It has been a relatively quiet quarter for United States-Japan relations.  Political, economic, and security relations have continued on a positive course.  The absence of any key event – read “crisis” – has allowed both governments to focus their attentions elsewhere.

Yet if the trajectory is good, there has been a big change in a critical element of the U.S.-Japan relationship: the popularity of Japanese Prime Minister Koizumi Junichiro has suffered a precipitous drop.  Since public support was the prime minister’s only card in his battles with the old guard of his Liberal Democratic Party (LDP), the plunge in public approval ratings threatens to undermine his entire legislative program.  Mr. Koizumi’s weakness will also be felt in relations with the United States.  The failure to pursue aggressive economic reform could damage his credibility in Washington’s eyes.  The prime minister has already been forced to give up on the passage of legislation that would allow the Japanese government to respond to crises – an indicator of Japan’s “new” seriousness in security affairs.

No News is Good News

When viewed from afar, relations between Washington and Tokyo look very good.  The United States continues to express its support for the Koizumi government and its reform agenda. In their June 25 meeting before the Group of Eight (G-8) summit in Kananaskis, Canada, U.S. President George W. Bush endorsed Japan’s efforts to get its economy back on track. For his part, Mr. Koizumi continues to support the U.S. antiterrorism effort and the U.S. initiative in the Middle East. Japan’s participation in the war against Afghanistan has been extended, although the naval presence has been slightly reduced. In early June, Tokyo dispatched two more vessels to the Indian Ocean as part of that effort. The two governments are also cooperating at lower-level meetings, such as the Trilateral Coordinating and Oversight Group (TCOG), which includes the U.S., South Korea, and Japan.

Japan Defense Agency (JDA) chief Nakatani Gen highlighted the importance of the U.S. security role in the region at the Shangri-la Defense Dialogue that convened in Singapore in early June and was hosted by the London-based International Institute for Strategic Studies. Mr. Nakatani toed the party line when he noted that the U.S. commitment to Asia is “vital not only for the defense of my country, but also for the stability of the region.”  He had ventured into more risky territory with an earlier remark: Mr. Nakatani called for regular meetings of a multilateral security framework of defense authorities, in which every country in the region would participate on an equal footing. He took some of the sting out of that proposal by arguing that it would “complement and reinforce” current bilateral alliances in the region, a line that seemed to parallel Secretary of State Colin Powell’s reasoning in his June Asia Society speech. Then, Powell said that the U.S.-Japan alliance is the “framework within which Japan can contribute more to its own defense as well as peace and security worldwide.”

There were some hiccups, however. Japan, along with other nations, protested the U.S. decision to impose tariffs on imported steel products and has filed notice with the World Trade Organization of its intention to impose its own tariff on U.S. exports. The U.S. has been backtracking on its original decision by offering a growing number of exemptions to foreign steel producers. By the end of June, over 250,000 tons of Japanese steel have been exempted from the tax. Japan’s rising steel exports to Asia have softened the impact of the tariff and it is reported that Japan may not retaliate after all.

A Smorgasbord of Scandals

The biggest issue for the bilateral relationship concerns domestic political developments in Japan. Scandal and the prime minister’s own political weakness – the two are related  – pose the biggest challenges for the alliance in the months ahead.

In late May, it was revealed that the JDA had been keeping tabs on individuals who requested information under Japan’s freedom of information act. Not only is keeping such lists illegal, but the JDA denied that it was keeping track of the individuals making the requests when word of the lists leaked. The government issued a series of misleading and incorrect statements that only increased concern about its credibility. Finally, officials tried to withhold the full report on the investigation into the scandal – despite promises to release the findings – but the media furor forced them to honor the original pledge.

The timing could not have been worse. The government had four priorities in the current Diet session: a bill to commence privatization of the postal savings system, another to reform health insurance, a law to limit information disclosure (considered a privacy bill to give it the right “spin”), and emergency legislation that would give the government special powers if a foreign country attacked Japan (yuji hosei). Because the defense scandal concerns the Defense Agency and information collection, it has effectively forced the government to take the latter two bills off the table. (The logic is that no legislation can be discussed without addressing the scandals and that would take too much time and be too divisive; moreover, the debate could cripple chances of getting the bills approved.)

That scandal followed revelations that Japanese defense officials had pressed the U.S. to request that Tokyo dispatch Aegis-equipped destroyers to the Indian Ocean as part of Japan’s contribution to the war against terror. While the U.S. had wanted the destroyers as part of the flotilla, there is no indication that the U.S. request reflected anything other than its own assessment of U.S. needs. Nonetheless, there were suspicions in Japan that the military was using the Sept. 11 crisis to make an end-run around the country’s normal policy process.

Finally, several Japanese politicians have made comments about the continuing relevance of Japan’s three nonnuclear priniciples. (According to that policy, Japan will not manufacture, possess, or introduce nuclear weapons.) In April, Liberal Party leader Ozawa Ichiro warned that China’s heavy-handedness could prompt a Japanese nuclear backlash. A few weeks later, Chief Cabinet Secretary Fukuda Yasuo declared that “depending upon the world situation, circumstances, and public opinion could require Japan to possess nuclear weapons.” Fukuda’s remarks were triggered by comments by his deputy Abe Shinzo to college students (thought to be off-the-record) that called for a rigorous examination of the legal restraints on Japan’s defense policies.

When put in context, the three statements make sense. But for many Japanese – and many others – the timing is suspect. Coming on the heels of the Maritime Self-Defense Forces deployment to the Indian Ocean and the tabling of legislation to extend government power in the case of an emergency, it looks like the government is trying to radically alter defense policy and the constraints in which it has been formulated.  (see “Trust Japanese Democracy,” PacNet 26)

The Koizumi Slide

Those incidents are trouble enough for a reform-minded administration. But Mr. Koizumi’s popularity has also taken a big hit. His decision in late January to dismiss Foreign Minister Tanaka Makiko has cost the prime minister his reformist image. The subsequent scandal that erupted in the Foreign Ministry and the mounting difficulties he has encountered have disillusioned the public. Mr. Koizumi’s public approval ratings have been halved since he took office. Recent polls show his favorable ratings are now in the high 30s and 40s (depending on the poll). While that is several times higher than his hapless predecessor, it is less than half his stratospheric ratings of a year ago. More damaging still is the fact that more respondents now give his Cabinet unfavorable marks than favorable ones.

That tumble signals much more than a politician’s return to earth. Since public support is Mr. Koizumi’s only real weapon in his battle against the LDP old guard, the drop in the polls undercuts his ability to fight the dinosaurs. That, in turn, will further erode his image as a reformer. And the opposition within the party smells blood. The old boys have been increasingly obstructionist in the Diet; to add insult to injury they have renewed calls for a Cabinet reshuffle to give the government “a fresh start.” That would give the faction leaders, who were excluded from the original Cabinet selection, a chance to reassert their power. It would effectively end Mr. Koizumi’s claim to be a new-style politician and could cost him his office.

While the U.S. has not put all its money on the prime minister, there is little chance that his replacement could establish the rapport with Mr. Bush that Mr. Koizumi has developed. Few Japanese politicians have Mr. Koizumi’s charisma and political sense. And even if they could create the same personal relationship with the U.S. president, it is extremely unlikely that his replacement would have the same reform agenda – after all, that program is what got the prime minister into trouble with his own party. Worse, it will take time for the new government to be established and to get down to business; that is time Japan does not have given its economic troubles.

Silence is Golden

“Troubles” is a polite term. Japan’s economic situation doesn’t seem to be improving. Despite government claims that the economy has bottomed out, the statistics don’t offer much reason for hope. Unemployment has started to rise again, hitting 5.4 percent in May, a tenth of a percentage point below the postwar record set last December. Employment has fallen to 63.56 million; 14 months of decline have brought that number to the lowest level since 1954. Yet there is still no sense of urgency in Japan. The new recovery plan unveiled at the G-8 summit was greeted with indifference. The Bank of Japan has intervened five times in the last few months to keep the yen from appreciating too strongly against the dollar, which would crush prospects for exports, the only bright spot in the Japanese economy. Despite the Bush administration’s free market leanings, the U.S. has kept silent about Japanese attempts to manipulate the value of their currency.

This silence reflects growing disillusionment in Washington about Japanese economic prospects. With one exception – Glenn Hubbard, the chairman of the president’s Council of Economic Advisors – the Bush administration has apparently decided that there is no point in beating a dead horse. In Secretary of State Colin Powell’s Asia Society speech in June, he merely listed Japan’s economic ills and called on the government to fix them. President Bush was largely silent on the subject when he met Mr. Koizumi in Canada in late June. U.S. thinking is that Japan will act when it is ready, and U.S. attempts to prod, push, or pull Tokyo will only generate ill will.

The POW Wild Card

There is one sleeping issue on the bilateral agenda that has potentially serious implications: compensation for POWs that did forced labor during World War II. U.S. soldiers have filed suit in a California court for redress and the court continues to assert jurisdiction despite arguments by the U.S. State Department that the issue was settled in the 1951 San Francisco peace treaty. Earlier this year, a Japanese court ruled that Japanese companies owed Chinese POWs compensation. That ruling could influence the U.S. court: A U.S. judge would be hard pressed to deny there is a grievance when a Japanese court has already awarded plaintiffs in a similar action.

Yet even if the case does not go forward in the U.S., Japan could lose in the court of public opinion. After the high-profile lawsuits against Swiss banks, lawyers are eager to take on new territory. The claims against South African companies for their behavior during the apartheid years are only the latest manifestation of these suit-happy attorneys. It will be extremely difficult for Japanese companies to argue for exemptions, especially when the plaintiffs are former U.S. soldiers.

Another Hot Summer

In other words, appearances are deceiving. The positive course in U.S.-Japan relations could abruptly shift. Much depends on developments in Japan: an economic shock or another blow to the Koizumi administration would oblige the Japanese political world to focus its energies inward. That might not be a bad thing, given the need for bold action in Tokyo. But turmoil in Tokyo would be problematic for the alliance if events elsewhere in the world force Washington to call on its ally for support. All in all, it promises to be a hot summer in Tokyo as political maneuvering picks up speed.