NATIONAL INTELLIGENCE ESTIMATE, NUMBER 41-70; JAPAN IN THE SEVENTIES: THE PROBL

Created: 6/25/1970

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NATIONAL INTELLIGENCE ESTIMATE

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Japan in the Seventies: The Problem of National Power

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DIRECTOR OF CENTRAL INTELLIGENCE

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CONTENTS

1

1

DISCUSSION

APANESE POLITICS: The State of 4

mi the Potential foi Change

II. ECONOMIC AND SOCIAL

The

Social

WOULD

The Pacific Power

The "Developed"

East

The Bole of the

V. IN

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JAPAN IN THE SEVENTIES: THE PROBLEM OF NATIONAL POWER

NOTE

Prime Minister Sato has said ihal inapan musl face the "problem of nationalconcept which he has defined as the "aggregateountry's political stability, economic strength, military might, its sway over intemalional opinion, its cultural heritage, and son this Estimate wt look at how these several aspects of Japanese national life are likely to evolve and interact during the decade, and at some of the implications for the US.

CONCLUSIONS

entersith the world's most dynamicpopulation proud of its accomplishments,oderatefirmly in the political saddle. Its problems during thewill be how to use its riches and growing self-confidencestandards ol living at home and touitable roleabroad.

chief arena of political competition will continue to(he Lilwral Democratic Partynd it is here thatsignificant new pressures will make themselves felt. In thethe LDP can probably maintain its commanding positionit meets mounting pressure for attention to Japan's socialneeds, especially in the hooming cities. In the process,for the party itself is likely to change markedly fromconstituencies to the urban middle classes. APPROVE! FOR ICLEASf

istrong position to continue rapidsooner orecline from the past average realofear is likely. Hut while Japan's strength and in-

fluence within the inteniatioiial economic complex will continue to increase, so will the dependence ot Japan's prosperity on continued access to foreignrolonged international recession or the imposition of severe foreign trade barriers by Japan's mailt trading partners would have grave economic repercussions in Japan, all the more so because lis economic system is geared to rapid growth.

searchworld rule" will locus initialonstatus and recognition through, for irjstance, anin the VS. and on continued efforts to promote Japaneseabroad. By the end of the decade, Japan will be moreequal in its economic relations with the US; is likely to beexternal factor in the economic life of non-Communistthe largest external economic in fluence in China. Australia,Zealand, and in all likelihoodhe greatest singleof theen in such traditional American preserves as

economically, and emotionally. Japan isthe developed nations, particularly those of the PacificCanada, Australia, and New Zealand. Its economic role ingivesajor stake in the stability of that region. Itsto East Asia will increase substantially, accompanied byand eventually political influence. In Southeast Asia,Japan will try lo keep its political activityultilateralEven in Northeast Asia, where Japan will engage inexchanges on intelligence and internal security withand Taiwan, it will want to avoid political or securitywhich might provoke North Korea and especially China.

Japan's Asian policies will lw fundamentally affectedby its relations with the US but also by its reading of thethe US. USSR, and Cliina. The Japanese think theyole to play between thenon-Communist powers in Asia. And to some extent the> count

on mutual antagonism among the three great powers to help JaPa<JJ^jUJJ influence with each one. They will be persistent in friendly overtures to China, and reluctant to engage in any activity whichonstrued as "anti-Communist".

Japanese defense related Industries will growthe decade, though the Self-Defense Forces probably willgradually with primary emphasis on air and naval forces.and air force will extend their area of operations, andcome toreater share of responsibility for defensevital lines of communications. But Japan will not wanttroops abroad or to accept foreign military commitments,not bilateral ones.

arc less certain about Japan's nuclear future. Thebe the subject of growing national debate, and the decisionaffected not only by Japanese sentiment per se but also by USpolicies. On balance, we think that unless the Japanesefeel some imminent threat to themselves for which USdeemed unreliable, they probably will not decide to produceat least for some years to coine.

will want the US military presence on itsreater Japanese voice in the use of the forces whichBut so long as it is ultimately dependent on Americanit will on balance probably want some US military-its territory to give force to the .American commitment.are likely toreater source of friction than USMost important of all, as the decade goes on, Japanesewill he increasingly eager tootherto their owntheir policies are independent

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DISCUSSION

the years since World War II. most Japanese have equatedwith economic strength. Tin'* has been the almost-obsessivepotentially divisivedifferences over how to sharebeen largely subordinated to the hard work which hasrespect and restored Japanese pride and self-confidence. Ando( conservative governments inthis effort has been thetheir domination ol Japanese politics since the war.

L JAPANESE POLITICS: The Stole of

i- li- of this domination over the pastears has beenDenu-rralic Partyhichf theeats Inporlianicntaryhe LDPdepends on Japan's rural(or the bulk of its votes. But the party's directing Establishment toof business and financial leaders, top civil servants, and partyIn Japan's unusually hoincgeneous society, these men share tinand school, common outlook,trong sense of mutualloyalties.

1 RESULTS Of9 LOWER HOUSE ElaVXTION

here also are more practical links. Business leaders bankroll not (ust the party but Individual politicians as well, and keep close, semiofficial contact withipicnts of their favors In turn the government, through the Bank of Japan, controls the commercial bank loans on which Japanese businessThe government alsomergers, price filing, and prodiietion and maikct during The bureaucracy lias an umiiually large role in shaping and implementing pobcy, as well asrrel needs of individual Dictnien. riirtlierinore, top civiltvants often "Mire" to lutsinevs posts and sometimes toffice.umples of "Deliberation Councils" includinguin the business world,every part ol (he bureaucracy. These and other ties result in piobably the most deftly guided economy in thecalled 'Japan.which individual business ambitions ore adjusted to serve the greater good

Liberal Di'iuocianc Party Japan Soiialisl Party

Koine itO

Japan DBiiiocfalie Socialistdiuuiiiiiiiii

TOTAl

traditions call lot uovemmcnt leaders to perceive and nilnationalather than for open contests fur votes on issues,the theory in Western dernocracies. This requires that the opposition'sgiven (or seem to be given. full oonsideration however small its vote,government avoid any impression of arbitrary action, and even thatelsewhere considered confidential be allowed into the public domain.in effect, that national policy changes only slowly, after persuasionwithin the LDP ant) alter pubLi opinion is fully prepared.of the concensus in postwar years has been renurluhly constant,to economic growth, low military budgets coupled with closethe US in defense and foieign policy, no nuclear weapons in Japantroops abroad, and no overt hostility toward China. In recent yearshas been affected by growing national awareness of Japanseconomic strengthesire to project Japan's image as an

"bigewer aspects have prompted efforts to recover territories occupied by the US and USSR, to scale down US military bases, and to sponsor such prestigous international activities as the Olympic games and

The LDP's success in discerning and eipTessing the national mood has helped to reduce the traditionalSocialists, Democratic Socialists, anda degree of impotence and frustration most extreme in the Japan Socialist Partyhe JSP entered the postwar era with high hopes. But its continued exclusion from power, the rivalries and recriminations within It. and its persistencerxut ideology of ever decreasing relevance to Japan's affluent society, -ill have contributedot which culminated in the loss of over one-lhird of its DietHO tothe9 election. Socialist backbenchers in Ihe Diet, and the labor unions on which the JSP depends for money and campaign work, aie openly impatient with the pirly. But tiny have been unable to move the party leadership Virtually exciuded from decision making, the party has resorted to demonstrations in the streets and physical disruption of the Diet in order to make its views felt. But these tactics of protest against the "tyranny of the majority" have lost the public sympathy they once helped engender for the JSP.ear-miraculous revitahuboa af Its leadership or some maior and now unforeseeable political or economic failure on the part of the LDP, the JSP Is likely to continue its decline into irrelevancy, or oven to suffer serious splits.

The much smaller Democratic SoeiaJist Party (JDSP) may actually have had more influence on Government actxrn over the years, as many of ib moderate and pragmatic proposals have subsequently beenby the Liberalbut the JDSP has in the processsecond conservativeppealing only to those who want toild opposition to thoOf all the Japanese parties, Ihe JDSP gained least ArVRuV&H'YHft&S'E debacle in tbe last elections, increasing ib Diet searstl9tlft$nt$i. Its poor electoral showings have thus far kept il from attracting those JSPwho might be tempted to defectore pragmatic socialist party; if the JSP does come apart in the future, the JDSP could of course expect to be a

majorlSP's best hopehare uf powrr may lieossible future LDP needoalition partner, rather than in any prospect of itselfajor opposition force.

The Japanese Communist!n the oilier hand, haveevival in recent yean. Their remariahle success at Ihe but national election in raisins their Diet seats, and In Tokyo city council electionsear ago, confirmed the parry in its stratcfcy of working to establish itself< Jenl mtional force by dcrnonstr.ilum iitoVpeiidcrice from foreign parties and at least tactical tnodVralion But most of the newvoters were in fact defectors from the JSP. and notiti lo Ihe left. Moreover, moat Japanese are far from accepting ihe party's new "loveablc" image while, on the olher flank, it is undei attack by radical students forgone conservative. The JCP can hope, at best, to continueore respectable pnity and toarger voice in opposition councils. But it Is unlikely loulficiently "Japanese" image even to lead the opposition, much less to challenge Ihe government.

A relatively new phenomenon in Japanese politics in tbe Konicito. or Clean Government Party. Komcito wai established4 as the political arm of the rapidly growing Value Creation Society (Sokatself an offshoot of the aggressive Nichiren Buddhist sect. Highly organised, superbly disciplined, virtually faction-free. Komcito is perhaps the first genuine attempt toroad-based politicalapan. Its appeal is pitched primarily to tbe lower noddle classes and the poor who fed uprooted and somehow left behind in Japan's race to new prosperity. The parent religion promise* it* inemlH-rs temporalsuccess or marital tranquility or regainediEnmediately upon conversion And Soka Gakkai's enormously smvesiliil net-work of organisations for every conceivable Japanese interest croup gives these people an important sense of "belonging".

omcito's own platformery pragmatic (its critics sayxploitation of the public'* growing coueern wilh domestic bread and butter Issues. Its stand on social issues, and on ihe desirability of closer ties with China and more distance from the US. could be calledut there aUu is an element of religious fanaticism in Komeilo's appeal, the suggestionapanese mission lo save Ihe world from tlie two "extremes" of Christianity and Marxism, which reminds some critics of the rightist nationalism of the prewar period.

omeito almost doubled itsast Decembers election and. perhaps even more important, got an estimated one-third of its votes from outside Sola Cakkais membership But Komcito. too. faces senouj obstacles Its rnihtancy. religions fanaticism, and lower-class image, as well as lite charges against it of ultranatiooalisrn. limit its appeal insecular, status-conscious loeiety. As the party tries to distance itself fromII religion and deal more specifically with concrete issues, it risks losing the fervor and unity it has thus far enjoyed. And as it strives for respectability, it may find itself moving closer to the LDP on major issues rather than providing a

new rallying point for potential opposition sentiment. The LDP. with itsol the economy, its access to talent, patronage, and funds, would easily hold the edge in any such contest.

nd the Potential for Change

Japanese politics is likely to change during, and some new directions already are apparent. For one thing, the issues in debate areand becoming more complex. Controversy will grow over how to divide the wealth, capo wilh Japan's urban and other environmental problems, educate the young, reapportion the Diet,orld role and cope with Japan'sproblems, perhaps even bow toadc-in-Japan constitution.

And there will be more players in the political game. Many of Japan's new urban middle classes seem to be leaving some of their traditional group loyalties back in the village. In social life this tends to greater permissiveness,eakening of the Japanese urge for conformity and acceptability- In polities, this may mean voting more discriminatingly on the issues, or at leastandidate's personal appeal, ralher thanasis of loyaltyolitical boss. And while the Japanese are not yet flocking tn become active members of political parties, tlwy are making more use of special interest groups such as consumer associations and the PTA to press their ideas andon Ihe government. Insofar as there is an erosion of the strength of paternalistic traditions, in government or in business, the potentialloating vote will grow.

Japanese labor is Increasinglyreater economic benefits for its members, and less willing cither to sacrifice higher wages to company growth or to lend itself to the archaic ideological crusades of Marxist parties. Thus regardless ol whether the presently com|>eting labor federations unify or not, the labor movement will probablyuch more conservative factor in Japanese politics even while becoming morf; aggressive in wage demands. Active labor support for the Socialist Party, in terms of money, voles, and sup. porting demonstrations, will continue to grow weaker.

At present Japan has no "defense establishment* in tin* American sense. Some large corporations and their subcontractors participate in Japan'sprocurement programs, but military procurement does notajor role in Japan's economy or in (lie profits of individual companies. Nonetheless, some industrialists and political lenders are becoming more outspoken indefense and defense-related industries. The military's influence may be further enhanced by Defense Chief Nakasone's efforts to improve the morale and image of the services. Nakasnne aUo wants toermanent Defense Committee in the Diet, and this could become the arena ^ROTBfUtFltbCASE "lobby" and for opposition to it. Butlirelated industries wouldelatively small role in Japans economy; and certainly the military are not likely to threaten civilian control of the

protests seem to be losing influence in Japan. Until quitedemonstrations complimented the efforts of leftist parties topolicies, and police suppression of the students won the leftsympathy. However, as tbe level of student violence rose and themore skillful in handling it, the mass of students, the generaleven motf lcftwing parties came to shun student extremists. Tbeappear resignedheir isolation and reportedly plan toon individual acts of terrorism than on getting large numbers intoAt the same time rightist student groups are announcing plans totheir radical leftist classmates in defense of "traditional Japaneseextremists of whnteven political stripe will probably remain abutolitical force if they continue present trends towardand toward fighting among themselves. But should they abandonof flagrant violence their influence on public Opinion, andacademic opinion, could grow.

a m

The new issues and participants in Japanese polities certainly will offer opportunities lo the opposition paities. But Japan remains essentially asociety, and the strength of tradition is likely to be just as impressive as the pace of change. Furthermore, the opposition is in poor shape to takeoi opportunities. Not even Komeito. which has greatest growth potential, seems likely loerious threat lo the LDP's political dominance. Nor is there any evidence that the opposition parties could cooperatenited front- Indeed the "multiparty" opposition which emerged frnm the last election, with no one parly able even tu pretend to leadership, theoretically gives thereer hand than ever.

Of course there could he political realignments dining the decade. Bui an upheaval great enough to challenge the present Establishment is unlikely in the absenceajor national crisis. This sanguine outlook for ihe LDP is not an unmixed blessing for Japanese democracy. If those who do sland outside the consensus feel tbe legal means lo influence closed to them, they will be tempted to lash out violently against "the system" as the "new left" does in the West, or to work covertly against it as the Japanese Communists have done in the past.

IS. But mostthe old Establishment of big business, orhopefuls in the military or local interest groups, or possibly evenlikely to conclude, that the way to make their influence fellt least for the next several years and probably well beyond that,be the chief arena of political competition. The LDP itself is likelyreflecting the changes in Japanese society and its consensus Theconcentrate less on Ihe dwindling mral population and more onemerging "floating vote- in the cities and newFOR RE1EA!

he present LDP leadership is certain to have at least two more

power beyond next autumn's party elections, when Prime Minister Sato will choose cither tooiirlh Iwo-year term as party chief or to name aUkefy Finance Minister Fiikuda or Party Secretary

among Ihe familiar faces. Beyond Ihal, differences over the more complex issues ofill complicate the old came of pcrsonnal rivalries andhone-lrading in contests for party leadership. The issues which willthee contests can be desirilwd as Japanese concern over three groups of questions: How to manage the further development ol the economy? How lo meet Japan's pressing social infrastructure needs and thus ease the inevitable tensionsooming, urbanizing society? And how toorld role which adequately expresses Japans economic strength and the talents of its people?

II. ECONOMIC AND SOCIAL ISSUES The Economy

ho key lo any judgment ahout Japan, perhaps even Io the continued moderation and caution of Ihe LDP leadciship, is further economic growth. The Japanese economy has expandedeal average annual rate ofercent in the past ISextraordinary performance by any standard. There have been frequent piedicbons of anowut in recent yean the rate of growth has accelerated toercent. By comparison the USood performance and most West European countries are satisfiedercent growth rate. The Soviet economy too. in spite of its strong growth orientation, has slowed toercent.

Japun's phenomenal growth rate has been partly due to ihe fact thai it was simply rntching tip with oilier major Industrial powers. But It lias now more than caught up svithol them, and giowth still continuesigh rate. Japan now has the world's third largest Cross National Productrailing only the US and Soviet Union. Per capita GNP is fast approaching that of the UK and if past rales of growth continue it will reach the present US levele stilllowdown in Japanese frowth sooner or later, perhaps in the second half of. Butorld depression orrestrictive US import policies we espect growth to be aroundercent in the next few years.

In some respects, Japan isetter positionhe past to sustain rapid economic expansion. Us improving balance of payments position reached the point in thehere ihe country was running almost continuous surpluses. This has given the government greater flexibility In Its economic policies, and makes less likely the periodic slowdowns imposed in the past to conserve foreign exchange TV high and still growing standards uf education and technical skill of the Japanese people, their increasingly sophisticated sales network across the world, even Japan's reputation as tbe world's most dynamicosition1 *triM"tti fromnrJl Itfe Lr3tSE and have forettui investors clamoring to be let into Japan. bbt|1

he restraints Ihe Japanese economyginning to encounter are inroduct of Its enormous success in Ihe past. The birth rate lias beenas prosperity has been growing, and now Japan laces labor shortages.

The labor force is expected to expand at about oneear duringood deal slower thanercent average annual rate during. More Japanese are staying in school longer and wanting better fobs at higher pay when they do go to work, which means employers will have an especially hard time finding enough manual workers.

abor stringencies have put Japanese unionstrong bargainingwages rose by aboutercent last year and pressure is on for wageon the order ofercent this year. Consumer prices have been rising on the orderear for the past few years. Until last year, export prices were very stable because the increase in wage costs and in productivity were about equal. But sincexport prices have also risen byercent, partially because of the higher wage rates.

Some of the force behind Japan's growth may diminish in. Rising labor costs will continue to push up the price of Japanese expoits. While similar inflationary pressures throughout the industrialized world will help keep Japan's competitive position strong, there could be some slowdown in its rate of export growth. Moreover, Japan will no longer have quite so much room for catching up with other industrial powers. Heretofore Japanese labor productivity on the average has been well Iwlow that of the US and Western Europe while the level of education of Japanese workers was among the world's higliest. thus allowing plenty of room for improvement as sophisticated plant and equipment were introduced. And Japan's industrial technology has lagged behind that of other industrial powers, thus enabling Japan to benefit from research done at other's expense. Both these advantages arc diminishing. Labor productivity is ncaring West European levels. And acquiring new technology may become mure expensive as Japan moves fromurchasernd West European licensesosition oforld leader in domestically developed technology.

Still, Japan clearly has the resources and institutions to grow rapidly in. The government has the control mechanism, and the demonstrated skill, for controlling prices and manipulating resources more easily than most of its trade rivals. The powerful Ministry of International Trade and Industryn conceit with other government departments, can "advise" the large economic combines to concentrate On those activities with greatest growthandational division of work among them. Thus the industries which have experienced the most phenomenal growth in paststeel, and consumerwill grow somewhat more slowly in the future. But at the same time the Japanese will be concentrating on the expansion

of their chemical, space, computer, transportation, and nuclear'jfp^Qytn for RELEASE

most apparent threat to this rosy prediction is from external fMKrlOVworld recession or the imposition of severe import reslrictioiis in

ihe US coulderious economic crisis in Japan. The most dynamic Japanese industries are also the most dependent On world markets and it would be diffi-

cult for them to adjustore Inward looking economic growth process.economic institutions, moreover, are adaptedapid economic growth and lack some of the built-in cushions and stabilizers lhat take the sharpness out of recessions in other countries. Japanese industry depends overwhelmingly on bank borrowing to finance its growth; its internal savings as well as its profit margins ire relatively smalL Japanese firms thus can not rest on their laurels, theyo continue esmandtog rapidly in order to survive. In the past even moderatefive percent ornumerous bankruptcies of smaller firms. 'Die government has been and continues dclcrmlned to bail out major firms from such contingencies. Nonetheless,aior and prolonged economic recession develop, the Japanese might be hard put lo cope with it without severe political and social strain*.

espite resistance. Japan's economy is llkeh/ to become morerather than mores the decade goes on. But its strength, influence, and impact upon the intem-itsonal economic complex will continue to grow. For instance. Japan already leads ihe world in shipbuilding and many consumer clc ctronie products and in thorobably will surpass the US in steel production. It also has reached the point of sizeable trade andsurpluses which are likely to continue for some time. Thus Japan'seconomic policies will have an Important bearing on the international economic climate.

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n

Japan: Exports and Imports

Social Issues

As Japan goes on getting richer. the deficiencies in its social infrastructure become more glaring This could hoeotne the LDP's greatest pitfall. Tho growing cities get most publicity, and do indeed badly need more houses, hospitals, schools, sewage facilities, and some casing of the appalling traffic congestion and air pollution. Bui tbe politically powerful rural areas also need better water supply and roads and more modem farm equipment. And localre d< manding more ot the money and authority now jealously guarded by Tokyo so they can cope with specific local problems. These needs have been neglected as most available money was plowed buck into Industrial growth. Now, Japanese attitudes clearly are changing. While top LDP spokesmen during the last election campaign were pointing with pride to Sato's success in the Okinawa negotiations with Washington, local candidates and the voters were talking about homing and roads and pollution and prices. Sato made these subjects the core of bis policy address to the new Diet in February.

Japan clearly lias the money to deal with these problems, and theis at least talking about their urgency. Perhaps more important. Japanese traditions of collective action and tight social organization would make anational effort mure feasible than In countries more given tu individualism and separation uf powers. More linpmtutit even than money may be the time needed to develop new programs. Thus the government's effort almost certainly will not entirely keep up with the pulilic'. hopes If it should fall too for behind, it would hand the oppositiont nmsiblr issue on whkli toajor challenge But we think it more lila.lv that the gcAenunenl will tie able to exploit its efforts along these linesajor *iurce of nationalemonstration of LDP responsibility, and grounds for satisfaction with continued LDP rule.

Tho decade wUI also see furllm transformation of Japanation of rural-agricultural roots to one permeated by the uiban.industrial outlook characteristic of the West. The postwar period of strong official encouragement and support lo tlie family-st/cd farm unit is approaching its end. Il it fnurKlering on costly rice production subsidies, easy availability of urban employment for farm youth, the insatiable demand for residential and industrial acreage,iowing undemanding of the need to rationalize an inefficient wctor of the national economy The LDP appreciate* the problem but is caught between its dependence on ihe declining rural voteeed to find more funds to meet the challenge of the cities and mi ensure support from the increasingly powerful complex of interests centered there. The issue of reapportionment of Diet seats to reflect the realities ol population distribution encompasses most facets of this sensitive rural-urban issue.

JAPAN'S WORLD ROLE

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Virtually ail discussions of Japan include some reference to revivingut the Japanese themselves are not sure just wlut this term involves. It appears tonertion of overt national pride at home

ompulsive desireake ihe rest of the world notice, appreciate, and respect the Japanese nation and its works. It includes strong ifajor Japanese voice in world councils and, to the extentowerful position in bilateral dealings with other nations. But the practicalof such urgings arc far from clear. At the very least, Japanese desire for praise and international status will grow For many, this need is satisfied by such things as the homage Western journals pay to Japans economicuccessful Space programell-publicized attack on environmental problems could also provide outlets for "nationalist" emotions.

he Japanese also place great importance on recently acquiredin tin* Eighteen Nation Disannament Conference and the International Monetary Fund Board of Directors. Japan parlici'larly desires to enhance its role in the UN, which it perceives to be well suited to Japanese aspirationsig power role without military commitments. Government officials talk of "semipermanent" Security Council membership, perhapsotational basis, or even of permanent membershipeto power. Either step would doubtless be seen by the Japanese .is an interim measure toward eventual full Security Council membership. The Japanese public sees these aspirationsatural and desirable consequence ofostwar revival. Opposition by foreign powers, particularly the US, could very well be Likenational affront.

pinion also is united on the need to continue to increase Japan's share of world trade. For the next several years at least, "foreign policy" still will beatter of economic relations. Japan will continue its search for diversified and reliable sources of raw materials, for expanded markets for its industrial goods, and for opportunities to establish cxport-oricntcd plants in nearby countries with an abundance of cheaper labor. Gos'crnmcnt circlesIhe importance of foreign aid in promoting Japan's commercial interestsrguments for more aid will also be supported by the country's large foreign exchange reserves, and the government's resulting desire to fend off international pressure for revaluation of the yen.onsequence of itsaid, Japan is likely toajor role in organizing multilateral aid consortia over the decade.

eyond these activities, most Japanese probably do not have anyconcepts about Japan's role in the world. The majority of voters areinterested in seeing urban traffic uncloggcd or farms modernized.of the businessmen most active in foreign countries are eager to avoidof political involvement which might offend, and thus damage tradeButuitable "world role" has become an importantsome leaders of the Japanese Establishment, and Is an area of potentialand friction amongformil/jddo

jpan probably readied second place amofijj developed countries in taints ot lutul financial outflow In underdeveloped countririotal approaching SU billion. Hawser,6 million ol (his was official aid, while private aid flows (export financing and overseasai rsumatcd al $btiO million-

The Pacific Power Balance

Japan's search for its pUce in the world will evolveackground of the balance among thereat PacificUS. USSR. China, and Japan itself. The presentighly favorable to japan. Theand military standoff amongther powers gives Japan great freedom to pursue its own intrrests withoutrries about its security.Japan, at the least ideologically- committed of thean expect rath of then some way to bid (or its favors as the decade goes on. The reverse of this picture could of course also beajor shift in the behavior of one or more of the others,ollapse of the balance among them, could leave Japan Ihe most exposed and vulnerable of the world's major powers, ln the Immediately following paragraphs, we assume ihe following continuity in Japan's Asian environment: that the Sino-Sovlet splii will endure, and that the US, svhile less visible militarily, willactor In Asia.iscusses the Implications ol certain contingencies svhich might alter this)

Tmr VS. Japan's closestpolitical, andof course with the US and likely to remain so. Economic links, more than anything else, cement this relationship The Japanesecatlly dependent on the US. to which it now sends aboutercent of its exports Moreover, duringhe cotnposiboo of these exports shifted from light manufactures to the more sophisticated industrial products on whuh Japan's further economic growth diuends. There is no apparent alternative market for these Japanese exports, especially so long as the European Community maintains importon Japanese goods. In addition, Japan depends on ihe US for someercent of its total imports,rowing supply of raw materials, and advanced pioduction and scientific equipment not readily availableThese economic links arc of course supplemented by Japan's reliance on the US lor military protection, and by tho advantages uf having American approval and intermilioii.il sponsorship.

liis very hblory of quasi-dependence on US goodwill and diplomatic effort however,otential source of weakness in the US-JapaneseFor an increasing number of Japanese, an essential component of their nation's "great power" status will be its ability to stoke out and defend political and economic positions Independent of the US and at times in conflict with it. For these Japanese, the issues nuy go beyond specific measurements of gain and loss to encompasi delicate questions of "face" in the InternationalThis does not meanajor breakdown of US-Japanese relations is Hkefy to occur on such issues as Japanese textile exports toSiminished willingness in Japan to bow to US press other important controversies. Economic conflicts areM the decade, as US businessmen try to open Japan to ioreign goods and capital, and at tin? same lime to restrict Japanese imports into the US. Competition for third country markets could also become acrimonious, and differences could arise over trade and credit policies tnwaid China, Such issues are likely to be

a much greater source of friction between the two governments than the much publicized matter of US military bases in Japan. Nevertheless, we expect that for Japan the areas of mutual benefit in its relationships with the US willgreatly to outweigh the areas of conflict.

ilnu. China looms large in any calculation about Japan's role inIt is potentially both the must tempting Asian market for Japanese goodi and Japan's greatest nval for influence in East Asia. In tunc, Japan might alto come to set? Chinailitary tlueat. although there is little concern on this score at present. The Japanese hope that if they keep from provoking Peking and expand economic and eventually political links tbey will somehow' help to draw Chinaore moderate course in lb internationaleanwhile increasing Japan's role in Its economy and leverage on its politics. They probably also vi'i Chinas present hostility to the US and USSHpecial opportunity lo improve Japanese influence in Peking. There it very little Japan can do to advance ib ainn so long as the Chinese leadership remain*ostile to ib "bridge-building" efforts- But It will persevere,

apan's efforts to improve relation* with China probably willfairly early in thewillingness to extend long-term credits for Chinese pnrchascs of Japanese capital roods, and somewhat later, offers of diplomatic recognition basedormula that provides tacit acceplnnco by Peking of continued Japanese relations with Taiwan. How fust lo move in lliis direction will he one of the livelier issues of Japanese pobtirs. japan is not likely Iu he seriously deterred from overtures to China because of tbe anguish these might cause in Taiwan or Ihe US. But the duel Importance of China in Japanesemay he negative, by making Japan wary of doing anything in Ihe rest of .Asia which might provoke China today. lest it diminish Japan's chance* for improved relations in tbe future.

he Socle' Union. We do nut foiesee the development of anythinga close political relationship betsveen japan and the Soviet Union in. The Japanese hasr long distrusted Russian ambitions in Asia, and now woo Id be especially cauuom about closer ties with the USSR which might antagonize China. The Soviets, for their part, clearly have mixed feelings about their relations with Japan. They routinely denounce Japantaging base for "capitalist" Influence, and of course for the US military. In Asia. But they may be cooling to wonder whether Japan's influence in Asia, and even its military tie with the US. mightseful counlerlorce to China. Japanese-Soviet relations are likely In continue erratic during the decade, svfth the Japanese suspicious but always eager to repond to Moscow's fricrKjJicieneral nile. the more antagonistic theattonship. the more incentive tbe Soviets have to encourage reasonably friendly relations witftff flOWtD FOB ftCLEASE But prospects are not goodormal change, ino conclude World War II. unless Moscowfind compelling reason to return the southern Kuril Islands and neighboring islets taken from Japan at the end ol the war. This now appears unlikely.

(he economic sphere, theie ate things the Soviets and Japaneseeach other. Chiefly, Moscow wants Japanese money and technicalthe economic development ol eastern Siberia and tbe Soviet Far East,Japanese are interested in that region's industrial raw materials. Thereprogress along these lines, but it will be slowed by the Soviet tendencymore capital and easier terms than the Japanese wish to offer.this development is not of first importance to either country. Japanthe most part lind more attractive sources of raw material supply, andgive relatively low priority to the development of their eastern lands.

The "Developed" World

Thus Japan has an "umbrella" of the Pacific power balance, as well as of its military alliance with the US, under which to pursue its international ambitions. One immediate question about those ambitions is what part of the world Japan belongs in. Its leaders often like to identify with the industrialized powers of theboth justifiable pride in Japan's economic achievements and corresponding arrogance toward their nearer neighbors. This emotionalaccords with Japan's economic interests, which are focused especially on the sophisticated markets and vast raw material sources of the US, Canada, Australia, and New Zealand. In political and strategic terms, Japanese leaders like to think of an informal community of these developed Pacific Basina grouping of rich and politically stable states connected by safe lines of air and sea communication. The Japanese and Australians, for instance, share major areas of mutual interest: Australia's continued economic growth is largely tied to Japanese purchase of its raw materials; and despite quite different policies, Ihe two share basic goals with respect to Asian security problems. Much of Japan's diplomatic activity over the decade will be devoted to strengthening ties with the Pacific Basin states, perhaps extending to some sort ol formalized political grouping among them.

The Japanese also look to the nations of Western Europe, measuring with pride Japan's greater economic gains and with some sensitivity its lower standard of living. They hope to increase sales of Japanese products in Europe's affluent societies, which in addition to the economic advantages would help decrease Japan's reliance on American markets. Recently the EEC countries have also shown increasing interest in broadening trade withider economic relations in turn would facilitate closer political relations between Japan and Western Europe. Japan might in some circumstances seek help from Franco for its nuclearn acquiring utuafeguarded uranium or even ina missile guidance system. And the Japanese probably also feci ainterest with the West Germansnlear'iy,^f'f^uttn'rfirlllltIfflSEthe restrict ions p'accl on bodi Viy iher NVt-Protih^ijirju/tiffty'

'Durlufl ihe past decade. West Fnropc accounted for onlyonstanti Japan's total trade while Japan had lea*ercent of West Europe's trade. aJthouxh thu latter figure doubled os<cr the decade-

East Alio

liile the developed world may be mote alltactive Io Japan. Japan clearly mines first in the economic calculations of its non-Communist Asiant has overtaken the US as the chief trading partner tA almost every country in East Asia, and ii Ihe prime market lor tbe raw materials which are virtually all that many of these countries have to sell. South Korea and Taiwanome respects become erteosioru of the Japanese economy, as Japanese firm* have moved into both in order to take advantage of lower labor cost* Elsewhere in East Asia. Malaysia, Singapore. Hong Kong, or Thailand might also be attractive sites for Japanese investment in labor intensive Industries alung the pattern of South Koiea and Taiwan. Otherwise, Japan is chiefly interested in those states with abundant raw materials and reasonably stable political life. Thus Indonesia, Malaysia, and Thailand. In particular, are targets for Japanese investment in extractive industries. Indothina. on the other band, will be of relatively httle economic interest until postwar reconstruction begins

However aloof Japan might like to remain from the political troubles of its Asian neighbors, its economic role does in fact carry with it an implicitMost Japanese, especially among the younger generation, appear indifferent lo anti-Communist appeals; but they do want Asia to be sufficiently stable for Japanese to go on doing profitable business there The issue in Japanese mind* is what role Japan ought to play In bolstering Asian security. Theirresponse is in economic terms. The region will continue to get tbe hulk of Japan's foreign aid. This still will be primarily aimed at advancingcommercial cnterptise; but as the decade goes on Tokyo may be more willing lo use aid money for promoting overall political stability and general economic growth. Japan already has taken the major role in the AsianBank, and sponsored regional meetings on wich subjects ai agricultural development and Indonesia's debt. The Japanese may view themselvesind of middleman between the developed states and their more backward .Asian brotheis Particularly in the UN. they may try to lie East Asia's spokesman to the West.

The Special Cmet of South Korea ami Taiuan. South Korea and Taiwan arc special cases for Japan, by virtue of their strategic location in Northeast Asia. Japan's heavy investment In their economies, and historical tin with both In both cases, government exchanges will grow in matters of intelligence and internal security. The Japanese count on continued US guarantees lo bothbosvever. and hupe not to have to do much more about the security of cither neighbor. The Japanese public does not share its leaders' sense ofin the fate of either country, and any projected "military adventure" abroad

wouldivisive issue even within the leadership. We do not beliesaattanara ma Mlfflff would involve itself in the defense of Taiwan in any foreseeablef only from fear of conflict with Peking

Koreaeu cleaicut case. But so long as the USseems dependable Japan is unlikely to play morearginal military

role in its defense,ase for US operations, and if necessaryuardian of tbe sea lanes between Japan and the peninsula. The Japanese arc generally optimistic about prospects for avoiding conflict in Korea. And theynique role for themselves: lo improve their own relations with North Korea and so help "civilize" it; and to workorth-South modus vivendi, thus defusing the threat of war before the US loses interest In South Korea's fate. If, however, there shouldenewed threat to South Korea from Ihe North whichseemed unlikely to meet resolutely, Japanese politics would be strained by the question of Japans role in the struggle and especially of whether to send troops to defend the South. Some government leaders probably would want to intervene, but it is doubtful that they couldational consensus in lavor of action. Many Japanese, especially the younger ones, sec littlenational interest in the preservationon-Communist Soulh Korea and feel no threat to Japan from North Korea.

Asia. The Japanese also arc testing the waters for whatthey might play in Southeast Asia. They will increasingly want to bein Asian talkingonference on Cambodia orpeace talks. They probably would Join, and gradually play anrole in. any UN or other international peace-keeping activity inarising out of the Indochina war. Japan will try, however, to keep allAsian activities multilateral and non-military. It wants to avoidits neighbors about its own ambitions in the area, but even more itavoid direct responsibility for any other country's troubles or in anyquarrel. Clearly, one motive for Japan's growing emphasis onis its desire to avoid bilateral responsibility and to keep pressureUS, Australia, and New Zealand for continued involvement inproblems.

The Role of the Military

greatest uncertainty in Japan's gropingworld role" ismilitary might contribute lo it. The Japanese Establishmeni is agreedmodest increase in military forces is desirable, if only for reasons ofand national prestige. This argument is reinforcedesire toobviously independent of flic US, and perhaps by the hope of somelarger Japanese military would enhance Tokyo's position with respect toUSSH. and China. There are powerful domestic interests which have astake in going further still. Some important Japanese industrialists,eye on possible government contracts, are far ahead of the politiciansfor stronger military forces. And somenotably Defense Director Nakasone, may try lofor prestige and profits by very ambiguousfuture. Ifhouldontest between the LDP andto which is morehis too could fuel the desirearge

Thereotent school of thought, probablyajority at present, who think quite differently. These men question the traditional coupling of "great power status" with strong military forces, especially in Japan's positionecognized giant among its weaker neighbors. They argue that Japan'srelations and political influence in East Asia would be damaged if it acquired the military trappings of great power status. They also question just whom Japan should arm against. Few Japanese currentlyilitary threat to their own lands. And there is widespread aversion to being drawn into Washington's conflicts with Asian communism. Any potential threat to Japan in the future would certainly comeuclear power, against whom "conventional self-sufficiency" would be of little use unless hacked by nuclear weapons. And the sort of token nuclear torcc which some Japanese might desiretatus symbol would be bitterly divisive at home and damage the image Japan is so assidously promoting abroad, without really achieving strategicfrom Washington. If this line of reasoning prevails, the Japanese just might he the first major naliOn to ask;hese and other argumentsassive military buildup will find considerable sympathy among the Japanese public, which is by no means cured of its "nuclearhich is still apprehensive about militarism, and which moreover is reluctant cither lo pay for or enlistarge defense establishment.

Given anything like the present international circumstances. Japans course among these conflicting pulls almost certainly willompromise which avoids torcclusurc of any option for future decision. Ambitious politicians will look for ways to exploit the issue, but none will want to expose himself to attack by getting too far ahead of the consensus. And consensus will be slower in coming as the decisions become more difficult.

The Military. The Fourth Defense Plan, now being drafted to cover the, will be based on the assumption that the US-Japuneav Security Treaty will remain in effect. The Treaty may be "reinterpreted" to meet changing circumstances, but the government will want toore formal change which would require Diet Or Congressional approval. The Defense Plan is expected to providelow and orderly augmentation of Ihe Self-Defense Forces, with emphasis being placed on qualitative improvement through equipment modernization and new procurement. Firsl priority is to be given lo improving the navy and air force: there also is to be some improvement in the ground forces mobility and capability for joint operations.ie defense-budget could go to as muchercent of therelatively small proportionally bul enough to give Japan the world's llh or 5th largt.sl defense budget. Recruiting, however, will continue toroblem, partlyapan's growing labor shortage. It is highly unlikely that Japan'swill be amended or reinterpreted to allow conscription.

' ll it) jurHfiit ,oni)sircd torrccut in ihe UK. West (Jemiaiiy. ami France.

5-i. defense related industries are likely to grow proportionately mote than defrme force* in the corningajor effort will be made lo produce most military equipment al home. High on (he mditary-industrial shopping list arc research and development contracts, as weD as production orders, for such advanced Items as antisubmarine detection and landhased radarariety of electronicide range of ships and aircraft, and rockets and antimissile missiles. There also will be pressure on the government to allow Japanese industry to produce such things as bombers, "non-nuclear' ballistic mis sales, ami antibalhstic missiles, and to case restrictions on foreign sales of military equipment. All this would put Japanosition to reduce its own purchase of US military goods and might eventually add an important line of exports, thus bringing Japan into competition with Ihe US for sales to third countries.

e do not however,ramatic change in ihe role of the forces Japan will be building during. The navy and aa force will extend their area of operations, partlyult of responsibilities assumed with the reversion of Okinawa, and eventually will come toreater share of responsibility for defense o( Japan's vital lines of communications. Tin1 decade will probably also see routine Japanese naval cruises in the Straits of Malacca and perhaps in tbe Indian and Sooth Pacific Oceans. But itunlikely that Japan will want to station any forces abroad or to accept foreign militaryairily not bilateral ones. At most. Japan might contribute some civilian police and security officers to an international truce-keeping force for Vietnam or possibly some UN operation further afield.

are less certain about Japan's military nuclear future. Someational nuclear capabilityatural component"big power"ar greater number of Japanese still arcthe very idea. And most probably are sincvn-ly troubled at tlic prospectlu choose between ion tinned andl lance on the US, andand political coit* to Japan of acquiring its own nuclear weapons.of other nations will be important Japan's nuclear temptations willif several others, especially another Asian, should acquire aJapan's eventual decision will be profoundly affected by US andor what the Japanese think them to be. An antibalhstic missilebe especially relevant for Japan if it felt exposedostile Chinaabout the US. If Japan wauled touclear antiballisticit would have to denounce the Nuclear Non-Proliferation Treatyhas signed but not yHut (lib probably would not of ilself beobstacle

balance, we think that unless the Japanese come to feel somethreat lo themselves for which US protection isj^dnwill outweigh the temptations at least for some yely?flft'ide

fromoreign war. acquiring nuclear weapons would be the moststep any Japanese government could take and the one winch would make il most vulnerable to political criticism, especially from within leadr-nhip circles and from its Asian neighbors.

apan certainly will want to keep its nuclear option open, throughboth of peaceful uses of nuclear energy andophisticated spaceJapan isosition, if it chose to ignore safeguards On fissionable materials presently on hand, touclear device some two to four years after deciding to do so. Another year or two would be required before operational nuclear weapons would be available. One probable motive for Japan's commercial space program is to develop the capabilityedium- or long-rangetrategic missile development program based on existing technology and launch vehicles wouldinimum of three to five years to complete As technology and hardware which the US has agreed to supply is exploited, the development time probably will be reducedear or so.

S Bases. Japan's efloits to build up its conventional military forces will reinforce already growing desires for reduction of the US bases in Japan and Okinawa. Defense Agency Director Nakasone has made public suggestions for Joint US-Japanese use of US bases and for the eventual return of all US facilities to Japan's Self-Defense Force or to the public for non-military use; theespecially want to reclaim land now used by US forces around crowded urban areas. While it is possible that therenowballing of opinion against the US bases at some point in the decade, it seems more likely that the Japanese will press for gradual transitional arrangements with lOitit use leading eventually to complete Japantsi' assumption of control. During, Tokyo may want to reduce the US base structure to little mure than the naval bases is Sascbo and Yokosukn. the .Misawa airha.se in northern Honshu,ew major air and logistics installations on Okinawa, all of which can be considered important for tbe protection of Japan mid its security interests in Northeast Asia, even iu these instances, the Japanese probably svill press lor the formal transler of the bases to their control Although tacitly accepting considerable US freedom of action in use Of such bases, the Japanese will clearly interpret their right ol "prior consultation" over theof US forces from Japaneto power. But so long as Japan is ultimately dependent On US military protection, it probably will want to keep some US bases in order to facilitate and giveto lhat protection And, in the interests of regional security, it svill not want to dilute too obviously Ihe US deterrent to Chinese or North Korean aggression on the mainland.

UNSETTLING CONTINGENCIES

(OBI

he government's ability to follow the cautious, option-holding course we have outlined depends not only on its own efforts but also on the international environment in which il will he operating, and especially On the behavior of the three majorSoviet Union, China, and theior RELEASE Japan measures its interests. If, to lake the most extreme case, thehina should patch up their differences and seem genuinely threatening toward Japan, and if at Ihe same time the US should be goingpell of posl-Vietnam Isolation ism. Ihe Japanese probably would feel forced lo change course. The government would have to eitherolitically difficult and costly

independent military effort, including the production of nuclear weapons, or try to reach accommodation with the threateninghether It could establish some land of consensus in fas or of either course, or would have toitterly divisive polarization of the nation, is difficult to predict and would of course depend on thehich the threat arose

Much of course depends on the future of Sino-Soviet relations, and whether Japan can continue to expect each of the rival Communist giants to be at least friendly enough to want to keep Tokyo from Ihe arms of the other The SmM t'ltion has the greatest capacity to threaten Japan, and is tbe power which has historically most worried the Japanese. But most Japanese expect the USSR to remainonservative force during, guarding the status quo at home and in what is left of its satellites. Chinauch more doubtful factor in Japan's long-run calculations. All Japan's Asian policies, as well as its defense thinking, largely hinge on whrthcr the Japanese continue to see China moreource of potential opportunity thanhreat

The central factor in Japanese strategic calculations, however, will continue to be tbe US. So long at the Japanese believe they can depend on W'oshinglon sthey are unlikely to be panicked into abrupt departures in their own defense policy. As we have noted above, large US forces in Japan will nut be necessary to make the alliance seem valid, but neither will US forces in Japan alone be entirely sufficient; some important Japanric would be seriously alarmed by the spectacle of an "abandoned- and threatened South Korea. By contrast, further escalation of tbe fighting in Indochina could revise Japanese liars that their military ties with Washington might somehow draw them into conflict with China.

V. IN

apan, then, is embarkedelf-conscious search for its 'rightful place* in the world. But barring some fairly dramatic change in the international environment its progress will be cautious, as the government carefully feels nut what the traffic will bear at home and abroad, ft will have to maneuver among the competing claims uf domestic needs und international ambitions, to balance .upirations for political status and influence against tears of being drawn into other people's problems or hurting trade.

W. As Japan goes on getting richer, its titizens will become even more self-confident in pursuing their economic inlm-Hs abroad. By the end of the decade. Japan will be more nearly an equal in Its economic relations with the US; is likely to be the dominant external factor in the economic life of non-Communist Asia, and the largest external economic Inlluencc in China. Australia, and New Zealand, and in all Likelihood, will be the greatest single[ US even In such traditional American preserves as Latine somewhat more careful about political lhan economic assertiveness. Whileeager toajor role in multilateral forums, it will continue wary of bilateral commitments, particularly anyilitary contribution.

here will inevitably be disagreements with ihe L'S on many issues. Japan will ne too assertive economically to suit American businessmen, and trss willing totiinty role than Washington might wish. It will continue to expect US nuclear protectionatter ofwn interest, without Ix-lngto do much in return. And it will be increasingly sensitive to Japanesein international negotiations over, for instance, nuclear power. Nevertheless, the essential ties with the US will endure, bused on economic interdependence and mutual Interest in the liability of Eastcommunity from which Japan cannot withdraw. But Japanese awareness of their reliance on these ties will itself add to their desire to appear indepeiKaent of the US, especially in Asian policies. Probably more important than any specific change in Japan's world role will he the change in Japanese attitudes. Especially in mditary mailers and in relations with the US. pragmatism will prevail over sentiment In Japanese Ihinking. One of Japan's chief goals inotive force behind the search for diversified resources and markets, the development of Japanese technology, the buildup of military potential, and the gropingohtical voice. wiQ be to increase Japan's ability* to act iiKjependentlyin certain circumstances in conflictUS,

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