Prime Minister Yoshihiko Noda of Japan speaks at a tourism conference in Tokyo, April 17 (WTTC)

During the Mekong-Japan Summit held in Tokyo last month, Japan announced additional development aid for and investments in the countries that make up the Mekong Delta region.

The summit was further evidence of Japan’s goal of developing stronger relations with Southeast Asian states as the Japanese economy is beset with tepid growth and due to the uncertainty and mistrust with the region’s biggest and fastest growing power, China.

However, the headlines last month overlooked one of the most important outcomes of these meetings thus far, the steady improvement of Japan-Vietnam relations to the level of strategic partnership.

Bilateral trade between Japan and Vietnam reached $21 billion last year, making Japan Vietnam’s leading trade partner in the region.

This comes as Japan and Vietnam have held increasingly numerous high level meetings and exchanges with each other. Both countries realize that they have a mutual interest in cooperating strategically in order to counter the growing maritime threat emanating from China.

During the summit, the fourth since 2009, Japan pledged ¥600 billion ($7.4 billion) in official development assistance to the five countries of the Mekong Delta—Cambodia, Laos, Myanmar, Thailand and Vietnam. The development aid will come in the form of loans, grants and infrastructure assistance and be spread over the next three years.

Japan’s previous aid commitment to the Mekong nation in 2009 was more than ¥500 billion over a similar three year period.

The summit provided a forum for the parties to discuss economic development, trade and political issues coming after a year of natural disasters in Japan and Thailand and the continuing fear over the prospect of the global economic crisis affecting the region. In their joint statement, Japan and the Mekong countries announced that they will continue to hold meetings at every level in order to encourage continued cooperation.

It was also significant that Burmese president Thein Sein attended because, besides being the first trip to Japan by a leader from Myanmar in twenty-eight years, the West has been gradually welcoming the country in from the cold since the government embraced political and economic reforms.

Myanmar is desperately seeking investment now that sanctions are being lifted in the wake of the recent elections in which Aung San Suu Kyi’s opposition party won forty-three of the forty-five contested parliamentary seats.

Japan hopes to ramp up its investment in Myanmar, as China has virtually had the entire country to itself in terms of infrastructure development and access to natural resources.

Just before the summit it was announced that Japan had agreed to forgive roughly half of the ¥500 billion ($6 billion) in debt that Myanmar owed it, with the balance dependant on reforms that the Myanmar Government must follow through on.

In addition to the development aid and economic opportunities, the joint statement expressed the countries’ solidarity in supporting free navigation of the seas, a reference to the continuing crisis over claims to islands in the South China and East China Seas in which Beijing has been increasingly assertive.

The Mekong countries, in turn, continued to extend Japan support in its bid for a permanent seat on the United Nations Security Council which China has long resisted.

In sum, the Mekong countries have a collective interest in engaging more deeply with Japan and vice versa, both as a counterweight to China and for their own development. Japanese investment revitalizes its own economy by assisting with the development of what it hopes will be future markets for its goods.

Tokyo, Japan at night, December 4, 2008 (cocoip)

In a move widely expected, but one which ultimately left markets disappointed, the Bank of Japan announced more measures that it hopes will fight off deflationary pressures and spur economic growth as well as weaken the yen versus the dollar to boost exports.

Japan’s central bank is expanding its government bond buying program by ¥10 trillion ($124 billion) to ¥40 trillion, extending the duration of corporate bonds it buys from two up to three years maturity and increasing the size of its total asset buying program by ¥5 trillion ($61 billion) to ¥70 trillion.

In addition, the central bank’s policy board voted unanimously to keep interest rates at virtually zero or .1 percent.

Market reaction was initially positive but when investors digested the news in its totality, sentiment soured. Given the size of Japan’s economy, the amount of easing was seen as fairly tepid.

In addition, the Bank of Japan said it was decreasing the amount of funds it lends at a fixed rate of .1 percent to institutions by ¥5 trillion. So, traders saw this as the central bank on the one hand injecting liquidity into the economy while removing it on the other.

Lawmakers have been pushing for the central bank to begin another round of quantitative easing as Japan continues to battle deflation amid anemic growth with the yen strengthening as a result of fears about the global recovery. Coupled with an announcement by the Japanese flagship company, Sony, of massive layoffs, concerns that Japan’s recovery has begun to slow are mounting.

Industrial production for March rose 1 percent from February, versus expectations of it rising 2.6 percent. Japanese manufacturing, while still in expansion mode, slowed in April.

However, the moves by the Bank of Japan belie the fact that the Japanese Government has still not faced up to the endemic structural problems in the economy which continue to prevent strong growth from taking hold. Specifically, Japan’s policy makers have avoided taking the tough but necessary measures to reverse thirty years of stagnation.

Japan’s aging society demands that the government do something that increases the country’s declining birthrates, as it has some of the lowest in the world. Liberalization of the nation’s immigration laws, for instance, would enable an infusion of workers.

Japan has long resisted opening large segments of its economy to foreign competition, as its politicians cling to the protection of their power bases. The government needs to bite the bullet and encourage more trade.

Instead of instituting reforms, the government avoids confronting its vested interests and lays the responsibility of stimulating growth on the central bank. Such policy avoidance by the legislature has not worked over the last three decades and will unlikely be the answer going forward.

British prime minister David Cameron arrives for a visit in Tokyo, Japan, April 1

Japan and the United Kingdom have agreed to an expansion of their defense relationship. Theirs is the first of its kind for Japan with another country besides the United States since the end of World War II.

In what was the first leg of a four day trip to Asia to promote British trade and investment, Prime Minister David Cameron met his Japanese counterpart Yoshihiko Noda in Tokyo and announced that the two countries would cooperate on identifying defense programs for joint development and production.

Though no specifics were mentioned, one Japanese newspaper reported that Cameron had mentioned developing helicopters or protective gear against chemical weapons. In a joint statement, the two countries stated they would launch at least one program as soon as possible in addition to developing joint military training and unit to unit affiliations.

Japan lifted its restriction on exporting weapons and cooperating with other nations in defense programs in December 2011. The ban had in place in accordance with its pacifist constitution and was in effect with all countries except the United States which ostensibly provide for the defense of Japan.

For Japan, this agreement should be considered in the context of continued economic weakness, domestic politics and the specter of a growing China.

The economic benefits of greater trade with Britain amid the continuing global economic crisis will be welcomed. Japan’s economy has been struggling to recover amid the slowdown in the European Union and a rising yen.

Its decision last year to opt for the F-35 stealth fighter by America’s Lockheed Martin over the Typhoon jet made by a consortium of European countries was controversial because Japan chose the more expensive plane during a time of scarce resources and a stagnating economy. Increased contact with the British military may result in more competition for Japanese defense expenditures in future procurement deals.

As China has become the number one trade partner to countries in Asia, Japanese security planners no doubt join others with concern about China’s long term goals in the region.

There is strong apprehension about China using its growing leverage to bully its neighbors in trade and territorial disputes. This fear, and the continuing threat from North Korea, has resulted in deeper cooperation with the West both economically and militarily by Japan and other nations in Asia as evidenced by the much vaunted Asian “pivot” by the United States.

The Japan helicopter destroyer JS Kurama leads ships during a rehearsal for a fleet review, October 21, 2009

Japan has activated its emergency alert system in anticipation of a long range ballistic missile test by North Korea.

Japan, South Korea and the United States have deployed navy ships equipped with antimissile systems in the waters surrounding the Korean Peninsula as it was reported that the North moved to the preparation stage for a long range rocket test.

The North Korean Government has said that it is preparing to launch a weather satellite into space in the coming weeks but Washington and its allies in the region suspect that it is really a cover for a long range ballistic missile test.

In addition, it was reported by the Associated Press that Pyongyang is preparing a tunnel for what would be its third nuclear weapons test in the area it used to detonate nuclear bombs in 2006 and 2009.

Residents in Tokyo this weekend noted with nervousness the contrast between Patriot antimissile batteries deployed in the city and throughout Japan at the ready to shoot down any incoming missiles, with the full bloom of the cherry blossoms signaling the start of spring and all that entails.

North Korea, in its customary bravado, announced through its state media that should one of its rockets get shot down, it would consider it a hostile act and respond with full scale war.

Thus, the potential for miscalculation and regional war in Northeast Asia is increasing once again.

With the death of Kim Jong-il in December 2011 and the earlier than expected elevation of his young and inexperienced son, Kim Jong-un, to the leadership position of the country, analysts predicted the transition to be rocky and unpredictable both inside and outside North Korea.

This missile test comes as the leadership is preparing for a massive one hundredth birthday celebration on April 15 of North Korea’s founder and revered leader, Kim Il-sung, at the same time it is dealing with widespread food shortages.

Some North Korea watchers believe that even if the young Kim wanted to cease the missile tests, his lack of experience in exercising leadership on a national scale, along with a shorter transition period than his father had before taking power, gives him little choice but to acquiesce to the wishes of the army and the security establishment.

In order to deal with its dire food situation, North Korea had agreed to a deal this past February with the United States to stop future missile and nuclear tests in exchange for food aid.

In trilateral meetings this weekend in China between the foreign ministers of China, Japan and South Korea, Beijing was noncommittal about any repercussions North Korea should suffer if it violated the February accord it signed.

China, in the middle of its own leadership transition this year and seeking stability in the region, stated that it hoped all sides would remain calm and exercise restraint.

The United States have halted food aid to the North in the meantime and deployed Aegis equipped destroyers to the region in support of its friends.

Japan is especially sensitive to another North Korean rocket launch because it was during a previous test in 1998 that a North Korean missile flew over Japan and landed in the Pacific Ocean.

Japan, alarmed and calling this provocative, pledged to shoot down any future North Korean missile tests that violated its airspace. So this time, the authorities have activated their J-Alert emergency system set up to warn its citizens of impending emergencies.

Energy industry in Ibaraki Prefecture, Japan, October 7, 2007 (Ryan McCune)

Japan on Thursday vowed to take “concrete” steps toward reducing its dependence on Iranian oil as the United States allied their Asian ally to put pressure on Tehran which they suspect is developing a nuclear weapons capacity.

Japan’s pledge is an encouraging sign for American foreign policy after China rebuffed sanctions aimed at starving the Iranian regime of the oil sales that provide 85 percent of its government revenue. Along with India, China and Japan account for more than 40 percent of Iran’s oil exports.

The European Union, another major buyer, has already committed to banning imports of Iranian oil. An embargo is expected to come into effect late in January.

The United States have lobbied Japanese and South Korean officials for months to reduce their Iranian oil buys. For each nation, Iranian crude makes up roughly 10 percent of their petroleum imports.

Japan’s finance minister cautioned that his nation wouldn’t be able to stop buying Iranian oil overnight. After a devastating tsunami and earthquake last year, Japan is struggling to build its economy. It is heavily dependent on foreign energy buys, especially as its nuclear industry is under pressure after the accident at the Fukushima power plant in March.

The United States have already banned Iranian oil imports. President Barack Obama imposed sanctions on its central bank and financial institutions that do business with it before the New Year’s. Japan hopes to secure a waiver for its banks from these punitive measures by supporting a Western oil embargo.

Iran insists that its uranium enrichment program serves no military purposes and staged naval exercises in the Persian Gulf earlier this year to try to stave off further international pressure. It has threatened to shut the narrow Strait of Hormuz through which passes 40 percent of the world’s seaborn oil transports every day.

Even if the United States don’t buy Iran’s oil, they are heavily dependent on exports from the other side of the Persian Gulf where Saudi Arabia’s oil industry is concentrated. A disruption in oil shipments could cause prices and insurance costs to rise but also hurt Iran’s economy as it may no longer be able to export to oil buyers in Asia while the US Navy tried to break an Iranian blockade of the Strait.

Prime Minister Yoshihiko Noda of Japan

Barely two months in office, Japan’s prime minister Yoshihiko Noda faces a split in his ruling party over a push to liberalize trade relations with other Pacific nations.

The premier has demanded consensus on Japan’s entry to the Trans Pacific Partnership before its prospective members are due to convene in Hawaii next month but his Democratic Party is divided.

The Trans Pacific Partnership began in 2006 as a free trade agreement between Brunei, Chile, New Zealand and Singapore. Australia, Malaysia, Peru, the United States and Vietnam are on track to join the organization which seeks to eliminate all tariffs on Pacific trade by 2015. Canada, the Philippines, South Korea and Taiwan have also expressed an interest in joining.

During next month’s Asia-Pacific Economic Cooperation meeting in Honolulu, present and future members of the TPP are expected to decide on expansion as well as the broad outlines for a trade agreement.

Japan’s agricultural lobby is opposed to joining the partnership. Former agriculture minister Masahiko Yamada leads the resistance against freer trade within the Democratic Party. He is an ally of party strongman Ichirō Ozawa who is currently under investigation on corruption charges. Noda’s ascendance to the premiership in September was a setback for Ozawa who had endorsed his opponent.

Noda has tried to unify the ruling party by bringing Ozawa allies into his cabinet but the debate over whether or not to join the Trans Pacific Partnership is fracturing his very government. The defense minister, Yasuo Ichikawa, a former agricultural ministry bureaucrat, is one of the voices cautioning against a multilateral liberalization of trade relations. Opponents of TPP membership fear that Japanese farmers would struggle to compete against other East Asian and South American producers.

The underlying predicament, writes Jeffrey W. Hornung at The Diplomat, is that both of Japan’s major political parties rely heavily on rural support. Bodies that represent farmers’ interests have gained an “inordinate amount of influence” of the political process, he writes.

The Democratic Party has advocated direct income subsidies for small farmers for more than a decade while the liberal democrats, traditionally in power, enacted structural economic reforms in the 1990s that disadvantaged the rural economy. Rural voters switched parties in 2009′s election and propelled the Democrats to power for the first time in their existence.

Japanese businesses, by contrast, argue that freer trade could be a boon to the country’s sluggish economy which is still recovering from March’s devastating earthquake and tsunami. They fear that Japan is lacking behind other Asian powerhouses, Korea in particular.

South Korea, which recently enacted a free trade agreement with the United States that could boost its exports by several tens of billions of dollars per year, conducts more than a third of its trade with countries it has trade deals with. The Japanese figure is just 18 percent.

Japan’s population, moreover, is shrinking. By midcentury, it is expected to have lost thirty-two million people, a huge drop for an industrial nation that will have to rely increasingly on exports.

Prime Minister Yoshihiko Noda of Japan in Kyoto, November 5, 2010 (AP)

As Japan changed prime minister this week for the sixth time in as many years, it’s tempting to dismiss the leadership reshuffle as virtually insignificant. Yoshihiko Noda, however, may finally herald the change that his Democratic Party promised to bring to Tokyo when it swept to power two years ago.

In what is interpreted as a sign of the new prime minister’s conservatism, Noda picked a relative lightweight to head his finance department—a key position in his cabinet as Japan copes with a debt twice the size of its $5 trillion economy and an expensive recovery in its northeast which was devastated by an earthquake and tsunami in March.

Without a potential challenger in the finance ministry, Noda can be expected to call the shots himself on economy policy where he believes a balance between fiscal consolidation and pro-growth reform is essential. “We can lose no time in reforming public finances,” he told a news conference after being formally appointed on Friday. “But I’m not putting fiscal reform on top of everything else.”

Noda could push for an increase in the nation’s sale tax which has among the lowest rates in the industrialized world. His predecessor failed to act on a promise to consider it. Naoto Kan, who was also finance minister before he headed the government, did enact tax relief for Japanese business last year in an attempt to boost economic growth.

At 40 percent, Japan’s corporate tax rate was the highest among major economies.

Noda replaced Kan who was generally unpopular and had been discredited by the nuclear power plant accident in Fukushima this spring. He inherits not only a divided parliament but warring factions in his Democratic Party as well.

Noda’s election was a setback for the powerful party chief Ichirō Ozawa who challenged Kan in August of last year after maneuvering him into the finance ministry in the first place. The first Democratic finance minister insisted on fiscal restraint to reduce Japan’s colossal debt. Kan was supposed to be more “flexible” in facilitating the sort of pork barrel spending and nepotism which propelled Ozawa to power.

The man who is often called Japan’s “shadow shogun” because of his enormous sway in Democratic Party politics was instrumental in its 2009 election victory which ended decades of Liberal Democratic Party rule. His tactics have since come under scrutiny however and his prestige has dwindled as evidenced by Noda’s win. Ozawa backed his opponent.

The party elder’s first chosen prime minister, Yukio Hatoyama, left office after less than nine months in power amid disappointment over his indecisiveness and incompetence.

Signaling a departure from Liberal Democratic policy, Hatoyama had demanded that the United States move a military base off the island of Okinawa as a demonstration of Japan’s security independence. The Americans, however, stayed put. Hatoyama, who, for all his rhetoric, recognized that Japan was extremely dependent on American protection, resigned in disgrace.

The Okinawa base debacle distracted attention from the real failure of Hatoyama’s cabinet—its unimaginative fiscal policy which offered no change at all from Liberal Democratic orthodoxy.

Before they came to power in 2009, the Democrats vowed to represent “self reliant individuals” and reduce the burdensome scope of Japan’s welfare state in favor of a market driven approach.

Once in government and confronted with a global economic contraction, the party blamed the free market policies of the past for job losses and a widening income gap. It suddenly championed more of the very Keynesian, demand side stimulus which had been implemented by the Liberal Democrats for close to two decades. A record, $1 trillion dollar budget was enacted, full of measures that were designed to soften the impact which the recession had on working Japanese.

The spending spree hugely increased Japan’s indebtedness while recovering from March’s natural disaster will probably require more borrowing on the short term.

It’s too soon to tell whether Noda has the political capital and the will to truly rein in the Japanese state but he says he wants to.

While finance minister, Noda championed a 10 percent spending cut across all departments of Japan’s government and aimed to cap the issuance of new sovereign bonds at half a trillion dollars. The need for fiscal restraint is clearly present as tax income now covers less than half of Japan’s annual budget.

In terms of foreign policy, the new prime minister signals a return to normalcy. He promised to restore the alliance with the United States as the “very foundation” of Japan’s international relations while Chinese editorials have chastised him for identifying rising nationalism and naval power across the East China Sea as potentially hazardous to regional stability.

As Democrats and Republicans said to be near a compromise that would avert the risk of default, British and Japanese officials on Sunday warned that failure to reach a deal could have global repercussions. “If they get this one wrong and there’s a default—we don’t expect that, we think that they will sort this out—but if that were to happen, it has consequences for every family and every business in this country and all across the world,” said the chief secretary to the British Treasury.

In Tokyo, sources familiar with Japan’s international and monetary affairs said that they were increasingly concerned that markets might be too hopeful about prospects for a lasting solution to America’s debt crisis. “Nobody thought Washington would let Lehman collapse,” one Japanese official told the Reuters press agency. “But look what happened.”

The United Kingdom and Japan, which hold $333 and $907 billion in Treasury bonds respectively, are among the United States’ largest creditors. China, which owns well over $1 trillion in American debt, has also expressed alarm.

On Saturday, China’s official People’s Daily newspaper, the mouthpiece of the Communist Party, castigated Congress’ handling of the crisis as “irresponsible” and “immoral.” It opined that Washington was to blame for a “farce,” claiming that “not a single representative has considered the world and even US national interests are being banished from the mind.

An editorial for the Xinhua news agency similarly blamed politicians of both parties for “kidnapping” the rest of the world.

Given the United States’ status as the world’s largest economy and the issuer of the dominant international reserve currency, such political brinkmanship in Washington is dangerously irresponsible, for it risks, among other consequences, strangling the still fragile economic recovery of not only the United States but also the world as a whole.

For all the jitters in international financial markets, the bulk of American debt is held domestically. Almost half, some $6 trillion, is owed either to the Federal Reserve or government accounts like Social Security and public retirement funds. An additional $3.2 trillion is owed to American investors. $4.4 out of a total debt of $14.3 trillion is held abroad. As a share of the American economy, the country’s debt to the world is relatively small, which is why it has been able to borrow at low interest rates.

The devastating tsunami that hit Japan earlier this month severely damaged a nuclear power plant along its northeastern coastline. Engineers have worked for several weeks trying to contain the damage but the facility is highly unlikely to ever become operational again.

Japan is the world’s third largest nuclear power. More than fifty nuclear plants provide over a third of the country’s energy needs.

The United States have the most nuclear power plants in the world but no new facilities have been built for more than twenty years. At least one influential senator has called for a moratorium on the construction of new plants. The administration, which seeks to decrease America’s dependence on foreign oil, doesn’t have particular nuclear ambitions anyway.

France, with nearly sixty plants, is almost entirely energy independent thanks to nuclear power. Nuclear accounts for almost 80 percent of France’s energy production while the country exports some 20 percent of its total production to neighboring European countries.

In Finland, four nuclear reactors are in operation while a fifth is being built. Last year, the country’s parliament approved the construction of two more. Neighboring Sweden has three operational nuclear power plants with ten reactors which produce nearly half of the country’s electricity. The rest is largely provided by hydroelectric power plants while fossils and other renewables account for less than 10 percent of total production.

China and India, which expect energy needs to skyrocket in years ahead, have made no attempt to stall the construction of new nuclear energy plants. Prime Minister Manmohan Singh announced a safety review of India’s six nuclear plants but five more continue to be built which should boost the country’s nuclear energy production by more than 50 percent.

China, the world’s largest energy consumer, has the most ambitious plans for nuclear expansion. The country currently operates thirteen reactors. An additional twenty-five are under construction while fifty more are planned.

Most of China’s energy, less than 70 percent, now comes from coal with hydroelectricity accounting for some 20 percent.

While the attention is hyped, it is understandable. Nuclear power accidents are potentially catastrophic and deserve reporting on. The rhetoric however has been totally overblown.

The European Union’s energy commissioner has characterized the incident as “apocalypse” and comparisons with Chernobyl are being thrown around like candy to longtime opponents of nuclear energy.

Japan has fifty-three nuclear power plants which provide more than a third of the country’s energy needs. The plants in the disaster area all shut down automatically when the earthquake hit Friday. The Fukushima facilities were the only ones that were seriously damaged.

The waves of the tsunami were too high for the protective seawalls built around the Fukushima plant which is located on the coast. The disaster probably destroyed the facility’s diesel backup power systems. While the actual reactor was unaffected, because of a lack of power, the plant’s pumps failed.

Normally, when a reactor is shut down, it can take more than a week for “decay heat” from traces of radioactive isotopes to cool down. The core’s fuel rods must be continually bathed in cooling water during that time to prevent overheating. This is what went wrong at Fukushima.

Because the pumps failed, the coolant water in the reactors overheated and began to evaporate. Engineers had to release pressure by venting radioactive steam which contained an otherwise harmless level of radiation.

The explosions that occurred at the Fukishima plants were hydrogen explosions. While damaging the plant’s infrastructure, these bore no immediate health risks.

If engineers at the plant do not manage to cool down the reactors, their water levels will drop and expose the fuel rods, leading to a meltdown. This would cause the rods to melt to the bottom of the steel and concrete containment vessels surrounding the reactors but still pose no immediate threat to the general population. The containment structures are powerful enough to withstand even the extreme temperatures of a full meltdown.

It is possible that one or several of the containment vessels of the Fukushima facility were damaged during the quake. A spokesperson has said that one spike in radiation levels was “probably” caused by damage to the container. If that is true, people in the vicinity of the plant could be exposed to harmful levels of radiation.

The government therefore ordered the evacuation of residents within a twenty kilometer radius from the Fukushima power plants. Tens of thousands of people had already left the area.

If a meltdown happens, the decay heat from the reactor must still be absorbed. Japanese engineers have reportedly used sea water to flood an entire containment structure. This causes irreversible damage to the reactor but should prevent further steam releases and with it, releases of radiation.

The incident at the Fukushima facility is utterly incomparable with the Chernobyl disaster.

The Ukrainian plant was very different from the Japanese in that it had no containment structure and used graphite instead of water to moderate the nuclear reaction. It was the graphite that caught fire in 1986 and because of the lack of a container, radiation was immediately released into the atmosphere.

The radiation released in Japan so far has not been excessive and is highly unlikely to have hurt anybody.

As a precaution, authorities have distributed iodine tablets which help minimize the damage incurred by breathing radioactive iodine which is a component of nuclear fallout.

Technically, this hasn’t been necessary. If people are to be exposed to unsafe levels of radiation as a result of the radioactive steam that was released from the Fukushima plants, it will be because they drank contaminated water or milk. This is a health hazard authorities should, and will, be looking out for.

(UPDATE) After this article was published it was reported that the pool containing spent nuclear fuel in at least one of the Fukushima reactors was without water, causing unusually high radiation levels. Japanese officials denied this.

The pools may be a greater danger than the reactors because they are not contained. The roofs of two of the plants at Fukushima were lost in hydrogen explosions moreover, exposing the spent fuel pools directly to the atmosphere.