Japan’s Trade Policy toward Asia （Shujiro Urata ）
Japan’s Monetary and Financial Cooperation ― From a Viewpoint of the Spillover Effects of Currency Misalignment （Eiji Ogawa, Michiru Sakane Kosaka）
Japan’s Strategy for Economic Cooperation with Asia （Yasuyuki Sawada）
Japan’s Innovation Strategy toward Asia （Yumiko Okamoto）
Asia Strategy on International Migration （Yasushi Iguch）
Japan’s Asia Energy Strategy （Reiji Takeishi）
Japan's Asian Strategy: Japan's Asian Environmental Strategy and a Soft Power of the 21st Century （Shunji Matsuoka）
Japan’s Asia Strategy from the Perspective of Food and Agriculture (Masayoshi Honma)
Japan's Asian Policy Strategy: Evolution of and Prospects for Multilateralism in Security, Trade and Financial Cooperation (Takashi Terada)
| By Shujiro Urata | （Professor, Graduate School of Asia-Pacific Studies, Waseda University） |
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(Abstract)
Japan’s economic relations with Asian countries have rapidly become increasingly close in recent years, mainly through trade and direct investment. In Asia, Japanese companies have pursued a “fragmentation strategy,” which refers to breaking down production processes and assigning each process, through direct investment, to the country or region suited to implement it most efficiently. As a result, when a certain product is manufactured, its intermediate materials and parts are actively traded between production bases located in various Asian countries, leading to the formation of a regional production network. The formation of such networks has significantly contributed to the economic growth not only of Asian countries but also of Japan. Factors behind the formation of such networks include the presence of wide gaps in the quality of workers and the level of wages between Asian countries due to differences in the degree of economic development as well as the liberalization of policies on trade and direct investment in Asian countries. However, constraints on trade and direct investment remain. To further promote the economic growth of Japan and Asian countries, it is necessary to reduce and abolish such constraints. However, as trade liberalization negotiations under the auspices of the World Trade Organization have stalled, concluding free trade agreements with specific countries to liberalize bilateral trade and investment is one of the few effective policy options available. In Asia, many FTAs have been concluded, mainly involving member countries of the Association of Southeast Asian Nations (ASEAN). However, as for an FTA that covers the whole of Asia, negotiations have just started on the Regional Comprehensive Economic Partnership (RCEP). The negotiations will proceed with a target year of 2015 for the conclusion of an agreement. As the most developed country in Asia, Japan must actively exercise its leadership in designing a partnership that will contribute to the economic growth of Asian countries and concluding an agreement by the target year. When developing a trade policy toward Asia, Japan must firmly recognize that the growth of Asian countries is essential to its own growth.
Key words: FTA, RCEP, production networks
JEL Classification: F13, F15, O53
| By Eiji Ogawa | （Professor, Graduate School of Commerce and Management, Hitotsubashi University） |
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| By Michiru Sakane Kosaka | （Assistant Professor, Faculty of Liberal Arts, Sophia University） |
(Abstract)
The purpose of this paper is to examine what forms of monetary and financial cooperation will be desirable in East Asia with a focus on the spillover effects of currency misalignment on the Japanese economy in particular, thereby obtaining implications for monetary and financial cooperation in which Japan should engage in the region in the future. First, we took an overview of the movements of East Asian countries’ currencies using the Asian Monetary Unit (AMU) and the AMU deviation indicator, which have been attracting attention in recent years as a measurement to measure currency misalignment. Then, we conducted empirical analysis of exchange rate systems adopted in effect by East Asian countries by measuring the currency basket weight and discussed the relationship between the systems and the global financial crisis. By conducting analysis with regard to both the pre-Lehman Shock period and the post-Lehman Shock period, we showed that because of the global financial crisis, the currency peg to the dollar strengthened in some countries and weakened in others. Next, we conducted a structural VAR (vector autoregressive) analysis as to how currency misalignment among East Asian countries could affect Japanese macroeconomic variables using the real AMU deviation indicator and examined what kind of exchange rate system and exchange rate policy will be desirable in order to achieve macroeconomic stability.
Key words: currency misalignment, AMU deviation indicator, East Asian currencies, currency and financial cooperation, global financial crisis
JEL classification: F31, F33, F42
| By Yasuyuki Sawada | (Professor, Graduate School of Economics, University of Tokyo) |
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(Abstract)
As Asia has made remarkable progress in economic development and poverty reduction, the global balance of economic power, in which the United States, Japan and Europe have acted as the three major forces, is changing drastically. In light of the new development, this paper discusses what kind of economic cooperation strategy Japan should pursue in Asia from the perspective of the official development assistance (ODA) strategy. There is an ongoing change in the global trend of ODA, as emphasis is shifting drastically from support for growth to direct assistance for poverty reduction, from bilateral assistance to multilateral assistance, and from transfer of public funds to public-private partnership. We also see the growing importance of assistance and international cooperation provided not only by China as an emerging donor but also by South Korea, which has recently become a formal member of the DAC (Development Assistance Committee) of OECD (Organisation for Economic Co-operation and Development), and non-public organizations, including private foundations like the Bill and Melinda Gates Foundation, NGOs and private companies. With regard to academic research as well, rigorous studies on development policies have been conducted one after another in the field of development economics based on the randomized controlled trial (RCT) approach, bringing about a kind of revolution. In the meantime, Japan has been forced to reduce the amount of its ODA, as achieving fiscal consolidation has become an urgent task. It has been pointed out that Japan cannot help but decline to the status of a “middling donor” in the future. Moreover, there are voices questioning why Japan needs to implement ODA now. On the other hand, some people recognize anew the importance of the past ODA because as many as 163 countries and regions offered assistance to Japan after the Great East Japan Earthquake. This paper discusses three major roles played by economic cooperation, particularly ODA, in Japan’s Asia strategy: (1) acting as a lubricant for growth and poverty reduction in Asia; (2) implementing policy measures to reduce and deal with catastrophic risks in Asia and around the world; and (3) exercising leadership in achieving the development goals of the international community from the Asian perspective. The Asia strategy should be underpinned by strategic activities such as engaging in intellectual production and communication, thereby contributing to international public goods. “Internationally competitive academic research” constitutes the core of such activities, so steadily accumulating the achievements of excellent academic research programs will enhance the value of ODA as a tool of diplomacy and promote national interests in the medium to long term.
Key words: Asia, Bangladesh, poverty reduction, official development assistance (ODA), public-private partnership, disasters, post-2015 development goals
JEL classification: I3, F35, O1, O53
| By Yumiko Okamoto | （Professor, Faculty of Policy Studies, Doshisha University） |
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(Abstract)
In the Asia-Pacific region, there is a growing move to explore a new growth paradigm. Innovation is the central theme of this activity. In Europe, there is a tendency to regard as a threat the rise of Asian emerging countries with their increasing innovation creation capability. For Japan, does their rise provide an opportunity or pose a threat? While the improvement of the innovation creation capability of Asia as a whole is something to celebrate, aren't there problems and challenges? Moreover, if Japan is to make full use of Asia's vitality to achieve its own growth while contributing to the development of the region, what kind of strategy should it adopt? This paper is intended to answer those questions.
Our analysis found that while the innovation creation capability of Asia as a whole has increased when measured against any benchmark, that is more a growth opportunity than a threat for Japan, which is making a clear shift to Asia in its foreign R&D investments. However, at the same time, it has become clear that the Asia-Pacific region faces some problems, such as widening differences in innovation creation capability between countries within the region, the closed nature of innovation models in the Northeast and a lack of a regional framework for R&D cooperation.
In light of the above findings, we proposed the following three Asia innovation strategies that Japan may pursue.
(i) Increasing ODA budget funds (particularly for ODA projects covered in the current account budget) and promoting economic cooperation featuring open innovation.
(ii) Improving the business environment in the region by utilizing the TPP and the RCEP
(iii) Establishing an Asia-wide innovation system.
Japan should aggressively pursue an Asia innovation strategy that can take advantage of the region's vitality to promote Japan's growth while continuing to contribute to the peace and prosperity of Asia and the Asia-Pacific region as a major economic power.
Key words: innovation, FTA, ODA, innovation system, absorption capacity
| By Yasushi Iguchi | （Professor, School of Economics, Kwansei Gakuin University） |
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(Abstract)
Japan needs to develop a strategy for planning and realizing an economic integration suitable for Asia. Such a strategy should cover not only liberalization of trade in goods and services and investment but also management of international migration. When developing the strategy, it is important to recognize that since the turn of the century, the leadership of globalization is shifting from developed countries to emerging countries.
Therefore, this paper conducted theoretical and empirical studies on the following five subjects:
Japan's failure to involve itself in Asia's growth is attributable to its lack of a strategy for managing international migration on an Asia-wide basis. Furthermore, when the government executes its growth strategy, it is essential to establish a comprehensive migration policy toward foreign nationals in Japan that consists of immigration policy and integration policy as two pillars
Key words: regional economic integration, trade in services, international migration, personnel with advanced skills, brain drain, foreign students, middle skills, supply-demand mismatch in the labor market, generation effect, multicultural coexistence , immigration policy, integration policy, circular migration
JEL Classification: F15, F22, F66, I23, J24, J61, M16, O15
| By Reiji Takeishi | (Professor, Department of International Relations, Tokyo International University) |
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(Abstract)
Energy consumption in Asia has been rapidly growing in line with increasing economic activities in the region and the growing role of the region in the global economy. As a result, it has become a huge challenge whether stable supply of energy, which constitutes the foundation of economic activities, can be maintained in the future. In particular, whether China, whose dependence on coal consumption is outstanding compared with other countries and whose coal consumption keeps growing, can afford to continue consuming vast amounts of coal in the future is extremely important for ensuring the prosperity and stability of Asia. In Asia, some countries are rich in energy resources but others are resource-poor. Among the countries in the Asia-Pacific region, including Oceania, Australia has abundant reserves of energy resources, so it is a very important partner for Asian countries. For Japan, it is important as an Asia strategy to actively involve itself in the establishment of a framework for ensuring the stability of the supply of resources in the whole of Asia, including both resource-rich and resource–poor countries.
Key words: energy supply and demand, shale revolution, Asian developing countries, energy strategy
JEL classification: F5, F6, O3, O5, Q4
| By Shunji Matsuoka | (Professor, Graduate School of Asia-Pacific Studies, Waseda University) |
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(Abstract)
This chapter examines Japan's Asian strategy from the perspective of the establishment of Asian environmental institutions. Generally speaking, "de jure integration and institutional integration" have been emphasized with regard to the European integration, while the Asian integration has been characterized by "de facto integration and functional integration". However, the time has come for Asia to consider institutional integration given the advance of both globalization and regionalization.
Japan's Asian environmental strategy started in the form of support for the development of East Asian countries' social environmental management capacity through bilateral environmental cooperation following an increase in environmental ODA that began in the latter half of the 1980s. That was in line with Japanese companies' advance into Asia, which was prompted by the yen's high appreciation triggered by the 1985 Plaza Accord. A typical example of Japanese environmental ODA is the Environmental Center Approach taken in Thailand, Indonesia and China. The Environmental Center Approach was intended to enhance environmental monitoring capacity in order to ensure air quality management in individual countries. Later, Japan's environmental cooperation expanded from bilateral cooperation to multilateral cooperation and led to the establishment of regional environmental institutions. A typical example of a regional environmental institution established under Japan's initiative is the Acid Deposition Monitoring Network in East Asia (EANET).
Japan started to pursue its Asian environmental strategy in earnest at a time when the global environment started to attract worldwide attention because of the 1992 Earth Summit. As a result, South Korea and the ASEAN also started efforts to establish regional institutions for environmental cooperation, posing competition to Japan's Asian environmental strategy. Japan itself failed to exercise initiative in establishing an epistemic community because of such domestic problems as vertically segmented administration. In addition, Japan was also unable to strategically determine the geographical scope ― Northeast Asia, East Asia or the Asia-Pacific ― of regional cooperation.
Consequently, regional environmental institutions in East Asia have the following three problems:
Regional environmental governance in East Asia is expected to be support by two pillars ― specialized environmental institutions and environmental institutions as part of frameworks for political cooperation intended to realize regional integration and create a regional community. However, unless there is an Asian strategy for utilizing both types of institutions in a coordinated manner, international transaction costs will grow, making it difficult to create a sustainable Asian society.
Key words: Environmental cooperation, environmental governance, regional institutions in Asia, Asian University Institute
JEL classification: Q58
| By Masayoshi Honma | (Professor, Graduate School of Agricultural and Life Sciences, University of Tokyo) |
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(Abstract)
Asia's growth is transforming the food and agricultural industry. An increase in income promotes a shift in food consumption from grains to livestock products. In addition, demand arises for a greater variety of vegetables and fruits. In response to these changes, the Asian agricultural industry is shifting production to agricultural products with higher value added. That means an expansion of intra-industrial trade in agricultural products and foods, providing the Japanese agricultural industry with opportunities to grow through an aggressive strategy.
Basically, if Japan is to pursue an Asia strategy that brings about the growth of the Japanese agricultural industry, it is essential to expand exports of agricultural products produced in Japan. Japanese agricultural products whose good quality has been recognized, such as beef, vegetables and fruits, are highly valued. However, the Japanese agricultural industry should not focus exclusively on wealthy people as customers. It should also adopt the strategy of exporting high-quality but affordable Japanese-brand products targeted at middle classes whose income is growing. Moreover, there is a growing move among Japanese farmers to produce agricultural products abroad based on Japanese technologies and skills, which is called "Made by Japan".
It will be necessary to develop a multilateral framework for resolving food and agricultural issues in Asia while pursuing an aggressive strategy in the food and agricultural sector. If a forum of comprehensive discussions on regional food and agricultural issues in Asia is created and ways of realizing the development of the agricultural industry of Asia as a whole is explored, it will open the way for an Asian common agricultural policy. That will also be the direction that Japan's food and agriculture strategy should desirably take.
Key words: food and agriculture, trade in agricultural products, growth strategy, Asian market, agricultural policy, advance into foreign markets
JEL classification: F14, F61, Q13, Q17, Q18
| By Takashi Terada | (Professor, Faculty of Law, Doshisha University) |
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(Abstract)
In the postwar period, cooperation in the fields of security, trade and finance in Asia had been conducted mainly through bilateral arrangements . However, since around 2010, there have been remarkable advances in cooperation by dint of multilateral frameworks. With regard to security framework, the East Asia Summit has served to promote compliance with laws in relation to territorial disputes in the South China Sea and other areas. As for trade liberalization, negotiations for regional integration have been progressing under such frameworks as the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership, a framework for regional integration in East Asia. In the field of financial cooperation, the Chiang Mai Initiative (CMI), which was nothing more than a network of bilateral currency swap arrangements, was turned into a multilateral arrangement called the Chiang Mai Initiative Multilateralisation agreement in 2010. Meanwhile, the ASEAN+3 Macroeconomic Research Office was established in order to conduct macroeconomic monitoring and analysis on East Asian economies. Thus, multilateral functions have been substantially enhanced. This paper argues that a main factor that caused a change in its orientation in cooperation in Asia, which has primarily evolved around bilateral partnerships by incorporating multilateral arrangements, is the United States' growing interest in multilateralism in its Asia strategy, and attributes this move to the rise of China. In other words, multilateral arrangements in Asia has been developing because the United States has been increasingly resolved to counter the rise of China through an effort to undertake coalition-building with like-minded countries amid the ongoing U.S-China competition in regional security, trade and finance. Finally, the paper concludes that Japan's pursuit of multilateralism in its foreign policy toward Asia is a response to this structural change in the region and suggest that it is imperative for Japan to engage coalition-building efforts as well, as a part of its Asian strategy to realize its interests.
Key words: multilateralism, regional integration, financial cooperation, regional security dialogue
JEL classification: F52, F53, F55
Any article in the Review reflects the writer's own opinion, and has nothing to do with any statement issued by the Ministry of Finance or the Policy Research Institute.
