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Japan’s New Economic

Diplomacy: Changing

Tactics or Strategy?

MAAIKE OKANO-HEIJMANS

Japan’s economic diplomacy has evolved significantly since the 1990s in

response to the reconfiguration of regional and global power. This article

places developments along a conceptual continuum and finds that, slowly but

steadily, Japanese policies shift from an emphasis on commercial goals of

economic diplomacy to include also a more outspoken element of power play.

While tourism promotion may be considered a new part of economic

diplomacy, long-time practices of trade and investment promotion, business

advocacy, and development cooperation are revamped with a focus on the

environmental and energy fields. The negotiation of trade agreements, which

for long was highjacked by domestic politics, was given new impetus in 2010,

while financial diplomacy—which seemed promising in the early 2000s—

stalled. Finally, negative sanctioning is no longer a taboo, particularly in the

relationship with North Korea. The appetite of the government and private

sector to conform with Western countries remains limited, however, and the

ambiguity between the old and the new suggests that we are witnessing a

change in Japanese tactics rather than in strategy.

Introduction

The practice of economic diplomacy has been a key characteristic of Japanese

foreign policy since the end of the Pacific War in 1945. Economic purposes

feature high in Japan’s external policies and economic instruments are of

crucial importance in its quest for national security. The on-going debate on if,

when, and how Japan will become a “normal” country that started in the 1990s1

is illustrative of the changes that this exceptional configuration has been under-

going in recent decades. On the one hand, the discussion revolves around devel-

opments in Japan’s military-strategic thinking, while at the same time changes

in the political-economic sphere are taking place. Interestingly, scholars and

ISSN 1343-9006 print; 1469-2937 online/12/010062–26Routledge Publishing, Taylor and Francis,http//www.tandfonline.com. 62# Institute for International Policy Studies,http://www.iips.org/.http://dx.doi.org/10.1080/13439006.2012.678628

Asia-Pacific Review, Vol. 19, No. 1, 2012

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practitioners have in recent years intensely debated the (alleged) remilitarization

of Japan, leaving the nexus of political and economic change relatively less

explored.2 Furthermore, while elements of the country’s evolving economic diplo-

macy have been addressed separately, rarely have policy changes in the various

subfields been considered comprehensively. This article addresses these flaws

by applying a comprehensive conceptual framework of economic diplomacy

that places the various economic diplomacy strands along a continuum.

The puzzle that is addressed here is whether the Japanese state is, as proposed

by Linda Weiss, in a transformative phase—that is, “adapting, dismantling

and innovating”—rather than “normalizing” or converging on a neo-liberal

(Anglo-American) norm.3 Or is the Japanese government “losing faith in [its com-

prehensive security] approach and concentrating instead on the military security

dimension,” as Christopher Hughes puts it?4

Further understanding on happenings in the field of economic diplomacy is

also expected to contribute to the question on Japan’s foreign policy and diplo-

macy raised in the works of Richard Samuels and Kenneth Pyle.5 Will Japan’s

foreign policy be very different from the grand strategy that Yoshida pioneered,

as Pyle argues, or will change be continuative, involving a reformulation rather

than abandonment of the Yoshida Doctrine, as Samuels suggests? In other

words, are we witnessing a change in Japanese tactics or strategy?

The analysis focuses on economic diplomacy, which is here regarded as an

umbrella-term that encapsulates a diversity of activities of a foreign policy strat-

egy that is based on the premise that economic/commercial interests and political

interests reinforce one another and should thus be seen in tandem. At stake are

broad national interests that include political and strategic as well as economic

dimensions. The analysis considers how and why Japanese economic diplomacy

practice evolved throughout the past two decades. Taken together, the five case

studies that address the various economic diplomacy strands suggest that slowly

but steadily, the emphasis on commercial goals of economic diplomacy is broad-

ened to include also a more outspoken and visible element of strategic power play,

including formal unilateral sanctioning. These changes are spurred in particular by

the re-emergence of China and the evolving role of the United States in the East

Asian region, as well as by Japan’s decline as an economic power in both absolute

and relative terms. Relationships between the public and private sector (min-kan)

are also evolving, with the trend pointing towards a narrowing rather than loosen-

ing of ties.

This study starts with a brief review of the historical context of Japan’s

economic diplomacy and the introduction of a conceptual continuum along

which policies are studied. This is followed by a series of case studies that

traces continuity and change since the 1990s in five strands of economic

diplomacy that are encapsulated in the framework: (1) commercial diplomacy—

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including tourism promotion, (2) trade diplomacy, (3) financial diplomacy, (4)

positive incentives—primarily development cooperation, (5) and negative sanc-

tions. General trends can then be discerned and the relevance of Japan’s economic

diplomacy style and practice more broadly considered. It is argued that the shift

in Japanese tactics brought to light in this study is of consequence to a world

wherein differences in diplomatic practice between “the West and the rest” will

only rise.

The economic diplomacy continuum

As the defeated power in the Pacific War and late-comer in a system that was

largely dominated by the United States and European countries, Japan followed

an approach to foreign policy that emphasized (to a greater extent than its

western counterparts) economic tools for foreign policy purposes, and political

tools for commercial purposes—that is, economic diplomacy.6 As is well-docu-

mented, the Japanese “peace constitution” and security guarantee provided by

the United States facilitated and reinforced this tendency. The so-called

Yoshida Doctrine (Yoshida rosen, Yoshida dokutorin), pioneered by Prime Minis-

ter Shigeru Yoshida in the 1950s and by later prime ministers in the 1960s, became

symbolic of Japan’s approach and was premised on a focus on economic growth

and passivity in global affairs—sometimes referred to as mercantile or economic

realism and free riding.7 The domestic organization of the political economy

that facilitated this approach became conceptualized in the notion of the “devel-

opmental state,” characterized by an interventionist government that guides and

supports social-economic development through industrial growth in a capitalist

environment.8 The emphasis on economic and diplomatic means rather than on

military means to protect the country’s national security is also ingrained in

Japan’s comprehensive security policy, developed in the 1980s.

While numerous studies of expressions of Japan’s economic diplomacy exist,

these commonly address one or a few particular element(s) of the whole.9 The

distinctiveness and overlap between various strands—that is, the policies, tools,

and purposes of economic diplomacy—thereby remain largely ambiguous. What

is needed is a conceptual framework that places the various economic diplomacy

strands along a continuum. Based on a reasonable judgment as to what

constitutes the primary goal or basis of a particular policy, economic diplomacy

expressions are positioned along two axes that represent the tools and the goals

of activities.10 The framework aims to facilitate comprehensive analysis of

happenings and long-term trends in a coherent matter, while not denying that the

distinction between the different strands is fluid or that certain overlap exists.

Reflecting the fact that economic power involves different forms of power,

the two extremes of the framework represent a “business end” and a “power-play

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end.” Because, in the words of Thomas Berger, “[e]conomic power is one of the most

basic and important sources of soft power” but “to the extent that it supports military

power (. . .) [it] is [also] very much a form of hard power.”11 The conceptual frame-

work facilitates analysis of this complex whole by viewing various expressions as part

of a continuum along which policies may evolve and through which countries or prac-

tices of economic diplomacy can be compared. This is schematically expressed in

Figure 1.

At the “power-play end” are instruments that generally involve actions and

negotiations of a primarily political character, such as sanctions (and lifting

thereof). Activities aim primarily to contribute to a stable international environ-

ment and are often referred to as economic statecraft. Underlying cost-benefit cal-

culations follow a political logic. At the “business end” of economic diplomacy

are cooperative efforts by the public and private sectors that aim to achieve com-

mercial objectives that advance national interests,12 including trade and invest-

ment promotion, business advocacy, and tourism promotion (commercial

diplomacy). Here, cost-benefit calculations primarily follow an economic logic

and maximizing business opportunities is the primary driver behind activities.

In between these ends are activities that may be more or less economic or political,

such as economic or development assistance, bilateral and multilateral nego-

tiations on trade agreements (trade diplomacy), and financial and monetary

policy (financial diplomacy). The more a government manages to interrelate the

different strands of economic diplomacy, the more comprehensive a country’s

strategy becomes. But while a broad, inclusive strategy is an important require-

ment for success in the long term, it is not a guarantee. Rather, it denotes the

capabilities and the intentions, but says little about the actual impact of policies,

which depends on the context wherein the undertaking is pursued.

Figure 1 Strands of economic diplomacy: Japan

Source: slightly modified from Okano-Heijmans (2011), see note 10.

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While the dashed line in Figure 1 represents the continuum, the dotted lines

mark (possible) variations between countries and between any one country’s

policies over time. As will be shown, for example, economic considerations

have featured large in Japan’s development assistance (incentives)—and of that

of other Asian countries in Japan’s wake. While aspiring to build friendly ties,

emphasis is given to the promotion of economic growth of both the sending and

the recipient state, rather than to direct efforts to improve political and social

rights such as good governance and human rights. In the 1990s, however, the

Japanese government shifted course in response to pressure from European

donors, and more recently it is again adjusting its policies due to competitive

pressures from emerging and other (Asian) donors. Similar differences and

policy shifts are discernable in the field of trade diplomacy, where the Japanese

government apparently is relatively more concerned with political-strategic

rather than commercial considerations. In other words, the Japanese government

sees trade agreements as an important tool in the struggle for influence in the East

Asian region and to spur domestic restructuring of the economy, while businesses

that favour such agreements seek enhanced commercial opportunities abroad.

Japan’s new economic diplomacy

The Japanese government has long adhered to a policy that integrates economics,

politics, and security. Only recently, however, is explicit reference being made to

the concept of economic diplomacy. The advent of the government led by the

Democratic Party of Japan in September 2009 marks a clear turning point in

this regard. The staunchest promoter of economic diplomacy as part of foreign

policy was DPJ figurehead Seiji Maehara—first in his position as Minister for

Land, Infrastructure, Transport and Tourism, and from September 2010 until his

sudden resignation in March 2011 as Minister for Foreign Affairs in the reshuffled

Kan Cabinet. In December 2010 Maehara launched a task force at the foreign

ministry, headed by the minister himself, to promote diplomacy with the aim to

amplify Japan’s economic gains. That economic diplomacy was more than just

Maehara’s pet project became clear when his successor Takeaki Matsumoto

also made explicit reference to the concept in his inaugural meeting with the

press in March 2011.13 Also in 2011, an ambassador in charge of economic diplo-

macy was added to the Foreign Ministry’s Economic Affairs Bureau. While this

position had been in place for a few years already, it was now given a clear

mandate—mainly in the field of trade negotiations (the World Trade Organization,

Trans-Pacific Partnership) as well as the Organization for Economic Co-operation

and Development (OECD).14

In his foreign policy speech of January 2011 Maehara provided a rare, clear

insight into what economic diplomacy entails from the government’s perspective.

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Economic diplomacy was placed at the centre of foreign policy and characterized

as comprising four pillars: (1) promoting the free trade system; (2) securing the

long-term and stable supply of resources, energy and food; (3) promotion interna-

tionally of infrastructure systems; and (4) promotion of Japan as a tourism-

oriented nation.15 Supplementing these, Japan’s diplomatic bluebook of 2011—

published in September 2011—adds a fifth pillar of publicizing the Japan

brand.16 While the financial field is left untouched, the apparent overlap

between these pillars and the strands of the conceptual framework suggest that

the latter is indeed a useful tool by which to trace continuity and change in

Japanese policies.

Five strands

The following paragraphs present short case studies that discuss policy shifts and

the evolving institutional setting of Japan’s contemporary economic diplomacy.

The cases cover the five strands of economic diplomacy identified in the frame-

work, involving commercial diplomacy, trade diplomacy, and positive and nega-

tive inducements—primarily Official Development Assistance and sanctions.

The key parameters to assess continuity and change in these fields are the

following: (1) high-level domestic policy initiatives; (2) bilateral or multilateral

negotiations with other countries; (3) debates in the public sphere involving poli-

ticians, the private sector, academia and the general public; and (4) institutional

and legal reform. The recurring question is whether initiatives in these respective

areas are being undertaken, planned, or not considered at all. That is, whether

the trend is towards increasing or declining activity in the various economic

diplomacy strands. Based on these findings, a comprehensive assessment is

made of change (or lack thereof) in Japan’s economic diplomacy at large and of

general trends since the 1990s.

Commercial diplomacy

Two of the four economic diplomacy pillars put forward in Maehara’s foreign

policy speech of January 2011 constitute expressions of commercial diplomacy.

These are the promotion of infrastructure systems abroad and the promotion of

Japan as a tourism-oriented nation.

Promotion of infrastructure systems abroad

Trade and investment promotion have long been two defining elements of Japan’s

economic diplomacy. Primary responsibility for policymaking in this field lies

with the Ministry for Economy, Trade and Industry (METI), while implemen-

tation is undertaken by the Japan External Trade Organization (JETRO), estab-

lished in 1958 with 72 overseas offices in 55 countries. At both the policy and

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the practical levels, policies have evolved significantly in the past decades. The

initial focus on export promotion and facilitation of trade complaints from

Japanese companies abroad (business advocacy) has been broadened to include

outgoing investment promotion. A serious effort to promote foreign direct invest-

ment into Japan materialized only in the new millennium, but more recently

JETRO’s focus returned to its outgoing function.17Active support for Japanese

enterprises has become particularly important in recent years, with the advance

of economic partnership worldwide and the rising demand for infrastructure,

especially in Asia.18

In the late 1980s a “green” economic diplomacy effort materialized that

largely builds on targeted domestic innovation policies. These “green” indus-

tries—which include not only green renewables but also sectors that harm the

environment in certain ways and technologies that are not new19—are the

primary object of recent proactive government efforts to promote infrastructure

systems abroad. In April 2010, for example, an Infrastructure and Plant Exporting

Assistance Committee was established at JETRO’s Tokyo headquarters. This

committee works with METI’s promotion and strategy offices that are active in

various sectors, including the railway, nuclear power generation, water, and

next-generation automobile industries. Each of these industries builds on domes-

tically developed “green” environmental and energy technology, which is sup-

ported by and used in relations with emerging and developed countries.20 As an

example of how this works in practice, consider the 10-year plan for promoting

strategic partnerships in such areas as trade and investment, infrastructure

development, connectivity, human resources development, and technology

transfers that Japan and the ASEAN countries launched in August 2011.21 By

strengthening efforts in this field the Japanese government aims primarily to

help its industries find new markets abroad, while at the same time addressing

issues of resources security, and securing cooperative relations with other

countries. Adjustment to shifting global power balances, domestic politics, and

climate change challenges also play a role, while “hard” security issues are

barely considered.22

Notwithstanding this new activism, the promotion of infrastructure systems

abroad faces various difficulties. The lack of a structure to provide the lump

package of equipment supply, maintenance, and management together with low

price competitiveness are seen as major reasons for the problems facing both

the nuclear and water industries. Unsuccessful bids for nuclear power projects

in the United Arab Emirates and Vietnam—lost to South Korea and Russia,

respectively—in particular, served as a wake-up call and spurred reorganization

efforts and government involvement. This included the creation in September

2010 of a “Ministerial Meeting for the Development of Package Infrastructure

Overseas” and of a support office at the Foreign Ministry the following month.

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Tourism promotion

In 1964 the Japan National Tourism Organization (JNTO), with 13 offices around

the world, was established “to further international exchange through tourism.”

Only recently, however, are serious efforts to increase tourism into Japan

placed into a context of their added value for Japan’s domestic economy and econ-

omic diplomacy. A 2003 policy speech by then Prime Minister Junichiro Koizumi

laid the basis for the government-sponsored “Visit Japan” and four years later the

Tourism Nation Promotion Basic Law was enacted and preparations were made

for the comprehensive, organized promotion of Japan as a tourism nation. But

even as the Japan Tourism Agency was established in 2008, little was made of

tourism (promotion) as part of economic diplomacy practice. A clear indication

of the shift in this direction was the June 2011 officers meeting on the economic

diplomacy for reconstruction, held at the foreign ministry with the aim to revita-

lize exports from Japan and increase the number of foreign visitors. Practical steps

of recent years have included attempts to enhance easier entry for visitors by

improving airport access and introducing more flexible visa regimes for visitors

from countries with growing rich and middle classes, especially China, as well

as for medical purposes. These initiatives aim primarily to tap tourists’ purchasing

power and thereby revitalize Japan’s domestic economy.

Tourism was taken up as a pillar of the new DPJ economic growth strategy of

2010 and explicit targets for tourism revenues were set in spring 2011. This

appears to have spurred initiatives also at the local level, such as “anime

tourism” in Saitama prefecture, where the chamber of commerce, fans and pub-

lisher joined forces. Complementing local and national-level initiatives, tourism

is increasingly discussed also at the international level, both in multilateral fora

and regionally. When tourism ministers from the APEC countries gathered for

the first time in 2000, they committed to improving the economic, cultural,

social, and environmental well-being of APEC member economies through

tourism. Ten years later they emphasized the development of sustainable

tourism industries and called for investment in newly emerging trends—including

medical/wellness tourism and sports tourism. Moreover, ministers from Japan,

China, and South Korea have also gathered in recent years to discuss tourism

trilaterally, thereby also facilitating cooperation between officials from local

government tourism bureaus, travel agencies and airlines. At the trilateral

hosted by China in 2010, initiatives were made to promote environment-friendly

tourism to help reduce carbon dioxide emissions, an indication of attempted

linkage to the “green” economic diplomacy effort discussed earlier.

To summarize, it is clear that a range of new policy initiatives is undertaken in

the field of commercial diplomacy. These occur at the local, prefectural, and

national level, as well as in bilateral and multilateral meetings with other

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countries. Politicians and representatives from a diverse private sector are

increasingly active, searching for new ways to further cooperation between

them. Both in the field of trade and investment promotion—infrastructure

systems in particular—and tourism, this also involves high-level political initiat-

ives and the establishment of new agencies.

Trade diplomacy

Promotion of the free trade system constitutes the first of four economic diplo-

macy pillars put forward by Maehara. Certain (Cabinet) members of the Demo-

cratic Party of Japan have shown to be truly committed to this cause, albeit

more so at the bilateral and (sub)regional level rather than at the multilateral

level—that is, within the World Trade Organization (WTO).23 Furthermore,

attempts to proceed in this direction have faced fierce opposition from within

the party as well as from other domestic players—in particular the agricultural

sector, which has been largely successful in keeping many of Japan’s protectionist

policies in place. As a result, initiatives are realized only very slowly, if at all, and

Japan has often lagged behind other countries.

The surge in negotiations towards bilateral and multilateral trade agreements

in Asia that started in the late 1990s has received extensive attention.24 Tokyo’s

decision to embark on this path came in response to the proliferation of trade

agreements in the global economy (with negative consequences for Japanese

companies that did not enjoy such preferential treatment) and the stagnation of

multilateral negotiations.25 The government’s ambitions are laid out in the

Basic Policy on Comprehensive Economic Partnerships, published in November

2010. Since October 2009, bilateral negotiations with Vietnam, Peru, Mongolia,

India, South Korea, and Australia were concluded or given new impetus.

Within the region, studies are undertaken to realize regional economic partner-

ships such as the China-Japan-Korea FTA, East Asian Free Trade Agreement

(EAFTA) and Comprehensive Economic Partnership in East Asia (CEPEA).

Furthermore, the government is aiming to join negotiations on the so-called

Trans-Pacific Partnership Agreement (TPP)—a regional free-trade initiative

involving the US, Australia, and other Asia Pacific nations—as well as to further

talks with the European Union and the Gulf Cooperation Council.

As pointed out by Mireya Solıs, Japan’s FTA policy has aimed to score points

on three goals: (1) conferring important economic advantages—amongst others,

restoring the level playing field for companies that have been excluded from exist-

ing trade areas and to expand market share; (2) furthering new rules given the

WTO deadlock; and (3) achieving political and diplomatic goals—that is, conso-

lidate relations with other countries and Japan’s influence in the region.26 Clearly,

the negotiation and conclusion of economic agreements is not merely trade

policy, but regarded by many in Japan as the trade element of a much broader

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geo-strategic architecture. The rivalry that exists between Japan and China, for

example, has led both governments to engage countries in the Asia Pacific

region through bilateral and regional trade agreements.27 The Japanese govern-

ment prefers the inter-regional TPP (pushed for by the United States) and the

CEPEA, covering ASEAN plus Six (with China, Japan, South Korea, India, Aus-

tralia, and New Zealand). China is not involved in the TPP negotiations and

instead emphasizes an intra-regional EAFTA (involving ASEAN plus Three,

meaning China, Japan, and South Korea).28 As the Kan administration reviewed

its policy priorities and postponed its decision whether or not to join TPP nego-

tiations, it became clear that opposing forces still had a stronghold in the wake

of the March 20011 triple disaster (earthquake, tsunami, and nuclear crisis).

Even so, diplomatic concerns relating to alliance politics and regional rivalry

apparently had the upper hand as the government in November 2011 announced

its intention to participate.29 This clear example of domestic politics and

geopolitical considerations shaping government approaches and interfering with

economic logic is indicative of the importance of the IPE-security nexus and

provides evidence of attempts at power play by the Japanese government.

There can be little doubt that the economic decline of Japan has (had) a nega-

tive influence on Japan’s ability to wield power through trade diplomacy, not only

multilaterally and through free trade agreements but also with regard to the

engagement of countries in the region. Indeed, the recent (re)surfacing of territor-

ial disputes with Russia concerning the Northern Territories has been directly

linked to Japan’s declining economic strength.30 The same can be said with

regard to rising tensions between Japan and China and South Korea—concerning

the Senkaku/Diaoyu Islands in the East China Sea and Takeshima/Dokdo,

respectively. This worsening position in which Japan finds itself politically and

diplomatically constitutes another strong driver behind DPJ-efforts to step up

negotiations on economic partnerships. Indeed, former Prime Minister Naoto

Kan emphasized that it will be vital for Japan to revive its economy in order to

restore its national strength.

Initiatives to further Japan’s free trade agenda are taken not only by govern-

ment actors, but also by Japan’s biggest business association Nippon Keidanren,

which published its “Proposals for Japan’s Trade Strategy” in April 2011. Further-

more, in an unprecedented effort to win public support for expanding free trade,

the government in early 2011 started a series of fora nationwide. At the same

time, the Japanese government is moving towards a more open and explicit use

of the law in defense of its economic interests.31 International and domestic insti-

tutions are emphasized: the WTO and reform of the legal profession, including the

creation of the Intellectual Property High Court and curriculum changes. This new

legalism is said to reflect the interests of “trade dominant” industries, exporters,

and investors and of government agencies, especially METI.

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Summing up, there is no lack of high-level policy initiatives in the field of

trade diplomacy but actual results have been limited. While the 1980s and 90s

were characterized by “bottom up” regional integration spurred by the private

sector, in the new millennium free trade agreements have become an instrument

in the rivalry for influence between governments in the region. This highlights

the economic-security nexus and the importance of geopolitical considerations

in trade diplomacy. So far, domestic political forces—first and foremost, the agri-

cultural lobby—have been largely successful to block actual progress in bilateral

and multilateral free trade negotiations, although debates in the public sphere

involving politicians, the private sector, academia, and even the general public

are rising.

Financial diplomacy

In the late 1990s the Japanese government became increasingly active not only in

negotiating trade agreements, but also in the field of financial diplomacy. Indeed,

as finance and capital flows expanded rapidly and became relatively more contro-

versial throughout the past decades, finance became the “new bogeyman.”32

Japanese policy activism focuses primarily on furthering financial cooperation,

shaping currency domination of the US dollar and exchange rate policy—at

times referred to as currency manipulation. Early in the new millennium it was

argued that Japanese policymakers had in many ways achieved their overall

goal of constructing the basis of a framework for regional financial monetary

cooperation with Japan at its centre.33 More recently, however, Japanese financial

diplomacy is challenged by stiff competition from China.

Japanese activism in the field of regional financial cooperation was invigo-

rated by the Asian financial crisis of 1997-98. As the country with the greatest

financial wealth and institutional power in East Asia, Japan chose to focus its

financial regionalism efforts on this region—in contrast to its wider Asia Pacific

preferences in trade, diplomacy, and security.34 In a rather unconventional

move, the Japanese government unexpectedly proposed the creation of an Asian

Monetary Fund (AMF) that was to enhance financial stability in the region.

This proactiveness appears to have been facilitated by the relative absence of sec-

toral lobby groups and inter-ministerial infighting. For example, the Ministry of

Finance did not even consult with other ministries before publicly announcing

the plan for an AMF.35 Although its proposals met with resistance particularly

from the United States and China and the regional fund never materialized,

Japan successfully pushed for the World Bank and IMF to recognize Japan’s

development success as globally transferable. Indeed, a new developmentalist

“identity” among policymaking elites—a distinctive approach to economic

matters that defies the dominant neoclassical paradigm—arguably constituted

the primary reason for Japan to attempt to challenge its alliance partner and the

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International Monetary Fund (IMF).36 Despite the fact that its initiative consti-

tuted a diplomatic debacle in the short term, the Japanese government managed

to further regional financial stability in the longer term by the creation of a

string of bilateral currency swaps, referred to as the Chiang Mai Initiative

(CMI). At the time of the multilateralization of the CMI in 2010, however, it

became clear that Japan had to share the driver’s seat with the Chinese govern-

ment. Both countries competed to become the primary investor in the fund and

struggled to co-lead the regional integration agenda. Japan’s experience in the

region has also shaped its response to the global financial crisis that started in

the late 2000s, wherein it emphasized global initiatives and downplayed the

regional agenda. In the words of Solıs, “this rebalancing in Japan’s economic

diplomacy reflects the greater political space that it has enjoyed on the global

level since its long-held views on the benefits of flexible IMF lending practices

and controls on volatile capital flows became mainstream.”37

Japanese financial diplomacy has for long also included attempts to shape the

role of the US currency in the global and regional economy. Since the late 1980s

the Japanese government invested heavily in US treasury bonds—holding over

40% of the total at its peak—while the private sector exported products at low

prices. Japan thereby played a pivotal role in supporting the hegemony of the

dollar over global finance and by extension of the American management of

global capitalism.38 Its policies towards the (role of the) dollar underwent substan-

tial change since the 1990s, however. As the Japanese government began to

address the region’s heavy dependence on this currency, which was regarded as

one of the causes of the Asian financial crisis, Tokyo shifted away from its sup-

portive policy toward the dollar.39 By the end of 2011 the Japanese government

even started to buy Chinese government debt, albeit at very low levels. That

being the case, domestic resistance within Japan and the power rivalry between

Japan and China still makes the dollar the currency of choice in the medium

term future.

To summarize, Japanese activism in the field of financial diplomacy is

uneven. While the Japanese government overcame US and Chinese resistance

and managed slowly but steadily to strengthen regional financial integration

in an early stage, it is now losing ground to China. Furthermore, while the

government continues to support the US dollar, it is at the same time diversifying,

including towards the Chinese yuan. Finally, at the global level the Japanese

government has made a significant financial contribution to expand the IMF’s

resources and to restore trade financing. On the other hand, however, it has not

played a major role in the debate surrounding the most pressing issues of a

future financial architecture, such as tackling global imbalances and promoting

foreign exchange-rate cooperation.40 Policies are thus ambiguous and mainly

undertaken at the government level, while public debates are rarely heard.

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Inducements

Securing the long-term and stable supply of resources, energy and food constitutes

the second economic diplomacy pillar in Maehara’s January 2011 foreign policy

speech. Policies in this field cannot be seen separate from the economic diplomacy

expressions of inducements—mostly positive, but also negative.41 That is to say, the

Japanese government seeks to strengthen relations with resource-rich countries—

especially emerging economies—through economic cooperation that also aims to

improve the security of supply of natural resources. Depending on the target

country and industry, these policies not rarely also have an element of commercial

and trade diplomacy, especially the provision of infrastructure systems.

The importance of natural resources in Japan’s economic diplomacy is of a

dual nature and involves the import of energy resources, as well as the security

of supply of rare earth metals and minerals needed for electric cars and nuclear

plants.42 To address the former challenge the Japanese government mainly

targets oil-rich countries in the Middle East, while the latter involves a number

of countries in Southeast and Central Asia, Latin America, and Africa that

harbour other natural resources. In both cases the Japanese government aims for

a dual win, whereby deals to import raw materials go hand in hand with projects

that benefit Japan’s exporting industries. For example, improvement of the secur-

ity of supply of crude oil is sought through provision of water and nuclear infra-

structure to Middle Eastern countries.43 In a similar vein, efforts are made in the

next-generation automobile sector to secure “stable supply of rare metals” by

forming “mutually beneficial relationships” with resource producing countries.44

If this is reminiscent of Japan’s Eurasian diplomacy and Silk Road diplomacy

initiated in the late 1990s, this is not a coincidence; these policies were about

reshaping Japan’s approach to Russia and strengthening political and economic

relations with the new republics in Central Asia and the South Caucasus against

a background of growing weight of China.45

As discussed, environmental and energy assistance became an important

feature of economic cooperation (ODA) programmes since the 1980s. Other

than the direct commercial benefits that emerge from this approach, improving

energy efficiency in other countries also helps to ease pressure in the competition

for natural resources. The strategic importance of forging mutually beneficial

relationships and the diversification of natural resources imports for the Japanese

business sector were underscored in a territorial and political dispute over Tokyo’s

detention of a Chinese trawler captain in the Senkaku/Diaoyu Islands in Autumn

2010. While the Chinese government denied that any formal ban had been

imposed, exports of rare earth minerals to Japan—and later, to the US and

European countries—suddenly stopped. This constituted a severe blow to the

Japanese manufacturing sector, which at the time largely depended on China

for imports of rare earth minerals. Indeed, there can be little doubt that this

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occurrence provided further impetus for the Japanese government to strengthen

ties with other countries that hold these resources. Rather than escalating the

conflict, Tokyo thus opted for a quiet economic diplomacy strategy that aimed

for long-term, comprehensive goals.

Economic cooperation or ODA?

It has been said that the reason Japanese development assistance is so impregnated

with foreign policy objectives has to do with the few tools available to Japanese

diplomacy.46 For historical reasons, ODA has indeed featured large in nego-

tiations on normalization with other countries in the East Asian region. As

another example of how political goals of foreign policy feature in Japanese assist-

ance efforts, Marie Soderberg points out that the 1993 ODA Charter justifies

assistance as a tool for peace making; it includes “contribution to peace and devel-

opment” as a concern.47 But while political goals do feature in Japanese develop-

ment cooperation, the Japanese government traditionally made relatively few

direct efforts to promote political goals that Western countries tend to emphasize

in their aid, such as furthering good governance, human rights, and the rule of law.

As Japan grew into an economic superpower, the government from the 1970s

deliberately increased its spending in the field of development assistance. Having

become the largest bilateral donor by 1989, Japan remained the single biggest

provider of official development assistance from 1991 through 2001. It is little

surprise, therefore, that its policies were intensely researched and debated—

both in the heydays of the early 1990s and after the subsequent decline of Japan

as a donor. The need for change began to be addressed in Japan in response to

fiscal problems, as well as to internal and external pressures for policy shifts—

such as the need to address a lack of transparency, sensitivity of recipient

needs, as well as a coherent and coordinated policy.48 This meant that, as the

only “non-Western” donor among G7/G8-countries throughout the 1990s and

early 2000s, Japan was at least partially “socialized” into the ways of the

OECD Development Assistance Committee, dominated by Western countries.

At the same time, however, the Japanese government attempted to garner

support for its “economic cooperation” approach. It was even successful in

having its principles of ownership and results-oriented assistance included in

the 2005 Paris Declaration on aid effectiveness. Furthermore, as illustrated by

the adoption of the Seoul Development Consensus on Shared Growth at the

G20-summit in 2010, convergence towards the economic, cooperative style of

aid-giving accelerated as a larger group of non-traditional donors emerged.

The rise of other Asian countries—mainly South Korea, China, and India—as

new donors, puts Japan in a middle position. It is challenged in particular by

Chinese activism in Africa, whose practice of conflating trade, investment, and

aid on the continent are reminiscent of Japanese policies of old. This may come

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as no surprise, as Chinese delegations do indeed visit Japan to learn from its

practices.49 Chinese proactiveness has pushed Japan to step up its own efforts

towards the continent, with the Tokyo International Conference on African

Development (Ticad) as its main vehicle. For example, in July 2008 development

organization JICA used Ticad to launch a Coalition for African Rice Develop-

ment, which aims to double African rice production within a decade. Similar

competitive dynamics between the two Asian giants are seen at the Asian Devel-

opment Bank (ADB). At the same time, and despite the worsening Sino-Japanese

relationship, the ADB has facilitated the development and maintenance of shared

expectations between the two parties over the future direction of development

assistance.50 China’s influence in the ADB has expanded, but arguably not (yet)

at Japan’s expense. Furthermore, Japan has responded to China’s rise by trying

to wind back the ADB’s operations to China—resulting in the ADB moving

towards so-called “social infrastructure” in certain regions.51

Clearly, while public debate remains scant, Japanese policies in the field of

development cooperation are in flux and simultaneously move in opposite direc-

tions. Assistance efforts today indisputably involve greater investments in social

goals that traditional donors have long emphasized, but at the same time new

donors are pushing the Japanese government towards renewed linkage with

commercial diplomacy. While this may leave the country in a good position to

act as a mediator between traditional and new donors, there are few signs that

the government is ready to take up such a role.52

Negative sanctions

Japan has traditionally held a strong preference for positive inducements and shied

away from using sanctions and other more blunt instruments at the “power-play

end” of economic diplomacy. That being said, its policies have shown remarkable

shifts in recent years. The notion of comprehensive security is subject to partial

reinterpretation, as hesitance to openly adhere to a (military) “stick” is weakening.

The key drivers of these policy shifts should be sought in declining ODA

capabilities and US demands for a greater military role of Japan, with the alliance

partner propelling Tokyo to make greater use of its military power.53

North Korea is presently the state under the heaviest sanctions imposed by

Japanese law and international regulations,54 and thereby provides useful

insight into the motivations of the shifts in Japanese foreign policy and economic

diplomacy. Tokyo’s sanctions on North Korea are of fairly recent origin and

involve a relatively straightforward legal framework. For example, while the

United States has imposed sanctions since 1950, laws for unilaterally implement-

ing sanctions were not in place in Japan until 2004. Serious discussion on the

establishment of a legal framework for sanctions started in Japan only after the

firing of the Taepodong missile in 1998. Indeed, in its relationship with North

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Korea, the Japanese government had tried economic engagement in various ways

until the early 1990s, but hardened its stance thereafter. Tokyo seems to have

come to the conclusion that North Korean rulers are more willing to preserve

the status quo than some wish to believe and, consequently, started to use the

North Korean threat to justify Japan’s controversial military enhancement in a

context of uncertainty about the United States’ commitment and an increasingly

stronger China.55 This strategy is practiced through a negative approach to econ-

omic diplomacy of withholding economic benefits, including trade, humanitarian

aid, and other assistance that would come available with normalisation of diplo-

matic relations. These are clear signs that the Japanese government is willing to

forcefully employ economic power in its foreign relations. This should not be

taken lightly, especially since it is accompanied by a broader reorientation of

Japanese strategic and military policy—most recently announced in the revision

of the National Defense Program Guidelines in December 2010.56

While sanctions and negative economic diplomacy towards North Korea may

be considered a still rather exceptional case of bold power play, there is no lack of

other instances of negative sanctioning since the 1990s. The cases of Iran and

Myanmar/Burma, for example, show a greater readiness to employ negative aid

sanctions, notably suspension of aid. At the same time, however, they may be

illustrative of the ambiguity of Japanese policies, as sanctioning has gone hand

in hand with positive inducements, including the promotion of infrastructure.

While warning that refusal by Tehran to abide by UN resolutions would lead to

stronger action, for example, Tokyo maintained relatively cordial relations with

Iran and exercised restraint in joining sanctions as tensions rose in recent

years.57 As a way of contributing to a solution of the tension surrounding the coun-

try’s nuclear programme, Japan offered to construct (and pay for) five nuclear

plants and to ship highly-enriched uranium to Iran.58 In 2004 the government

invested in an oil field development project in Azadegan, but withdrew in 2010

amid rising international tensions and possible US sanctions over Tehran’s

nuclear activities. The Japanese government thus still prefers to positively

engage countries like Iran and Myanmar, but has in the past decade been increas-

ingly less reluctant to employ punitive measures of its own and to concur with

international sanctions. As Iran failed to respond to calls to stop its nuclear pro-

gramme, for example, Japan in mid-2010 sided with the United States and other

allies to support fresh UN sanctions on Iran, while steadily reducing oil imports

from the country. Furthermore, the government showed willingness to join inter-

national sanctions on Myanmar and cancelled an aid grant in 2007, and approved

with UN sanctions against Libya in Spring 2011. More generally, it is said that

while the Japanese government may take punitive measures against the countries

that represent strong economic interests for Japan, it resumes aid to these countries

as soon as possible.59 Exemplary of this is the announcement in November 2011

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by Prime Minister Yoshihiko Noda of Japan’s intention to assist the economic

development of Myanmar through economic cooperation and investment—just

prior to US Secretary of State Hillary Clinton’s ground-breaking visit to this

reclusive state. Such practice points to a continued inclination in Japan towards

a comprehensive economic security policies, while bold power play remains

primarily a default strategy.

To sum up, it is fair to say that while formal sanctions remain the exception

rather than the rule in Japanese policies, the possibility that the Japanese govern-

ment opts for more forceful economic diplomacy is greater today than at any other

time in postwar history. High-level policy initiatives in this direction are limited to

ad hoc occasions, as they are in bilateral or multilateral negotiating fora. Public

debates are very much guided by domestic political purposes—vote-winning—

and at the same time aim to garner public support for the strengthening of military

capabilities, and thus more forceful economic diplomacy. Policy and institutional

reform towards this end was undertaken in the early 2000s in the field of sanctions,

and more recently with the strengthening of defense capabilities.

Japan’s trajectory since the 1990s

Based on the preceding case studies, broad trends in Japan’s economic diplomacy

can be discerned. Commercial diplomacy is being revamped and linked to devel-

opment assistance in new ways, especially in the “green” environmental and

energy fields. Tourism promotion is elevated and is quickly becoming an impor-

tant part of commercial diplomacy efforts as well. Formal unilateral sanctions are

no longer a taboo, even if they are still applied only in exceptional cases—

especially in the relationship with North Korea. Bilateral and multilateral trade

diplomacy took off in the early 2000s and was revamped in 2010, with regional

rivalry and alliance politics as key drivers. Substantial success has so far been

scant, however, not least because of strong domestic forces of resistance.

Finally, Japan’s financial diplomacy in the region, which seemed promising in

the early 2000s, lagged in recent years, while currency policies move in opposite

directions. Figure 2 summarizes the developments in the various subfields of

these strands, based on the parameters formulated in the introduction.

Taken together, the case studies show that slowly but steadily Japanese

policies shift from an emphasis on the business end of economic diplomacy to

include a more outspoken and visible element of power play. At the same time,

commercial diplomacy is reinvented in response to enhanced competition and

rising global challenges such as climate change and natural resources scarcity.

The question that arises next is what these findings suggest about the context

wherein changes in Japan’s economic diplomacy occur. Put differently, do

these developments mark a substantive departure from past traditions and in

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what direction does Japan appear to move when the larger perspective of global

rebalancing is considered?

Breaking with the past?

What the developments in Japan’s inducement and sanctioning regime, as well as

financial, trade and commercial diplomacy, have in common is that they are

spurred by the on-going change in the geo-strategic and economic power balances

between countries in East Asia. Regional and global rebalancing thus appears as

the primary driver behind Japan’s strategic reorientation. The evolving role of

the United States and the US-Japan alliance plays a fundamental part herein.

This conforms with earlier studies, which found that the Japanese government

appears to be adjusting to the new reality wherein the hegemonic presence of

the United States will be a more negotiated system that will entail a more plura-

listic organization of power and influence.60 Japanese politicians and policy-

makers are having another look at the economic and military benefits of the

alliance and reconsidering their policies.

The case studies presented here further substantiate Christopher Hughes’

observation that Japan’s comprehensive security policy includes economic and

environmental dimensions. Even so, the findings challenge his assertion that the

Japanese government “may be losing faith in this [comprehensive security]

approach,” concentrating instead on the military security dimension.61 In other

words, Hughes’ conclusion that changes “reflect a gradual retreat from using

economic power for security ends and, possibly, using economic power as the

principal means to contribute to regional security” may not be warranted62

Figure 2 Japan’s new economic diplomacy (since the 1990s)

Source: author’s compilation.

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While there is no denying that the Japanese government since the 1990s is also

strengthening and restructuring its military capabilities, its diplomatic practice

still emphasizes economic means. This includes more forceful means of diplo-

macy, which can still largely be seen within a comprehensive framework of a

economic diplomacy. In other words, Japan’s new economic diplomacy no

longer relies on inducements per se, but also includes more outspoken and forceful

ways to defend strategic interests. The greater willingness to use economic diplo-

macy also in negative (punitive or coercive) ways—as in the case of North

Korea—appears to be a broadening by the Japanese government of its tool kit

of economic power projection. This is not so much an erosion of the comprehen-

sive notion of security and economic diplomacy practice as a pragmatic reorienta-

tion in response to the changing regional economic and security environment.

Convergence – in what direction?

The shifts in Japan’s economic diplomacy since the 1990s beg the question

whether Tokyo is moving closer to traditional policies of Western countries that

generally adhere to a stricter separation of the public and private and of the

economic and military-strategic spheres. Indeed, the close and sometimes intran-

sparent links between Japanese business and government (min-kan) have been the

subject of much debate from the 1980s, as foreign countries grew increasingly

critical of Japan’s “mercantilist practices.” The large-scale administrative

reform effort initiated in the early 2000s by (then) Prime Minister Koizumi can

be interpreted as partly addressing this critique. JICA and JETRO were among

a group of organizations that were transformed from “special administrative

agencies” (tokushu-gyosei-hojin) into “independent administrative agencies”

(dokuritsu-gyosei-hojin) in 2002-03. Whether the reforms were successful in

decreasing the role and influence of ministries over the agencies is questionable,

however, as real change reported has scant.63 The DPJ attempts to further

restructure and reduce the administrative agencies for research development,

but these efforts to reduce bureaucracy are by no means uni-dimensional. This

is illustrated by the establishment in 2010 of offices at various ministries and

the Cabinet Office to further economic diplomacy goals, such as the METI-

panel involving the public and private sectors to study ways to gain infrastruc-

ture-related business orders abroad.64

Although regulatory reform and restructuring has obviously entered a new

phase in Japan, past experience shows that even as the country introduces rules

that appear more similar or even identical to those in the United States and Europe,

“interpretation and implementation will differ (. . .) as a result of different heritage

that took many centuries to develop.”65 This provides a clue as to why a study of

Japan’s “managed globalization” concluded that “as of 2001 convergence [with

global (or American) economic practices] was a distant possibility for Japan.”66

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The case studies presented here also suggest that Japan is not converging on

an Anglo-American neoliberal norm, but rather going through a transformative

phase. This conforms with the argument made by Richard Samuels, raised in

the introduction, that change is continuative. Japanese policies in the field of

commercial diplomacy, financial diplomacy and development cooperation, for

example, both engage and challenge the “Western consensus” by linking idea-

tional and rationalist materialist factors.67 At roughly one third of the total,

loans—compared to grants—remain a much larger percentage of Japanese pro-

grammes in comparison with European donors, while grants are largely technical.

Furthermore, the tendency to employ know-how of modern industrial production-

related sectors to build friendly relations with target countries and simultaneously

contribute to the stable supply of natural resources is still apparent. Indeed, the

observation that while the economic importance to Asia of Japan as a nation

has decreased in relative terms, the importance of Japanese firms has not, at

least to an equal degree,68 may be regarded as a success of Japan’s economic

diplomacy, which has evolved to a next phase.

Recent policies in the field of commercial diplomacy and development assist-

ance are strengthened and still largely revolve around economic objectives, while

negative sanctioning also involves economic power play. Returning to the ques-

tion raised in the introduction, the Japanese state can be seen to be adapting and

innovating—that is, reconsidering its tactics.

This in turn begs the question whether (or how) Japan’s path and evolving

policies may foreshadow the future of other states in East Asia that follow a

similar economic growth model. While this study contributes only marginally

to this complex question, and notwithstanding the many differences between

this group of countries, one can safely say that Japan’s experience seems to be

of interest for at least four reasons: (1) its roots of state-led development that

has inspired other countries in the region; (2) the evolvement of Japanese policies

in response to power shifts in the region; (3) the country’s decades-long experi-

ence as the only non-western member of the group of developed countries; and

(4) Japan’s geographical and cultural closeness to one of the world’s most

rapidly developing regions. The finding of this study that Japan’s new policies

do not so much involve a change of strategy but rather a change of tactics thus

appears to be of broader relevance in a world wherein differences between “the

West and the rest” will only rise.

Conclusion

This article has presented a rough sketch of the trajectory of Japan’s economic

diplomacy since the 1990s. A conceptual framework that distinguishes five econ-

omic diplomacy strands was employed to capture diverging developments in

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various fields and to make sense of the sometimes contradictory policies that are

part of the Japanese approach. The framework proved helpful to distinguish tools

and objectives in various strands of economic diplomacy towards different

countries and thereby to make sense of multiple policy considerations that bring

together the fields of security studies and international political economy.

It has been impossible in this small scale study to cover in detail all factors

that shape Japan’s economic diplomacy. Even so, the trend points to an evolving

practice of economic diplomacy wherein positive incentives are still preferred but

negative sanctioning is no longer a taboo. Japan’s new economic diplomacy

started in the early 1990s and is undergoing further substantial change in recent

years. Policy shifts largely take place in coordination and cooperation with the

private sector. Long-time practices in the field of commercial diplomacy are

revamped and reframed around the promotion of infrastructure systems abroad.

Also, tourism promotion is taken up as part of commercial diplomacy practice.

Ambitious goals are set but little real progress has been made so far in the field

of trade diplomacy that, on the part of the government, largely involves political

considerations related to alliance politics and regional rivalry. In financial diplo-

macy, the Japanese government appears to be deferring the momentum to China.

Furthermore, positive incentives are redirected to the fields of environmental and

energy technology, while a greater willingness towards (unilateral) sanctioning

has become apparent. Not surprisingly, the domestic economic and social chal-

lenges in Japan and the reconfiguration of regional and global power—spurred

by the re-emergence of China in the economic, political, and military fields—

appear as key drivers of change, while responding to global challenges such as

climate change and scarcity of energy and other natural resources are further

considerations. There can be little doubt that Japan’s new economic diplomacy

involves greater conformity to Western ways in some areas—notably negative

sanctions. That being said, the continued adherence to economic power as the

main tool to strive for influence suggests that the appetite of the Japanese govern-

ment and private sector to switch to a strategy that conforms with Western

countries remains limited. It is this ambiguity between the old and the new that

suggests that we are witnessing a change in Japanese tactics rather than in strategy.

Notes1 Normalcy is commonly discussed in the neorealist sense, meaning that a

country’s military might is commensurate with its economic might. Seefor example Hiro Katsumata and Li Mingjiang, “What is a ‘Normal’ Japan?Implications for Sino-Japanese Relations,” China Brief, vol. 8, no. 16,Jamestown Foundation, August 1, 2008; Chu Shulong, The SecurityChallenges in Northeast Asia: A Chinese View, Strategic Studies Institute,November 2007; and Yoshihide Soeya, Masayuki Tadokoro and David

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A. Welsch (eds), Japan as a ‘Normal Country’? A nation in search of itsplace in the world (Toronto: University of Toronto Press, 2011). A criticalassessment of the idea of Japanese exceptionalism is provided in LinusHagstrom, “Critiquing the Idea of Japanese Exceptionalism: Japan andthe Coordination of North Korea Policy,” European Journal of East AsianStudies, vol. 7, no. 1, 2008, pp. 131-154.

2 See for example Michael J. Green, Arming Japan: Defense Production,Alliance Politics, and the Postwar Search for Autonomy (New York:Columbia University Press, 1995); Glenn D. Hook, Demilitarization andRemilitarization in Contemporary Japan (London: Routledge, 1996); andChristopher W. Hughes, Japan’s Remilitarization (London: Routledge,2009). An important exception to the turn away from studies of Japaneseindustry and industrial policy is Ulrike Schaede, Choose and Focus:Japanese Business Strategies in the 21st Century (Ithaca: CornellUniversity Press, 2008).

3 Linda Weiss, “Developmental States in transition: adapting, dismantling,innovating, not ‘normalizing,” The Pacific Review, vol. 13, no. 1, 2000,pp. 21-55.

4 Christopher W. Hughes, Japan’s Security Agenda: Military, Economic,and Environmental Dimensions (Boulder: Lynne Rienner Publishers,2004), p. 208.

5 Richard J. Samuels, Securing Japan: Tokyo’s grand strategy and thefuture of East Asia. Ithaca: Cornell University Press, 2007. Kenneth B. Pyle,Japan Rising: the resurgence of Japanese power and purpose. New York:Public Affairs, 2007.

6 This may be thought of as the foreign policy-implication ofGerschenkron’s argument that latecomers in the world economy requirea centralized approach to industrialization and economic growth. See:Alexander Gerschenkron, Economic Backwardness in HistoricalPerspective (Cambridge, MA: Harvard University Press, 1962).

7 Eric Heginbotham and Richard J. Samuels, “Mercantile Realism andJapan’s Foreign Policy,” International Security, vol. 22, no. 4, 1998,pp. 171-203.

8 See for example M. Woo-Cumings (ed), The Developmental State (Ithaca:Cornell University Press, 1999); and Chalmers Johnson, MITI and theJapanese Miracle: The Growth of Industrial Policy, 1925-1975 (Stanford,CA: Stanford University Press, 1982). As is well-documented, othercountries in the region—including South Korea, Singapore, Indonesia,China and most recently Vietnam—followed a similar approach of state-led development.

9 See for example on Japan’s commercial diplomacy: ChristopherB. Johnstrone, “How Much Bang for the Buck? Japan’s CommercialDiplomacy in Asia,” in: Jeffrey Garten, Robert Zoellick and James Shinn(eds), Riding the tigers : American commercial diplomacy in Asia(New York: Council on Foreign Relations, 1998); on official developmentaid: David Arase (ed), Japan’s Foreign Aid: Old Continuities and NewDirections (London: Routledge, 2005); and on sanctions: Jean-Marc

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F. Blanchard and Norrin M. Ripsman, “A Political Theory of EconomicStatecraft,” Foreign Policy Analysis, vol. 4, no. 4, 2008, pp. 374-398.

10 For more on this framework, see Maaike Okano-Heijmans,“Conceptualizing Economic Diplomacy: The Crossroads of InternationalRelations, Economics, IPE and Diplomatic Studies,” The Hague Journal ofDiplomacy, vol. 6, nos. 1-2, 2011, pp. 7-36 (special issue on economicdiplomacy, also published as book with Martinus Nijhoff Publishers).

11 Berger argues that economic power can translate into soft power in atleast three ways: (1) by influencing other countries’ desire to cooperateand work with that country for the sake of increasing their own materialprosperity; (2) by the country becoming a model that others seek toemulate; (3) by enabling the country to undertake other types of softpower activities. See: Thomas Berger, “Japan in Asia: A Hard Case for SoftPower,” Orbis, Fall 2010, p. 569.

12 This definition follows Kopp but distinguishes more explicitly betweenODA and other commercial activities in which the government is involved.See: Harry W. Kopp, Commercial Diplomacy and the National Interest(Washington: American Academy of Diplomacy/Business Council forInternational Understanding, 2004), p. 1.

13 MOFA, Press Conference, March 9, 2011.14 Communication with an official of the Japanese Ministry of Foreign

Affairs, March 2012.15 Ministry of Foreign Affairs, Foreign Policy Speech by Minister for Foreign

Affairs Seiji Maehara to the 177th Session of the Diet, January 24, 2011,http://www.mofa.go.jp/announce/fm/maehara/speech110124.html.

16 MOFA, Diplomatic Bluebook 2011, p. 8.17 Interview with JETRO-official Hiroshi Kobayashi, Tokyo, February 4, 2010.18 MOFA, Diplomatic Bluebook 2011, p. 29.19 For more on the former, see Christopher M. Dent, ‘Renewable Energy and

East Asia’s New Developmentalism: Towards a Low Carbon Future?’,Pacific Review, forthcoming 2012.

20 For a more detailed analysis, see Maaike Okano-Heijmans, “Japan’s‘Green’ Economic Diplomacy: Environmental and Energy Technology andForeign Relations,” The Pacific Review, forthcoming 2012.

21 “Strategic cooperation with ASEAN still goal,” Japan Times, August 5,2011.

22 Okano-Heijmans, “Japan’s ‘Green’ Economic Diplomacy.”23 The Cabinet reshuffle of January 2011 was directly linked to this internal

rift. Also as a sign of Prime Minister Kan gearing up to seek FTAs, the morepro-free trade Kaieda Banri replaced Ogata Sadako as METI-Minister.

24 For the case of Japan, see for example articles by Masahiro Kawai andShujiro Urata.

25 Saadia M. Pekkanen, Mireya Solıs and Saori N. Katada, “Trading Gains forControl: International Trade Forums and Japanese Economic Diplomacy,”International Studies Quarterly, vol. 51, December 2007, pp. 945-970.

26 Mireya Solıs, “Globalism Ascendant, Regionalism Stagnant: Japan’sResponse to the Global Financial Crisis,” The Hague Journal of Diplomacy,

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vol. 6, nos. 1-2, 2011, pp. 51-2. See also Naoko Munakata,“Regionalization and Regionalism: The Process of Mutual Interaction,” in:RIETI Discussion Paper Series, 04-E-006 (Japan: Research Institute ofEconomy, Trade and Industry, 2004).

27 For more on this, see for example Lam Peng Er, “Japan’’s FTA withSingapore: The China factor and Regionalism,” Japanese Studies, vol. 26,no. 2, 2006, pp. 211-220; and Aurelia George Mulgan, “Where Japan’sForeign Policy Meets Agricultural Trade Policy: The Australia – Japan FreeTrade Agreement,” Japanese Studies, vol. 28, no. 1, May 2008, pp. 31-44.

28 This trade rivalry may be likened to the on-going competition in the fieldof regional institution building—wherein Japan favors the intraregionalEast Asia Summit (including the United States and other countries in thePacific) while China pushes for the ‘Asians-only’ ASEAN Plus Three (APT).

29 See for example Masaaki Sugiura “TPP sanka ni wa, taichu, tairo kensei nosokumen mo” [TPP participation also has element of China, Russiacontainment], Giron Hyakushutsu no. 1747, 10 November 2011 andother contributions to this forum, including by Nobuo Ogata and AikoIkeo.

30 Gemba Koichiro, “TPP wo kika ni kosho wo kasokuka suru,” Voice,January 2011, pp. 96-101. (also published as: “Free Trade Agreements: anurgent part of Japan’s agenda,” JapanEchoWeb, no. 4, December 2010–January 2011).

31 Saadia M. Pekkanen, Japan’s Aggressive Legalism: Law and Foreign TradePolitics Beyond the WTO (Palo Alto, CA: Stanford University Press, 2008).

32 Daniel W. Drezner, “Why is the WTO protest-free?, ” Foreign Policy blog,September 15, 2010 (5:41 p.m.), http://drezner.foreignpolicy.com/posts/2010/09/15/why_is_the_wto_protest_free.

33 Glenn D. Hook, Julie Gilson, Christopher W. Hughes and Hugo Dobson,“Japan and the East Asian Financial Crisis: Patterns, Motivations andInstrumentalisation of Japanese Regional Economic Diplomacy,”European Journal of East Asian Studies, vol. 1, no. 2, 2002, pp. 177-197.

34 William W. Grimes, Currency and Contest in East Asia: The Great PowerPolitics of Financial Regionalism (Ithaca, NY: Cornell University Press,2009).

35 Shigeko Hayashi, Japan and East Asian Monetary Regionalism: Towards aProactive Leadership Role? (London: Routledge, 2006).

36 Yong Wook Lee, The Japanese Challenge to the American NeoliberalOrder: Identity, Meaning, and Foreign Policy (Stanford: StanfordUniversity Press, 2008).

37 Solıs, “Globalism Ascendant, Regionalism Stagnant.”38 Taggart R. Murphy, “A Loyal Retainer? Japan, capitalism, and the

perpetuation of American hegemony,” The Asia-Pacific Journal, 41-3-10,October 11, 2010. Slightly revised version of an essay that is published inThe Crisis This Time: Socialist Register 2011, Leo Panitch, Greg Albo, andVivek Chibber (eds.).

39 Saori Katada, “From a supporter to a challenger? Japan’s currency

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leadership in dollar-dominated East Asia,” Review of InternationalPolitical Economy, vol. 15, no. 3, 2008, pp. 399–417.

40 Solıs, “Globalism Ascendant, Regionalism Stagnant.”41 This conforms with Berridge’s definition of economic diplomacy, which

refers to “diplomacy that employs economic resources, either as rewardsor sanctions, in pursuit of a particular foreign policy objective.” GeoffR. Berridge (with Alan James), Dictionary of Diplomacy (Basingstoke:Palgrave-Macmillan, 2003 [2000], p. 91.

42 Okano-Heijmans, “Japan’s ‘Green’ Economic Diplomacy.”43 Ministry of Foreign Affairs of Japan, Japan’s ODA White Paper 2009 -

Japan’s International Cooperation, 2010.44 Ministry of Economy, Trade and Industry, Jisedai-jidosha-senryaku 2010

[Next-generation vehicle strategy 2010], April 12, 2010.45 Reinhard Drifte, Japan’s Eurasian Diplomacy: power politics, resource

diplomacy or romanticism (London: Routledge, 2004).46 Arase, Japan’s Foreign Aid.47 Marie Soderberg (ed), The Business of Japanese Foreign Aid: Five case

studies from Asia (London and New York: Routledge, 1996).48 Arase, Japan’s Foreign Aid.49 JICA representative in a seminar on February 3, 2010 at Tokyo University.50 Joel Rathus, “China, Japan and Regional Organisations: The Case of the

Asian Development Bank,” Japanese Studies, vol. 28, no. 1, 2008, pp. 87-99.

51 Rathus, “China, Japan,” p. 98.52 As illustrated by the G-20 Seoul Summit and the subsequent High-Level

Forum on Aid Effectiveness organized in Busan late 2011, South Koreaappears to be more proactive in furthering the middle position.

53 Hughes, Japan’s Security Agenda.54 Sanctions have been either unilaterally imposed under domestic

legislation or passed in conformation with UN resolutions (SecurityCouncil Resolutions 1540, 1695 and 1718).

55 Maaike Okano-Heijmans, “Troubled Neighbours: Japan’s NegativeEconomic Diplomacy towards North Korea,” European Journal of EastAsian Studies, vol. 9, no. 2, 2010, pp. 363-394. See also Hagstrom,“Critiquing the Idea of Japanese Exceptionalism.”

56 Under the new Guidelines Japan essentially reserves the right to upgradeits military capabilities, increasing its defense expenditures beyond thelong-held ceiling of one percent of gross domestic product. Furthermore,the guidelines are accompanied by a re-structuring of Japan’s armedforces, including an upgrade of naval and coast guard capabilities. AxelBerkofsky, “Dissecting Japan’s New Defense Guidelines,” InternationalRelations and Security Network (ISN), 16 February 2011.

57 Until China gained foothold in Iran in recent years, Japan was thecountry’s third-largest trading partner and the leading consumer ofIranian oil, Japan’s third largest supplier.

58 Press TV, “Iran ready to accept Japan’s nuclear offer,” February 26, 2010.

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59 Larisa Nikitina and Fumitaka Furuoka, Japan’s Foreign Aid SanctionsPolicy after the End of Cold War, MPRA Paper 6757, 2008.

60 For an analysis of the changing US hegemony and role in East Asia andthe interaction between subsystems of economics and security therein,see for example G. John Ikenberry and Takashi Inoguchi, “Introduction,”International Relations of the Asia-Pacific, vol. 10, no. 3, 2010, pp. 383–388.

61 Christopher W. Hughes, Japan’s Security Agenda: Military, Economic,and Environmental Dimensions (Boulder: Lynne Rienner Publishers,2004), p. 208.

62 Hughes, Japan’s Security Agenda, p. 240.63 Interviews of the author with representatives from JICA, JETRO and

NEDO, January-February 2010.64 This panel is formally called the “Subcommittee on Infrastructure and

Advanced Systems Strategy” (sangyo kozo shingikai boeki keizaikyoryoku bunka-kai infura-shisutemu rinshutsu-bukai).

65 In Europe these processes are steered by the state, individuals andsociety, compared to min (public) and kan (private) in Asia. In thiscontext, globalisation is seen as an attempt to unify the structures ofrelationships between (political) power and ownership rights (bothindividual and collective)—of which the enforcement of acceptance ofsame rules for all societies is one means. See: Kurt W. Radtke, “Publicversus private: governance in East Asia in the age of globalisation,” in: BigBusiness and Economic Development, in: Alex E. Fernandez and BarbaraHogenboom (eds) (London and New York: Routledge, 2007), p. 34.

66 Ulrike Schaede and William Grimes (eds.), Japan’s ManagedGlobalization: Adapting to the Twenty-first Century (London: M.E.Sharpe, 2003), p. 252.

67 Sato and Hirata make a similar argument based on research in otherfields. See: Yoichiro Sato and Keiko Hirata (eds), Norms, Interests, andPower in Japanese Foreign Policy (New York: Palgrave Macmillan, 2008).

68 Edward Lincoln, “The Asian Regional Economy,” in David Shambaughand Michael Yahuda (eds), International Relations of Asia (MD: Rowmanand Littlefield, 2008).

About the author

Maaike Okano-Heijmans is a research fellow at the Netherlands Institute for Inter-

national Relations ‘Clingendael’ in The Hague. She is finalizing her Ph.D. thesis at

the University of Antwerp, Belgium. Maaike is also a visiting fellow at the Asia-

Pacific College of Diplomacy of the Australian National University and a co-

editor of the book review section of The Hague Journal of Diplomacy (Brill).

Email: mokano-heijmans@clingendael.nl

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