Nationalist Tokyo Governor Forms New Political Party

In an unexpected move, the nationalist governor of Tokyo Shintaro Ishihara resigned on Thursday and announced that he will form a national political party to compete in the lower house elections that are expected to take place early next year. The wily eighty year-old politician, running with a populist message, could emerge as an important power broker and force a new political realignment in Japan.

During his news conference, Ishihara repeated his call for revising Japan’s pacifist constitution which he views as unacceptable because it was written while Japan was occupied by the United States after World War II. He also said that he wants to reform Japan’s bureaucracy “that has continued since the Meiji era” and reinstitute military conscription in order to toughen up the youth. This in addition to his controversial views on Japan’s island disputes with China and South Korea.

The two major parties, the Democratic Party of Japan and the Liberal Democratic Party, are not expected to have outright majorities after the upcoming elections and will need the support of smaller parties to form a government. Ishihara’s party could garner enough support to put it in a position to play a role in determining who assumes power in Japan’s closely contested elections. As such, Ishihara will have leverage and an opportunity to shape national policy.

Ishihara’s influence on national politics could well have profound ramifications on Japanese foreign policy and signal a shift to a more hardline stance in its relations with China and to a lesser extent South Korea. But it would also raise eyebrows with the country’s major allies in the United States.

A change to the Japanese constitution that gives the Japanese Self Defense Forces more authority to take offensive actions if necessary would undoubtedly cause concern among its neighbors who still with dread recall the Japanese occupation across Asia during the 1930s and 1940s. The United States have supported Japan taking a more proactive role in its security but would most likely oppose the army adopting a more aggressive posture in the region over fear that it will upset relations with China.

The former Tokyo governor is no stranger to controversy. His announcement last spring to purchase the Senkaku Islands from their Japanese owner in order to safeguard them and build a fishing harbor caused outrage in China. China also lays claim to the islands where they are known as the Diaoyu Islands. The Japanese government stepped in and nationalized the islands with the belief that it would be less likely to antagonize the Chinese than Ishihara’s planned purchase.

Anti-Japanese demonstrations sprang up in dozens of Chinese cities nevertheless, resulting in Japanese businesses curtailing operations and even closing their doors. Chinese surveillance ships have in turn been said to be routinely violating what Japan considers its territorial waters off the Senkakus.

Regarding South Korea, after President Lee Myung-bak made an unprecedented visit by a sitting president to the uninhabitable Takeshima Islands in August (known as the Dokdo Islands to Koreans), Japan-Korean relations have been strained.

In his announcement, Ishihara said that he would “like to offer my last service to this country.” He has been in politics for 44 years, having won a seat in the upper house in 1968 at age of 35 for the Liberal Democrats and then served in the lower house in 1972 before becoming head of the Environment Agency and transport minister. He has been Tokyo governor since 1999 as an independent.

The success of Ishihara’s new party and its populist message will be an important barometer of the direction that Japan’s government takes. The environment is ripe for a leadership change in the country as it is occurring under the backdrop of a weak economy and increasingly difficult foreign relations.

Former Japanese Premier Could Return to Power

Former prime minister Shinzō Abe was elected the new leader of Japan’s main opposition Liberal Democratic Party on Wednesday. Abe is now poised to become the next premier in elections widely expected to be called in the next few months.

Abe, who defeated his rival and former defense minister Shigeru Ishiba as party leader in a runoff, served in 2006 as Japan’s prime minister for a year before resigning for personal reasons.

Abe’s reputation as a nationalist could raise apprehension in the region. Specifically, Japan’s tense relations with China and South Korea over its competing claims to the the Senkaku and Takeshima Islands respectively could worsen. Read more “Former Japanese Premier Could Return to Power”

China Seen Wipping Up Anti-Japan Demonstrations

Anti-Japan protests across China intensified over the weekend as demonstrators vandalized Japanese products and businesses in more than fifty cities. With Japanese companies announcing plans to close temporarily, tensions between Asia’s two great powers mount.

The protests, coming after Japan purchased the disputed Senkaku Islands, known as Diaoyu in China, to which countries claim as sovereign territory, are believed to be the worst in years. Japan finalized a deal to purchase three of the islands from their private owner last week.

The move was likely taken to prevent tensions with China from escalating further after the outspoken governor of Tokyo, Shintaro Ishihara, said that he planned to buy them for development. However, when Prime Minister Yoshiko Noda took a hardline position when he reiterated that the islands are Japanese territory, both historically and from international law, nationalists in China were outraged.

China’s Foreign Ministry spokesman Hong Lei denounced the sale as illegal and said that China would take “necessary measures” to defend its sovereignty. Soon, two Chinese surveillance ships were seen around the islands, resulting in Japan mobilizing its Coast Guard. A few days later, six Chinese surveillance vessels were reported briefly entering Japanese waters. On Monday, a flotilla of up to 1,000 Chinese fishing boats was believed to be on their way to the islands.

American defense secretary Leon Panetta was in Japan over the weekend and announced an agreement to deploy a second radar on Japanese territory in order to beef up its missile defense systems. Panetta said that the system was meant as a defense to North Korean missiles but China believes that it is pointed against it.

Panetta arrived in Beijing on Monday and was scheduled to meet with Chinese vice president and leader in waiting Xi Jinping on Wednesday.

In the meantime, Japanese companies are halting business temporarily on the mainland as a result of the protests. Canon said that it would close its factories. Honda, Mazda and Nissan announced similar measures. Sony is said to be discouraging nonessential travel to China while popular Japanese retailer Uniqlo is closing stores too.

All sides are bracing for what happens on Tuesday, the anniversary of the Manchurian Incident of September 18, 1931. On that day, Japan staged an explosion on a Japanese owned railway which led to Imperial Japan’s invasion and occupation of China.

The protests may be orchestrated by the Chinese government as part of its longtime practice of whipping up nationalism, usually against Japan, to serve its geopolitical aims. Accordingly, the authorities allow Chinese nationalists to vent their anger for a period of time before putting an end to the unrest. By preventing the demonstrations from getting out of control, they allow the public to let off some steam and keep the protests from eventually threatening the Communist Party itself.

According to Caixan, a respected Chinese newspaper, the protesters are mainly males in their twenties and thirties. Its reporter approached one of the policemen guarding the protest route and asked if it was all right to take part without a permit, which the government requires. The policeman said that it was fine since “the organizer” had a permit. But when the reporter asked if it was okay to protest about corruption in China, the policeman said no. Only protests related to the Diaoyu Islands were permitted.

China’s Shadow Looms Over Clinton’s Asian Trip

Secretary of State Hillary Clinton arrived in China on Tuesday for two days of meetings with top officials where she is expected to discuss a wide range of issues including the disputes between China and its neighbors over uninhabited islands in the South China Sea.

Clinton is on an eleven day, six nation trip to Asia that could be her last if she steps down at the end of the Obama Administration’s first term.

The visit is meant to convoy the United States’ commitment to the economic and security issues in Asia encapsulated in what the administration has dubbed the Asian “pivot.” The countries that Clinton visits highlight the strategic competition for influence that is underway between China and the United States in the region. Read more “China’s Shadow Looms Over Clinton’s Asian Trip”

Banking Scandal Exposes Split in Vietnam Leadership

Vietnam has been rightly recognized as one of the hottest markets by global investors since its đổi mới policy of market reforms was instituted in the late 1980s. It has taken great strides in transforming itself from a wartorn country thirty years ago to one of the Asian Tigers. Lately however, Vietnam has hit a speed bump from bad economic policies seemingly resulting in a split within the Communist Party. These differences, culminated last week in the arrest of a prominent businessman, have sent shock waves through the country with rumors rife of additional arrests.

The 2000s were heady times for Vietnam as its gross domestic product averaged 7 percent annual growth, foreign direct investment flowed into the country and it joined the World Trade Organization. The euphoria began to wilt after the government, in a bid to stimulate greater growth in the economy, clung to expansionary monetary policies too long which caused inflation to spiral out of control. Inflation peaked at 23 percent in August 2011 before falling to 8.3 percent in May of this year.

Since then, GDP growth has slowed from 6.8 percent in 2010 to 5.9 percent in 2011 to 4 percent in the first quarter of 2012. The World Bank warned in June that “inefficiencies in state-owned enterprises, banks and public investments [will] be a drag on long-term growth.”

The government’s economic policy, modeled on the growth of South Korea’s chaebol style conglomerates, called for assisting its domestic companies to expand in order to become more competitive globally.  But after years of cheap credit, state-owned companies have turned into inefficient behemoths saddled with ballooning debt levels.  They are so big that they currently produce 40 percent of Vietnam’s GDP.

The collapse of the state shipping companies Vinashin and Vinalines could be indicative of the trouble many public enterprises are in. In fact, the ruling party was so concerned about the state-owned enterprises that it convened in early 2011 to review the country’s economic growth model and its failure in building chaebol style companies.

Against the backdrop of a slowing economy and troubled state-owned enterprises, officials are increasingly concerned about the stability of the country. The arrest of business tycoon Nguyễn Đức Kiên two weeks ago, the cofounder of Asia Commercial Bank and owner of the Hanoi Football Club, for unspecified economic crimes is being interpreted as a way to deflect blame from the government.

A few days later, Asia Commercial Bank’s chief executive officer Lý Xuân Hả was also picked up for “violating state regulations on economic management,” according to the state run Vietnam News Service.

Since the arrests, the Ho Chi Minh Stock Index has sold off by 12 percent and ACB’s stock is down 22 percent. Moody’s Investors Service cut the bank’s credit rating with a warning that it was placing its credit on review for a possible future downgrade. Fitch Ratings wrote, the “arrest could trigger renewed investor concerns about corporate governance, transparency and liquidity issues in Vietnam’s banking sector.”

According to some press reports, the arrests at ACB, one of Vietnam’s biggest priate banks, are the result of a power struggle within the Communist Party. Specifically, between Prime Minister Nguyễn Tấn Dũng and President Trương Tấn Sang.

Dũng, viewed by many as Vietnam’s most powerful prime minister after being reelected to a five year term in 2011, was the force behind Vietnam’s drive to develop dominant state-owned enterprises.

Sang, on the other hand, is believed to be part of the old guard, worried about the increasing divide between rich and poor in the country. As such, cracking down on state-owned enterprises because of corruption is a way of discrediting the chaebol policy.

In a pointed opinion article last week, President Sang said that “Vietnam was now under pressure from broken state-owned enterprises.” He lamented the “degradation of political ideology and the morals and lifestyle” of public officials. A not so subtle shot at Dũng.

The prime minister, for his part, has come out supportive of the punishment of illegal activities in the banking sector “no matter who they are.”

The crackdown by the government is sparking rumors of other arrests. Yesterday, Nguyễn Đăng Quang, the chairman of the food conglomerate Masan Group, came forward to dispel rumors that he had been detained.

If the Communist Party seeks to insulate itself from the public’s ire over the struggling economy with a campaign targeting the wealthy, it risks starting another economic crisis by scaring away the foreign investment that drove much of the country’s growth in recent years. If that happens, its entire economic reform program could be threatened.

Japan’s Noda to Call Snap Election in November

Japanese prime minister Yoshihiko Noda shared with opposition lawmakers on Thursday his intention to call snap elections in November.

While the outlook is uncertain as to what party will come out on top given the public’s disgust with politics as usual, it is clear that the ruling party is in for a tough election.

The Democratic Party of Japan has suffered especially weak approval ratings since it increased the country’s sales tax in June. There is also a general perception that it has failed to follow through on its pledges to change the way politics is done in Japan.

Noda secured the support of the Liberal Democratic Party and New Kōmeitō during negotiations in early August to get his consumption tax bill through the upper house of the Diet. The conditions were that he would call elections soon though no timetable was given. Read more “Japan’s Noda to Call Snap Election in November”

Nationalism Fuels East Asian Island Disputes

Tensions between China and Japan have flared up again after heavily publicized political stunts by nationalists over uninhabited islands in the East China Sea that both countries lay claim to.

The islands, known as Diaoyu in China and Senkaku in Japan, continue to elicit strident nationalism among their respective populations. But these episodes are just the latest in a series of tit for tat actions across Asia that is increasing the chance of events spinning out of control and resulting in a regional conflagration. Read more “Nationalism Fuels East Asian Island Disputes”

Japanese-South Korean Relations on the Rocks

On Friday, Japan recalled its ambassador to South Korea after President Lee Myung-bak made an unprecedented visit by a sitting president to disputed islands in the Sea of Japan. The rocky outcrop of islands, known as Dokdo in Korea and Takeshima in Japan, are claimed as sovereign territory by both governments and is believed to contain vast deposits of natural resources.

President Lee landed on one of the Dokdo islands by helicopter and stayed there for a little over an hour to eat pizza and chicken with South Korean policeman stationed in the territory.

The visit was apparently driven by domestic public opinion as the Lee Administration has been grappling with corruption scandals and accusations from the political opposition of being too pro-Japanese. Read more “Japanese-South Korean Relations on the Rocks”

United States Consider Drone Deployment to East China Sea

In what seemed a routine meeting between American defense secretary Leon Panetta and his Japanese counterpart Satoshi Morimoto last week, The Yomiuri Shimbun reports that the two allies agreed to “consider conducting surveillance” by unmanned spy aircraft over the disputed Senkaku Islands in the East China Sea.

Known as the Diaoyu Islands in China, the competing claims between the two Asian nations involve a deeply emotional issue and stir nationalist passions on both sides. It dates back to 1895 when Imperial Japan humiliated a weakened and divided China and took control of the islands.

After receding in importance in Sino-Japanese relations for most of the last century, during which China was alternately grappling with internal strife and civil war, the dispute flared up again in 2010 when a Chinese fishing trawler crashed into a Japanese coast guard vessel.

The Chinese captain was arrested which fueled a nationalist outrage in China. After two weeks of escalating tensions, which saw China suspend all senior level meetings with Japan, encouraged its citizens to cancel trips to the country and suspend the export of rare earth minerals, Japan relinquished and released the captain.

Concerned about China’s possible future actions over the islands, Japan and the United States have been elevating their level of cooperation diplomatically and militarily since.

At the Pentagon last Friday, the two countries announced the eventual deployment of the Marine Corps MV-22 Osprey aircraft to Okinawa “to enable Marines to fly faster and farther… to remote islands in Japan.” The Osprey is a tiltrotor aircraft, giving it the ability to land like a helicopter and fly with the speed and range of a fixed-wing aircraft.

Morimoto also said that Japan is moving forward with its “dynamic defense cooperation” with the United States which will mean even closer ties between the two militaries and the establishment of joint training on Guam and Northern Mariana.

For its part, China has seen escalating tensions with its other neighbors over the disputed islands in the South China Sea. The United States have also deepened their security relationships with Australia, the Philippines, and Vietnam in that area.

Thus, the announcement last week at the Pentagon and speculation about the deployment of American drones to the Far East, while reaffirming the support of an important American ally in Japan, promises to add to the tensions with China across the region.

China Establishes Military Command in South China Sea

China has taken new actions that raise the stakes in its disputes with its Southeast Asian neighbors over the islands and atolls in the South China Sea. Taken together, they are but another worrying sign, not only about the prospect of a multilateral agreement between the parties but also about governments in the region and their commitment to negotiate over their competing claims.

Over the weekend, China’s state run news agency Xinhua reported that the People’s Liberation Army would establish a military garrison in Sansha city in order to provide security to the islands it claims in the South China Sea and the waters around them, known as Nansha, Zhongsha and Xisha island in Chinese (also known as the Spratley, Macclesfield Bank and Spratley Islands respectively by their other claimants). Read more “China Establishes Military Command in South China Sea”