“On the Ground” Comment

A colleague of mine, Ko Fujii, has offered some excellent insights on some of the issues discussed below.  Vastly more informed than mine, I offer them for consideration:

Okinowa

The seemingly harsh stance taken by the Obama administration on Japan in contrast to its lighter touch engagement policies toward some rogue states, in my view, are in fact proof of the mature trust that our two countries have built since WW II.  Friends who trust each other are more able to talk in a straight forward manner without fear of seriously harming the fundamental relationship.  Obama adopts engagement policies for Iran or DPRK because there is no mutual trust to start with.  The risk for US with hard talks against the Hatoyama administration on the Okinawa base issue is not in breaking the fundamental bilateral alliance, but more in destabilizing the newly born two party democracy.  The Washington Post editorial and your blog correctly point this out.  In the long term, any ruling party in Japan would not be able to completely deny the Japan-US Security Treaty, because the only way to become completely militarily independent in Japan’s geographical position is to go nuclear.  Sound citizens and policy makers in Japan and US all know that this option is unrealistic.  There is the underlying trust and understanding on both sides of the Pacific that, unlike Iran or DPRK, Japan would not go that far.  On the other hand, destabilization of DPJ which may lead to a fractured coalition or a complete reshuffling of political parties in the short term and a possible return to a rigid one party system in the long term would create a dysfunctional political system in Japan.

Monetary Policy

I am sure you are well aware of why some Japanese policy makers support a weaker yen while a stronger dollar is preferred in the US.  This is not a matter of political culture or difference in communications strategy.  Japan prefers cheap yen, at least in the short term, because it is an export-led economy.  Not so for the US.  The US is a big importer and in order to fund its aggressive consumption, needs countries like Japan to invest in US, which helps to maintain the price of US financial assets.  A weakening dollar means that any profit from investing in US may be offset by currency risks.  Thus the US needs the dollar to be stable, and fundamentally strong.  Another reason for US needing a strong dollar is to maintain its position as the world’s key currency.  If the dollar loses this position to currencies such as the euro, it is a fundamental loss of US hegemony over the global economy.  Japan has no such worries because its ambition for the yen to become a key currency at least in Asia is a long-lost dream.  So in conclusion, it is not strange that politicians from US and Japan speak differently about the currency.