The lead editorial in the Nikkei this morning is headlined “How should Japan contribute to ‘demand within Asia’?”
In getting the global economic crisis under control, Asia, which is called the growth center of the 21st Century, looms large. In a 21 May lecture, Prime Minister Taro Aso called for the expansion of “demand within Asia”; how can Japan fulfill a leading role in doing so? The challenges posed and responsibilities thrust upon it are weighty.
The prime minister took as his topic “Toward an Asia that surmounts the economic crisis and soars again,” and he stressed that there is a need to shift the Asian economy from the export-driven structure it’s had up to now into a structure driven by internal demand. Where that is concerned, the diverse nations and territories of Asia are not likely to dissent.
A supplementary-budget proposal for FY 2009 that undertakes additional economic measures on a scale that exceeds the previous maximum of JPY 15 trillion is not under deliberation in the House of Councillors. It’s necessary to start taking financial action, but annual expenditures that it’s not unrealistic to expect to be tied to money politics will not contribute to an increase in Japan’s ability to grow. There’s a need to move forward in parallel with structural reforms, such as deregulation, as well.
On the other hand, we will have to accept more from Asian nations and territories–not just imports but also human resources. Pain will accompany the opening of agricultural markets and things, but there’s no way to get around it.
In connection with the stability and expansion of Asian financial markets, the prime minister stated, “we want to make the ‘yen’ something that different countries can use for financing in times of crisis.” The idea is to provide emergency loans of Japanese yen to countries that have insufficient foreign currency, but it can also be considered an intention to “internationalize the yen.”
In Asia, China has pushed for an economy built on the yuan with trade negotiations with neighboring nations and territories such as ASEAN. These are activities with a view toward a “yuan currency sphere.”
China is the 3rd-largest economy in GDP after the United States and Japan. There’s a high probability that it will pull ahead of Japan in one or two years. Still, the hurdles to internationalization for the yuan are higher than for the yen.
The prime minister has issued invitations to heads of state of five nations in the Mekong River Basin, such as Thailand and Vietnam, and also announced that he will hold the first “Japan-Mekong Summit” within the year. The nations of the Mekong Basin, which border China, are of major geographic importance.
It is important for Japan to strengthen its tie-ups with and trust from Asian nations and territories and to show some ability to develop a concept for the expansion of demand within Asia. That will also have an effect on the renaissance of the Japanese economy.
I quote the editorial at some length not because it says anything new but because it doesn’t. Take away the figures specific to the budget and to China, and this sounds like just about every editorial on the Japanese economy in the last fifteen years: Asia is becoming more important, we need to liberalize our markets and make nice with the neighbors, and that means not being so closed off. The current crisis does change things, and it will be interesting, if that’s the word, to follow possible damage to the dollar as the world currency.
But I’m not so sure the yen is a good candidate for a replacement, even in Asia. I’ve always found it interesting that we in the West are so bent on explaining Japan; in my experience, people from other places in Asia are far more willing to conclude that Japan is just plain weird and leave it at that. Perhaps part of the reason is that they already understand Buddhism and Confucianism and therefore don’t get hung up on trying out novel ways of applying them to the Japanese–I don’t know. In any case, countries in Asia know they need Japan and have a lot to gain from tapping into its industrial capacity, but they seem to recognize the Japanese political and economic systems as real headaches for outsiders beyond a certain point. And the Nikkei can wag its finger about the necessary but difficult process of making Japan more open to foreigners, but to this point, somehow talk of “internationalization” has rarely resulted in meaningful action. If nothing else, it should be interesting to see how Beijing reacts to Aso’s Mekong Basin thing.