Taplin: Developments in attitudes by new Japanese government to international financial issues
30 September 2009
The new Japanese government is starting to grapple with the major issues raised by the loss of Japanese weight in moving from G8 to a G20 formation that includes China. Perhaps closer arrangements with the EU can help offset US influences.
Mainichi Shimbun (from the Japanese) 26 September 2009: With regard to G20, many say the G8 is no longer capable of handling world-scale issues, which a source in the Japanese government calls ‘the reality it does not want to accept’. The new Hatoyama government does not wish to see Japan’s status diminished as it will be one of 20, not one of 8 (G8). Although it has been influential to date as the only member state from Asia, Mr. Hatoyama said, ‘Discussions will be led by bureaucrats as more prior arrangements will be held due to the increase in the number of member states in the G20’. This is a view held by the Foreign Ministry. In addition, it is worrying that there may be fewer opportunities for Japan to have a say in the international community if Japan cannot even become a member state in the Security Council. Seniors in the Foreign Ministry put forward the strong view that G20’s members are not democratic and not developed enough and therefore it is doubtful that G20 members can discuss and share the same values. China will be a threat and may attempt to lead the G20 with the US leaving Japan powerless in the G20. On the other hand, an idea to have regular summits may motivate Japan to strengthen relationships with emerging countries. Mr. Hatoyama proposed the concept of an East Asian Community. Mr. Hatoyama is still supporting the move by some such as the Italian Prime Minister to maintain the G8.
RT comments: The article in the New York Times of one of Mr. Hatoyama’s previous speeches highlights the fact that he and his government wish not to rely solely on the US, and to be seen as an equal partner not a subservient one to the US. . Japan has been worried by the financial crisis that emanated from the US, and the unclear signs from the American Presidential Office of whether it supports China or Japan looking to the former for further strengthening of financial ties. Japan still relies on the US for security against possible Chinese expansionism in the region or against its former colony Taiwan. Yet, the European Union is increasingly being seen as an ally in terms of financial strategy such as standards being set by the IASB in Europe to put into place universal accounting standards that will assist in mitigating highly irresponsible behavior by financial institutions such as the former Lehman Brothers. The US has not accepted fully the IASB’s move towards universal standards. A closer relationship between Japan and Europe is slowly being forged.
Reuters: 29 September 2009: Japan's new Prime Minister wants to set up a powerful agency called the National Strategy Bureau to oversee the budget process and set priorities for policy. The huge national debt, pensions and attempts to raise government revenue are all priorities.
RT comments: The strength of the yen is another problem but signs are that Finance Minister Fujii will resist intervention and has encouragingly stated full support for the free market system. There is great pressure on Mr. Fujii to intervene as Japanese exporters have been hit hard by the strong yen (with the Nikkei average being pushed down by 2.7 per cent recently)and the US dollar went even lower against the yen as investors unwound short yen positions. However, Mr. Fujii also hinted that a priority for the Japanese government is to move away from an export- led economy and this may also weaken the US-Japan trading relationship as Japan promotes R&D, innovation and IP in direct competition with the US.
Democrat Party Manifesto (from the Japanese) of Mr. Hatoyama’s government- some salient points:
Foreign Policy:
· Develop proactive foreign policy strategies and build a close and equal Japan-US alliance. Also included are the development of an autonomous foreign policy strategy for Japan and revision of the Japan-US Status of Forces Agreement, a move to review the realignment of the US military forces in Japan and the role of US military bases in Japan.
· Establish intra-regional cooperative mechanisms in the Asia-Pacific region with the aim of building an East Asian Community, particularly in such areas as trade, finance, energy, the environment, disaster relief and measures to control infectious disease.
· Ensure that N. Korea halts development of nuclear weapons and missiles, and makes every effort to resolve the abduction issue
Financial matters:
· Integrate the Social Insurance Agency with the National Tax Agency to form a ‘Revenues Agency’ responsible for the integrated collection of taxes and social security premiums
· Fundamental review of postal services, which were privatized under the Koizumi government : Enactment of the Act Concerning the Freezing of Sales of Japan Postal Shares is one of the options.
· Reducing the corporate tax rate for SMEs from 18% to 11%. Minister, Kamei, indicated the government will make a new law that allows the exemption of repayment of loans and mortgages held by SMEs for a certain period. However, financial institutions such as banks are not satisfied with the idea as defaults by SMEs may contribute to their mis-management. This issue is ongoing.
· Promoting EPAs and FTAs with countries of the Asia-Pacific region and the world, covering a broad range of fields including investment, labour and Intellectual Property.
© Ruth Taplin
