Japan-Southeast Asia relations have been largely positive over the past year and this trend will likely continue in a foreseeable future. Relations have gained new political traction since early 2018 from Japan’s “Free and Open Indo-Pacific” (FOIP) concept, which has bolstered Japan’s political, economic, and security engagement with Southeast Asia. There are three main positive trends: a synchronization of Indo-Pacific concepts, Japan’s enhanced security commitment to Southeast Asia, and constructive development of bilateral relations between Japan and Southeast Asian countries, particularly Vietnam. However, these trends have been focused on short-term goals and have not yet cemented a strategic relationship between Southeast Asia and Japan. Accomplishing that longer-term goal depends on whether Japan and Southeast Asian states can effectively manage three emerging challenges: reconciling differences with the US approach to the FOIP, expanding economic connectivity, and developing digital infrastructure.

Japan-Southeast Asia relations have been largely positive over the past year and this trend will likely continue in the foreseeable future. This is partly because Japan-Southeast Asian relations have gained new political traction from Japan’s “Free and Open Indo-Pacific”(FOIP) concept, which has bolstered Japan’s political, economic, and security engagement with Southeast Asia. Relations have reached a high point. According to the 2019 ISEAS survey, Southeast Asian states consider Japan (65.9%) the most trusted state; compared to the United States (27.3%) and China (19.6%). They also believe Japan (65.9%) would contribute to global peace, security, prosperity and governance whereas the US (27.3%) and China (19.6%) had much lower scores.

Further, the warming relationship between Japan and China, which has been maintained since Premier Li Keqiang’s visit to Japan in May 2018, made it easier for Southeast Asian states to enhance their relations with Japan. Despite existing regional issues such as territorial disputes in the South China Sea, the most significant strategic concern for most Southeast Asian states is that they might be forced to align with a particular major power, either the US or China. Since Japan consistently sides with the US, improvement in China-Japan relations provides Southeast Asian states with more strategic space to flexibly manage relations with the major powers, at least in the short-term.

In this context, three main positive trends strengthened Japan-Southeast Asia relations: a synchronization of Indo-Pacific concepts, Japan’s enhanced security commitment to Southeast Asia, and the constructive development of bilateral relations between Japan and Southeast Asia states, particularly Vietnam. However, these are short-term trends. Ultimately, the relationship depends on whether Japan and Southeast Asian states can manage three emerging challenges: reconciling differences with the US approach to the FOIP, expanding economic connectivity, and developing digital infrastructure.

Three positive trends

Recent stability in Japan-Southeast Asian relations is well illustrated by three major positive trends.  First, Japan and Southeast Asia’s concepts of the Indo-Pacific concept have gradually aligned in the past year. The basis for Japan’s FOIP concept is “US in, China down, ASEAN/India/Australia up.” While encouraging a sustained US presence in the region and constraining China’s behavior with existing international rules and norms, Japan aims to empower ASEAN, India, and Australia through the enhancement of bilateral and multilateral ties. However, there is always a risk that Japan could face a situation where its FOIP concept is not endorsed by regional states.

Indeed, in May 2018, Singapore’s Foreign Minister Vivian Balkrishnan stated that unless ASEAN centrality was clearly defined in the FOIP concept, Singapore would not join related groupings such as the quadrilateral cooperative framework between Australia, India, Japan, and the United States. This concern was generally shared by all ASEAN member states because such non-ASEAN arrangements would politically marginalize the association and prevent it from setting or controlling the agenda for regional multilateralism. This is one of the most compelling reasons why Indonesia began pursuing the idea of developing a separate ASEAN Indo-Pacific concept in 2018, resulting in ASEAN’s formal discussion on the concept in November. In March 2019, Indonesia hosted the first High-Level Dialogue on Indo-Pacific Cooperation, emphasizing the basic principles that ASEAN values: openness, inclusivity, transparency, rules-based order, and ASEAN centrality.

Japan moved to mitigate ASEAN’s concern by incorporating the association’s principles into its FOIP concept between mid-2018 to early-2019. In August 2018, some ASEAN member states argued that it would be difficult to support the “strategy” as it would presumably target China. Accordingly, Japan eliminated the term “strategy” since it was seen as connoting that there were targeted actors to “defeat,” shifting from talking about the “Free and Open Indo-Pacific Strategy,” to simply using “FOIP.” While the change in terminology does not have a strategic impact on Japan’s basic posture or policies, it sends a political signal that Japan is open to suggestions from external actors, particularly ASEAN.

A second, more important, change was Japan incorporation of the principle of “ASEAN unity and centrality” into its FOIP concept. Japan’s initial FOIP framework in 2016 was rudimentary and did not include a reference to ASEAN. In 2018, Japan incorporated ASEAN in its FOIP conceptual map and publicly emphasized the importance of ASEAN centrality and unity. The Quad states also publicized the importance of these principles: there is Indian Prime Minister Narendora Modi’s keynote speech at the 2018 Shangri-La Dialogue, Australian Foreign Minister Marise Payne’s speech at the 2019Australia-US Dialogue, and the 2019 joint statement of the US-Japan Security Consultative Committee. Mitigating ASEAN’s political concerns in the context of the emerging FOIP concepts have gradually aligned the concepts of Japan and ASEAN, creating a shared vision toward the Indo-Pacific region.

Japan has also started institutionalizing its defense commitment to Southeast Asia. Japan’s “Vientiane Vision” in 2016 set the framework for cooperation to ensure regional security, including management of nontraditional security and maritime security, with ASEAN member states. As part of this effort, Japan has conducted joint military exercises and capacity-building programs.

Bilaterally, as the Philippines and Vietnam face acute strategic pressures from China over the South China Sea, Japan not only provided maritime law enforcement assets, such as coast guard patrol ships, but also conducted coordinated capacity building programs with the United States, aimed at strengthening Southeast Asian states’ capabilities, including maritime domain awareness (MDA). In this connection, Japan also plans to launch new programs, such as the “professional airmanship program,” which facilitates confidence-building measures between air services and nurtures shared values to adhere to rule of law.

While these programs illustrate the continuity of Japan’s commitment, the most salient trend of Japan’s policy in Southeast Asia from 2018 is its increasing defense presence in the region, despite its political limits and limited military capabilities. From August to October 2018, Japan conducted the Indo-Southeast Asia Deployment 2018 (ISEAD 2018), in which approximately 800 Japanese personnel with JS Kaga, JS Inazuma, and JS Suzutsuki sailed through the South China Sea and the Indian Ocean, making port calls at Southeast Asian ports in Indonesia, Singapore, and the Philippines. While this operation is not formally institutionalized, Japan dispatched JS Izumo and other fleets for Singapore’s first maritime review in May 2017, and in 2019, Japan plans to conduct the Indo-Pacific Deployment 2019 (IPD19), which is equivalent to ISEAD 2018, from April to July, bringing JS Izumo and JS Murasame with approximately 590 personnel to  visit Brunei, Malaysia, Philippines, and Singapore.

These operations are neither equivalent to US freedom of navigation operations (FONOPs) nor guaranteed to be conducted every year given Japan’s limited military assets. Also, if they not carefully managed, these operations could provide China justification to be more assertive in the South China Sea. Nevertheless, Japan’s increased presence and visibility in the South China Sea has served to check China’s activities, which has been welcomed by some Southeast Asian states, especially Vietnam. Japan has also engaged with other potential partners, including France and the United Kingdom, to coordinate such operations. If a division of labor is established, this could offer a new strategic option that Southeast Asian states can rely on for ensuring freedom of navigation and overflight in the South China Sea.

While Japan’s bilateral relations with each Southeast Asian state have been well managed, these efforts have been concentrated on a limited number of states, Vietnam in particular. The focus on Vietnam is partly because it is the ASEAN country coordinator for Japan from 2018 to 2021. However, with Vietnam becoming the ASEAN chair in 2020, it will also be able to shape the ASEAN agenda during its tenure. Vietnam welcomes this opportunity because Japan has been an important strategic partner for its economic and defense development. Additionally, 2018 was the 45^th anniversary of Japan-Vietnam diplomatic relations, which gave both states traction to enhance bilateral ties.

President Tran Dai Quang visited Japan in May as a state guest and issued the Joint Statement with Prime Minister Abe Shinzo that touched on Japan’s FOIP objectives that Vietnam shares: freedom of navigation and overflight in the South China Sea, adherence to international law, maritime security, and connectivity through quality infrastructure development based on international standards. Throughout 2018, both states frequently conducted high-level dialogues, confirming the continued importance of Japanese overseas development assistance (ODA) to Vietnam and joint efforts to facilitate free trade through the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP). In December, Japan and Vietnam began negotiating a mutual legal assistant treaty and extradition treaty, nurturing bilateral legal norms. These cooperative schemes support the rules-based international order.

Other bilateral relations have also steadily strengthened. In addition to issuance of Indonesia’s samurai bonds, Japan has pledged to issue samurai bonds in the Philippines (approximately $1.4 billion – focusing on infrastructure linked to environmental protection) and Malaysia (approximately $1.8 billion – focusing on education and transportation). For infrastructure development, Indonesia completed the first phase of the Jakarta subway project in March 2019 and has been constructing the Patimban Deep Sea Port using loans from Japan. Also, Japan and Thailand agreed to enhance areas of cooperation between the Mekong-Japan framework and the Thai-led Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy (ACMECS) to promote subregional cooperation among Thailand, Laos, Vietnam, Cambodia, and Myanmar. Japan supported democratization and human rights protection in Cambodia and Myanmar through the Japan-East Asia Network of Exchange for Students and Youth (JENESYS) by inviting younger politicians from Cambodia and through the Japan-Myanmar Human Rights Dialogue.

Some of these initiatives were in place long before Japan’s FOIP concept emerged. Yet, under it, Southeast Asian states have received additional political, military, financial, and socio-cultural support from Japan, which facilitates interconnectedness between Japan and Southeast Asian states.

Three challenges: political values, economics influence, and digitalization

Despite these positive trends, three strategic challenges and risks remain in Japan-Southeast Asia relations: diverging approaches to the FOIP, limited economic connectivity, and uncertain prospects for digital infrastructure. These issues would not immediately threaten the entirety of Japan-Southeast Asian relations, but they could marginalize the relationship as they gradually diminish Japan’s influence in Southeast Asia.

First, Japan’s approach toward “fundamental rights” within the FOIP concept has diverged from the US approach, which could affect the stability of the Southeast Asian strategic environment. While Japan and the US share the common objective of maintaining the existing international order led by the United States, Japan has emphasized rule of law at the international level while the US focuses on both the domestic and international levels, including the promotion of democratization and human rights protection as Alex Wong, deputy assistant secretary of Bureau of East Asian and Pacific Affairs at the US State Department, has explained.

Japan takes a softer approach toward nondemocratic Southeast Asian states, especially Cambodia and Myanmar. When Cambodia held a general election in July 2018, its election process was criticized as illegitimate by the United States and Europe because of political pressure imposed by Hun Sen, the prime minister from the Cambodia People’s Party (CPP). Most notably, Hun Sen dissolved the opposition party, the Cambodia National Rescue Party (CNRP), in November 2017, which had been rapidly gaining public support for the upcoming election. In Myanmar, despite the democratization process, the government has conducted counterinsurgency operations in Rakhine State since 2016, when it clashed with the Arakan Rohingya Salvation Army (ARSA). This incident resulted escalated the conflict and led to major human rights violations against Rohingya, which triggered a refugee crisis.

While the United States imposed sanctions on individual human rights violators in Myanmar in 2018 and passed a sanctions bill targeting Hun Sen and senior officials in Cambodia in 2019, Japan continued to take a softer approach by providing ODA to these states to facilitate socio-economic stability while supporting infrastructure development. Japan expressed regret about Cambodia’s election process and it showed a political interest in promoting democratization. Yet, Japan avoided direct criticism; instead, it conducted educational exchange programs for young policymakers to learn about Japans’ democratic process.

This divergence in FOIP concepts has a long-term strategic implications for Japan and Southeast Asian states. Without a clear understanding of each state’s policy and a political division of labor, diplomatic misunderstandings and tension between the US and Japan over these issues could emerge, further complicating relations between China, Japan, and the United States. As major power competition intensifies in the Indo-Pacific region, states, including Japan, are likely to pay less attention to regional multilateralism and possibly marginalize ASEAN.

A second challenge is the clear limitations on Japan’s economic influence in Southeast Asia in the long-term, in comparison with China. China surpassed Japan’s GDP in 2010 and has been ASEAN’s number one trading partner since 2009. In recent years, China’s trade volume rapidly increased. In 2016, China increased its export of goods from $144 billion in 2016 to $186 billion in 2017; meanwhile, Japan increased exports from $96 billion to $105 billion. China’s imports increased from $224 billion in 2016 to $254 billion in 2017 while Japan’s increased from $105 billion to $113 billion. This trade imbalance is particularly glaring in Cambodia, Laos, Myanmar, and Vietnam, where China’s figure in 2017, $113 billion, is approximately three times larger than Japan’s figure, $37 billion. For individual Southeast Asian states, China’s exports are three to four times larger than Japan’s. The figures are relatively close in Thailand’s case, but even so, Japan’s figure is $27/29 billion in 2016 and 2017, respectively, while China’s is $37/38 billion. In terms of imports, Japan exceeds China in Brunei and Cambodia, but the absolute amount was still relatively small. Given the size of China’s domestic market, this trend is likely to continue.

These figures do not capture the effect of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), however, which went into effect Dec. 30, 2018. The figures might change for Singapore and Vietnam, while waiting for Malaysia’s and Brunei’s ratification. However, given relatively stable trade trends, China’s trade influence over Southeast Asian states will not likely shift in the near future. RCEP is another tool to bolster trade relations among member states. Yet, in 2018 the RCEP ministerial meeting postponed its deadline for completing the agreement from the end of 2018 to the end of 2019, which raised doubts about whether the framework can be implemented as scheduled.

On foreign direct investment (FDI), Japan has been a dominant player in Southeast Asia, but this trend is also shifting. According to the 2018 ASEAN Investment Report, Japan’s share of total investment in ASEAN was 9.6% ($13.2 billion) in 2017, passing the United States, which lagged behind in 2017 with 3.9% ($5.4 billion – significantly decreasing from $18.8 billion in 2016 due to large divestment). China maintained its investment level, providing $11.3 billion and moved up from fourth in 2016 to third in 2017, just behind ASEAN and Japan. As such, Japan maintained its dominant position. However, the situation in Cambodia, Laos, and Myanmar is different. China surpassed ASEAN in 2017, raising its share from 22% to 22.6%, and became the top investor (Japan was at 8.7% in 2016 and 8.3% in 2017). China has been the largest investor in Laos, dominating with a share of 66% in 2016 and 77.5% in 2017. (Japan was at 4.1% in 2016 and 2017). In Myanmar, neither China nor Japan was the dominant player in 2016 and in 2017 while ASEAN and the Republic of Korea played a significant role, dominating with 56.3% and 19.7% in 2016 and 18.2% and 48.2% in 2017, respectively. In these countries, investment gaps between Japan and China were not narrowed. Furthermore, since China’s overall FDI has rapidly increased, it would not be surprising if China becomes the top investor in Southeast Asia in the near future.

From this regional economic trend, it is understandable why the 2019 ISEAS Survey indicated that Southeast Asian states consider Japan to be the most trustworthy country while China was seen as the most influential state in Southeast Asia.

A third challenge, digital infrastructure, has added strategic uncertainty in Southeast Asia. Industry 4.0 has gained attention from the international community as it has the potential to alter ways of life through automation and digitalization of society primarily based on a new 5G telecommunications system. Digital infrastructure becomes the key to advancing society, and it has been greatly contested as seen in the 2018 Huawei incident, which intensified the technological rivalry between China and the US. This issue also affects Japan-Southeast Asia relations because Japan has followed the US lead in this field while many Southeast Asian states have yet to clarify their stance.

Japan is concerned about incorporating Chinese products into its 5G system due to security reasons, including cyberattacks, influence operations, and information security. Four Japanese companies – NTT Docomo Inc., KDDI Corp., SoftBank Corp., and Rakuten – have been distributed Japanese 5G frequencies and decided to refrain from using Chinese products, including Huawei and ZTE. While Southeast Asian states have yet to establish 5G guidelines, it is unlikely that they will exclude Chinese products despite the security risks. For developing economies, cyber security risks are lower priority. Since they cannot technically control information security, they might well purchase Chinese products because of their lower cost and better performance. These choices have long-term implications for state security. Nevertheless, socio-economic development is likely to be their short-term priority.

Some Southeast Asian states are concerned about digital influences and information security. For example, Vietnam is now considering development of its own 5G system through Viettel, the largest mobile network provide in Vietnam. Singapore has sought to maintain a neutral position by including Ericsson, Nokia, and Huawei through its three telecommunication companies, Singtel, Starhub, and M1. A problem would arise if the US takes a tougher stance against China’s 5G system to force countries to exclusively select a system. This would make it difficult for Japan to cooperate in not only the digital field but also other areas related to Industry 4.0 with Southeast Asian states that adopt Chinese systems.

Although the issue remains largely speculative, the development of digital infrastructure in Japan and Southeast Asian states creates strategic uncertainty in their relations, which needs to be closely watched in 2019/2020.

Looking ahead: 2019 and beyond

From the mid-2018 to early 2019, Japan-Southeast Asia relations remained stable and ties have gradually strengthened. Japan conducted careful diplomacy to avoid disrupting bilateral and collective relations with Southeast Asian states while steadily strengthening its security presence in the South China Sea through ISEAD 2018 and providing quality infrastructure to the region through developmental assistance. Southeast Asian states nurtured amicable relations with Japan without antagonizing China, essentially hedging against being forced to choose between the US or China.

ISEAD 2018. Photo: MilitaryLeak.com

These strategic trends are not destined to continue in the longer term, considering the potential intensification of competition between the United States and China. Then, Japan and Southeast Asian states would likely face the above-mentioned challenges more acutely, which could create tensions in the relationship. The key to making the Japan-Southeast Asia relationship more resilient and a pivotal part of the Indo-Pacific region is to include risk-management dialogues to address the challenges.  For Japan, 2019 is the “year of action to realize a free and open Indo-pacific,” which should help consolidate and elevate Japan-Southeast Asian relations.