The Fukuda Doctrine and ASEAN: New Dimensions in Japanese Foreign Policy 9789814379403

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The

Fukuda Doctrine

and

A SEAN

The Institute of Southeast Asian Studies (ISEAS) was established as an autonomous organization in 1968. It is a regional research centre for scholars and other specialists concerned with modern Southeast Asia1 particularly the many-faceted problems of stability and security, economic development1 and political and social change. The Institute is governed by a twenty-two-member Board of Trustees comprising nominees from the Singapore Government1 the National University of Singapore 1 the various Chambers of Commerce 1 and professional and civic organizations. A ten-man Executive Committee oversees day-to-day operationsi it is chaired by the Director, the Institute 1s chief academic and administrative officer.

The

Fukuda Doctrine

and A SEAN New Dimensions in Japanese Foreign Policy SUEO SUDO

I5EA5

INSTITUTE OF SOUTHEAST ASIAN STUDIES

Published by Institute of Southeast Asian Studies I leng Mui Keng Terrace Pasir Panjang Road Singapore 0511 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying recording or otherwise, without the prior permission of the Institute of Southeast Asian Studies. ©

1992 Institute of Southeast Asian Studies

The responsibihty for facts and opinions tn thts pub!tcatton rests exclusively with the author and hts interpretattons do not necessarily reflect the views or the po!tcy of the lnstttute or tts supporters. Cataloguing in Publication Data

Sudo, Sueo. The Fukuda doctrine and A SEAN: new dimensions in Japanese foreign policy. 1. Japan-Foreign relations-19452. Japan-Foreign relations-Asia, Southeastern. 3. Asia, Southeastern- Foreign relations- Japan. 4. Japan- Foreign relations-ASEAN countries. 5. ASEAN countries- Foreign relations- Japan. I. Title. sls91-1700 1992 DS889.5 594 ISBN 981-3016-14-0 (soft cover) ISBN 981-3016-15-9 (hard cover) Typeset by The Fototype Business Printed in Singapore by Prime Packaging Industries Pte Ltd.

To My Parents Shozo and yukiko Sudo

Contents

List of Tables

ix

Preface

xi

Abbreviations

xiii

Introduction

1

chapter one

A Framework for Analysing Japanese Policy Towards Southeast Asia

7

chapter two

Post-war Japans Re-entry into Southeast Asia

24

chapter three

Japans Policy Towards Regional Development

53

chapter four

External Challenge and Changing Japan-Southeast Asia Relations1 1975-77

77

chapter five

A Changing Southeast Asia in Japanese Politics

114

chapter six

Formulating the First Doctrine in Japanese Foreign Policy

151

Contents

Vlll

chapter seven

Japarr's ASEAN Policy7 1977-87

186

chapter eight

Conclusion

226

Appendices

241

Bibliography

256

index

272

List of Tables

1. U.S. and Japanese ODA to Southeast Asia 7 1971-80

82

2. ASEAN 1s Economic Relations with Japan

103

3. External Powers1 Commitments to ASEAN

108

4. Party Shares1 Lower House Elections1 1958-76

115

5. House of Councillors Elections1 19741 1977

123

6. MFA's Proposal for Japanese ODA

190

7. Japan-ASEAN Economic Relations

216

Appendix 2. Japads Exports to ASEAN 1 1967-89

248

Appendix 3. Japads Imports from ASEAN 7 1967-89

250

Appendix 4. Japanese Investments in ASEAN 7 1967-89

252

Appendix 5. Japarrs ODA to ASEAN 1 1967-89

254

Preface

This is a study of Japanese foreign policy towards Southeast Asia in the post-Vietnam war period1 with special emphasis on the socalled Fukuda Doctrine of August 1977. Given the controversial nature of the Doctrine 1 this book attempts a scrutiny of its rationale and developments since 1977 with the view that the Doctrine in fact ushered in a new era in Japan-Southeast Asia relations. In explaining why and how changes in Japarrs Southeast Asian policy occurred1 four alternative perspectives are introduced: the international system1 the regional subsystem1 domestic politics1 and ideas. These four perspectives are examined in order to assess their relevance in analysing concrete cases. Having formulated the framework for analysis in Chapter 11 a historical evolution of Japan-Southeast Asia relations is given in the following two chapters for the purpose of comparing pre-Doctrine and current phases. Chapters 4 to 6 constitute the core of the book1 which explain how a shift in Japanese foreign policy towards the region came about. Chapter 7 follows up the Fukuda Doctrine period in order to investigate the impact of the Doctrine on Japan-Southeast Asia relations. Finally1 the nature of the Doctrine and the four perspectives in explaining the shift are discussed1 with a conclusion

xll

Preface

that the Fukuda Doctrine constitutes a major departure from Japarr's traditional economic policy towards the region in two dimensions. Playing an active political role and forging a special relationship with the Association of Southeast Asian Nations (ASEAN) are major characteristics of the Doctrine 1 which continue to be an integral part of Japarr's Southeast Asian policy to the present time. In writing this book1 I was greatly assisted by many individuals and institutions1 only a few of which can be acknowledged here. First of all 1 I am indebted to Professors John Campbell and Russell Fifield who helped me immensely to complete my doctoral thesis1 which constitutes the main part of this book. I would also like to thank Professor Masashi Nishihara and Masahide Shibusawa1 Director of East-West Seminar1 for their unstinting comments and guidance. I am grateful to Professors Mayako Ishii1 Setsuho Ikehata and the late Masataka Banno for their generous support and encouragement. The Institute of Asian Studies at Chulalongkorn University in Thailand deserves a special mention. Its Director1 Dr Khien Theeravit1 with whom I worked for two years1 has enlightened me in immeasurable ways. Most of all1 the Institute of Southeast Asian Studies1 Singapore 1 provided needed encouragement and an excellent environment for writing this book. For this I am deeply grateful to the Director1 Professor K.S. Sandhu. I have decided to dedicate this book to my parents who showed me how to live a life based on devotion and hard work. Finally, no acknowledgement can be complete without thanking my wife 1 Chantanee 1 whose understanding, patience 1 and special care for our children1 Yasuharu and Kenji1 made it much easier for me to undertake the task of producing this book.

Abbreviations

ADB ASA ASEAN AS PAC Keizai Doyukai EC ECAFE EPA ESB FEC Keidanren LDP MAFF MCEDSEA MFA MITI MOF MTN NICs

Asian Development Bank Association of Southeast Asia Association of Southeast Asian Nations Asia-Pacific Council Japan Committee for Economic Development European Community Economic Commission for Asia and the Far East Economic Planning Agency Economic Stabilization Board Far Eastern Commission Federation of Economic Organizations Liberal Democratic Party Ministry of Agriculture1 Forestry and Fisheries Ministerial Conference for Economic Development of Southeast Asia Ministry of Foreign Affairs Ministry of International Trade and Industry Ministry of Finance Multilateral Trade Negotiations Newly Industrializing Countries

Abbrevtattons

XIV

Nissho ODA PARC SCAP SEATO STAB EX UNCTAD ZOPFAN

Japan Chamber of Commerce and Industry Official Development Assistance Policy Affairs Research Council Supreme Commander for the Allied Powers Southeast Asian Treaty Organization Stabilization of Export Earnings United Nations Conference on Trade and Development Zone of Peace1 Freedom and Neutrality

Note on Japanese Names Japanese names are given in the Western manner with the given name preceding the family name.

Introduction

A t the third Summit of the Association of Southeast Asian Nations (ASEAN) on 15 December 1980 Prime Minister Noboru Takeshita delivered a speech entitled uJapan and ASEAN: A New Partnership Toward Peace and Prosperity;;; in which he stressed three policy goals: (1) to strengthen the economic resilience of ASEANj (2) to promote political co-ordination between Japan and ASEANj and (3) to promote cultural exchanges. 1 The third ASEAN Summit heralded the advent of a 11speciaF; relationship between Japan and the ASEAN countries by the fact that Japan was the only guest country among the dialogue partners of ASEAN to be invited. Since this event deserves particular scrutinY) in the pages that follow we will delve into the origins and development of this aspeciaF; relationship between Japan and Southeast Asia. Japan's active involvement in the region can be traced back to the Fukuda Doctrine enunciated by the former Japanese Prime Minister Takeo Fukuda in August 1977 Since then; Japan's policy has been flamed systematically in order to resolve the problem of Indochina and to help Southeast Asian countries develop their economies. At the same time; the Japanese Government has been trying to forge closer links with ASEAN as a viable regional organization. It is 1

2

fntroductwn

these changes brought about by Japans first doctrine that led Takeshita to attend the third ASEAN Summit. As a result7 for the first time in the history of Japan-Southeast Asia relations7 Japan has come to be regarded as a bona fide actor in this part of the world. This rare 11successn in Japanese foreign policy can be readily recognized against a background of historically trouble-ridden relations.

SOUTHEAST ASIA IN JAPANESE FOREIGN POLICY

Consummating the Meiji Restoration in 18687 a newly unified Japan engaged in a vigorous aggrandizement in foreign policy, epitomized in the slogan7 Fukoku Kyohet (a rich nation and a powerful army). Japan entered the international system through a series of acquisitions of foreign territories - Taiwan7 Korea 7 Manchukuo and Southeast Asia. It is true that after the Meiji Restoration 7 many Japanese urged their compatriots to move southward (Nanshin). Yet it was only in the 11 Fundamental Principles of National Policyn7 adopted at the Five Ministers 7 Conference on 7 August 19367 that the Japanese Government incorporated a southward advance into its national policy. As an extension of this expansionistic foreign policy, many Japanese unrealistically hoped that Imperial Japan would be able to reign over the entire Asian region with the aim of promoting peace 7 stability and prosperity7 to wit7 a Greater East Asia Co-Prosperity Sphere. 2 Thus7 it is not surprising that the surrender of 1945 had a lingering impact on the Japanese 7 as succinctly depicted by Nish: 11The Japanese have suffered from an imperial hangover. Like most hangovers7 theirs was unpleasant and uncomfortable 7 accompanied as it was by a sense of guilt. The guilt in turn acted as a constraint on her freedom of action in the political spheren. 3 Because of these historical experiences7 Japan-Southeast Asia relations were pervaded by residual feelings of enmity until the early l970s 1 reaching a peak in 1974 when stormy anti-Japanese movements engulfed the region. During this time 7 or the pre-Doctrine period7 11economic diplomaci77 largely formulated by Prime Minister Shigeru Yoshida and officially promulgated in 1950 constituted the heart of Japans policy towards Southeast Asia. The first White Paper on Japanese Diplomacy of 1957 cogently put it: 11 For our country

IntroductiOn

which adopted pacifism as its basic policy the only way to raise the living standards of the 90 million people living on the four small islands1 and to develop our economy is peaceful expansion of our economic powern. 4 Economic diplomacy, officially defined as upeaceful expansion of Japarr's economy in foreign markets necessary for the maintenance of the national economyn 1 thus became the modus vivendi of Japanese foreign policy. At the same time 1 intertwined with the American cold war strategy1 Japanese policy towards the region began to foster a triangular relationship1 linking U.S. capital1 Japanese technical know-how and Southeast Asian raw materials. Motivated by these economic imperatives1 Prime Minister Nobusuke Kishi paid the first high-level official visit to the region in 1957, followed by Prime Minister Hayato Ikeda in 1961 and 1963. As many observers maintain 1 the reparations settlement became an integral part of this diplomacy and soon served as the catalyst for Japarr's economic intrusion into the region. Through the reparations negotiations1 Japarr's first coherent policy towards Southeast Asia emerged. By the mid-1960s1 Japan was facing increasing pressures from Western and developing countries alike who called on Japan to share a greater burden as a udeveloped11 country in the international arena. It was at this time that U.S. policy towards Southeast Asia entered a new stage 1 playing the predominant role in protecting South Vietnam against communist expansion. Accordingly, the Japanese Government1 endorsing President Lyndon Johnson's plan for Southeast Asian development in 19651 came to share its ueconomicn burdens as a member of the Western alliance 1 thereby pouring huge capital into and initiating development plans and projects for the region. By the late 1960s1 therefore 1 Japan had moved into a commanding trade position. It was this uinducedn activism that made Japan involve itself more extensively in the region although the substance of its foreign policy remained intact. 5 It was also partly the result of the triangular strategy Japan had vigorously pursued. However1 Japarr's economic diplomacy gradually confronted formidable obstacles in the early 1970s. In particular1 the end of the Vietnam war in April 1975 and the ASEAN Summit conference of February 1976 in Bali had a profound impact on Japanese foreign

Introduction

policy. In the wake of the U.S. withdrawal from the region1 Japan was expected to take up the challenge of giving concrete support to efforts at regional organization and display its willingness to take on international responsibility. As one scholar best described it: 11 Since about 1977, for the first time after it regained independence in 19521 Japan has emerged as a visible political actor in the Asia Pacific region. In that year1 Prime Minister Takeo Fukuda proclaimed the 'Fukuda Doctrine' in a speech in Manila. The Doctrine was designed to define Japanese policy directions towards Southeast Asia and suggest playing a positive political role there 11 . 6 In many respects1 therefore 1 since the declaration of the Doctrine 1 Japan-Southeast Asia relations may be said to have entered a new phase.

THE FUKUDA DOCTRINE: A NEW ERA Although there are three different phases in Japan-Southeast Asia relations in the post-war period1 it seems more appropriate to divide them into two major periods1 as the first two phases can more or less be deemed as an 11economically oriented11 period. The dividing line will be how and why the Fukuda Doctrine marked a new stage in the relationship. At the outset of this book1 therefore 1 we need to identify the essence of the Fukuda Doctrine and how it was formulated. The Fukuda Doctrine 1 the first 11doctrine 11 as such in Japanese foreign policy to be proclaimed by the government1 formally states three commitments to Southeast Asia: (1) Japan rejects the role of a military poweri (2) Japan will do its best to consolidate the relationship of mutual confidence and trust based on 11heartto-heare1 understandingi and (3) Japan will be an equal partner of ASEAN 1 while attempting to foster mutual understanding with the nations of Indochina. Thus1 the three pillars of Japarr's Southeast Asian policy may be characterized as having a non-military, cultural and political orientation. Most important is the fact that the Doctrine was politically oriented and intended to replace the economically oriented 11 triangular11 strategy of the previous two decades. This study will stress the following three reasons for Japarr's active involvement in the region after the promulgation of the Doctrine. First1 it was because of a declining American security role in the

Introduction

region that the Doctrine established a systematic framework for Japarr's political conduct in the region 1 replacing the earlier unregulated process of decision-making regarding policies towards Southeast Asia. Furthermore 1 Japan tried to play an intermediary role by conveying the peaceful intentions of the ASEAN countries towards the Indochinese bloc. Japarr's view was that peaceful relations between ASEAN and Indochina would not only help maintain stability in the region 1 but would also encourage the three Indochinese countries to be more independent vis-a-vis the Soviets and the Chinese. Japarr's Southeast Asian policies were thus crucially nurtured by the Doctrine. This study will illuminate in particular how Japan 1 with political determination1 has attempted to establish a new regional framework for peaceful and prosperous relations in Southeast Asia since the Vietnam war. Secondly1 since the declaration of the Doctrine 1 the Japanese Government has actively developed its contacts with ASEAN as a viable regional organization 1 as evidenced in Japarr's support for regional projects1 the establishment of a fund for cultural exchange 1 and regular conferences between Japan and ASEAN 1s foreign ministers. As such1 many policy issues have been co-ordinated through these networks as well as through the efforts of official envoys sent by Japan to Southeast Asia 1 an action which had not been considered prior to the enunciation of the Doctrine. Thirdly1 Japarr's policies towards North-South problems have become more constructive since 19781 with the heightening of political pressure from ASEAN and the approach of the fifth United Nations Conference on Trade and Development (UNCTAD) in Manila. The Japanese were particularly instrumental in developing a compromise formula on the financing of the second window of the Common Fund. In fact 1 Japan was one of the first major industrialized countries to go on record as willing to make a direct government contribution to the Fund. In this sense 1 the relationship between Japan and ASEAN can be said to epitomize the North-South problems for Japan. These three dimensions will be further explained later in our examination of post-Doctrine developments. If the Fukuda Doctrine has marked a new era in Japan-Southeast Asia relations, then we need a framework to explain what has

6

Introduction

caused the change. More importantly, how do we systematically explain the historical developments in these relations? It is thus of critical importance to formulate a systematic framework 1 to which we now turn. NOTES 1. Nihon Ketzai Shimbun 1 16 December 1987, p. 2. 2. The term Nanshin 1 southward advance 1 is used commonly in Japan

3.

4. 5. 6.

to describe }a parr's policy towards Southeast Asia. For pre-war relations1 see Kenichiro Shoda1 ed. 1 Kindai Nthon no TonanaJia kan (Tokyo: Ajia keizai kenkyusho1 1978); and Toru Yano1 Nanshin no keifu (Tokyo: Chuokoron sha 1 1975). See also1 Willard Elsbree 1 Japans Role in Southeast Asian Nattonafist Movements, 1940-1945 (New York: Institute of Pacific Relations1 1953); F.C. ]ones1 Japans New Order in East Asia (London: Oxford University Press1 1954); Josef Silverstein 1 ed. 1 Southeast Asia m World War II (New Haven: Southeast Asian Studies1 Yale University, 1966); Alfred McCoy1 ed. 1 Southeast Asia under Japanese Occuration (New Haven: Southeast Asian Studies 1 Yale University1 1980); and William H. Newell1 ed. 1 Japan in Asia, 1942-1945 (Singapore: Singapore University Press1 1981)1 for the Japanese occupation of Southeast Asia. Ian Nish 1 aRegaining Confidence: Japan after the Loss of Empiren 1 Journal of Contemporary Hzstory 151 no. 1 (January 1980): 194. Gaimusho1 Waga gaiko no kinkyo (Tokyo: Okurasho insatsukyoku1 1957)1 p. 9. For a reliable source on Japarr's economic diplomacy1 see Mitsuru Yamamoto1 Nthon no ketzai gaiko (Tokyo: Nikkei shinsho1 1973). Masashi Nishihara 1 a;apan: Regional Stabilityn1 in Security Interdependence m the Asia Pacific Region1 edited by James W. Morley (Lexington: Lexington Books1 1986) 1 p. 65. See also1 Seki Tomoda 1 Nyumon gendai Nihon gazko (Tokyo: Chukoshinsho1 1988)1 pp. 55-63.

-------chapter o n e - - - - - - -

A Framework for Analysing Japanese Policy Towards Southeast Asia

Japanese foreign policy has been characterized as passive and reactive due to the inflexibility of its policy-making process and its heavy dependence upon the United States with which Japan concluded a bilateral security treaty at the end of the American occupation. Indeed1 the relationship between Japads political system and how decisions are actually made remains one of the most puzzling research questions. 1 Furthermore 7 since at the time of its independence Japan was a war-torn country without any natural resources1 the main goals of Japanese foreign policy were set for the promotion of economic development through obtaining raw materials and lucrative markets overseas. As a corollary1 Japanese external behaviour has been regarded as 11 profit-mongeringn and as dovetailing into U.S. foreign policy In the study of Japads foreign relations1 the Southeast Asian region has tended to be neglected or dealt with in the context of the Third World. 2 This has been the predominant posture of the Western and U.S.-oriented foreign policy in Japan 1 so that whenever conflicts arose Western interests would prevail in Japanese foreign policy At best1 Southeast Asia is usually subsumed under the subcategory of greater Asian international relations1 characterized by 7

chapter one

China's predominant role. When the importance of the region is focused it is always in tandem with the sea lanes through which Japan imports vital raw materials. Let us look more closely at how observers and scholars analyse Japan-Southeast Asia relations before presenting a framework of analysis in this book.

REVIEW OF THE LITERATURE Turning to the analytical aspect of Japanese policy towards the region there seems to be a paucity of major works on the subject. In the literature on Japan-Southeast Asia relations1 there are at least fifteen major works with approaches that may be grouped into three primary categories: study of a specific country or bilateral relations1 " specific dimension or issue/ and a synoptic description." Of the fifteen works1 although they are all solid1 only five are based upon a specific framework or analytical concept. Two works base their analyses upon Marxist or New Leftist perspectives. Marxist perspectives on Japan-Southeast Asia relations emphasize the extent to which such policy is a means to enhance the power of the ruling class. This approach focuses upon the contradictions of the capitalist system 1 which in turn necessitate an imperialist foreign policy. The influence of big business on Japarr's policies1 such as trade 1 investment and aid 1 would 1 in this view1 to a large extent determine the direction of Japanese policies in the region. As Halliday and McCormack have said: "Japarr's reparations programme was instigated by big business as a means of pumping taxpayers1 money back into the hands of industry11 . 6 Hideo Kobayashi also sees Japarr's policy towards Southeast Asia as the impetus behind Tokyds clear -cut plan to establish an "East Asian Economic Sphere 111 supported by the monopoly corporations and the conservatives. 7 Secondly, Taketsugu 1surutani1 basing on the predominant theme of passivity in Japanese foreign policy1 extends his own concept of politophobia into Japan-Southeast Asia relations. He argues that politophobia, conditioned by Japanese psychological orientations towards passive optimism and self-uncertainty1 was abetted and reinforced by post-war conditions: the ethnocentric notion that the

A Framework for Analystng Japanese Poltcy Towards Southeast Asta

9

Japanese are a unique racei the consensual mode of decision-makingi and the ruling partis factionalism. 2 In a similar vein 7 Donald Hellmann developed a thesis that Japans policy towards East Asia is a function of domestic politics7 particularly the factionalism of the ruling party. Hellmann contends: 11The government has made major political decisions regarding foreign affairs only when it was no longer possible to avoid them 7 and then matters of factional and intraparty politics have intruded to blur international reality and stifle Japanese initiative 77 •9 Lastly7 Yasutomo explored new dimensions in Japanese foreign policy by challenging for the first time the traditional theme of passivity. In analysing Japans active policy towards the Asian Development Bank (ADB) 1 Yasutomo found current analyses of Japanese foreign policy to be inadequate in explaining Japans behaviour towards the ADB because 11 for the first time in the post-war era 7 Japan played a major role as a donor nation in an international organization. For the first time 7 a nation matched an American contribution to an international organization. For the first time 7 Japan sought a major managerial role in the operations of an international agency. For the first time 7 Japan provided the major portion not only of international civil servants to an international institution but also the dominant proportion of its authorized capital. And for the first time 7 Japan participated in a large-scale regional institution-building project in Asia 77 • 10 Then 7 instead of the traditional approach 7 Yasutomo proposed four interrelated factors which would have a consistent influence on the development and maturation of Japan-ADB relations: individual initiatives7 bureaucratic activism 7 national prestige 7 and the external environment. 11 These analytical studies except Yasutomds suggest that JapanSoutheast Asia relations have been regarded as 11business as usuaF 7 relations7 and analysed in terms of a single dimension 7 that is7 economic imperialism or passivity. While acknowledging different stages in Japan-Southeast Asia relations7 these studies usually contend that Japanese policy towards the region has been notoriously reactive and if the Japanese responded at all to the changing environments7 their responses were slow and inadequate. These conclusions are in a way understandable because these works were conducted mainly in the 1970s.

10

chapter one

However1 if we closely examine the sweep of Japan-Southeast Asia relations in the post-war period1 we can recognize the changing nature of the relationship. As such 1 if Japan's policy towards the region has to be understood in terms of epistemological perspectives that offer some plausible clues to the future development of the relations1 then an extensive and systematic study of Japan-Southeast Asia relations needs to be done. Although post-Vietnam war Southeast Asia has generated many studies in recent years1 Japan-Southeast Asia relations have never been closely examined. 1 ~ It is for this reason that a study on the Fukuda Doctrine and its impact on the region has been attempted1 especially from the Japanese viewpoint.

THE FRAMEWORK FOR ANALYSIS The study of foreign policy constitutes a crucially important part of international politics1 for foreign policy lies at the intersection of the domestic and international aspects of a nation's life. Thus1 in explaining foreign policy, the decision-making approach1 which is a framework used to identify critical variables that determine national responses to concrete situations1 has usually been applied. 13 Given the paucity of analytical or conceptual studies on Japan-Southeast Asia relations1 this study employs a general decision-making approach. A loosely-structured framework is particularly important to examine certain recurrent patterns1 consistency and change 1 of the specific case studies. In other words1 the process of forging and implementing the Fukuda Doctrine will be described by examining four alternative perspectives or variables: the international system 1 the regional subsystem1 domestic politics1 and ideas. The explication of these four independent variables is in order. The International System

Of the many theories on why states behave as they do1 none are more frequently offered than the explanations that focus on the international context. Most traditional analysts1 or so-called 11 realists 111 emphasize the nature of the international system in determining how a state will behave 1 assuming that the state is a monolithic actor and

A Framework for Analysing Japanese Po!tcy lowards Southeast Asta

11

acts rationally. 14 Simply put; this perspective explains the foreign policies of states according to the imperatives of an international system. Two elements are crucial: economic and politico-military. Economic relationships play an important role in the international context. The flow of goods; services and capital in particular makes certain states dependent upon others. As such; changes in international economic conditions will directly affect the foreign policy of dependent nations. Most of these systemic changes have a bearing on U.S. foreign policy, to wit; the demise of Pax Americana. For instance; increasing the structural power of the Third World; that is; the Group of 70 resulted in enhanced concessions from the developed nations. Changes in politico-military relationships; especially alliances and strategic balance; can have a great impact on members as well as non-members. Besides these long-term contextual factors; the nature of the international system influences a state;s behaviour. For instance; a change from a bipolar to a multipolar international system seems to have increased bloc members; freedom of action; thus allowing more independent foreign policy, as exemplified by West Germanis active policy towards the East; to wit; Ostpolitik. The nature of the power configuration in the system may be said to determine the direction of a state's foreign policy. Accordingly, this perspective posits that a change in the nature of the international system would lead to alteration of the state's foreign policy. The best example of this is the cold war between the United States and the Soviet Union; which determined post-war international politics for many nations. Japan's China policy in 1972 cannot be explained without referring to external changes; particularly with respect to the shift from the cold war to detente. 15 Since the United States is one of the two superpowers that can affect vitally these two elements; let alone the only protector for Japan; this perspective invariably focuses on U.S. foreign policy. The Regional Subsystem: Southeast Asia

Within the system perspective in international relations theories; the interest of scholars in delineating subsystems has increased since the early 1960s. Although their works thus far have been confined

12.

chapter one

to a definition of subsystems themselves1 the contributions of this perspective to the study of foreign policy will include the following: (1) The analysis of regional subsystems permits some reduction in the complexity of world politics. (2) If regional subsystems exist in world politics as distinct theatres of operation, they deserve a share of the analyses attention. This is especially the case when national elites consider their regional environments to be of primary concern. (3) The study of regional subsystems presents an opportunity for the integration of the findings of area specialists and international relations students. (4) There is an excellent opportunity for gaining further insight through comparative analysis. 16

If we can deepen our understanding of why and how regional conditions determine the foreign policy of a nation1 then this perspective would be immensely important. For our present purposes1 we contend that the necessary and sufficient conditions for a regional subsystem would include a pattern of relations among basic units in world politics which exhibits a particular degree of intensity, plus an awareness of this pattern among the participating units. 17 Without contesting the definition of a Southeast Asian subsystem1 we maintain that the region of ten independent countries (Brunei1 Burma1 Cambodia1 Indonesia1 Laos1 Malaysia1 the Philippines1 Singapore1 Thailand and Vietnam) is one of the subsystems and exerts an independent impact on Japanese foreign policy. The subsystem perspective posits that if a region becomes more cohesive 1 it will take a stronger stance in negotiating with external powers1 thus stimulating a process of policy change. Particularly in the area of economics1 the impact of a subsystem on external powers seems to be extensive. As Michael Brecher et al. hypothesized after surveying the foreign policies of eight countries: ain politicaldiplomatic issue area1 subsystem inputs are of preeminent importance to developing countries1 but not to developed nations. In economicdevelopmental issue area, developing nations ranked the global system input as important while developed nations perceived subsystems as more importane1. 1 ~ Accordingly, we will examine how the growing cohesion of a regional organization and change in regional co-operation

A Framework for Analysmg Japanese Polley 7owards Southeast Asta

13

affected Japanese foreign policy. The importance of regional factors to Japan need not be reiterated since we have already witnessed some significant events. The oil crisis of 1973 is a case in point. In fact 1 Japan suddenly changed its policy from a pro-Israel to a pro-Arab stand because of the effects of this crisis. 1 ~

Domestic Politics

The first and second perspectives emphasize external stimuli that affect the direction and content of Japan's policy towards Southeast Asia. The third perspective 1 focusing on domestic determinants of foreign policy, claims that policy content in a variety of fields responds to shifts in the power configuration generated by the domestic political scene. Assuming that the individual characteristics of a state will provide all-important inputs1 and that a state 1s foreign policy will be the consequence of these characteristics1 the third perspective posits that changes in domestic politics lead to alteration of foreign policy. This perspective has developed several variants 7 three of which are especially relevant here: political parties1 the bureaucracies1 and interest groups. The following propositions could be culled from these three sub-perspectives. The political party perspective posits that policy change responds to regime changes7 to shifts in the strength of the ruling party7 and to power games among the major political parties1 including elections and factions within the party. The bureaucratic perspective posits that decisions 7 or for that matter1 changes7 arise in accordance with change in the organizational composition of a political systemi outcomes of decision-making depend on the strength of government organizations which represent various dimensions of an issue. The interest groups perspective posits that foreign policy change is the result of the influence of interest groups because the private arena is the critical decisional locus for explaining foreign policy7 especially in economic fields. In Japan 7 these three perspectives are uniquely important in the delineation of the process of decision-making, as advocated by the power-elite model. Although the pluralists have successfully demonstrated that there is much variety and difference among the three and within each grouping, the three actors still play a leading

14

chapter one

role in the process of decision-making in Japan. 20 The single ruling party7 the Liberal Democratic Party (LDP) has ruled Japanese politics since 1955 and has sometimes been called uthe government 77 itself. The bureaucratization of decision-making in Japan has often been called %ureaucratic dominatiod7 in Japanese politics. Finally7 interest groups are too influential to be overlooked in an explication of the process of Japanese economic policy. Let us examine these actors more closely. The Liberal Democratic Party (LDP). As the ruling party7 the LDP has dominated the decision-making process since the merger of the Liberal Party and the Democratic Party in 1955. The partis formal decision-making process has four major components: the Party Conference7 the Assembly of the Members of the National Diet7 the Executive Council7and the Policy Affairs Research Council. Decisions are made through consensus. 21 The role of a prime minister7 who is at the same time the party president7 depends largely on his style of leadership. In general terms7 the main-stream LDP leaders7 called Hoshu Honryu in Japanese 7 such as Shigeru Yoshida 7 Hayato Ikeda and Eisaku Sato1 tend to emphasize Japan-U.S. relations while other leaders such as Nobusuke Kishi 7 Takeo Miki and Takeo Fukuda prefer to pursue a more independent course. Thus7 the prime minister7s statements and actions are not necessarily synonymous with the LDP 7s official positions7 although in most cases they are identical. Factionalism is one negative aspect of this LDP-dominated policymaking process. It often impairs consistency in foreign policy and hinders swift decisions7 as was epitomized by the normalization of relations with the Soviet Union and the revision of the security treaty with the United States. 12 Despite the lack of regime change 7 it is possible to posit that altering political conditions1 including a change in premiership would lead to a change in foreign policy. The LDP 7s role and function in Japanese politics have changed in response to electoral trends: first 7 the long-term trend of decline in the conservative vote 7 with the peak reached in 1976; and secondly7 the fragmentation of the opposition vote. How do these changes affect foreign policy? One of the intriguing political phenomena emerging as a result of these

A Framework for Analysmg Japanese Po!tcy lowards Southeast Asta

15

changes is the absence of sharp controversy in foreign policy orientations. The most obvious case is the Japan-U.S. security treaty issue 7 where the conservatives advocated a policy of alliance with the United States while the opposition called for a policy of unarmed neutrality. 2" But now the opposition has reduced its ideological attacks on the ruling party. Paradoxically. despite its declining popularity. the LDP has broadened its role in foreign policy. a policy which is now freed from sharp ideological division. The Business Community. The role of the major pressure groups in the Japanese political process was significant in the 1950s7 but it was later weakened and substantially diffused. Theoretically7 big business in Japan has very effective channels to promote its economic interests in Southeast Asia because of its financial capability to support politicians and the ruling party. In particular7 the big four business associations - Keidanren (Federation of Economic Organizations)7 Nissho (Japan Chamber of Commerce and Industry); Keizai Doyukai (Japan Committee for Economic Development)7 and Nikkeiren (Federation of Employers7 Organizations) - represent divergent business interests and articulate them to the government. 24 In reality7 however7 the extent of the business communitis influence and the channels through which it flows remains obscure. Anti-Japanese movements in Southeast Asia in the early 1970s and the dramatic explosion of the movements in 1974 served as the catalyst for the business community to curb the 11 visibilityn of its activities. As a result7 the Japanese Government was called upon to replace the primary financial flow of Japanese capital into the region. At the same time 7 the nature of Japan's economic assistance gradually shifted from private investments and export credits to the promotion of large-scale plants export to Southeast Asia. Since these large-scale plants required huge capital investments7 the business community had to share its financing with the government7 and thus welcomed active official involvement in Southeast Asia. The role of the business community in the process of foreign policymaking has been extensively analysed elsewhere 7 but the real impact of the changing power of big business on foreign policy remains to be seen. 25

chapter one The Bureaucracies. For all practical purposes1 the ruling party

monopolizes control of the government1 including the process of policy-making, yet it relies heavily on senior career bureaucrats for the initiation and implementation of specific foreign policies. Moreover1 due to the autonomy bestowed upon each minist!)) the policy-making process in Japan is highly compartmentalized/() thus provoking interbureaucratic rivalry. For instance 1 conflicts between the Ministry of Foreign Affairs (MFA) and the Finance Ministry are commoni the former advocates an 11 internationalise1 posture while the latter strives to avoid any action requiring increased expenditure of public funds and thus increase the burden of the national treasury. The Ministry of International Trade and Industry (MITI) also has conflicting interests vis-a-vis the Foreign Ministry in international economic policy. since the MITFs mission is to carry out export promotion drives through foreign economic assistance. The difference between the MFA and the MITI is crucial because the latter espouses the significance of foreign aid as part of trade promotion1 for example 1 through large-scale projects1 and opposes aid which restricts and damages domestic indust!)) such as the implementation of completely untied loans. The MFA1 on the other hand1 regardless of the impact1 emphasizes increase in official foreign aid as a responsibility of a developed nation. Although the functions of these governmental institutions have been well analysed with respect to foreign aid policies and economic policies127 much less is known concerning Japan-Southeast Asia relations. The role of bureaucracies in policy-making has also changed over time. Economic ministries1 especially the MITI1 have passed the peak of their renown which marked the late 1950s and early 1960s. During the 1960s1 when international interest in Japarr's economic miracle was aroused1 the MITI suddenly acquired notoriety for iL pursuit of protectionist import and aggressive export policies. The Foreign Minist!)) on the other hand1 lacking a domestic constituency and as the second smallest ministry in terms of budget and personnel1 clearly lacked the prerequisites that make up a powerful ministry in Japan. It was no coincidence then that the MITI published the White Paper on Economic Cooperation in 1958. By the mid-1970s1 however1 the era of dominant economic ministries had apparently

II Framework for 1\nalyslllf, Jaranese Po!tcv lovcards Southeast 1\sta

17

passed7 for as trade and investment liberalization progressed7 the range of the MITFs licensing powers gradually narrowed 7 thus enforcing 11 internalizatiorr'7 of the ministris senior officials. As a result 7 the Foreign Ministry regained a higher status to pursue its ''internationalistn policies. At the same time 7 the MFA began to reappraise its foreign policy7 especially since the 11 Nixon shocksn of 1971. Acknowledging an 11unmistakable upsurge of nationalist rhetoricn 7 therefore 7 Fukui had this to say: 11Todais Young Turks [in the Foreign Ministry] may be beginning to fight against postwar pacifism and 'economic diplomacy 7 in the name of an independent foreign policyn. ::>J Although the above three actors remained significant in Japanese politics7 it is of critical importance to appreciate the changing nature of Japanese politics in the 1970s. The so-called 11 tripartite system' 77 or to use PempeFs coinage 7 acorporatism without labourn/1 began to change primarily as a result of the first oil crisis of 1973 and the internationalization of the Japanese economy. However7 the nature of the post-tripartite system has not as yet emerged7 but its effects are discernible. To begin with 7 the LDP 7s dominance was fading away, or at least popular support for the party had declined steadily until1980. Moreover7 major industries had become more independent of bureaucratic control. The role of agriculture in the conservative political alliance had also declined. The opposition parties became fragmented (tatoka). Finally7 citizen protests began to prevail in many policy issues. Thus 7 Pempel maintains 7 active policies7 including the policy of increasing official development assistance (ODA) and Japan's leadership role in the ASEAN region 7 have resulted from changes in domestic politics. 30 Ideas

Finally7 a small group of scholars has advocated a cognitive approach in explaining external behaviour based upon the beliefs and cognitive processes of policy-makers. 31 They maintain that behaviour depends not on reality but on how reality is perceived and interpreted. The core claim of this cognitive approach is that changes in reigning ideas help produce changes in policy content. In other words 7 the introduction of new ideas into the existing policy agenda will trigger

18

chapter one

a process of policy change. I{Ideas 11 in our framework of analysis) adopting Goldmanrrs definition1 are meant to induce ideas that 11are circulating in the policy-making system without necessarily being expressed in the name of the organizatiorr1 . 32 We are not concerned with the cognitive process per se 1 however1 but with the content of ideas. We will pay attention to the following questions in advancing this perspective: Where do policy ideas come from'? Which new ideas are more likely or less likely to prevail'? Does this approach explain how changes take place'? This cognitive approach claims that the content of reigning ideas has independent effects on policy content. As Ode! contends: Situation factors may explain the rejection of an old policy1 the timing of a policy change 1 or the degree of policy coherence 1 but contain no explanation for the choice of a new policy from among the alternatives. 33

Based upon this definition of 11 ideas 11 1 policy change is assumed to stem from a change in ideas1 in the sense that policy-makers attain new ideas that are dissonant with the ongoing policis assumptions and goals. The best example would be Nixon/Kissingds China policy in 1971 1 which was regarded as an innovative one. Innovations1 defined as a policy change requiring the reworking of images of reality, accrued from a change in reigning ideas1 that is1 from containment to alliance with China. Then 1 why do ideas change'? Crises and the creation of new organizations for policy initiatives all have probable impetus to alter the ideas of policy-makers. Yet1 for our present purposes1 as Heclo and Polsby maintain1 ideas ought to change as a result of political learning, in the sense that 11 Governments not only 1 power1i they also puzzlen.~ 4 In particular1 when past policy has malfunctioned or current ongoing policy is not working, then the policy innovators 1 be they politicians1 interest groups1 bureaucrats or policy middlemen 1 will initiate a new policy. It needs to be stressed here that an application of the cognitive perspective to Japanese foreign policy has not as yet been undertaken. 3-" The four perspectives presented above constitute a comprehensive framework for explaining a shift in foreign policy. In short1 we are going to attempt to delve into the policy-making process of forging

A Framework for Analysing Japanese Polley Towards Southeast Asta

19

and implementing the Fukuda Doctrine 7 asking questions suggested by each perspective 7 and explaining which set of questions prove most useful in understanding and explaining a new era in JapanSoutheast Asia relations. Given the fact that existing works on the Doctrine have failed to explain the so-called 11 black boxn of decisionmaking, these four perspectives will shed some light on the conflict between the pros and cons of Japan's significant policy initiatives. This chapter has clarified two attempts or endeavours in this study. One is to vindicate a new phase in Japan-Southeast Asia relations since 1977 as epitomized by the Fukuda Doctrine. The other is to present a systematic framework to theoretically explicate 77 policy shift. To begin with 7 if aactive policies7 as we have seen above 7 did accrue from the Doctrine 7 the nature of Japanese foreign policy decision-making must be reassessed7 for the Fukuda Doctrine might be a case where Japan could take an active political role in the region despite its faction-ridden and reactive policy-making process. Secondl)) theoretically7 policy shift can be explained by understanding various stimuli from the four alternative perspectives. Each approach explicates the shift from a different angle 7 emphasizing it at the international and regionallevels7 changes in domestic politics7 and the ideas of the leadership. The purpose of the second endeavour - an analytical attempt to explain foreign policy shift - is to evaluate which of these perspectives has more explanatory power. In order to understand Japan's goals and intentions during the period 1951-747 preceding the Fukuda Doctrine 7 and to contrast the differences before and after the application of this Doctrine 7 the following two chapters will scrutinize two major phases in JapanSoutheast Asia relations: the first phase of economic relations7 1951-647 and the second phase of strong support of American Southeast Asian policy7 1965-74. In the light of the fact that specific case studies are better qualified to demonstrate the task in this book than a mere historical description of the relationship7 two specific cases were chosen: (1) Japan's reparations polic)) and (2) the establishment of the Asian Development Bank. Since these cases are representatives of the period under consideration7 by examining the case studies it is hoped that some unique characteristics of Japan-Southeast Asia relations will be delineated.

20

chapter one

Finally, given the underdeveloped state of the literature 1 some fundamental questions will also be addressed: (1) What policy rationale has Japan developed with respect to Southeast Asia during the post-war period? (2) Has the significance of Southeast Asia in Japanese foreign policy grown? and (3) What impact has the Doctrine had on Japan-Southeast Asia relations up to the present time? Is there any significant trend emerging as a result of the Doctrine? By way of answering these questions1 our enquiry in this book 1 based on a loosely-structured framework 1 will provide a different perspective in explaining Japanese foreign policy by looking at the often neglected area of Japan-Southeast Asia relations. NOTES

1. See J. Stockwin, et a!., Dynamic and lmmobiiist Politics In Japan (London: Macmillan, 1988). 2. See, for instance, Akio Watanabe, ed., Sengo Nihon no tmgaisClSaku (Tokyo: Yuhikaku 1 1985). For a survey on the literature, see Ikuo Iwasaki, Japan and Southeast Asia: A Bibliography (Tokyo: Institute of Developing Economies1 1983). 3. K. Kesavan, Japans Relations with Southeast Asia, 1952-1960 (Bombay: Somaiya Publications, 1972); and Masashi Nishihara, The Japanese and Sukarnos indonesia (Hawaii: University of Hawaii Press1 1975). 4. Jon Halliday and G. McCormack, Japanese fmpenalism Today (New York: Monthly Review, 1973); Tomas R.H. Havens, Fire Across the Sea: Tlze VIetnam War and Japan, 1965-1975 (Princeton: Princeton University Press, 1987); Hideo Kobayashi, Sengo Nliwn shihonshugi to HigashiaJia keizmken (Tokyo: Ochanomizu shobo, 1983); Taketsugu Tsurutani, Japanese Polley and East Asian Secumy (New York: Praeger1 1981); and Dennis Yasutomo, Japan and the Asian Development Bank (New York: Praeger, 1983). 5. Donald C. Hellmann, Japan and East Asia (New York: Praeger, 1972)j Raul Manglapus1 Japan 111 Southeast Asia: Colliswn Course (New York: Carnegie Endowment for International Peace, 1976); Charles E. Morrison, Japan, the United S"tates and a Changmg Southeast 1\sia (New York: The Asia Society, 1985); and Kiyotaka Ochiai, Mhon omeguru Ajltl 110 kokusaikankvo (Tokyo: Keibundo, 1981); Tatsumi Okabe, TollallaJUl to Ndwn no shtnro (Tokyo: Nikkei shinsho, 1976); L. Olson, Japan 111 Postwar Asia (Tokyo: Praeger, 1970); Masahide Shibusawa, /apa11 and the Astalz

A Framework for Analvsrng Japanese Polrcv lowards Southeast Asra

6. 7. 8. 9. 10. 11.

12.

13.

14.

15. 16.

17.

18.

19.

21

PaCific Regzon (London: Croom Helm, 1983)j and Toru Yano, Tonanafla seisaku (Tokyo: Saimaru shuppankai, 1978). Halliday and McCormack, op. cit., p. 21. Kobayashi, op. cit., especially pp. 17-19. Tsurutani, op. cit., p. 123. Hellmann, Japan and East Asia, p. 44. Yasutomo, op. cit., p. 3. This approach has a bearing on my framework, yet some of the factors seem to be at a different level: for example, prestige is a goal not a cause. The only exception is Masahide Shibusawa's Japan and the Aszan Pacific Regzon, which emphasizes Japan's 11 isolation'' as the main cause of inactive relations. For a seminal work in the field and a recent one, see Richard C. Snyder, H. Bruck and B. Sapin, forergn Policv Dectstolr-Making (New York: Free Press, 1962); and Lloyd Jensen, fxplarmng foreign Po!tcv (Englewood Cliffs: Prentice-Hall, 1982). The best example is Hans J. Morgenthau, Po!ttics Among Nations, 5th ed. (New York: Knopf, 1973). See also, Robert Gilpin, War and Peace m World Po!ttics (Cambridge: Cambridge University Press, 1981). See Chae-Jin Lee, Japan Faces China (Baltimore: Johns Hopkins University Press, 1976). William R. Thompson, "The Regional Subsystem: A Conceptual Explication and Propositional Inventory" 7 International Studies Quarterly 17, no. 1 (March 1973): 91. See also, Ronald J. Yalem 7 "The Level-of-Analysis Problem Reconsidered" 7 The year Book of World Affairs 1979 (London: Stevens and Sons7 1979), pp. 306-267 for an interesting discussion of regional subsystems as a level of analysis in international politics. Donald C. Hellmann, Japan and East Asia, p. 19. For earlier studies on the Southeast Asian subsystem, see George Modelski, "International Relations and Area Studies: The Case of South-East Asia" 7 lnternatlonal Relatwns II (April 1961): 143-55j and Michael Brecher, "International Relations and Area Studies: The Subordinate State System of Southern Asia", World Po/illes XV7 no. 2 (January 1963): 213-35. See Michael Brecher, B. Steinberg and J. Stein 7 11A Framework for Research on Foreign Policy Behaviour", Journal of Conflict Resolution XIII, no. 1 (March 1969): 75-101. See Kenneth Juster7 11 Foreign Policy Making During the Oil Crisis 7', Japan Interpreter 2, no. 3 (Winter 1977) 7 pp. 293~312.

22

chapter one

20. Haruhiro Fukui, astudies in Policymaking", in Po!tcymaking in Contemporary Japan, edited by T.J. Pempel (Ithaca: Cornell University Press, 1977), pp. 22~59. For literature on contemporary policy-making in Japan, see Akira Nakamura and Yuzuru Takeshita, Nihon no seisaku katet (Matsuda, Chiba: Azusa shuppan sha, 1984)j and Takashi Inoguchi, Gendai Nihon seip keizai no kozu (Tokyo: Toyokeizai shimpo sha, 1983). 21. See particularly, Haruhiro Fukui, Party in Power: The Japanese Liberal Democrats and Policy-Makmg (Berkeley: University of California Press7 1970)j and Seizaburo Sato and Tetsuhisa Matsuzaki 1 Jiminto seiken (Tokyo: Chuokoron sha, 1986). 22. Donald Hellmann, Japanese Foreign Policy and Domestic Politics (Berkeley: University of California Press, 1969)j and George R. Packard, Protest in Tokyo: The Security Treaty Crisis of 1960 (Princeton: Princeton University Press1 1966). 23. G. Curtis 1 "Domestic Politics and Japanese Foreign Policy", in Japan and the United States: Cha!!enges and Opportunities, edited by William Barnds (New York: New York University Press, 1979), pp. 21~85. 24. See Chitoshi Yanaga, Big Business in Japanese Politics (New Haven: Yale University Press, 1968)j Hideo Otake, Gendai Nihon no seiJikenryoku keizaikenryoku (Tokyo: Sanichi shobo, 1979)j and Michio Muramatsu 1 Mitsutoshi Ito and Yutaka Tsujinaka 7 Sengo Nihon no atsuryokudantai (Tokyo: Toyokeizai shimpo sha, 1986). 25. See Sadako Ogata, aThe Business Community and Japanese Foreign Policy'77 in The Foreign Policy of Modern Japan, edited by Robert Scalapino (Berkeley: University of California Press 1 1977) 7 pp. 175~203j and Shigeo Misawa 1 aTaigaiseisaku to Nihon zaikai", in Taigai seisaku ketteikatei no Ntchi Bet hikaku 7 edited by C. Hosoya and J. Watanuki (Tokyo: Tokyo daigaku shuppan kai, 1977), pp. 179~211. 26. See particularly, TJ. Pempel, aThe Bureaucratization of Policymaking in Postwar Japan", American Journal of Political Science XVIII, no. 4 (November 1974): 647~64j and Michio Muramatsu, Sengo Nthon no kanryose1 (Tokyo: Toyokeizai shimpo sha, 1981). 27. See Alan Rix, Japans &:anomie Aid (London: Croom Helm, 1980)j and Chikara Higashi, Japanese Trade Policy Formulation (New York: Praeger7 1983). 28. Haruhiro Fukui 1 aPolicy-Making in the Japanese Foreign Ministry" 1 in The Foreign Policy of Modern Japan, p. 35. 29. T.J. Pempel and Keiichi Tsunekawa, acorporatism Without Labour?:

A Framework for Analysmg Japanese Polley Towards Southeast Asta

30.

31. 32. 33.

34.

35.

23

Japanese Anomali', in Trends toward Corporattst lntermediattOn 7 edited by P.C. Schmitter and G. Lehmbruch (Beverley Hills: Sage Publications, 1979), pp. 231-70. TJ. Pempel, aNihon no gaikoseisaku no naiseiteki kison, in Sekaiseilt no nakano Nthonseqi, edited by Nobuo Tomita and Yasunori Sone (Tokyo: Yuhikaku, 1983), especially p. 56j Nakamura and Takeshita, op. cit., pp. 6-9. For a new pattern of policy-making in Japan, see Takeshi Inoguchi and Tomoaki Iwai 7 Zokugtin no kenkyu (Tokyo: Nihon keizai shimbun sha, 1987)j and Minoru Nakano, ed., Nihongata seisakukettet no henyo (Tokyo: Toyokeizai shimpo sha, 1986). See particularly, Robert Jervis, Perception and Misperception tn InternatiOnal Politics (Princeton: Princeton University Press, 1976). Kjell Goldmann, Change and Stability in Foretgn Polley (Princeton: Princeton University Press, 1988), p. 11. John S. Odell, US. International Monetary Po!tcy: Markets, Power, and Ideas as Sources of Change (Princeton: Princeton University Press, 1983), p. 62. Hugh Heclo, Modern Social Politics in Britain and Sweden (New Haven: Yale University Press, 1974), p. 305j and Nelson Polsby, Political Innovation in America: The Polittcs of Policy Initiation (New Haven: Yale University Press, 1984). The only exception is the work by Okimoto, who utilized the concept of ideas in terms of athe role of intellectualsn in the formulation of national security policies. See Daniel I. Okimoto, aideas, Intellectuals and Institutions: National Security and the Ouestion of Nuclear Armament in Japann (Ph.D. dissertation, University of Michigan, 1978).

-------------chapter two-------------

Post-war Japan's Re-entry into Southeast Asia

Although Japan was admitted to the club of nations and regained its independence 1 the conclusion of the San Francisco peace treaty in 1951 did not fully settle the differences between Japan and its Asian neighbours. Most of the Southeast Asian nations withheld ratification of the peace treaty until the settlement of reparations1 demanding across-the-board restitution of war losses. To restore friendly relations with them1 therefore 1 Japan's positive action was of great necessityi hence war reparations1 economic aid and trade. During the 1950s1 because it was difficult for Japan to rely on the China market Japanese policy-makers began to regard Southeast Asia as a raw materials supplier and a lucrative market for Japan's products. The region became the prime target for Japan's 11economic diplomacyn 1 a policy initiated by Prime Minister Yoshida and carried out vigorously by successive administrations without due consideration of the voices of the Southeast Asian countries. Prime Minister Nobusuke Kishi (1957-60) in particular finalized Japan's economic linkage with the region by resolving the reparations negotiations and1 more importantly, by visiting the region in 1957 - the first prime minister to do so since World War II. Unlike Yoshida's enigmatic triangular relationship with strong U.S. support1 or to put it bluntly

Post-war Japans Re-entry into Southeast Asia

25

11 riding on the American Asian policy 1 Kishi attempted to cultivate closer Japan-Southeast Asia relations with less dependence on Washington. To be sure 1 it was a successful re-entry; but not a smooth transition.

11

JAPAN'S REPARATIONS POLICY AND SOUTHEAST ASIA

After acceptance of the Potsdam Declaration in August 19451 Japan was put under the control of the Allied Powers (or SCAP - Supreme Commander for the Allied Powers)1 which was led by General Douglas MacArthur until 11 April 1951 and by General Matthew Ridgway until 28 April 1952. Like other defeated countries1 Japan invariably faced its reparations obligation1 as the Potsdam Declaration stipulated: uJapan shall be permitted to maintain such industries as will sustain her economy and permit the exaction of just reparations in kind1 but not those which would enable her to re-arm for war.}} This obligation was soon formulated in the documents entitled 1 11 uUnited States Initial Post-Surrender Policy for Japarr' and Basic Initial Post-Surrender Directive to Supreme Commander for the Allied 7 Powers for the Occupation and Control of Japarr' . The ultimate objective7 according to these documents1was to 11 foster conditions which will give the greatest possible assurance that Japan will not again become a menace to the peace and security of the world}}. Japan 11 thus came into American hands and the aim was to democratize 7 1 and demilitarize Japarr' . The reparations were thought to compensate for the sufferings and destructions wrought by Japanese militarism.

The United States and the Onset of the Cold War As a significant part of American occupation policies1 three survey missions were sent to Japan to investigate as well as earmark industrial facilities for reparations. 2 The first mission1 headed by Ambassador Edwin W Pauley; embarked on its survey in November 1945 and compiled and presented its recommendations to the U.S. President on 18 December. The basic aim of the reparations1 according to the report7 was that uthe greater part of Japan's remaining industrial 71 facilities must be dismantled and reallocated to other countries and

26

chapter two

that uJapan:'s standard of living should remain as high as that of Southeast Asian countriesll. This upunitive7 element of the report was hardly surprising at the time as most U.S. policies were centred around the elimination of Japan as a potential threat to peace. The second survey team7 commissioned by the U.S. War Department and headed by Clifford Strike 7 chairman of Overseas Consultants Inc. 7 was sent in January 1947 in order to re-evaluate Japanese industrial capacity Due to the changing international environment7 however7 Strikes report was quite different from the first one in that it advocated a swift rehabilitation of the Japanese economy Along the lines of the second mission7 the third and last survey team was sent by the Department of Army in early 19487 and after a quick survey the team compiled a report suggesting ua cumulative urgency for the rapid rehabilitation of Japan's industryll. 3 By the time of the third Johnston mission in 19487 therefore 7 the upunitive 77 elements of reparations had been discarded in favour of reconstructing the Japanese economy The change in U.S. reparations policy palpably suggested that its American occupation policy entered the second phase in 1947-48. As one participant in the Allied Council for Japan observed: In 1947 the United States authorities were reticent and tentative about amending or reversing the Allied policies of 1945j during 1948 the new American policy has been crystallized7 publicized and developed. America now aims to help [Japan] regain her prewar position as workshop of East Asia. 4

When the reverse course began 7 the reparations question became entangled in the politics of peace settlement and of ueconomic cooperation:'7 between the United States and Japan. In 1947; two powerful forces in the United States had combined to direct U.S. occupation policy away from its original course. The first of these forces 7headed by George Kennan 7 Chairman of the State Departmenes Policy Planning Council 7had advocated a swift recovery for Japan as part of the plan to contain the Soviet Union. The second7 represented by UnderSecretary of the Army7 William Draper7and supported by the aJapan Iobb/11 had embarked on a campaign to reconstruct Japan economically in order to reduce the U.S. financial burden during the occupation."

Post-war Japans Re-entry into Southeast Asia

27

The evident success of these factions by early 1948 was seen in Secretary of the Army RoyaFs speech of 6 January, U.S. Far Eastern Commission representative McCoy7s speech of 22 JanuarY; and Kennan's visit to Japan in March that year. George Kennan was particularly responsible for the new course of U.S. occupation policy. After completing the recovery plan for Europe in early 1940 Kennan started advocating a new course for Japan later that year7 and after a trip to Japan in March 1948 formulated the framework which finally became the National Security Council (NSC) 13/2 adopted in October 1948. This document emphasized the goal of economic recovery rather than those of demilitarization and democratization. Stressing the need to make Japan economically strong as well as resuscitate Tokyds propensity to seek uan empire to the south'77 Kennan recommended the following specific policies: (1) the relaxation of SCAP control over the Japanese Government7 (2) the discontinuation of the purge 7 (3) an end to reparations payments7 (4) the entrusting of reform efforts to the Japanese 7 (5) the strengthening of the National Police 7 (6) the development of a self-supporting economy, and (7) the postponement of an early peace treaty. 6 Secretary of State Dean Acheson was another strong advocate of Japan's economic recovery. Acheson contended in his famous speech of 8 May 1947 that the greatest workshops of Europe and Asia - Germany and Japan - needed to be assisted by U.S. emergency aid because world economic stability and peace depended on their recovery? Consonant with the Kennan thesis urging a policy of delaying the occupation in order to strengthen the nation's resistance to communism7 instead of throwing an unarmed Japan into the midst of the cold war7 Washington contemplated a Japanese trade recovery programme before concluding the peace treaty. U.S. officials7 William Draper prominent among them 7 proposed ueconomic co-operation:'77 contending that the trade imbalance of Japan7 that is7 the dollar gap7 had to be redressed first by utilizing the co-ordinated aid scheme and then by integrating Japan and Southeast Asia economically. 8 The concept of triangular integration was already on the policy agenda in Washington before war occurred in Koreaj the war7 started on 25 June 19507 hastened the finalization of the policy. The Korean

28

chapter two

war thus served as the catalyst for formulating a viable triangular strategy with two components: security and economic. 11 Economic co-operatiorr'1 between Japan and the United States appeared on the agenda again in early 1951 when special envoy John Foster Dulles came to Japan to prepare for the conclusion of the San Francisco peace treaty. Japan's Prime Minister Shigeru Yoshida and Dulles agreed at the meeting, albeit through the mediation of MacArthur1 that Japan could best contribute to the Free World through economic co-operation with the United States. At the request of the conference on 16 February, MacArthur asked Yoshida to work towards the establishment of a system of economic co-operation. On 16 May 19511 General Marquat went one step further by disclosing Washington's views on 11economic co-operatiorr'11 which was composed of the following points:

1. Japan would be accorded world markets and sources of raw materials supply on a non-discriminatory basis. 2. The United States was fully cognizant of the advantages entailed in including Japan in its emergency procurement programme. 3. lnternational1 United States and private financing could be made available to Japan on the basis of the credit risk involved. 4. Japan's industrial potential could be utilized advantageously to a maximum extent to increase raw materials production and industrial potential in Southeast Asia. To these ends efforts should be exerted to enlist the support of the various U.S. economic aid and technical missions in Southeast Asia to develop programmes linked to the overall U.S.-Japan economic co-operation plans.'~ In a similar vein1 Charles E. Wilson1 Director of Defense Mobilization1 proposed to the Department of State and Defense in July 1951 that 11 if Japan's idle productive capacity could be combined with Southeast Asian resources1 the resulting commercial and industrial structure would help lighten American burden7 contribute to the stabilization of Southeast Asia 7 and provide for economic integration of free nations of Asian. 10 Although precise measures to effect the triangular policy was not spelled out by the U.S. Government1 the idea itself generated considerable interest in Japan. In formulating the peace treaty with Japan1 the United States

Post-war Japa11s Re-entry mto Soutlzeast Ast'"

made sure that Japan would be capable of sustaining itself economic1 ally1 with U.S. military bases on the island. Dulles approach to the peace settlement assumed that Japan would become a loyal member of the Western bloc1 linked militarily to the United States1 but encouraged to forge commercial relations with a variety of countries within the bloc. Thus7 the first draft treaty eliminated the reparations obligations. The peace treaty7 according to the seven-point memo11 11 randum1 should be ubrie£1 general and non-punitive . However1 Dulles1 no-reparation policy provoked vehement objection on the part of the Allied Powers1 an objection which almost jeopardized U.S. efforts to effect the San Francisco peace conference. The voices of Southeast Asian countries thus far received little attention1 if not totally ignored. To reconcile the differences among the Allied powers1 Dulles visited Southeast Asia at the last moment in February 1951. Stressing the role of Japan as part of a containment policy, Dulles persuaded Philippine President Ouirino to approve the treaty by promising to provide some sort of reparations and security guarantee against any renewed Japanese aggression. L? A revised draft treaty included a reparations clause1 Article 141 which was adopted on 8 September in San Francisco: It is recognized that Japan would pay reparations to the Allied Powers for the damages and suffering caused by it during the War. Nevertheless1 it is also recognized that resources of Japan to make complete reparations are not presently sufficient for all such damage and suffering and at the same time to meet its other obligations. Therefore1 Japan will promptly enter into with a negotiations with the Allied Powers so desired view to assisting to compensate those countries for the cost of repairing the damage done1 by making available the services of the Japanese people in production 1 salvaging and other works for the Allied Powers in question. Ll

This concept of uservicen reparations was a compromise as well as a positive gesture by the United States1 but Dulles underscored the real motivation of the reparations clause in the following way: Japan has a population not now fully employed and it has industrial capacity not now fully employed and both of these

30

chapter two aspects of unemployment are caused by lack of raw materials. These7 however7 are possessed in goodly measure by the countries which were overrun by Japarr's armed aggression. If these war devastated countries send to Japan the raw materials which many of them have in abundance7 the Japanese could process them for the creditor countries and by these services7 freely given 7 provide appreciable reparations. 14

Dulles was equally concerned with Japan's economic inclination towards Communist China. To carry out his containment policy7 he called on Japan not to develop its contacts with Beijing. The Japanese Government responded by issuing the so-called 11Yoshida Letter 77 on 24 December 1951 which clarified the intention of its post-occupation policy in Asia 7 that is7 to support and recognize the Republic of China in a joint quest against communism. 15 With the issuance of the Yoshida Lettelj Japan accepted the position of a client to the United States. In other words7 security concerns - fulfilment of the role of a faithful allY; the meeting of Washington's expectations concerning relations with the communist countries7 and the obtaining of low-cost military protection - prevailed over the economic potentialities of a Chinese market. The loss of the China market invariably compelled the Japanese Government to turn to the Southeast Asian economies requiring development through the input of American dollars. Dulles was realistic enough to understand that Japan's economic needs could not be met totally by the United States. Thus7 in subsequent years he constantly reiterated the need for Japan to expand economically into Southeast Asia. In November 19527 Assistant Secretary of State John Allison was sent to Japan and the Southeast Asian countries7 with whom relations with the United States were considered only rudimentary and in need of strengthening to deal with the growing Soviet threat. In Tokyo7 Allison suggested that the reparations problems be resolved as soon as possible7 and that the United States would serve as a mediator if so requested. Thus7 the United States encouraged Japan to promote the triangular integration by urging an early resolution of the reparations question. Although Southeast Asian trade disappointed recovery planners in Japan and Washington because of chronic economic difficulties in the region 7 their interest remained

Post-war Japans Re-entry into Southeast Asza

31

great. Under the precarious regional situation 1 the United States intensified its military and development programmes in Southeast Asia to ureassure Japarr'1 • 16 After concluding the U.S.-Japan Security Treaty in 1951 and estabishing the Southeast Asian Treaty Organization (SEATO) in September 19541 thus forging a security utriangle 11 1 the United States turned to implementing a policy of promoting triangular economic relations. In early 19551 Washington called on India to convene a conference on Asian economic development. The resulting Shimla Conference of May 1955 was1 however1 a failure and no agreement was reached over the proposed uPresidenes Fund for Asian Economic Development)) of US$200 million. As one participant observed1 Southeast Asians were all more concerned with bilateral aid than with multilateral ones1 in which only larger and more developed countries would receive the lion's shareY The United States had learned a hard reality that eventually compelled a reappraisal of its Asian policy, although it continued to seek a better regional development scheme. Southeast Asian Reactions

Between 1941 and 19451 all the Southeast Asian countries except Thailand were occupied by the Japanese army which became the sole colonial power reigning over the region. At the precipitate surrender of Japan in August 19451 the long road to decolonization in the region began. Between 1946 and 1957, the former colonial powers relinquished sovereignty over the greater part of Southeast Asia. The process of independence characterized international relations within the region as piecemeal and protracted because Southeast Asian nationalists had to fight against attempts at restoration by some colonial powers. When Malaya gained independence in August 1957 the cold war competition engulfed the region 1 thus severely constraining the foreign policy of new Southeast Asian states. Due to these historical and new constraints Southeast Asia was deeply divided and fragmented 1 composed of many enfeebled states. As Russell Fifield analysed it in 1958: 11 Regionalism is not presently a powerful force although it may be in the years to come. Little

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basis presently exists for effective regional cooperation on any truly extensive scalei the force separating the countries are much stronger than uniting them. There is in reality no voice of Southeast AsiaJJ. 18 From 1945 to about 19597 most of the initiatives and much of the impetus for regionalism originated outside the region 1 with the lead being provided by the United States1 Britain and India. The most significant organizations with Southeast Asian membership to emerge in this period were the United Nations Economic Commission for Asia and the Far East (ECAFE) 1 formed in 1940 and the Colombo Plan which started as a Commonwealth undertaking in 1950. In the military field 1 the Southeast Asian Treaty Organization was launched in 1954 with only the participation of Thailand and the Philippines from Southeast Asia. These organizations soon came to function as an international vehicle through which bilateral aid to several countries of the region flowed. Among the three 1 ECAFE played a central role in promoting regional co-operation and reconstruction. Since early 1948 ECAFE had emphasized expansion of trade within the region 1 particularly trade with Japan as a significant path towards accelerated economic development 1 mainly initiated by India. ECAFE subsequently took up the issue of the reconstruction of Japan until 1951 when the Committee on Trade decided to drop the issue from ECAFFs agenda owing to disagreement among the committee members1 and recommended that further action be left to only interested Asian countries. 19 Britain and the Philippines strongly opposed the restoration of the Japanese economy for fear that Japan would become a strong competitor in the Asian market again. Given the fact that the reparations question was a bilateral issue between Japan and the Southeast Asian countries1 there developed no common attitudes on the part of the latter towards the reparations. Except for strong voices against Dulles1 no-reparation policy, the Southeast Asian countries remained divided and reactive to the dictates of the United States. As one observer cogently put it: 11 Filipinos looked on reparations in various lights - as a punitive measure 1 as just retribution, and as moral due. But Filipinos did not have a free hand to formulate a reparations policy. Their role was primarily one of response to United States policy enunciations11 . ~' 1 As such, the role of the United States, unlike former colonialists, did alleviate

Post-Wtlr Japan~' Re-e111rv mto s·outheast 1\sw

33

the otherwise conflicting relations between Japan and Southeast Asia. In re-entering the region 1 therefore 1 Japan had to demonstrate to the regiorrs leaders that it would be a faithful ally of the United States. These factors augured well for the reparations negotiations as long as the Japanese Government adopted a low-profile policy, sympathizing with the regiorrs efforts towards economic development.

The Yoshida Strategy

In October 19481 domestic politics in Japan underwent a shift from middle-of-the-road to conservative in nature. Accordingly, the Japanese Government gradually voiced its concerns for economic rehabilitation with marginal 1 if not no1 reparations. The NSC 13/2 was particularly significant because it was adopted when conservative leader Shigeru Yoshida came to power in Japan1 setting a new course in Japan in following the dictates of the United States. When American occupation policy began to take a different direction1 the power of the government section of SCAP declined1 and so did middle-of-the-road Japanese groups. After a decisive victory in the general election in January 19491 Yoshida's Liberal Party strengthened its position1 with increasing mutual dependence between Yoshida and MacArthur. As one scholar has put it1 Yoshida kept his administration with MacArthur1s backing and MacArthur had Yoshida to complete the reverse course. 21 Upon forming his second Cabinet1 Yoshida devoted all his efforts to economic rehabilitation and the peace treaty. In responding to MacArthur1s letter of 16 February 1951 concerning U.S.-Japan economic co-operation 1 the relevant ministries began to lay their foundation for post-treaty economic rehabilitation. Because of earlier preparations for Japarrs reconstruction 1 the Economic Stabilization Board (ESB) swiftly released two documents in February and submitted a policy plan on 11economic co-operatiorr1 to SCAP in March. The ESB then began to shift its emphasis from self-support to the theme of 11economic co-operatiorr1. The business community had issued a joint statement on 25 January 19511 even before the Yoshida- Dulles meeting, calling for a 11 partial peace treaty11 and 11economic co-operatiorr1. Establishing within the Federation of Economic Organizations (Keidanren) the Committee for Japan-U.S.

34

chapter two

Economic Cooperation1 the Keidanren issued its uViews on the Structure of U.S.-Japan Economic Cooperatiorr'1 on 15 March 1 strongly advocating American special procurements to foster Southeast Asian economic development. The Yoshida Cabinet regarded the idea of ueconomic co-operatiorr'1 as an inevitable development since the Japanese economy was suffering from the repercussions of the economic boom enjoyed by Japan during the Korean war1 and most members of the Cabinet anticipated that Japan would develop its raw material sources in Southeast Asia. 22 As a result of the economic boom during the Korean war1 instead of inadequate foreign demands1 Japan now faced such problems as import shortages1 raw materials inflation1 and production bottlenecks. All these problems would be resolved 1 the Japanese leaders thought1 by achieving a peace settlement predicated upon economic co-operation between Japan and the United States. Subsequently, within the framework of the usan Francisco Systerrr'11 that is1 the peace treaty and the Japan-U.S. Security Treaty1 Japanese foreign policy became a function of the following crucial factors: (1) U.S. military protection and its reliable commitments in Asiaj (2) the free access to raw materials and export markets in order to reinforce Japan's economyi and (3) a stable political framework in which the conservative ruling party can pursue a consistent aeconornid1 foreign policy Although the conservatives in Japan were not united until 1955 and there existed a strong group against Yoshida's pro-U.S. policies1 the San Francisco System was retained as a prerequisite for Japan's foreign policy Suffice it to say that any policy which worked against these principles was bound to have been rejected. While maintaining this framework 1 the Japanese benefited substantially from the system's low-profile 1 U.S.-oriented foreign policy With strong U.S. support1 all the major bureaucracies responded accordingly by stressing a policy of ueconomic co-operatiorr'1 . The Economic Planning Agency (EPA) 1 formerly the Economic Stabilization Board 7 formulated the first post-war economic plan in 1955 focusing on a national programme for Japan's economic growth 1 including economic diplomacy and trade promotion in Southeast Asia as two of its major goals. The Ministry of Foreign Affairs published the first Blue Book on Diplomacy in 1950 proclaiming

Post-wtlr Japan~' Re-mtrv mto c'-)outheast !\s1a

three principles: (1) to support the United Nationsi (2) to co-operate with democratic nationsi and (3) to establish itself as a member of Asia. With respect to the third1 the MFA stressed the vigorous promotion of economic diplomacy. Finally1 the Ministry of International Trade and Industry compiled the first annual report on economic co-operation in 19581 contending that Japan's ultimate economic goal was the promotion of trade to secure the resources necessary for Japan's industrial development1 and to develop markets for the products of Japan's industry. 2" Thus1 these ministries agreed on 11economic co-operatiorr'11 although the policies of the different ministries varied. The business community began its organizational restructuring for economic co-operation with the United States in March 1952 by announcing the Keidanrerr's 11 Views Regarding Steps to be Taken by the Government to Promote Japan-U.S. Economic Co-operatiorr'1 . This document proposed that the government should attempt to adjust and unify the domestic economy. secure raw materials1 introduce new technologies1 modernize production facilities1 ensure availability of capital funds 1 and stabilize prices. 24 After four months of consultations1 the Keidanren decided to upgrade the existing Japan-U.S. Economic Co-operation Council into the Economic Co-operation Council in August. This new Council was centred around the Defence Production Committee. As its founding charter stipulated: 11 The CounciFs purposes are to co-operate with the U.S. and others in strengthening defence production concerning the Far East1 and to assist reconstruction and development of Southeast Asian countries by utilizing Japan's industrial potentials and technologies.m 5 Particularly important was the growing power of prominent businessmen in Japanese politics. Although Yanaga's description of the 11 predoi:ninant roleJJ of big business is exaggerated,2o under the Yoshida administration 1 the mutual quest for political stability did forge a close relationship between the business community and the ruling conservative party in strengthening the nation's economy.

The Emergence of Economic Diplomacy Independent of 11 U.S.-Japan economic co-operatiorr'11 the Japanese also prepared1 on their own initiative1 for post-war economic reconstruction1

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exemplified by the Foreign Ministry 7s report 7 11 Problems in the Reconstruction of Japan's Economyn 7 disclosed in March 1946. This document may be regarded as an official starting point for Japan's post-war recovery, which clearly recognized the importance of economics as a governing factor in the development of Japan's post-war foreign policy. Furthermore 7 the 11export-or-die 77 concept came to be shared by concerned ministries. As one official in the ESB cogently put it in 1948: Having studied our policy on trade in various ways we believe that Japan must take a trade-first policy internally and a policy of international division of labor externally. So far, our policy has been to gain time by depending on American aid while striving to promote export and revitalize export industries. From now on, however, we must keep in mind that we export or die since American assistance is not necessarily reliable due to its weather-like nature of the American Congress. 27

The bureaucracies7 the ruling party7 and big business responded to the idea of 11economic co-operation' very positively. Due to Japan's capital shortage as well as its urgent need to import raw materials7 the Japanese considered it mandatory to take advantage of the opportunities provided by U.S. aid programmes in Southeast Asia 7 while at the same time seeking a self-supporting economy at home. Yoshida's post-war policY; which he outlined in August 1945 just after the war, attested to the importance he attached to the goal of economic rehabilitation: If the Devil has a son, surely he is Tojo. In order to reconstruct our nation, we must terminate the cancer of military politics, clean up the political circle, and upgrade the national morals. By promoting science and inviting American capital, our financial community can regain its footing, thus reviving the great spirit of our nation. In this sense, the defeat is not that pernicious. After the rain, the soil improves. 22

This firm belief in an economics-first policy was shared by the economic bureaucracies whose power was enormously enhanced through war-time economic planning, and reinforced during the U.S. occupation. It was these economic bureaucrats who supported Yoshida's

Posl-\mr Japan~' Rc-wtrv tnto ,'->'outheast Astil

policy of 11economics above all!! and who succeeded him.~" The emergence of the conservative alliance in Japanese politics became the strong framework for sustaining economic diplomacy. Thus1 when Japan regained its independence 1 although it lost its overseas territories1 its economic capacity was not subjected to severe restrictions and Tokyo took to itself a new style of foreign policy1 to wit1 11 economics above ann. The lesson was palpable: foreign policy was an extension of domestic economic needs1 yet external obstacles and pressure would be formidable unless the Japanese strived to remove these obstacles through economic diplomacy. The role played by Prime Minister Yoshida in formulating Japads post-war foreign policy thus cannot be underestimated. In particular1 the Yoshida-Dulles negotiation in 1950 was critically important1 and through the negotiation came post-war Japads raison detre 1 that is1 a trading state. In the course of the negotiation1 Dulles repeatedly requested Yoshida to re-arm Japan against communism. However1 Yoshida held on to the idea that defeated Japan could win victory ultimately through attaining high economic recovery, thus suggesting an alternative to Dulles 1 approch to combatting communism. If Yoshida had given in and accepted the request1 post-war Japan would have taken on a different role in Asia. Furthermore 1 just before the renouncement of his long premiership1 Yoshida attempted to stage a political act by proposing to the United States an Asian development plan in November 1954. In essence 1 Yoshida made a strong plea for an 11Asian Marshall Plan!! under which Washington would spend approximately US$4 billion. This gigantic plan envisioned a combination of U.S. money and Japanese technical know-how for the benefit and security of the free nations of Asia." 11 Although Yoshida knew that Washington would not agree to his plan 1 he intended to generate some political effect. Thus1 in requesting the special loans1 he resorted to the threat of communism in Asia 1 which he thought could attract more attention from the United States. Formulation of the Reparations Policy

As we have seen thus far1 through negotiating the peace settlement Japan started to mould a unique style of foreign policy, one which

38

clz?ipter two

prevailed throughout the reparations negotiations with the tacit agreement of the United States. According to the peace treaty of 1951, as stipulated in Article 14, Japan had to enter immediately into negotiations with the Southeast Asian recipients, whose ratification of the treaty was of pivotal importance to Tokyo, both politically and economically. In late September 1951, in establishing the Co-ordinating Committee for reparations within the Cabinet, Yoshida asked the Foreign Ministry to promptly prepare for Japan's negotiating positions. The Co-ordinating Committee, comprising the ESB, the Ministry of Finance, the Ministry of International Trade and Industry, and the Foreign Ministry met several times and determined the so-called "Basic Principles of Reparations'' on 17 November. This was presented to Dulles in Tokyo on 13 December 1951. The Principles were:

1. Services should be furnished within the financial and economic abilities of Japan. 2. There should be supply latitude in any type of service desired. 3. The furnishing of any service should not entail any foreign exchange burden upon Japan. 4. No service in production (processing) which will eventually hamper Japan's normal export can be furnished. 31 This was undoubtedly a tactical decision to keep down the reparations payment, and Yoshida knew, before the negotiations started, that each of these Principles, in its literal sense, would not be tenable. The Japanese Government also prepared an alternative plan, since the claimants were expected to "pressure)} Japan to pay huge reparations. As the plan described it: Should negotiations be deadlocked, we might consider the availability of proposing a solution in the form of economic cooperation in which (1) the claimant nations renounce their right to reparations, (2) Japan extends them credits strictly within the limits of her capacity.'~

While Yoshida explained these difficult problems and proposed likely solutions at the meeting in December, Dulles was faced with another critical issue concerning Japan's relations with the People's

Post-war Japans Re-entry into Southeast Asia

39

Republic of China. Japan 1 like the United Kingdom 1 wanted to promote its relations in this area1 mainly for economic reasons. Yet1 the U.S. policy of containing China shattered Japarr's hopes for it1 and the U.S. Government now asked for Japarr's guarantee not to negotiate a bilateral treaty with Communist China in conjunction with the peace treaty1 which was pending ratification by Congress. In response to this1 the Japanese Government issued the Yoshida Letter in December 1951. Particularly important was the adamant objection of the British to Japarr's decision to abandon the China market since Japan1 without economic relations with mainland China1 would naturally dominate those Southeast Asian markets which the British wanted to keep as their own 11 hunting ground)) for trade. Thus1 it was mainly because of the Southeast Asian issue that Anglo-American relations began to sour. Sensing this serious cleavage 1 Yoshida sent a letter on 27 December 1951 to General Ridgway, calling for an early settlement of the dispute between the United Kingdom and the United States. 33 It was a signal that Japan could not involve itself extensively in the regiorr's economic development without their tacit support1 and in a way1 the Yoshida Letter served as a 11guaranteen for Japarr's economic access to Southeast Asia. In late 19511 based on the 11 Basic Principlesn1 the Japanese Government dealt with the recipients of reparations. Indonesia sent its first reparations mission in December 19511 asking for US$115 billion1 including services and cash payments. The Philippines started its negotiations by requesting the Japanese Government to send a: Japanese reparations mission to Manila in early 1952. This mission1 headed by Juichi Tsushima1 Director-General of the Foreign Ministr/s Asian Affairs Bureau1 was told by the Philippine Government to pay US$8 billion in ten years. 34 On both occasions1 the Japanese Government insisted that the total amount of reparations be decided after hearing from all the recipients1 and that no reparations other than services could be furnished 1 as stipulated in Article 14 of the peace treaty. The requests by Manila and Jakarta1 totalling US$25.5 billion1 were too excessive for Tokyo to pay without hampering the Japanese economy (Japarr's gross national product in 1952 was only about US$17 billion). Although all the recipient countries demanded a swift and sincere settlement over the amount of reparations1 the

charter two

Japanese Government adopted a wait-and-see tactic1 as economic 1 recovery predicated upon 11economic co-operatiorr' with the United States was the top priority1 even without considering the extraordinary sum requested by the recipients of reparations. Encouraged by U.S. policy-makers1 the Japanese Government began to give serious consideration to the problem after a period of indifference lasting almost a year. Thus1 for the first time in an official policy statement 1 Yoshida referred to the Southeast Asian region in his policy speech of November 1952: With respect to trade promotion 1 the government shall carry out economic diplomacy1 i.e. 1 conclusion of commercial treaties1 broaden and develop trade opportunities by increasing overseas merchant ships1 strengthening export industries1 and utilizing foreign currency reserves. In so doing, we will particularly develop economic linkages with Southeast Asian countries.

Yoshida's positive attitude towards Southeast Asia reflected the agreement on the new foreign policy reached at the Cabinet meeting on 19 November. This agreement stressed three principles: (1) co-operation with democratic countriesi (2) co-operation with the United Nationsi and (3) normalization and the promotion of friendly relations with Southeast Asian nations." 6 Based upon this reappraisal1 the Japanese Government modified the basic principles for reparations in early December in order to speed up resolution of the reparations issue. In order to resume negotiations1 the Foreign Ministry sent Eiji Wajima1 director of the Asian Affairs Bureau1 to Southeast Asia. Visiting the Philippines 1 Indonesia and Burma 1 the three major recipients in the region 1 Wajima learned that Japan would have to go 1 beyond Article 14 of the peace treaty in order to satisfy the recipients demand for capital goods as well as services. Without making this concession 1 Japan could not establish diplomatic relations with the Southeast Asian countries. The Wajima mission yielded no tangible results in this regard except in the case of the Philippines, with which Japan was able to reach agreement on the salvaging of sunken ships. Upon Wajima's return from Southeast Asia, Yoshida concentrated on the two issues of trade promotion and Southeast Asian development. He began to develop the idea of linking the reparations payment

Post-war Japans Re-cmry

11110

Southeast Asw

with the simple promotion of Japan's trade. In early May 19531 Yoshida announced at a Cabinet meeting his intention to formulate a long-term plan concerning trade promotion1 to be supervised by MITI 1 and Southeast Asian development1 to be supervised by the Foreign Ministry. When the fifth Yoshida Cabinet was launched on 21 May 19531 therefore 1 the programmes for Southeast Asian development got under way. The first plan was announced by the Foreign Ministry in late May. The Foreign Ministry1s proposal were threefold: (1) Japanese provision of capital goods and technologies for Asian economic development programmesi (2) Japanese co-operation with ECAFE and the Colombo Plani and (3) government assistance in commercially-based activities overseas:17 The delay in a governmental decision for reparations settlement plagued the business community. On 29 May 19531 the Keidanren met with members of the Liberal Part/s Policy Research Council and charged that the absence of reparations agreements was retarding trade and other commercial relations. It also called on the government to seek a quicker settlement. 38 The government responded to the Keidanrerr's demand in July7 when the Foreign Ministry set up its Asian Economic Council under the chairmanship of Yasusaburo Hara1 President of the Japan Powder Mill Company. Many Council members regarded reparations more as a privilege than an obligation 7 and were contemplating to increase the amount of reparations to US$5 billion. 1 ~ From this time on 7 private businessmen were directly and sometimes extensively involved in the official negotiation process between Japan and the recipient Southeast Asian countries7 an involvement which was encouraged by Yoshida himself7 as he explained: I thought it crucial to scrutinize deepening future economic relations between Japan and recipient countries although viewing the reparations payment from [Japanese] people's burden was mandatory. In other words, how to make use of reparations would be most significant for both parties. This is why we asked Mr. Mamoru Nagano. who has a great deal of business experiences for a long time, to visit the region. By doing so. I wanted to delve into meaningful ways to implement the reparations. 411

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In order to assess Southeast Asian reactions further1 for the first time in the history of post-war Japan-Southeast Asia relations1 Japans Foreign Minister1 Katsuo Okazaki1 visited the countries of Southeast Asia in September 1953. Okazakfs official visit had first been proposed in July but it took almost two months to prepare Japans omiyage (presents) for the reparations recipients. New proposals for the negotiation were made just before Okazaki left for Asia. These proposals stressed: (1) that Japan would furnish capital goods in addition to extending the service reparations provided for in the peace treatyi (2) the payment period would be ten to twenty yearsi and (3) Japan would pay US$250 million to the Philippines1 US$125 million to Indonesia1and US$60 million to Burma within the framework of a 4:2:1 ratio. 41 Okazakfs visit to the region was a constructive step forward in the reparations negotiations1 although it yielded no more tangible results than had the previous attempts. In Manila1 Okazaki met with his Philippine counterpart as well as with the leaders of the Philippine Nationalista Party1 which demanded US$8 billion in reparations. In Jakarta1 Okazaki met with Prime Minister Ali Sastroamidjojo1 who requested US$17.2 billion. In Rangoon1 since Burma did not attend the San Francisco peace conference he proposed a draft for a peace treaty between the two countries and a plan for Japanese reparations payments. Okazaki did not officially put forward concrete proposals in any of the three capitals. Instead1 he outlined Japans financial capabilitY; saying that US$500 million would be allocated to the three countries in a ratio of 4:2:1 1 as the Foreign Ministry had contemplated previously. He particularly assured the Southeast Asian nations that Japan would expand Article 14 of the peace treaty so as to make possible further payments in capital goods. Upon Okazakfs return from the region 1 Yoshida asked the Asian Economic Council to devise basic Japanese economic policies towards Southeast Asia in order to expedite the reparations negotiations as well as to reinforce Japans trade with the region. The Yoshida government1 after reviewing the CounciFs specific proposals1 announced its basic policy for economic aid to Southeast Asia in a Cabinet decision on 18 December 1953. The following seven points were stressed in the decision:

Post-war Japans Re-entry into Southeast Asta

43

1. Various organizations related to Southeast Asia shall be integrated

2. 3. 4.

5.

6. 7.

into the Asia Society (Ajia Kyokai); which shall undertake overall research 7 technical co-operation and advertisement in order to avoid inflicting an image of Japan's economic intervention under the name of economic co-operation. Promotion of exchanges and training of technicians by concluding official technical accords. To smooth its operation of economic co-operation by avoiding dual taxation. To keep needed capital and activate the function of the ExportImport Bank in order to promote exportation of plants7 which is the core of economic co-operation. To take into consideration the measures to waive taxes whenever necessary. To keep close contact with counterpart agencies in Asian countries as well as U.N. related agencies. To undertake the reparations negotiations honestly to restore diplomatic relations with the recipient countries. 42

Based upon these principles7 aeconomic co-operatiorr'7 7 with the settlement of the reparations problem as the core7 was vigorously carried out from 1954. As Foreign Minister Okazaki put it: aJaparr's foreign policy since independence has stressed in every possible way the expansion of trade and the increase of exportsn. 4 ~ Thus7 in late 19537 Japan's economic foreign policy7 embodied as the national diplomatic strategy and greatly influenced by Yoshida 7 came to the fore. The seven principles announced by the Cabinet constituted the fundamental underpinnings of what was later called aeconomic diplomac/77 officially promulgated by the first White Paper on Japanese Diplomacy in 1957. It was a fine-tuning of Japan's obligations7 that is 7 war reparations 7 and Japan's need for survival 7 that is7 economic development. What became apparent in the announcement of Japan's economic policy was that7 reflecting Yoshida's belief7 the utmost efforts had to be made to achieve an "economic 77 foreign policy particularly directed towards the countries of Southeast Asia where demand for Japanese goods was very high 7 yet the economies were impoverished.

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Since the problems facing Japan's trade in Southeast Asia were so great the government had to be called on to assist private initiatives. It was natural 1 therefore 1 that Japan 1 according to Okazaki 1 11sought to devise means to increase their purchasing power through payment of reparations1 development of resources1 investment 1 setting up of joint enterprises1 and the purchase by Japan of large quantities of raw materials11 . 44

REPARATIONS NEGOTIATIONS AND JAPAN'S RE-ENTRY

Thus1 once Japan's 11 peacefuF1 economic expansion into the region was guaranteed through reparations negotiations1 the reparations question per se was bound to be resolved 1 with Tokyo showing more flexible attitudes towards each case. 41 In August 19541 Burma sent its first reparations mission 1 headed by Industry Minister U Kyaw Nyein 1 to begin negotiations. After extended bargaining, Japan gave in and accepted in principle the Burmese demand for US$400 million in reparations over a twenty-year period1 but offered instead a US$200 million plan over ten years because of the same annual payment. Nyein agreed to this proposal but stipulated that Burma had the right to make adjustment to the total amount of reparations after considering the settlements with other countries. In the agreement signed on 5 November 1954 Japan promised to pay US$200 million in services and capital goods and an additional US$50 million as investment in joint ventures over a ten-year period. 16 The Philippines was the next of the recipient countries to reach an agreement with Japan after several rounds of hectic negotiations. The first major settlement was reached in April 19541 even before that of the Burmese. The so-called Ono-Carcia agreement - US$400 million in twenty years - was rejected by the Philippine Senate under the leadership of Senator Recto1 who claimed one billion dollars as the irreducible minimum. It was not until May 1955 that the final agreement was reached between the two countries. Ambassador Neri, representing the Philippine reparations mission, proposed that Japanese reparations payment should total USS800 million, and refused to yield to Japanese counter-proposals. After several negotiations

Post-1var Japans Re-cmrv

tllto

.Southeast

1\sttl

45

with his Japanese counterpart1 on 15 August Neri presented his official draft1 which stipulated a reparations payment of US$500 million and a long-term development loan of US$250 million over a twentyyear period. The most serious problem still remained unresolved at this point: Manila's rejection of Japarr's demand for the inclusion of a clause on the expansion of trade. Prime Minister Hatoyama's special envoy1 Aiichiro Fujiyama 1 Chairman of Nissho1 was sent to Manila to expedite negotiations. Presenting his own formula on the question of economic development loans1 Fujiyama won favour with the Philippine Covernment1 and by late April 1956 all the issues had been resolved. 17 Settlement with Indonesia took the longest time 7 first because 1 of an insurmountable difference in both sides proposals for the total amount 1 and secondly7 Indonesia's political instability. After completing the settlement with the Philippines in May 19561 thus fixing the upper limit of the payment7 Japan began to pay more attention to Indonesia. Subsequently, Indonesia requested US$400 million in reparations and US$400 million in economic aid 7 to which Japan responded in September 1957 with the Kobayashi proposal of US$200 million in reparations over ten years1 cancellation of Indonesia's trade debt (US$177 million) 1 and US$400 million in economic aid. Helped by the extensive involvement of the so-called uJapan lobbyists11 1 the final agreement came when President Soekarno and Prime Minister Kishi met in November 1957 At this private 7 closed meeting, Soekarno proposed to Kishi that Japan pay US$230 million for reparations and US$170 million for debt cancellation 7 plus US$400 million in credit. Although Soekarnds proposal exceeded Japarr's original offer7 Kishi accepted it instantly7 thus concluding the negotiations. 48 Prime Minister Kishi visited Southeast Asia twice in May-June and November 1957 in order to expedite the reparations negotiations and more importantly7 to generate support for his idea of establishing an Asian Development Fund amounting to US$700 million: US$500 million for long-term development loans 7 US$100 million for promoting plants export 1 and US$100 million for stabilizing the prices of agricultural commodities. Unlike the Yoshida plan of 19547 the proposed Fund was relatively rich in specific policies and projects

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directed towards Southeast Asian development with U.S. capital and Japanese technology. 49 Although the idea did not materialize mainly because of the lack of U.S. as well as Southeast Asian support7 Kishi developed the so-called uAsia-centred policy77 7 stressing that Japan 7 as a spokesman for Asia 7 would be a promoter of Asian concerns. Thus7 together with the settlement of the reparations issue with Southeast Asds largest nation 7 Indonesia 7 Kishfs Southeast Asian policy marked a new page in Japads relations with the region. The last to settle the reparations issue was South Vietnam 7 with which Japan had the most serious political problems simply because the country was divided by the cold war7 and the Japanese believed that Vietnam was in practically the same situation as Laos and Cambodia7 both of which countries had renounced all claims to reparations. When South Vietnam claimed reparations after a temporary resolution of domestic strife in 19567 the Japanese Government offered a payment of US$8 million in reparations and economic co-operation amounting to US$12 million. This offer was immediately rejected by South Vietnam. At the same time 7 North Vietnam protested against Japads attitudes towards the reparations issue 7 declaring that Hanoi also had the right to claim reparations from Japan. Because of U.S. relations with South Vietnam 7 Japan completely ignored North Vietnam and dealt only with the Ngo Dinh Diem government. In September 19567 Foreign Minister Fujiyama appointed the Keidanren Vice-President Kogoro Uemura as special envoy to negotiate with Vice-President Nguyen Ngoc Tho. Uemura completed the negotiations7 and on 15 May 19597 signed an agreement for a total of US$55.6 million payable in five years7 consisting of US$39 million in reparations 7 US$7.5 million in economic aid 7 and US$9.1 million in loans. 50 Therefore 7 primarily led and co-ordinated by prominent businessmen7 by 1960 all four reparations negotiations7 with the exception of Burma's supplementary agreement in 19637 were completed. Throughout these negotiations7 Japan was able to obtain agreement for its trade expansion7 which was the core of the reparations settlements: All four reparations agreements7 for instance 7 stipulated that the payments should neither prejudice normal trade nor impose additional foreign exchange burdens upon Japan 7 and that Japanese products

supplied under the agreement should not be re-exported to other countries. More importantly, Japan confined the products to be supplied to capital goods, a restriction which undoubtedly promoted Japan's trade, particularly its heavy industries.' 1 To recapitulate, the case study above has shown that Japan's basic policy, the 11economic'' foreign policy formulated by Yoshida, underscored Japan-Southeast Asia relations during the 1950s and early 1960s. In fact, the reparations issue was a by-product of, and the price paid for Japan's reckless war in Asia. Working in a favourable international environment generated by the burgeoning cold war since 1948, however, Japan was able - using Yoshida's metaphor - to transform defeat into victory by means of diplomacy. In the process of gaining Japan's independence in 1951, Yoshida's tactics worked well in favour of Japan, as exemplified by the "servicen reparations and minimum armed forces. Two most telling factors were the strong U.S. endorsement of Japan as the workshop of Asia and the favourable economic conditions bestowed upon Japan as part of 11Japan-U.S. economic co-operation''. Yoshida - his political style was called "one-man rule'' - played a leading role in underscoring Japanese economic diplomacy, within which the direction and the extent of the reparations were determined. The prime movers in this case, then, were the United States and Yoshida; other factors - the regional subsystem and domestic politics - were relegated to secondary and supportive roles. The United States, through redirection of its occupation policy, was to guarantee Southeast Asian markets and its raw materials for Japan in return for Japan's alliance with the free nations in the region: in short, the establishment of a nexus of aid and trade between the United States, Japan and Southeast Asia. Yoshida, recognizing that reform policies would not rebuild post-war Japan, successfully pursued his policy of 11economics above alln. Southeast Asia was thus seen merely as a supplier of raw materials to Japan and as a market for Japanese heavy industrial merchandise. Ensconced in U.S. security networks in Southeast Asia, Japan concentrated on intensifying its economic penetration into the region. In this sense, the reparations payments reinforced Japan's encroachment on the region because the 11service" reparations enabled Japan to export and introduce Japanese goods into the region on a constant

basis. To this end, the concerned ministries and the business com11 munity operated in consonance with Yoshida's econornics above 11 aW diplomacy. The ministries, imbued with the trade-or-dien concept, vigorously implemented economic reconstruction. The business community was most enthusiastic about U.S.~Japan economic co-operation, and placed particular emphasis on special military procurements, with an incentive to settle the reparations question as early as possible. More importantly, prominent businessmen, who had intimate relations with Yoshida, took the lead in negotiating the reparations settlement.

NOTES 1. For the American occupation policy, see Ikuhiko Hata. 1\niertctl 110 til!-Ntcht ">CIIIVO se!scli::u (Tokyo: TcJyokeizai shimpo sha. 1976); Michael Schaller, The Occupat!0/1 of /apcm (New York: Oxford University Press. 1985); and Makoto loki be, Bc1koku no Nd1o11 senrvo se!sczku (Tc1kyo: Chuokoron sha. 1985). two volumes. 1

.3.

l 5.

6.

One of the best works on the American reparations policy is Okurasho zaiseishi shitsu. ed., Slzowtl zaN!sln. Vol. I (Tokyo: Tc)yokeizai shimpo sha, 1984) . For the three reports. see Department of State. Report on /t~pmzesc Ref'dlilttOitS to tile Presulcnt of tlze U111ted States (Washington, D.C.: U.S. Government Printing Office, 1946); Overseas Consultant Inc., Report 011 lndustrwl Rq't~rtltt0/15 Sww)l ofJt~pan to tile Ullltcd .'1-tt~tes of IIIIIC!Ht1 (New York: Overseas Consultant Inc., 1948); and U.S. Committee to Inquire into Economic Problems of Japan and Korea. ··Report on the Economic Position and Prospects of Japan and Korea and the Measures Requned to Improve Them" (np .. 1948). These can be found in the Japanese Foreign Ministry's records. See C:d1ko k1roku. B .3.1 11--.3. B .3.1.1.1-4. and B .3. 1.1.1-5. M. Ball. /dj'd/1. biC/11\' ,y 1\lh· (New York: John DZ!y CompZ!ny. 1949). p. 167. For the Japan lobby, see I loward Schonberger. llftem1t~tlz of W:zr.· ~~mmuu1c. dlld the Rm~tzk11zg ofJilj'tlll. l•l..f "'-l•l-) 2 (Kent. Ohio: The Kent State University Press, 1989). chZ!pter 5. For NSC 1.3/2, see Department of State. Fomgn Rclilt/0115 of tile U111ted Stt~tec. t•l..f8 (hereZ~fter cited as FRUS). Vol. VI (Washington. D.C.: Government

Post-war Japan5 Re-wtry mto ,'-,-outheast llstd

7.

8.

9.

10. 11.

12.

13.

14. 15.

Printing Office, 1974), pp. 858-62; and George Kennan, Memotrs, 1CJ25-fil)c} (Boston: Little, Brown, 1962), pp. 391-92. Department of State, Bul!etm, 18 May 1947, pp. 991-94. In fact, it was Acheson who asked Kennan to assign the Policy Planning Staff the task of developing a comprehensive Southeast Asian policy in early 1949, which resulted in the 11 PPS 51". See Schaller, op. cit., pp. 158-62. See particularly, William Borden, The Paetfic 11/!tance: Umted States Foreign Economic Po!tcy and Japanese Trade Recovery, 1947-1955 (Madison: The University of Wisconsin Press, 1984); and Andrew J. Rotter, The Path to Vtetnam (Ithaca: Cornell University Press, 1987), especially chapter 6. On 22 June 1950, Takeshi Watanabe, then head of the Liaison Office in the Finance Ministry, expressed the same idea in his talks with Dulles. See his Watanabe lakesht mkkt (Tokyo: Toyokeizai shimpo sha, 1983), p. 521. Okurasho zaiseishi shitsu, ed., Showa zatsetshi, Vol. XX (Tokyo: Toyokeizai shimpo sha, 1982), pp. 569-72. For U.S. economic co-operation, see Mitsuru Yamamoto, 11 The Cold War and U.S.-Japan Economic Cooperation", in lhe Ongms of the Cold War tn Asw, edited by Yonosuke Nagai and Akira lriye (Tokyo: University of Tokyo Press, 1977), pp. 408-25; and Takafusa Nakamura, 11 Nichi-Bei keizaikyoryoku kankei no keisei", in laihetyo senso, edited by Kindai Nihon kenkyu kai (Tokyo: Yamakawa shuppan sha, 1982), pp. 279-302. New york Times, 22 July 1951; and Nthon K£tZat Shtmbun, 24 July 1951, p. 1. Kennan, op.cit., p. 391. The Japanese Government strongly requested a "no reparations" policy to Dulles. See Carko ktroku, B 4002, pp. 27, 45-46. FRUS N5 1, vol. VI, part 1 (1977), pp. 880-83; and Kiichi Miyazawa, iokyo-Washinton no mitsudan (Tokyo: Jitsugyo no Nihon sha, 1958), pp. 86-87. However, it was not until May 1952 that the Japanese Government began to consider providing services as part of the settlement. See Carko kiroku, B 4006, pp. 32-39. Department of State, Conference for the C01zclusron and ,'-,-rgnawre of the Ireatv of Peace wrth Japan: Record of Procceduzgs (Washington, D.C.: Government Printing Office, 1951), pp. 319-20. Prime Minister Yoshida characterized the Treaty as "the spirit of no-reparations". Shigeru Yoshida, Karso ;rmcn (Tokyo: Shincho sha, 1958), vol. IlL p. 158. Department of State, Bul!ctm. 17 September 1951, p. 457. Dean Acheson, Present clt the Cretltton (New York: Norton, 1969), p. 603.

50

chapter two

16. Borden, op. cit., p. 217. The NSC 125, adopted on 27 July 1952, vindicates this move. See FRUS, 1952-54, vol. XIV, part 2 (1985), especially p. 1290. 17. Saburo Okita, Koronbokezkaku to Tonana;ia kathatsu no shmte1z (Tokyo: Keizai dantai rengokai, 1955), pp. 17-18. The failure was partly because of the American intention to belittle the significance of the Bandung Conference of April 1955. 18. Russell H. Fifield, Diplomacy of Southeast Asza, 1945-1958 (New York: Harper and Brothers, 1958), pp. 498-99. 19. Lalita P. Singh, The Politics of Economzc Cooperation m Asza (Columbia, Missouri: University of Missouri Press, 1966), p. 120. 20. Milton W. Meyer, A Dzplomatzc Hzstory of the Phzlippines (Honolulu: University of Hawaii Press, 1965), p. 63. See also, Renato Constantino, uFirippin gaiko no genba kara", in Sekai no nakano Nzhon senryo, edited by Rinjiro Sodei (Tokyo: Nihon hyoron sha, 1985), pp. 347-52, for domestic concerns. 21. Junnosuke Masumi, Sengo setfl, 1945-1955 (Tokyo: Tokyo daigaku shuppankai, 1983), p. 333. 22. Yoshida naikaku kankokai, yoshzda nazkaku (Tokyo: Yoshida naikaku kankokai, 1954), pp. 344-56. 23. See Keizaikikakucho, Cendai Nihon kezzaz no tcnkaz: Kezzazkzkakucho san;unen shz (Tokyo: Okurasho insatsukyoku, 1976)j Gaimusho, Waga gazko no kmkyo (Tokyo: Okurasho insatsukyoku, 1957)j and Tsushosangyosho, Kezzaikyoryoku no gen1yo to mondaiten (Tokyo: Tsusho sangyo chosakai, 1958). The best account of economic policy before 1955 is Yujiro Hayashi, Nzhon no kezzaz kezkaku (Tokyo: Toyokeizai shimpo sha, 1957). 24. Keidanren, Kezdanren;unenshz (Tokyo: Keidanren, 1962), Vol. I, pp. 25657. 25. Keidanren, KezdanrC/1 sanlunenslzz (Tokyo: Keidanren, 1978), pp. 59-61. 26. Chitoshi Yanaga, Bzg Busmess Ill Japanese Polztzcs (New Haven: Yale University Press, 1968), pp. 63-94. 27. Gaimusho, Cazko kzroku, E 2009, Vol. 2, pp. 269-70. For the MFA's report, see Kmtei Nilzon kezzaz sazken no mondaz (Tclkyo: Gaimusho chosakyoku, 1946)j and James F. McGarry, "A Study of Decision-Making in Japan's Postwar Foreign Economic Policy'' (Ph.D. dissertation, University of Pennsylvania, 1964). 28. See Nzhon Kezzaz Shzmbwz, 19 November 1975, p. 24; Akio Watanabe, "From Bitter Enmity to Cold Partnership'', in Anglo)af?dlzese Alzwatzon

Post-war }apcms Rc-emry tlllo Southeast Asza

29.

30. 31. 32. 33.

34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45.

46. 47.

51

NN-1952, edited by Ian Nish (Cambridge: Cambridge University Press, 1982), p. 236; and Masataka Kosaka, Sazsho yoshzda Shzgeru (Tokyo: Chuokoron sha, 1968), pp. 68-69. See, for instance, Saburo Okita, Japans C.lta!lenging years (Canberra: Australia-Japan Research Center, Australian National University, 1983), pp. 30-48. For Yoshida's leadership, see John W. Dower, Empire and Afrermath (Cambridge: Harvard University Press, 1979). Yoshida, Kaiso JUnen, vol. I, pp. 191-92, 232. Caiko kiroku, B 4008, p. 10; and Yoshida, Kaiso JUnen, vol. III, p. 162. Cazko kzroku, B 4008, pp. 6-7. Ibid., pp. 80-86. See also Roger Buckley, Occupation Dzplomacy: Britam, the United States and Japan 1945-1952 (Cambridge: Cambridge University Press, 1982), chapter 10. Gaimusho, Cazmusho no hyakunen (Tokyo: Hara shobo, 1969), Vol. II, p. 811. Yoshida, Karso JUnen, vol. IV, p. 250. Asahr Shrmbun, 19 November 1952, p. 1. See also its evening issue for the Cabinet decision. Ibid., 1 July 1953, p. 1. Nihon Kmai Shzmbun, 29 May 1953, p. 1. Marmchi Shzmbun, 1 February 1954, p. 1. Yoshida, Kazso JUnen, vol. III, p. 168. Gaimusho, Carmusho no hyakunen, vol. II, pp. 821-22. Nthon Kezzaz Shimbun, 19 December 1953, p. 2. Katsuo Okazaki, {/Japan's Foreign Relations", Annals of the Amencan Academy 308 (November 1956), p. 161. Ibid., p. 162. All the other Southeast Asian countries besides the four in question here either did not have legal right to the reparations, for example, Thailand, or had renounced the right, that is, Malaya, Singapore, Laos and Cambodia. To these countries, however, the Japanese Government paid semi-reparations grants. See particularly, Kanki Okano, Nthon baishoron (Tokyo: Toyokeizai shimpo sha, 1958); and Gaimusho baishobu, Nihon no baisho (Tokyo: Sekai janaru sha, 1965) for Japan's reparations negotiations. See William Hanna, aJapan Begins to Pay Reparations", Amencan University Field Staff Report 4, no. 15 (November 1955): 1-30. See Takushi Ohno, {/Philippines-Japan Relations, 1945-1956" (M.A. thesis, University of the Philippines, 1975); and Yoko Yoshikawa,

chapter two

48. 49.

50. 51.

'·Nihhi baisho kosho: Hatoyama naikaku no sogaku kettei kosho" 1 Kyoto sangyo datgaku ronslzu (February 1984)1 pp. 201-30. See Masashi Nishihara 1 The Japanese and Sukarnds lndonesta (Honolulu: University of Hawaii Press1 1976). For Kishfs proposal 1 see Asahi shimbun chosakenkyushitsu 1 ed. 1 Tonanapa shokoku no gen;osei (Tokyo: Asahi shimbun sha 1 1958)1 pp. 56571. See also Ministry of Finance 1 Thailand 1 "Japanese Proposals for Asian Development Fund" (Bangkok: National Archives1 9 July 1957) for a negative Southeast Asian reaction to the proposals. See Masayoshi Nagata1 Stgmftcance of Japanese Reparations for Vtetnam (Tokyo: Vietnam Association 1 1959). For these points1 see Jumpei Kato1 "Baiso no keizaitekikoka ni kansuru shiron: (1)n 1 Caimusho Ozosa Ceppo 41 no. 7 (1963): 55-82.

-------chapter three-------

Japan's Policy Towards Regional Development

In the course of the reparations negotiations1 as we have seen in the previous chapter1 Japanese policy towards Southeast Asia came to be viewed as an economic stepping-stone back into the region. Furthermore 1 Japan's economic aid1 although marginal in its volume and initiated largely due to external pressure in the late 1950s1 was characterized by strict conditions and tied loans. As in the case of the reparations payments1 Japan's aid policy was employed to promote foreign trade. As a result1 in 1964 Japan's trade with the Southeast Asian region as a whole surpassed that of the United States1 becoming first or second in importance in the trade of nearly every single country in the region. Japan's post-war economic growth has been phenomenal since the early 1960s. Rapid expansion of the Japanese economy has raised expectations and attracted accolades while at the same time generating considerable apprehension 1 resentment and criticism. In some instances1 Japan's economic growth by the mid-1960s appeared to have occurred at the expense of other countries. As a price for its rapid economic penetration1 Japan had to confront a serious blow in the form of boycott movements against Japanese goods in the early 1970s. Anti-Japanese movements in 1974 thus became the

chapter three

catalyst in forging a new relationship between Japan and Southeast Asia. Japarrs Southeast Asian policy began to loom large in its economic diplomacy during the Hayato Ikeda (1960-64) administration. Following Kishfs first official visit to the region 1 Ikeda visited Southeast Asia twice in 1961 and 1963 and tried to play a mediating role in the Indonesia-Malaysia conflict1 although his main focus was on Japarrs domestic economy1 that is1 an income-doubling policy. Southeast Asia thus gained renewed interest in Japarrs foreign policy. At the same time 1 Southeast Asia began a quest for regional identity and co-operation. Consequently1 intra-regional interactions became more pronounced and inter-regional contacts increased1 particularly with the major powers. 1 It was these changing environments surrounding Japan that had a significant impact upon the foreign policies of Southeast Asia and the major powers.

JAPAN AND THE ASIAN DEVELOPMENT BANK

In the early 1960s the idea of establishing a development bank in Asia emerged as a product of the mushrooming regionalism in many parts of the world. Spurred by indigenous as well as exogenous factors 1 Southeast Asia went through an unprecedented upsurge of regionalism in the 1960s: the Ministerial Conference for the Economic Development of Southeast Asia (MCEDSEA) in April 19661 the Asian Pacific Council (ASPAC) in June 19661 the Asian Development Bank (ADB) in November 19661 and the Association of Southeast Asian Nations (ASEAN) in August 1967. Among the four organizations1 ASEAN was established as a genuine Southeast Asian group. Japan joined the ASPAC rather grudgingly while initiating the MCEDSEA for the first time in the post-war history of Japarrs diplomacy. However1 these two regional bodies were products of the cold war and failed to generate any significant centripetal force for regional co-operation. The ADB is thus the only regional body which substantially benefited by the Japanese contribution to Southeast Asian regional development; hence the choice of the case study in this chapter. The year 1965 was a crucial one for the region - the escalation of the Vietnam war and consolidation of regionalism1 two

Japmz5 Po!tcy Towards Regwnc1! Dcvelopmmt

developments which were not unrelated. Together with changing domestic conditions1 these factors compelled Japan to tone down 1 if not modify1 its long-standing economic diplomacy fostered by the reparations negotiations. Although the concept of a regional bank was initiated by the Southeast Asians and the Japanese independentlJS the directions and characteristics of the bank were largely determined by the politics of regionalism1 which was not immune to the influences of non-regional superpowers. The United States and the Vietnam War

Operating as the world policeman in managing international problems1 the United States had been involved in the Vietnam war since 1954i however1 two presidents1 Dwight D. Eisenhower and John F. Kennedy did not commit themselves to any actual warfare. It was only during the Johnson Administration that Washington directly took over South Vietnam1 fighting against the spread of communism in the region 1 as exemplified first by the Gulf of Tonkin Resolution in August 1964 and then by the adoption of the Rolling Thunder Program in February 1965. From that time American Southeast Asian policy evolved around two main themes: the second Indochina war and regional development.~ While the latter theme was less important in U.S. foreign polic)0 it remained a key issue in Japan-U.S. relations during the mid-1960s. For instance7 in early 19641 the Joint U.S.-Japan Committee on Trade and Economic Affairs7 established in June 1961 to resolve bilateral economic issues 7 began to devote itself exclusively to international problems. As the Committee concluded at its third meeting, 11developments in world affairs now demand that the interests and concerns of both countries in trade and economic matters be considered from a global perspective)).; Undoubtedly7 direct U.S. involvement in Indochina pressured Japan to play a more significant role in creating the so-called usoft walF 7 against communism in Asia. It became increasingly clear that Japarrs enlarged economic role was called for to strengthen the U.S. security role in the region. U.S. approach to the regions economic problems was reminiscent of that pursued during the early 1950s. This time the United States

(hapter three

had a strong advocate as well as an established economist1 Walt W. Rostow. Capitalizing on the concept of regionalism 7 Rostow7 serving as Chairman of the State Departmenes Policy Planning Council since the previous Administration 7 stressed four principles in the so-called Johnson doctrine of March 1965:

1. The governments and peoples of the region 7 in co-operation with international organizations1 should assume an enlarged role for their own economic1 political1 and security affairsi 2. Given the limitations of national states in dealing with contemporary problems1 such an enlarged regional role requires intensified regional co-operationi 3. Given the continued potential dangers of direct communist aggression1 it is in the U.S. interest7 and the regional interests7 to provide co-operative security relations with the United Statesi and 4. Regional arrangements should be democratic in character1 avoiding the domination of any one state or group of states over others. In the same month the United States started its regular bombing of North Vietnam and it appeared that the situation in Vietnam was framed by equally ominous prospects throughout Southeast Asia. President Johnson concluded that aas tensions heightened across the Pacific1 a general statement of policy toward Vietnam and Asia was required for the American people 11 . 1 This was a significant change because before early 19651 U.S. finance experts and government officials had expressed their negative attitudes towards the establishment of a regional bank in Asia. In 1 March 19657 for instance, U.S. delegates had stated at the ECAFE s 11 Wellington conference that our government would cooperate 7 but probably would not joirr'.~ However7 in a speech made at Johns Hopkins University on 7 April 19651 President Johnson changed the cautious U.S. policy towards Southeast Asia by emphasizing a functional approach to resolving regional problems. In the speech 7 aPattern for Peace in Southeast Asian, Johnson stressed: 11The first step is for the countries of Southeast Asia to associate themselves in a greatly expanded cooperative effort for development.)) He went on to say: 11 For our part I will ask the Congress to join in a billion-dollar American investment in this effort as soon as it is underway)).(, On

!arans Polley lowc1rds Regtona/ Devclorment

57

the same day, Johnson asked Eugene Black1 former President of the World Bank1 to be his Special Adviser on Southeast Asian Economic and Social Development. Black was first instructed to 11call on UN Secretary General U Thant to ask him what concrete steps the U.S. could take 11 . After conferring with U Thant1 Black became convinced that the United States should become actively involved with the proposed bank. 7 About two weeks later1 Johnsods decision was given in a press release: Mr. Black has discussed with me the project for an Asian Development Bank. He reports that after discussions both in New York and Washington1 he finds agreement within this Government that under appropriate conditions and with sound management such a bank would be of considerable value in promoting regional development. I agree with this position and believe that the US would wish to participate if such a bank can be established.C

Black hurried to a conference in Bangkok in June 1965 to declare a plan to contribute US$200 million to the proposed bank 1 the same amount Japan pledged. Thus1 it was not until late April 1965 that the United States became actively involved in establishing an Asian development bank. Once it expressed its willingness1 momentum was gained towards the bank1s realization 1 encouraging Southeast Asian and Japanese leaders1 who1 on their own initiatives1 had begun to explore regional co-operation several years before.

Southeast Asian Regionalism

By the early 1960s1 Southeast Asia had reached a new phase in its search for regional order and development. The first regional body1 the Association of Southeast Asia (ASA) 1 was formally established on 31 July 1961 when delegates from Malaya 1 the Philippines and Thailand met and issued the Bangkok Declaration. Three years later1 a new regional organization called Maphilindo1 comprising Malaysia1 t0e Philippines and Indonesia1 was formed as a compromise formula to resolve their intra-mural tension over the Philippine

chapter three

claim to North Borneo in 19627 which had dealt a devastating blow to the life of the ASA. Maphilindo was ill-founded7 however. Immediately after the formation of Malaysia in September 19637 Indonesia's policy of Konfrontasi prevented the organization from functioning in Southeast Asia. Between 1963 and 1960 moreover7 Southeast Asia underwent a dramatic change 7 as exemplified by the Indonesian coup in October 19657 which allowed little room for the Southeast Asian countries to effect regional co-operation. Therefore 7 in promoting economic co-operation among Asian nations7 the Economic Commission for Asia and the Far East played the most vital role. During the first decade or so of its existence 7 ECAFE7s work consisted largely of research activities and advisory services7 but since 1960 there had been two new developments - a shift of emphasis to regional co-operation and to action-oriented programmesY Based on the resolution for regional co-operation reached at its sixteenth session in 19607 the Commission organized the socalled Three-man Committee (Japan's Saburo Okita 7 India's K.D. Lall7 and Thailand7s Luan Thavil Setaphanichkarn) 7 which proposed the establishment of the Organization for Asian Economic Co-operation in 1961. However7 when faced with the cautious reservations of member countries7 ECAFE decided to consider its organizational issues within a larger framework of trade expansion. The ECAFPs annual Intra-Regional Trade Promotion Talks were held in January 1963 and twenty-six proposals7 including a Thai proposal for a regional development bank7 were taken up for further scrutiny. 10 The ECAFE Secretariat organized the Working Group of Experts on Regional Economic Co-operation in pursuit of Resolution 45 adopted at the nineteenth session in March 1963. The Working Group7 after considering the twenty-six proposals7 summarized a report in September7 which was further examined by the preparatory meeting in October. Two months later7 the reports of the Working Group and of the preparatory meeting were finally presented to the First Ministerial Conference for Asian Economic Co-operation. The Conference adopted the so-called Manila Resolution 7 recommending the prompt convening of ad hoc meetings of representatives and expert groups to study and suggest practical programmes aimed at increasing regional co-operation and to make recommendations on

JarmZ: Polrcy Jowards Reg10wil Oevclormem

various projects1 including an Asian development bank. According toR. Krishnamurti1 director of ECAFE's International Trade Division1 however1 the First Ministerial Conference attached no higher priority to the bank issue than to other projects included in the resolution. 11 After the Ministerial Conference in December 19631 the Ad Hoc Working Group of Experts1 chaired by Krishnamurti1 was established by the ECAFE Secretariat to carry out further studies. The Experts Group met in October 19641 and achieved considerable results. The meeting of experts was able to produce a comprehensive report agreeable to all participants1 and the report was delivered to concerned governments towards the end of 1964. In March 19651 the twentyfirst session of ECAFE in Wellington examined a draft charter for the proposed bank1 which was favoured by most delegations. Accordingly1 the ECAFE Secretariat formed a consultative committee drawn from nine regional countries to consult with the governments of the developed countries in order to secure their participation1 for there still existed considerable uncertainty1 largely deriving from the U.S. position and the likely impact on others. 1 ~ Thus1 when the United States expressed its willingness to join the proposed bank in the middle of 19651 ECAFPs efforts came to bear fruit. As one scholar put it: "A good number of Asian countries did not decide to commit themselves fully and seriously to the Bank project until after they learned that Washington would support itn.Lc; Ikeda, Sato and Regional Development

The ruling Liberal Democratic Part/s involvement in the process of Southeast Asia's development was minor because with respect to foreign policy issues the LDP was preoccupied with Chinese and Korean problems. During the Ikeda administration 1 in particular1 foreign issues were all relegated to economic expansion so that Japan could become one of the three pillars in the world power configuration1 and for this reason Ikeda was called 11a model student of the Yoshida schooF1. Japan's admission into the 11 rich-marrs club'11 that is1 membership in the Organization for Economic Co-operation and Development (OECD) and as an Article 8 nation in the International Monetary Fund (IMF)1 in this sense symbolized a significant achievement of

chapter three

the administration. As a result of the political crisis of 19601 Ikeda had to avoid any political issue 1 domestic as well as foreign 1 and thus vigorously implemented "the income-doubling plarr'1 which attempted to set the pattern for Japarr's economic activities in the 1960s. Ikeda's foreign policy was characterized by a low-profile economic diplomacy. In relations with the United States1 he urged greater economic aid to the developing countries of Southeast Asia and in July 1961 proposed joint Japanese-U.S. actions. The idea was to utilize the so-called CARIOA-EROA scheme to assist Southeast Asian development. 14 Visiting the region in November 1961 and again in 19631 Ikeda attempted to solicit support for his idea of Southeast Asian development1 but negative attitudes on the part of the United States made him give up the plan. Meanwhile 1 Japan undertook aggressive economic policies so that Ikeda came to be called a atransistor salesmarr'1 and the Japanese in general were called an aeconomic animaP. Besides his aggressive economic expansion policy1 the non-committal posture towards international issues was skilfully maintained throughout1 and upon being consulted by one of the promoters1 Ikeda endorsed the setting up of a development bank provided that "Japan plays a parallel funding role in the bank on the basis of equality with the United States11 . 1" The advent of Prime Minister Eisaku Sato in November 1964 proved to be a turning point in Japan's ADB policy. Even from the very beginning of the administration 1 Sato contended that Japan should take an active Asian policy aimed at contributing to regional peace and stabilitY; unlike the one taken by his predecessors emphasizing only economic relations. Sato averred his intention to pursue a vigorous Southeast Asian policy1 including the establishment of the Asian development bank in January 1965. Largely motivated by the antithesis of Ikeda's "low-profile 11 approach 1 Sato now determined to promote "politicaF1 policies in Asia 1 beginning in November 1964, when he held a study meeting with Foreign Ministry officials. lh In January 19651 Sato flew to Washington to consult with the newly elected President Johnson and pledged his "active 11 involvement in Asian affairs. As the joint communique stipulated: "The Prime Minister expressed a particular interest in expanding Japarr's role in development and technical assistance for Asia 11 . 17 Sato also explained

fti{Jan