My Vision for Japan's Economic Future: Sustainable Growth Through Structural Reform

October 1, 2013

The Honorable Yoshihiko Noda
, Former Prime Minister of Japan; Member of the House of Representatives

Gerald Curtis
, Burgess Professor of Political Science, Columbia University; Member of Board of Directors of Japan Society

On October 1, 2013, former Prime Minister Yoshihiko Noda spoke at Japan Society about how to promote sustainable growth and fiscal discipline in the Japanese economy.

By way of preface, Mr. Noda underlined two central messages that he hoped to impart to the audience:

First, that "Japan will tackle important challenges" in a manner that's both bipartisan and decisive. (With a twinkle in his eye, Mr. Noda hastened to disclaim any reference to the U.S. government shutdown that began in the early hours of the day of his lecture.)

Second, that "Japan is not turning to the right," and is eager to "participate positively" in the shaping of trade rules and other rules that guide the behavior of nations toward each other.

U.S.-Japan Alliance
The presence of U.S. forces "is indispensable in order to stabilize the strategic environment" in the Asia-Pacific region, Mr. Noda reflected.

How to ensure that their presence can be sustained in an era of U.S. budget deficits and budget cuts, defense cuts in particular, is a matter of great importance. Thus Japan needs "to think seriously what kind of support Japan can render as the most important ally of the United States in Asia and the Pacific."

On the Okinawa military base controversy: In the near term, the U.S. and Japan must continue their efforts to carry out the existing agreement to relocate the American base at Futenma, Mr. Noda said.

"But in the long run, we need to pursue the best solution where Japan can function as the cornerstone as the U.S. rebalances its presence in the Asia-Pacific region. In order for Japan to do that, Japan itself needs to establish a system in which Japan can carry out its own national defense."

On the TPP: "When I was the prime minister, we decided on a basic policy to move forward to participate in the TPP negotiations. This was because I thought that Japan should, together with the United States, participate in the rule-making process to achieve the goal of an open trade system."

In conversation with President Obama during the November 2012 ASEAN summit, Mr. Noda recalled, he suggested a music analogy. "'If the United States is John Lennon, Japan is Paul McCartney. John and Paul needed to get along well. Otherwise the Beatles would not have been successful.' So, TPP without Japan is not possible," Mr. Noda said. President Obama laughed heartily, and said, "I like Paul very much."

Beyond TPP: There are other forums in the region where close cooperation is needed among Japan, the U.S. and other allies such as Korea, Australia, China and India, the prime minister said. These include the ASEAN Regional Forum, the ASEAN Defence Ministers' Meeting and track 1.5 meetings, such as the Shangri-La conferences, where official and nonofficial actors work together.

These efforts can address such topics as maritime security, weapons export principles, lessons learned from the Fukushima Daiichi nuclear accident, and the Japanese Self-Defense Force's extensive know-how on how to respond to large-scale natural disasters such as tsunamis and earthquakes.

"When Japan is to play a larger role in international society, what is important is first of all... to stabilize our relations with China and Korea," Mr. Noda continued. Deepening relationships in Europe, the Middle East, Africa and Southeast Asia is clearly important, but "we really have to first firm our foothold in East Asia."

Japan and China
When the Japan-China relationship began to normalize in the early 1970s, China was a developing country; but with China's extraordinary growth, the structure of that relationship "has begun to change very rapidly," Mr. Noda said.

Rising tensions between China and countries in Southeast Asia and East Asia are "a very clear example" of China's pride in its economic growth and its "unprecedented demand" for recognition of and deference to its national interests.

By land area, Japan is small, but the seas that surround its 6,800 islands are large, both in area and in volume. In these deep seas are rare metals and rare ores, whose presence "will give Japan an opportunity to shift away from resource-poor countries. Therefore, as a maritime nation, Japan has to pursue security and economic policies based on its national interest and standing, and secure territorial land and sea strategically."

Senkaku Islands:
It's this context that gave rise to the government's decision under Mr. Noda to purchase the Senkaku Islands. "No doubt the Senkaku Islands are inherently part of the territory of Japan in light of history and international law," he said. But after the aggressive conduct of Chinese vessels in the area and the August 2011 landing of activists from Hong Kong, not to mention Governor Ishihara's announcement that the Tokyo Metropolitan Government intended to acquire ownership of the islands, there really was no choice but to have the national government make the purchase.

"It was not my hope that all that the Japan-China relations deteriorated over the Senkakus," Mr. Noda declared. The Japan-China relationship is of such importance that "even if there is disagreement on one single issue, exchanges cannot or should not be blocked, or communication between leaders should not be rejected."

"We have come to the point where we have to consider seriously how to build a relationship with China by asserting what we ought to assert, and incorporating what we ought to incorporate between Japan and China, just like the U.S. and China, in concrete issues such as the economy, environment, energy and international relations in the Asia-Pacific going forward, and the nuclear issues of North Korea. If the bilateral relations become dysfunctional, there is too much to lose for both sides."

"The essence of what the Japanese government advocates" is "mutually beneficial relations based on common strategic interests."

Japan and Korea
Starting with the establishment of diplomatic relations between Japan and Korea in 1965, "Japan has steadily built relations with its closest neighbor," Mr. Noda said. The 1998 joint statement between the two "was a truly meaningful agreement. However, over the last 10 years Japan-Korea relations have witnessed a change."

"Globalization has advanced in Korea, and they have deepened their confidence on the economy." In principle, building up confidence "is quite praiseworthy," but it can be taken to extremes. Former President Lee Myung-bak's landing on Takashima in 2012 was "contrary to the 1965 Basic Treaty" and "certainly erode[d] efforts to build the relations between the two countries."

"Currently, between Japan and Korea we should never forget that there are more commonalities than differences. In order to cope with the nuclear issue of North Korea, it is extremely important for Japan and Korea to closely cooperate with the United States," he said.

Relationships in East Asia: The History Issue

"What I would like to make clear is that the majority of the Japanese feel a deep sense of remorse about the tremendous damage and suffering Japan inflicted on Asian people," Mr. Noda said.

Patriotism is Not Militarism: The Japanese people's "desire to love our country and protect the safety of our country can be defined as patriotism. But this patriotism is by no means the same as militarism during the prewar period. Over 68 years after the war we are proud of the peace-loving nation and the sound patriotism to protect our territory, and the life and property of the people, should not be [confused] with right-wing drift."

Domestic Economy and Political Life
"In light of the current fiscal standing of Japan, in order to ensure the stable funding for Social Security expenditures, the rise of the consumption tax is absolutely necessary," Mr. Noda said. However, when I looked at the economic measures [set forth in the Abe plan], it only worries about the current voters. And fundamental issues facing Japan’s national finances seem to be deferred to our children and future generations."

To address the needs of the Japanese economy, it's essential that tax increases and spending cuts take place simultaneously. "The comprehensive reform of Social Security and tax was a domestic political agenda in which I staked my political career when I was prime minister," Mr. Noda said. Ultimately, this became a sticking point with Mr. Ozawa and other DPJ members. They "left the party, which led to the breakup of the party."

The DPJ defeat was devastating, he acknowledged, and he expressed sympathy for his colleagues in the party. "However, I have no regrets at all about my decision to give priority to the next generation rather than the next election and... to the national interests over the intraparty reconciliation."

Mr. Noda's career in political life has been inspired by a desire to represent national interests over narrow partisan interests; "I always wanted to become the political reformer," he said.

The most-needed political reform in Japan, Mr. Noda declared, is to "serve the cause of the next generation." His resolution: "No more procrastination"—Japan's leaders must make the tough choices and then follow through to execute those decisions.


Columbia professor Gerald Curtis, who presided, began the Q&A:

As a conservative politician, in what way does your vision for the country differ from the vision of Prime Minister Abe and the LDP?

"As far as Abenomics goes, if he can bring about a good result, that's fine. But I think the basic philosophy is different," Mr. Noda said. Lowering the corporate tax rate, or ending recovery tax measures a year ahead of schedule, "is really going to give priority to corporate activities" and not to the needs of ordinary people; and it is those needs that the DPJ holds central.

The audience joined in:

An overwhelming majority of Japanese citizens are still opposed to nuclear power. Given the ongoing problems, to what extent do you still believe the shutdown nuclear plants should be restarted?

Japan managed to get through this past year without a sudden blackout, but the country came close to the 2 percent reserve ratio, Mr. Noda replied. If the regulatory authority determines that the plants are safe, then "the political decision is necessary. The issue is alternative energy. Alternative energy can be developed in place of nuclear power. We have to dedicate our efforts towards that."

I find that I am more in agreement with your security policies than with those of your predecessors. What is your view regarding the DPJ's stance vis-à-vis security?

"In the 21st century the Japan-U.S. alliance is the key," and this includes the rule-making effort that TPP represents, Mr. Noda said. The alliance is "the pillar for our diplomatic and strategic policy. You referred to my predecessors, but I think the Democratic Party has become much more practical, more realistic."

—Katherine Hyde

Topics:  Policy

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