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Japan's regional and global future


      The Ditchley Foundation




A note by the Director (13/11)

12 - 14 December 2013

Introduction

December saw Ditchley discussing Japan, and how internal developments there were likely to impact on the future place of the country in the region and the wider world. It was one of our largest conferences in terms of numbers, but was unfortunately less blessed in terms of gender diversity. More private sector participation from Japan would also have brought different perspectives to our debate. The range of views was nevertheless impressively broad in what was a very intense and wide-ranging set of discussions on questions with huge implications for Asia and global peace and prosperity. We were very grateful for the generous support of the Great Britain Sasakawa Foundation for the conference.

Summary

We were on the whole optimistic about the impact of Abenomics so far, and about its future influence, including the so-called third arrow. It was encouraging that the deregulation agenda was being actively pursued, even in sensitive areas like agriculture. While appreciating Prime Minister Abe’s commitment to ‘womenomics’, we were less convinced about the likelihood of rapid progress, given highly conservative attitudes in the upper reaches of politics and business. The need to increase the role of women was symbolic of a wider need to increase diversity in Japan’s economy and society. Japan remained for example very hard to penetrate for most foreign companies, and many had effectively given up, at least in terms of investment in Japan. But how far did the Japanese actually want to change and open up, given the many advantages of Japan’s cohesive society, and the high quality of life for most people? This was an open question, but our belief was that Japan could not preserve its advantages without changing in a globalised world. Meanwhile Japanese cynicism about their leaders and their establishment, reinforced by the Fukushima experience, was a problem. Economically, it made sense to restart nuclear energy, but it would be difficult to do so politically as things stood.

Japan’s relations with its two big neighbours of China and Korea were seen as highly problematic. With China, the problem was structural, reflecting the difficulty of adjusting to China’s dramatic rise, and recent Chinese behaviour, including over the Senkaku/Diaoyu islands. We saw little prospect of change for the time being, and many risks in the situation, despite the degree of economic interdependence. With Korea, the issue was more emotional and related to history, but relations were now at a post-war nadir, and no-one seemed to know how to start moving them back onto a better basis, despite obvious common economic and political interests. Both sides had played their part in this, but we were inclined to think that Japan needed to make another effort, despite the sensitivities, including explaining better its recent security moves. Overall, there was a need for all three counties to start to find areas where they could cooperate practically at government level, in order to build trust and confidence, and prevent history and nationalism from ruining everything. Japanese relations with the countries of south-east Asia were much more positive, but there were still unexploited opportunities. Japan would do well to be more active in cultivating friendships there, including through a greater presence in general, and more active public diplomacy.

In the wider world, the US-Japan relationship was arguably more important than ever, but also more difficult to manage, given expectations on both sides and the potential for misunderstandings about these. It would need a lot of continuing effort from both sides. Relations with Russia had improved significantly recently, though the territorial dispute would remain a major problem. The EU needed to raise its game in the region generally, and stop looking at it through too exclusively a commercial lens. Relations with Japan herself would be boosted if the Free Trade Agreement being negotiated could be agreed.

In conclusion, a number of suggestions for the future are set out, in all humility, particularly regarding regional relationships. These are seen as by far the biggest risk for the future, though they did not damp our overall optimism and enthusiasm about the new path on which Japan now seems to have embarked, whose success will be important for the world, not just Japan.  

Main Note
Japanese domestic developments
Our main focus was on how Japan would influence and relate to the region and the broader international community, but our starting point had to be what was happening in Japan itself, and how this would affect its international policies and standing. Discussion was dominated by Prime Minister Abe and the new start he was trying to give Japan after two decades of political stasis and relative economic stagnation. How far were Abenomics working, and what were the future prospects?

Most participants were on balance positive about the impact so far. The jolt given to business and the stock market by the first two ‘arrows’ of money supply and fiscal stimulus had been significant, and apparently reasonably effective so far in increasing confidence and restoring a sense of dynamism and optimism. The longer term impacts were not easy to predict, and there were inevitably doubts about the effect of the planned increase in consumption tax in early 2014, but the rise in the stock market, the fall of the yen, the growth figures, and the uptick in inflation were all seen as good signs. One crucial point would come in the spring: would wages rise to compensate for the rise in inflation, and thus ensure that there was some extra spending power in the economy to maintain the boost to production. If not, there could be a significant backlash from the unions, as well as a setback to growth. There were encouraging signals from some of the big employers, but these needed to be translated into reality.

How far should we be worried about the size of the public debt? At 224% of GDP, this looked cripplingly high. Views varied. Some argued that because it was domestically held for the most part, Japan would never find itself in the same position of vulnerability as, say, some parts of the EU periphery. Japan’s credit was basically good, and the markets would not conclude otherwise unless there were a further deterioration both in the economy and the deficit. Others worried about the sheer size of the debt, and the vagueness of official plans to bring it under control. We all agreed that it was a serious problem which would have to be tackled in the longer term, even if there were a window of opportunity for the broader economy which meant the debt could take a back seat for now.

Assuming the first two arrows continued to have the desired effect, therefore, the big question was whether the third arrow of deregulation and improving competitiveness in a number of key areas would be carried through and have the necessary impact on growth and productivity. Here there was also a degree of optimism, not just from the representatives of the Japanese Government round the table, about official determination to make progress. This seemed to be true even in previously sacrosanct areas like agriculture, where the aim was to encourage larger-scale agribusinesses. Eight deregulatory bills had been passed at the extraordinary Diet session which had concluded just before our meeting. Abe also seemed personally committed to moving things on in key areas like the role of women in society and the economy, and immigration. At the same time, there were already signs of the traditional vested interests pushing back in some areas.

This was where doubts about the likely speed of movement began to creep in. We spent some time on the issue of ‘womenomics’. There was no doubt about the objective need to increase the use made of the talent represented by women. Japanese society was ageing rapidly and the birth rate continuing to fall. The working population would fall by 40% by 2050. The ability of those working to support the rest of the population would be severely tested, to put it no higher. Using women more and better was therefore obvious common sense. The current situation, where many talented and spirited young women preferred either to work for foreign companies, or to set up their own businesses, than to chance their arm in the still male-dominated worlds of business and government, was clearly unhealthy. Better availability of childcare would help.

But cultural attitudes inevitably changed slowly. Older generation politicians and business leaders remained highly conservative for the most part. Japan was also different from many western societies in that women’s rights had been granted largely by the US occupiers after World War II, rather than fought for by women themselves. There was no tradition of female militancy to draw on.

In any case, we tended to see the question of women as only part of a wider question of the benefits of much greater diversity in Japanese society and business. This diversity should encompass a bigger role for foreigners and for the younger generation, as well as for those with less orthodox views. Japan could only benefit, in a globalised world, from moving away from what some saw as a stiflingly rigid and hierarchical system. Many Japanese companies and areas such as higher education were almost exclusively Japanese and changing only very slowly, if at all.

This could of course be seen as a negative and highly foreigner-influenced way of looking at things, even though it was a view which seemed to be shared by many of the Japanese around the table. The other side of the coin was the benefits of a largely homogeneous society with many shared values and respected traditions, where crime was low, and families remained together. The quality of life was good for most people, and the infrastructure was excellent. Many Japanese seemed content with this, and saw little need for radical change, even if their brief period of world economic primacy had come and gone. The advantages of being able to buy even more consumer goods seemed dubious at best. It could be argued that Japan had outgrown growth.

There was nothing intrinsically wrong with such an attitude. But turning inwards once more would not restore dynamism to Japan’s economy and society in the way desired. In any case, if Japan did not move forwards, we thought she would inevitably move backwards over time, in a globalised world where competition was fierce at every level. The response to the 2011 tsunami had shown what Japan could do when she had to. The challenge facing Prime Minister Abe now was to remotivate Japan’s young generation to recreate and transform the country once more, and to promote change without ruining the many good things about Japan.

One notable example of the tensions around change was energy policy. Prime Minister Abe and most of the elite, particularly in the corporate world, believed that it was essential to restart Japan’s nuclear industry, despite the terrible Fukushima experience, since she had no indigenous sources of energy, and it made obvious sense from both environmental and economic points of view. The cost of imported gas was already proving potentially crippling for some sections of Japanese industry, and was also increasingly burdensome for domestic consumers. While the price should reduce over time, if exports of shale gas from the US increased as hoped, it was still likely to remain a problem. At the same time, a high proportion of the Japanese population – opinion polls suggested up to 80% - was opposed to any restart, and this was particularly true of women, notably well-educated women. Some women even believed that it would be better to return to a former way of life, less dependent on electric power, rather than reactivate the nuclear genie. Concern over the future of their children seemed to be the main factor.

Most participants took the view that at least some of the nuclear plants would be restarted, within the next year or 18 months. But some thought this was seriously to underestimate the strength of public resistance. If the government simply rode roughshod over public opinion, the political and social consequences could be grave.

The nuclear dossier was exemplary in another sense. The failings which had led to the mistakes at Fukushima were reflective of the weaker points of Japanese society: a too easy acceptance that everything was fine; a cosy culture between TEPCO, the ministry and the regulators, where the latter came from the former, and were reluctant to upset the applecart; no outsiders to question what was happening; and no transparency. In the nuclear field, that would have to change for there to be any chance of an accepted restart, and there were some encouraging signs. But again it was less clear that rapid change was likely in wider society.

This also related to Japan’s general openness to the rest of the world, not least in the business field. Most foreign companies continued to find it very hard to penetrate the Japanese market. Many continued to make the commercial effort to sell because Japan was a large and wealthy consumer market, but seemed little interested in investing in Japan on any scale. Indeed there seemed to be a trend of disinvestment by some well-known names. Certainly Japan was no longer seen as the, or even a, regional platform by most western companies. Business costs were high, including corporation tax, higher than most of her competitors at 38%, and the likely return on capital less than in most of Japan’s competitors. Many Japanese company boards remained largely Japanese in make-up, and little if any diversity of gender, background or nationality. Japanese companies themselves were tending to invest more abroad than in Japan, because they saw the potential for growth and profits as higher elsewhere. Most of Japanese companies’ corporate income now came from abroad. So Japan was integrated in the international economy in an outward direction, but not the other way round.

This picture was contested by some, pointing to continuing significant rates of FDI into Japan, and changing attitudes at corporate level, even if the rate of change was slow. Japan was not the only market in the world which was hard to penetrate, and which demanded an effort to understand the culture from outsiders wishing to do well. Japan’s economy remained strong and successful in many ways, with leading positions in many sectors, such as the automotive sector. Part of the problem in Japan was nothing to do with foreigners. It was rather the advantage which Japanese culture and conformism gave to incumbents. It was hard even for Japanese newcomers to break into any established sector, which was why Japanese entrepreneurs tended to look towards new market niches rather than take on the traditional big players.

But others also pointed to the poor English language skills of the Japanese, even those operating professionally in various fields, as another symbol, and cause, of Japan’s lack of engagement with the outside world. It might seem arrogant of those from English-speaking countries to make such a point, particularly when few foreigners were willing to make the effort to learn Japanese. But the need to speak and understand English well was simply a reality of the modern globalised world. Other countries were doing much better than Japan in this regard, including Asian competitors like Korea. Tourism to Japan would also continue to struggle as long as efforts to promote it remained introverted, with so little labelling in English in major museums, for example.

This discussion risked being seen as arrogant foreigners lecturing Japan. But several participants emphasised that their motivation in bringing out these points was long-standing admiration for Japan and her achievements, goodwill towards the country and her people, and a strong and sincere desire to see Japan once more taking her proper, constructive place in the world, based on renewed economic success and positive engagement with the rest of the international community. This meant a change of mentality, not just third arrow deregulation.

What role could immigration play in Japan in the future? Current policies to encourage immigration concentrated almost exclusively on the wealthy and highly qualified end of the market, while the need for more labour was arguably at the other end of scale, where the declining numbers in the labour market meant many low-paid jobs would be increasingly hard to fill. However Japanese cultural resistance to mass immigration remained very strong, and it was very hard for immigrants to fit in, for linguistic and other reasons. In any case, seeking to increase immigration would be hard to square politically with Prime Minister Abe’s emphasis on Japanese traditional values. While there was likely to be some gradual increase in immigration, legal and illegal, from countries like China and the Philippines, therefore, large-scale immigration was unlikely for the foreseeable future. This only emphasised the need for Japan to make full use of women in the labour market, and also increase retiring ages.

We also asked whether Japan had a clear vision of herself for the future, for example as a middle-ranking power. The answer seemed to be no. But this raised the question whether any country could be said to have such a clear vision – even in a supposedly homogeneous country like Japan, different groups within the population were bound to have varying views of where they wanted to go. Did we ask whether the UK, or France, or Germany, had a clear vision of herself for the future? If not, why were we applying a different standard to Japan? But these reasonable points did not entirely satisfy those who argued that, unlike in the post-war period, when recovery from the disaster and achieving economic success had unified the Japanese, there was no clear national goal now, which explained why Japan had apparently been able to live relatively comfortably with stagnation for so long.

We also asked whom the Japanese population now trusted, given that levels of cynicism seemed to be high, not least about politicians. The answer seemed to be virtually no-one. Fukushima had been the straw which finally broke the camel’s back. Lack of credibility of established authorities was not of course an exclusively Japanese problem by any means, but it did seem to be worse in Japan than in many comparable countries. The long LDP monopoly of power had no doubt not helped. The opposition’s failure when they had been in office was potentially worrying for Japanese democracy, because there was now no political opposition to speak of, and few political checks and balances. There was more trust at local, community level than at national level, but Japan remained very centralised politically.

In any case, it was clearly one of the main aims of Prime Minister Abe to tackle this cynicism, and to restore a sense of national pride and ambition to Japan and the Japanese people. Economic recovery was in this sense only a means to an end. While outsiders generally wished the Prime Minister well in this endeavour, there was also an inevitable undercurrent of concern on the part of some about where this might lead, given the history, not least among Japan’s immediate neighbours. Squaring this circle was arguably the single greatest challenge facing
Mr Abe.

Japan and its region
This naturally led us on to how Japan was perceived by her neighbours, how she saw her own place in the neighbourhood, and how some of the key relationships might evolve in the coming years. The starting point had to be China. The overwhelming view among those around the table was that there were structural problems in the relationship which could not be easily or quickly overcome, and that a further, possibly lengthy, period of tension and uncomfortable co-existence was therefore likely. China’s rapid economic and political rise had been bound to cause disquiet in Japan, given her former economic dominance in the region, and there was little doubt that most Japanese leaders now saw her huge neighbour as a potential threat to Japan’s own position in Asia and the world. Moreover the Japanese also now saw China as behaving aggressively and beginning to throw her weight around. This might be, as some around the table suggested, a Chinese strategic miscalculation, but it was not clear they were going to change. In any event, no matter how great the degree of economic interdependence in terms of trade and investment, it would be very hard to remove the element of competition and rivalry from the relationship.

China’s overall attitude did not exactly help. She was clearly unwilling to regard the relationship as one between equals, in the light of the huge disparity in population and territorial size, and was therefore unwilling to engage in a dialogue on this basis. She preferred to regard the US as her only equal in this sense, and to see a G2 dialogue as the only one worth having, despite her deep reservations about US policy and ambitions in the region. She was also inclined to see Japan as never having fully acknowledged or apologised for her behaviour before and during WW II, and to regard Japanese efforts to increase her military strength with corresponding suspicion.

Against this background it made more sense to see the dispute and tension over the Senkaku/Diaoyu islands as a symptom of the problems in the relationship, rather than a cause. But that did not in any way reduce the risk of mutual misunderstanding and escalation over the islands – rather the contrary. Both sides regarded the issue as a matter of vital interest where national pride was at stake. This made progress extremely hard to achieve. Both sides seemed to be playing with fire by stoking patriotic feelings when it suited them – a particularly dangerous game when nationalism was not far below the surface in either country. China’s declaration of an ADIZ seemed deliberately provocative in this context. Could Japan nevertheless at least accept that there was a dispute about the islands? This seemed unlikely, as did an agreed referral of the issue to the ICJ, desirable in principle though that might be. The best solution would be to return the issue to the freezer, but this was increasingly difficult for both sides to do now.

The bilateral economic relationships remained deep despite all this. Mutual trade and investment were still at remarkably high levels. This clearly created huge incentives for both sides to manage their problems peacefully and keep issues such as the islands in proportion. Nevertheless, it was no longer possible to say that the economic relationships were unaffected by the political problems. The popular attacks on Japanese economic interests in 2012, and consumer boycott of some Japanese goods, had had a significant impact on both sides. Japanese companies in highly visible sectors like cars were now less likely to want to invest in China, while Chinese consumers were more resistant to Japanese goods than hitherto. Even if China’s economic rise faltered, Japan would have a China problem, because that would affect the prosperity of the whole region.

The other major relationship was obviously with South Korea. Here the consensus was that relations were at their post-war nadir, in particular over Japanese attitudes towards their own history, and to issues such as the so-called comfort women and forced labour. The Japanese view was that they had clearly apologised and that questions arising from their behaviour had been settled some time ago by mutual agreements, including the payment of compensation where appropriate. Now the Koreans, particularly President Park, seemed intent on moving the goalposts and reopening issues which had been satisfactorily resolved already. The Japanese did not see how they could do any more than they already had, and the result was a kind of Korea fatigue in Tokyo.

For the Koreans, the issue was that the continuing behaviour and statements of some Japanese politicians in relation to questions such as the comfort women raised doubts about the sincerity of past official statements and agreements. They could never be satisfied while such behaviour continued, including by senior ministers, even Prime Ministers. While President Park might be exploiting the issue domestically for her own reasons, the public feeling about such historical questions was genuine and strong. The Koreans felt they were treated by the Japanese with less respect than some of Japan’s other partners, and that Japan was too eager to forget the past, and not keen to teach the younger generation about what had happened (the contrast with Germany was stark in this respect). The issue was therefore unlikely to go away.

While the problem was therefore less structural than in the case of China, and could in principle be more easily dealt with, it was also more emotional and in practice there seemed little likelihood of improvement for now. Neither side seemed willing or able to make the first move to defuse the tension, and there was little prospect of a change while current governments on both sides were in office. The challenge was therefore how to manage the problems sensibly and prevent escalation until such time as solutions became more possible. As with China, mutual trade and investment remained at high levels. But there were some potentially disquieting signs. For example Japanese tourism to Korea was declining, though tourism was still increasing in the opposite direction.

One obvious way forward for the three countries was to find issues where they had common interests and to pursue mutual, practical cooperation strongly in these areas, setting aside the subjects on which they could not find a way forward for the time being, and not letting them interfere with broader collaboration. Areas like energy and the environment clearly fell into this category. There were some useful efforts in this direction, bilaterally and trilaterally, but not much success to point to yet.

In the Asian region in general, a form of confidence-building measures (CBMs) could help to lessen tensions. But one constant problem was whether the US should be included in any such discussions. The Chinese were bound to go on resisting this. The issue of the lack of regional security architecture was also raised. Here the view was that fora were not lacking. The problem was that none of them was really working.

The other country in the immediate north-east Asia neighbourhood was North Korea. Japan’s relationship with and attitude to North Korea was clearly important, but she did not have major interests which were different at this stage from most of the rest of the international community: she wanted to avoid nuclearisation of the country, reduce the military threat from a rash leadership, and promote eventual peaceful reunification of the two Koreas. She had some specific concerns such as the hostages, but would otherwise want to play a constructive role within the 6 party framework. Could she be more pro-active? It was possible, but there was little real scope for individual bilateral diplomacy in present circumstances.

The part of the region on which we focused most otherwise was south-east Asia, and particularly the ASEAN countries. Here relations were seen as generally much more positive than with the immediate neighbours. While there were some concerns about history in this part of the world too, by and large Japan was seen as a positive and trusted country, a source of inspiration as well as investment. The issue here was therefore whether Japan should not be more pro-active in cultivating her political, cultural and economic links, as there were still a lot of unexploited opportunities and goodwill. The Japanese presence in many areas remained weak. Frequent changes of Japan’s leadership had prevented good relationships at the top level from developing. Japan needed more friends in the region and should be more diligent in cultivating them, while being careful to avoid the impression of ganging up against China. Better public diplomacy would help. The news during the conference that, at the Japan-ASEAN Commemorative Summit in Tokyo, Japan had offered very significant financial help ($20 billion altogether) to ASEAN’s development and to the poorer countries in the region came as welcome confirmation that the relationship was indeed moving forward.

How far was it possible for Japan to improve her military capability without alarming her neighbours? Hard power mattered too, particularly in Asia. Views differed on the significance of what was happening. Japanese officials around the table made clear that recent and planned percentage rises in defence expenditure were very small, particularly in real terms, and bore no relation to the increases in Chinese defence spending. They were also transparent, unlike those of China. The establishment of a National Security Council, and corresponding strategy, did not betoken any dramatic change of policy. So there was no reason for any kind of alarm or fear. It was all part of Japan becoming a more ‘normal’ country, taking more responsibility for her own security. Prime Minister Abe’s clear priority was economic, not military.

Others suggested that, whatever the reality, there was bound to be concern because of the history, and that some of Prime Minister Abe’s rhetoric was unhelpful in this regard. While some countries in ASEAN, and the US, might welcome greater Japanese capability, that was by no means the case for all her neighbours. There was also bound to be worry about plans to change Article 9 of the constitution, even though there was little or no chance of such a change in practice because the necessary political support for a constitutional amendment, in terms of parliamentary votes, was more or less impossible to assemble. Mr Abe’s visit to the Yasukuni Shrine shortly after the end of the Ditchley conference can only have complicated further the task of reassuring Japan’s neighbours, judging by their harsh reactions.

In the rest of Asia, outside her immediate neighbourhood, Japan was developing increasingly close relations with India. As with ASEAN, wider Asian perceptions of Japan were largely positive, and there was an appetite for a more proactive Japanese role.

Japan and the wider world
How was Japan’s current standing in the international community, and where was it likely to go? We tried to avoid the old cliché about punching below her weight, but did not entirely succeed.  In the 1970s and 1980s, Japan had been seen as an exemplary economic success story, and had attracted wide interest and admiration for that reason. The economic and political stagnation of the last 20 years had changed all that. Japan nevertheless still had many formidable assets, not least her continuing export capability, her capacity for innovation and her strong research and development effort. Britain was a particularly strong beneficiary of Japanese investment, and western countries in general saw Japan’s economic revival and engagement in global trade negotiations as highly important for the world economy.  One measure of this would be the results of the Free Trade Agreements in which Japan was now participating, not least the Trans-Pacific Partnership, which would also be important for the current government’s pursuit of deregulation and liberalisation.

Japan had in any case retained immense soft power potential, as shown by the huge popularity of its food and culture. Japanese public diplomacy efforts over the years, through programmes such as JET, the Japanese Foundation, and student exchanges, had been marked by significant success. Japan had long been a model member of the UN, and although official ODA flows had declined markedly in recent years, Japanese aid had been widely welcomed and effective. We did not spend time discussing Japan’s bid to become a permanent member of the UN Security Council, not least since the overall process of Security Council Reform has been stuck for so many years now, but if these efforts, revived by Prime Minister Abe, were crowned with success, that would be another powerful symbol of Japan’s revival.

We spent relatively little time on the individual relationships between Japan and major international partners, with the exception of the US. The US-Japan relationship was of fundamental importance for both sides, and was basically sound, but was rarely free of tension. It was arguably now more crucial than ever, but at the same time more difficult to manage than ever. Japan was desperate to retain a strong US presence in the region to counter-balance China, and anxious for US support in the dispute over the islands. The alliance therefore remained vital. But there was a fear that the so-called US pivot to Asia had less to it than met the eye, or had been quietly set aside. At the same time, the US military presence in Japan herself continued to rankle in some quarters, and Japan under Prime Minister Abe also wanted to present herself as a more active and independent actor, which implied a greater degree of distance from US policy and dependence on the US. It was not easy to see how this circle could be squared.

The US meanwhile wanted to maintain a close relationship with Japan, including on the military side, as part of the pivot, and would also welcome a greater Japanese military effort in the region, including an eventual change in the constitution. But it was not anxious to be dragged into the bilateral dispute over the islands – the US did not and would not recognise Japanese sovereignty, as opposed to accepting Japanese administrative control – though it would not of course renege on its alliance commitment. The US did not want to see tension in the area rising more generally. It would also strongly favour a renewed attempt to improve Japanese-Korean relations. All this meant there was plenty to discuss bilaterally, and a lot of scope for misunderstanding about entanglement on one side, and abandonment on the other. The relationship would therefore continue to need to be worked at intensively by both sides to preserve as much harmony as possible.

Japan’s often chequered relationship with Russia was meanwhile on the up, with bilateral cooperation going well, including economically. The chances of a settlement of the territorial dispute continued to look remote, but at least the improvement in the atmosphere and content of bilateral contacts provided a better context for future discussions of the contested islands. Russia continued to think that Japan should reduce its foreign policy dependence on the US.

Europe and the EU figured infrequently in our discussions, but there was a general view that the EU needed to take Japan and the region more seriously, and stop looking at it through a too exclusively commercial lens. Europe’s role could never be the same as that of the US, but it could certainly do more to promote conflict resolution according to international law and the rule of law more generally. European leaders also needed to get together more and sing from the same hymn sheet, to stop the Chinese playing divide and rule so effectively. Meanwhile agreement on the planned EU/Japan FTA would be a very useful step forward in relations.

Recommendations
While it may seem presumptuous to offer specific recommendations to Japan, and outsiders certainly would not claim to have all the answers, a number of potentially helpful steps did emerge from the discussion and are worth recapitulating:

  • Strong encouragement for Japan to pursue with determination the steps envisaged under Prime Minister Abe’s third arrow;
  • Strong encouragement for renewed efforts to open up Japan further, including for foreign investment, but also in areas like higher education and science;
  • Strong encouragement for policies which will increase the role of women in Japan’s economy and society, and increase diversity more widely;
  • Support for efforts to reach a politically and publicly acceptable way forward on nuclear power, which will enable the restart of some plants, without simply ignoring the opposition;
  • Despite the domestic sensitivities, Japan should make further efforts to settle the outstanding historical issues with her neighbours, and be ready to take the initiative with Korea in particular, given the obvious advantages of a better relationship and the extent of common interests;
  • In the meantime all sides should refrain from using history as a political tool, and should delink history from other policy issues and intensify collaboration in areas of mutual interest;
  • Japan can also only benefit from greater efforts to reach out to and reassure Chinese public opinion, making more of the many positive stories which already exist, while continuing and intensifying dialogue at governmental level, hopefully on a more equal footing than hitherto;
  • Support for further attempts to identify and implement confidence-building measures with the neighbours, particularly China, for example over air and maritime arrangements around the disputed islands, including the possibility of effective military ‘hot lines’ to defuse incidents before they can escalate;
  • Support for greater Japanese attention to explaining her security policies and reassuring others about her intentions – as part of more and better public diplomacy in general;
  • Support for further efforts by Japan to strengthen her links with the countries of south-east Asia, and with other Asian countries more widely, including through more visits, student exchanges etc;
  • Support for continuing efforts to strengthen the US-Japan alliance, despite the difficulties;
  • Support for a further look at the OSCE experience in Europe as a possible model to help resolve tensions and improve dialogue in east Asia.

Conclusion
While we naturally tended to focus on the problems facing Japan, both domestically and internationally, this did not blind us to the many positive features of a country which most around the table knew well and appreciated highly. The desire for Japan to make an international comeback, politically and economically, was palpable throughout our discussion. The global community needed and wanted a successful and fully engaged Japan. On the whole we were reasonably optimistic that this was now the direction in which Japan was heading, despite numerous obstacles still to be overcome, and a sense that many Japanese were not sure they wanted the country transformed. Economic reform was clearly crucial. If Abenomics failed, what some saw as the slide into global irrelevance was likely to continue. But the Olympics of 2020 might also be just the opportunity needed to put Japan back on the map globally in a very positive, forward-looking way.

If there was an area of pessimism, it was about relations with China and Korea. Japan’s friends would very much like to see her make new efforts in this regard, despite the domestic sensitivities. Otherwise these tensions could prove a serious brake not only on future Japanese economic growth, but also on wider Japanese diplomacy and on peace and prosperity in north-east Asia as a whole.

This Note reflects the Director’s personal impressions of the conference. No participant is in any way committed to its content or expression.

PARTICIPANTS

CHAIR: Sir Stephen Gomersall KCMG 
Director, Hitachi Limited; Group Chairman for Europe (2004-13). Formerly: HM Diplomatic Service (1970-2004): Ambassador to Japan (1999-2004); Director, International Security, Foreign and Commonwealth Office (FCO) (1998-99); Deputy Permanent Representative to the UN, New York (1994-98); Head, Security Policy Department, FCO (1990-94).

AUSTRALIA

Mr David MacLennan 
Australian Diplomatic Service: Head, Political and Economic Branch, Australian High Commission in London (2012-). Formerly: Western Australian State Director, Department of Foreign Affairs and Trade (DFAT) (2009-12); APEC Exchange Officer, Peruvian Ministry of Foreign Affairs (2008); Deputy Head of Mission, Australian Embassy, Mexico City (2005-07); Civilian Peace Monitor, Bougainville, Papua New Guinea (2001); Office of the Minister for Trade and the Trade Finance Section; Department of Industry, Science and Resources.

Mr Peter Rowe 
Australian Diplomatic Service: Head, North Asia, Australian Department of Foreign Affairs and Trade (2010-). Formerly: Ambassador to the Republic of Korea (2005-09); Deputy Head of Mission, Australian Embassy, Jakarta (2003-05); Assistant Secretary, North East Asia Branch (2002-03); Assistant Secretary, East Asia Branch (2001-02); High Commissioner to Sri Lanka (1999-2001); Minister and Deputy Head of Mission, Australian Embassy, Seoul (1995-98).

CANADA

Ambassador Joseph Caron 
Founder, Joseph Caron Incorporated, Vancouver, Canada; Distinguished Fellow, Asia Pacific Foundation of Canada; Fellow, Institute of Asian Research, University of British Columbia. Formerly: Canadian Diplomatic Service: High Commissioner to India and Ambassador to Bhutan and Nepal (2008-10); Ambassador to Japan (2005-08); Ambassador to China, DPRK and Mongolia (2001-05); Assistant Deputy Minister for Asia and Senior Official for APEC (1998-2001).

Mr Leonard Edwards 
Strategic Adviser, Gowling Lafleur Henderson LLP, Ottawa; Distinguished Fellow, Asia Pacific Foundation of Canada and the Centre for International Governance Innovation (CIGI). Formerly: G8 and G20 'Sherpa' for Prime Minister Harper (2008-10); Deputy Minister of Foreign Affairs (2007-10), Agriculture and Agri-Food Canada (2004-07) and International Trade (2001-04); Ambassador to Japan (1998-2001) and Korea (1991-94).

Dr Charles McMillan 
Professor of International Business, Schulich School of Business, York University. Formerly: Senior Policy Advisor to the Prime Minister of Canada; Director, Asia Pacific Foundation of Canada; author, ‘The Japanese Industrial System’.

Mr Graham Shantz 
Department of Foreign Affairs and International Trade Canada (1990-): Director General, North Asia Bureau (2012-). Formerly: Ambassador to Spain (2009-12); Acting Assistant Deputy Minister, Policy and Strategic Planning Branch; Director General, Policy Planning Bureau; Deputy Director, Investment Trade Policy Division.

EUROPEAN COMMISSION/ITALY

Mr Antonio Parenti 
Deputy Chief Negotiator for the EU-Japan FTA and Deputy Head of Unit, Trade with the Far East, European Commission. Formerly: Vice President Public Affairs, Severstal International (2007-09); Trade and Economic Counsellor, Delegation of the European Commission to Russia (2003-07).

GERMANY

Professor Christian Oberländer 
Professor of Japanese Studies, Martin Luther University Halle-Wittenberg (2002-); Vice Director, Institute for Political Science and Japanese Studies. Formerly: Visiting Professor, University of Tokyo.

Dr Volker Stanzel 
German Diplomatic Service (1979-13). Formerly: Ambassador to Japan (2009-13); Political Director, German Federal Foreign Ministry (2007-09); Ambassador to China (2004-07); Director General, Political Affairs, Berlin (2002-04); Director, Asian and Pacific Affairs, Berlin (2001-02); Director, Department for Non-Proliferation and Civilian Use of Nuclear Energy, Berlin (1999-2001); Visiting Fellow, German Marshall Fund, Washington DC (1998-99); Foreign Policy Adviser to Social Democratic Party of Germany (1995-98); Director, Operations Centre, Bonn (1993-95); Director, Press and Information Department, Embassy of Germany, Beijing (1990-93).

JAPAN   

Mr Jun Arima 

Director General, Japan External Trade Organisation, London (on secondment from Ministry of Economy, Trade and Industry). Formerly: Japan's Chief Negotiator, UN Climate Talks, Cancun, Mexico (2010); Head of Division, Country Studies, Long-Term Co-operation and Policy Analysis, International Energy Agency, Paris (2002-06); Councillor (Energy) to Permanent Delegation of Japan, OECD.

Professor Yukiko Fukagawa 
Professor, School of Political Science and Economics, Waseda University, Tokyo. Formerly: Faculty Member, Aoyama Gakuin University and University of Tokyo; Visiting Fellow, Korea Institute for Industrial Economics and Trade, Columbia University, and Korea University; Long-Term Credit Bank Research Institute; Japan External Trade Organization.

His Excellency Mr Keiichi Hayashi 
Diplomatic Service of Japan: Ambassador to the United Kingdom (2011-). Formerly: Deputy Vice-Minister and Deputy Chief Cabinet Secretary; Ambassador to Ireland; Director-General, International Legal Affairs Bureau; Political Counsellor, Embassy of Japan, London.

Mrs Mami Mizutori 
Executive Director, Sainsbury Institute for the Study of Japanese Arts and Cultures, Norwich; Managing Trustee, Daiwa-Anglo Japanese Foundation, London; Director, Association for Aid and Relief, Japan. Formerly: Japanese Ministry of Foreign Affairs: Director, Budget Affairs (2009-10); Director, Japan Information and Culture Centre, Embassy of Japan to the United Kingdom (2005-08); Director, National Security Policy (2003-05); Director, United Nations Security Policy (2002-03); Director, Status of Forces Agreement (2000-02).

Ambassador Yoshiji Nogami 
President, The Japan Institute of International Affairs, Tokyo (2009-). Formerly: Vice Minister, Ministry of Foreign Affairs, Japan; Ambassador of Japan to the Court of St. James's: Senior Visiting Fellow, Middle East Programme, The Royal Institute of International Affairs; A Governor, The Ditchley Foundation (2004-09).

Mr Toshio Oya 
Counsellor, Minister's Secretariat, Ministry of Finance, Tokyo. Formerly: Assistant Commissioner for International Affairs, Financial Services Agency; Director, Foreign Exchange Markets, International Bureau, Ministry of Finance; Japanese Representative at the IMF and World Bank, Washington, DC.

Mr Noriyuki Shikata 
Japanese Diplomatic Service (1986-): Political Minister, Embassy of Japan to the United Kingdom (2012-). Formerly: Deputy Cabinet Secretary for Public Affairs, Director of Global Communications, Office of the Prime Minister of Japan (2010-12); Director, Economic Treaties, Ministry of Foreign Affairs (2009-10); Director, US and Canada Economic Affairs (2007-09); Assistant Press Secretary (2006-07); Director, Status of US Forces Agreement (2004-06); Energy Advisor, Japanese Delegation to the OECD (1999-2002); Lecturer, Chuo University and International University of Japan.

Mr Masatoshi Sugiura
Japanese Diplomatic Service: Director, Policy Planning Division, Ministry of Foreign Affairs (2013-); member, Committee on Budget and Finance, International Criminal Court (2011-); Lecturer, Chuo University (2012-). Formerly: Director, International Peace Cooperation Division (2011-13).

Professor Hitoshi Tanaka 
Chairman, Institute for International Strategy, Japan Research Institute Ltd; Senior Fellow, Japan Center for International Exchange; Visiting Professor, Graduate School of Public Policy, University of Tokyo. Formerly: Deputy Minister of Foreign Affairs (2002-05); Director General, Asian and Oceanian Affairs Bureau (2001-02).

MALAYSIA

Dr Tang Siew Mun 

Director, Foreign Policy and Security Studies, Institute of Strategic and International Studies, Kuala Lumpur; member, Executive Committee of the Malaysian Japanese Studies Association. Formerly: Senior Lecturer, School of History, Politics and Strategic Studies, Universiti Kebangsaan Malaysia.

OECD/USA

Dr Randall Jones 

Head, Japan-Korea Desk, OECD, Paris.

PEOPLE’S REPUBLIC OF CHINA

Professor Dingping Guo 

Professor of Political Science, School of International Relations and Public Affairs, Fudan University; Deputy Director, Confucius Institute, School of Contemporary Chinese Studies, University of Nottingham. Formerly: Vice-Dean, Institute of International Studies (2009-12), and Director, Centre for Japanese Studies (2008-12), Fudan University.

Dr Zhang Zhexin 
Research Fellow, Center for Asia-Pacific Studies, Shanghai Institutes for International Studies (2008-); Editing Board Member, Journal of Political Marketing.

REPUBLIC OF KOREA

Ambassador Chung Eui-yong 

Secretary General, International Conference of Asian Political Parties (2007-); Senior Advisor, Shin & Kim (2009-). Formerly: Member of the National Assembly of the Republic of Korea (2004-08); Chairman, Foreign Relations Committee, Uri Party (later Democratic Party); Diplomatic Service of the Republic of Korea (1971-2004): Spokesman; Minister, Korean Mission to the EU; Director General, Trade Bureau; Minister, Korean Embassy, Washington, DC; Ambassador to Israel; Deputy Minister for Trade; Ambassador to the United Nations and other International Organisations in Geneva.

RUSSIAN FEDERATION

Mr Dmitry Birichevskiy 

Deputy Director, Third Asian Department, Ministry of Foreign Affairs of the Russian Federation (2011-). Formerly: Director, ECOSOC and UN Regional Commissions Division, Department of International Organisations (2008-11); First Secretary, Russian Embassy to Japan (2005-08); Assistant to the Minister of Foreign Affairs (2004-05); Attaché, Russian Embassy to Thailand (1999-2004).

Professor Alexander Fedorovskiy 
Head, Pacific Studies Section, Institute of World Economic and International Relations, Moscow (1996-). Formerly: Executive Secretary, Center for Contemporary Korean Studies (2003-07); Professor, Moscow State Institute of International Relations (2002-04).

SINGAPORE

His Excellency Mr T. Jasudasen 

Diplomatic Service of Singapore (1977-): High Commissioner for the Republic of Singapore in the United Kingdom (2011-). Formerly: High Commissioner in Malaysia (2006-11); Ambassador to Myanmar (2004-06); Ambassador to France (1997-2004).

UK

The Rt Hon. Baroness Virginia Bottomley PC DL 

Director, Odgers Berndtson (2000-); Member, International Advisory Council, Chugai Pharmaceutical Co. Ltd (2011-); NED, Smith and Nephew (2012-); Trustee, The Economist Newspaper; A Governor, London School of Economics; Chancellor, University of Hull (2006-); Pro Chancellor, University of Surrey (2005-); Life Peeress (2005-). Formerly: Member of Parliament (Conservative), Surrey SW (1984-2005); Secretary of State for National Heritage (1995-97), for Health (1992-97); non-executive Director, BUPA (2007-13). A Governor and a member of the Business Committee, The Ditchley Foundation.

Professor Kerry Brown 
Founder, Joseph Caron Incorporated, Vancouver, Canada; Distinguished Fellow, Asia Pacific Foundation of Canada; Fellow, Institute of Asian Research, University of British Columbia. Formerly: Canadian Diplomatic Service: High Commissioner to India and Ambassador to Bhutan and Nepal (2008-10); Ambassador to Japan (2005-08); Ambassador to China, DPRK and Mongolia (2001-05); Assistant Deputy Minister for Asia and Senior Official for APEC (1998-2001).

Mr Charles Grant CMG 
Co-founder and Director, Centre for European Reform (1996-); member, International Council, Terra Nova; advisory board member, Moscow School of Political Studies; advisory board member, Centre for Economic and Foreign Policy Studies, Istanbul. Formerly: board member and trustee, British Council (2002-08); Defence Editor and Brussels Correspondent, The Economist. Chairman of the Programme Committee, a member of the Council of Management and a Governor, The Ditchley Foundation.

Ambassador Tim Hitchens CMG LVO 
HM Diplomatic Service: British Ambassador to Japan (2012-). Formerly: Director Africa, Foreign and Commonwealth Office, London (2010-12); Director, European Political Affairs (2008-10); Minister, British Embassy, Paris (2005-08); Head, Africa Department (Equatorial) (2003-05).

Mr Jason James 
Director General, Daiwa Anglo-Japanese Foundation (2011-). Formerly: Director, British Council, Tokyo (2007-11); Chair, European Union National Institutes of Culture Japan cluster; board member, Japan-British Society; board member, United World Colleges Japan; Head of Global Equity Strategy, HSBC, London; Head of Research, HSBC Securities, Tokyo.

Mr Stephen Lillie 
HM Diplomatic Service (1988-): Director, Asia Pacific, Foreign and Commonwealth Office (FCO) (2013-). Formerly: Ambassador to the Philippines (2009-13); Head, Far Eastern Group, Asia PacificDirectorate, FCO (2006-09); Counsellor (Economic) and Director of Trade and Investment, New Delhi (2003-06); HM Consul-General, Guangzhou (1999-2003); Deputy Head, China Hong Kong Department (1998-99).

Mr Nicolas Maclean CMG 
Co-Chairman, Japan400 (2013-); Board Member, Canada-UK Council (2007-); Fellow Emeritus, British Association of Japanese Studies (2001-); Chief Executive, MWM (Asia) (2000-); Fellow, British-American Project (1985-). Formerly: Senior Fellow, The International Institute for Strategic Studies (2000-07); Executive Director, Prudential Corporation Asia Limited and Group Adviser (Asia), Prudential Corporation plc (1997-99); Senior Adviser (China), Robert Fleming (1993-97); Chairman of Membership and Council Member, Royal Institute of International Affairs (1986-92).

Mr John McLaren 
Chairman, Barchester Group; non-executive Director, a number of UK and US companies; novelist and business journalist. Formerly: Director, Morgan Grenfell; Director, Deutsche Bank; General Partner, Hambrecht and Quist Venture Partners, San Francisco; Director, Barings Bank; HM Diplomatic Service: British Embassy, Tokyo.

The Rt Hon. John Spellar MP 
Member of Parliament (Labour) for Warley (1997-); Shadow Foreign and Commonwealth Office Minister (2010-). Formerly: Government Whip (2008-10); Minister of State, Northern Ireland Office (2003-05); Minister for Transport (2001-03); Minister of State for the Armed Forces (1999-2001).

Professor Arthur Stockwin

Founding Director (1982) and Emeritus Fellow, Nissan Institute of Japanese Studies, Oxford. Formerly: Political Science Department, Australian National University.

The Viscount Trenchard DL
Consultant and Senior Adviser, Mizuho Bank Ltd (2013-); Chairman, Royal Air Force Benevolent Fund (2006-); Chairman, Stratton Street PCC Ltd (2006-); Director, Lotte Chemical UK Ltd (2010-); Deputy Lieutenant for Hertfordshire (2008-); Director, Bache Global Series SICAV (2007-); Member, House of Lords (1987-99, 2004-). Formerly: Managing Director, Mizuho International plc (2007-12); Joint Chairman, The Japan Society (2000-04); Director, Robert Fleming and Co. Ltd (1996-2000); Director, Kleinwort Benson Ltd (1986-96), Chief Representative in Japan (1980-88, 93-95).

Sir Mark Walport FRS FMedSci 
Chief Scientific Adviser to HM Government, Government Office for Science. Formerly: Director, Wellcome Trust; Professor of Medicine and Head of the Division of Medicine, Imperial College London.

Sir David Warren KCMG 
Chairman, The Japan Society; Visiting Professor, Sheffield and De Montfort Universities; a member of the Council, University of Kent at Canterbury. Formerly: HM Diplomatic Service: Ambassador to Japan (2008-12); British Embassy, Tokyo (three postings between 1977 and 2012); Head, China Hong Kong Department, Foreign and Commonwealth Office (1998-2000).

UK/USA

Lady Judge CBE 

Former Chairman, United Kingdom Atomic Energy Authority; Chairman, UK Pension Protection Fund (2010-); Deputy Chairman, TEPCO Reform Committee and Chairman of its Task Force on Nuclear Safety; Director, NV Bekaert SA (Brussels); Director, Statoil (Norway); Director, Magna International (Canada), among others. Formerly: Executive Director, Samuel Montagu & Co. Ltd; Director, News International; Commissioner, US Securities and Exchange Commission. A Governor and a member of the Programme Committee and Business Committee, The Ditchley Foundation.

Sir Howard Stringer 
Formerly: Chairman and CEO, Sony (2005-12); President, Sony Corporation of America (1997-2005); President, CBS Inc. (1988-95); President, CBS News (1986-88).

USA

Dr Michael Auslin 

Resident Scholar in Asian and Security Studies and Director of Japan Studies, American Enterprise Institute, Washington DC (2007-); Columnist, The Wall Street Journal.  Formerly: Associate Professor of History, Yale University (2000-07).  Author, 'Pacific Cosmopolitans: A Cultural History of US-Japan Relations' (Harvard University Press, 2011).

Professor Gerald Curtis 
Burgess Professor of Political Science, Department of Political Science, and former Director of the Weatherhead East Asian Institute, Columbia University; Senior Research Fellow, Tokyo Foundation. Formerly: Royal Institute of International Affairs, Chatham House, London; Collège de France, Paris; Lee Kwan Yew School of Public Policy, Singapore; Keio and Tokyo Universities; National Graduate Research Institute for Policy Studies.

Mr Glen Fukushima
Senior Fellow, Center for American Progress (2012-); Board of Directors, Japan Society of Boston; Board of Trustees, Japan Association of Corporate Executives; member, Council on Foreign Relations; member, Asia Society Global Council. Formerly: President and CEO, Airbus Japan; President and CEO, NCR Japan; President and CEO, Cadence Design Systems Japan; President, Arthur D. Little Japan; Vice President, AT&T Japan; President, American Chamber of Commerce in Japan; Director for Japanese Affairs and Deputy Assistant US Trade Representative for Japan and China, USTR; member, Trilateral Commission; National Science Foundation Fellow, Harvard University.

Mr Jesper Koll 
Managing Director and Head of Japanese Equity Research, JP Morgan Securities Japan Co. Ltd; Member, Keizai Doyukai (Japan Association of Corporate Executives). Formerly: President and CEO, Tantallon Research Japan KK, Tokyo; Chief Economist, Merrill Lynch Japan; Managing Director, Tiger Fund; Chief Economist, JP Morgan, Tokyo.

The Hon. Stanley Roth 
Vice President, International Government Relations, The Boeing Company, Arlington, Virginia (2006-); Board of Directors, Atlantic Council; a member, Asia Society Business Advisory Council. Formerly: Vice President of International Relations – Asia, The Boeing Company (2001-06); US Department of State: Assistant Secretary of State for Asian and Pacific Affairs (1997-01); Director of Research and Studies, US Institute of Peace (1996-97); Special Assistant to the President and Senior Director for Asian Affairs, National Security Council (1994-96); Deputy Assistant Secretary of Defense for East Asia and Pacific Affairs (1993-94).


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