Old Wounds May Infect Japan's Economic Future
William Pesek Jr.
Bloomberg News
Thursday, August 05, 2004TOKYO As Japan's soccer team filed onto the playing field in China this week, the real opponents seemed to be in the stands. Chinese fans in the city of Chongqing booed the team, sat down during Japan's national anthem and pelted Japanese fans with garbage.
The episode even prompted Prime Minister Junichiro Koizumi to urge Chinese fans not to let animosity over Japan's World War II exploits affect sporting events.
While it might not seem it, Japan's bad reception at this week's Asian Cup is an economic story, too. The antics that had Japanese soccer players scrambling to their team bus for safety after playing highlights an issue with which politicians here in Tokyo need to grapple: how Japan's failure to atone for its past military aggression may undermine future growth.
With Asia stealing the spotlight from the mature, aging, risk-averse economies of the United States and Europe, Japan is realizing its economic future lies here in Asia, not in the West.
Japanese politicians and business people who once bragged that Japan had joined the West, effectively distinguishing itself separate from Asia, now look to this region for growth.
Koizumi first seemed to realize this when he visited China in October 2001. The 62-year-old was taken aback by China's futuristic skyscrapers and energy. If ever there was a time for Japan to worry about its dwindling status on the global stage, that was it.
More recently, Koizumi has watched as China reached out to Asia economically and diplomatically. China is in the midst of a global charm offensive to convince Asia it aims to be a trusted partner, not a brash rival. Many leaders moved from fearing China to figuring out how to ride its wave of economic growth.
Finally, Koizumi's government is realizing that it risks being eclipsed as China's influence grows. That explains why Japan is scrambling to sketch out free-trade agreements with countries such as Malaysia, South Korea and Thailand. Koizumi also is traveling throughout the region, pledging cooperation on economic and trade issues as never before.
The trouble is, Japan's historical baggage remains an 800-pound gorilla in rooms where such talks occur.
Take Koizumi's recent trip to South Korea, Asia's No.3 economy. He and South Korea's President Roh Moo Hyun last month planned to work on a free-trade agreement and North Korea's nuclear weapons program. Yet precious time was spent on discussions about Koizumi's visits to a controversial shrine that honors class-A war criminals.
Korea's 48 million people demanded that Roh raise issues surrounding Japan's history textbooks - which whitewash its attempted colonization of Asia - and Koizumi's war shrine visits.
The same was true in October 2001 when Koizumi met with then-President Kim Dae Jung. Their chat focused on repairing historical wounds between two of Asia's biggest economies. Little, if any progress, has been made since.
And then there's China, by far Asia's most dynamic economy and one playing a major role in Japan's recovery. China is sucking up all the attention and, more importantly, much of the capital that is flowing to Asia.
Japan needs Chinese buyers for its goods, as well as easy approval for its companies looking to build factories on the mainland and invest there.
It also needs Chinese consumers to be interested in its promising "cultural export" industry centering on music, film, books, video games and design.
Japan's leaders may not realize it, but the nation's past military aggression haunts its current relations and may ultimately undermine its economy. If Japan wants to regain its lofty status in Asia, it needs to heal the wounds it inflicted on nations around the region. It means doing more to apologize for World War II atrocities and paying reparations. Until then, the billions of dollars in financial aid Japan hands to neighbors won't temper the hard feelings.
Thanks to Japan's reluctance to atone for its past and his culturally insensitive pilgrimages to Yasukuni Shrine in Tokyo, Koizumi can't even visit China. That the leader of Japan can't set foot in Asia's most vibrant economy and the key to Japan's economic future puts Japan at a disadvantage.
That, at a time when Japan needs to ride China's coattails. That, at a time when Japan needs to internationalize its bond market - 97 percent of government debt is held domestically - so it can sell more securities in the years ahead. That, at a time when China and Japan should join hands to resolve tensions with North Korea. That, at a time when Asians should cooperate on becoming an economic bloc that rivals the West.
Asia wants to create a euro-like single-currency zone, build a region-wide bond market, link stock markets, create a better credit rating system for bonds and adopt standardized accounting regulations. It would help if Asia's two biggest powers were working together to boost growth in the region.
Instead, China and Japan are bickering over geopolitical issues, and not just on the soccer field. It's something about which Japan needs to think far more seriously.