Japan faces multipolar world

(Agencies)
Updated: 2008-01-02 15:37

All indications are that today's world is in the midst of structural changes.

The position held by the United States as the sole superpower is being shaken, revealing bit by bit the emergence of a multipolar world.

The growing uncertainty in the status of the United States is not solely attributable to a decline in international trust in that country as a result of its unwise decisions and conduct in connection with the Iraqi war. An even more essential factor is a decline in the prestige long held by the US dollar as the world's key currency.

The euro, the single currency used by 13 European Union nations, has been steadily gaining strength on the international market, and has established itself as the world's second key currency. In fact, oil producers in the Middle East are gradually shifting from the dollar to the euro as a new dependable currency, while further increasing their already massive financial assets as a result of a sharp rise in crude oil prices.

To be more exact, these nations now have a portion of their assets in euros. China is following suit as the largest holder of foreign currency reserves in the world.

Russia--which has acquired deep pockets partially thanks to a windfall in crude oil income in recent years--also is worth noting. The nation has reversed its conciliatory attitude toward the United States exhibited since the collapse of the Soviet Union. Today, Russia is poised to pit itself against the United States, apparently striving to revive its erstwhile status as a political superpower.

Meanwhile, China has enjoyed sizzling economic growth in recent years. This growth has been so rapid that its economy is predicted to exceed Japan's within a few years if things go well, and become the world's second-largest economic power. China's economic growth has been accompanied by a sharp buildup in its military. China could one day emerge as another pole to rival the United States as a military power.

People began to talk about the "BRICs" about four years ago. BRICs stands for Brazil, Russia, India and China and the coinage was made as a prediction that these countries would grow into major economic powers by 2050.

According to that projection, China would replace the United States as the world's largest economy in about 40 years. The United States would be second, putting India--which has a population to rival China's--at third.

Relations with China important

A more recent projection puts Mexico above Russia in the ranks. Whatever the case, both China and India are bound to emerge as new poles that would reduce Japan to a less prominent economic presence in the world.

In 1995, China was already ahead of Japan in purchasing power parity, becoming the world's second-largest by that standard, according to one economic report. The report adds India outstripped Japan in this respect to become the world's third-largest in 2006.

The ongoing change in the global power balance may be accompanied by twists and turns and friction among nations. The most formidable challenge facing Japan's foreign policy will be how to deal with China as it emerges as a new pole; that is, how to build "strategically mutually beneficial relations".

Still, the foundation of this country's foreign policy--its relationship with the United States--will remain unchanged. Japan must keep its alliance with the United States intact in the foreseeable future. This also will be essential when it comes to keeping this nation's ties with China on a proper keel.

This line of reasoning seems to be reflected in Prime Minister Yasuo Fukuda's call for keeping Japan's alliance with the United States and its relations with Asian neighbours "synergistic."

There are concerns that China's rise as a new global power could make the United States less interested in Japan.

US Senator Hillary Clinton, D-N.Y., a candidate for the 2008 US presidential election, has attracted attention with the remark that effectively said the most important bilateral relationship for the United States in the 21st century is with China.

Japan-US alliance a cornerstone

No matter who becomes the next US president, the United States has every reason to regard its relations with China as the most important, if it considers its foreign policy from a medium- and long-term perspective.

To maintain relations with the United States as its most important ally, Japan must further step up diplomacy toward achieving that goal, while also shouldering burdens commensurate with this determination.

The basis of Japan's efforts to conduct flexible diplomacy--whether in dealing with the United States or China and other Asian countries--is political stability at home. Any turmoil in this country's domestic politics would undermine the credibility behind any statements and pledges made to the rest of the world, and would undermine diplomatic clout.

However, this country's current political situation is a far cry from being satisfactory. The opposition camp retains a majority in the House of Councillors, while the ruling parties have an overwhelming majority in the House of Representatives.

Under this unusual power relationship in the Diet, political leaders are finding it difficult to make swift decisions about important affairs facing this country both at home and abroad. This has been symbolised by protracted confusion over the submission of a new government-sponsored antiterrorism bill aimed at resuming refueling activities in the Indian Ocean.

This legislative morass also has been accompanied by a delay in reforming the tax and fiscal systems--a pressing issue that needs to be addressed by the government--while also fundamentally fixing troubled social security systems. The task of tackling these problems has been put off because of the calculated motives held by both the ruling and opposition parties in seeking to win the next lower house election.

Social security mechanisms can only endure if they are supported by sound and stable financial resources. State coffers are bound to run out someday if a rise in social security costs cannot be offset by hikes in tax and other sources of revenue. If state finances collapse, social security systems will be doomed to fail, too.

The government budget for fiscal 2008 incorporates about 22 trillion yen in social security spending. The figure accounts for one-fourth of general account expenditures. A natural increase in such government spending as a result of the rapidly graying of the population is predicted to come close to 1 trillion yen. The figure is set to stay at that level for the foreseeable future.

Meanwhile, the government's debts have surpassed a figure more than 10 times its annual tax revenue, and it continues to grow. The government must pay about 9.3 trillion yen in debt-servicing costs each year.

Fiscal, social security systems at risk

For years, the government has sought to curtail an increase in social security-related spending, while unsure about how, and if, it will be able to raise funds for a continuous rise in social security costs.

However, the consequence of repeated dependence on such an approach is extremely disturbing. Many people are not only concerned about the future of the state-run pension plan. They also have expressed anxiety that the social security systems in their entirety--medical and nursing care insurance services included--risk collapse.

An increase in the consumption tax rate--that is, a rise in financial burdens shouldered by all members of the public--will be the only practical way to replenish state coffers. Both the ruling and opposition parties are fully aware that there is no other way to overcome current fiscal straits. However, they have shied away from fundamental reforms.

German Chancellor Angela Merkel's experience may be helpful in this respect. In 2005, the Christian Democratic Union, the then opposition party led by Merkel, won the country's general election despite a seemingly unpopular promise to voters: a plan to raise the value-added tax, Germany's equivalent of the consumption tax.

No one welcomes a tax increase. But the victory by Merkel's party demonstrated that Germans understood the importance of raising taxes.

Government must show resolve

There is no reason to believe Japanese are unable to understand the need to raise the consumption tax, provided the government adequately explains the necessity of doing so and what kind of social welfare system will emerge in the future.

A task of immediate importance to be tackled by the Fukuda administration is to tell the nation and the world that the government is firmly determined to grapple difficult problems it faces. We believe the government should decisively implement policies necessary for properly dealing with other countries, addressing fiscal problems and improving people's lives.

This also is true regarding bills submitted to the Diet for such purposes. If necessary, the government should take advantage of a provision stipulated in the Constitution that permits a bill, even if it is rejected or not put to a vote when sent to the upper house, to be adopted into law through a second vote in the lower house, provided it gets a two-thirds majority. The new antiterrorism bill should not be the only piece of legislation deemed needing this constitutional clause.

The prime minister has no reason to fear a censure motion by the opposition camp. The two-thirds clause is a rule laid down by the Constitution. A censure motion has no such legal weight. Neither the Constitution nor the Diet Law provides for such a right. A censure motion does not even begin to compare with the weight carried by a no-confidence motion against the Cabinet.

Current lower house members have another two years to serve. There is no reason for an early dissolution of the lower house for a general election.

Needless to say, determined efforts by the government to implement key policies and pass important bills must be complemented by an attempt to adequately explain to the public why they are needed.