How Shinzo Abe Can Win Friends and Influence China
Comment of the Day

July 19 2013

Commentary by David Fuller

How Shinzo Abe Can Win Friends and Influence China

For Abe, though, Japan's revival isn't merely a matter of yen rates and export figures. He envisions a broader renaissance, in which the island nation reasserts itself as a natural leader of Asia. The prime minister's advisers don't hesitate to say that the boldness of Abenomics emerged out of a sense of existential threat -- a feeling that Japan had begun to settle into genteel decline and had put itself at the mercy of a bullying, arrogant China.

Abe has talked of revising the "pacifist" constitution in order to transform Japan's Self-Defense Forces into a regular military, free to conduct combat missions abroad. He hasn't ruled out the possibility that he might visit the Yasukuni Shrine, which honors Japan's war dead, including 14 Class A war criminals. A wing of Abe's Liberal Democratic Party is pushing to rewrite Japanese history to be less critical of Japan's record in World War II.

All these measures are hugely controversial at home, let alone abroad, where they enrage Japan's neighbors. China, Japan's largest trading partner, is happy to wage this fight. President Xi Jinping faces a tough, painful stretch of economic restructuring at home that could throw millions of Chinese out of work. He needs to keep an assertive military on his side, and a restless populace distracted: Japan-bashing serves both purposes. Heightened tensions -- particularly around disputed islands administered by Japan but claimed by China -- may well escalate into a military conflict that would draw in the U.S. and derail Japan's incipient recovery.

The Clintonian adage applies: Japan can't challenge China for leadership of Asia without a strong, vibrant, innovative economy, stupid. Anything that doesn't further that goal is, by Abe's own logic, a distraction.

David Fuller's view The politics in this region do concern me, as I have mentioned before. Hopefully, China and Japan are more interested in economic growth than jingoism.

I believed I mentioned in Wednesday's Audio that Japan was susceptible to some temporary profit taking with the approach of Sunday's election. Today the Nikkei 225 and TSE2 had small downside key day reversals. However, only moves beneath 13,500 and 3,000, respectively, would suggest more than a short-term pause.

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