues, Republicans will support the Democratic president.

Security policy could be another source of tension. It seems that Obama favors a bigger U.S. military presence in Afghanistan to rescue the failed U.S.-installed regime in Kabul. This, like the Iraq War, is likely to turn out to be a grievous error. A minimalist strategy aimed at keeping al-Qaida on the defensive, working with all elements of Afghan society and avoiding attempts to alter Afghan mores and customs offers greater chances of success. But if this ambitious path is followed, America will want its allies to provide support. How far Washington will go to get Japan to contribute to the Afghan War is yet unknown, but it could create a dilemma for Tokyo, which is reluctant to participate in these types of operations.

Japan should be able to avoid making military commitments in Afghanistan by contributing monetarily to the U.S. war effort through aid or other programs. As for the economic issues on which the entire American administration, Congress and electorate will focus, it will be hard for Tokyo to avoid making difficult choices.

Robert Dujarric is director of the Institute of Contemporary Japanese Studies at Temple University Japan, Tokyo. (robertdujarric@gmail.com)