01:38 pm
G-20: Japan’s Setting Sun?
Did anyone else notice just how invisible (and inconsequential) Japan was during the G-20? It was almost as if they were a second-tier power. I don’t have the numbers in front of me, but Japan remains the third-largest economy in the world (behind China and the U.S.), and it did commit $100 billion to the proposed tripling of the IMF’s funds. But for the most part, it was a non-player, and nobody appeared too concerned about it.
I think there are three reasons for this. First, Japan’s ongoing deflationary crisis, which is now something like fifteen years old (and the product of its own real estate bubble), scares the living piss out of everyone, and given the fact that the Japanese have yet to find a way to solve their own problems, nobody is really that interested in hearing what they have to say. Keep in mind as well that it was only six weeks ago that Finance Minister Shoichi Nakagawa had to resign after appearing stoned/drunk at a news conference.
Second, Japan’s highly dysfunctional political system, which now rivals Italy in its ability to generate new prime ministers. The ruling Liberal Democratic Party appears to be falling apart, and may splinter into several groups. But given the fact that neither it, its various factions, nor its main rivals really have any idea how to fix the country’s problems, nobody should be surprised that it doesn’t have much of a voice on the international stage right now.
Third, Japan’s economy has begun to wane just as China’s has risen. Although the two have spent the past decade competing for the informal title of Asia’s dominant economic power, there’s no longer a contest. Japan is yesterday’s news. Given that it was only twenty years ago that everyone was convinced that Japan was on the verge of overtaking the United States, it’s amazing how quickly their fortunes have turned (then again, given points one and two above, it shouldn’t be surprising).
The combination of a disastrous economy, dysfunctional politics, and declining influence isn’t t exactly a prescription for international leadership. The question is whether we’re witnessing the beginning of a long slow decline or merely a blip. It certainly would be in the Obama Administration’s interests to do what it can to bolster Japan’s role in a way that will allow it to counterbalance China’s growing dominance without challenging it. It would be a mistake, however, to expect much more.