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Unipolar Politics: Realism and State Strategies After the Cold War, by Ethan B. Kapstein and Michael Mastanduno (eds.)
Eric Heginbotham and Richard J. Samuels
Scholars of international relations have largely overlooked Japan in their surveys of great power politics, while students of Japan frequently focus on a single policy-area or on Japan’s bilateral relations with specific states and have generally failed to test Japan’s larger strategic calculus against international relations theory. 1 Those who have examined Japanese grand strategy typically adopt a structural realist model, under which states are motivated primarily by the fundamental imperative of military security and frequently subordinate other goals to that end. Some scholars, observing divergence from behavior predicted by this theory, have concluded that Japan’s foreign policy is nonrealist or otherwise exceptional. 2 In this article, we examine Japan’s postwar foreign policy both against structural realism and against what we call mercantile realism, which recognizes technoeconomic security interests—including, but not limited to, those associated with military security—as central considerations of state policy. We conclude that although Japan clearly does not ignore military security, its foreign policy is organized around the goal of advancing its technoeconomic position. Moreover, when tradeoffs must be made between military and technoeconomic security values, the latter frequently take precedent. These findings have implications for the U.S.-Japan relationship, for the broader prospects for peace and prosperity in the coming decades, and for how we reconstruct an international relations theory that explains the behavior of as many of the major powers in the system as possible. Ultimately, we believe that the economic and military security imperatives of state behavior should be reintegrated in a more comprehensive realist theory that captures the complexity of how various economic and military interests are balanced in the short- and long-term to maintain or advance the position of the state in the international system.
In the next section we test Japanese foreign policy against predictions consistent with structural realism and find that it poses a number of problems for this theory. First, structural realists frequently suggest that in cases where economic and military interests cannot be pursued simultaneously, the threat of war will lead each state to subordinate its economic interests to the dictates of maximizing military security. Yet, despite the dramatic growth of defense budgets across East Asia, Japan has adopted a long-term defense plan that will reduce the size of its military force. Second, structural realism posits that concerns over relative gains and dependence on goods vital to national defense will convince most leaders to limit the scope of their state’s economic engagement with those states deemed to represent the most imminent military threats. Yet, while China is Japan’s most important potential military challenger, Japan has shown limited sensitivity toward the distribution of relative economic gains from its trade with China. In fact, Japan has become China’s largest trading partner and serves as that country’s largest supplier of bilateral and multilateral aid. Ironically, Japan has been far more sensitive to relative gains from trade and investment in its dealings with the United States and the states of Western Europe, its major Group of Seven partners.
Rejecting structural realism as an adequate explanation for Japanese behavior, however, is not to reject all realist-inspired explanations. In the third section of the paper we examine the argument made by Samuel P. Huntington that “for decades Japan has acted in a way totally consistent with the ‘realist’ theory of international relations, which holds that international politics is basically anarchic and that to ensure their security states act to maximize their power. Realist theorists have focused overwhelmingly on military power. Japan has accepted all the assumptions of realism but applied them purely in the economic realm.” 3 We first establish key predictions for a mercantile realist theory of state behavior and test those against observed Japanese foreign policy. We find that not only is Japan’s economic and foreign economic policy consistent with the theory, but also that policy in a much broader array of areas—including military and diplomatic—supports Japan’s technoeconomic security agenda.
The final section of this paper seeks to explain the origins of Japanese strategic preferences: to show how they are manifest in Japanese institutions and to assess the likelihood of change. We argue that elements of Japanese grand strategy today are consistent with its nineteenth-century strategy, when Japanese survival depended on the rapid acquisition of foreign technology and the modernization of its industrial base. But whereas Japan once pursued policies designed to strengthen its economic base for the purposes of enhancing its military power, today the very concepts of security and power frequently are defined in technological, industrial, and economic terms. Japan’s defeat in World War II discredited military measures as a means of enhancing national security, and the hobbling of the state’s military bureaucracy has ensured that Japan’s powerful economic state organs and their industrial allies have immense influence over the terms by which Japan’s security interests are articulated. Japan’s prewar economic planning agencies, once in the service of a militarized state, have in effect been liberated both from the burden of war planning and from the constraints of military supervision. The U.S. alliance has provided time for both the new strategic thinking and the domestic structures in which they are embedded to take root. Mercantile realism has persisted beyond the end of the Cold War and the gradual emergence of more challenging strategic realities, and it is likely to be an enduring feature of a wealthy Japan’s foreign policy well into the next century.
Structural Realism and Japanese Foreign Policy
Structural realism makes the following set of assumptions: states are the key actors in international relations; they interact in an anarchic environment devoid of rules and enforcers; and, as a consequence of anarchy, much of their behavior is shaped by the possibility of war and the necessity of preparing to deter or defeat military challengers. The threat of war leads each state to maintain its own defense capabilities and to form loose alliances whenever possible with states that share common defense interests. Although structural realists disagree about the foreign policy propositions that derive from the theory, the following are broadly accepted:
1. States tend to balance against military threats, not bandwagon with them. Kenneth Waltz writes that “secondary states, if they are free to choose, flock to the weaker side; for it is the stronger side that threatens them.” 4 Stephen Walt proposes an important modification, suggesting that “states balance against threats rather than against power alone. Although the distribution of power is an extremely important factor, the level of threat is also affected by geographic proximity, offensive capabilities, and perceived intentions.” 5
2. States prefer to maintain independent military capabilities. Although states will form loose military alliances in order to balance against primary threats, they will guard themselves against the possible defection of allies by maintaining a full array of military forces and will resist the specialization of their military forces in the interests of greater alliance rationality.
3. Powerful states are more prone to follow predictions 1 and 2 than are weak states. Both Waltz’s and Walt’s propositions about state behavior pertain primarily to great powers. Walt observes that “in general, the weaker the state, the more likely it is to bandwagon rather than balance. This situation occurs because weak states add little to the strength of a defensive coalition but incur the wrath of the more threatening states nonetheless.” 6
Contemporary realists have been largely silent on economic issues and on how economic and military security concerns relate to one another. The following propositions capture the most salient observations that have been made on the subject.
4. States will be highly sensitive to the relative economic gains of other states they consider military threats. Realists agree that less trade will occur than is rational from a classical economic standpoint. 7 Given that trade may benefit one partner relatively more than the other and that trade involves the specialization of labor between states, states will restrict trade in order to avoid shifts in the balance of power or dependence on trade partners for goods that may be critical in the event of war. The trade-inhibiting effects of differential benefits from trade will be muted within alliances and between partners that are not potential military competitors. 8
5. The greater the perceived military threat to a state, the more that state will pay in order to maintain its alliance relationships. How the costs of a military alliance will be divided among component members will be affected by the relative military dependence of the states involved. 9 When a state faces both a high degree of military threat and the possibility of defection by allies, it will pay relatively more to entangle its partner(s) and reduce the likelihood of abandonment.
Testing Structural Realism against Japan’s Cold War Foreign Policy
The crushing defeat Japan suffered in 1945 knocked it cleanly out of the great power ranks. Japan’s economy and military power were destroyed, its territory was occupied, and it had little choice but to ally with the United States. That alliance was, however, fully compatible with Prime Minister Yoshida Shigeru’s goal to rebuild the Japanese economy behind the protective shield of American military power. Within the alliance Japan did not maintain a fully capable or autonomous military force and did relatively little to contribute militarily to the West’s effort to balance Soviet power. But those limitations on Japan’s military forces were also consistent with Yoshida’s strategy of avoiding any commitment that might slow economic reconstruction. When John Foster Dulles, then chief negotiator of the 1951–52 peace and security treaties, pressed Japan to expand its National Security Force from 110,000 to 350,000 troops, Yoshida refused, fearing that if Japan’s forces were larger than absolutely necessary to defend Japan, the United States would ask it to send forces to Korea. 10 In 1952, when the Ministry of International Trade and Industry (MITI) and business leaders pressed Yoshida to rearm and use the arms industry as the locomotive for postwar reconstruction, he declined, siding instead with the Ministry of Finance and the banks’ preference for nurturing the commercial economy. 11
As an American ally, Japan enjoyed access to U.S. markets for industrial products technology, and investment. Japan’s Foreign Investment Law of 1950 and other controls, however, effectively excluded U.S. products and capital from the Japanese market. As Japan began to relax legal restrictions in order to join the General Agreement on Tariffs and Trade (GATT) in the 1950s and the Organization of Economic Cooperation and Development (OECD) in the 1960s, its leaders erected a broad array of new nontariff barriers designed to limit foreign investment and imports. 12 Japan also benefited from U.S. influence in Europe, notably pressure forcing the British and the French to accept Japanese entry into the new GATT organization. Japan sacrificed relatively little, and may in fact have gained much, from alliance efforts to contain the Soviet Union during the Cold War. While it was certainly not a completely “free ride,” it was a cheap and profitable one for Japan.
Neither Japan’s economic policy nor its military policy during the Cold War was clearly at odds with the predictions of structural realism outlined above. Japan did join an alliance that worked to balance against the Soviet Union, which it regarded as its primary military threat [proposition 1]. Although Japan failed to maintain a well-rounded and independent defense force and did not expend significant resources to maintain its alliance connections, this too is not necessarily inconsistent with structural realism. Relatively weak powers, like Japan throughout the 1950s and 1960s, are not predicted to balance as actively as more powerful states [proposition 3]. Moreover, the willingness of states to assume the economic leadership of an alliance will, according to structural realism, depend on the relative degree of threat faced by the alliance partners and on the relative size of their economies [proposition 5]. The United States felt that it was engaged in a life or death struggle with the Soviet Union and that U.S. allies on the periphery of the Eurasian land mass were particularly important, since their defection might tip the global balance in favor of the Soviet Union. Given this intense military competition and the vast relative size of the U.S. economy during the 1950s and 1960s, it was unlikely that the United States would object too strenuously to limited cheap riding by allies.
The importance that U.S. policymakers attached to Japan as a military ally is borne out by the 1952 comments of a government official who wrote that “The most highly industrialized country in the Far East must remain outside the Soviet orbit if there is to be a free Asia, and to this end U.S. policy should be directed by whatsoever means are necessary, military or economic, to assist in the establishment of political tranquillity and economic betterment in all of free Asia . . .and until it is clear that Japan can stand firmly on its own feet, the United States must of necessity lend support, even to the extent of providing an unrestricted market for such Japanese goods as American consumers find attractive.” 13
The strength of the U.S. commitment was not lost on Japanese officials who frequently played the alliance card to secure economic concessions. In 1966, for example, Japanese officials warned that continued U.S. pressure over Texas Instruments’ attempts to enter Japan could slow the more general process of capital liberalization and harm the overall U.S.-Japan relationship. An editorial in Japan’s leading business daily suggested that “American failure to ‘understand’ Japanese treatment of Texas Instruments and similar foreign direct investment cases might endanger Japan’s support for U.S. security policies.” 14
Although Japan’s behavior during the Cold War was not necessarily at odds with the predictions of structural realism, it hardly provides decisive validation of the theory. Structural realism claims only to explain the behavior of large states with any degree of reliability. The idea that weak states will be less inclined to balance against threats by forming alliances and generating additional military resources serves more as a caveat to the general theory than as a primary prediction. Few structural realists would suggest that a state that refuses to mobilize more than a tiny fraction of its gross national product or available manpower for defense or one that structures its armed forces to provide minimal rear-area services to those of an ally (rather than autonomous, well-rounded national defense capabilities) provides compelling evidence buttressing structural realism. 15
Perhaps more to the point, it would be difficult to describe Japan in the latter decades of the Cold War as without options in the great power game. By the 1970s Japan’s economy had surpassed the Soviet Union’s. By the end of the Cold War it was larger in proportion to the U.S. economy than the combined economies of Japan and Germany had been in 1939. While its military capabilities were tiny compared with those of the Soviets’ at the end of the Cold War, Japan’s military weakness was a result of state policy, not resource limitations. Japan had become very rich, and could easily have become very strong as well. Yet despite the rise of Japan’s industrial and financial power and despite its capability to turn itself into a military great power, Japanese foreign policy changed relatively little during the 1970s and 1980s.
Structural realists propose that powerful states are more inclined than weaker ones to balance against threats and maintain independent military capabilities, but they sometimes leave undefined how “powerful states” should be defined. We would suggest that if the term is used to refer to states with strong military capabilities, then there is a sort of circular logic to the theory: powerful military states will prefer to maintain independent military capabilities. If structural realism is to have predictive value, its propositions should address the behavior of states with the existing capability to generate powerful military forces, as well as those that have already done so. Viewed in this light, Japan’s behavior at the end of the Cold War begins to diverge from that predicted by structural realism. In 1970, the quintessential realist Herman Kahn suggested that if Japanese economic growth continued the “Japanese will almost inevitably feel that Japan has the right and duty to achieve full superpower status and that this means possessing a substantial nuclear establishment.” 16 But Japan did not become a nuclear power and did not aspire to superpower status, at least in the traditional sense of the term. If structural realism did not capture fully Japan’s Cold War dynamics, what of its utility after the Cold War?
Testing Structural Realism against Japan’s post-Cold War Foreign Policy
Structural realist theory predicts a dilemma for post-Cold War Japan. The United States has lost much of its strategic and economic motivation for maintaining its global alliance system. With the collapse of the Soviet Union and the implosion of the Russian economy, U.S. GNP is now 15 times greater than Russia’s. Moreover, a new barrier of affiliated states unfriendly to Russian expansion now exists between Russia and Western Europe. Despite China’s economic growth, the U.S. economy also is 11 times larger than its economy. 17 Neither China nor Russia could mount a credible direct military threat to the United States in the next ten or fifteen years. Nor could either conquer the Eurasian landmass. Even after reducing defense spending to just over 4 percent of GNP, the U.S. military budget remains more than five times larger than any other single state, and greater than the next ten largest military budgets combined. At the same time, the U.S. share of the world economy declined from around 40 percent in 1950 to around 25 percent by the mid-1990s. Hence the United States is relatively less able to reap the rewards of the free trade system that its military alliance system facilitates.
Given reduced military threats and the relative slippage of American economic strength over time, some U.S. foreign policy elites became more inclined to reexamine the logic, structure, and costs of U.S. alliance commitments. 18 Militarily, the United States undertook to evaluate systematically the need for and costs of maintaining forward deployed U.S. forces on a continuous basis. 19 Economically, the first Clinton Administration took an aggressive approach to promoting U.S. exports, and showed less willingness to tolerate discriminatory trade practices by its allies. 20 In its dealings with Japan, the administration used the threat of economic sanctions to leverage trade concessions; it openly manipulated exchange rates to apply pressure directly on Japanese export-oriented firms; and, until they backed off in 1996, U.S. officials hinted that the security relationship could depend on Japanese willingness to bargain in good faith on the economic front. 21
Since that time, the regional situation confronting Japan in East Asia has if anything become more uncertain. First, the situation on the Korean peninsula remains unstable. North Korean missiles are now within range of Japan, and there is fear that those missiles could soon carry nuclear warheads. Moreover, although the presence of 50,000 U.S. troops in South Korea is reassuring to Japan, these troops may not remain in place after unification. South Korean military technological and military strength and a history of uneasy Korean-Japanese relations may make a unified Korean peninsula even more a threat to Japan than North Korea is currently.
Despite the passage of time since the Japanese occupation of Korea, anti-Japanese sentiments in South Korea have not diminished. To the contrary, a 1995 survey of Korean attitudes shows that a record 69 percent of Koreans responded that they “hate” Japan, while only 6 percent responded that they “like” Japan. 22 In this general atmosphere of distrust, defense officials in Japan and South Korea peer across the Tsushima Straits warily. The South Korean navy has grown faster than any other in the region in the last ten years, and much of the rhetoric justifying this growth suggests that the Japanese navy is the competitor. 23 Unresolved territorial disputes also continue to affect the relationship. Japan’s extension of 200-mile fishing and mining rights gave increased prominence to the demarcation of islands and waterways. In February 1996 South Korea conducted naval and air exercises around the island of Tokdo (known as Takeshima in Japan) in order to counter Japanese claims to the island. 24 Given these problems, it should not be surprising that some Japanese military analysts view South Korea as a threat and its rapprochement with China as laden with political and even military significance. 25
Nor has the threat from Russia receded as far from the Pacific as it has from Europe. Russia no longer physically borders Western Europe; however, its borders remain unchanged in the Far East. Because of a lack of resources and maintenance problems, Russia’s Far Eastern fleet is largely restricted to port. But it still represents a potentially powerful force in the region and occasionally makes its presence felt. More important, if the Russian economy recovers, the entire fleet, as well as the Far Eastern air force, could be brought up to operational readiness. This has historical precedence, as Japanese strategists are well aware. 26 Given the political uncertainties in Moscow, and the persistent possibility that nationalists could someday gain control of the government, Russia too represents a potential military threat to Japan.
While the latent threats from the volatile Korean peninsula and the Russian Far East are considerable, the growth of China’s power looms as Japan’s greatest strategic problem. China’s military forces are less capable than those the Soviet Union maintained during the Cold War. But China, unlike the Soviet Union, sits between Japan and Southeast Asia, Japan’s most important sources of raw materials and one of its most important markets for finished products. In addition, Chinese capabilities are growing. Chinese official defense budgets have grown by 60 percent in real terms since 1989. While this represents a figure that is only half that of Chinese GNP growth, the Chinese National Defense Law, adopted in March 1997 stipulates that henceforth growth in the national economy should be fully reflected in the military budget.
As important as the rise of Chinese power is the question of how China will behave in coming years. Efforts by the Chinese leadership to solidify its domestic position through the use of nationalist symbols and propaganda include the depiction of Japan, with U.S. backing, as a power bent on regional hegemony. 27 Such rhetoric provided the backdrop against which China’s long dormant territorial dispute with Japan over the Senkaku/Diaoyu islands was aggravated in the summer of 1996. 28 Moreover, the influence of the military appears to have grown in the last several years. In 1995 conservatives in the military succeeded in pushing Jiang Zemin and other national leaders toward a more confrontational stance on Taiwan independence, culminating in China’s launch of missiles across the Taiwan strait in March 1996. With the death of Deng Xiaoping, the influence of the military has further increased: there is greater military representation in the Communist Party Central Committee, and the new National Defense Law requires that educational and media institutions should heighten their efforts at “national defense education.” 29
Japan has two options consistent with structural realism for dealing with its current security challenges. First, it could develop the conventional (and perhaps nuclear) forces necessary to balance against regional threats independent of U.S. assistance, and it could secure military allies among the minor and midsized powers of the region, particularly in Southeast Asia. Alternatively, Japan could work aggressively to offset the natural decline in U.S. alliance motivation by redefining the alliance so that Japan can shoulder a greater portion of military responsibilities within the existing framework; or Japan could be more conciliatory on trade and investment disputes, which, with the end of the Cold War, may assume ever greater importance for U.S. policymakers. Regardless of which strategy it pursues, we should expect Japan to exhibit great sensitivity to the distribution of gains through its trade with China.
The record to date indicates that: (1) although Japan has taken some measures to redeploy its forces into defense positions opposite China, it has not taken measures necessary to balance against China independent of U.S. assistance; (2) despite heightened rhetoric and media attention to the alliance after the 1995 incident in which three U.S. servicemen were convicted of raping an Okinawan schoolgirl, Japan has taken only limited measures to minimize the possibility of U.S. defection; and (3) Japan has shown little sensitivity to the problem of relative gains from trade between itself and China. We examine each point in turn.
Redeployment
To be sure, Japan’s military forces are being shifted southward, and in some ways remodeled, to counter Chinese power. 30 Demonstrations of Japanese concern have included the dispatch of Maritime Self-Defense Forces vessels to the disputed Senkaku/Diaoyu islands, the use of Maritime Safety Agency vessels to apprehend “pirates,” and political appeals for China to justify its military buildup and make its activities more transparent. 31 Japanese P-3C antisubmarine aircraft have been shifted from northern bases in Hokkaido and Aomori southward to Okinawa. Mobility will be enhanced with the addition of an amphibious assault ship which will be twice the size of any Japanese naval vessel built since World War II that, after minor modifications to the deck, will be able to accommodate Harrier fighter aircraft. 32 Other important additions to Japanese military forces include four Aegis guided-missiles cruisers and four AWACS (airborne warning and control systems) aircraft. Japanese military and diplomatic officials have also initiated or intensified dialogue with virtually all the states of East Asia. 33 In addition, Japan’s first postwar military intelligence agency, Joho Honbu, was established in late 1995. Much of this activity appears to be designed to help Japan better observe and counter whatever military moves China might mount against Japanese islands ringing the East China Sea.
These measures, however, are limited in scope; and it would be difficult to say that they signal a concerted shift of resources into military assets that could be used independently to balance against China’s regional objectives. Although some new capabilities have been added, the new National Defense Program Outline (NDPO), Japan’s official long-term military planning document adopted in 1996, calls for the reduction of unit formations in all three services. Almost across the board, personnel and equipment numbers will decline. For example, under the new plan, the number of ground-force tanks will be reduced by 25 percent, the number of maritime-force major surface combatants will decline by 17 percent, and the combined total number of combat aircraft in the maritime and air forces will decline by 14 percent. 34 The government announced in mid-1997 that the defense budget will not be exempt from its program of fiscal austerity. Japan Defense Agency (JDA) officials have been assured that procurement will decline even faster than the NDPO requires. 35
Reductions in the size of Japan’s force structure stand in stark contrast to developments in other parts of the region where regional force structures, particularly naval and air forces, have grown rapidly over the last decade. For example, while the number of major surface combatants in the Japanese Maritime Self-Defenses shrank between 1984 and 1993, the number of major surface combatants in the navies of other Northeast Asian states grew by 64 percent and those of East Asia as a whole (minus Japan) grew by 35 percent. 36
Given that U.S. security guarantees are currently in force, and that even without U.S. forces the Japanese military would enjoy significant advantages in defensive combat against all potential regional aggressors, Japan’s refusal to shift proportionally more resources into the defense sector will not leave the home islands vulnerable to invasion in the near future. Nevertheless, continued limitation on the size of Japan’s military force suggests that Japan is not preparing to balance against Chinese military power comprehensively. The lack of significant power-projection capabilities will leave Japan unable to defend her interests in areas distant from the home islands, and will make it difficult for Japan to secure firm allies or create an alliance system in Southeast Asia should strategic circumstances make such a development desirable.
Japanese policymakers are not simply taking the “go slow” approach to the expansion of Japan’s force structure. Limitations on the Japanese force structure have been codified in long-term planning documents. The first NDPO was adopted in 1976, and its provisions were faithfully followed for twenty years. It will be difficult to modify the 1996 NDPO quickly, even if strategic circumstances should change. Similarly, although Japan has the technical capability to produce nuclear weapons on fairly short notice (and some analysts have consequently echoed Herman Kahn’s 1970 prediction that Japan would go nuclear), Japanese planners are not preparing the population for the introduction of nuclear weapons. 37
Redefining the Alliance
Although there is little evidence that Japanese planners are thinking seriously about a defense strategy independent of U.S. forces, Japan is doing little substantively, either as a military or economic partner, to make the alliance more appealing to its American ally. During the 1995 crisis over North Korean nuclear program, U.S. defense officials approached their Japanese counterparts about military cooperation in the event of war on the Korean peninsula. The Japanese side refused to commit to the dispatch of minesweepers and other specialized assets in that eventuality. 38 After the Okinawa rape incident revealed the fragility of Japanese public support for the continued U.S. presence there, Japanese and U.S. officials hustled to reaffirm the alliance. A pair of highly visible rhetorical flourishes of solidarity—the April 1996 Clinton-Hashimoto Joint Declaration and the September 1997 Defense Guidelines—were designed to inject new meaning and confidence to the alliance in a changed security environment. Alliance managers made four claims: (1) the alliance was updated; (2) Japan’s defense perimeter was enlarged; (3) the alliance is more reciprocal and balanced; and (4) mutual trust was enhanced. 39 Yet, immediately after the summit, Prime Minister Hashimoto backed away from President Clinton’s use of the term “Asia-Pacific” to describe the common defense perimeter. Within months, senior Japanese Foreign Ministry officials sought to reassure Chinese diplomats at a vice-ministerial meeting that “the April 1996 Japan-U.S. joint declaration on security cooperation is not aimed at expanding the sphere of activity or application based on the security treaty.” 40 A year later, as new defense guidelines were debated, the Japanese leadership openly split on whether a crisis in Taiwan was included in the geographic expression “area surrounding Japan.” In the event, Japan refused to stipulate the contingencies under which it would provide rear area support for U.S. forces or even the geographic scope of the “area surrounding Japan.” 41 In short, although there has been much talk about enhanced roles and missions—and Japanese rear area support for U.S. military in particular—the two sides have not articulated clearly what the alliance stands for, nor who it is designed to protect against.
The United States and Japan have made even less progress on the greatest single irritant in the bilateral relationship, namely, asymmetries in trade and investment. When President Clinton sought numerical targets on Japanese imports, Japanese leaders (especially Prime Minister Hashimoto who was then MITI minister) were hailed as heroes “who could say ‘no’ ” to the powerful Americans. U.S.-Japanese bilateral imbalances in trade and investment persist despite decades of often acrimonious trade talks. Promises of a Japanese “big bang” market liberalization in 2001 are met with widespread skepticism. 42 Despite U.S. officials’ proclamations that the alliance depends on Japanese cooperation on trade, despite open moves by U.S. firms to “pass Japan” and move operations elsewhere in the region due to commercial difficulties they encounter in Japan, and despite an ambiguous U.S. China policy, all of which ought to raise the specter of abandonment in Japanese eyes, Japan’s economic behavior has not appreciably changed. 43
Relative Gains
From the perspective of structural realism perhaps the greatest anomaly has been Japan’s failure to exhibit a sensitivity to the relative distribution of gains that have accrued to China from its economic relations with Japan and other states. Although Japan has repositioned its military forces nearer China, and although it has made modest efforts to redefine its alliance with the United States, Japan has done little to stifle China’s economic growth. To the contrary, Japan has competed vigorously for a major investment presence in China. The Japanese used their influence in the Asian Development Bank and elsewhere to argue for the early lifting of the sanctions imposed on China after the suppression of the Tiananmen demonstrators in 1989, and Japanese business leaders visited China within months to reaffirm the commercial relationship. In fact, Prime Minister Hashimoto reminded his audience at a speech in Tokyo, just before his September 1997 visit to Beijing, that he was the first G-7 finance minister to visit China after Tienanmen. 44 In the late 1990s Japan is China’s largest trading partner, and China is Japan’s second largest trading partner after the United States. More Japanese official development assistance goes to China than to any other country. As a partial consequence of Japanese and other investments, the Chinese economy has grown at a double-digit pace for more than a decade.
In 1991 Prime Minister Kaifu Toshiki announced that Japan’s aid decisions would thenceforth be tied to the recipient state’s military and political behavior. However, despite concerns about Chinese nuclear testing, its conventional arms buildup, its military actions in the South China Sea, and its lack of military transparency, the Japanese government announced in December 1994 that annual aid for the three-year period after 1996 would be increased by more than 40 percent. 45 In September 1997 Prime Minister Hashimoto promised Beijing an additional $2 billion concessionary loan package, the largest ever extended. But, of even greater significance, was the report that same month that Japan had broken ranks with (and undercut) the United States and the European Union on the terms for Chinese membership in the World Trade Organization. 46
Japan is not pursuing these China policies behind a comprehensive U.S. shield. U.S. policy toward China is indeterminate at best. On the one hand, U.S. diplomatic recognition of Vietnam, the visit of Taiwanese leader Lee Teng-hui, and U.S. military support for Taiwan are all perceived in Beijing as measures designed to contain the growth of Chinese power. On the other hand, the Clinton administration’s policy of “engaging” China may clear the way for the United States to reestablish the military-to-military ties and defense industrial cooperation that existed during the Cold War. The United States has not established a clear deterrent posture in the South China Sea area. 47 The ambiguity of U.S. policy, particularly the lack of any comprehensive U.S. promise to protect Japanese interests outside of the areas surrounding Japan, makes the Japanese decision not to pursue a relative gains strategy against the Chinese difficult to reconcile with the core propositions of structural realism.
Japan’s economic and foreign aid policies toward China are even more puzzling when considered in the context of its economic policies toward the United States and Western Europe. Whereas Japan is eagerly courting China as an economic partner, its economic relations with other advanced industrial states continue to be difficult. Japan has protected itself against significant import penetration by the other G-7 states by effectively limiting the ability of multinationals to gain control of Japanese companies. Despite the lifting of many formal restrictions on foreign ownership during the 1970s, less than 0.1 percent of all investments in Japan from 1982 to 1992 originated from foreign sources. 48 This is less than one-tenth the level of Germany, the G-7 country with the next lowest ranking.
Japan’s reticence to integrate its economy reciprocally with those of Western Europe and the United States, while continuing to deepen its economic relations with China, is perplexing from a structural realist perspective because there seems to be little correlation between the willingness of Japan to engage these states economically and the degree of military threat they pose. Even if one were to make the extreme argument that Japan might view the United States as a potential military threat, it would be extraordinarily difficult to make such a case for the states of Western Europe. None is as populous or as wealthy as Japan; none has a defense budget as large as Japan’s; each is so distant from Japan that the projection of force across the gap would be extraordinarily difficult; and finally, none has any territorial or other major unresolved political disputes with Japan, and all are fellow democracies. Structural realists are surely correct that military security concerns sometimes act to inhibit trade and investment flows. At least in the case of Japan’s economic relations, however, other considerations would seem to be more important in determining the nature of trade with specific partners.
Japanese foreign policy after the Cold War provides ample evidence that the possibility of war and conquest is not the central concern of Japanese policymakers. Despite great new uncertainties in its relations with both China and the United States, Japan has shown great reluctance to create more independent, robust, or well-rounded military forces. Moreover, it has shown greater concern over Japan’s relative economic position vis-à-vis the United States and Western Europe than it has over the rapid expansion of the Chinese economy.
This observation that Japanese behavior does not seem consistent with the predictions of structural realism is not ours alone. Other American defense officials and academics, recognizing this, conclude that Japan has no serious security strategy, or that it is an “economic giant and political pigmy.” 49 However, while we find structural realism inadequate as a guide to Japanese international behavior, we would not rush to conclude that Japan is in any way bereft of (or that its norms preclude) strategic thought. Rather, we would first entertain the possibility that Japanese strategy is consistent with the sort of technoeconomic logic referred to by Huntington (and quoted in the introduction to this article). In the following section, we first consider the principles and predictions that would be associated with such a theory and then examine whether Japanese foreign policy is consistent with those predictions.
Mercantile Realism
The idea that technology and national wealth should be given prominence in providing security is hardly unique to the contemporary era. Its disparate antecedents include the nineteenth-century neomercantilist propositions of Alexander Hamilton and Frederick List and the mid-twentieth-century insights of Joseph Schumpeter, E. H. Carr, and Eli Hecksher. We learn from Hamilton and List that states must nurture their manufacturing capacity to remain strong; from Hecksher and Carr that states can use economic power to unify and dominate the system within their sphere; and from Schumpeter that innovation is the most dynamic source of structural change and power in capitalist economies.
Although traditional mercantilists and classical realists have been concerned largely with the connection between national wealth and national military power, we note that policies designed to enhance the technological and economic fortunes of states may be pursued to increase a state’s political leverage and independence even in the absence of military-security considerations. In developing predictions consistent with a mercantile version of realist theory, we have entertained the notion that broad segments of the elite in some states might embrace three ideas: (1) the possibility that the efficacy of appeals to arms has, for a variety of reasons, declined dramatically during the course of the twentieth century; 50 (2) the idea that national economic power can be used to constrain the sovereignty or independence of states; 51 and (3) the notion that national economic power can be enhanced through industrial and trade policies designed to create comparative advantage in critical high-tech sectors. 52
This effort should be seen in a larger context. In its classical formulation, realism was a comprehensive theory of state behavior. Only during the Cold War did it became closely associated with the more narrow logic of military competition. We agree with Randall Schweller that the breadth and full texture of international economic competition has been lost in the structural realists’ quest for parsimony. According to Schweller, “ . . .scholars and practitioners have been getting off the realist train at various stops over the past decade or so. . . At its core, classical realism is a theory of the state and international competition. It is not, primarily, a theory about how states acquire security or about strictly defense issues. Indeed, the best treatments of realism’s intellectual roots are not found in the security side . . .but rather in its more overlooked economic philosophy of mercantilism.” 53
Despite differences in goals, structural and mercantile realism share several common elements. Each is “realist” because each posits states as the most important actors in world politics; each assumes that state behavior is determined by rational national leaders who seek to maximize state power; and each suggests a competition among states for relative power and security. Despite sharing core elements, mercantile and structural realism produce divergent predictions under many global and regional political conditions. These differences involve more than differential rates of military investment or trade policies. They comprise a broad range of preferences, including the question of how elites define threats and select allies, as well as how they conduct themselves with states they find threatening and those they find nonthreatening.
Here we outline several propositions associated with mercantile realism, paying special attention to areas where predictions differ from those of structural realism: (1) security threats are economic as well as military; (2) powerful technoeconomic states will balance against other technoeconomic states; (3) when tradeoffs must be made, technoeconomic interests may be pursued at the expense of political-military interests; and (4) the nationality of firms matters as much or more than the location of production.
Economic Security Threats
Under structural realism, the primary threat to state security is from direct attack. The equivalent of military conquest in mercantile realism is deindustrialization or dependency. States that intervene in their national economies to nurture domestic producers are acting to protect domestic markets from the economic equivalent of direct attack; we would thus expect states to justify these interventions as matters of national security that will therefore entail the sorts of national mobilization and sacrifice associated with military mobilization elsewhere. It follows that the elite cadres of economic bureaucrats in such states should enjoy the same training and status as military officers in the states better described under structural realism. Such states should be particularly sensitive to technological dependency. Given that technological capabilities are essential for prosperity in industrial economies, timely access to technology is a matter of national security. The dangers of excessive dependence are measured as more than “vulnerability” to access denied; there are the opportunity costs of foregone chances to learn and to innovate. Mercantile realists will also worry about exploitation by technological leaders who would use their market power to “tie” (influence purchases), to “rent-seek” (raise prices), to extort by allocating or denying supplies for strategic reasons, and to be predatory by driving another nation’s producers from the market entirely. 54 Mercantile realists refer to the consequence of such dependency—the reduction of national firms to assemblers, handlers, and retailers unable to reap the full profits of manufacturing and innovation—as “hollowing” and make it a central focus of strategy.
Economic Balancing Behavior
States may balance both economically and politically against rival industrial powers even when those nations pose little military threat; conversely, close economic and political relations may be pursued with states possessing complementary economies, even when such behavior entails some degree of future military risk. States may adopt a wide array of measures, including strengthening ties with economically less-threatening partners, in order to mitigate this danger. As in structural realism, balancing behavior is most likely to characterize the behavior of major industrial states. Technologically weak states may have little choice but to integrate their economies (bandwagon) with the dominant partner. The economic bloc that would ensue is the mercantile realist analogue to the military alliance in structural realism. Under mercantile realism, states will also balance against others based upon judgment of their strength, position, and behavior, but these judgments will conform to a technoeconomic logic:
Strength
Strength in the mercantile world is not always determined by size, population, or military capability, but also by wealth and technology. While these have hardly been unrelated historically, they are not always covariant and should be distinguished analytically. 55 Mercantile realists will balance against wealthy states that are endowed with technology-intensive industries.
Position
Position in the mercantile world is defined by its industrial structure rather than by its physical geography. States that compete in the same sectors will tend to view one another as threatening, and mercantile realists will minimize intra-industry trade. While military strength is rapidly attenuated across space, technological power, and the ability to profit from it, are not. Hence, in the context of global markets, states far away may pose as big a threat as those that share common borders.
Behavior
States will balance against others that behave as economic predators. Moreover, because the behavior of other states may be misinterpreted under mercantile realism just as it is in the world of structural realism, we can imagine the problem of technoeconomic “security dilemmas” in which defensive efforts made by one state (e.g., to protect infant industries) may be viewed by trading partners as aggressive actions to which they respond with tariffs and other sanctions.
Economic-Military Tradeoffs
Nations may be forced to choose between maximizing technoeconomic values or political-military values. Structural realists argue that when forced to make this choice, states will seek to achieve political-military goals first. Military security is like oxygen, they assert. It is taken for granted until there is too little of it, at which point, states will do anything to get more. 56 Mercantile realists respond that economic security is just as important, adding that once economic security is gone, it is difficult to recover. A state with a powerful technological and industrial base is capable of transforming itself from a military pygmy into a military giant within a short span of time, whereas states with large militaries that allow their industrial and technological base to wither find themselves in a more difficult predicament. 57 They may thus be unable to protect themselves from either economic coercion or military threats.
Nationality of Firms
Even in a global economy, mercantile realists assume that firms have (and will retain) a national center of gravity. States therefore seek not only to nurture firms within their borders but also to support national firms abroad. These firms are more comfortable trading with co-nationals sited abroad than they are with foreign-owned entities at home. It follows that outward foreign direct investment can be used to entangle allies and to create dependence that serves national ends, while inward direct investment can be carefully monitored and circumscribed to prevent the same result. Mercantile realists have no difficulty identifying “who is us?” After all, as Laura D’Andrea Tyson put it, mercantile realists know very well that “they are not us.” 58 Under structural realism, the physical location of production may be more important, because production assets may be nationalized in the event of war.
Testing Mercantile Realism Against Japanese Foreign Policy
Given that strong military states are also often wealthy states with advanced technology, the predictions of structural realism and mercantile realism frequently are congruent. This, however, is not always the case. Japanese foreign policy is an important case in point. Here we evaluate postwar Japanese foreign policy against each of our propositions in turn.
Economic Security Threats
Japan persistently has acted as if its greatest vulnerabilities have been economic and technological. Foreign penetration of Japanese markets, particularly in manufactured goods, has been perceived as a threat, whether that penetration was by the firms of a military competitor or ally. For example, in 1982 at the height of the Cold War, Wakasugi Kazuo, the director-general of the Trade Policy Bureau of MITI, warned publicly that unless the United States and Europe relaxed their trade and market-opening pressures, Japan might be forced to join the communist bloc. 59
When economic threats are perceived, Japan’s leaders have been willing to sacrifice military values for technoeconomic ones. For example, in the late 1980s, the U.S. Department of Defense (DoD) began a program to improve efficiency in weapons acquisition. The DoD, working with some of its major prime contractors, developed software for an electronic materiel database: the computer aided acquisition and logistical support system (CALS). CALS is designed to shorten development time and reduce inventory, thereby increasing efficiency; contractors including Boeing and General Motors began adapting this integrated product management system for commercial use. According to Japanese press reports: “Japanese companies are afraid that CALS . . .will become the international standard . . .and if Japanese products do not meet the standard they will be kept out of the world market. It could also lead to the disintegration of the Japanese traditional keiretsu business practices and to worldwide restructuring since cost/performance could be the driving force for the use of CALS.” 60
The threat that Japanese firms will be excluded from the marketplace, and that traditional supplier relationships will be disrupted by low cost and direct procurement (something desirable in the United States) led MITI to budget $17 million in 1997 to develop both a domestic CALS and an international one that excludes U.S. and European firms. The industrial threat posed by the possible imposition of a U.S. procurement standard clearly was given greater weight than considerations of cost in military procurement or than the interests of the U.S.-Japan military alliance. MITI has invited China, Indonesia, Malaysia, and the Philippines to participate in the development of pilot CALS systems in the areas of automobile, electronics, and textile manufacturing. MITI says that it will invite the United States to participate “in the future.” 61
Japan’s leaders perceive a range of foreign threats—not the least of which are threats to the sustenance of long-term manufacturing capabilities—including market shifts and technological revolutions. As a result they vigilantly monitor the economy to mitigate the worst effects of each. They also fear “excessive competition”—the fratricidal competition among domestic firms that results in bankruptcies and unemployment. In the Japanese view, the social dislocations of “excessive competition” are as great or greater than the economic costs of excessive concentration in the neoclassical model. Thus firms and sectors are nurtured, and the resulting dense local, regional, national, political, and industrial networks do not facilitate the “cut and run” strategies typical in the United States. Rather, Japanese firms share market pain, and grow together during economic upturns.
The threat of deindustrialization—popularly referred to as “hollowing” in Japan—has never been far from public concern and strategic attention. Perhaps as a consequence, a stronger yen in the first half of the 1990s drew much less investment away from Japan than Western analysts expected. Small and medium-sized manufacturing employment actually rose by 8 percent between 1990 and 1992, stayed flat through 1993–94, and fell just 2 percent from late 1994 to 1995. 62 Thus, Japanese manufacturers added jobs after the bubble burst, despite the high yen, which encouraged even faster investment overseas. That the United States (despite its cheap dollar) lost 12 percent of its manufacturing base during this same period suggests that Japanese strategists place a different value on manufacturing and are willing to pay a higher cost to maintain it.
Finally, there is the issue of technology transfer to Japan’s trading partners. Whereas structural realism might predict that states will use technology transfer to strengthen an alliance against military competition, mercantile realism makes no such prediction. During the Cold War it was in the perceived security interest of the United States to encourage U.S. firms to sell technology to Japan (or at least not to intervene when the Japanese demanded such transfers as the cost of gaining access to the Japanese market). The United States provided technology to support its allies. By contrast, in the Japanese case, technology may be traded and transferred within firms, but it is rarely sold at arm’s length to unrelated firms. As mercantile realism would predict, there are very few countries with which Japan enjoys a technology trade surplus. Further, those that do have a technology trade surplus with Japan are also those—such as China, Thailand, Indonesia, and the United Kingdom—where Japanese investment accounts for a large portion of domestic manufacturing investment. In Japanese practice, technology, like trade, follows investment, and technology is a strategic asset, not a commodity. 63
Economic Balancing Behavior
During the Cold War Japan seldom had to choose between advancing its political-military or technoeconomic interests. The Soviet Union represented a military security threat to Japan; it did not represent an economic threat, nor did it represent an economic opportunity. For its part, the United States was willing to provide both economic public goods in the form of open markets and military public goods in the form of an extended nuclear deterrent and forward-deployed ground, sea, and air forces. Japan could bandwagon with the United States politically and balance against it economically; thus the general outline of Japan’s alliance patterns during the Cold War—that is, a security policy built on an alliance with the United States combined with a protectionist economic policy—is consistent with both conventional and mercantile realism.
In the post-Cold War period, Japanese leaders face difficult choices about how to reconcile technoeconomic with military-political security interests. Intermittent, but intense, U.S. pressure for market access has provoked a heated debate in Japan between those who would suggest an Asia-first strategy and those who would seek to maintain the American alliance. To date, the alliance supporters have prevailed. Yet many Japanese bureaucrats, politicians, and business leaders have openly advocated turning away from the U.S. alliance and toward Asia. 64
From a mercantile realist standpoint, Japan has significant incentives to pursue an Asia-first strategy. Many Asian economies are highly complementary to Japan’s; and Japan enjoys tremendous leverage in its dealing with those states by using its size and technological position to play them off against one another. Japan has not only established wholly owned subsidiaries throughout the region, but it has also replicated entire supplier-producer networks in Asia. 65 The results have been impressive. In 1996 Japan had an $18 billion surplus with members of the Association of Southeast Asian nations (ASEAN) and a $23 billion surplus with Taiwan and the Republic of Korea alone. 66 Japan runs trade surpluses with virtually all its trade partners—rich and poor, agricultural and industrial, those with budget surpluses and those with deficits. These results belie the argument that Japanese trade balances are merely the consequence of low savings and investment abroad.
Economic-Military Tradeoffs
Many of Japan’s decisions in the military realm have been driven as much by economic considerations as by strictly military calculations. In 1968 and 1970 Prime Minister Sato Eisaku commissioned studies on Japanese nuclear options. The second of these reports concluded that “the days are gone when the possession of nuclear weapons is a prerequisite for superpower status.” The studies were undertaken to provide the intellectual justification for Japan’s ratification of the nuclear Non-Proliferation Treaty (NPT). It was hoped that ratification of the NPT would provide both economic and political benefits useful for a Japanese government bent on maintaining high growth. One participant reported that “there was a pressing need to secure nuclear energy for economic growth by joining the treaty. It was therefore urgent that we arm ourselves with a rationale against acquiring nuclear weapons.” 67
The debate over the role of Japan’s conventional forces and on whether or not Japan should become a “normal” nation is colored by economic considerations and the exigencies of economic diplomacy. Even those, such as politician Ozawa Ichiro, who use the term “normal” to mean a greater Japanese political and military role in the world, would limit Japanese involvement in operations overseas to U.N.-sponsored and directed missions. 68 Although Japan displays great concern for autonomy in economic affairs, works diligently to acquire and indigenize foreign technology, and resists the foreign ownership of production in Japan, it also displays a far greater willingness than many other states to place its forces under international command. Unlike most “normal” nations, the rationale for the use of military force by a “normal” Japan would be the assumption of greater international burdens. Use of force would not be undertaken in the pursuit of national interests as structural realists would define them. Rather, the use of force would be the burden that Japan would assume in order to maintain its image as a member in good standing of the world community. It is that image, not the use of force per se, that serves Japan’s national interests by reinforcing other states’ inclinations to continue supporting the free-trade system that makes Japan’s prosperity possible. 69
Whereas the United States is willing to overpay for defense goods to guarantee the autonomy and health of its defense industry, Japan is frequently willing to pay higher factor costs to maintain industrial autonomy. Examples are easy to find. Although Japanese reports in 1995 indicated that acceding to U.S. demands for increased auto parts imports would have enabled Japanese makers to cut costs on those parts by 20 to 30 percent, a rapid shift in supplier relations was judged detrimental to Japan’s interests since it might jeopardize Japanese production, employment, and the keiretsu system of industrial relations. 70 Japan has shown less sensitivity to the problem of relative gains vis-à-vis one of its greatest potential military competitors than structural realism might predict, while displaying greater sensitivity in its economic relations with the United States and Europe. From the beginning of the U.S. occupation in 1945 until today, Japanese strategists have been more willing to accept U.S. military on their soil than they have U.S. bankers or manufacturers.
Nationality of Firms
As noted earlier, structural realists have made few detailed predictions about national economic priorities, such as whether the ownership of firms or the location of those firms is more important. Although it is therefore difficult to test predictions of structural and mercantile realism with equal certitude, the evidence does suggest three conclusions. First, the logic described by mercantile realism on the question of national ownership does seem to be at work in the Japanese case. Second, Japanese leaders take the question so seriously that they are willing to risk undermining important political-military relationships in the pursuit of Japanese interests in this area. Third, the United States does not pay the same premium for national ownership. Japanese elites are certain that nations and national ownership count, even in a “global economy.” The Japanese know exactly “who is us,” and prefer to trade with (and transfer technology among) co-nationals.
The 1995 auto parts trade dispute between the United States and Japan illustrates these points clearly. U.S. pressure on Japan to purchase higher volumes of U.S. manufactured automobile parts in 1995 went beyond routine demand-making and threatened to lead to a fuller trade war. The Clinton administration set a deadline by which 100 percent tariffs would be applied to imported Japanese luxury automobiles unless there were “measurable” changes in Japanese procurement of U.S. auto parts. The Japanese reacted vigorously and refused to bow to U.S. pressure. Hashimoto Ryutaro, then Minister of MITI, said “no” to the United States and was hailed as a hero. Ultimately, an agreement was reached that Japan would increase imports of auto parts manufactured by Japanese firms in the United States. The Clinton administration was satisfied that jobs would stay at home, while Japanese firms were pleased to achieve significant cost reductions and retain control and profits. Japan’s ability to say “no” to the United States on the ownership of firms and technology and the willingness of the United States to take “no” for an answer are attributable to the difference between the dominant U.S. view that firms do not have a nationality and the prevailing Japanese view that Japanese firms are Japanese wherever they are located.
An even clearer illustration of the emphasis that Japanese leaders place on national ownership and control can be seen in the approach to competitive foreign pressure euphemistically called “development importing” (kaihatsu yunyu). Using this approach, when aluminum smelting proved hopelessly uneconomical in the early 1980s, Japanese firms were guided by the government toward collective investment in Brazilian and Indonesian smelters to avoid dependence on foreign ingot. 71 Following the same logic, the liberalization of beef and citrus a decade later was accompanied by the acquisition of cattle ranches and groves abroad.
Conclusion
Japanese policymakers and academics commonly argue that economic power is now more salient than military power. The former head of the Mitsubishi Research Institute summarized this position when he wrote that “although national supremacy was once a product of military power, it is now decided primarily by economic power. Economic power is, for its part, decided primarily by the ability to generate technology.” 72 Ishihara Shintaro, the conservative politician, and Morita Akio, the former chairman of Sony, called attention to this view when they wrote that production of the microchips used in sophisticated weapons systems abroad gives Japan leverage over even the world’s strongest states. 73 Economic power is, in this view, not simply the basis on which military power rests but can be used to safeguard or constrain national sovereignty.
Despite Japan’s capability to generate substantial military power, there is no broad-based call for Japan to convert its economic strength into military power and assume regional, much less global, leadership. Rather, many Japanese intellectuals have proposed Japan pursue a division of labor in international society. Noting that that by the end of the Tokugawa era Japan belonged to the merchants and the samurai (warriors) had been reduced to poverty, Amaya Naohiro, the late MITI official, argued that “for a merchant to prosper in samurai society, it is necessary to have superb information-gathering ability, planning ability, intuition, diplomatic skill, and at times the ability to be a sycophant.” 74
Japanese strategists have noted that Japan’s history parallels the experience of Renaissance European trading states. Gotoda Masaharu, an LDP (Liberal Democratic Party) politician, argues that “while Mediterranean states such as Genoa, Naples, and Pisa fell one after another, Venetian prosperity continued, giving it a thousand year reign. What enabled Venetian prosperity alone to continue? First, Venice coolly faced the reality that there was no alternative path to making a living by selling their produce overseas. Accordingly, it pursued a wise foreign policy and made no missteps in its foreign policy choices. Secondly, its political and administrative apparatus remained in firm control, internal opposition was overcome, and a comparatively stable social order was maintained domestically.” 75 Viewed from this perspective, Japanese efforts to exclude foreign firms from penetrating domestic markets and their willingness to pay a premium for high employment are more understandable. Japanese mercantile realism includes both measures designed to strengthen the technological, industrial, and financial underpinnings of power and measures designed to insulate Japanese society from forces that might ultimately jeopardize the state’s ability to pursue a mercantile policy in the long run.
During the 1980s, books and articles held up Japan as the outstanding example of the country whose behavior undermined neoclassical economic theory. Here we suggest that Japan is also a difficult case for orthodox theories of security. Some aspects of Japan’s foreign policy are difficult to reconcile with realist theory, when the primary motivation of state behavior is said to be military threat. Of course, structural realists do not claim that all states follow the behavioral imperatives of their theory; rather, they claim that any state which does not will pay a penalty. Japan may ultimately pay a high penalty for its apparent adherence to a different causal model of what makes states succeed or fail. Then again, by following a different, equally rational strategy, it may avoid these costs and emerge stronger and safer than before. Mercantile realism seems to have served Japan well during the period we studied. At a minimum, any comprehensive realist theory should include the logic of technoeconomic competition if it seeks to include Japan in the states the behavior of which it claims to explain.
Some analysts, pointing to the fact that the United States has guaranteed Japanese security, will argue that Japanese behavior is consistent with the precepts of structural realism and that Japan’s behavior will change if the U.S. alliance is weakened. While we cannot rule out such a possibility (and while we readily acknowledge that U.S. hegemony abetted the consolidation of the system we describe), we would urge circumspection both toward Japanese foreign policy and structural realism itself based upon our analysis. By now Japan has long had the world’s second largest economy—an economy greater in proportion to the world’s largest economy than either the Soviet Union’s at the height of the Cold War or Imperial Japan’s and Nazi Germany’s combined on the eve of World War II. Yet Japan, with all of the makings of a traditional great power, continues to rely on another great power for its military security. While this so-called “free-riding” may be realist—and we argue that it is in fact very consistent with mercantile realism—it is difficult to reconcile with the self-reliant and militarily focused world of great-power competition found under structural realism. A Japan operating under a structural realist model would long ago have begun lobbying to “pop the U.S. cork” from its bottle; it should have been “overproducing” military security since the 1970s. 76 Japan’s foreign policy instead consistently reflects a more complex calculus, under which the maximization of military security frequently is subordinated in the pursuit of technoeconomic security interests. Military security is not ignored, but neither is it the predominant focus of a grand strategy designed to enhance comprehensive state power in the long run.
Acknowledgment
The authors gratefully acknowledge the thoughtful critiques of earlier drafts of this essay by Robert Art, Joseph Grieco, Chalmers Johnson, Iain Johnston, Chikako Kawakatsu Ueki, Michael Mastanduno, Randall Schweller, Christopher Twomey, and Stephen Van Evera. This was originally prepared for the Olin Institute conference on “Realism and International Relations After the Cold War,” Cambridge, Massachusetts, December 1995.
Endnotes
Note 1: See, for example, the essays in two recent compendia on Japanese foreign policy: Gerald Curtis, ed., Japan’s Foreign Policy After the Cold War (New York: M. E. Sharpe, 1993) and Yoichi Funabashi, ed., Japan’s International Agenda (New York: New York University Press, 1994). Exceptions are Takashi Inoguchi, Japan’s International Relations (London,: Pinter, 1994); Chalmers Johnson, “The State and Japanese Grand Strategy,” in Richard Rosecrance and Arthur Stein, The Domestic Bases of Grand Strategy (Ithaca, N.Y.: Cornell University Press, 1993) and Mike M. Mochizuki, “American and Japanese Strategic Debates: The Need for a new Synthesis,” in M. Mochizuki, ed., Toward a true Alliance: Restructuring U.S.-Japan Security Relations (Washington, D.C.: Brookings Institution Press, 1997), ch. 2. Back.
Note 2: Peter Katzenstein, Cultural Norms and National Security: Police and Military in Postwar Japan (Ithaca, N.Y.: Cornell University Press, 1996) and Peter Katzenstein and Nobuo Okawara, Japan’s National Security: Structures, Norms and Policy Responses in a Changing World (Ithaca, N.Y.: Cornell University Press, 1993). Back.
Note 3: Samuel Huntington, “Why International Primacy Matters,” International Security 17 (4) (Spring 1993): 311. Back.
Note 4: Kenneth N. Waltz, Theory of International Relations (New York: Random House, 1979), 126. Back.
Note 5: Stephen Walt, The Origins of Alliances (Ithaca, N.Y.: Cornell University Press, 1987), 5. Back.
Note 6: Waltz, Theory, 134 and Walt, Origins, 29. Back.
Note 7: This rationale can be found in Waltz, Theory, 104–7. For realist critiques of institutionalism which make similar points, see Joseph Grieco, “Anarchy and the Limits of Cooperation: A Realistic Critique of the Newest Liberal Institutionalism,” International Organization 42 (Summer 1988): 497–500 and John Mearsheimer, “The False Promise of International Institutions,” International Security 19 (Winter 1994/95): 21. Back.
Note 8: Joanne Gowa, Allies, Adversaries, and International Trade (Princeton: Princeton University Press, 1994), 53 proposes that “free trade is more likely within than across alliances.” See also Grieco, “Anarchy and the Limits of Cooperation,” p. 501 and Arthur Stein, “The Hegemon’s Dilemma: Great Britain, the United States, and the International Economic Order,” International Organization 38 (Spring 1984): 364–67. Back.
Note 9: See Glenn Snyder, “The Security Dilemma in Alliance Politics,” World Politics 36 (July 1994): 471–72. Back.
Note 10: John Dower, Empire and Aftermath: Yoshida Shigeru and the Japanese Experience, 1878–1954 (Cambridge: Harvard University Press, 1979), 388–89. Back.
Note 11: Richard Samuels, “Rich Nation, Strong Army”: National Security and the Technological Transformation of Japan (Ithaca, N.Y.: Cornell University Press, 1994), ch. 3. Back.
Note 12: Edward J. Lincoln, Japan’s Unequal Trade (Washington, D.C.: Brookings Instititution, 1990), 15 provides a full analytical summary of Japanese nontariff barriers. For a discussion of measures to discourage foreign investment, see Mark Mason, American Multinationals and Japan (Cambridge, MA: Council on East Asian Studies, Harvard University, 1992). Back.
Note 13: Jerome Cohen, Economic Problems of a Free Japan (Princeton: Princeton University Center for International Studies, 1952), 89. Back.
Note 14: Mason, American Multinationals, 183. Back.
Note 15: Since 1976, the Japanese defense budget has remained essentially fixed as a percentage of GNP (around 1 percent by Japanese accounting practices or 1.5 percent by NATO accounting standards). Back.
Note 16: Herman Kahn, The Emerging Japanese Superstate: Challenge and Response (Englewood Cliffs, N.J.: Prentice-Hall, 1970), 165. Back.
Note 17: GNP figures are from the World Bank, World Development Report (1994), 166–67. Back.
Note 18: See, for example, Eric A. Nordlinger, Isolationism Reconfigured: American Foreign Policy for a New Century (Princeton: Princeton University Press, 1995) and Eugene Gholz, Daryl G. Press, and Harvey M. Sapolsky, “Come Home America: The Strategy of Restraint in the Face of Temptation,” International Security 21 (4) (Spring 1997): 5–48. Back.
Note 19: The United States reduced the number of forward-deployed military personnel in Western Europe, where the threat has receded most dramatically, from over 300,000 in 1989 to approximately 100,000 in 1997. U.S. forces have been withdrawn entirely from the Philippines, where the United States had been asked to pay a larger sum for basing rights. Back.
Note 20: On the increased assertiveness of U.S. economic policy, see Michael Mastanduno, “Preserving the Unipolar Moment: Realist Theories and U.S. Grand Strategy after the Cold War,” International Security 21 (4) (Spring 1997): 49–88. Back.
Note 21: Department of Defense Office of International Security Affairs, United States Security Strategy for the East-Asia Pacific Region, February 1995. Back.
Note 22: Asahi Shimbun, July 29, 1995, 1. A survey done in seven major East Asian cities showed that while a majority of the people interviewed in Southeast Asia (Bangkok, Manila, Singapore, and Jakarta) responded that “Japan had become a country which could be trusted,” those in Seoul, Beijing, and Shanghai responded that it had not. Asahi Shimbun, August 13, 1995. These feelings help explain why a novel by a little-known author about a Korean nuclear attack on Japan sold two million copies in its first ten months in 1993 and why the popularity of President Kim Yong-Sam rose in 1994 after he ordered the destruction of the National Museum in Seoul, a structure originally built to house Japanese occupation authorities. See Katsuhiko Kuroda, “’Nichi-Kan Kakusenso Shosetsu’ no Kiken” (“The Danger of a ‘Japan-South Korean Nuclear War Novel”’), Bungeishinju, June 1994. Back.
Note 23: The official South Korean Defense White Paper listed Japan as a potential military threat in 1992. Under U.S. pressure, explicit references were subsequently deleted. Back.
Note 24: New York Times, February 15, 1996, 5. Back.
Note 25: See, for example, Shinju Butei, “Kan-Chu Kokko Juritu to Nichi-Kan Kankei” (“Korean-Chinese Normalization and Japanese-Korean Relations”), Bôei Kenkyû (5) (1992). Back.
Note 26: According to Foreign Media Note, August 12, 1993, a military analyst, Goro Saito, pointed out in Gunji Kenkyu, May 1993 that Moscow had recovered from the chaos of the Russian Revolution to field formidable Soviet forces in Siberia and the Maritime Province and argued that Japanese need “to learn from history the risk of Japan’s northern threat recovering.” p. 2. Back.
Note 27: For Chinese propaganda towards Japan, see Asahi Shimbun, September 14, 1995. On the larger effort to inspire nationalism, see Far Eastern Economic Review, November 9, 1995, 21–26. Back.
Note 28: Following harsh rhetoric from China on the issue, the central government ultimately apparently became alarmed at independent calls by student organizations for even tougher measures. The police were called upon to prevent further independent student agitation, and the government softened its own rhetoric. Back.
Note 29: See Jiefangjunbao, March 19, 1997, for full text of National Defense Law and Asahi Shimbun, September 19, 1997 for data on Central Committee representation. The official Chinese military budget passed in March 1997 called for a 15 percent increase in defense spending—about the same rate as national economic growth. Back.
Note 30: Asahi Shimbun, May 14, 1994, 13. Michael Green and Benjamin L. Self, “Japan’s Changing China Policy,” Survival (Summer 1996). Back.
Note 31: See for example, Shigeo Hiramatsu, “China’s Naval Advance: Objective and Capabilities,” Japan Review of International Affairs (8) (Spring 1994); Beijing Review, November 5–11, 1995; and “Murayama to Raise Spratlys Issue with Li Peng,” FBIS, March 9, 1995, 4. Back.
Note 32: The Maritime Self-Defense Force announced its intention to procure “Harrier-2 plus” fighters in April 1995. See the report in Tokyo Shimbun, April 28, 1995 in FBIS-EAS-95–083, May 1, 1995. Back.
Note 33: In Southeast Asia, there has been active cooperation with regional states. For example, Japan coordinates its efforts toward Burma and Indochina with Thailand, where strong political and military ties have been reinforced by high levels of foreign aid, exchange programs for military officers, and constant high level contact between diplomats. See, Asahi Shimbun, March 13, 1995. See also Japan Digest, March 20, 1995. Back.
Note 34: “Shinboei Keikaku Taiko” (“The New National Defense Program Outline”), Asahi Shimbun, November 29, 1995. Back.
Note 35: JDA procurement officer interview, September 18, 1997, Tokyo. The rise of the yen and the growth of the Japanese economy has resulted over the decades in the steady rise of Japanese defense spending in constant dollar terms. By FY 1996 the Japanese defense budget reached almost $60 billion, easily the second largest defense budget in the world. Yet given the continued unwillingness of the Japanese to increase the share of GNP devoted to defense and the high price of domestically produced defense goods, even that amount is insufficient to produce a force with substantial power projection capabilities. Back.
Note 36: IISS, Military Balance 1993–94, Map insert titled “Asia: the Rise of Defense Capability, 1984–1993. “Primary surface combatants” refers to combatant naval ships over 1,000 tons.” Back.
Note 37: For realist predictions of the nuclearization of Japan, see Christopher Layne, “The Unipolar Illusion,” International Security 17 (Spring 1993) and Waltz, Theory, 1993. As noted earlier, Kahn, The Emerging Japanese Superstate, 1970, is of particular interest in this regard. On Japan’s technical capabilities and the concerns that Japan’s plutonium-based energy program has engendered, see Eugene Skolnikoff, T. Suzuki and K. Oye, International Responses to Japanese Plutonium Programs (Cambridge, MA: Center for International Studies, Massachusetts Institute of Technology, 1995). Back.
Note 38: Asahi Shimbun, November 26, 1995, 1. Back.
Note 39: Patrick Cronin,” The US-Japan Alliance Redefined,”Strategic Forum, (75) (May 1996). Back.
Note 40: Yoshitaka Sasaki, “New Order in the Asia-Pacific Region and Japan’s Non-Military Role,” unpublished paper presented to the Abe Fellows Symposium, December 19, 1996, p. 10. Back.
Note 41: See the Office of the Secretary of Defense (Public Affairs), Joint Statement of the U.S.-Japan Security Consultative Committee on the Completion of the Review of the Guidelines for U.S.-Japan Defense Cooperation , No. 507–97, September 23, 1997. Kajiyama Seiroku, Japan’s Chief Cabinet Secretary, resigned soon after being scolded by LDP Secretary General Kata Koichi for asserting that Taiwan was “naturally included” within this area. See Asahi Shimbun, September 3, 1997. Back.
Note 42: Some refer to the “Big Bang” as a “Big Whimper.” The Daily Yomiuri, February 3, 1997, 6. Back.
Note 43: A 1995 DOD East Asian strategy statement (the so-called “Nye Report”) warns that “if public support for the relationship is to be maintained over the long term, progress must continue to be made by both sides in addressing fundamental economic issues.” Department of Defense Office of International Security Affairs, United States Security Strategy for the East-Asia Pacific Region, February 1995, 10. In a 1995 column, Thomas Friedman argued that “We are being played for fools. Japan will only change when we use the full strategic and economic weight of the U.S. to make it clear to Tokyo that a failure to open all its markets, with concrete results, will lead to a crisis in the U.S.-Japan strategic relationship—not just economic ones—and to specific retaliation against Japanese exports.” New York Times, March 26, 1995, 15. Back.
Note 44: Prime Minister Ryutaro Hashimoto, “Seeking a New Foreign Policy Toward China,” Speech to the Yomiuri International Economic Society, August 28, 1997. Back.
Note 45: Peter Evans, “Japan and the United States Diverge on Assistance to China,” Japan Economic Institute Report No. 19A (May 19, 1995). Japan protested Chinese nuclear testing in May 1995, and suspended grant aid for the coming year. However, given that grant aid represents only one quarter of all Japanese ODA to China, given the limited nature of reductions in that aid, and given that Japan maintained its far more significant ($6 billion) yen loan package, it is clear that the use of ODA for leverage on military issues, is a secondary consideration at most. See Sankei Shimbun, May 24, 1995. Back.
Note 46: A Financial Times, September 16, 1997 story as reported in the Japan Digest, September 22, 1997. Back.
Note 47: For example, although the U.S. has a defensive alliance with the Philippines, it declared that that treaty commits the U.S. only to the defense of the main islands, not to the defense of the Spratlys. That clarification came in the weeks following the Chinese seizure of a reef in that island group long claimed by the Philippines. Nor were U.S. military assets mobilized to combat piracy by Chinese vessels, many with military markings, against selective targets (including Japanese ships) in the South and east China Sea areas during the early and mid-1990s. Back.
Note 48: Keidanren, “Tokushu: Sangyo no Kudoka ni Oeru” (“Special Issue: Responses to Industrial Hollowing”), Gekkan Keidanren, March 1995, 21. See Lincoln, Japan’s Unequal Trade, 1990. See also Henri-Claude De Bettignies, “Japan and E.C. ‘92,” in Craig C. Garby and Mary Brown Bullock, Japan: A New Kind of Superpower? (Washington, D.C.: Woodrow Wilson Center Press, 1994), 81, who suggests that “if one word can characterize the European-Japanese economic relationship, it is probably imbalance. Whether one looks at trade, investment, or people, the key feature remains disequilibrium, increasing over the years.” Back.
Note 49: Michael Blaker, “Evaluating Japan’s Diplomatic Performance,” in Gerald Curtis, ed., Japan’s Foreign Policy (New York, M. E. Sharpe, 1993), 3, argues that Japanese policymakers simply “cope” with crises and have “no calculated strategy.” See also Charles Krauthammer, “The Unipolar Moment,” Foreign Affairs 70 (1) (1990/91): 24. Back.
Note 50: A broad range of realists and nonrealists alike have made these arguments. For essays on both sides of the issue, see Sean Lynn-Jones and Steven E. Miller, The Cold War and After: Prospects for Peace (Cambridge: MIT Press, 1994). Back.
Note 51: David Baldwin, Economic Statecraft (Princeton: Princeton University Press, 1985); Stephen Krasner, Defending the National Interest: Raw materials Investment and U.S. Foreign Policy (Princeton: Princeton University Press, 1978); The classical analysis is Albert O. Hirschman, National Power and the Structure of Foreign Trade (Berkeley: University of California Press, 1945 [1980]); For a test of Hirschman’s “asymmetric trade dependence” hypothesis in the contemporary Asian context, see Davis B. Bobrow, Steve Chan, and Simon Reich, “Trade, Power, and APEC: Hirschman Revisited,” forthcoming in International Interactions. Back.
Note 52: Paul Krugman, ed., Strategic Trade Policy and the New International Economics (Cambridge: MIT Press, 1990). Back.
Note 53: Randall Schweller, “Realism and the Present Great Power System: Growth and Positional Conflict Over Scarce Resources,” paper prepared for the Olin Institute conference on “Realism and International Relations After the Cold War,” Cambridge, Massachusetts, December 1995, 46. Back.
Note 54: This analysis is from George Gilboy, “Technology Dependence and Manufacturing Mastery,” unpublished paper, Massachusetts Institute of Technology, Department of Political Science, Cambridge, 1995. See also Theodore Moran, American Economic Policy and National Security (New York: Council on Foreign Relations Press, 1993). Back.
Note 55: Russia in the nineteenth century was a first-rate military power, yet its industrial and technological base was second-rate. Spain in the sixteenth century, or China today, may also be regarded as strong military states without comparable economic or technological strength. Contemporary states such as Switzerland and Singapore stand out as examples of states with limited military capabilities but strong technological and financial ones. Back.
Note 56: See Joseph S. Nye, Jr., “The Case for Deep Engagement,” Foreign Affairs 74 (4) (July/August 1995) for the use of this metaphor. Back.
Note 57: The best example of an economic superpower transforming itself rapidly into a military great power is the United States, which had been spending only 1.5 percent of its GNP on defense in the two decades before World War II. In 1939 the U.S. produced only a quarter as many military aircraft as Germany. Yet, by 1941 it was producing well over twice as many military aircraft as Germany. [See Paul Kennedy, The Rise and Fall of the Great Powers (New York: Random House, 1987), 324, 332, 354.] The reverse example is sixteenth-century Spain. Not only did Spain’s relentless wars weaken its financial position, but mercantile policies specifically designed to amass gold reserves for military operations rather than to promote manufactures also enervated Spanish industry. Ultimately, Spain lost its edge over England and even the United Provinces in both military technology and in the relative ability to finance military operations. Back.
Note 58: The debate over “Who is Us?” was initiated by Robert Reich, “Who is Us?,” Harvard Business Review (January/February 1990). See also Laura D’Andrea Tyson, “They Are Not Us: Why American Ownership Still Matters,” The American Prospect, No. 4 (Winter 1991). Back.
Note 59: Chalmers Johnson, “La Serenissima of the East,” Asian and African Studies 18 (1) (March 1984): 59. Back.
Note 60: Foreign Media Note, August 23, 1995, 1. This English-language compendium cites reports in Nikkan Kôgyô Shimbun, July 25, June 5, and May 29, 1995; Nikkei Sangyô Shimbun July 13, July 31, 1995; Nikkei Mechanical May 1, 1995; Nihon Keizai Shimbun, July 28, 1995. Back.
Note 62: Sofuchô Tôkeikyoku, ed., Rodoryoku Chosa Nenpo (Annual Report on the Labor Force Survey) (Tokyo: Sofuchô Tokeikyoku, 1994), Table 6. On responses to hollowing, see Keidanren, Gekkan Keidanren, 1995; see also National Institute for Research Advancement (NIRA), “Sangyo no Kudoka to Chiiki Keizai” (“Industrial Hollowing and Regional Economics”), Seisaku Kenkyo 8 (2) (February 1995). Back.
Note 63: For more on differences between the U.S. and Japanese strategic treatment of technology, see U.S. Congressional Office of Technology Assessment (1994). For comprehensive data on Japanese technology trade see Kagaku Gijutsu Chô and Kagaku Gijutsu Seisaku Kenjyûjo, ed., “Nihon no Gijutsu Yushutsu no Jittai: Nihon no Gijutsu, Shinhon to tomo ni Ajia E” (The Actual Condition of Japanese Technology Technology trade: Japanese Technology and Capital Together toward Asia), (Tokyo, 1997). Back.
Note 64: See Michael Green and Richard J. Samuels, “Recalculating Autonomy: Japan’s Choices in the New World Order,” NBR Analysis 5 (4) (December 1994) for how these choices are framed by politicians and bureaucrats. See also Kazuo Ogura, “Ajia no Fukken no Tamemi” (In the Interest of Asia’s Revival), Chuo Koron, July 1993 and Shigeki Tejima, “Sekkyoku shisei ni tenjita Nihon no kaigai toshi” (“Japanese Overseas Investment Turns Active”), Shukan Toyo Keizei, 1994. Back.
Note 65: Michael Borrus, “Left for Dead: Asian Production Networks and the Revival of U.S. Electronics,” MITJP Working Paper No. 96–24 (Cambridge: MIT-Japan Program, 1996). John Ravenhill, “Japanese and U.S. Subsidiaries in East Asia: Host Economy Effects,” MITJP Working Paper No. 96–07 (Cambridge: MIT-Japan Program, 1996). Back.
Note 66: China is nearly alone among Japan’s trading partners to enjoy a bilateral trade surplus ($19 billion in 1996). Trade data are from the Japanese Ministry of Finance web page: http://www.mof.go.jp/trade-at/199638c.htm. Back.
Note 67: Asahi Shimbun, November 13, 1994. Back.
Note 68: Ichiro Ozawa, Blueprint For A New Japan (Tokyo: Kodansha, 1994). Back.
Note 69: This argument is made explicitly by Ozawa, ibid. Back.
Note 70: FBIS, June 6, 1995, 1–2. Back.
Note 71: Richard Samuels, “The Industrial Destructuring of the Japanese Aluminum Industry,” Pacific Affairs 56 (3) (Fall 1993): 495–509. See Mark Tilton, “Informal Market Governance in Japan’s Basic Materials Industries,” International Organization 48 (4) (Autumn 1994) for more on upstream integration overseas by Japanese firms. Back.
Note 72: Noboru Makino, “Kokka no Haken wa Gijutsuryoku de Kimaru” (“National Supremacy is Decided by Technological Strength”), Chuo Koron (July 1990), 111. Back.
Note 73: Shintaro Ishihara and Morita Akio, “No” to Ieru Ajia (The Asia That Can Say “No”) (Tokyo: Kappa Hard, 1989), 14. Back.
Note 74: Cited in Kenneth Pyle, The Japanese Question: Power and Purpose in a New Era (Washington, D.C.: The AEI Press, 1992), 38. Back.
Note 75: Masahara Gotoda, Seiji To Wa Nanika? (What is Politics?) (Tokyo: Kodansha, 1988), 97. Johnson, “La Serenissima of the East,” 1984, also offers a compelling comparison between Japan and Venice. Back.
Note 76: The “cork in the bottle” metaphor is from General Henry Stackpole, former commandant of U.S. Marines in Japan. Washington Post, March 27, 1990. Back.
Unipolar Politics: Realism and State Strategies After the Cold War
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