Japan Travel Program For US Future Leaders 2009 Yearbook

2 0 0 9 R E P O R T
JAPAN TRAVEL PROGRAM FOR U.S. FUTURE LEADERS
Association of Professional
Schools in International Affairs
About the Japan Travel Program for U.S. Future Leaders
The Japan Foundation Center for Global Partnership (CGP), in collaboration with the
Association of Professional Schools of International Affairs (APSIA), implemented the Japan
Travel Program for U.S. Future Leaders with the goal of fostering a new generation of future
leaders in the United States who are interested in achieving a greater understanding of Japan
and its roles in global affairs, and in engaging in dialogue and interchange with their
counterparts in Japan.
Thirteen second-year graduate students from the network of APSIA schools participated in the
program. Some of the participants were already engaged in Japanese studies, while others had
demonstrated an interest in Japan but did not have previous exposure to the country. On a
ten-day trip in August 2009, the group met with experts in the fields of economics, politics,
diplomacy, security, environment, and international development; visited institutions including
government ministries, think tanks, policy institutes, businesses, and non-profit organizations;
set personal appointments based on the research interests of each student; and conducted
cultural excursions in Tokyo, Hiroshima, and Kyoto.
About This Report
The following report is based upon the experiences of the thirteen participants and the
knowledge gained as a result of this program. Each section was written independently by the
participants and the final report was prepared by project leaders Sarah Berke, Nicole Nakagawa
and Karen Hoiyan Tam. The views expressed in this report do not necessarily reflect those of
either CGP or APSIA.
! 2 0 0 9 J a p a n Tr a v e l P r o g r a m f o r U . S . F u t u r e L e a d e r s
i
Table of Contents
Participants! ! ! ! ! ! ! ! ! !2
Executive Summary! ! ! ! ! ! ! !5
Subgroup Sections! ! ! ! ! ! ! !7
! Environment! ! ! ! ! 7
! Domestic Economy! ! ! ! ! 14
! International Economy!! ! ! ! 18
! International Development! ! ! ! 23
! Diplomacy!! ! ! ! ! ! 27
! Security! ! ! ! ! ! ! 30
Photo Gallery ! ! ! ! ! ! ! ! 35
Acknowledgements! ! ! ! ! ! ! 38
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Participants
Theodore (Ted) Alcorn
Ted Alcorn is a joint MA/MHS candidate at the Johns Hopkins School for Advanced International Studies
(SAIS) and Bloomberg School of Public Health. His academic focus is on systems-design for the provision
of social services such as health care and water supply. He has a BFA in Film and Television Production
from the New York University’s Tisch School of the Arts, and previous to his current studies, he worked
on Ken Burn’s documentary miniseries, The War, which tells the story of the American experience during
the Second World War.
Harvey Beasley
Harvey Beasley is currently pursuing his Master’s degree at The Fletcher School of Law and Diplomacy.
His studies focus on the diplomatic relationships between the United States and East Asia. After
graduating from Fletcher, he will work as a U.S. Foreign Service Officer in the Department of State
focusing on Public Diplomacy. He plans to spend the majority of his career working in East Asia. Harvey
attended Indiana University Bloomington for his undergraduate studies in Japanese and Information
Technology. He also spent one year studying Japanese at Nanzan University in Nagoya, Japan during his
junior year. After graduating from Indiana University, Harvey worked for GE Japan for 4 years splitting
his time between Tokyo and Osaka. He later spent one year studying intensive Japanese at IUC
Yokohama, and then worked for one year as a technical translator in Osaka.
Sarah Berke
Sarah Berke is a Master of Public Policy student at the University of Minnesota's Humphrey Institute of
Public Affairs, concentrating in economic and community development. Originally from Nebraska, she
graduated from St. Olaf College in Minnesota with a BA in political science and Russian in 2003. She
studied in Velikiy Novgorod, Russia, as a Fulbright student fellow in 2004-2005. Berke has five years of
professional experience in community economic development and access to financial services. She has
managed communications and fundraising at the Chicago Community Loan Fund, served on the
supervisory committee of the North Side Community Credit Union and volunteered as a tax preparer for
low-income Chicago residents. She is now a consultant for the Center for Financial Services Innovation
(an affiliate of ShoreBank Corp.) and the Native American Community Development Institute. Berke has
academic and professional interests in public-private-nonprofit collaboration, access to credit and
financial services for low-income communities and households, and comparative international learning.
Scott Hartley
Scott Hartley is a joint-degree policy and business graduate student at Columbia University, holds a BA in
Political Science from Stanford University where he served as a Director of Stanford in Government, and
earned fellowships to Ecuador and Japan. A former Google employee, he launched global products,
spent a year in India founding a team, and lectured on entrepreneurship as a Google.org business
development consultant in East Africa. He has held research positions at Stanford Medical, Columbia
Business, and Harvard Law School’s Berkman Center, and interned in the U.S. Department of State in
Geneva, Switzerland, the United Nations Development Program (UNDP), and the White House National
Economic Council. He is a participant in the Young Leaders program at Pacific Forum CSIS on US-China
Trade, has co-authored a report under sub-contract to the Defense Advanced Research Projects Agency
(DARPA), and has published at Stanford, Harvard, Yale, Columbia, and in Foreign Policy. Interested in
sports and travel, he competes in Ironman 70.3 triathlons and has visited over 50 countries.
Samuel Lederer
Originally from New York City, Samuel Lederer graduated from Dartmouth College in 2005 with a Bache-
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lor of Arts Degree in Art History and English. After graduation, he taught English in Kawane Town, Shi-
zuoka Prefecture on The Japan Exchange & Teaching (JET) Program for two years. He is currently a Japan
Studies Master of Arts in International Studies candidate at the Henry M. Jackson School of International
Studies at the University of Washington (Seattle). His research interests include Japan's renewable energy
technology industries, Japan's geothermal power plant industry, Japanese colonial government policy
during the occupation of Korea, local level international environmental cooperation, and general Japanese
art history. He is also pursuing a certificate in Global Trade, Transportation, and Logistics (GTTL) at the
University of Washington. In his free time, he enjoys traveling, hiking, live music and art.
Timothy Little
After graduating high school in Deltona, FL, Tim enlisted in the Army and was stationed in South Korea.
It was here where his interest in Asia began. After getting out the Army, Tim attended Florida State Uni-
versity receiving his BA in International Affairs with a minor in Mandarin Chinese. Upon graduation he
was commissioned as an officer in the Army where he was once again stationed in Korea before doing 2
deployments to Iraq. Currently Tim is attending the Josef Korbel School of International Studies at the
University of Denver. He is working on his MA in Global Finance, Trade and Economic Integration and is
expected to graduate June of 2010. Following graduation Tim plans on working living and working in
China.
Ross Matzkin-Bridger
Ross Matzkin-Bridger is a Master's student at Georgetown University's School of Foreign Service,
studying international affairs and security. As an undergraduate student he studied at George
Washington University, receiving a Bachelor's degree in Asian Studies and Japanese Language and
Literature. He spent four years living in Japan, two as a student and two working for a local government.
He speaks, reads and writes Japanese. After graduating from Georgetown, he hopes to work in the public
sector promoting further partnership between the U.S. and Japan.
Nicole Nakagawa
Nicole is a Master’s candidate at UC San Diego’s School of International Relations and Pacific Studies
(IR/PS) specializing in International Environmental Policy with a regional focus on Japan. Prior to
IR/PS, Nicole was a research assistant in the Environmental Studies Department at UC Santa Cruz. She
worked on several projects that analyzed the effectiveness of local-level initiatives to promote
conservation and made policy recommendations on open space, sustainability and environmental justice
issues. In 2008, she received her BA in Environmental Studies and Biology from UC Santa Cruz. Nicole
believes that there is a large disconnect between the science that identifies environmental problems and
the policies that are intended to remedy them. She hopes to use her background in both biology and
environmental policy to bridge this gap, particularly in international conservation efforts. Over the
summer, she worked as a field biologist for the U.S. Fish and Wildlife Service and, currently, is Marketing
Director for the student-run organization Strategic Community Consulting.
Kevin O’Driscoll
Kevin O’Driscoll is a graduate of New York University and is currently a second-year student at
Georgetown University pursuing a Masters degree in security studies with a certificate in Asian studies.
Academically, he is interested in the security of Northeast Asia, particularly U.S. alliances and troop
deployments. The son of an Army officer, he has travelled extensively throughout the United States and
the world. He previously spent three years in Asia; two years teaching English in South Korea and one
year studying at Nagoya University, Japan. He is conversationally proficient in both Japanese and
Korean, though admittedly a little rusty. He enjoys soccer, skiing, hiking, video games and travelling.
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Luke Schoen
Luke Schoen is pursuing a Master's degree at The Fletcher School of Law and Diplomacy, focusing on
International Environmental Policy, Sustainable Development Economics, and East Asia. He is currently
researching international collaboration on renewable energy projects in China for his thesis, and interna-
tional energy policy as a Research Associate at the Fletcher School’s Center for International Environment
and Resource Policy. Previously, as a Fellow at the U.S Environmental Protection Agency, he analyzed
regional air quality management systems and environmental diplomacy in China and the United States.
Before returning to academia, Luke taught English in Yamagata Prefecture for three years with the Japan
Exchange and Teaching (JET) Program, worked for CNN's Beijing bureau, and spent a year in Germany
with the Congress-Bundestag Youth Exchange Program. He holds a BA in Anthropology and Asian Lan-
guages and Literature from Dartmouth College.
Karen Hoiyan Tam

Karen Tam is a joint-degree Business Administration and Public Policy graduate student at the University
of Michigan. She graduated from the University of Chicago in 2006 where she pursued a curriculum in
pre-medicine and a degree in Comparative Human Development. After graduation, she worked for a
healthcare consulting company, helping hospital executives understand the changing economic and
political influences that affect the finances and welfare of their services in the U.S. and abroad. She has
academic and professional interests in issues of access to quality healthcare in low-income communities
and emerging markets. Her career goal is to research, develop, and implement solutions for global
challenges by engaging businesses, policy makers, and recipient communities. During the summer of
2009, she interned for the Access Project Rwanda to improve the access and quality of healthcare by
teaching business management skills to health providers in rural Rwanda. Currently, she is a community
consultant for the Detroit Partnership in their 501c3 application and board development. Outside of
school and work, she is an avid traveler and has visited 21 countries and worked/lived in five of those.
Michael Verba
Michael Verba was born in Ukraine and grew up in Colorado. He entered the world of public policy after
graduating from Cornell University with a Bachelor of Arts in Economics and Government. He first
worked for a nonprofit organization assisting the homeless population of New York. More recently he has
worked as an Assistant Economist in the Regional Affairs Department of the Federal Reserve Bank of
Kansas City. He is currently a student at the Woodrow Wilson School for Public and International Affairs
at Princeton University, where he is a candidate for a Master’s degree in the Economics and Public Policy
Program. This past summer, he worked on a project for the National Planning Department of the
Republic of Colombia, the aim of which is to inform government policy in the area of technology and
innovation.
Lisa Vura-Weis
Lisa is currently a Master of Public Affairs student at Princeton University, where she is focusing on
Economics and Public Policy, with a Certificate in Science, Technology, and Environmental Policy. She
was born and raised in Southern California, and left her home state to attend Harvard University, where
she graduated with an AB in Economics. After graduation, Lisa worked for the New York Attorney
General’s Office, where she calculated economic damages in financial wrongdoing, antitrust, healthcare,
and civil rights cases. She spent a year conducting health and development economic research at
Princeton University then moved back to New York State government. At the New York State Insurance
Department, she worked on health, workers’ compensation, and medical malpractice reform.
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Executive Summary
As the parliamentary election campaign season got underway and cicadas buzzed in the streets of Tokyo
in mid-August 2009, our group of thirteen graduate students comprising the inaugural cohort of the
Japan Travel Program for U.S. Future Leaders immersed ourselves in Japan’s contemporary politics,
economics, security debates, diplomacy issues, environmental policy, and international development
strategies. The program provided us with incomparable opportunities to meet with Japanese leaders,
engage in dialogue about the relationship between our two countries, and learn from each others’ shared
experiences in meeting local and global challenges.
This report is a set of six policy briefs, documenting and analyzing what we have learned about Japan, its
role in the world, its relationship with the U.S., and some common issues both countries face.
Environment. Japan is an undisputed leader in environmental technology and policy.

Japan’s best practices in research and development, cross-sector industry-government
collaboration, and international work to combat climate change represent a series of
examples on which the U.S. can draw as it works to meet its own obligations to reduce
carbon emissions and develop its own green economy. We believe that the environment
sector represents many promising opportunities for more U.S.-Japan collaboration.
Domestic Economy. Japan faces a number of key challenges in its domestic economy.
Among those we researched are the aging of the population, financial regulation for
consumer protection, and promoting entrepreneurship. Viewing these issues in
comparative perspective with the U.S., we found several examples through which the
two countries could learn from each other’s successes and failures in policy making and
policy implementation.
International Economy. Japan’s economy faces challenges related to the role of exports in a
dynamic world economy, the degree of engagement it should have with the rest of the
world, and productive transformation in the manufacturing sector. We discovered that
the Japanese government is working to address these challenges through smart
investments in the short-term to respond to the global economic crisis and strategic
positioning for future growth in the long-run. Specific programs that help foreign and
Japanese firms to work together are being implemented to support economic growth
priorities.
International Development. Japan and the U.S. have a long history as bilateral partners in
international development work. The U.S.-Japan Partnership for Global Health is a
particularly important current effort. Japan is well known for its expertise in planning
and implementation of development projects. There are still many opportunities for the
U.S. and Japan to learn mutually from each others’ approaches to development, and to
strengthen their cooperative work.
Diplomacy. U.S.-Japan diplomatic relations are closely tied to the bilateral security
alliance. Diplomatic issues include the U.S. military presence, evolving relationships
with China on both the U.S. and Japanese side, and North Korea and its nuclear weapons
program. It will be a challenge to define the U.S.-Japan relationship in a new Japanese
political environment led by the Democratic Party of Japan (DPJ). Another challenge for
Japan is to turn the significant soft power it wields into real political power. We believe
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that doing so effectively has the potential to benefit Japan directly and the U.S. indirectly.
Security. The U.S.-Japan alliance has been essential to both nations for more than 50
years, serving as a pillar of stability in East Asia. This alliance, while strong, is
undergoing a phase of transition and evolution. The foundation of our security
cooperation remains the defense of Japan, however new opportunities for partnership
continue to develop. Challenges ahead will require both countries to work together to
tackle issues such as nuclear nonproliferation, global stability in an age of terrorism,
North Korea, and the rise of China. These challenges exist in the context of continuing
debate about the Japanese constitution’s pacifist Article 9.
Through the program, we have gained a better appreciation of the common interests that our two coun-
tries have, and of the common challenges that face us. This new understanding will inform our future
careers in international affairs and public policy. With our peers in Japan, we will work together to main-
tain the U.S.-Japan relationship as both a strong security alliance and a fruitful partnership for mutual
learning and cooperation on global and local issues.
Kinkakuji, Kyoto
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Subgroup Sections
ENVIRONMENT
Japan’s Environmental Leadership
Samuel Lederer
Nicole Nakagawa
Luke Schoen
Japan has been revered as an environmental leader, not only for

producing some of the most advanced technology in the world,
but for implementing effective policies that curtail environ-
mental degradation both at home and abroad. How can one ex-
plain this success? To help answer this question, the Environ-
ment subgroup of the Japan Travel Program for Future U.S.
Leaders met with Japan’s Ministry of the Environment, the New
Energy and Industrial Technology Development Organization,
the Institute for Global Environmental Strategies, and Toyota
Motor Corporation in August 2009. Each provided insights into
Toyota Motor Corporation, Head Office, Tokyo how Japan has crafted effective environmental policies. An ex-
amination of Japan’s technology and industry sectors, as well as
its climate change policies, identifies lessons that the U.S. can learn from Japan’s policymaking and im-
plementation processes.
Technology
Japan’s national program of new energy technology research and development began as a response to the
1973 oil shock, which exposed the country’s energy dependence. With the start of the Sunshine Project in
1974, Japan initiated a commitment to the research, development, and deployment of renewable energy
technologies such as solar photovoltaic (PV) cells and wind turbines. Although the percentage of Japan’s
total primary energy supply derived from renewable sources remains low (around 3.2% in 2006),
government agencies and corporations are working to overcome economic and technological obstacles to
encourage further diffusion. 1 By undertaking research into a variety of materials and technology
applications, Japanese companies maximize learning and avoid concentrating financial and human
resources in losing technologies, or path dependence. Government agencies have supported the diffusion
of renewable energy technologies through subsidy programs and cooperation with local and foreign
governments. U.S. stakeholders stand to gain valuable insights from their Japanese counterparts’
attitudes towards learning and policy coordination.
In the realm of solar power, the New Energy and Industrial Technology Development Organization
(NEDO) has supported research into a variety of materials such as silicon thin-film and organic film
photovoltaic. With the aim of decreasing the power generation cost of solar photovoltaic cells from the
current 26 yen/kWh to 7 yen/kWh (equivalent to the current cost of electricity for industrial customers)
by the year 2030, NEDO subsidizes research targeted at increasing the efficiency and lowering the
production cost of photovoltaic cells.2 Aided by NEDO’s flexible and sustained support, Japanese
scientists have maximized their learning through hands-on experiences assessing, testing, and
overcoming challenges in different photovoltaic materials. To encourage the diffusion of photovoltaic
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cells for residential applications, NEDO interacts with local governments to assess local environmental
and economic characteristics, such as average annual days of sunlight and residential construction codes.3
NEDO also supports symposiums and workshops to educate local populations about the technological
characteristics and benefits of renewable energy.4 Through these policies, NEDO takes a pragmatic
approach to improve both the production and consumption environments in which Japanese solar
photovoltaic manufacturers operate.
!
Japanese automakers such as Toyota have taken a similarly pragmatic approach by conducting research
into a variety of advanced power technologies. Although the Prius has sold well in both the domestic
and international markets, Toyota continues to invest resources to increase the efficiency of its hybrid
drive train technology. Hoping to position itself for entry into the market for next generation
automobiles, Toyota is exploring advanced technologies including electric motors, lithium ion batteries,
and hydrogen fuel cells. To augment its research, Toyota views demonstration projects, such as the Japan
Hydrogen and Fuel Cell (JHFC) Demonstration Project, as key venues for learning and building public
support for new technologies.5 By collaborating with other manufacturers and receiving customer
feedback through demonstration projects, Toyota can identify technological problems and work toward
solutions.6
!
Recognizing the uncertainty of renewable energy, Japanese corporations and government agencies are
investigating a variety of technologies in order to avoid path dependence. Japanese stakeholders have
benefited from a pragmatic learning approach, as exemplified by Toyota’s participation in the JHFC. U.S.
corporations such as General Motors, a JHFC participant, could benefit from adopting such a proactive
stance toward learning. By participating in similar demonstration projects and research consortia, U.S.
companies can learn from both their domestic and international competitors. In the public sector, U.S.
government agencies can aid the diffusion of renewable energy applications by increasing coordination
between national policymaking bodies and local governments. In both of these areas, corporate strategy
and government policy, stakeholders should consider the characteristics of the U.S. market, such as the
range of state government preferences toward renewable energy.
Industry
Japan is breaking away from the old command-and-control model of pollution mitigation that has slowed
the improvement of environmental policy in the U.S. for decades. The regulatory mechanisms in Japan
are some of the strictest in the world, yet for some sectors, these mechanisms have promoted innovation,
government-industry cooperation and the establishment of realistic targets. This is not to say that
bottom-up initiatives in the U.S. are non-existent, but rather that attempts on the part of industry to be
involved in the development or improvement of policy are often mired in convoluted processes. A
comparison between the environmental policies and politics of the U.S. and Japan can best be illustrated
with an analysis of Toyota Motor Corporation. The company operates in both countries and can provide
an industry perspective on the implications of bottom-up control.
Through negotiating and working with industry, the Japanese government has been able to establish
realistic targets that spur innovation rather than stifle it. Meetings with both the Ministry of the
Environment and Toyota Motor Corporation in 2009 revealed that policies for fuel economy and
emissions standards are only implemented following discussions between the government and industry.
Such discussions include Toyota’s ability to meet a set of standards given technological and economic
constraints, marginal improvements in the company’s performance, and infrastructure improvements
required by the Japanese government (e.g. installation of charging stations for electric cars).
The Japanese government has been very receptive to policy initiatives developed by Japan’s auto
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industry. Take, for example, the 2009 tax incentives to promote the use of fuel-efficient and low-emission
vehicles. This tax incentive, which will be in effect from April 1, 2009 until March 31, 2012, will reduce
both the tonnage tax and acquisition tax of vehicles that meet certain environmental criteria (see Figure 1
below).
Figure 1: Acquisition and Tonnage Tax Reductions/Exemptions7
Additionally, each vehicle is awarded a certification sticker that reflects the vehicle’s performance in
terms of fuel efficiency and emissions reduction. Stickers fall into the following three categories, each
with its own ranking system: (1) Advanced Fuel Efficiency Certification, (2) Environmental Performance
Certification for Vehicles with Low Emissions and (3) Low Nitrogen Oxides and Particulate Emissions
Certification for Trucks and Buses. These tax incentives and certification schemes are an ingenious way of
benefiting the consumer and improving sales for the producer, all the while helping to curtail
environmental degradation.
Japan’s 2015 Fuel Economy Standards provide further evidence of the success of collaboration between
government and industry. Implemented with the goal of improving passenger vehicle efficiency by 24%,
from 32 miles per gallon (mpg) to 39.5 mpg, the target has already been met with Toyota’s development
of the iQ and Prius.8,9,10 Compare this with the U.S.’s current standard of 27.5 mpg, set in 1985, for the
same types of passenger vehicles. The U.S.’ 2015 Corporate Average Fuel Economy (CAFE) Standards
improve upon this current standard and are set at 35.7 mpg. However, as one can see, this is well below
what is already being accomplished in Japan. But how is the same company, with the same resources,
using the same technology, able to achieve such high standards in one country but not another?
Toyota explains that, in addition to differences in consumer behavior, there is a strong emphasis on raw
numbers in the U.S. (units of benefit) as opposed to the margin (units of benefit for every unit of input),
making it very difficult to meet ambitious targets.11 This, in turn, leads to inflexibility on the part of
government to compromise on a set of standards realistically achievable by industry. Therefore, instead
of first working with industry to establish a goal, the U.S. government often sets a standard and expects
industry to be able to reach it. Such is the case in California, a state that, in March of 2008, was denied a
request to set its own limits on greenhouse gas emissions but continues to pressure the government to
9
improve CAFE Standards nonetheless. The political clout surrounding this issue continues to be a
challenge for companies like Toyota and reveals quite a contrast to the government-industry relationship
in Japan.
In a society that is extremely sensitive to rising fuel prices and becoming keenly aware of mankind’s
impacts on the natural world, there are many opportunities for the U.S. to improve. Toyota’s production
of small, fuel-efficient vehicles for the U.S. market appropriately reflects these changes in consumer
preferences. However, the U.S.’ Big Three automakers have been slow to react and, consequently, have
suffered with slumped sales and government intervention. For decades, U.S. automakers have possessed
the technology and capability to improve their vehicles, but have failed to do so in a timely manner. The
oil shock of the 1970s and subsequent spike in gasoline prices allowed Toyota to enter the U.S. market
and take advantage of the niche ignored by the Big Three automakers. The current economic and
environmental conditions warrant the need not only for innovation, but improvement of
government-industry relationships. Although there has been a dramatic shift on the part of U.S.
automakers towards fuel efficiency, there has been little change on the part of government to decouple
politics from industry standards.
International/Climate Change
Japan has long been recognized as a world leader in the energy efficient technologies that help mitigate
climate change, and as a source of innovative policies and programs that help facilitate international
cooperation on many other environmental issues. The U.S. could stand to benefit both economically and
in improving its international reputation by learning from Japan's stance in international climate change
negotiations and its collaborative projects with rapidly developing nations like China.
Recent political developments have reinforced Japan's commitment to international environmental

cooperation. Just four months before the United Nations Climate Change Conference in Copenhagen, the
Democratic Party of Japan (DPJ) unseated the incumbent Liberal Democratic Party (LDP) that had been in
power for the past 55 years. During the campaign, one component of the DPJ's platform was a promise to
commit Japan to reducing its greenhouse gas emissions to 25% below 1990 levels by 2020, while the LDP
advocated only an 8% reduction. With the DPJ now in control of the Diet, the party is faced with making
good on its campaign promises. Prime Minister Yukio Hatoyama reaffirmed his party's intention to
uphold the 25% reduction commitment at the G20 Pittsburgh Summit in September, eliciting widespread
approval from the international environmental community.12 This could be an important source of
momentum going into the negotiations in December.
As a nation that has achieved a high level of energy efficiency, Japan recognizes the necessity of
collaborating with developing nations on environmental protection initiatives. China has emerged as a
major actor in international environmental issues, recently surpassing the U.S. as the largest emitter of
CO2. To help China protect its own environment and the global climate, the Japanese Ministry of the
Environment (MOE) initiates annual policy dialogs with China's Ministry of Environmental Protection,
provides technical assistance to China directly through the Japan International Cooperation Agency
(JICA) and promotes environmental collaboration through sister-city partnerships.13
The U.S. already collaborates with China on many environmental issues, but it could increase its portfolio
of activities by looking to Japanese examples. Most urgently, in international climate change negotiations,
the U.S. has stalled on making serious commitments to emissions reductions targets due to China's
reluctance to do the same, often citing the fear of losing economic competitive advantage. But as the
world's second largest economy with one of the highest energy efficiencies among OECD nations, Japan
has shown that economic success and environmental stewardship can be achieved simultaneously. In the
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weeks preceding the climate change negotiations in Copenhagen, the U.S. and China released a joint
statement affirming their intentions to work together on climate change through many collaborative
efforts, including the establishment of a joint Clean Energy Research Center, carbon capture and
sequestration (CCS) demonstration projects, and an Electric Vehicles Initiative. However, the document
still lacked any emissions reductions commitments from either side, perpetuating the ambiguous
“common but differentiated responsibilities” principle. 14 The U.S. has the opportunity to break this
bilateral stalemate by proposing an emissions reduction commitment going into Copenhagen, as Japan
has already done, an act that could lend momentum to the negotiations and facilitate the construction of a
meaningful agreement.
Although it has an exemplary environmental record, one that it continues to improve upon, several
challenges remain for Japan. Some within Japanese environmental circles fear that the reductions target
set by the DPJ may be too ambitious to be economically feasible. As a country that is already highly
energy efficient, marginal abatement costs are much higher than in other nations, a fact that Japan's MOE
and Japanese industries continuously struggle to clarify during negotiations. Many of the cheapest
control measures have already been implemented, and further improvements will come at a higher cost
than comparable gains in other countries. The U.S. has a much higher energy intensity (7,796 btu per
dollar of GDP) compared to Japan (4724 btu per dollar of GDP), yet both nations spend approximately the
same amount on environmental protection efforts as a proportion of GDP (1.6%).15 Therefore, a bilateral
policy dialog on best practices with Japan may be a fruitful area for improving U.S. energy efficiency
without requiring additional expense. Similar policy dialogs with developing nations that result in
quantifiable energy efficiency improvements may be one avenue for Japan to achieve its ambitious 25%
emissions reduction goal if given credit under the Clean Development Mechanism.
Conclusion
The sections above have highlighted the key explanations for Japan’s success and leadership in
environmental policy. A recurring theme is the Japanese government’s proactive support of and
receptiveness to industry-led initiatives, market-based incentives, and the pursuit of policy coordination
both at home and abroad. Other possible explanations are industry’s investment in research and
development for diverse technologies, its collaborative efforts with various government agencies and
competitors, and its pragmatic approach to learning. Taken together, these policies provide excellent
sources of inspiration for the U.S. As a country that is responsible for the second largest carbon footprint
in the world, the U.S. is obliged to contribute to global efforts to curb environmental degradation. By
adopting or learning from some of the practices set forth by Japan, the U.S. can take a more proactive
stance on environmental issues, all the while realizing the economic and social benefits associated with
such practices.
Japan’s Best Practices

• By undertaking research into a variety of materials and technology applications, Japanese
companies maximize learning and avoid path dependence in losing technologies.
• Through these policies, NEDO takes a pragmatic approach to improve both the
production and consumption environments in which Japanese solar photovoltaic
manufacturers operate.
• Japan’s strong government-industry relationship leads to the establishment of realistic
fuel efficiency and emissions standards, and spur innovation.
• The Japanese government is receptive to policy mechanisms developed by industry. This
is demonstrated by certification schemes, labeling of environmentally friendly
technology, and tax incentives.
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• In developing industrial policies and setting standards, there is a strong emphasis on
marginal improvements rather than raw numbers.
• Japan supports environmental initiatives in developing nations like China through
ministerial-level policy dialogs and sister-city partnerships, and development assistance
from JICA.
• Japan has pledged ambitious greenhouse gas emissions reductions despite having one of
the highest energy efficiencies among OECD nations.
Policy Recommendations for the United States

• U.S. government agencies can aid the diffusion of renewable energy applications by
increasing coordination between national policymaking bodies and local governments.
In both of these areas, corporate strategy and government policy, stakeholders should
consider the characteristics of the U.S. market, such as the range of state government
preferences toward renewable energy.
• The U.S. should strive to improve government-industry relationships (i.e. more
bottom-up as opposed to top-down control).
• The U.S. should adopt incentive programs to promote the use of more fuel-efficient
vehicles or alternative modes of transportation. These incentives might include carpool
lane exemptions for hybrid vehicles, tax breaks for the purchase of fuel-efficient vehicles,
and pay-as-you-drive car insurance (i.e. individuals who drive less are rewarded with
lower car insurance premiums).
• The U.S. government should attenuate political influence in the establishment of fuel
efficiency and emissions standards.
• The U.S. should join Japan in stating national emissions reductions targets before the next
round of climate change negotiations. This will lend momentum to the effort and may
draw in China.
• The U.S. should hold a joint energy efficiency expenditure audit with Japan to identify
how the U.S. can maximize the effectiveness of its investments in environmental
protection.
1 International Energy Agency, Energy Policies of IEA Countries: Japan, 2008 Review (Paris: OECD/IEA, 2008) 148.
2 Hidenori Yonekura (New Energy and Industrial Technology Development Organization), personal interview, 20 August 2009.
3 Sakae Fujisaki (New Energy and Industrial Technology Development Organization), email to the author, 27 Sept. 2009.
4 Fujisaki, email to the author, 27 Sept. 2009.
5 Satoshi Kato (Toyota Motor Corporation). Personal interview, 20 August 2009.
7 Japan Automobile Manufacturers Association, Inc. (JAMA), The Motor Industry of Japan 2009 (Tokyo: JAMA, 2009) 48.
8“All New Fuel Economy Standards Completed toward Fiscal 2015,” 2008, Japan for Sustainability, 19 Aug. 2009
<http://www.japanfs.org/en/pages/026901.html>.
9 “Toyota to Launch Ultra-compact ‘iQ’ in Japan,” News Release, 2008, Toyota Motor Corporation, 19 Aug. 2009
<http://www2.toyota.co.jp/en/news/08/1015.html>.
12
10“Gas Mileage of 2009 Vehicles by Toyota,” 2009, U.S. Department of Energy (USDOE), 19 Aug. 2009 <http://www.fuel
economy.gov/Feg/bymake/Toyota2009.shtml>.
12“PM Hatoyama in Pittsburgh,” 9 Sept. 2009, Consulate-General of Japan in New York, 10 Oct. 2009.
<http://www.ny.us.emb-japan.go.jp/en/c/2009/japaninfo0909.html#3>.
13 Taku Ohmura (Ministry of the Environment), personal interview, 20 August 2009.
14 The White House, Office of the Press Secretary. “U.S.-China Joint Statement, November 17, 2009”. 71 Nov. 2009.
<http://beijing.usembassy-china.org.cn/111709.html>.
15 “Environment Statistics,” 2009, Nationmaster, 13 Sept. 2009 <http://www.nationmaster.com/cat/env-environment>.
13
DOMESTIC ECONOMY
Japanese Challenges in Comparative Perspective
Sarah Berke
Tim Little
Lisa Vura-Weis
This section turns towards Japan’s domestic economy and the key
challenges it faces. Although Japan has been hit hard by the global
financial crisis, it also has many home-grown challenges that need to
be addressed. These include access to finance, promoting
entrepreneurship, and a rapidly aging population. Interestingly,
Japan’s policymakers are wrestling with the some of the same
questions that are being addressed in the United States. How can an
aging population sustain itself? How can consumer protection be
enhanced? What are the best ways to ensure competitiveness in the
future? How can small business be encouraged?
Yokohama Women’s Citizen Credit Cooperative
Japan’s Aging Population
Japan’s population is rapidly aging due to declining birth rates. While roughly 22% of the population
was over 65 in 2008, 39% of the population is expected to be over 65 in 2050. In fact, while the aging trend
can be seen in many developed countries, including the U.S., Japan has the highest proportion of elderly
people of any country in the world, and its population has already started to shrink 1.
The effects of an aging population may be devastating for Japan. With fewer working-age people for
every elderly person, the GDP per capita of Japan is likely to fall. In addition, financing pensions and
health benefits will be increasingly difficult as the tax base shrinks. On a personal level, the elderly may
be neglected due to a lack of resources, and young Japanese may be crushed by debt as they attempt to
care for their parents and grandparents. Many raised the issue of providing support for the increasing
elderly population while not over-burdening the productive economy.
Output per worker, which can also be thought of as a country’s standard of living, will shrink unless Ja-
pan increases its productivity. GDP per capita is a function of labor productivity and the labor participa-
tion rate. As the population ages and the labor participation rate falls, each Japanese worker will need to
produce more to maintain a constant GDP/capita. Morgan Stanley Japan estimates that in a “compla-
cency” scenario, in which worker productivity increases by 1%, the growth rate of GDP/capital will fall.2
Other than substantially increasing productivity, Japan has two policy instruments that can help it deal
with the aging population: increasing the birth rate or allowing more immigration.
In terms of increasing the birth rate, Japan can take either financial steps, structural steps or both. For
example, one type of financial incentive can be providing subsidies or tax credits to families with
children. Japan’s new government is considering providing families with roughly $3,300 per year for
every child until age 15.3
Financial incentives may not be sufficient to increase the birth rate. A number of structural features of the
Japanese economy discourage both marriage and fertility rates. First, young people often do not feel
financially secure enough to start a family or get married. High real estate prices contribute to this
14
problem, as young adults are unable to leave their parents’ homes and branch out on their own. Second,
there is a serious lack of child-care resources in Japan. Mothers have traditionally provided the bulk of
child-care services. However, many young women understandably do not want leave their careers to be
stay-at-home mothers. Taking time off for the birth of a child is often also seen as detrimental to a
woman’s career, even if a relative can provide child-care later on.
Japanese policymakers can address these structural issues by investing in public child-care centers,
creating maternity and paternity leave policies that protect parents from repercussions at work, and
encouraging family-friendly flexible work schedules.
The second policy instrument that Japan can use to counter its rapidly aging population is to allow more
immigration. Although it does allow some temporary migrant workers in seasonal and service
industries, Japan has a notoriously strict immigration policy. Japan is even paying some immigrants to go
home, including ethnically Japanese Brazilians. Conversations with policymakers indicate that Japan is
unlikely to increase immigration anytime soon, despite the urgency of its aging demographic, because it
is such a culturally explosive topic.
Innovation Policy
For decades, Japan was known as a leader in innovation. Companies like Sony invented technology like
the Walkman, only to see its legacy eclipsed by the iPod 20 years later. Having previously been
unsurpassed in the technology sector, many looked toward Japan as if to ask, “Why didn’t you think of
that?” This is not altogether an unreasonable question. Why has Japan begun to fall behind countries
like the U.S. and Korea in terms of technological innovation? The answer lies not in any one factor, but
instead in several contributing factors.
First, Japan has a very regulated market. There is a general feeling that Japan needs to trim back or revise
its regulatory superstructure. However, throughout our discussions, we did not hear any proposals
intimating the possibility of consensus. In fact, the debate appeared polarized. The most
pro-deregulation business leaders were deeply skeptical of the willingness and ability of either major
political party to pursue deregulatory reforms that would foster more competition, which suggested that
regulatory changes would be slow and partial. At the time of our visit one week prior to the elections,
many perceived change in leadership to be at best an alteration from the status quo.
Second, and perhaps due to the highly regulated structure of the Japanese economy, there is a lack of
entrepreneurs within Japan. Because those outside the corporate culture are unwilling or unable to start
new businesses, innovation is left to the R&D sections of large corporations. This is where the vicious
cycle begins. While the Japanese Business Federation (Nippon Keidanren) reports that tax incentives
exist for companies to invest in R&D, in harsh economies like the current one, companies are forced to
make cuts and R&D is often one of the first victims. Where credit becomes scarce, companies have an
even tougher time justifying long-term investments like research and development. Without enough
money and manpower to put into innovation, it stands to reason that it will continue to stagnate.
The rise of a new group of Japanese entrepreneurs could come to the rescue. The main factors preventing
such a rise are subject to debate. Many Japanese industry experts would agree that the death of
entrepreneurship originates from two key issues:
1. The real or perceived risk-averse nature of Japanese culture

2. Government policies which do not provide the necessary incentives or support
15
Japan is understood as an incredibly risk-averse society. In the U.S., failure as an entrepreneur can be
seen almost a badge of honor. Failure is an invaluable opportunity to learn from mistakes and do it right
the second, third, or fourth time. No such concept is present in Japan. To encourage more risk-taking,
Japan would need to initiate campaigns to change its business culture.
• One effective solution may be an education campaign by the government. The

government has proven its ability to mobilize the Japanese people with successful
campaigns such as “Cool Biz” which was recently initiated to reduce energy usage
associated with air conditioning in the summer. The previously conservatively dressed
Japanese businessmen, never without a tie, left their ties at home and even undid their
top buttons at the insistence of the government so that companies would be able to turn
up the thermostat by a few degrees in the summer. There is no reason to believe that a
similar campaign to promote the merits of entrepreneurship while promoting its
contribution to Japanese society would not be successful. Only by removing the stigma
associated with failure can the first hurdle be overcome.
Without the policy changes necessary to provide support for small businesses and ease the challenges of
starting up, any government culture campaign would be irrelevant. The second half of the problem is the
lack of support for small and aspiring businesses. The Ministry of Economy, Trade, and Industry (METI)
claims that small and medium enterprises make up nearly 95% of Japanese businesses. They also say that
this is the main source of innovation and increases in employment within Japan.
• Still, more start-up friendly policies need to be enacted. Progress has been made in some
areas, with the cost of starting a business being reduced from 10 million down to 1 yen.
While licenses are no longer prohibitively expensive, there is still a significant need for
capital to start virtually any small business.
• Risk aversion is again an issue in acquiring capital as many banks and investors are
unwilling to loan to aspiring businessmen and women.
• The final aspect of the needed change would be the development of a safety net for those
whose businesses do fail. Liability needs to be limited so that individuals will no longer
have to fear losing not only their business but everything they own.
If the risks associated with starting a new business are reduced, Japanese people will begin to look at new
ventures as an opportunity as opposed to an all-or-nothing gamble. As these new businesses develop
fresh ideas, perhaps we will begin to again see the innovation that Japan was known for 20 years ago.
Even more likely is that instead of giant corporations, such innovation will come from a new generation
of Japanese entrepreneurs, eager to create the next Google or Twitter.
Consumer Financial Protection

Consumer financial protection policy—an area in which the U.S. is currently engaged in its own debate—
is an example that illustrates some of the tensions between Japan's policy making, structural reforms, and
ability to meet its broader demographic and competitiveness challenges. In recent decades, a large
consumer money-lending industry, with trillions of yen in loans outstanding, arose in response to
consumer demand for credit. A significant minority of borrowers are unable to repay such loans, which
are loosely underwritten. Approximately 7% of borrowers have become trapped as "multiple debtors"
with five or more consumer loans outstanding.
The Financial Services Agency (FSA) of Japan is the first Japanese public institution to have consumer
protection embedded in its mission and has existed for just over ten years as a regulatory body
16
independent of the Treasury. In an effort to fulfill its new consumer protection mandate, the FSA has
aggressively targeted the excesses of the money-lending industry by lowering interest rate caps to 20% on
an annual basis, requiring income-based underwriting, and strengthening enforcement mechanisms for
such laws. While this regulatory strengthening is motivated by good intentions to protect consumers and
has already driven several money-lending companies out of business, it also has unintended
consequences.
Part of what drives demand for consumer loans—despite their usurious interest rates—is the lack of
capital available to small-dollar borrowers in the formal banking system. Nonprofit grassroots
community financial institutions, sometimes known as NGO Banks in Japan, which are working to make
credit available to ordinary citizens for social enterprises, fall under the regulatory rubric of the
money-lending industry. They are therefore facing significant regulatory barriers to continuing their
socially and economically beneficial work.
One leader in this small, emerging NGO bank sector is the Women's Citizen Credit Cooperative in
Yokohama, which lends to women-led social enterprises, has with just 124 million yen in total capital and
barely enough income to support two staff members. New laws requiring non-bank lenders–including
NGO banks–to hold reserves of 50 million yen in net assets and subscribe at a cost of 300,000 yen
annually to a new credit information network would almost certainly drive the Yokohama organization
out of business, if they are not modified.
While the crackdown on abusive and previously unregulated money-lending is well-intended and, in
fact, necessary in Japan, the unintended consequences of the specific form of the regulation could do
unintended harm to a promising new nonprofit sector. The Yokohama credit cooperative finances exactly
the kinds of enterprises that are needed to help the country meet challenges of demographic change and
economic competitiveness. Nearly one third of the organization's portfolio supports providers of
healthcare and other social services for the elderly, and another significant portion of the portfolio
comprises women who are self-employed as social entrepreneurs in industries such as childcare and
catering.
• Japanese financial regulators must work to mitigate the unintended consequences of

strict consumer protection regulation, and to improve access to credit for women-owned
small businesses and social enterprises.
• As the U.S. moves closer to implementing new consumer financial protection regulations,
it should be careful—drawing on the Japanese example—to ensure that well-intended
policies to protect consumers from predatory loans do not have the unintended
consequence of stifling access to financial services.
Conclusion
Japan's domestic economy faces a number of challenges that need to be addressed. Consumer protection,
small business promotion, and demographic change are issues that the United States is struggling with as
well, and Japan and the United States should learn from each other's successes and failures in policy
making and policy implementation.
1 http://www.stat.go.jp/english/data/handbook/c02cont.htm#cha2_1
2 Feldman, Robert Alan. Lecture. “Japan Economics. Maybe We Might: Japan in the Age of Change.” August, 2009.
3 http://online.wsj.com/article/SB125495746062571927.html
17
INTERNATIONAL ECONOMY
Japan’s Economic Dilemmas in a Global Context
Scott Hartley
Michael Verba
Our research identified several key international economic dilemmas facing Japan:
Role of Exports: Much of Japanese development can be attrib-

uted to export-led growth, and the economy is still highly de-
pendent on exports. Japan’s export dependence reached a his-
torical peak in 2007, when exports represented 17.6% of GDP.
The 2002-2007 economic recovery was led by exports and the
current global economic crisis impacted the Japanese economy
through a drop in exports. There is an outstanding question of
what the structure of the Japanese economy should be going
forward, and what role exports should play. While domestic
demand will remain important, exports will continue to play a
central role in the growth and sustainability of the Japanese
economy. To take advantage of gains from trade, Japan must continue to produce and export those goods
for which it maintains a comparative advantage, realizing that in a dynamic, globalized economy, their
comparative advantage will not be static. Instead, the government must institute programs of education
and trade adjustment assistance to buffer against inevitable alterations in comparative positioning. As
India, China, and other nations develop, those intermediate and final goods they can most efficiently
produce will likely change, impacting Japan’s relative position. As such, Japan must not disengage from
the global economy, must not adhere dogmatically to an anachronistic view of its role in the world econ-
omy, but must acknowledge its continuing dynamic strategic advantages, and exploit those through effi-
cient domestic production and exports.
Global Engagement: While Japan is an island nation, and has long been independent, it cannot shirk
from its global engagement. Isolationism is no longer a viable option. Some argue that isolationism has
not been a viable option since Christopher Columbus and Vasco de Gama broadened global sea-faring
trade routes roughly 500 years ago. As will be shown in latter parts of this report, institutionally, Japan
has opted for robust international engagement. Despite this outward engagement through multi-lateral
institutions, there is a sense that in culture and in disposition Japan remains an “introverted” country.
Some have argued that in the modern era of globalization this ethos is akin to swimming against the cur-
rent. Fewer Japanese students are choosing to study in the U.S. Few Japanese speak fluent English. And,
as mentioned above, immigration is a taboo subject in Japan—most are against it.
Productive Transformation: Globally, Japan is in competition with China and India, two countries that
enable lower-cost production of final goods. Whereas formerly China and India dominated in human-
capital intensive industries such as textiles and production processes in which lower labor costs enabled
the production of cheaper goods, China has recently begun replacing Japan in the production of skilled-
labor and automated manufacturing processes as well. Whereas India retains a competitive advantage in
the service export industry, due to its large, educated, English-speaking population of nearly 10 million
who work in information technology operations, high-technology production has begun to rotate to
China. While intermediate goods are still exported from Japan, Taiwan, and Korea, many such goods are
exported to China where consolidated manufacturing now creates the final goods that are distributed to
18
the United States and other mature global markets. This rotation has left Japan in a tenuous export situa-
tion, where its service exports cannot compete on cost with down-market producers such as India, and
where even high-value modular manufacturing products have become cheaper to produce in China. As
Takahiro Fujimoto, Executive Director of Tokyo University’s Manufacturing Management Resource Cen-
ter (MMRC), argues, Japan retains its ability to export high-value manufactured goods that leverage inte-
gral production processes, building upon the Japanese cultural penchant for teamwork.
Japan’s Technological and Economic “Grand Strategy”

The Japan Foundation Center for Global Partnership afforded our group the opportunity to meet repre-
sentatives from the Ministry of Economy, Trade and Industry (METI). METI is the public agency that
oversees economic and development planning in Japan. At METI, we discussed Japan’s continuing and
forward-looking economic strategy.
Short- to Medium-Term Strategy: Recovery from Recession via “Smart Investment

Over the past decade, Japan’s exports have shifted sharply toward high value-added goods such as
automobiles, electric machinery and general machinery. However, during the current economic crisis, the
demand for high value-added goods dropped more precipitously than demand for more basic goods.
Highly inelastic goods maintained centrality, as minor fluctuations in price did not erode quantities de-
mand, but many higher-value Japanese exports shifted to the margin. Stretched economic resources ne-
cessitated prioritization of demand, and more elastic goods were pushed aside. The large share of con-
sumer durables in Japanese exports to the U.S. led to a huge decline in Japanese exports. Diminished ex-
ports impacted not only the trade balance, but also the current account, putting pressure on the Japanese
to compensate through consumption, investment, and government spending. In contrast, China–a coun-
try that predominately exports basic, low value-added goods to the U.S–continues to grow through the
crisis, as demand for the types of goods included in Chinese exports remains robust.
METI’s short-term economic program, called the “J Recovery Plan,” is primarily focused on recovering
from the global recession. It is guided by Japan’s “Vision for the Year 2020” which states, inter alia, the
following:
“Japan will become a nation that plays world-leading roles through low-carbon emission revolu-
tion, a nation where all the citizens, irrespective of age and gender, are able to lead an active life
without anxiety, and a nation where citizens and local communities are able to fully exercise their
potentials and attractive characteristics at home and abroad.”
Many countries have implemented stimulus measures in response to the global economic crisis. Accord-
ing to METI, in Japan the goal of fiscal stimulus measures is more than just government spending to in-
crease consumption. The basic principle is to stimulate the economy through “smart investment” that
will contribute to long-term growth. The J Recovery Plan consists of three parts:
1) Selecting a project with “double-barreled” effects: Pulling out from economic recession
in the short run and encouraging sustainable economic growth in the medium- and long-
run.
2) Identifying […] potentially competitive sectors […] (“underlying strength”) that will
yield significant positive economic impacts and have great significance […] rather than
taking economic-stimulus measures. Working on concentrated investments and acceler-
ated reforms for the next 3 years.
3) Achieving sustainable growth by breaking away from recession, expanding domestic
demand, and drawing on energetic economic performance in Asia and dynamism of the
19
world economy. Offering ideal future societal models to Asian nations that are facing
constraints from environmental/resource perspectives.
As such, Japan recognizes that fiscal stimulus is but one part of economic recovery. Detractors of fiscal
stimulus argue that under full employment the expectation of future taxation would undermine the will-
ingness to consume in the present. However, long-run investment-focused fiscal stimulus that creates
employment and value also generates more sustainable growth that can countermand short-run de-
creases in aggregate demand. While the above capital allocation framework identifies the necessary pri-
oritization of investments that bolster consumer spending, increase aggregate demand, and lay the
groundwork for sustainable job creation and development, the devil is in the details.
Long-Term Strategy: Positioning for Future Growth

Furthermore, the long-term “Global Economic Strategy and Foreign Economic Policy of Japan” is based
on “four prioritized fields”:
1. Domestic and foreign integrated economic measures: Since Japan is a trade-oriented nation its
growth depends on growth in foreign demand. Japan is seeking to ride this growth in
foreign demand. This principle is based on the following lines of action: 1) deterrence of
protectionism and 2) international development of infrastructures-related businesses,
including electric power supply, transportation, water supply, services, etc. The second
line of action is particularly focused on emerging markets in Asia. According to one
METI official: “[…] by developing Asian infrastructure Japan can grow together with
Asia.”
2. Promotion of innovation in the “volume zone:” The “volume zone” refers to the middle
segment of the Emerging Market, consisting of a population of about 880 million. If a
market ranges from the high-end (higher margins) to middle-end to low-end (lower mar-
gins), the “volume zone” is that segment of the market which corresponds to the middle-
end of the product market and serves the growing middle class in emerging economies.
The volume zone is the segment with high potential for future market growth. METI
believes that Japanese firms are strong in the upper middle-end segment, but the bulk of
future growth is in the middle “volume zone.” For them, the challenge is to tap into the
volume zone by promoting innovation in this segment and building networks and part-
nerships with enterprises in emerging markets.
3. Global development of the low carbon revolution: METI wants Japan to be at the center of
solutions to problems facing the globe. This involves helping build a foundation for
global cooperation on the environment and energy conservation and promotion of inter-
national energy conservation and overseas market expansion that centers on low carbon
technology. This “prioritized field” involves foreign affairs action and engagement in
forums such as the G8, the International Partnership for Energy Efficiency Cooperation
(IPEEC), the Japan-China Energy Conservation and Environmental Forum and Japan-U.S
cooperation on leading edge technology in the environmental field. It also involves co-
operation between industries in environmental areas, through organizations such as the
Worldwide Japanese Business Alliance for Smart Energy. Another practical aspect of the
low carbon revolution strategy is the setting up of a new generation of energy parks all
over Japan—five of which have already opened with eight due to open in the future.
4. Multi-layer cooperation including industrial cooperation with countries rich in natural resources:
Because Japan is resource-poor it sees cooperation with resource-rich countries as vital.
20
Overall, Japan’s long-term strategy for economic recovery and growth broadly addresses issues such as
trade promotion, focused industry, involvement in the carbon and renewable energy revolution, and in-
dustrial cooperation to secure access to vital strategic energy and natural resources.
Japan’s Technological and Economic Development “Ground Operations”

The broader challenge, however, is going from setting strategic economic goals to their execution. While
METI is the main architect of development strategy, there are many agencies involved in its implementa-
tion. Although it was not possible for us to review these operations exhaustively, it was possible to get a
glimpse of implementation by looking at one public organization charged with economic policy man-
agement.
In addition to visiting METI, we also visited the Japan External Trade Organization (JETRO). JETRO has
36 offices all over Japan and over 70 offices overseas. JETRO is responsible for the manifold areas of eco-
nomic policy implementation. For example, JETRO is responsible for the promotion of FDI and cross-
border business into Japan, is involved with assisting Japan’s small and medium-sized enterprises
(SMEs), as well as helping facilitate Japanese business expansion overseas. Within this role, JETRO has
within its purview the ability to advise foreign companies entering Japan, and Japanese companies look-
ing to expand abroad. Their promotion of cross-border business ties helps facilitate technology transfer
while their understanding of international legal regimes helps home companies protect their intellectual
property rights abroad. Specifically, JETRO’s Trade Tie-Up Promotion Program (TTPP) and Invest Japan
Business Support Center (IJBSC) respectively help Japanese businesses find international partners and
help foreign companies broaden direct business engagement in Japan. Such proactive engagement accel-
erates and facilitates FDI, bringing long-term, sustainable capital inflows to Japan that provide jobs, trans-
fer technology, and increase output.
Rising to the Challenge

Based on the above description of Japan’s economic development strategy and implementation, the fol-
lowing assessment can be made about Japan’s answers to the dilemmas confronting it:
1. Global Engagement: Although there is concern in Japan that their society may pay a
price in the age of globalization for its “introversion,” it is clear that, economically, Japan
has opted for robust global engagement—not isolation. In fact, global engagement is a
fundamental pillar of Japan’s long-term development strategy—all four prioritized fields
specified in the long-term development plan involve international engagement. Trade
engagement, focus on the value zone, and coordination on the issues of renewable energy
and resource acquisition all require collaboration.
2. Regional Integration: Integration of Asian economies and Japan’s active participation in
the economies of its neighbors are part and parcel of the long-term development plan.
Given trade opportunities in other parts of Asia and the need for energy, Japan views
regional engagement as imperative.
3. Diplomacy: High-level diplomacy plays a pivotal role in Japan’s economic development
strategy. Deterrence of protectionism, investment in strategic foreign markets such as
infrastructure, maintaining the business environment for licensed production, global co-
operation on the environment, technology transfer in the green energy and environ-
mental fields, promotion of trade agreements, protection of intellectual property and co-
operation with resource-rich countries will all involve concerted diplomatic action.
4. Awareness of Strengths & Trends: The long-term development plan is based on an as-
sessment of Japan’s strengths, as well as projection of global industrial trends. Aware of
its strengths, Japan must also recognize the likelihood of globalization’s domestic indus-
21
trial impacts, educating workers and providing trade adjustment assistance for those
displaced.
5. Exports: Exports will probably continue to play a central role in the growth and sustain-
ability of the Japanese economy. To take advantage of gains from trade, Japan is planning
to export those goods for which it maintains a comparative advantage. Takahiro Fuji-
moto, Executive Director of Tokyo University’s Manufacturing Management Resource
Center (MMRC), argues that Japan retains its ability to export high-value manufactured
goods that leverage complex and integral production processes.
6. Low Carbon Technology Revolution: The low carbon revolution figures prominently in
Japan’s strategy. Japan is betting big on the low carbon revolution and positioning itself
to take full advantage of growth in green energy and environmental technologies. Given
its position on the avant garde end of technological innovation, and given its strength in
“integral” team-based manufacturing, Japan could bolster its growth by helping the
world innovate and manufacture tomorrow’s energy conserving technology.
7. Consensus: There seems to be broad consensus that Japan is well positioned in the green
energy and environmental technology industries. According to METI “low carbon tech-
nology… is one of Japan’s major strengths.” JETRO believes that, “[h]igh-tech industries,
such as biotechnology, information and communication technology (ICT), energy and the
environment, are expected to be the main force driving Japan’s future economic growth.”
These views are shared by the business sector. The Japan business federation, for exam-
ple, holds that the sectors in which Japan is most competitive are “energy and environ-
mental technologies.” Given this consensus between policy and business, synthesis be-
tween innovation, capital, regulation, and distribution has the utmost potential.
8. SME Focus: Post-World War II Japanese development has centered on large conglomer-
ates, and on their labor stability. By contrast, current development-oriented activities in
Japan involve support for SMEs as both novel forms of employment, and sources of dra-
matic innovation.
Conclusion
Based on the aforementioned synopses of Japanese short-term, medium-term, and long-term interna-
tional economic programs for both recovery and growth, our Japan visit afforded us perspective with
which we can provide recommendations. Much will not change; Japan remains an island nation reliant
on trade. However, recognizing change invites new opportunity. Smart investments can increase aggre-
gate demand and lift Japan from the economic downturn. While the development of India and China
will necessarily cause trade rotation, resource constraints, the need for engagement, and cooperation, if
such externalities of development can be mitigated through domestic education and adjustment assis-
tance, tomorrow’s opportunities begin with the rising sun.
22
INTERNATIONAL DEVELOPMENT
The U.S.-Japan Bilateral Partnership
Karen Hoiyan Tam
As one of the largest bilateral donors of foreign assistance after the

U.S., the U.S.-Japan bilateral partnership in international develop-
ment initiatives plays a pivotal role in maintaining Japan’s security
and prosperity goals. Under the Bush Administration, the U.S. and
Japan expanded their cooperation on development issues under the
Strategic Development Alliance in 2005 to promote poverty reduc-
tion through economic growth, sustainability, capacity building,
empowerment, development and security. In 2007, in a summit
meeting between the U.S. and Japan, former President Bush and
then-Prime Minister Fukuda pledged to strengthen cooperation on
critical global trade, energy and environmental challenges.
These goals have since included new challenges from terrorism to issues of global health. In 2002, the
two countries launched the Clean Water for People Initiative to provide clean water and sanitation for the
world’s poor, improve watershed management, and increase the productivity of water. On climate
change, the two countries are working together to accelerate the development and deployment of clean
energy technologies. In the case of the 2004 tsunamis, Japan and the U.S. acted quickly to jointly provide
relief. However, in the second Bush Administration, cooperation took the form of ad hoc initiatives and
has tended to be less coherent, smaller in scale, and lacking the vitality and vibrancy of previous coopera-
tion frameworks. 1 This has caused Japan to be more and more “inward-looking,” especially in develop-
ment work in Africa.
Japan’s Policy Framework for International Development

The ODA Charter. The Official Development Assistance (ODA) charter is an integral part of Japan’s for-
eign policy. It aims to meet global challenge through support of capacity development and nation-
building efforts in developing countries.2 Japan’s role in international development is driven by an em-
phasis on “human security”, a concept that emphasizes the individual, building societies that allow eve-
ryone to live with dignity, and protecting and empowering individuals and communities that are exposed
to actual or potential threats. 3 Japan’s technical strength in supporting the self-help efforts of developing
countries allows it to exercise its “soft power” on the world stage through collaboration with interna-
tional communities and other stakeholders, including international organizations, other donor nations,
non-governmental organizations (NGO), and the private sector.
Policy Planning/Implementation. Several organizations work together to plan and implement Japan’s for-
eign assistance and development plans. The Ministry of Foreign Affairs (MOFA) performs policy plan-
ning and formulation functions. Within the Ministry, the International Cooperation Bureau (ICB) is re-
sponsible for planning and drafting policies related to bilateral and multilateral development assistance.
In addition, it coordinates the work done by government agencies and ensures that the ODA provided by
each is designed and implemented according to strategic values. 4
In October 2008, the former Japan International Cooperation Agency (JICA) was merged with the Over-
seas Economic Cooperation within the former Japan Bank for International Cooperation to form the new
JICA. This allows New JICA to handle all three instruments of aid—technical cooperation, grant aid and
23
ODA loans—in an integrated fashion, enabling it to maximize synergy. Under the New JICA, more than
US $10.3 billion in financial resources is available.
Foreign Aid. During the 1990s, Japan was the largest donor country in the world. Japan’s ODA budget
peaked in fiscal year 1997, and since then, the scale of its assistance has declined steadily. Among OECD-
DAC countries, Japan’s net ODA disbursements in 2002 ranked second behind the U.S.; in 2008, they
ranked fifth. Japan’s net ODA disbursements in 2008 totaled USD $9.4 billion, compared with USD $7.7
billion in 2007, an increase of 8.2% in real terms over 2007.
Perhaps more important than the amount of money being channeled to developing countries, Japan’s
bottom-up approach—policy-making influence at a centralized level, with community-based work and
protection and empowerment of people—is arguably one of its major strengths. Even when Japan does
not compare with the U.S. in terms of numbers of aid-workers sent abroad, its traditional superiority in
planning and implementation and technological advances leads the way in global development.
USAID-Japan Partnership for Global Health

Health problems in developing countries are rarely isolated. They are not only threats to individual lives
and human security; they also have global impacts. Infectious diseases can spread easily across national
borders, posing a common threat to humankind. In June of 2002, the U.S.-Japan Partnership for Global
Health was initiated to combat the key health challenges in the dearth of health workers, polio, malaria,
and neglected tropical diseases. 5
2008 was a critical year in the field of global health as it marked the mid-point for achieving the Millen-
nium Development Goals (MDGs) as well as the year of the G8 Hokkaido Toyako Summit and the Fourth
Tokyo International Conference on African Development (TICAD IV). On July 6, 2008, Bush and Fukuda
pledged to strengthen the U.S.-Japan alliance in tackling critical African health challenges. On February
17, 2009, Secretary of State Clinton met with Prime Minister Aso in Tokyo and again agreed to strengthen
this relationship. In addition, on May 5, 2009, President Obama launched a Global Health Initiative that
earmarked $63 billion for health assistance over six years, effectively placing global health among the
Administration’s highest foreign aid priorities for 2011. 6
The U.S.-Japan Partnership for Global Health targets five health areas ranging from human capital short-
ages to disease burdens:
• Health systems/health workers

• Maternal, newborn and child health
• Family planning and reproductive health
• Infectious diseases (e.g. HIV/AIDS, malaria, tuberculosis, polio, NTDs, avian and pan-
demic influenza)
• Water and sanitation
The strength of the Partnership is that in each of these five strategic areas, it seeks to use the strengths of
both countries to complement each other and magnify impact. For example, in the area of health systems
and health workers, the U.S. supports health worker training in a number of African countries through
the President’s Emergency Plan for AID Relief (PEPFAR) to increase, by at least 140,000, the number of
functional community health workers and volunteers serving at the primary care and community levels.
Japan complements this strategy by committing to train 100,000 health workers in Africa, including
health professionals and community health workers, over five years. Specifically, Japan focuses on train-
ing policy-oriented personnel to make sound national health plans and strategies and to build capacity of
24
local health administrations to establish evidence-based health management in decentralized health sys-
tems. Together, the two countries are encouraging further collaboration with stakeholders to standard-
ize, modify and apply recipient country-specific health information to form and evaluate policies.
Another prominent example of U.S.-Japan collaboration on global health projects is the Clean Water for
People Initiative launched at the World Summit on Sustainable Development in Johannesburg in 2002.
While USAID focuses on preventing and controlling diarrheal diseases, Japan promotes development of
water and sanitation facilities with technologies affordable to partner countries; in particular, providing
adequate water and sanitation facilities to schools and hospitals, dispatching Water Security Action
Teams to Africa, supporting good hygiene practices including hand washing, and promoting good water
cycle management for sustainable use of water. 7
Strengths and Weaknesses of Japan’s International Development Efforts

A salient characteristic of the assistance that Japan provides is the application of its experience in
economic/social development and economic cooperation to benefit developing countries, and to share
with them its innovative technologies, knowledge, human resources and systems, in a manner responsive
to a developing country’s policies and needs. Japan’s steady implementation of a range of initiatives to
fulfill its responsibility to the international community can be said to be another important characteristic
of the assistance it provides. !
Under the technical cooperation scheme, Japan dispatches experts in a variety of fields to developing
countries to provide assistance in implementation projects. In some cases, Japan sends advisors to health
ministries in developing countries who contribute to the self-effort of the recipient organizations and in-
stitutions to improve health systems or plan/formulate new projects.
Japan also invites key individuals, healthcare administrators and practitioners from developing countries
to participate in training programs in Japan. These participants have the opportunity to experience and
learn about the services Japan’s health system offers and provide a springboard for participants to expand
their own health services.
The Japanese are in a unique and privileged position to create awareness, to provide strategic leadership,
and to provide direct resources to all related stakeholders including donor countries, developing coun-
tries, international organizations, private sector, academia and civil society for a healthier world. Its re-
markable participatory approach contributes to the formulation of international discussion on health sys-
tems as well as its materialization in the context of Japan’s health assistance.
Challenges for U.S. and Japan Collaboration

In light of the global economic crisis, internal pressures within both governments to sustain their own
economies is a high priority and puts additional pressure on the U.S. and Japan’s abilities to expand
funding for development work. However, both countries continue to contribute a substantive amount to
their ongoing programs. The challenges exist mainly in the areas of monitoring and evaluation of pro-
gram progress and impact. Both countries should also encourage and enable national NGOs to be recog-
nized internationally, and help them connect to the larger world of nonprofit organizations.
25
1 Wakabayashi, Hideki. The US-Japan Alliance: A New Framework for Enhanced Global Security. Oct 2008. CSIS.
2 Takasu, Yukio. UN Economic and Social Council – Substantive session for 2009. E/2009/86. May 28 2009.
3 “Human Security” means protecting individuals from “fears” and wants”, and empowering them so that they can make
choices and take actions for improving the quality of lives against those threats. “Health and Development” Initiative To-
ward Achieving MDGs by 2015. JODA. Dec 2006.
4 Takasu, Yukio. UN Economic and Social Council – Substantive session for 2009. E/2009/86. May 28 2009.
5 USAID-Japan Partnership for Global Health Action Plan for 2009-2010. June 22, 2009.
6 Wakabayashi, Hideki. The US-Japan Alliance: A New Framework for Enhanced Global Security. Oct 2008. CSIS.
7 USAID-Japan Partnership for Global Health Action Plan for 2009-2010. June 22, 2009.
26
DIPLOMACY
Challenges for the U.S.‐Japan Relationship

Ted Alcorn
Harvey Beasley

The U.S.‐Japan bilateral relationship was born out of a tragic war,
but nevertheless has become the strongest and most prosperous
East‐West bilateral relationship of our time. The alliance has
endured difficult times, including Japan’s economic boom in the
1980s which stirred emotions and fueled years of U.S. “Japan
Bashing” into the early 1990s, and more recent criticisms of
America’s handling of, and Japan’s support of, the war in Iraq.
However, good relations have endured and we are optimistic that
the challenges the relationship faces today will also be overcome.

The following were the major reoccurring themes in the U.S.‐Japan diplomatic relationship that were
brought to light during our recent study tour:

‐ The Rise of China and Fears of “Japan Passing”
‐ China Threat Theory Revisited
‐ North Korea
‐ Japan’s Soft Power Potential

We will briefly explore each and suggest recommendations as to how these challenges can be overcome
for the mutual benefit of Japan and the U.S.

Passing Japan for China?
The increasingly important role that China plays in the U.S. relationship with East Asia is one factor that
has created fears in Japan that a new age of “Japan Passing” may be approaching. However, Japan still
remains the U.S.’ strongest democratic ally in East Asia and still boasts the world’s second largest
economy. Japan’s military potential is great, and U.S. bases located in Japan are key to the enduring
security of the region. This is an entrenched relationship that cannot be lightly tossed aside for China, the
“new” contender for attention in Asia. In an attempt to address rising fears among Japanese that the U.S.
may be on the verge of abandoning Japan for China, former U.S. Ambassador to Japan Ambassador
Thomas Schieffer said, “Back in my home state of Texas, we have an old saying: never trade an old friend
for a new friend or you will wind up with no friends.” Indeed, current U.S. Deputy Chief of Mission Jim
Zumwalt also relates that one of the most persistent aspects of his job is to reaffirm the U.S. commitment
to Japan. Although the rise of China undoubtedly unsettles the existing order, we can nevertheless say
with confidence that the relationship between the U.S. and Japan will endure over time.

We have recommendations for both Japan and the U.S. to address the fears of the U.S. neglecting Japan in
favor of China.

 Japan should resist the urge to see its relationship with the U.S. as a zero‐sum game. U.S.
government officials have emphasized that an improvement in Sino‐U.S. relations does
not imply a weakening of the U.S.‐Japan relationship.

2009 Japan Travel Program for Future U.S. Leaders

27
 From the other side, the U.S. administration should be careful to continue sending
signals that the U.S.‐Japan alliance remains a high priority. Secretary Clinton’s decision
to make Japan her first stop in Asia, and President Obama’s decision to invite
then‐Prime Minister Aso to the White House as the first visit by a foreign leader are
examples of actions that highlight the continued importance of the alliance.

China Threat Theory Revisited
The challenge that the rise of China poses to the U.S.‐Japan bilateral relationship is complicated by the
two countries’ differing perceptions of the change. While the U.S. does not perceive China’s conventional
military gains as a threat, the Japanese view is much more cautious. Officials at the Ministry of Foreign
Affairs (MOFA) whose focus is security described Chinese submarines that penetrate Japan sovereign
waters as regrettable. American and Japanese opinions of Japanese military strength are similarly
divergent. U.S. officials at the Yokosuka naval base expressed confidence in the technical and professional
capabilities of Japan’s Self Defense Forces, while their Japanese counterparts worried that while Japan
may technically be capable of military operations, the relative inexperience of their staff puts them at an
insurmountable disadvantage.

Changing perceptions is a long and difficult process, but to account for these perception gaps, we
recommend that:

 The U.S. should offer increased opportunities for Japan to participate in joint military
operations.
 Japan should take a more proactive role in the region. Recently elected Prime Minister
Hatoyama’s emphasis on Asian diplomacy has potential to build an improved
trust‐based relationship between the U.S. and China.

North Korea
Another diplomatic and security‐related issue that continues to strain the U.S.‐Japan relationship is North
Korea’s active nuclear weapons program. Both the U.S. and Japan desire to maintain a nuclear‐free
Korean peninsula, but the reality is that efforts by the U.S. to slow North Korea’s nuclear weapons
program have been of minimal success. Given the tenacity with which Japan clings to the kidnapping
issue in which Japanese citizens were abducted by North Korean government agents in the late 1970s, it is
clear that Japan will not be quick to let future unfavorable developments on the peninsula go unresolved.
But further development of the North Korean nuclear weapons program will meet much fiercer
sentiment in Japan than in the U.S. As the U.S. has experience coping with the nuclear armaments of
other states such as Russia and China, it will carefully weigh all of its options in dealing with North
Korea.

 To mitigate the potential challenge that this issue poses to U.S.‐Japan relations, it is vital
for the two countries to not only take steps to prevent North Korea from gaining nuclear
capabilities, but to also openly discuss what both the U.S. and Japan’s posture will be in
the event that North Korea succeeds in achieving full nuclear capability.

Japan’s Soft Power Potential
One final challenge to the bilateral relationship we wish to highlight is the positioning of Japan’s soft
power potential. Japan has placed much emphasis on this facet of Japanese diplomacy in recent years. We
can all recognize the undeniable brand recognition that Japan has built for itself through Japanese Manga
that are read all over the world in a multitude of languages. But some academics posit that Japan’s soft


28
power role is not in itself adequate to compensate for its non‐participation in other traditional hard roles.
The U.S. has also urged that Japan take a more proactive role in “hard” diplomacy, such as the
controversial refueling missions of U.S. ships operating in Afghanistan. Officials at MOFA said that
Japanese influence engendered by the popularity of Japanese language and culture abroad is indeed
significant, and the MOFA is trying to use Japan’s soft power initiatives as an important public
diplomacy tool to promote Japan’s national interests.

Discovering an effective method to convert Japanese soft power into real political power is indeed a
challenge that will need to be carefully studied and managed over the long term. MOFA officials pointed
out that with the economic downturn, the MOFA’s budget for cultural activities is usually the first target
of cuts. We would advise that:

 The Japanese government should reevaluate the significance of its ministry‐funded
initiatives that contribute to soft power and adjust budget allocations as necessary. We
suspect that with closer examination additional investment into soft power initiatives
and programming will be found to be justifiable.
 The U.S. and Japan should work together in devising ways to more effectively harness
Japanese soft power to achieve international ends. Due to the closeness of the U.S.‐Japan
relationship, a good global perception of Japanese foreign policy reflects well on the U.S.
as well.

Though the challenges facing the U.S.‐Japan bilateral relationship are formidable, the alliance has
success‐fully endured difficult times in the past. The fresh energy that the DPJ will bring to Japanese
politics, and the comprehensive review of the security aspects of the alliance that Prime Minister
Hatoyama has planned, are expected to bring a new vitality and relevance to the alliance. It is not overly
optimistic to expect that a strong U.S.‐Japan relationship will continue to endure for years to come.


29

SECURITY
The Future of the U.S.-Japan Alliance
Ross Matzkin-Bridger
Kevin O’Driscoll
For more than fifty years, the U.S.–Japan

security alliance has been a cornerstone for
the defense of both nations, serving as a
pillar of stability in East Asia. This alliance
calls for the U.S. to use its forces to defend
Japan in return for permission to use
Japanese land for military bases, as well as
the funding necessary to maintain those
forces. Furthermore, it calls on both sides
to “contribute toward the further
development of peaceful and friendly
international relations.” While all Research Institute for Peace and Security (RIPS), Tokyo
indications point toward the continuance
of a strong alliance marked by deep cooperation, the relationship between the U.S. and Japan is in a phase
of transition and evolution. Since the fall of the Soviet Union, some have questioned the direction of the
alliance. Some ask if it necessary for the U.S. to maintain its current level of nearly 35,000 troops stationed
in Japan. Others question whether it is in Japan’s interest to have such a foreign military presence on its
soil. The threats of the 21st century are much different than the challenges of the Cold War; however, they
are no less grave. The U.S.-Japan alliance has the potential to play a crucial role in promoting peace,
prosperity and security across Asia and around the world. To ensure that the alliance remains effective,
both countries must identify the specific issues on which the two sides should cooperate and lead. We
believe that these issues should include:
• The security of the Japanese homeland–U.S. and Japanese forces must continue to work
together to secure Japan from potential attacks by both state and non-state actors. Key
issues are threats from North Korea and terrorism.
• Global stability–Instability, poverty and the extremist ideologies that these conditions !
breed remain one of the largest security threats to the U.S. and Japan. The two countries
should work together in both military and civilian capacities to promote stability in
fragile regions.
• Nuclear nonproliferation–The U.S. and Japan are two of the leading countries in promoting
nuclear security. Tackling this difficult problem is a unique opportunity for mutual
leadership.
In the past, both countries have cooperated on major global issues, but have each played very different
roles. On Japanese homeland security, the U.S. has taken on the brunt of defense responsibilities. On the
one hand, this has allowed Japan to keep its defense budget at roughly a modest 1% of GDP, but it has
also forced it to grant land to 134 U.S. bases that occupy a total land area that is more than one and a half
times the size of Tokyo. Japan also contributes a significant amount of money to maintain the U.S.
presence; however, it is a small sum compared to what they would have to spend on defense in the
absence of U.S. forces.
30
On tackling foreign threats, ongoing debate about Japan’s pacifist constitution continues to affect how the
two countries define their cooperation. Current legal interpretations prohibit Japan from engaging in
combat missions abroad, in many cases limiting their contribution to humanitarian assistance and
economic aid missions.
By maintaining the original goals of the alliance while retooling its mission to reflect 21st century realities,
the U.S. and Japan can play a leading role in promoting peace and security around the globe.
The Challenge
The August 2009 elections that brought the opposition Democratic Party of Japan (DPJ) into power serve
as a point of both uncertainty and hope for the future of the alliance. On one hand, the DPJ and its ruling
coalition has voiced frustration over the current status quo. They argue that the Status of Forces
Agreement, the pact that lays out the details of U.S. military base structure in Japan, should be revised.
Specifically, some elements from within the ruling coalition have been calling for the U.S. to return some
of their bases to Japan, arguing that this is in the best interest of the communities that live around the
bases. These concerns are understandable byproducts of the long-term U.S. military presence in Japan.
As long as the discussion focuses on security posturing and not populist political posturing, a fresh
dialogue is a welcome development. One specific area of contention is the relocation of Futenma Airbase
to a less centralized location in the northern part of Okinawa Prefecture. The relocation also includes a
provision that would have several thousand U.S. Marines and their families relocate from Okinawa to
Guam. This deal was reached between the U.S. and the LDP-led Japanese government, but is now being
questioned by the DPJ. It is a thorny situation that has raised tensions on both sides, however it should
not be mistaken for a microcosm of the entire alliance. The U.S. and Japan still have many more points of
agreement than disagreement. Moving ahead, if a slightly reduced U.S. footprint in Japan is coupled
with a more assertive security role by Japanese forces, there is potential for a new kind of partnership that
would benefit both sides.
Finally, many in Washington are concerned about the DPJ’s tendency to move closer to Asia and form
stronger ties with China and South Korea. Much of this concern is misguided, and better relations
between Japan and its neighbors could serve as a boon to U.S. interests in the region. Prime Minister
Hatoyama has continued to express his commitment to the U.S.-Japan Alliance, and there is no reason to
believe that Japan is looking toward Asia to replace its relations with the U.S. There is no doubt that a
Japan with stronger regional partners may over time bring some challenges and minor setbacks to the
U.S.; however, the larger potential of greater regional stability should more than offset these concerns.
Reaffirming Common Goals

Before the details of base structure and status of forces can be tackled, both countries must reaffirm the
goals of the alliance. The first such goal should be the defense of Japan. Both sides understand the
importance of bilateral cooperation in defending Japan from potential threats. The U.S. remains fully
committed to this cause, however there are those in Japan who question the degree to which the U.S.
would actually be willing to use its own forces to defend Japan in the event of an attack. It is important
the U.S. clearly presents its case that the security of Japan is intrinsically tied to its own security, and thus
the U.S. is fully committed to preventing and reacting to any potential future attack.
Japanese Homeland Security

The most prominent security issues that the Japanese mainland faces include (note that this list is not
exhaustive and does not include certain transnational threats such as climate change that are beyond the
purview of this paper):
31
• North Korea–This is the most immediate threat to Japanese security.
• China–Japan and China have greatly improved relations over the last several years and
there is little immediate threat from China to the Japanese homeland. Both sides must
work hard to continue this trend in order to mitigate future conflicts of interest.
• Transnational Security Issues–As the world’s second largest economy and integral player
in many international organizations, Japan remains a target for extremists. In addition,
as an island nation, Japan is particularly affected by piracy in both Southeast Asia and the
Middle East.
North Korea presents the most immediate threat to Japanese territory and U.S. interests in the Asia Pacific.
Pyongyang has a number of short-range and medium-range ballistic missiles that are capable of hitting
Japan, and they have on multiple occasions taken provocative steps such as test firing these weapons in
close proximity to Japanese territory. Additionally, North Korea has kidnapped dozens of Japanese
citizens, many of whose whereabouts remain unknown. Finally, the regime’s nuclear program is also a
great concern, especially if the North were to develop the ability to attach a nuclear warhead to their
existing missile technology.
• The U.S. and Japan should continue a twofold strategy toward North Korea that includes
being ready to defend against any potential attack and working together to end
Pyongyang’s nuclear and missile programs through a combination of peaceful
negotiations and economic sanctions.
• Proliferation of nuclear technology and materials from North Korea is another great
concern. The U.S. and Japan should continue to track suspicious North Korean vessels
and gather intelligence on potential proliferation activities.
!
China and Japan have built up a great deal of trust since the end of the Koizumi administration. However
there is still much more to be done to strengthen the relationship. China has shown positive signs of
becoming a responsible international stakeholder on economic issues such as trade and investment. On
other aspects of international relations, there is still a great deal of uncertainty. China maintains a lack of
transparency on military issues, and it is unclear what its long term goals are. Beijing’s extensive
relations with “rogue” states such as the Sudan and Burma also calls into question their ultimate motives.
Japan is especially worried about China strategic threat to Taiwan and disputed islands in the East China
Sea.
We are hopeful that more trust can be built with China; however, in the mean time, the U.S. military
presence in Japan serves as an effective deterrent against any potential Chinese aggression. Furthermore,
both the U.S. and Japan need to continue to work together to further promote China’s emergence as a
responsible stakeholder in the international system. This means urging China to forge policies that are in
line its rhetoric of peace and stability. The opaque nature of much of China’s decision making is of
particular concern, and the U.S. should work with Japan to urge greater transparency and a gradual shift
towards democracy.
• It is in everyone’s best interest to have a China that is more responsible in the

international arena. As such responsibility emerges, it would be a welcome development
for China take to a larger constructive role in world affairs. It has already demonstrated
some such capabilities with its leadership role in the Six-Party Talks with North Korea.
Transnational Security Issues such as terrorism and piracy are other key threats that Japan now faces.
32
Al-Qaeda leaders have communicated direct threats to Japan in the past, actively trying to establish
terrorist networks within the country. Piracy affecting international sea lines also threatens to limit to free
flow of goods and energy to and from Japan. We have already seen that in response to these threats,
Japan has been more willing to join the U.S. and the world community in security operations abroad,
such as the deployment of Japanese troops to Iraq following the 2003 U.S.-led invasion, re-fueling
missions in the Indian Ocean, and anti-piracy operations in the Gulf of Aden. These actions have sparked
debate as to how much of a military role Japan should play overseas, and this dialogue is a healthy step
in facing the new security realities of the 21st century.
Politics and Security

One issue that complicates Japan’s growing global role is its pacifist constitution. Article 9 of the
constitution renounces war and prohibits an offensive military capability. Current interpretations of
Article 9 prevent Japan from sending combat forces abroad or from engaging in collective self defense
with its allies. This has turned into a political issue with strong opinions calling for the protection of
Article 9 on one side and a constitutional revision on the other. Recent changes in Japanese politics may
have an impact on how this issue plays out.
Several of the previous LDP prime ministers had strongly been in favor of altering Article 9 to allow for
Japan to engage in collective security operations, such as UN peacekeeping missions. The DPJ has
historically taken a less favorable look on constitutional revision, and the current ruling government
coalition that includes the Socialist Democratic Party (SDP) will almost certainly reject any such proposal.
The short-term impact of the DPJ coming to power is that several of Japan’s overseas operations will end,
as we have already seen with the Self Defense Force’s re-fueling mission in the Indian Ocean. In addition,
Japanese leaders are attempting to re-negotiate the consolidation of American troops on Okinawa. The
long-term picture, however, remains much less clear. The DPJ has not been in favor of amending the
constitution; however, they have advocated a greater international role for Japan. This could mean a
greater role in non-military realms, or it could also include at least a reinterpretation of Article 9 that
would allow for collective self defense and limited overseas operations.
Deterring Nuclear Proliferation

In addition to the fight against terrorism, the U.S. and Japan must employ collaborative leadership in
fighting worldwide nuclear proliferation. Secretary of State Clinton has called nuclear weapons the
gravest threat to international security. Both the U.S. and Japan are in unique positions to lead a new
nonproliferation campaign. Japan is the only country to ever suffer a nuclear attack, and has long
advocated a world without nuclear weapons. President Barack Obama has notably announced the goal
of eventually eliminating all nuclear weapons. The nuclear bombs dropped on Japan at the end of WWII
caused unspeakable devastation, and both the U.S. and Japan are now ready to develop concrete policies
to prevent any future use of nuclear weapons. Both sides realize that modern nuclear weapons could
deliver yields more than ten times as powerful as the ones that hit Hiroshima and Nagasaki. Any such
attack would be catastrophic.
!
There are several steps that the U.S. and Japan should implement together in order to deter nuclear
proliferation.
• First, both countries should work to prevent new countries and transnational
organizations from developing nuclear weapons.
• Next, they must work to prevent nuclear materials and technology from being traded
and exported. Nascent nuclear programs in North Korea and Iran are of great concern,
and the U.S. and Japan should take leading roles in strengthening and enforcing
33
international safeguards. Key targets for these goals include looking for ways to improve
the UN Non Proliferation Treaty at next year’s review and working with the
International Atomic Energy Agency to bolster the Global Nuclear Energy Partnership.
• Finally, the U.S. and Japan should combine their technical expertise and create tougher
standards proliferation resistance in nuclear power plants. Assembled nuclear weapons
are not the only proliferation threat. Fissile material from nuclear power plants and
reprocessing facilities should be equally well protected.
Outlook
The election of the DPJ has brought some uncertainty to the U.S.-Japan alliance, and recent disputes over
the Futenma Air Base relocation have highlighted some of the new struggles that the two sides will face.
Though this friction is likely to remain for the foreseeable future, it is a natural part of an evolving
alliance. There will continue to be disagreements, but they will be far outweighed by the great potential
for mutual cooperation. The U.S. and Japan share many security interests, among them the safety of the
Japanese homeland, the curbing of global terrorism and nuclear nonproliferation. In the end, there are
many reasons to believe that the alliance will endure well into the future, providing a strong and stable
foundation for the security of East Asia.
34
2 0 0 9 J a p a n Tr a v e l P r o g r a m f o r U . S . F u t u r e L e a d e r s
35
36
37
Acknowledgements
Organizers
Masaru Sakato, Executive Vice President, Japan Foundation
Tadashi Ogawa, Managing Director, CGP (Tokyo)
Hideki Nishimatsu, Deputy Managing Director, CGP (Tokyo)
Akiko Machimura, Assistant Director, CGP (Tokyo)
Ayano Inami, Program Staff, CGP (Tokyo)
Lia Cosco, Program Staff (Intern), CGP (Tokyo)
Tomoki Akazawa, Program Director, CGP (New York)
Melanie Standish, Associate Program Officer, CGP (New York)
Kathryn Ibata-Arens, Academic Advisor, DePaul University
Leigh Morris Sloane, Executive Director, APSIA
Project Leaders
Sarah Berke, Editor in Chief
Nicole Nakagawa, Creative Director
Karen Hoiyan Tam, Project Manager
Team Leaders
Samuel Lederer, Environment
Lisa Vura-Weis, Domestic Economy
Michael Verba, International Economy
Karen Hoiyan Tam, International Development
Harvey Beasley, Diplomacy
Ross Matzkin-Bridger, Security
Photos
Ted Alcorn
Sarah Berke
Scott Hartley
Nicole Nakagawa
Luke Schoen
Melanie Standish
Karen Hoiyan Tam
Lisa Vura-Weis
38

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2 0 0 9 R E P O R T

JAPAN TRAVEL PROGRAM FOR U.S. FUTURE LEADERS

About This Report

Karen Hoiyan Tam

Environment. Japan is an undisputed leader in environmental technology and policy.

Japan has been revered as an environmental leader, not only for

Figure 1: Acquisition and Tonnage Tax Reductions/Exemptions7

Recent political developments have reinforced Japan's commitment to international environmental

Japan’s Best Practices

Policy Recommendations for the United States

4 Fujisaki, email to the author, 27 Sept. 2009.

5 Satoshi Kato (Toyota Motor Corporation). Personal interview, 20 August 2009.

6 Satoshi Kato (Toyota Motor Corporation). Personal interview, 20 August 2009.

11 Satoshi Kato (Toyota Motor Corporation). Personal interview, 20 August 2009.

13 Taku Ohmura (Ministry of the Environment), personal interview, 20 August 2009.

15 “Environment Statistics,” 2009, Nationmaster, 13 Sept. 2009 <http://www.nationmaster.com/cat/env-environment>.

1. The real or perceived risk-averse nature of Japanese culture

• One effective solution may be an education campaign by the government. The

Consumer Financial Protection

• Japanese financial regulators must work to mitigate the unintended consequences of

Role of Exports: Much of Japanese development can be attrib-

Japan’s Technological and Economic “Grand Strategy”

Short- to Medium-Term Strategy: Recovery from Recession via “Smart Investment

Long-Term Strategy: Positioning for Future Growth

Japan’s Technological and Economic Development “Ground Operations”

Rising to the Challenge

Karen Hoiyan Tam

As one of the largest bilateral donors of foreign assistance after the

Japan’s Policy Framework for International Development

USAID-Japan Partnership for Global Health

• Health systems/health workers

Strengths and Weaknesses of Japan’s International Development Efforts

Challenges for U.S. and Japan Collaboration

For more than fifty years, the U.S.–Japan

Reaffirming Common Goals

Japanese Homeland Security

• It is in everyone’s best interest to have a China that is more responsible in the

Politics and Security

Deterring Nuclear Proliferation

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