From April 26th until the 3rd of May, Shinzo Abe will visit the U.S. as a state guest. For a Japanese prime minister, this will be a great honor, something not seen for nine years. Abe will speak at both the U.S. Senate and the House of Representatives, a glory not even granted to his grandfather Nobusuke Kishi when he visited the U.S. many years ago. At a time when the world will be celebrating the 70th anniversary of the end of the Second World War, the Japanese leader intends to use the visit to further integrate security protection with economic relations, which may bring Japan-U.S. relations to an epoch-making new level. The underlying conflicts between the two countries, however, can hardly be masked and Japan-U.S. relations run the risk of accelerated hollowing-out.
On the security front, the talks between the two heads of state will bolster bilateral security cooperation in more areas and help the two sides seek “security integration” that is “seamless.” Before Abe’s visit, the U.S. Secretary of Defense visited Japan to draw up a new blueprint for the amendment to the Japan-U.S. defense cooperation guidelines and upgrade the “right to collective self defense” to “security integration.” The key is for the Japanese Self Defense Force to engage in all-dimensional and all-weather defense cooperation, be it at war time or peace time, be it in the peripheral region or across the globe, and both in “grey areas” and at “grey time.” The situation in the surrounding areas identified in the 1997 updates of the defense guidelines would evolve into the situation of great significance and the hypothetical threat would come from China’s possible military activities in the east and south China seas. This may serve Abe’s purpose of “virtual security strategy,” but it will also push Japan to the forefront of the U.S. strategy and force it to help the U.S. address its fiscal inadequacy and achieve rebalance in security projection.
Abe sees the U.S. needs as an external condition for his expansionist defense development and an important opportunity to carry forward his grandfather’s legacy of seeking equal status with the U.S. in the area of security. Now that Japan is no longer Asia’s Number One in economic terms, Abe intends to make Japan Asia’s Number One in security terms by relying on the U.S. His calculation may lead to hollowing-out of the seamless defense integration between Japan and the U.S.
On the economic front, the Nikkei stock average, for the first time in 15 years, hit 20,000 points in early April. “Abenomics,” which gives top priority to the “price of capital,” features bold financial policy and flexible fiscal policy. By encouraging devaluation of the Japanese yen, it has helped Japanese companies translate advantageous exchange rate into profits and thus push up stock prices. “Abenomics” is hence widely recognized and appreciated by investors.
The real purpose of Abe’s yen devaluation policy is to attract Asian capital from the New York stock market and channel it into the Japanese stock market. Over the past two years since Abe’s assumption of office, the Nikkei stock average has expanded by nearly 2.3 times and the U.S. dollar-denominated stock index in the Japanese market has grown faster than the Dow Jones industrial average. At present, the U.S. and Japan have taken categorically different financial policies, with the U.S. adopting a tight policy, and Japan a loose one. This has led to an accelerated devaluation of yen, which poses as competition to the U.S. exchange rate. As a result, the Japanese virtual economy started to show its “power of growth,” and Abe therefore vowed not to trade Japan’s national interests for the conclusion of the TPP before his visit to the U.S. The Japanese and U.S. heads of state are not likely to yield any satisfactory results on economic issues.
Viewed through the prism of rebalancing regional institutions, the domino effect of the AIIB has exposed the divergence of G7′s positions. Behind the converging attitudes of Japan and the U.S. are the thinly veiled differences in their calculations. The U.S. believes that the AIIB should adopt the operational model of the World Bank while Japan cares more about “Asian dream” that is dominated by the Asian Development Bank. The ADB annual conference will be held together with the ASEAN+3 finance ministers’ conference in May. This arrangement is similar to the paralleled convening of the World Bank annual conference and the G20 finance ministers conference. This implies the asymmetric relationship between the power of yen as a regional currency and that of the US dollar as a global currency. Being one of the currencies in the SDR valuation basket of the IMF, the Japanese yen is already an international currency both in form and in institutional arrangement. In comparison, China’s RMB yuan is still marching toward internationalization, at least institutionally. It is more realistic to expect the Japanese yen to compete with the U.S. dollar. And given the asymmetric interdependence of the Chinese and U.S. economies, the currencies of China and the US are more complementary. In this sense, China, the US and Japan will play distinctive roles in the process of institutional rebalance in the Asia Pacific. Against such a backdrop, how to align Abe’s virtual economic, political and security strategy with the US institutional rebalance strategy in the Asia Pacific region may present itself as the other side of a coin in Abe’s state visit to the US.