Repositioning Japan’s Narrative as the Economic Order Evolves

The all-too-common narrative for Japan today is that the country’s economic heyday is over. Even though it remains the world’s third-largest economy in terms of GDP, the prospect of holding on to that position seems increasingly unlikely. Indeed, the question usually raised nowadays is when, not if, Japan’s global economic standing will falter, as other Asian countries such as India and Indonesia thrive. From an increasingly graying population to a persistently high debt-to-GDP ratio, the challenges facing Japan’s economic regeneration seem formidable at best and insurmountable at worst. Yet, at the same time, expectations for Japan to do more to ensure stability across Asia are on the rise, particularly as its longest-serving prime minister Shinzo Abe had ambitions for the country to take on a greater role in defining new rules of international economic engagement, rather than simply being a follower of rules.

In Japan’s New Regional Reality: Geoeconomic Strategy in the Asia-Pacific, Saori Katada argues that Japan’s best days are far from over and contends that the country has succeeded in redefining itself by overhauling some of the formulas that led to its initial postwar economic success in order to meet its strategic objectives in the 21st century. To that end, Japan has been repositioning itself as an economic power in a way that reflects the shifting political dynamics of the region. One of Katada’s core arguments is that the shift in the global order has made an important impact in re-establishing Japan’s own worldview and ambitions as an Asian power. Propelled by postwar reconstruction efforts and focused on economic regeneration while under the U.S. security umbrella, Japan achieved dazzling results with its model for economic development that other East Asian countries came to emulate from the 1960s to the early 1990s.

This model, however, was actually the period in which Japan was effectively an emerging economy. One of the most striking arguments Katada makes is that Japan “shed its developmentalist shell” (p. 190) that depended on state support to be competitive during the height of its economic power. Not until the new millennium did it emerge as a country fully committed to promoting the liberal economic order that had initially allowed it to flourish, precisely because of its protectionist policies to limit global competition. This metamorphosis from a de facto developing economy into a truly globalized, competitive economy also led to a clear divide between companies that could compete internationally without government intervention and those that struggled without state assistance. Katada makes the case that in their emergent stage Japanese businesses needed government support to thrive, but as they blossomed into multinational corporations, it was the Japanese government that then needed their support in order to pursue its strategic vision of economic foreign policy. In fact, the decoupling of the government-business relationship was seen not only on the domestic front but also overseas, including in strategy toward official development assistance.

Katada also makes a clear case for the shift in Japan’s comprehensive economic strategy as a result of changes in the geoeconomic landscape of the Asia-Pacific, most notably the rise of China and the steady disengagement of the United States as a Pacific power. Certainly, Washington’s withdrawal from the Trans-Pacific Partnership (TPP) trade agreement actually provided a hitherto unprecedented opportunity for Japan to take leadership in ensuring the adherence of established rules and an economic order that had been critical for its own rise. Yet Katada points out that lobbying efforts by Japanese businesses for Japan to remain fully committed to the TPP were notably absent. Instead, like the Obama administration, it was the Abe government that pushed for the deal to move forward to ensure Japan’s geoeconomic influence as much to secure future business opportunities.

It is perhaps in articulating the particularly challenging situation in which Japan finds itself vis-à-vis China that the book shines most, given Katada’s nuanced approach to understanding the evolution of Sino-Japanese economic relations. For instance, in assessing the geoeconomic rivalry...