Korea's Future and the Great Powers

5. Japan and the Unification of Korea: Challenges for U.S. Policy Coordination / Michael H. Armacost and Kenneth B. Pyle

5 Japan and the Unification of Korea: Challenges for U.S. Policy Coordination Michael H. ArmacostandKenneth B. Pyle The sudden, unanticipated end of the Cold War presented Japan with a new set of foreign policy challenges, among which the prospect of Korean reunification is one of the most problematic. In this essay we argue that although it has critical interests at stake, Japan labors under constraints that make it unlikely to take the lead in resolving the complex issues involved. Rather, it is more likely to be reactive and adaptive to the unification process , accommodating to the changing circumstances of unification in a cautious and incremental fashion. In some respects, because the nature ofreunification is so uncertain in its implications for Japan's interests, Japanese policymakers may privately prefer a continuation of the status quo of a divided Korea. Nevertheless, Japan cannot afford to resist unification. Moreover , in the potential scenarios for unification that we examine, Japanese cooperation with the United States is essential. American leadership in resolving strategic issues on the Korean Peninsula remains indispensable, but successful American initiatives will require skillful policy coordination with Japan that takes account of its interests and sensibilities. The resources that Japan can bring to bear and the role it plays will go a long way toward 125 126 MICHAEL H. ARMACOST AND KENNETH B. PYLE determining an enduring settlement on the peninsula and achieving a stable new order in Northeast Asia. JAPAN'S STAKE IN KOREAN UNIFICATION Japan has an immense stake in the outcome of unification because it will determine the fundamental nature of its strategic relationship with its closest neighbor. As Masashi Nishihara, the president of Japan's National Defense University, sums up, "Japan seeks a united Korea that is friendly to Tokyo and Washington, that is economically viable and politically open, and that will allow token U.S. presence to remain."1 Ifunified Korea retains nuclear weapons, is tilted toward China, refuses to countenance a continued security relationship with the United States that includes some residual American military presence, and/or is resolutely hostile toward Japan in its vision of the future, it would represent a major foreign policy defeat for Japan and a problem of immense concern for the nation's future. A reunified Korea with renewed animus toward Japan would have long-term unfavorable implications for Japanese security. In addition to the strategic relationship, Japan's commercial interests will also be deeply affected by the outcome of the reunification process. Despite the prolonged political bitterness between Japan and the Republic of Korea since World War II, the two countries have developed close economic ties. Japan provided the model for growth and supplied many ofthe capital goods needed for South Korea's industrialization. It also provided official development assistance, sizable flows ofprivate investment, increasingly significant technology transfers, and a market for some imports. By the 1990s, although Japan ran persistent trade surpluses with the ROK, South Korea nevertheless emerged as a fierce competitor with Japan in steel, consumer electronics, shipbuilding, and many other key areas. At the same time, Japan had become South Korea's second leading trade partner (after the United States) and its leading source of foreign investment. The extensive interdependence of their economies was evident in the 1997-98 financial crisis in South Korea: Japan contributed billions of dollars to help rescue the ROK economy and thus also cover the exposure of JAPAN AND THE UNIFICATION OF KOREA 127 Japanese banks, which held more than a third of South Korea's foreign debt. At the same time, Japan's own economic troubles caused problems for South Korea. Japan's banks, burdened by a mountain of nonperforming loans, had to withdraw credit facilities from neighboring countries. The stagnation of Japan's economy dried up a major Korean export market. Japanese Finance Minister Kiichi Miyazawa proposed a $30-billion trade facilitation fund, which was well received by Koreans but barely offset the withdrawal of bank credits formerly available. All of this is testimony to the close economic ties that had developed and that will be influenced and shaped by the course of unification. Reunification andJapan sRelations with OtherPowers But more is at stake than Japan's future relations with Korea. So central is the issue of Korean reunification to the future structure of international relations in the region that it will bear heavily on Japan's relations with the other major powers whose interests intersect...