This week on Nikkei CNBC programs I need to speak a lot about the EU Stress-Test results scheduled to be released on July 23. Many investors are also anxious about them. Here are interesting articles. Just FYI.
Cheers, Kosuke
91 Banks + 20 Nations = Stress Test Overload
Next Friday, news screens may be straining with information overload as stress test results are published.
The publication of stress test results for European banks looms large as midsummer’s event for financial Europe next Friday. It also could make for a few frightful hours if the results are released helter skelter from myriad sources, as early information suggests.
Banking sources are beginning to shed early light on how the results will be disclosed. If true and left unamended, it could involve a blizzard of releases from national regulars and the individual banks at 1600 GMT.
In Spain, for example, banking industry sources say that the local banking associations representing Spanish banks and the savings banks will post the test results of individual members on their websites. The Spanish central bank will then publish a report on how the sector did as a whole.
Multiplied by the 91 banks and 20 nations being tested by the Committee of European Banking Supervisors (not including Switzerland), the event will have news screens straining with information overload.
Final disclosure plans are still pending. But some could argue that a more controlled, uniform and consolidated release source could smooth market absorption and the chance of error.
“Hopefully,” economists at UniCredit write to clients, “the exercise will be handled professionally enough to avoid a major accident.”
WEEKEND INVESTOR
JULY 17, 2010.
Playing the EU Stress-Test
By BEN LEVISOHN
Sometimes stress can be profitable.
On July 23, European regulators will release the results of its "stress tests," designed to gauge the ability of Europe's banks to withstand future economic shocks. If all goes well, the tests could signal an end to the crisis of confidence in Europe and global markets in general, at least in the short term.
Traders already are placing bets on a European bank rebound. The Markit iTraxx Europe Senior Financial Index of credit-default swaps on 25 banks and insurers, which tracks the cost of insuring against a bank default, fell 0.33 percentage point during the past month and is near its lowest level in almost three months. The financial-services sector of the Russell Developed Eurozone Index, meanwhile, has risen 14% this month through July 14, after having fallen 30% during the first half of 2010.
Investors should tread carefully, however. When the U.S. conducted similar stress tests in early 2009, bank stocks rallied for two months before the results came out—then fell 14% over the following two months, even though the results were mostly positive.
"We see relative strength as a good opportunity to take profits," says Chad Deakins, portfolio manager of the $250 million Ridgeworth International Equity Fund, which is overweight European financials.
But by differentiating between the strong and the weak, the stress tests may help to restore confidence in higher-quality European banks, which should benefit longer-term investors. In the U.S., bank stocks as a group were 12% higher on the one-year anniversary of the stress tests. U.S. Bancorp jumped 29% during the period, while BB&T rose 27% and Capital One gained 59%.
Despite strong capital levels and exposure to markets outside Europe, banks such as Spain's Banco Santander SA and France's BNP Paribas have been tarred with the same brush as weaker competitors on the Continent. Although they have gained as much as 43% during the run-up to the stress tests, they seem attractive over the long term, says Fred Rizzo, a London-based European bank analyst at T. Rowe Price.
A broader way to play Spanish banks in general and Santander in particular is via the iShares MSCI Spain Index exchange-traded fund, which has 47% of its portfolio in financials and one-quarter of its assets in Banco Santander. If Spain's publicly traded banks come through the stress tests better than expected, these stocks could give the fund a boost.
Thanks in part to Europe's banking woes, the entire Spanish market looks cheap on a valuation basis, says Leila Heckman, a Chicago-based senior director at Mesirow Financial, which manages more than $35 billion in assets. Stocks there are trading at a price-earnings ratio of 10, compared with a long-term average of 14 times.
The Netherlands, which has few of the issues plaguing its peripheral peers, is a safer play, Ms. Heckman says. The iShares MSCI Netherlands Investable Market Index ETF provide exposure to the Dutch market and Dutch banking giant ING Groep makes up 11% of its portfolio.
"Just a month ago, the fear was that Europe was taking everything down with it," says Michael Hasenstab, who oversees the $35.4 billion Templeton Global Bond Fund. "That won't be the case," he predicts.
Investors wary of buying stocks or funds outright could hedge their bet using a "covered call" strategy. It boils down to buying a stock while selling a call option, or the right to buy the stock at a certain price. The main drawback: If the stock rallies too much, you will be forced to sell below the peak. But the "premium" you rake in from selling the call can mitigate a loss should the stock price fall.
Even the shares of Allied Irish Bank, one of the most troubled of Europe's banks, seem more attractive in a covered-call trade. In Friday's market, the stock fetched around $2.28 on the New York Stock Exchange. By selling a February call with a strike price of $2, an investor can rake in a premium of 65 cents a share, or $650 per 1,000 shares. That is a 23% return if AIB is trading above $2 a share when the option expires. On the flip side, shares of AIB can drop to $1.63 before investors take a loss.
"We think Allied will come back," says Vic Schiller, president of options-research service InvestorsObserver. "But by using the right covered-call strategy it can drop 28% and you won't lose a penny."
Sunday, July 18, 2010
Sunday, June 27, 2010
Interesting articles on "new rules"
June 25, 2010
New Rules May Affect Every Corner of JPMorgan
By ERIC DASH and ANDREW MARTIN
Not since the Great Depression, when the mighty House of Morgan was cleaved in two, have Washington lawmakers rewritten the rules for Wall Street as extensively as they did on Friday.
And perhaps no institution better illustrates what would — and would not — change under this era’s regulatory overhaul than the figurative heir to that great banking dynasty, JPMorgan Chase & Company.
Unlike in the 1930s, the modern House of Morgan will remain standing. So will its cousin, Morgan Stanley, which broke off in 1935 after Congress placed a wall between humdrum commercial banking and riskier investment banking.
The proposed Dodd-Frank Act, worked out early on Friday morning, stops far short of its Depression-era forerunner. But in ways subtle and profound, it has the potential to change the way big banks like JPMorgan do business for years to come.
“It’s a tough bill, and shows the pendulum is swinging toward tighter regulation,” said Frederick Cannon, a banking analyst at Keefe, Bruyette & Woods in New York. “This is going to pressure bank earnings well into the future.”
Of course, all the big banks would feel some effect. Goldman Sachs, for example, would have to rein in its high-rolling traders. Wells Fargo would be subjected to stricter rules on consumer lending. And many large banks would feel the pinch of lower transaction fees on debit cards.
But JPMorgan Chase — forged by a merger of J. P. Morgan & Company with Chase Manhattan in 2001, after the wall came down between commercial and investment banking — and its chief executive, Jamie Dimon, will have to contend with all that and more.
It is the largest player in derivatives, the financial vehicles that have been widely faulted for adding excessive risk to the system. It runs the largest hedge fund in the banking industry, the $21 billon Highbridge Capital unit, and makes billions of dollars’ worth of trades in its own account. And it has a network of retail branches in nearly every corner of the country.
“Given its franchise diversity, JPM is impacted by virtually all of the coming regulatory reforms,” Keith Horowitz, an analyst at Citigroup who follows big banks like JPMorgan, wrote in a research note last week.
One part of the bill would push much of the buying and selling of derivatives onto clearinghouses, forcing banks to put up collateral against each trade. For JPMorgan, that could tie up billions of dollars that would otherwise have gone toward lending or the bank’s own trading.
A smaller portion of trading in derivatives would take place over exchanges, making prices visible to the public and pushing down prices — and profit margins.
Banks would be required to hold more capital in reserve to cover potential trading losses. In some cases they might also be prohibited from using federally insured bank deposits for risky trading. That would hit JPMorgan hard because of its heavy reliance on customer deposits to finance other businesses.
Both changes would take even more money out of play and lower profits.
JPMorgan has already begun dismantling its so-called proprietary trading operation, to comply with new restrictions on banks making speculative bets using their own capital. Analysts say that will force the bank to give up about 2 percent of its revenue.
Under the proposed bill, the bank would also have to be more careful about separating its money from the money it manages for clients in its private equity and hedge fund units, because of a rule to limit the amount banks can invest in such funds. Still, JPMorgan would be able to hang on to Highbridge and several other investment funds because of a special exemption.
It is more difficult to judge how the new rules could affect the Chase side of JPMorgan. A newly created consumer financial protection agency would have broad new authority over financial products like mortgages and credit cards, but it may be years before the agency issues new rules governing such products.
Recent legislation imposing new restrictions on credit cards and overdraft fees has already taken a bite out of bank revenue. The new legislation would add to that drain on revenue by restricting the fees banks can charge for debit card transactions.
In his research note, Mr. Horowitz estimated that the legislation would ultimately reduce the bank’s earnings by as much as 14 percent. That estimate could be cut in half or more because several of the most severe measures in the bill have since been dropped or diluted.
Of course, these assessments do not take into account all the steps that JPMorgan and other banks could take to mitigate the effect of the legislation, like passing on some costs to customers or seeking exemptions from regulatory agencies.
Indeed, JPMorgan could feel a greater effect from deliberations taking place at the United States Federal Reserve and among central bankers in Switzerland. Both sets of regulators are considering a requirement that banks hold additional capital as a cushion against losses. They also may alter the businesses the banks can invest in, or the regions where they can expand.
Indeed, Mr. Dimon has delayed raising the bank’s dividend until international rules are set on capital requirements.
Investors seemed to signal relief that the legislation did not turn out to be as tough as it might have been, sending the share prices of most major banks up about 3 percent on Friday.
Charles Geisst, a professor of finance at Manhattan College and a Wall Street historian, said the bill, which is expected to be signed by President Obama before the Fourth of July holiday, was the most comprehensive financial regulation since the Great Depression because it touched on so many different areas. But he said its effects would not be as fundamental as the impact of changes made in the wake of the Depression.
“It doesn’t go anywhere near,” he said. “It doesn’t change institutional behavior like that did. This is business as usual, with some moderation.”
June 25, 2010
Banks Likely to Offset Impact of New Law, Analysts Say
By CHRISTINE HAUSER
Banks are expected to find ways to offset the impact of the new financial regulations on their earnings, though they face a potentially complex process of adapting to the new requirements, analysts said on Friday.
The share prices of some of the biggest United States banks, including Citigroup, JPMorgan Chase and Bank of America, were higher in afternoon trading, hours after a House-Senate conference committee completed work on a bill that would toughen financial regulations.
Analysts pored over the specifics of the deal as they emerged on Friday and expressed a wide array of views about the impact it would have. Some saw the bill as more of a political statement than a practical measure that could prevent another financial meltdown. Others said banks’ costs would increase, but banks would pass the increased costs along to consumers.
“They have got their work cut out for them, absolutely,” said William Fitzpatrick, an equities analyst who focuses on banks for Optique Capital Management
“The terms of this regulation appear to be extremely onerous on the large banks,” he said. “It is indeed a tough bill, and you are going to see several measures that are going to weigh on the profitability of the large banks.”
“I suspect they are going to have a hard time offsetting the increased regulations,” said Mr. Fitzpatrick.
Richard Bove, a banking analyst with Rochdale Securities, said the bill would not severely curtail banks’ operations.
“I don’t see there being a tremendous clampdown on the ability of banks to make money,” he said.
“The banks will have numerous methods of getting around the most onerous provisions in this bill to maintain their earnings growth,” he added. “But the things they will do will increase the cost of banking to everybody in this country.”
For instance, Mr. Bove pointed to last year’s credit card bill, which led banks to push up rates pre-emptively or reduce customers’ credit limits.
“You’re going to get a letter from your bank saying you now have to pay $1 to $15 a month to pay for this bill,” he said. “The banks are going to get the money back because the consumer is going to pay for the bill, and that’s the killer for the consumer.”
John McDonald, a financial services analyst at Sanford C. Bernstein in New York, said there should be relief among investors, but the implementation would usher in a new phase of uncertainty.
“There is still a long way to go in terms of getting clarity on the key issues that investors are focused on, like required capital,” Mr. McDonald said.
Just take an issue like derivatives. It is still not clear what activities the banks will need to cordon off in a separate holding tank. Nor is it clear how much capital they will need, which is a major factor affecting the profitability of the business, he said.
One part of the legislation known as the Lincoln Amendment, for example, would demand the banks hold more capital. At the same time, another part that drives derivatives trading onto clearinghouses and exchanges could lessen, in aggregate, the amount of capital that banks must hold. “There are a lot of variables in the air,” Mr. McDonald noted.
Mr. Fitzpatrick said he expected the restrictions on overdraft fees, less proprietary trading and the alteration of the banks’ swaps desks to have an impact on earnings.
“All these things, in addition to higher capital requirements, will weigh on the bottom line of the large banks,” he said.
Cornelius Hurley, a professor at the Boston University School of Law and a former counsel to the Federal Reserve Board of Governors, saw deficiencies.
“They missed the crisis,” he said. “The crisis they’re dealing with now is the November elections. This is a bill, despite its length and complexity, that’s more geared to the elections than the financial system.” He said that the bill would inevitably be revised and that “in no way does it address the too-big-to-fail issue.”
“The credit ratings agencies keep rating the too-big-to-fail banks higher than everybody else, and they say it’s because of the implicit government support,” he added.
“There will be a lot of regulatory costs,” Mr. Hurley said. “There will be a lot of motion, smoke — but not fire — as we go through the regulatory process. There’s going to be ton of activity, but at its core we’re going to be back where we were the day that Lehman failed.”
Several of the larger banks said that they were still studying the bill.
“Although there are aspects of the legislation which are different from what we would have preferred, we will be able to conduct a fuller assessment of its impact after the regulators issue new rules,” said Vikram Pandit, the chief executive officer for Citigroup.
A spokesman for Goldman Sachs said: “We are studying the bill and are mindful that it still has to go through the House and the Senate. We’re also mindful of the fact that much interpretation responsibility lies with regulators, so we think it is too early to be able to express an informed view.”
But it is apparent already that banks will have to adapt the way they currently do business with their subsidiaries.
“As they wind down and spin off these more market-oriented derivatives businesses, that is going to be a challenge for them in part because of the complexity of the business,” said Jim Eckenrode, a banking analyst at TowerGroup, a financial services consulting firm.
But some analysts noted that the overhaul served an important purpose in improving confidence and providing transparency as a response to the challenges posed to the American financial system.
“My first line of thinking is that obviously there was a lack of systemic oversight in some of the businesses that were generating a lot of profits for the industry,” said Mr. Eckenrode.
“Trying to harmonize the regulatory environment I think makes a lot of sense. I do think that generally the banks should be pleased that it was not worse than it was,” he said.
For example, creating a resolution fund addressing the financial crisis, Mr. Eckenrode said, “certainly has been reduced quite a bit.”
The chief executive of the Securities Industry and Financial Markets Association, Tim Ryan, said in a statement that the new law should bolster confidence.
“Much of this new law should help to restore and maintain confidence in U.S. financial markets, including several important provisions such as the establishment of a systemic risk regulator, resolution authority and a new federal fiduciary standard for retail investors,” he said.
“But this is a tough law that will also have profound effects on the operations and cost structure of most financial services companies and financial markets,” Mr. Ryan added.
Joshua Steiner, a managing director who covers the financial sector for Hedgeye Risk Management, said he was still examining the legislation but said the new regulations could potentially weigh on earnings.
“One of the issues is really going to be going forward trying to understand how this is actually going to affect earnings, because the banks have been very cagey on how much of their earnings generally come from proprietary trading and private equity and hedge fund investing,” he said.
“So I think net-net over time this will come to represent essentially a tax on the industry for all intents and purposes,” Mr. Steiner said. “It will be a long-term depressant on earnings.”
He added: “Constraints will force them to re-allocate their capital elsewhere.”
The approvals on Friday cleared the way for both houses of Congress to vote on the full financial regulatory bill next week.
One lawmaker was quick with criticism of the bill. Senator Judd Gregg, Republican of New Hampshire and a member of the Senate Banking Committee, said: “In an effort that should be geared toward correcting deficiencies in our regulatory structure, and during a time when we should be focused on economic recovery, this legislation is a failure on both counts. It will not encourage much-needed stability and confidence in our financial markets. It will not significantly reduce systemic risk in our financial sector.”
But Ed Mierzwinski, consumer program director for the Federation of State Public Interest Research Groups, saw some positives for consumers and described the bill as “landmark legislation.”
He noted that the idea for creating a new consumer financial protection agency was proposed just three years ago. Despite intense efforts by the banking industry to water down the agency or kill it outright, Mr. Mierzwinski said the agency survived with broad authority, a strong financing stream and an independent director.
Graham Bowley, Eric Dash, Andrew Martin, Cyrus Sanati, Louise Story and Edward Wyatt contributed reporting.
New Rules May Affect Every Corner of JPMorgan
By ERIC DASH and ANDREW MARTIN
Not since the Great Depression, when the mighty House of Morgan was cleaved in two, have Washington lawmakers rewritten the rules for Wall Street as extensively as they did on Friday.
And perhaps no institution better illustrates what would — and would not — change under this era’s regulatory overhaul than the figurative heir to that great banking dynasty, JPMorgan Chase & Company.
Unlike in the 1930s, the modern House of Morgan will remain standing. So will its cousin, Morgan Stanley, which broke off in 1935 after Congress placed a wall between humdrum commercial banking and riskier investment banking.
The proposed Dodd-Frank Act, worked out early on Friday morning, stops far short of its Depression-era forerunner. But in ways subtle and profound, it has the potential to change the way big banks like JPMorgan do business for years to come.
“It’s a tough bill, and shows the pendulum is swinging toward tighter regulation,” said Frederick Cannon, a banking analyst at Keefe, Bruyette & Woods in New York. “This is going to pressure bank earnings well into the future.”
Of course, all the big banks would feel some effect. Goldman Sachs, for example, would have to rein in its high-rolling traders. Wells Fargo would be subjected to stricter rules on consumer lending. And many large banks would feel the pinch of lower transaction fees on debit cards.
But JPMorgan Chase — forged by a merger of J. P. Morgan & Company with Chase Manhattan in 2001, after the wall came down between commercial and investment banking — and its chief executive, Jamie Dimon, will have to contend with all that and more.
It is the largest player in derivatives, the financial vehicles that have been widely faulted for adding excessive risk to the system. It runs the largest hedge fund in the banking industry, the $21 billon Highbridge Capital unit, and makes billions of dollars’ worth of trades in its own account. And it has a network of retail branches in nearly every corner of the country.
“Given its franchise diversity, JPM is impacted by virtually all of the coming regulatory reforms,” Keith Horowitz, an analyst at Citigroup who follows big banks like JPMorgan, wrote in a research note last week.
One part of the bill would push much of the buying and selling of derivatives onto clearinghouses, forcing banks to put up collateral against each trade. For JPMorgan, that could tie up billions of dollars that would otherwise have gone toward lending or the bank’s own trading.
A smaller portion of trading in derivatives would take place over exchanges, making prices visible to the public and pushing down prices — and profit margins.
Banks would be required to hold more capital in reserve to cover potential trading losses. In some cases they might also be prohibited from using federally insured bank deposits for risky trading. That would hit JPMorgan hard because of its heavy reliance on customer deposits to finance other businesses.
Both changes would take even more money out of play and lower profits.
JPMorgan has already begun dismantling its so-called proprietary trading operation, to comply with new restrictions on banks making speculative bets using their own capital. Analysts say that will force the bank to give up about 2 percent of its revenue.
Under the proposed bill, the bank would also have to be more careful about separating its money from the money it manages for clients in its private equity and hedge fund units, because of a rule to limit the amount banks can invest in such funds. Still, JPMorgan would be able to hang on to Highbridge and several other investment funds because of a special exemption.
It is more difficult to judge how the new rules could affect the Chase side of JPMorgan. A newly created consumer financial protection agency would have broad new authority over financial products like mortgages and credit cards, but it may be years before the agency issues new rules governing such products.
Recent legislation imposing new restrictions on credit cards and overdraft fees has already taken a bite out of bank revenue. The new legislation would add to that drain on revenue by restricting the fees banks can charge for debit card transactions.
In his research note, Mr. Horowitz estimated that the legislation would ultimately reduce the bank’s earnings by as much as 14 percent. That estimate could be cut in half or more because several of the most severe measures in the bill have since been dropped or diluted.
Of course, these assessments do not take into account all the steps that JPMorgan and other banks could take to mitigate the effect of the legislation, like passing on some costs to customers or seeking exemptions from regulatory agencies.
Indeed, JPMorgan could feel a greater effect from deliberations taking place at the United States Federal Reserve and among central bankers in Switzerland. Both sets of regulators are considering a requirement that banks hold additional capital as a cushion against losses. They also may alter the businesses the banks can invest in, or the regions where they can expand.
Indeed, Mr. Dimon has delayed raising the bank’s dividend until international rules are set on capital requirements.
Investors seemed to signal relief that the legislation did not turn out to be as tough as it might have been, sending the share prices of most major banks up about 3 percent on Friday.
Charles Geisst, a professor of finance at Manhattan College and a Wall Street historian, said the bill, which is expected to be signed by President Obama before the Fourth of July holiday, was the most comprehensive financial regulation since the Great Depression because it touched on so many different areas. But he said its effects would not be as fundamental as the impact of changes made in the wake of the Depression.
“It doesn’t go anywhere near,” he said. “It doesn’t change institutional behavior like that did. This is business as usual, with some moderation.”
June 25, 2010
Banks Likely to Offset Impact of New Law, Analysts Say
By CHRISTINE HAUSER
Banks are expected to find ways to offset the impact of the new financial regulations on their earnings, though they face a potentially complex process of adapting to the new requirements, analysts said on Friday.
The share prices of some of the biggest United States banks, including Citigroup, JPMorgan Chase and Bank of America, were higher in afternoon trading, hours after a House-Senate conference committee completed work on a bill that would toughen financial regulations.
Analysts pored over the specifics of the deal as they emerged on Friday and expressed a wide array of views about the impact it would have. Some saw the bill as more of a political statement than a practical measure that could prevent another financial meltdown. Others said banks’ costs would increase, but banks would pass the increased costs along to consumers.
“They have got their work cut out for them, absolutely,” said William Fitzpatrick, an equities analyst who focuses on banks for Optique Capital Management
“The terms of this regulation appear to be extremely onerous on the large banks,” he said. “It is indeed a tough bill, and you are going to see several measures that are going to weigh on the profitability of the large banks.”
“I suspect they are going to have a hard time offsetting the increased regulations,” said Mr. Fitzpatrick.
Richard Bove, a banking analyst with Rochdale Securities, said the bill would not severely curtail banks’ operations.
“I don’t see there being a tremendous clampdown on the ability of banks to make money,” he said.
“The banks will have numerous methods of getting around the most onerous provisions in this bill to maintain their earnings growth,” he added. “But the things they will do will increase the cost of banking to everybody in this country.”
For instance, Mr. Bove pointed to last year’s credit card bill, which led banks to push up rates pre-emptively or reduce customers’ credit limits.
“You’re going to get a letter from your bank saying you now have to pay $1 to $15 a month to pay for this bill,” he said. “The banks are going to get the money back because the consumer is going to pay for the bill, and that’s the killer for the consumer.”
John McDonald, a financial services analyst at Sanford C. Bernstein in New York, said there should be relief among investors, but the implementation would usher in a new phase of uncertainty.
“There is still a long way to go in terms of getting clarity on the key issues that investors are focused on, like required capital,” Mr. McDonald said.
Just take an issue like derivatives. It is still not clear what activities the banks will need to cordon off in a separate holding tank. Nor is it clear how much capital they will need, which is a major factor affecting the profitability of the business, he said.
One part of the legislation known as the Lincoln Amendment, for example, would demand the banks hold more capital. At the same time, another part that drives derivatives trading onto clearinghouses and exchanges could lessen, in aggregate, the amount of capital that banks must hold. “There are a lot of variables in the air,” Mr. McDonald noted.
Mr. Fitzpatrick said he expected the restrictions on overdraft fees, less proprietary trading and the alteration of the banks’ swaps desks to have an impact on earnings.
“All these things, in addition to higher capital requirements, will weigh on the bottom line of the large banks,” he said.
Cornelius Hurley, a professor at the Boston University School of Law and a former counsel to the Federal Reserve Board of Governors, saw deficiencies.
“They missed the crisis,” he said. “The crisis they’re dealing with now is the November elections. This is a bill, despite its length and complexity, that’s more geared to the elections than the financial system.” He said that the bill would inevitably be revised and that “in no way does it address the too-big-to-fail issue.”
“The credit ratings agencies keep rating the too-big-to-fail banks higher than everybody else, and they say it’s because of the implicit government support,” he added.
“There will be a lot of regulatory costs,” Mr. Hurley said. “There will be a lot of motion, smoke — but not fire — as we go through the regulatory process. There’s going to be ton of activity, but at its core we’re going to be back where we were the day that Lehman failed.”
Several of the larger banks said that they were still studying the bill.
“Although there are aspects of the legislation which are different from what we would have preferred, we will be able to conduct a fuller assessment of its impact after the regulators issue new rules,” said Vikram Pandit, the chief executive officer for Citigroup.
A spokesman for Goldman Sachs said: “We are studying the bill and are mindful that it still has to go through the House and the Senate. We’re also mindful of the fact that much interpretation responsibility lies with regulators, so we think it is too early to be able to express an informed view.”
But it is apparent already that banks will have to adapt the way they currently do business with their subsidiaries.
“As they wind down and spin off these more market-oriented derivatives businesses, that is going to be a challenge for them in part because of the complexity of the business,” said Jim Eckenrode, a banking analyst at TowerGroup, a financial services consulting firm.
But some analysts noted that the overhaul served an important purpose in improving confidence and providing transparency as a response to the challenges posed to the American financial system.
“My first line of thinking is that obviously there was a lack of systemic oversight in some of the businesses that were generating a lot of profits for the industry,” said Mr. Eckenrode.
“Trying to harmonize the regulatory environment I think makes a lot of sense. I do think that generally the banks should be pleased that it was not worse than it was,” he said.
For example, creating a resolution fund addressing the financial crisis, Mr. Eckenrode said, “certainly has been reduced quite a bit.”
The chief executive of the Securities Industry and Financial Markets Association, Tim Ryan, said in a statement that the new law should bolster confidence.
“Much of this new law should help to restore and maintain confidence in U.S. financial markets, including several important provisions such as the establishment of a systemic risk regulator, resolution authority and a new federal fiduciary standard for retail investors,” he said.
“But this is a tough law that will also have profound effects on the operations and cost structure of most financial services companies and financial markets,” Mr. Ryan added.
Joshua Steiner, a managing director who covers the financial sector for Hedgeye Risk Management, said he was still examining the legislation but said the new regulations could potentially weigh on earnings.
“One of the issues is really going to be going forward trying to understand how this is actually going to affect earnings, because the banks have been very cagey on how much of their earnings generally come from proprietary trading and private equity and hedge fund investing,” he said.
“So I think net-net over time this will come to represent essentially a tax on the industry for all intents and purposes,” Mr. Steiner said. “It will be a long-term depressant on earnings.”
He added: “Constraints will force them to re-allocate their capital elsewhere.”
The approvals on Friday cleared the way for both houses of Congress to vote on the full financial regulatory bill next week.
One lawmaker was quick with criticism of the bill. Senator Judd Gregg, Republican of New Hampshire and a member of the Senate Banking Committee, said: “In an effort that should be geared toward correcting deficiencies in our regulatory structure, and during a time when we should be focused on economic recovery, this legislation is a failure on both counts. It will not encourage much-needed stability and confidence in our financial markets. It will not significantly reduce systemic risk in our financial sector.”
But Ed Mierzwinski, consumer program director for the Federation of State Public Interest Research Groups, saw some positives for consumers and described the bill as “landmark legislation.”
He noted that the idea for creating a new consumer financial protection agency was proposed just three years ago. Despite intense efforts by the banking industry to water down the agency or kill it outright, Mr. Mierzwinski said the agency survived with broad authority, a strong financing stream and an independent director.
Graham Bowley, Eric Dash, Andrew Martin, Cyrus Sanati, Louise Story and Edward Wyatt contributed reporting.
Nice article on the US housing market
June 23, 2010
U.S. New Home Sales Drop 33% in May
By DAVID STREITFELD
The new housing market has never been this bad, at least not since the government started tracking such things in 1963.
Outdoing even the pessimists’ expectations, sales of new homes declined by a record amount in May to a new low. The dismal data, released by the Census Bureau on Wednesday, followed a disappointing report on sales of existing homes earlier in the week and added to growing concerns about the strength of the economic recovery.
Unemployment remains stubbornly high as private sector employers do not add jobs and retail sales are weak. And if no one seems to want to buy a house, many other people apparently are voluntarily ditching the ones they already have.
Fannie Mae, the big mortgage finance company that is a ward of the government, said Wednesday that homeowners who intentionally defaulted because they owed much more than the house was worth would be ineligible for a new Fannie Mae-backed loan for seven years.
“Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting,” Terence Edwards, Fannie Mae’s executive vice president for credit portfolio management, said in a statement.
Fannie Mae and its sister company Freddie Mac own or guarantee about 30 million mortgages. The new measures could help limit demand for houses for much of the next decade.
Fannie Mae said it would take legal action to recoup outstanding mortgage debt from borrowers who walk away. According to one study, 588,000 borrowers strategically defaulted in 2008.
Other economic news on Wednesday was downbeat.
Policy makers at the Federal Reserve, meeting in Washington, said that “financial conditions have become less supportive of economic growth.” As expected, the Federal Open Market Committee voted to keep short-term interest rates near zero.
Even as mortgage rates fell again last week, flirting with their modern-day lows, the Mortgage Bankers Association said that applications for loans to purchase homes fell. It was the fifth drop in six weeks for the purchase index, which is 36.8 percent below its level in June 2009.
“We can’t get the phones to ring,” said Michael E. Menatian, president of the Sanborn Mortgage Corporation in West Hartford, Conn. “Until there is economic growth — i.e., more jobs, wage appreciation, overtime and bonuses — we will have a housing problem.”
Builders sold new homes in May at an annual rate of 300,000, the Census Bureau said. That was 32.7 percent below the 446,000 rate in April, when buyers could still qualify for a tax credit, and is about a third the level in a normal economy.
Analysts had been expecting a drop to about 400,000. “We would be lying if we said the size of the drop was not shocking,” Dan Greenhaus, chief economic strategist for Miller Tabak, said in a research note.
Sales are now even lower than they were during the recession of the early 1980s, when interest rates approached 20 percent. The previous record low was September 1981.
“I think that builders should bite the bullet and stop building houses,” said Howard Glaser, a housing consultant. “They keep dumping new inventory into the market when what the market really needs is a moratorium.”
The builders maintain that they build only when they have orders from customers, and that their buyers are not interested in older stock. But the result is the same: too many houses, new and old, are competing for too few buyers.
The situation will likely get worse over the summer. In a normal market, the supply of homes available is less than six months. Currently, there are more than eight months’ worth of both new and existing homes.
With more foreclosures headed to the market, those numbers will likely go up.
Government data released Wednesday showed that newly initiated foreclosures increased 18.6 percent during the first quarter, to 371,000. Foreclosures in process increased 8.5 percent, to 1.17 million.
Under the system announced Wednesday by Fannie Mae, owners who walk away from their mortgages will be penalized even more than those who filed for multiple bankruptcy protection. Multiple filers are eligible for a new Fannie-backed mortgage after five years.
A Fannie spokeswoman said executives were not being made available to comment. The release did not address the question of how Fannie intended to distinguish between those who walk away and those who really could not avoid foreclosure.
Analysts and economists are growing more discouraged about the housing market; a majority said in one new survey that they expected prices to decline again this year. The size of the drop will be dictated by whether the market’s current queasiness is a temporary reaction to the end of the $8,000 tax credit or a more permanent malaise.
Buyers who signed contracts before April 30 qualified for the credit. These purchases will turn up in sales reports as they are completed.
While the credit clearly stimulated sales, the effect was milder than anticipated. The National Association of Realtors said this week that existing houses sold in May at an annual rate of 5.66 million, down slightly from April.
At a mortgage conference last month, David H. Stevens, Federal Housing Administration commissioner, said housing was “a market purely on life support, sustained by the federal government. Having F.H.A. do this much volume is a sign of a very sick system.”
In a recent interview, Mr. Stevens said his point was misconstrued. “The system is showing signs of stabilizing,” he said. “We’re vastly improved over where we were a year ago.”
To underline that notion, the Obama administration released this week its first monthly “housing scorecard.” It presents an optimistic picture of a housing market saved from the abyss by extensive government intervention.
Some of its good news, however, was distinctly relative. “Home equity up more than $1 trillion since first quarter 2009,” said one headline in the report. But, as the chart clearly indicated, in the three years before that, equity had fallen $6 trillion.
U.S. New Home Sales Drop 33% in May
By DAVID STREITFELD
The new housing market has never been this bad, at least not since the government started tracking such things in 1963.
Outdoing even the pessimists’ expectations, sales of new homes declined by a record amount in May to a new low. The dismal data, released by the Census Bureau on Wednesday, followed a disappointing report on sales of existing homes earlier in the week and added to growing concerns about the strength of the economic recovery.
Unemployment remains stubbornly high as private sector employers do not add jobs and retail sales are weak. And if no one seems to want to buy a house, many other people apparently are voluntarily ditching the ones they already have.
Fannie Mae, the big mortgage finance company that is a ward of the government, said Wednesday that homeowners who intentionally defaulted because they owed much more than the house was worth would be ineligible for a new Fannie Mae-backed loan for seven years.
“Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting,” Terence Edwards, Fannie Mae’s executive vice president for credit portfolio management, said in a statement.
Fannie Mae and its sister company Freddie Mac own or guarantee about 30 million mortgages. The new measures could help limit demand for houses for much of the next decade.
Fannie Mae said it would take legal action to recoup outstanding mortgage debt from borrowers who walk away. According to one study, 588,000 borrowers strategically defaulted in 2008.
Other economic news on Wednesday was downbeat.
Policy makers at the Federal Reserve, meeting in Washington, said that “financial conditions have become less supportive of economic growth.” As expected, the Federal Open Market Committee voted to keep short-term interest rates near zero.
Even as mortgage rates fell again last week, flirting with their modern-day lows, the Mortgage Bankers Association said that applications for loans to purchase homes fell. It was the fifth drop in six weeks for the purchase index, which is 36.8 percent below its level in June 2009.
“We can’t get the phones to ring,” said Michael E. Menatian, president of the Sanborn Mortgage Corporation in West Hartford, Conn. “Until there is economic growth — i.e., more jobs, wage appreciation, overtime and bonuses — we will have a housing problem.”
Builders sold new homes in May at an annual rate of 300,000, the Census Bureau said. That was 32.7 percent below the 446,000 rate in April, when buyers could still qualify for a tax credit, and is about a third the level in a normal economy.
Analysts had been expecting a drop to about 400,000. “We would be lying if we said the size of the drop was not shocking,” Dan Greenhaus, chief economic strategist for Miller Tabak, said in a research note.
Sales are now even lower than they were during the recession of the early 1980s, when interest rates approached 20 percent. The previous record low was September 1981.
“I think that builders should bite the bullet and stop building houses,” said Howard Glaser, a housing consultant. “They keep dumping new inventory into the market when what the market really needs is a moratorium.”
The builders maintain that they build only when they have orders from customers, and that their buyers are not interested in older stock. But the result is the same: too many houses, new and old, are competing for too few buyers.
The situation will likely get worse over the summer. In a normal market, the supply of homes available is less than six months. Currently, there are more than eight months’ worth of both new and existing homes.
With more foreclosures headed to the market, those numbers will likely go up.
Government data released Wednesday showed that newly initiated foreclosures increased 18.6 percent during the first quarter, to 371,000. Foreclosures in process increased 8.5 percent, to 1.17 million.
Under the system announced Wednesday by Fannie Mae, owners who walk away from their mortgages will be penalized even more than those who filed for multiple bankruptcy protection. Multiple filers are eligible for a new Fannie-backed mortgage after five years.
A Fannie spokeswoman said executives were not being made available to comment. The release did not address the question of how Fannie intended to distinguish between those who walk away and those who really could not avoid foreclosure.
Analysts and economists are growing more discouraged about the housing market; a majority said in one new survey that they expected prices to decline again this year. The size of the drop will be dictated by whether the market’s current queasiness is a temporary reaction to the end of the $8,000 tax credit or a more permanent malaise.
Buyers who signed contracts before April 30 qualified for the credit. These purchases will turn up in sales reports as they are completed.
While the credit clearly stimulated sales, the effect was milder than anticipated. The National Association of Realtors said this week that existing houses sold in May at an annual rate of 5.66 million, down slightly from April.
At a mortgage conference last month, David H. Stevens, Federal Housing Administration commissioner, said housing was “a market purely on life support, sustained by the federal government. Having F.H.A. do this much volume is a sign of a very sick system.”
In a recent interview, Mr. Stevens said his point was misconstrued. “The system is showing signs of stabilizing,” he said. “We’re vastly improved over where we were a year ago.”
To underline that notion, the Obama administration released this week its first monthly “housing scorecard.” It presents an optimistic picture of a housing market saved from the abyss by extensive government intervention.
Some of its good news, however, was distinctly relative. “Home equity up more than $1 trillion since first quarter 2009,” said one headline in the report. But, as the chart clearly indicated, in the three years before that, equity had fallen $6 trillion.
Saturday, May 29, 2010
Reconciling the local demand to move the base with US strategic interests appears impossible
Here is an Okinawan's very nice letter to the editor of the New York Times. Although this week's NYT article said Prime Minister Hatoyama's announcement was "a victory for the Obama administration and a humiliating setback for Mr. Hatoyama," reconciling the local demand to move the base with US strategic interests appears impossible at this time.
I also attached my feature story on Okinawa, which I used to write for Asia Times Online. Please go over it, if you get time. Thanks, Kosuke
May 28, 2010
The U.S. Air Base on Okinawa
To the Editor:
“Japan Relents on U.S. Base on Okinawa, Reneging on a Campaign Promise” (news article, May 24) characterizes Prime Minister Yukio Hatoyama’s announcement that the United States Marine Air Station Futenma would be moved to northern Okinawa — as originally agreed to — as “a victory for the Obama administration and a humiliating setback for Mr. Hatoyama.”
Obviously, in this squabbling, the Hatoyama administration succumbed to the Obama administration’s all-out pressure to stick to a 2006 bilateral agreement. Mr. Hatoyama had raised Okinawans’ expectations during the last election campaign by saying that Futenma’s functions must be moved away from Okinawa.
The Obama administration should remember, however, that its victory is self-defeating as well because it contradicts the principle of democracy that Washington advocates in dealing with “undemocratic” and “unenlightened” nations.
The overwhelming majority of Okinawans are opposed to any plan to keep the base on Okinawa, as Washington is fully aware. How dare Mr. Obama ask Mr. Hatoyama to act without regard to the wishes of his compatriots?
Yoshio Shimoji
Naha, Okinawa, May 24, 2010
On Okinawa, trouble at home base
By Kosuke Takahashi
TOKYO - The recent crash of a US military transport helicopter in a densely populated residential area near the United States Marine Corps Futenma Air Station on Okinawa in southernmost Japan is again arousing latent anti-American sentiment there. This presents more than public relations problems, since the strategic value of Okinawa cannot be overemphasized. The revived resentment comes as the US military strives to expand the global scope of its operations from Japan, South Korea and elsewhere in East Asia to the Middle East and the Indian Ocean in "war against terrorism".
Okinawa is home to 25,000 of the almost 40,000 US troops in Japan, excluding the Navy Seventh Fleet's 12,000 personnel, with their home port at Yokosuka in Kanagawa Prefecture. It is considered part of a global forward base in the new US basing strategy. Reconciling the local demand to move the base with US strategic interests appears impossible at this time.
The mounting anti-base movement in Okinawa could eventually hurt Japan-US security arrangements, the centerpiece of the two countries' solid strategic relations, unless the two nations swiftly ease the burden of US military bases, long carried by the Okinawans alone. The return to Okinawa of the contentious Futenma Air Station could be one political feasible way for both governments to avoid aggravating the situation.
On September 8, 1951, Tokyo and Washington signed the Japan-US Security Treaty that has served as the cornerstone for peace and stability in the Asia-Pacific region, and on which both nations have built a close security relationship.
"Okinawa has been the cornerstone for Japan's own safety and prosperity for years, firmly supporting the US-Japan security alliance," professor Haruo Shimada at Keio University in Tokyo and a special adviser to the Cabinet Office under Prime Minister Junichiro Koizumi, told Asia Times Online. "Thus, to realize a society where the Okinawans can live feeling reassured, without any anxiety about their safety, itself contributes to the security partnership of Japan and the US." Shimada served from 1996 to 2000 as chairman of two committees created to study the domestic complexities and problems involving US bases on Okinawa, advisory groups to Japan's Chief Cabinet Secretary.
Marines go to university
A large US Marines CH-53 military helicopter crashed and burst into flames on a sunny Friday afternoon, August 13. It struck a school building on the Okinawa International University campus in Ginowan, a southern city in the main island of Okinawa. Three US Marines on board were injured, but there were no civilian casualties, though some vehicles and homes were damaged by crash debris. One piece smashed a window in a house 50 meters from the crash site and bits of glass sprayed a baby's cradle. On a wing and a prayer just a minute earlier, the baby was grabbed from his cradle and rushed outside by his mother who had been surprised by the roar of the falling helicopter. She escaped from the house while hugging her baby close, news reports said.
The university is located in a populated residential area bordering the south side of US Marine Corps Futenma Air Station, from where the chopper took off. For the university, it was not the first such accident. In 1972, a fuel cell dropped from a US surveillance plane hit the campus, but caused no injuries. But in 1959, a US fighter jet crashed into an elementary school in central Okinawa island, leaving 17 people dead, including 11 children. Okinawans remember these accidents and the recent crash revives bitter memories.
This time, even more than the accident itself, what infuriated the Okinawan people is that the US military apparently made the campus its virtual extraterritorial sanctuary. US Marines sealed off the crash site and barred Japanese police from joining the on-site investigation conducted by the US Marines. Japanese media were also kept away from the site, but Japanese TV stations still managed frequently to broadcast some disturbing and offensive scenes, including one in which several young Marines on the Japanese camps repeatedly yelled at the media, "Get out! Get out!"
All of those rebroadcast scenes have aroused in the Japanese public some suspicions that the US military still retains an occupation force mentality and that Okinawa remains under American occupation, drawing protests from residents of the prefecture. Citizens, sponsored by the Ginowan city government, plan to hold a protest rally against the US forces in Okinawa this Sunday, September 12. So far they have collected more than 100,000 signatures from Okinawa and elsewhere, according to local newspapers.
The business and economic picture in Okinawa, vis-a-vis the US bases, is complicated. Some residents are heavily dependent on the US bases and Okinawa's conservatives, including those in the construction industry who support the ruling Liberal Democratic Party, are in favor of the bases. For example, a plan to relocate Futenma Air Station to Nago, a northern, less populated city in Okinawa, chosen for its relatively low impact on the environment, was abandoned, largely because of business pressure.
To be fair, the US military just may have invoked a provision of the Status of Forces Agreement (SOFA), which has governed the management and operations of the US military in Japan. The SOFA was signed by both governments in 1960 when the two countries revised the Japan-US Security Treaty. But unlike this recent Okinawa case, in the previous aircraft crashes, as the ones in Yokohama City in 1977 and in Ehime Prefecture in 1988, US forces allowed the local police to carry out joint Japan-US inspections.
The incident intensified public calls in Okinawa to revise the SOFA to prevent any US discretion concerning applications of SOFA rules, but the Japanese government has said it will study the handling of the incident in light of the accord and will ask for improved enforcement of the accord, rather than revising it - to the dismay of Okinawans. The Tokyo government appears to have concluded there is little possibility that the US will agree to revise SOFA, since the US has similar treaties with other nations, such as South Korea and Germany. The Japanese government, therefore, focuses on the application of SOFA rules, which tend to give the US military sole discretion, and on procedures and standards for deciding which roles local police and US military authorities play, which are not spelled out under the SOFA.
Okinawa a special place in Japan
To understand Okinawa's decades of agony and humiliation, one has to know the history of modern Okinawa. Japanese, especially older generations, feel compassion and experience a keen sense of sympathy on thinking about Okinawa. It once flourished as an independent trading nation, the Kingdom of Ryukyu, over several centuries, until the early 16th century. Japan conquered the kingdom in 1609. At the end of World War II, Okinawa became the biggest and most crucial battlefield between the US and Japan. American scholar Herbert Bix says in his Pulitzer-prize-winning book Hirohito and the Making of Modern Japan that the Okinawa battle "cost an estimated 94,000 to 120,000 Japanese combatants and 150,000 to 170,000 noncombatants, including more than seven hundred Okinawans whom the Japanese army forced to commit collective suicide. American combat losses were approximately 12,500 killed and more than 33,000 wounded; among these casualties were more than 7,000 sailors, reflecting the toll taken by kamikaze attacks."
Soon after the war, Tokyo deserted Okinawa, and the US claimed the Okinawa islands clearly due to its huge casualties and loss of population in the battles. Many experts such as Bix have pointed out that after the war, in September 1947, the last Showa Emperor Hirohito sent an official on a secret mission to US General Douglas MacArthur, then the post-surrender potentate in Tokyo and protector of the Japanese monarchy, to request the American occupation of Okinawa and other islands in the Ryukyu chain continue for 99 years. Around that time, MacArthur said there was no Japanese opposition to the US retaining Okinawa, for "the Okinawans are not Japanese". Hirohito's Okinawa message and MacArthur's willingness to retain Okinawa show that Okinawa was sacrificed for the convenience of the new monarchy and postwar Japan. As a result, the last emperor, who died in 1989, could not have visited Okinawa at all during his lifetime.
Not until 1972 did the US return Okinawa to Japan. Since then, Okinawa has accepted massive US troop presence. Though the area of Okinawa Prefecture is only 0.6% of the total national land, 75% of all the US bases in Japan are concentrated in Okinawa. Indeed, 18.8% of the total area of Okinawa's mainland is used as US bases. This number may not ring a bell for non-Okinawans, but it is indeed huge. Take Central Park in Manhattan, New York City. The total area of Central Park is 3.4 square kilometers, while Manhattan Island is 58 square kilometers. Although Central Park seems very large to New Yorkers, it only accounts 5.9% of the total area of Manhattan. Compare 18.8% and 5.9%. You need more than two more Central Parks in New York City, if you take into consideration the huge presence of US bases in Okinawa. Still, two more Central Parks are not harmful, because unlike US military bases in Okinawa, they do not bring earsplitting roars of planes and helicopters every day and night, and sometimes crime.
Thirty-eight US facilities are located in Okinawa Prefecture. Among them is the famous Kadena Air Base, the largest and strongest US military base in the Far East. The base occupies 83% of Kadena Town. Although the base itself belongs to the US Air Force, basically most of about 25,000 US military personnel in Okinawa are Marines. This is because one of the US's three Marine Expeditionary Forces in the world, or the III Marine Expeditionary Force, is stationed in Okinawa. Marines in Okinawa are generally young, as they are almost everywhere. About 60% of the Marines in Okinawa are said to be 19-25 years old.
The contentious Futenma Air Station
In September 1995, a serious political and social problem arose not only in Okinawa, but also in the whole of Japan. Three Marines raped a 12-year-old schoolgirl. Faced with the subsequent surge of the anti-base campaign, the US and Japanese governments for the first time took US base matters into their own hands. The two governments organized the Special Action Committee on Okinawa (SACO). In April 1996, Japan and the US agreed to relocate the disputed Futenma Air Station, located in the midst of residential and school areas. Prime minister Ryutaro Hashimoto demanded the return of the space to Japan because the danger caused by the base was evident, as was also shown this time around. After more than eight years, however, the future of the base remains unclear.
In November 2003, US Secretary of Defense Donald Rumsfeld visited Okinawa and looked over Futenma from the air. At that time, he said he could not believe there were not more accidents in such a place.
But there has been little prospect of an early relocation of the facility and return of the site to Japan until the recent helicopter incident. For one thing, although a civilian-military airport off the coast of Nago, a northern, less populated city in Okinawa, was proposed as a new site for the facility, some local residents and environmental groups have strongly opposed the alternative. Okinawa governor Keiichi Inamine promised to impose a 15-year limit on the military use of the new facility, but the US military flatly rejected the plan.
Political observers and Japanese media are criticizing Koizumi's leadership. On the date when the US helicopter crashed, he continued to see the film Deep Blue during his summer vacation. Critics said he was just thinking about the beautiful sea on the cinema screen, not about Okinawa surrounded by beautiful sea, and soaked in Okinawans' growing ire. It was indeed 12 days after the accident before Koizumi finally met Okinawa's governor Inamine, but did not make any commitment to satisfy Inamine's requests, including a review of SOFA and an early reversion of the Futenma airfield to Japan. Meantime, Koizumi was busy calling Japanese gold medalists in the Athens Olympics. He appears to have concluded that Okinawa affairs are not among his vote-getting policies, and now looks very busy thinking about his cabinet shuffle expected later this month, and his No 1 priority, reform of the postal system.
Time to return Okinawa US Air Station
The accident in Okinawa occurred at a time when the US is transforming its forces overseas. According to President George W Bush's speech last month, the redeployment would bring up to 70,000 troops, and 100,000 family members and civilian workers back to the US within a decade. Among them, it is estimated US troops in Europe will be reduced by more than 40,000, mostly in Germany, from the current 117,000. In Asia, the US and South Korea already have agreed to reduce 12,500 out of about 40,000 troops now on the Korean Peninsula. But the transformation in Japan is still unclear. It remains to be seen how many US troops in Japan, totaling some 40,000, excluding the Navy's Seventh Fleet's 12,000 personnel, will be reduced.
The Japanese media have reported that Japan's role in the US reorganization would be enhanced as a forward deployment strategy. Among them are the transfer of US Army I Corps in Washington State to Camp Zama in Kanagawa and consolidation of the 13th Air Force in Guam with the 5th Air Force Yokota in Tokyo. Experts view this US move as the intention to make Japan the forward command headquarters to cover the Middle East and the Indian Ocean on a global scale to fight terrorism. This is apparently beyond the purpose of the US troops' presence as defined in the current Japan-US security treaty. The treaty limits the scope of their operations just to the Far East. Some experts express concern that if Japan accepts these reported plans, the nation could well be another terrorist target.
In Japan, excluding the Communist Party, almost nobody denies that the US is Japan's most important ally. The two countries' ties have been consolidated more than ever before, especially after the September 11, 2001, terrorist attacks on the US. Yet, combined with the recent Okinawa helicopter crash, as well as the whopping 244.1 billion yen (US$2.2 billion) - this fiscal year's Japanese budgets that support US troops in Japan - well beyond the essential minimum, there is a strong possibility that anti-American sentiment will run high in Okinawa and elsewhere in Japan in the near term. To avoid that, the return of the Futenma Air Base to Okinawa, or the consolidation of Futenma and Kadena bases, would be a politically feasible solution, even though the US Marines and US Air Force are sometimes at odds.
Kosuke Takahashi is a former staff writer at the Asahi Shimbun and is currently a freelance correspondent based in Tokyo.
(Copyright 2004 Asia Times Online Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies.)
I also attached my feature story on Okinawa, which I used to write for Asia Times Online. Please go over it, if you get time. Thanks, Kosuke
May 28, 2010
The U.S. Air Base on Okinawa
To the Editor:
“Japan Relents on U.S. Base on Okinawa, Reneging on a Campaign Promise” (news article, May 24) characterizes Prime Minister Yukio Hatoyama’s announcement that the United States Marine Air Station Futenma would be moved to northern Okinawa — as originally agreed to — as “a victory for the Obama administration and a humiliating setback for Mr. Hatoyama.”
Obviously, in this squabbling, the Hatoyama administration succumbed to the Obama administration’s all-out pressure to stick to a 2006 bilateral agreement. Mr. Hatoyama had raised Okinawans’ expectations during the last election campaign by saying that Futenma’s functions must be moved away from Okinawa.
The Obama administration should remember, however, that its victory is self-defeating as well because it contradicts the principle of democracy that Washington advocates in dealing with “undemocratic” and “unenlightened” nations.
The overwhelming majority of Okinawans are opposed to any plan to keep the base on Okinawa, as Washington is fully aware. How dare Mr. Obama ask Mr. Hatoyama to act without regard to the wishes of his compatriots?
Yoshio Shimoji
Naha, Okinawa, May 24, 2010
On Okinawa, trouble at home base
By Kosuke Takahashi
TOKYO - The recent crash of a US military transport helicopter in a densely populated residential area near the United States Marine Corps Futenma Air Station on Okinawa in southernmost Japan is again arousing latent anti-American sentiment there. This presents more than public relations problems, since the strategic value of Okinawa cannot be overemphasized. The revived resentment comes as the US military strives to expand the global scope of its operations from Japan, South Korea and elsewhere in East Asia to the Middle East and the Indian Ocean in "war against terrorism".
Okinawa is home to 25,000 of the almost 40,000 US troops in Japan, excluding the Navy Seventh Fleet's 12,000 personnel, with their home port at Yokosuka in Kanagawa Prefecture. It is considered part of a global forward base in the new US basing strategy. Reconciling the local demand to move the base with US strategic interests appears impossible at this time.
The mounting anti-base movement in Okinawa could eventually hurt Japan-US security arrangements, the centerpiece of the two countries' solid strategic relations, unless the two nations swiftly ease the burden of US military bases, long carried by the Okinawans alone. The return to Okinawa of the contentious Futenma Air Station could be one political feasible way for both governments to avoid aggravating the situation.
On September 8, 1951, Tokyo and Washington signed the Japan-US Security Treaty that has served as the cornerstone for peace and stability in the Asia-Pacific region, and on which both nations have built a close security relationship.
"Okinawa has been the cornerstone for Japan's own safety and prosperity for years, firmly supporting the US-Japan security alliance," professor Haruo Shimada at Keio University in Tokyo and a special adviser to the Cabinet Office under Prime Minister Junichiro Koizumi, told Asia Times Online. "Thus, to realize a society where the Okinawans can live feeling reassured, without any anxiety about their safety, itself contributes to the security partnership of Japan and the US." Shimada served from 1996 to 2000 as chairman of two committees created to study the domestic complexities and problems involving US bases on Okinawa, advisory groups to Japan's Chief Cabinet Secretary.
Marines go to university
A large US Marines CH-53 military helicopter crashed and burst into flames on a sunny Friday afternoon, August 13. It struck a school building on the Okinawa International University campus in Ginowan, a southern city in the main island of Okinawa. Three US Marines on board were injured, but there were no civilian casualties, though some vehicles and homes were damaged by crash debris. One piece smashed a window in a house 50 meters from the crash site and bits of glass sprayed a baby's cradle. On a wing and a prayer just a minute earlier, the baby was grabbed from his cradle and rushed outside by his mother who had been surprised by the roar of the falling helicopter. She escaped from the house while hugging her baby close, news reports said.
The university is located in a populated residential area bordering the south side of US Marine Corps Futenma Air Station, from where the chopper took off. For the university, it was not the first such accident. In 1972, a fuel cell dropped from a US surveillance plane hit the campus, but caused no injuries. But in 1959, a US fighter jet crashed into an elementary school in central Okinawa island, leaving 17 people dead, including 11 children. Okinawans remember these accidents and the recent crash revives bitter memories.
This time, even more than the accident itself, what infuriated the Okinawan people is that the US military apparently made the campus its virtual extraterritorial sanctuary. US Marines sealed off the crash site and barred Japanese police from joining the on-site investigation conducted by the US Marines. Japanese media were also kept away from the site, but Japanese TV stations still managed frequently to broadcast some disturbing and offensive scenes, including one in which several young Marines on the Japanese camps repeatedly yelled at the media, "Get out! Get out!"
All of those rebroadcast scenes have aroused in the Japanese public some suspicions that the US military still retains an occupation force mentality and that Okinawa remains under American occupation, drawing protests from residents of the prefecture. Citizens, sponsored by the Ginowan city government, plan to hold a protest rally against the US forces in Okinawa this Sunday, September 12. So far they have collected more than 100,000 signatures from Okinawa and elsewhere, according to local newspapers.
The business and economic picture in Okinawa, vis-a-vis the US bases, is complicated. Some residents are heavily dependent on the US bases and Okinawa's conservatives, including those in the construction industry who support the ruling Liberal Democratic Party, are in favor of the bases. For example, a plan to relocate Futenma Air Station to Nago, a northern, less populated city in Okinawa, chosen for its relatively low impact on the environment, was abandoned, largely because of business pressure.
To be fair, the US military just may have invoked a provision of the Status of Forces Agreement (SOFA), which has governed the management and operations of the US military in Japan. The SOFA was signed by both governments in 1960 when the two countries revised the Japan-US Security Treaty. But unlike this recent Okinawa case, in the previous aircraft crashes, as the ones in Yokohama City in 1977 and in Ehime Prefecture in 1988, US forces allowed the local police to carry out joint Japan-US inspections.
The incident intensified public calls in Okinawa to revise the SOFA to prevent any US discretion concerning applications of SOFA rules, but the Japanese government has said it will study the handling of the incident in light of the accord and will ask for improved enforcement of the accord, rather than revising it - to the dismay of Okinawans. The Tokyo government appears to have concluded there is little possibility that the US will agree to revise SOFA, since the US has similar treaties with other nations, such as South Korea and Germany. The Japanese government, therefore, focuses on the application of SOFA rules, which tend to give the US military sole discretion, and on procedures and standards for deciding which roles local police and US military authorities play, which are not spelled out under the SOFA.
Okinawa a special place in Japan
To understand Okinawa's decades of agony and humiliation, one has to know the history of modern Okinawa. Japanese, especially older generations, feel compassion and experience a keen sense of sympathy on thinking about Okinawa. It once flourished as an independent trading nation, the Kingdom of Ryukyu, over several centuries, until the early 16th century. Japan conquered the kingdom in 1609. At the end of World War II, Okinawa became the biggest and most crucial battlefield between the US and Japan. American scholar Herbert Bix says in his Pulitzer-prize-winning book Hirohito and the Making of Modern Japan that the Okinawa battle "cost an estimated 94,000 to 120,000 Japanese combatants and 150,000 to 170,000 noncombatants, including more than seven hundred Okinawans whom the Japanese army forced to commit collective suicide. American combat losses were approximately 12,500 killed and more than 33,000 wounded; among these casualties were more than 7,000 sailors, reflecting the toll taken by kamikaze attacks."
Soon after the war, Tokyo deserted Okinawa, and the US claimed the Okinawa islands clearly due to its huge casualties and loss of population in the battles. Many experts such as Bix have pointed out that after the war, in September 1947, the last Showa Emperor Hirohito sent an official on a secret mission to US General Douglas MacArthur, then the post-surrender potentate in Tokyo and protector of the Japanese monarchy, to request the American occupation of Okinawa and other islands in the Ryukyu chain continue for 99 years. Around that time, MacArthur said there was no Japanese opposition to the US retaining Okinawa, for "the Okinawans are not Japanese". Hirohito's Okinawa message and MacArthur's willingness to retain Okinawa show that Okinawa was sacrificed for the convenience of the new monarchy and postwar Japan. As a result, the last emperor, who died in 1989, could not have visited Okinawa at all during his lifetime.
Not until 1972 did the US return Okinawa to Japan. Since then, Okinawa has accepted massive US troop presence. Though the area of Okinawa Prefecture is only 0.6% of the total national land, 75% of all the US bases in Japan are concentrated in Okinawa. Indeed, 18.8% of the total area of Okinawa's mainland is used as US bases. This number may not ring a bell for non-Okinawans, but it is indeed huge. Take Central Park in Manhattan, New York City. The total area of Central Park is 3.4 square kilometers, while Manhattan Island is 58 square kilometers. Although Central Park seems very large to New Yorkers, it only accounts 5.9% of the total area of Manhattan. Compare 18.8% and 5.9%. You need more than two more Central Parks in New York City, if you take into consideration the huge presence of US bases in Okinawa. Still, two more Central Parks are not harmful, because unlike US military bases in Okinawa, they do not bring earsplitting roars of planes and helicopters every day and night, and sometimes crime.
Thirty-eight US facilities are located in Okinawa Prefecture. Among them is the famous Kadena Air Base, the largest and strongest US military base in the Far East. The base occupies 83% of Kadena Town. Although the base itself belongs to the US Air Force, basically most of about 25,000 US military personnel in Okinawa are Marines. This is because one of the US's three Marine Expeditionary Forces in the world, or the III Marine Expeditionary Force, is stationed in Okinawa. Marines in Okinawa are generally young, as they are almost everywhere. About 60% of the Marines in Okinawa are said to be 19-25 years old.
The contentious Futenma Air Station
In September 1995, a serious political and social problem arose not only in Okinawa, but also in the whole of Japan. Three Marines raped a 12-year-old schoolgirl. Faced with the subsequent surge of the anti-base campaign, the US and Japanese governments for the first time took US base matters into their own hands. The two governments organized the Special Action Committee on Okinawa (SACO). In April 1996, Japan and the US agreed to relocate the disputed Futenma Air Station, located in the midst of residential and school areas. Prime minister Ryutaro Hashimoto demanded the return of the space to Japan because the danger caused by the base was evident, as was also shown this time around. After more than eight years, however, the future of the base remains unclear.
In November 2003, US Secretary of Defense Donald Rumsfeld visited Okinawa and looked over Futenma from the air. At that time, he said he could not believe there were not more accidents in such a place.
But there has been little prospect of an early relocation of the facility and return of the site to Japan until the recent helicopter incident. For one thing, although a civilian-military airport off the coast of Nago, a northern, less populated city in Okinawa, was proposed as a new site for the facility, some local residents and environmental groups have strongly opposed the alternative. Okinawa governor Keiichi Inamine promised to impose a 15-year limit on the military use of the new facility, but the US military flatly rejected the plan.
Political observers and Japanese media are criticizing Koizumi's leadership. On the date when the US helicopter crashed, he continued to see the film Deep Blue during his summer vacation. Critics said he was just thinking about the beautiful sea on the cinema screen, not about Okinawa surrounded by beautiful sea, and soaked in Okinawans' growing ire. It was indeed 12 days after the accident before Koizumi finally met Okinawa's governor Inamine, but did not make any commitment to satisfy Inamine's requests, including a review of SOFA and an early reversion of the Futenma airfield to Japan. Meantime, Koizumi was busy calling Japanese gold medalists in the Athens Olympics. He appears to have concluded that Okinawa affairs are not among his vote-getting policies, and now looks very busy thinking about his cabinet shuffle expected later this month, and his No 1 priority, reform of the postal system.
Time to return Okinawa US Air Station
The accident in Okinawa occurred at a time when the US is transforming its forces overseas. According to President George W Bush's speech last month, the redeployment would bring up to 70,000 troops, and 100,000 family members and civilian workers back to the US within a decade. Among them, it is estimated US troops in Europe will be reduced by more than 40,000, mostly in Germany, from the current 117,000. In Asia, the US and South Korea already have agreed to reduce 12,500 out of about 40,000 troops now on the Korean Peninsula. But the transformation in Japan is still unclear. It remains to be seen how many US troops in Japan, totaling some 40,000, excluding the Navy's Seventh Fleet's 12,000 personnel, will be reduced.
The Japanese media have reported that Japan's role in the US reorganization would be enhanced as a forward deployment strategy. Among them are the transfer of US Army I Corps in Washington State to Camp Zama in Kanagawa and consolidation of the 13th Air Force in Guam with the 5th Air Force Yokota in Tokyo. Experts view this US move as the intention to make Japan the forward command headquarters to cover the Middle East and the Indian Ocean on a global scale to fight terrorism. This is apparently beyond the purpose of the US troops' presence as defined in the current Japan-US security treaty. The treaty limits the scope of their operations just to the Far East. Some experts express concern that if Japan accepts these reported plans, the nation could well be another terrorist target.
In Japan, excluding the Communist Party, almost nobody denies that the US is Japan's most important ally. The two countries' ties have been consolidated more than ever before, especially after the September 11, 2001, terrorist attacks on the US. Yet, combined with the recent Okinawa helicopter crash, as well as the whopping 244.1 billion yen (US$2.2 billion) - this fiscal year's Japanese budgets that support US troops in Japan - well beyond the essential minimum, there is a strong possibility that anti-American sentiment will run high in Okinawa and elsewhere in Japan in the near term. To avoid that, the return of the Futenma Air Base to Okinawa, or the consolidation of Futenma and Kadena bases, would be a politically feasible solution, even though the US Marines and US Air Force are sometimes at odds.
Kosuke Takahashi is a former staff writer at the Asahi Shimbun and is currently a freelance correspondent based in Tokyo.
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Thursday, March 25, 2010
The Will and Imagination to Return to Common Sense: Toward a Restructuring of the US-Japan Alliance By Terashima Jitsuro
This is an article you can never read in the mainstream big Japanese media.
The Will and Imagination to Return to Common Sense: Toward a Restructuring of the US-Japan Alliance
By Terashima Jitsuro
Translation by John Junkerman
In a discussion of early 20th-century China, the writer Lu Xun lamented how the Chinese, completely accustomed to their colonial status, had become “slave-faced.” Slave-faced is the expression of a person who is accustomed to being persecuted and lives by toadying to the powerful. It is the hollow expression of those who have lost the courage to think on their own about the condition they are in, of those who do not determine their own fates. That is “slave-faced.”
Tracking media reports on the Futenma base relocation issue since the fall of 2009, I realized that slave-faced expressions have become a permanent feature of Japanese intellectuals, including the media. The US-Japan military alliance has become fixed as an unalterable postulate, and the intellectual indolence of those who utterly reject any discussion of altering the alliance is simply astonishing.
To return to common sense. This is what is required of the Japanese, to return to the common sense of international society and to restore the recognition that it is unnatural for foreign military forces to be stationed for an extended period of time in an independent nation. A nation that does not have the will to transcend sophistry and narrow self-interest and confront this problem directly cannot be called an independent nation. Let me once again specify the facts we must face.
1) In the 65th year since the end of the Pacific War and 20 years after the end of the Cold War, there are some 40,000 US soldiers (and about 50,000 civilians and dependents) stationed in Japan on US bases that occupy approximately 1,010 square kilometers of land (1.6 times the area of the city of Tokyo).
2) Of the top five large-scale foreign bases that the US maintains around the world, four are in Japan (the Yokosuka naval base, and the Kadena, Misawa, and Yokota air bases).
3) Since an agreement is in place that makes the entire territory of Japan available for bases, and decisions on what areas to provide are made by the Joint Committee of US and Japanese government representatives (Article 2 of the Status of Forces Agreement [SOFA]), bases can be established anywhere in Japan without the approval of the Japanese Diet. There is a concentration of US bases in the vicinity of the nation’s capital, Tokyo, that is unparalleled anywhere in the world (the Yokota air base, the Yokosuka naval base, the Zama army base, and the Atsugi naval air station, among others).
4) 70 percent of the costs of stationing US forces in Japan are borne by the host nation, a situation that exists nowhere else in the world.
5) The status of US forces in Japan under the SOFA has been carried over from the Administrative Agreement that governed bases during the US occupation, and not only is Japanese sovereignty under the agreement weak, but Japan has had to bear base-related expenses that are not even specified in the SOFA.
Rediscoveries Made on a Trip to the US in Early December 2009
I visited New York and Washington during the first week of December. Since I returned to Japan in 1997 after working in the US for more than 10 years, I have made four trips a year to conduct “fixed-point observations.” The purpose of the trip was to share opinions with specialists on US-Japanese industrial cooperation in the environmental energy field, some nine months after the Obama administration launched the “Green New Deal;” and on next-generation information and communications technology, about which I chair a task force for the Ministry of Internal Affairs and Communication. Discussions on the US-Japan security relationship were not on my agenda.
Nonetheless, simply because I am a long-time friend of Prime Minister Hatoyama Yukio and sometimes have an opportunity to share thoughts with him, the Nikkei and Yomiuri newspapers repeatedly portrayed my visit to the US as that of a secret envoy of the prime minister, sent to pave the way for a solution to the pressing Futenma problem. Parallel diplomacy is always to be avoided, since conducting negotiations on a separate plane when official negotiations are taking place can only confuse the situation, and I am not stupid enough to engage in such activity. In fact, considering the delicacy of the timing of the trip, I intentionally avoided the departments of State and Defense, the president’s office, and others with responsibility for US-Japan relations, and restricted my visits and discussions to Washington think tanks involved with international relations, the World Bank, the Inter-American Development Bank, and journalists and specialists involved with energy and environmental problems.
Those who just recently were saying, “Japan’s refueling mission in the Indian Ocean is living proof of the US-Japan alliance, and if it ends, the alliance will collapse,” are now insisting, “Unless Japan implements the terms of the US-Japan agreement on the Futenma relocation, the US-Japan alliance will crack.” Many of the Washington-based correspondents for Japanese media are only capable of reporting that “a breakdown of favorable US-Japan relations looms.”
Just what do these people mean by “favorable US-Japan relations”? I dare to say they think it is desirable to maintain the US-Japan relationship of the Bush-Koizumi era, when Japan responded swiftly to American expectations that it “show the flag,” by dispatching Self-Defense Forces first to the Indian Ocean and then to Iraq. In other words, the reports of my trip to the US reflected the overreaction of those who consider the US-Japan security relationship as the permanent status quo, to which any change is unwelcome.
However, we have witnessed the failure of the war in Iraq. The US has sacrificed the lives of over 5300 soldiers in Afghanistan and Iraq, while spending over $1 trillion on the wars. The initiator of the war, President Bush himself, concluded the Iraq war was based on faulty intelligence, and it is estimated that the war has cost the lives of at least 100,000 Iraqis. In the US itself, this reassessment has led to a paradigm shift, with the Iraq war-opponent Obama as president. Among the Japanese, it is amazing how few have been willing to admit that the nation took the wrong path when it got involved with that war. But it is not possible to map out the future of US-Japan relations without first sincerely coming to terms with these issues. This is because a proper recognition of the process that led to the reorganization of the US military after 9.11 is the foundation for examining the next stage in the US-Japan alliance.
Still, the foul odor emanating from those who cling to US-Japan security is fierce. I keenly feel the need to keep at arm’s length those in Washington who make their living off US-Japan security, those who are generally referred to as “Japan hands” and “pro-Japanese.” These people greet visitors from Japan with smiles on their faces, and often participate in symposiums in Japan, where they sing the praises of “the US-Japan alliance as a permanent axis.” They always refer to the “responsibilities” of base-hosting Japan and call for increased cooperation with the US, in the name of making “international contributions.” Of course, there is a group of “US hands” and “pro-American” Japanese who sing in chorus, and this mutual dependence has long set the course for US-Japan relations.
On my trips to the US over the past several years, I have made an effort to meet with people who have a broader view of the world and to hear their thoughts on US-Japan relations from a diversity of perspectives. This is because I wanted to hear objective opinions that went beyond vested interests and preconceptions, in order to assess the present state of the US-Japan alliance within a broader view.
What I have been surprised to find is that, even among top-level intellectuals and specialists in international issues, most of those who are not directly involved in US-Japan relations don’t have any knowledge of the reality of the alliance (the state of the bases and the content of the SOFA). They might preface their response with “US national interest aside,” but they respond to the fact that this is the ongoing reality with puzzled expressions and honest doubt.
I would also like to mention a mind-twisting experience I had when I visited China to lecture at Peking University in October. In discussing the US-Japan alliance with a variety of diplomats and specialists in international affairs, they often mentioned as an honest concern the “cap in the bottle” theory. In short, this is the idea that, if an increasing sense of Japanese autonomy leads to the withdrawal of US military forces, the “cap” that suppresses the revival of Japanese militarism will be eliminated, to the alarm of Japan’s neighbors in Asia. This made me aware of the irony that it is not only those who make their living off of US-Japan security who want to maintain the current framework, but China itself is counting on the continued presence of the US military in Japan.
One can only smile bitterly over the twisted reality of US-Japan security, but what we Japanese must resolve is that the peace and security of Japan has to be secured through the exercise of the will of the Japanese people themselves. It is our responsibility to exercise a thoroughly pacifist self-restraint that will present no threat to our neighbors.
The Essence of US-Japan Security and Post-Cold War Changes
It hardly needs to be said that the US-Japan security system was established in the context of the Cold War. This was clearly stated by Prime Minister Yoshida Shigeru, who traveled to San Francisco in 1951 as the initiator of this system on the Japanese side. In Chapter 19 (“The Origins of the US-Japan Mutual Defense System”) of his memoir (Kaisō Jūnen [Recollections of 10 Years]), Yoshida wrote that the US-Japan security treaty was neither imposed by the US nor requested by Japan. Rather, Yoshida and Secretary of State John Foster Dulles “had the same perception of objective conditions and the prospects for Japan’s defense and the defense of the free world, and we decided there was no better policy to fill the vacuum in Japan’s defense that would result from the withdrawal of the occupation army after the peace treaty,” he explained. Yoshida then added, “The security treaty, as the treaty itself clearly assumes, is entirely a provisional measure. That is to say, if Japan’s ability to defend itself is strengthened sufficiently, or if international conditions improve dramatically and the need for the treaty is eliminated, it can be terminated at any time.”
The US-Japan Security Treaty got its start in the context of the Cold War and was provisional in nature. From then until the late 1980s, it must be said that the treaty functioned effectively as the framework for security in the Cold War standoff with the Eastern bloc. However, in the inertia of those four decades, Yoshida’s successors, politicians and diplomats alike, became fettered to the Cold War framework. They abandoned the ability to conceive of flexible policies that transcended that framework in active response to changing world conditions. And that continues today.
On the eve of the San Francisco Peace Conference and the signing of the US-Japan Security Treaty, Yoshida Shigeru told the young diplomats in his entourage, “I am prepared to sign, having made the judgment that it is appropriate to pursue postwar recovery and security as a member of the Western camp, but you must examine Japan’s diplomatic options with flexibility.”
Emerging from the Cold War era, the Berlin Wall was toppled in 1989 and the world entered the post-Cold War era. The US-Japan security system, which was premised on the Cold War, should have been fundamentally reexamined in the context of the changed world situation. However, conditions in Japan didn’t allow this. The “1955 System” that pitted the ruling Liberal Democratic Party (LDP) against the opposition Japan Socialist Party (JSP), in what amounted to a political proxy war in the East-West standoff, lost its reason for existence, and the political scene in the 1990s became much more fluid. In 1993 the Miyazawa Cabinet became the last in the unbroken string of one-party LDP governments, and a succession of relatively short-lived cabinets followed for the rest of the decade. This period even saw the birth of the Murayama Cabinet, heading a coalition of the LDP and the JSP. It was not possible to construct a new diplomatic foundation in this context.
During that first post-Cold War decade, Japan should have reviewed its US-centered security system, just as Germany did in 1993. As a result of the review of American bases in Germany, US forces were slashed from 260,000 to 40,000, and the SOFA was revised. In contrast, based on the perception that the Cold War had not ended in Asia, the US-Japan Security Treaty continued to be renewed automatically. To the extent there was a review, it was confined to the 1996 Clinton-Hashimoto Declaration that reaffirmed the security treaty and the 1997 revision of the guidelines for US-Japan defense cooperation.
In fact, the revised guidelines included provisions that harbored great danger. The emergencies that the security treaty was meant to address (now defined to include “situations in areas surrounding Japan”) were no longer restricted to the Far East, but instead were defined as situations that are judged to have “an important influence on Japan’s peace and security.” In other words, this created the possibility for Japan to cooperate militarily with the US anywhere in the world, if a situation was deemed to threaten Japanese peace and security.
It should be noted that the context for these decisions was the perception of the state of the world in the 1990s. It had become commonplace to discuss the “unipolar hegemony” of the US in the post-Cold War world, and to describe the US as “the sole superpower.” Without careful consideration, Japan became increasingly integrated into American global strategies. This was how things stood as we entered the 21st century, and when the US suffered the shock of 9.11 and the Bush administration, in a frenzy, invaded Afghanistan and Iraq, the unthinking decision that “Japan had no choice but to go along with the US” was unavoidable.
During the six decades since the security treaty was signed, what is incomprehensible amid the changing context is the ever-increasing share of the costs borne by the Japanese side. Originally, the SOFA did not impose a cost burden on Japan. Under Article 24 of the agreement, the costs of maintaining US forces in Japan were borne, not by Japan, but by the US. Japan was to provide the land for the bases, but maintenance expenses were to be paid by the US. There were even cases where the US paid a usage fee, just as it paid the government of the Philippines for the use of the Subic naval base and the Clark air force base until the US withdrew from these bases in 1992.
However, the Japanese cost burden increased steadily over the years. Beginning in 1978, when Defense Agency Director-General Kanemaru Shin offered to pay part of the welfare costs of Japanese employed by the US forces, in what he termed a “sympathy budget,” Japanese cost-sharing became the norm. When the costs of land rental and measures for the areas surrounding bases are included, the Japanese government continues to pay about ¥600 billion (about $6.7 billion) annually in expenses associated with the US bases. In the 20 years since the end of the Cold War, the Japanese people, through their taxes, have borne the “security cost” of more than ¥10 trillion (about $110 billion) in US-base related expenses.
There are no other places in the world where the host country pays 70 percent of the costs of US military bases, and one quickly realizes that this contributes to the difficulty of changing the status quo. The knowledge that Japan is the cheapest place in the world to station US forces permeates the US military establishment, and Japan’s payments nurture the population, in the US and Japan, that lives off the US-Japan security arrangement. Last fall, when the new Democratic Party of Japan government conducted its review of expenditures, it was pointed out that that wages paid to Japanese employees on US bases in Okinawa are 20–30 percent higher than wages paid for equivalent occupations in the civilian sector. There was discussion of paring these wages, which was met by angry comments from a representative of the base workers, an exchange that only highlighted the complexity of the base problem.
In any case, there was no structural review of the US-Japan security setup during the first “lost” decade of the post-Cold War era. Then, entering the new century, we were faced with 9.11 and the resulting “restructuring” of the US military, which further transformed the US-Japan alliance.
What Did the Restructuring of the US Military Amount To?
The military analyst Ebata Kensuke, who died in 2009, always based his analysis on accurate knowledge and information, and was much deserving of respect. His 2005 book, Beigun Saihen (US Military Restructuring), was a cool-headed analysis of the reality behind the restructuring of the US military in Japan. “The US is planning to use Japan,” he wrote, “as a forward position on the far side of the Pacific, from which to supply and deploy troops whenever necessary.” Identifying this as the true character of the restructuring, Ebata suggested that these goals do not coincide with Japan’s and indicated that “danger lurks” in the restructuring. He made strategic proposals for reducing and moving bases, revision of the SOFA, and reduction of the “sympathy budget.” We would do well to heed his warnings and pursue his recommendations.
The restructuring of the US military, which military officials in the US refer to as a “transformation,” was a strategy developed in response to the Iraq war and the war on terror, led by the Bush administration secretary of defense, Donald Rumsfeld. Its goals were, first, to increase the efficiency of the war on terror, including the use of preemptive attacks; and, second, to strengthen joint operations with allied forces. These goals deviate from the original goals of the US-Japan security relationship.
At a Tokyo symposium on US-Japan relations in December 2009, former deputy secretary of state Richard Armitage appealed to the audience, “The reason you can sleep peaceably tonight is because the United States is protecting Japan.” I’m sure his intentions were good, but he failed to accurately convey the fact that, unfortunately, the US-Japan security apparatus has strayed far from its origins in “protecting Japan” and “protecting the security of the Far East.” It has been transformed into the foundation for joint operations in “America’s war”—the war on terror, focused on Islamic fundamentalism from the Middle East to Central Asia. Fighting terrorists grounded in Islamic fundamentalism subtly increases hatred of Islam in general and runs the risk of igniting a clash of civilizations. From Japan’s perspective, it is foolish to place itself in a framework where Islam is seen as a threat to Japan’s security.
I have been involved with the problems of the Middle East since the 1980s, and I think Japanese should be aware that many people in Middle Eastern countries have respect and affection for Japan as the only developed country that has not exported weapons to or intervened in any Middle Eastern country. In addition, in contrast to the US, there are no domestic pressures on Japan to support the Israeli side in the Israel-Palestine conflict. We must be aware of where Japan stands and realize there are things in the world that should be confronted jointly with the US and others that should not.
Examining Afresh the “Threats” that Surround Japan
At the end of the first decade of the 21st century, with the world in the midst of major structural change, what exactly are the threats to Japanese security? We should reconsider them with a cool head.
Does Russia pose a threat? While it is true that there are disputes between Japan and Russia over the Northern Territories and fishing rights, the possibility of military aggression that existed during the Soviet era is no longer realistic. Rather, incidents like the Russian invasion of Georgia in 2008 increase tensions between the US and Russia, and if these tensions lead to a new Cold War, the more likely threat is that Japan would be drawn into an American war as an ally of the US.
What about the threat from North Korea? To be sure, North Korea’s continuing development of missiles and nuclear capabilities, out of proportion to its national strength, makes it a threat. But the North Korean threat today is different from what it was during the Cold War. Then, a North Korean invasion of the south represented a military action with the support of the Soviet Union and China, which posed the threat of transforming South Korea and Japan into socialist states. Today, the North Korean threat is that of a “rogue state,” without a message that would mobilize world sympathy; it is like the death cry of the “Military First” state, the orphan of the Cold War, and it only serves to deepen North Korea’s isolation.
However, a desperate North Korean invasion of the south cannot be dismissed entirely, and the presence of the US Marines in Okinawa as a deterrent force must be acknowledged. Nonetheless, what is most important for Japan is to pursue a diplomatic strategy that renders North Korean missiles and nuclear arms unusable, and to continue leading the initiative for a denuclearized Northeast Asia that also encompasses Russia, China, South Korea, and the US.
How about the Chinese military threat? Chinese military expenditures have increased annually for 21 years, and the 2009 budget was $70.3 billion (an increase of 14.9 percent over the previous year), which is substantially more than Japan’s military budget (¥4.7 trillion or $52 billion in 2009). Considering the low cost of personnel in China, it is clear that the country is aiming to build a prodigious complement of armaments. Many are swayed by the logic that the US-Japan alliance must be strengthened to meet this Chinese threat, but the reality is not so simple. This is because of shifts in the US-China relationship. The high-level US-China Strategic Economic Dialogue begun in 2006 was upgraded under the Obama administration in April 2009 to include political and security issues. Meanwhile, nearly 500 US corporations now participate in the US-China Business Council, which, in contrast to the recent sluggishness of the Japan-US Business Council, has increased the intensity of exchange.
Given this, let us explore whether the US-Japan Security Treaty would come into play and whether the US would take action if China, in a hypothetical scenario, were to forcibly occupy the disputed Senkaku (Diaoyu) Islands. In the Japanese view, since the Senkakus were under US administration until the moment Okinawa reverted to Japan, there is no question about Japanese possession of the islands. But in recent years, as seen in the statements of US diplomats that the US does not want to get involved in territorial disputes between China and Japan, the US stance is ambivalent. Probably, in a balanced view, the US government would heed American public opinion, and if it concluded that it was appropriate to take action, it might defend the Senkaku Islands.
Engaging in speculation of this sort leads to the conclusion that the threats that Japan and the US must face jointly have changed dramatically and are not always clearly defined. From the Japanese side, neither excessive expectations nor excessive dependence are reasonable. Rather, the most realistic view is what might be called a “strategic ambiguity,” that the US presence in the US-Japan alliance serves as a vague symbol of leverage in a time of crisis, and stands as a guarantee to the world that Japan does not stand alone.
The Evolution of the US-Japan Alliance
With this understanding of the status of the alliance in mind, what sort of US-Japan security relationship should we aim for in the 21st century? With both governments having a new party in power, this is a good time to explore new frameworks that transcend the vested interests and fixed ideas of the past.
In his book Embattled Garrisons: Comparative Base Politics and American Globalism, Reischauer Center for East Asian Studies director Kent Calder cites the intriguing statistic that, over the past 50 years, the probability that a regime change in a country hosting military bases was followed by a withdrawal of bases is 67 percent, even for US bases. If one makes a calm assessment of the situation of East Asia, it is likely that the US military’s presence in Japan should continue at a certain level, even if it is in the nature of a “strategic ambiguity.” However, we should proceed with a reconstruction of a US-Japan alliance worthy of our mutual trust, not with the inertia that has prevailed to date, but on the basis of careful deliberation. To that end, I would like to offer the following proposals.
1) Establish a mechanism for strategic dialogue between the US and Japan, to facilitate cabinet-level discussions on future-oriented US Japan relations in the areas of economics and security, and to redesign the US-Japan alliance. Specifically, carry out strategic dialogue to deepen US-Japanese cooperation in economics and industry, through such measures as industrial cooperation and free trade agreements; and strategic dialogue on the preferred state of US bases in Japan and US-Japan defense cooperation, to foster the evolution of the security system.
2) With regard to security, clarify Japanese thinking on long-term goals for the US-Japan military alliance. For example, while paying heed so as not to create a military vacuum in East Asia, examine the purpose of each US military base and facility, and eliminate those that have fulfilled their purpose, with a goal of a 50 percent reduction over 10 years. (Note that Article 2.3 of the SOFA states, “The facilities and areas used by the United States armed forces shall be returned to Japan whenever they are no longer needed.”)
3) With regard to the SOFA, gradually transition US military bases, under a framework administered by the Japanese government, to the stationing of US forces on Self-Defense Force bases, where they would be jointly administered (as provided in SOFA Article 2.4b). (Note that former Defense Minister Ishiba Shigeru once proposed, with the same concern in mind, that “in the future, as a matter of principle, all American forces should be stationed at bases controlled and operated by the Self Defense Forces,” in essence, that bases should be used jointly, under Japanese sovereignty.)
4) Regarding the future shape of US-Japan security, explore flexible scenarios, including an arrangement where Japan and South Korea bear an appropriate cost for retaining, for a certain period of time, an emergency dispatch force in Hawaii and Guam, as a mechanism to maintain a US presence and avoid a military vacuum in East Asia.
5) The problem of the relocation of the Futenma base should be considered in the context of the long-term review of the US-Japan security system, but, given the dangers to local residents from the continued use of the base, quickly determine realistic alternatives that will make it possible to fulfill the agreement with the US to move the base by 2014. In this case, considering US strategic planning, the point of agreement will likely be the maintenance of the combined strength of forces in Okinawa and Guam.
When you think about it, the perspective of “returning to common sense” that I mentioned at the beginning of this article resonates with the 1776 pamphlet that Thomas Paine wrote, using for his title the catchphrase “common sense” that was then used among Americans pressing for independence from Great Britain. Paine argued that it was common sense that American subordination to and dependence on Britain risked embroiling the colonies in unnecessary wars, fought in the name of “British justice,” and he appealed for American autonomy and self-respect. The historical context is different, but this spirit should resound in the hearts of Japanese today.
The time is nearing for us to calmly face a revision of the treaty in our era.
Terashima Jitsuro is the president of Tama University, as well as president of the Mitsui Global Strategic Studies Institute and chairman of the Japan Research Institute. His work has been regularly featured in Chuo Koron, Sekai, Forbes, PHP, and Asahi among others, and he has his own monthly TV program. A foreign policy advisor to Prime Minister Hatoyama Yukio, he was touted in some circles as a possible foreign minister. This is a slightly abbreviated translation of an essay that appeared as the lead article in a special section of Sekai (February 2010), devoted to the Futenma base relocation issue. It is the 94th installment of his column, “Lessons in Brain Power.” For another recent essay by Terashima, “Time for a Mature Foreign Policy,” originally published in Chuo Koron in October 2009, see Japan Echo, December 2009.
John Junkerman is an American documentary filmmaker and Japan Focus associate living in Tokyo. His most recent film, “Japan’s Peace Constitution” (2005), won the Kinema Jumpo and Japan PEN Club best documentary awards. It is available in North America from First Run Icarus Films. He co-produced and edited “Outside the Great Wall,” a film on Chinese writers and artists in exile that will be released in Japan and abroad later this year.
Recommended citatation: Terashima Jitsuro, "The Will and Imagination to Return to Common Sense: Toward a Restructuring of the US-Japan Alliance," The Asia-Pacific Journal, 11-3-10, March 15, 2010.
The Will and Imagination to Return to Common Sense: Toward a Restructuring of the US-Japan Alliance
By Terashima Jitsuro
Translation by John Junkerman
In a discussion of early 20th-century China, the writer Lu Xun lamented how the Chinese, completely accustomed to their colonial status, had become “slave-faced.” Slave-faced is the expression of a person who is accustomed to being persecuted and lives by toadying to the powerful. It is the hollow expression of those who have lost the courage to think on their own about the condition they are in, of those who do not determine their own fates. That is “slave-faced.”
Tracking media reports on the Futenma base relocation issue since the fall of 2009, I realized that slave-faced expressions have become a permanent feature of Japanese intellectuals, including the media. The US-Japan military alliance has become fixed as an unalterable postulate, and the intellectual indolence of those who utterly reject any discussion of altering the alliance is simply astonishing.
To return to common sense. This is what is required of the Japanese, to return to the common sense of international society and to restore the recognition that it is unnatural for foreign military forces to be stationed for an extended period of time in an independent nation. A nation that does not have the will to transcend sophistry and narrow self-interest and confront this problem directly cannot be called an independent nation. Let me once again specify the facts we must face.
1) In the 65th year since the end of the Pacific War and 20 years after the end of the Cold War, there are some 40,000 US soldiers (and about 50,000 civilians and dependents) stationed in Japan on US bases that occupy approximately 1,010 square kilometers of land (1.6 times the area of the city of Tokyo).
2) Of the top five large-scale foreign bases that the US maintains around the world, four are in Japan (the Yokosuka naval base, and the Kadena, Misawa, and Yokota air bases).
3) Since an agreement is in place that makes the entire territory of Japan available for bases, and decisions on what areas to provide are made by the Joint Committee of US and Japanese government representatives (Article 2 of the Status of Forces Agreement [SOFA]), bases can be established anywhere in Japan without the approval of the Japanese Diet. There is a concentration of US bases in the vicinity of the nation’s capital, Tokyo, that is unparalleled anywhere in the world (the Yokota air base, the Yokosuka naval base, the Zama army base, and the Atsugi naval air station, among others).
4) 70 percent of the costs of stationing US forces in Japan are borne by the host nation, a situation that exists nowhere else in the world.
5) The status of US forces in Japan under the SOFA has been carried over from the Administrative Agreement that governed bases during the US occupation, and not only is Japanese sovereignty under the agreement weak, but Japan has had to bear base-related expenses that are not even specified in the SOFA.
Rediscoveries Made on a Trip to the US in Early December 2009
I visited New York and Washington during the first week of December. Since I returned to Japan in 1997 after working in the US for more than 10 years, I have made four trips a year to conduct “fixed-point observations.” The purpose of the trip was to share opinions with specialists on US-Japanese industrial cooperation in the environmental energy field, some nine months after the Obama administration launched the “Green New Deal;” and on next-generation information and communications technology, about which I chair a task force for the Ministry of Internal Affairs and Communication. Discussions on the US-Japan security relationship were not on my agenda.
Nonetheless, simply because I am a long-time friend of Prime Minister Hatoyama Yukio and sometimes have an opportunity to share thoughts with him, the Nikkei and Yomiuri newspapers repeatedly portrayed my visit to the US as that of a secret envoy of the prime minister, sent to pave the way for a solution to the pressing Futenma problem. Parallel diplomacy is always to be avoided, since conducting negotiations on a separate plane when official negotiations are taking place can only confuse the situation, and I am not stupid enough to engage in such activity. In fact, considering the delicacy of the timing of the trip, I intentionally avoided the departments of State and Defense, the president’s office, and others with responsibility for US-Japan relations, and restricted my visits and discussions to Washington think tanks involved with international relations, the World Bank, the Inter-American Development Bank, and journalists and specialists involved with energy and environmental problems.
Those who just recently were saying, “Japan’s refueling mission in the Indian Ocean is living proof of the US-Japan alliance, and if it ends, the alliance will collapse,” are now insisting, “Unless Japan implements the terms of the US-Japan agreement on the Futenma relocation, the US-Japan alliance will crack.” Many of the Washington-based correspondents for Japanese media are only capable of reporting that “a breakdown of favorable US-Japan relations looms.”
Just what do these people mean by “favorable US-Japan relations”? I dare to say they think it is desirable to maintain the US-Japan relationship of the Bush-Koizumi era, when Japan responded swiftly to American expectations that it “show the flag,” by dispatching Self-Defense Forces first to the Indian Ocean and then to Iraq. In other words, the reports of my trip to the US reflected the overreaction of those who consider the US-Japan security relationship as the permanent status quo, to which any change is unwelcome.
However, we have witnessed the failure of the war in Iraq. The US has sacrificed the lives of over 5300 soldiers in Afghanistan and Iraq, while spending over $1 trillion on the wars. The initiator of the war, President Bush himself, concluded the Iraq war was based on faulty intelligence, and it is estimated that the war has cost the lives of at least 100,000 Iraqis. In the US itself, this reassessment has led to a paradigm shift, with the Iraq war-opponent Obama as president. Among the Japanese, it is amazing how few have been willing to admit that the nation took the wrong path when it got involved with that war. But it is not possible to map out the future of US-Japan relations without first sincerely coming to terms with these issues. This is because a proper recognition of the process that led to the reorganization of the US military after 9.11 is the foundation for examining the next stage in the US-Japan alliance.
Still, the foul odor emanating from those who cling to US-Japan security is fierce. I keenly feel the need to keep at arm’s length those in Washington who make their living off US-Japan security, those who are generally referred to as “Japan hands” and “pro-Japanese.” These people greet visitors from Japan with smiles on their faces, and often participate in symposiums in Japan, where they sing the praises of “the US-Japan alliance as a permanent axis.” They always refer to the “responsibilities” of base-hosting Japan and call for increased cooperation with the US, in the name of making “international contributions.” Of course, there is a group of “US hands” and “pro-American” Japanese who sing in chorus, and this mutual dependence has long set the course for US-Japan relations.
On my trips to the US over the past several years, I have made an effort to meet with people who have a broader view of the world and to hear their thoughts on US-Japan relations from a diversity of perspectives. This is because I wanted to hear objective opinions that went beyond vested interests and preconceptions, in order to assess the present state of the US-Japan alliance within a broader view.
What I have been surprised to find is that, even among top-level intellectuals and specialists in international issues, most of those who are not directly involved in US-Japan relations don’t have any knowledge of the reality of the alliance (the state of the bases and the content of the SOFA). They might preface their response with “US national interest aside,” but they respond to the fact that this is the ongoing reality with puzzled expressions and honest doubt.
I would also like to mention a mind-twisting experience I had when I visited China to lecture at Peking University in October. In discussing the US-Japan alliance with a variety of diplomats and specialists in international affairs, they often mentioned as an honest concern the “cap in the bottle” theory. In short, this is the idea that, if an increasing sense of Japanese autonomy leads to the withdrawal of US military forces, the “cap” that suppresses the revival of Japanese militarism will be eliminated, to the alarm of Japan’s neighbors in Asia. This made me aware of the irony that it is not only those who make their living off of US-Japan security who want to maintain the current framework, but China itself is counting on the continued presence of the US military in Japan.
One can only smile bitterly over the twisted reality of US-Japan security, but what we Japanese must resolve is that the peace and security of Japan has to be secured through the exercise of the will of the Japanese people themselves. It is our responsibility to exercise a thoroughly pacifist self-restraint that will present no threat to our neighbors.
The Essence of US-Japan Security and Post-Cold War Changes
It hardly needs to be said that the US-Japan security system was established in the context of the Cold War. This was clearly stated by Prime Minister Yoshida Shigeru, who traveled to San Francisco in 1951 as the initiator of this system on the Japanese side. In Chapter 19 (“The Origins of the US-Japan Mutual Defense System”) of his memoir (Kaisō Jūnen [Recollections of 10 Years]), Yoshida wrote that the US-Japan security treaty was neither imposed by the US nor requested by Japan. Rather, Yoshida and Secretary of State John Foster Dulles “had the same perception of objective conditions and the prospects for Japan’s defense and the defense of the free world, and we decided there was no better policy to fill the vacuum in Japan’s defense that would result from the withdrawal of the occupation army after the peace treaty,” he explained. Yoshida then added, “The security treaty, as the treaty itself clearly assumes, is entirely a provisional measure. That is to say, if Japan’s ability to defend itself is strengthened sufficiently, or if international conditions improve dramatically and the need for the treaty is eliminated, it can be terminated at any time.”
The US-Japan Security Treaty got its start in the context of the Cold War and was provisional in nature. From then until the late 1980s, it must be said that the treaty functioned effectively as the framework for security in the Cold War standoff with the Eastern bloc. However, in the inertia of those four decades, Yoshida’s successors, politicians and diplomats alike, became fettered to the Cold War framework. They abandoned the ability to conceive of flexible policies that transcended that framework in active response to changing world conditions. And that continues today.
On the eve of the San Francisco Peace Conference and the signing of the US-Japan Security Treaty, Yoshida Shigeru told the young diplomats in his entourage, “I am prepared to sign, having made the judgment that it is appropriate to pursue postwar recovery and security as a member of the Western camp, but you must examine Japan’s diplomatic options with flexibility.”
Emerging from the Cold War era, the Berlin Wall was toppled in 1989 and the world entered the post-Cold War era. The US-Japan security system, which was premised on the Cold War, should have been fundamentally reexamined in the context of the changed world situation. However, conditions in Japan didn’t allow this. The “1955 System” that pitted the ruling Liberal Democratic Party (LDP) against the opposition Japan Socialist Party (JSP), in what amounted to a political proxy war in the East-West standoff, lost its reason for existence, and the political scene in the 1990s became much more fluid. In 1993 the Miyazawa Cabinet became the last in the unbroken string of one-party LDP governments, and a succession of relatively short-lived cabinets followed for the rest of the decade. This period even saw the birth of the Murayama Cabinet, heading a coalition of the LDP and the JSP. It was not possible to construct a new diplomatic foundation in this context.
During that first post-Cold War decade, Japan should have reviewed its US-centered security system, just as Germany did in 1993. As a result of the review of American bases in Germany, US forces were slashed from 260,000 to 40,000, and the SOFA was revised. In contrast, based on the perception that the Cold War had not ended in Asia, the US-Japan Security Treaty continued to be renewed automatically. To the extent there was a review, it was confined to the 1996 Clinton-Hashimoto Declaration that reaffirmed the security treaty and the 1997 revision of the guidelines for US-Japan defense cooperation.
In fact, the revised guidelines included provisions that harbored great danger. The emergencies that the security treaty was meant to address (now defined to include “situations in areas surrounding Japan”) were no longer restricted to the Far East, but instead were defined as situations that are judged to have “an important influence on Japan’s peace and security.” In other words, this created the possibility for Japan to cooperate militarily with the US anywhere in the world, if a situation was deemed to threaten Japanese peace and security.
It should be noted that the context for these decisions was the perception of the state of the world in the 1990s. It had become commonplace to discuss the “unipolar hegemony” of the US in the post-Cold War world, and to describe the US as “the sole superpower.” Without careful consideration, Japan became increasingly integrated into American global strategies. This was how things stood as we entered the 21st century, and when the US suffered the shock of 9.11 and the Bush administration, in a frenzy, invaded Afghanistan and Iraq, the unthinking decision that “Japan had no choice but to go along with the US” was unavoidable.
During the six decades since the security treaty was signed, what is incomprehensible amid the changing context is the ever-increasing share of the costs borne by the Japanese side. Originally, the SOFA did not impose a cost burden on Japan. Under Article 24 of the agreement, the costs of maintaining US forces in Japan were borne, not by Japan, but by the US. Japan was to provide the land for the bases, but maintenance expenses were to be paid by the US. There were even cases where the US paid a usage fee, just as it paid the government of the Philippines for the use of the Subic naval base and the Clark air force base until the US withdrew from these bases in 1992.
However, the Japanese cost burden increased steadily over the years. Beginning in 1978, when Defense Agency Director-General Kanemaru Shin offered to pay part of the welfare costs of Japanese employed by the US forces, in what he termed a “sympathy budget,” Japanese cost-sharing became the norm. When the costs of land rental and measures for the areas surrounding bases are included, the Japanese government continues to pay about ¥600 billion (about $6.7 billion) annually in expenses associated with the US bases. In the 20 years since the end of the Cold War, the Japanese people, through their taxes, have borne the “security cost” of more than ¥10 trillion (about $110 billion) in US-base related expenses.
There are no other places in the world where the host country pays 70 percent of the costs of US military bases, and one quickly realizes that this contributes to the difficulty of changing the status quo. The knowledge that Japan is the cheapest place in the world to station US forces permeates the US military establishment, and Japan’s payments nurture the population, in the US and Japan, that lives off the US-Japan security arrangement. Last fall, when the new Democratic Party of Japan government conducted its review of expenditures, it was pointed out that that wages paid to Japanese employees on US bases in Okinawa are 20–30 percent higher than wages paid for equivalent occupations in the civilian sector. There was discussion of paring these wages, which was met by angry comments from a representative of the base workers, an exchange that only highlighted the complexity of the base problem.
In any case, there was no structural review of the US-Japan security setup during the first “lost” decade of the post-Cold War era. Then, entering the new century, we were faced with 9.11 and the resulting “restructuring” of the US military, which further transformed the US-Japan alliance.
What Did the Restructuring of the US Military Amount To?
The military analyst Ebata Kensuke, who died in 2009, always based his analysis on accurate knowledge and information, and was much deserving of respect. His 2005 book, Beigun Saihen (US Military Restructuring), was a cool-headed analysis of the reality behind the restructuring of the US military in Japan. “The US is planning to use Japan,” he wrote, “as a forward position on the far side of the Pacific, from which to supply and deploy troops whenever necessary.” Identifying this as the true character of the restructuring, Ebata suggested that these goals do not coincide with Japan’s and indicated that “danger lurks” in the restructuring. He made strategic proposals for reducing and moving bases, revision of the SOFA, and reduction of the “sympathy budget.” We would do well to heed his warnings and pursue his recommendations.
The restructuring of the US military, which military officials in the US refer to as a “transformation,” was a strategy developed in response to the Iraq war and the war on terror, led by the Bush administration secretary of defense, Donald Rumsfeld. Its goals were, first, to increase the efficiency of the war on terror, including the use of preemptive attacks; and, second, to strengthen joint operations with allied forces. These goals deviate from the original goals of the US-Japan security relationship.
At a Tokyo symposium on US-Japan relations in December 2009, former deputy secretary of state Richard Armitage appealed to the audience, “The reason you can sleep peaceably tonight is because the United States is protecting Japan.” I’m sure his intentions were good, but he failed to accurately convey the fact that, unfortunately, the US-Japan security apparatus has strayed far from its origins in “protecting Japan” and “protecting the security of the Far East.” It has been transformed into the foundation for joint operations in “America’s war”—the war on terror, focused on Islamic fundamentalism from the Middle East to Central Asia. Fighting terrorists grounded in Islamic fundamentalism subtly increases hatred of Islam in general and runs the risk of igniting a clash of civilizations. From Japan’s perspective, it is foolish to place itself in a framework where Islam is seen as a threat to Japan’s security.
I have been involved with the problems of the Middle East since the 1980s, and I think Japanese should be aware that many people in Middle Eastern countries have respect and affection for Japan as the only developed country that has not exported weapons to or intervened in any Middle Eastern country. In addition, in contrast to the US, there are no domestic pressures on Japan to support the Israeli side in the Israel-Palestine conflict. We must be aware of where Japan stands and realize there are things in the world that should be confronted jointly with the US and others that should not.
Examining Afresh the “Threats” that Surround Japan
At the end of the first decade of the 21st century, with the world in the midst of major structural change, what exactly are the threats to Japanese security? We should reconsider them with a cool head.
Does Russia pose a threat? While it is true that there are disputes between Japan and Russia over the Northern Territories and fishing rights, the possibility of military aggression that existed during the Soviet era is no longer realistic. Rather, incidents like the Russian invasion of Georgia in 2008 increase tensions between the US and Russia, and if these tensions lead to a new Cold War, the more likely threat is that Japan would be drawn into an American war as an ally of the US.
What about the threat from North Korea? To be sure, North Korea’s continuing development of missiles and nuclear capabilities, out of proportion to its national strength, makes it a threat. But the North Korean threat today is different from what it was during the Cold War. Then, a North Korean invasion of the south represented a military action with the support of the Soviet Union and China, which posed the threat of transforming South Korea and Japan into socialist states. Today, the North Korean threat is that of a “rogue state,” without a message that would mobilize world sympathy; it is like the death cry of the “Military First” state, the orphan of the Cold War, and it only serves to deepen North Korea’s isolation.
However, a desperate North Korean invasion of the south cannot be dismissed entirely, and the presence of the US Marines in Okinawa as a deterrent force must be acknowledged. Nonetheless, what is most important for Japan is to pursue a diplomatic strategy that renders North Korean missiles and nuclear arms unusable, and to continue leading the initiative for a denuclearized Northeast Asia that also encompasses Russia, China, South Korea, and the US.
How about the Chinese military threat? Chinese military expenditures have increased annually for 21 years, and the 2009 budget was $70.3 billion (an increase of 14.9 percent over the previous year), which is substantially more than Japan’s military budget (¥4.7 trillion or $52 billion in 2009). Considering the low cost of personnel in China, it is clear that the country is aiming to build a prodigious complement of armaments. Many are swayed by the logic that the US-Japan alliance must be strengthened to meet this Chinese threat, but the reality is not so simple. This is because of shifts in the US-China relationship. The high-level US-China Strategic Economic Dialogue begun in 2006 was upgraded under the Obama administration in April 2009 to include political and security issues. Meanwhile, nearly 500 US corporations now participate in the US-China Business Council, which, in contrast to the recent sluggishness of the Japan-US Business Council, has increased the intensity of exchange.
Given this, let us explore whether the US-Japan Security Treaty would come into play and whether the US would take action if China, in a hypothetical scenario, were to forcibly occupy the disputed Senkaku (Diaoyu) Islands. In the Japanese view, since the Senkakus were under US administration until the moment Okinawa reverted to Japan, there is no question about Japanese possession of the islands. But in recent years, as seen in the statements of US diplomats that the US does not want to get involved in territorial disputes between China and Japan, the US stance is ambivalent. Probably, in a balanced view, the US government would heed American public opinion, and if it concluded that it was appropriate to take action, it might defend the Senkaku Islands.
Engaging in speculation of this sort leads to the conclusion that the threats that Japan and the US must face jointly have changed dramatically and are not always clearly defined. From the Japanese side, neither excessive expectations nor excessive dependence are reasonable. Rather, the most realistic view is what might be called a “strategic ambiguity,” that the US presence in the US-Japan alliance serves as a vague symbol of leverage in a time of crisis, and stands as a guarantee to the world that Japan does not stand alone.
The Evolution of the US-Japan Alliance
With this understanding of the status of the alliance in mind, what sort of US-Japan security relationship should we aim for in the 21st century? With both governments having a new party in power, this is a good time to explore new frameworks that transcend the vested interests and fixed ideas of the past.
In his book Embattled Garrisons: Comparative Base Politics and American Globalism, Reischauer Center for East Asian Studies director Kent Calder cites the intriguing statistic that, over the past 50 years, the probability that a regime change in a country hosting military bases was followed by a withdrawal of bases is 67 percent, even for US bases. If one makes a calm assessment of the situation of East Asia, it is likely that the US military’s presence in Japan should continue at a certain level, even if it is in the nature of a “strategic ambiguity.” However, we should proceed with a reconstruction of a US-Japan alliance worthy of our mutual trust, not with the inertia that has prevailed to date, but on the basis of careful deliberation. To that end, I would like to offer the following proposals.
1) Establish a mechanism for strategic dialogue between the US and Japan, to facilitate cabinet-level discussions on future-oriented US Japan relations in the areas of economics and security, and to redesign the US-Japan alliance. Specifically, carry out strategic dialogue to deepen US-Japanese cooperation in economics and industry, through such measures as industrial cooperation and free trade agreements; and strategic dialogue on the preferred state of US bases in Japan and US-Japan defense cooperation, to foster the evolution of the security system.
2) With regard to security, clarify Japanese thinking on long-term goals for the US-Japan military alliance. For example, while paying heed so as not to create a military vacuum in East Asia, examine the purpose of each US military base and facility, and eliminate those that have fulfilled their purpose, with a goal of a 50 percent reduction over 10 years. (Note that Article 2.3 of the SOFA states, “The facilities and areas used by the United States armed forces shall be returned to Japan whenever they are no longer needed.”)
3) With regard to the SOFA, gradually transition US military bases, under a framework administered by the Japanese government, to the stationing of US forces on Self-Defense Force bases, where they would be jointly administered (as provided in SOFA Article 2.4b). (Note that former Defense Minister Ishiba Shigeru once proposed, with the same concern in mind, that “in the future, as a matter of principle, all American forces should be stationed at bases controlled and operated by the Self Defense Forces,” in essence, that bases should be used jointly, under Japanese sovereignty.)
4) Regarding the future shape of US-Japan security, explore flexible scenarios, including an arrangement where Japan and South Korea bear an appropriate cost for retaining, for a certain period of time, an emergency dispatch force in Hawaii and Guam, as a mechanism to maintain a US presence and avoid a military vacuum in East Asia.
5) The problem of the relocation of the Futenma base should be considered in the context of the long-term review of the US-Japan security system, but, given the dangers to local residents from the continued use of the base, quickly determine realistic alternatives that will make it possible to fulfill the agreement with the US to move the base by 2014. In this case, considering US strategic planning, the point of agreement will likely be the maintenance of the combined strength of forces in Okinawa and Guam.
When you think about it, the perspective of “returning to common sense” that I mentioned at the beginning of this article resonates with the 1776 pamphlet that Thomas Paine wrote, using for his title the catchphrase “common sense” that was then used among Americans pressing for independence from Great Britain. Paine argued that it was common sense that American subordination to and dependence on Britain risked embroiling the colonies in unnecessary wars, fought in the name of “British justice,” and he appealed for American autonomy and self-respect. The historical context is different, but this spirit should resound in the hearts of Japanese today.
The time is nearing for us to calmly face a revision of the treaty in our era.
Terashima Jitsuro is the president of Tama University, as well as president of the Mitsui Global Strategic Studies Institute and chairman of the Japan Research Institute. His work has been regularly featured in Chuo Koron, Sekai, Forbes, PHP, and Asahi among others, and he has his own monthly TV program. A foreign policy advisor to Prime Minister Hatoyama Yukio, he was touted in some circles as a possible foreign minister. This is a slightly abbreviated translation of an essay that appeared as the lead article in a special section of Sekai (February 2010), devoted to the Futenma base relocation issue. It is the 94th installment of his column, “Lessons in Brain Power.” For another recent essay by Terashima, “Time for a Mature Foreign Policy,” originally published in Chuo Koron in October 2009, see Japan Echo, December 2009.
John Junkerman is an American documentary filmmaker and Japan Focus associate living in Tokyo. His most recent film, “Japan’s Peace Constitution” (2005), won the Kinema Jumpo and Japan PEN Club best documentary awards. It is available in North America from First Run Icarus Films. He co-produced and edited “Outside the Great Wall,” a film on Chinese writers and artists in exile that will be released in Japan and abroad later this year.
Recommended citatation: Terashima Jitsuro, "The Will and Imagination to Return to Common Sense: Toward a Restructuring of the US-Japan Alliance," The Asia-Pacific Journal, 11-3-10, March 15, 2010.
Monday, March 22, 2010
（Nikkei） Aircraft Designed For SDF To Get OK For Civilian Exports
(There is much room for Japan's aerospace and defense industry to expand business both inside and outside Japan. Cheers, Kosuke)
Monday, March 22, 2010
Aircraft Designed For SDF To Get OK For Civilian Exports
TOKYO (Nikkei)--The government has decided to let cargo planes and some other aircraft developed for the Self-Defense Forces be exported for nonmilitary use as a way of revitalizing a defense industry hit by a decline in spending, The Nikkei learned Sunday.
Civilian exports of the XC-2 may soon be cleared for takeoff.The move will initially cover three domestic aircraft models. The XP-1 patrol plane and the XC-2 cargo plane, both co-developed by Kawasaki Heavy Industries Ltd. (7012) and the Defense Ministry, are undergoing flight tests. The US-2, produced by ShinMaywa Industries Ltd. (7224) for air-sea rescue work, is already being used by the Maritime Self-Defense Force.
Both Kawasaki Heavy and ShinMaywa had envisioned civilian use of these aircraft from the development stage. The XP-1 can be outfitted as a regional passenger jet, and the US-2 can be used for firefighting.
The Ministry of Economy, Trade and Industry estimates global demand for 100- to 150-seat passenger planes like the XP-1 at 9,400 units over the 20 years through 2027. And demand for large cargo planes similar to the XC-2 is projected to almost triple from current levels by that year.
METI also anticipates demand to replace firefighting aircraft in France, Spain and Italy over the next five years.
The government is pushing civilian use of aircraft designed for the SDF because the nation's defense spending continues to decline and aircraft prices are rising. By selling the aircraft to the private sector, the Defense Ministry expects to cut per-aircraft introduction costs and recoup a portion of development costs.
A study group of officials from relevant ministries will be formed as early as next month to discuss civilian use of the XP-1, the XC-2 and the US-2. Because these planes use mostly nonmilitary components, the government determined that the move would not violate rules banning the export of weapons.
(The Nikkei March 22 edition)
Monday, March 22, 2010
Aircraft Designed For SDF To Get OK For Civilian Exports
TOKYO (Nikkei)--The government has decided to let cargo planes and some other aircraft developed for the Self-Defense Forces be exported for nonmilitary use as a way of revitalizing a defense industry hit by a decline in spending, The Nikkei learned Sunday.
Civilian exports of the XC-2 may soon be cleared for takeoff.The move will initially cover three domestic aircraft models. The XP-1 patrol plane and the XC-2 cargo plane, both co-developed by Kawasaki Heavy Industries Ltd. (7012) and the Defense Ministry, are undergoing flight tests. The US-2, produced by ShinMaywa Industries Ltd. (7224) for air-sea rescue work, is already being used by the Maritime Self-Defense Force.
Both Kawasaki Heavy and ShinMaywa had envisioned civilian use of these aircraft from the development stage. The XP-1 can be outfitted as a regional passenger jet, and the US-2 can be used for firefighting.
The Ministry of Economy, Trade and Industry estimates global demand for 100- to 150-seat passenger planes like the XP-1 at 9,400 units over the 20 years through 2027. And demand for large cargo planes similar to the XC-2 is projected to almost triple from current levels by that year.
METI also anticipates demand to replace firefighting aircraft in France, Spain and Italy over the next five years.
The government is pushing civilian use of aircraft designed for the SDF because the nation's defense spending continues to decline and aircraft prices are rising. By selling the aircraft to the private sector, the Defense Ministry expects to cut per-aircraft introduction costs and recoup a portion of development costs.
A study group of officials from relevant ministries will be formed as early as next month to discuss civilian use of the XP-1, the XC-2 and the US-2. Because these planes use mostly nonmilitary components, the government determined that the move would not violate rules banning the export of weapons.
(The Nikkei March 22 edition)
Friday, March 5, 2010
Okinawa and the new domino effect By John Feffer
Yesterday I just finished filing my tax return for the last year. I am very relieved now. This is a very big job for any freelance journalist in Japan. You need to support your tax return form by every single receipt, just in case the taxation authorities may examine your filing closely in the future.
Well, a lot of such precious taxes, including mine and yours, still go for military-related expenses in Japan, especially for US military bases! Here is a good story to think about it. Cheers, Kosuke
Okinawa and the new domino effect
By John Feffer
For a country with a pacifist constitution, Japan is bristling with weaponry. Indeed, that Asian land has long functioned as a huge aircraft carrier and naval base for United States military power. We couldn't have fought wars in Korea (1950-1953) and Vietnam (1959-1975) without the nearly 90 military bases scattered around the islands of our major Pacific ally. Even today, Japan remains the anchor of what's left of America's Cold War containment policy when it comes to China and North Korea. From the Yokota and Kadena air bases, the United States can dispatch troops and bombers across Asia, while the Yokosuka base near Tokyo is the largest American naval installation outside the United States.
You'd think that, with so many Japanese bases, the United States wouldn't make a big fuss about closing one of them. Think again. The current battle over the US Marine Corps air base at Futenma on Okinawa - an island prefecture almost 1,600 kilometers south of Tokyo that hosts about three dozen US bases and 75% of American forces in Japan - is just revving up. In fact, Washington seems ready to stake its reputation and its relationship with a new Japanese government on the fate of that base alone, which reveals much about US anxieties in the age of President Barack Obama.
What makes this so strange, on the surface, is that Futenma is an obsolete base. Under an agreement the George W Bush administration reached with the previous Japanese government, the US was already planning to move most of the Marines now at Futenma to the island of Guam. Nonetheless, the Obama administration is insisting, over the protests of Okinawans and the objections of Tokyo, on completing that agreement by building a new partial replacement base in a less heavily populated part of Okinawa.
The current row between Tokyo and Washington is no mere "Pacific squall", as Newsweek dismissively described it. After six decades of saying yes to everything the United States has demanded, Japan finally seems on the verge of saying no to something that matters greatly to Washington, and the relationship that Dwight D Eisenhower once called an "indestructible alliance" is displaying ever more hairline fractures. Worse yet, from the Pentagon's perspective, Japan's resistance might prove infectious - one major reason why the United States is putting its alliance on the line over the closing of a single antiquated military base and the building of another of dubious strategic value.
During the Cold War, the Pentagon worried that countries would fall like dominoes before a relentless communist advance. Today, the Pentagon worries about a different kind of domino effect. In Europe, North Atlantic Treaty Organization countries are refusing to throw their full support behind the US war in Afghanistan. In Africa, no country has stepped forward to host the headquarters of the Pentagon's new Africa Command. In Latin America, little Ecuador has kicked the US out of its air base in Manta.
All of these are undoubtedly symptoms of the decline in respect for American power that the US military is experiencing globally. But the current pushback in Japan is the surest sign yet that the American empire of overseas military bases has reached its high-water mark and will soon recede.
Toady no more?
Until recently, Japan was virtually a one-party state, and that suited Washington just fine. The long-ruling Liberal Democratic Party (LDP) had the coziest of bipartisan relations with that city's policymakers and its "chrysanthemum club" of Japan-friendly pundits. A recent revelation that, in 1969, Japan buckled to president Richard Nixon's demand that it secretly host US ships carrying nuclear weapons - despite Tokyo's supposedly firm anti-nuclear principles - has pulled back the curtain on only the tip of the toadyism.
During and after the Cold War, Japanese governments bent over backwards to give Washington whatever it wanted. When government restrictions on military exports got in the way of the alliance, Tokyo simply made an exception for the United States. When cooperation on missile defense contradicted Japan's ban on militarizing space, Tokyo again waved a magic wand and made the restriction disappear.
Although Japan's constitution renounces the "threat or the use of force as a means of settling international disputes", Washington pushed Tokyo to offset the costs of the US military adventure in the first Gulf War against Saddam Hussein in 1990-1991, and Tokyo did so. Then, from November 2001 until just recently, Washington persuaded the Japanese to provide refueling in the Indian Ocean for vessels and aircraft involved in the war in Afghanistan. In 2007, the Pentagon even tried to arm-twist Tokyo into raising its defense spending to pay for more of the costs of the alliance.
Of course, the LDP complied with such demands because they intersected so nicely with its own plans to bend that country's peace constitution and beef up its military. Over the last two decades, in fact, Japan has acquired remarkably sophisticated hardware, including fighter jets, in-air refueling capability, and assault ships that can function like aircraft carriers. It also amended the 1954 Self-Defense Forces Law, which defines what the Japanese military can and cannot do, more than 50 times to give its forces the capacity to act with striking offensive strength. Despite its "peace constitution", Japan now has one of the top militaries in the world.
Enter the Democratic Party of Japan (DPJ). In August 2009, that upstart political party dethroned the LDP, after more than a half-century in power, and swept into office with a broad mandate to shake things up. Given the country's nose-diving economy, the party's focus has been on domestic issues and cost-cutting. Not surprisingly, however, the quest to cut pork from the Japanese budget has led the party to scrutinize the alliance with the US. Unlike most other countries that host US military bases, Japan shoulders most of the cost of maintaining them: more than $4 billion per year in direct or indirect support.
Under the circumstances, the new government of Prime Minister Yukio Hatoyama proposed something modest indeed - putting the US-Japan alliance on, in the phrase of the moment, a "more equal" footing. It inaugurated this new approach in a largely symbolic way by ending Japan's resupply mission in the Indian Ocean (though Tokyo typically sweetened the pill by offering a five-year package of $5 billion in development assistance to the Afghan government).
More substantively, the Yukio Hatoyama government also signaled that it wanted to reduce its base-support payments. Japan's proposed belt-tightening comes at an inopportune moment for the Obama administration, as it tries to pay for two wars, its "overseas contingency operations", and a worldwide network of more than 700 military bases. The burdens of US overseas operations are increasing, and fewer countries are proving willing to share the costs.
Of dugongs and democracy
The immediate source of tension in the US-Japanese relationship has been Tokyo's desire to renegotiate that 2006 agreement to close Futenma, transfer those 8,000 Marines to Guam, and build a new base in Nago, a less densely populated area of the island. It's a deal that threatens to make an already strapped government pay big. Back in 2006, Tokyo promised to shell out more than $6 billion just to help relocate the Marines to Guam.
The political cost to the new government of going along with the LDP's folly may be even higher. After all, the DPJ received a healthy chunk of voter support from Okinawans, dissatisfied with the 2006 agreement and eager to see the American occupation of their island end. Over the last several decades, with US bases built cheek-by-jowl in the most heavily populated parts of the island, Okinawans have endured air, water, and noise pollution, accidents like a 2004 US helicopter crash at Okinawa International University, and crimes that range from trivial speeding violations all the way up to the rape of a 12-year-old girl by three Marines in 1995.
According to a June 2009 opinion poll, 68% of Okinawans opposed relocating Futenma within the prefecture, while only 18% favored the plan. Meanwhile, the Social Democratic Party, a junior member of the ruling coalition, has threatened to pull out if Hatoyama backs away from his campaign pledge not to build a new base in Okinawa.
Then there's the dugong, a sea mammal similar to the manatee that looks like a cross between a walrus and a dolphin and was the likely inspiration for the mermaid myth. Only 50 specimens of this endangered species are still living in the marine waters threatened by the proposed new base near less populated Nago. In a landmark case, Japanese lawyers and American environmentalists filed suit in US federal court to block the base's construction and save the dugong.
Realistically speaking, even if the Pentagon were willing to appeal the case all the way up to the Supreme Court, lawyers and environmentalists could wrap the US military in so much legal and bureaucratic red tape for so long that the new base might never leave the drawing board.
For environmental, political, and economic reasons, ditching the 2006 agreement is a no-brainer for Tokyo. Given Washington's insistence on retaining a base of little strategic importance, however, the challenge for the DPJ has been to find a site other than Nago. The Japanese government floated the idea of merging the Futenma facility with existing facilities at Kadena, another US base on the island. But that plan - as well as possible relocation to other parts of Japan - has met with stiff local resistance. A proposal to further expand facilities in Guam was nixed by the governor there.
The solution to all this is obvious: close down Futenma without opening another base. But so far, the US is refusing to make it easy for the Japanese. In fact, Washington is doing all it can to box the new government in Tokyo into a corner.
Ratcheting up the pressure
The US military presence in Okinawa is a residue of the Cold War and a US commitment to containing the only military power on the horizon that could threaten American military supremacy. Back in the 1990s, the Bill Clinton administration's solution to a rising China was to "integrate, but hedge". The hedge - against the possibility of China developing a serious mean streak - centered around a strengthened US-Japan alliance and a credible Japanese military deterrent.
What the Clinton administration and its successors didn't anticipate was how effectively and peacefully China would disarm this hedging strategy with careful statesmanship and a vigorous trade policy. A number of Southeast Asian countries, including the Philippines and Indonesia, succumbed early to China's version of checkbook diplomacy. Then, in the last decade, South Korea, like the Japanese today, started to talk about establishing "more equal" relations with the US in an effort to avoid being drawn into any future military scrape between Washington and Beijing.
Okinawa and the new domino effect
By John Feffer
Now, with its arch-conservatives gone from government, Japan is visibly warming to China's charms. In 2007, China had already surpassed the US as the country's leading trade partner. On becoming prime minister, Hatoyama sensibly proposed the future establishment of an East Asian community patterned on the European Union. As he saw it, that would leverage Japan's position between a rising China and a United States in decline. In December, while Washington and Tokyo were haggling bitterly over the Okinawa base issue, DPJ leader Ichiro Ozawa sent a signal to Washington as well as Beijing by shepherding a 143-member delegation of his party's legislators on a four-day trip to China.
Not surprisingly, China's bedazzlement policy has set off warning bells in Washington, where the People's Republic is still a focus
of primary concern for a cadre of strategic planners inside the Pentagon. The Futenma base - and its potential replacement - would be well situated, should Washington ever decide to send rapid response units to the Taiwan Strait, the South China Sea, or the Korean peninsula. Strategic planners in Washington like to speak of the "tyranny of distance", of the difficulty of getting "boots on the ground" from Guam or Hawaii in case of an East Asian emergency.
Yet the actual strategic value of Futenma is, at best, questionable. The South Koreans are more than capable of dealing with any contingency on the peninsula. And the United States frankly has plenty of firepower by air (Kadena) and sea (Yokosuka) within hailing distance of China. A couple thousand Marines won't make much of a difference (though the leathernecks strenuously disagree). However, in a political environment in which the Pentagon is finding itself making tough choices between funding counterinsurgency wars and old Cold War weapons systems, the "China threat" lobby doesn't want to give an inch.
Failure to relocate the Futenma base within Okinawa might be the first step down a slippery slope that could potentially put at risk billions of dollars in Cold War weapons still in the production line. It's hard to justify buying all the fancy toys without a place to play with them.
And that's one reason the Obama administration has gone to the mat to pressure Tokyo to adhere to the 2006 agreement. It even dispatched Secretary of Defense Robert Gates to the Japanese capital last October in advance of president Obama's own Asian tour. Like an impatient father admonishing an obstreperous teenager, Gates lectured the Japanese "to move on" and abide by the agreement - to the irritation of both the new government and the public. (See Gates gets grumpy in Tokyo, October 28, 2009)
The punditocracy has predictably closed ranks behind a bipartisan Washington consensus that the new Japanese government should become as accustomed to its junior status as its predecessor and stop making a fuss. The Obama administration is frustrated with "Hatoyama's amateurish handling of the issue," writes Washington Post editorial page editor Fred Hiatt. "What has resulted from Mr Hatoyama's failure to enunciate a clear strategy or action plan is the biggest political vacuum in over 50 years," adds Victor Cha, former director of Asian affairs at the National Security Council. Neither analyst acknowledges that Tokyo's only "failure" or "amateurish" move was to stand up to Washington. "The dispute could undermine security in East Asia on the 50th anniversary of an alliance that has served the region well," intoned The Economist more bluntly. "Tough as it is for Japan's new government, it needs to do most, though not all, of the caving in."
The Hatoyama government is by no means radical, nor is it anti-American. It isn't preparing to demand that all, or even many, US bases close. It isn't even preparing to close any of the other three dozen (or so) bases on Okinawa. Its modest pushback is confined to Futenma, where it finds itself between the rock of Japanese public opinion and the hard place of Pentagon pressure.
Those who prefer to achieve Washington's objectives with Japan in a more roundabout fashion counsel patience. "If America undercuts the new Japanese government and creates resentment among the Japanese public, then a victory on Futenma could prove Pyrrhic," writes Joseph Nye, the architect of US Asia policy during the Clinton years. Japan hands are urging the United States to wait until the summer, when the DPJ has a shot at picking up enough additional seats in the next parliamentary elections to jettison its coalition partners, if it deems such a move necessary.
Even if the Social Democratic Party is no longer in the government constantly raising the Okinawa base issue, the DPJ still must deal with democracy on the ground. The Okinawans are dead set against a new base. The residents of Nago, where that base would be built, just elected a mayor who campaigned on a no-base platform. It won't look good for the party that has finally brought real democracy to Tokyo to squelch it in Okinawa.
Reverse island hop
Wherever the US military puts down its foot overseas, movements have sprung up to protest the military, social, and environmental consequences of its military bases. This anti-base movement has notched some successes, such as the shut-down of a US navy facility in Vieques, Puerto Rico, in 2003. In the Pacific, too, the movement has made its mark. On the heels of the eruption of Mt Pinatubo, democracy activists in the Philippines successfully closed down the ash-covered Clark Air Force Base and Subic Bay Naval Station in 1991-1992. Later, South Korean activists managed to win closure of the huge Yongsan facility in downtown Seoul.
Of course, these were only partial victories. Washington subsequently negotiated a Visiting Forces Agreement with the Philippines, whereby the US military has redeployed troops and equipment to the island, and replaced Korea's Yongsan base with a new one in nearby Pyeongtaek. But these not-in-my-backyard (NIMBY) victories were significant enough to help edge the Pentagon toward the adoption of a military doctrine that emphasizes mobility over position. The US military now relies on "strategic flexibility" and "rapid response" both to counter unexpected threats and to deal with allied fickleness.
The Hatoyama government may indeed learn to say no to Washington over the Okinawa bases. Evidently considering this a likelihood, former deputy secretary of state and former US ambassador to Japan Richard Armitage has said that the United States "had better have a plan B". But the victory for the anti-base movement will still be only partial. US forces will remain in Japan, and especially Okinawa, and Tokyo will undoubtedly continue to pay for their maintenance.
Buoyed by even this partial victory, however, NIMBY movements are likely to grow in Japan and across the region, focusing on other Okinawa bases, bases on the Japanese mainland, and elsewhere in the Pacific, including Guam. Indeed, protests are already building in Guam against the projected expansion of Andersen Air Force Base and Naval Base Guam to accommodate those Marines from Okinawa. And this strikes terror in the hearts of Pentagon planners.
In World War II, the United States employed an island-hopping strategy to move ever closer to the Japanese mainland. Okinawa was the last island and last major battle of that campaign, and more people died during the fighting there than in the subsequent atomic bombings of Hiroshima and Nagasaki combined: 12,000 US troops, more than 100,000 Japanese soldiers, and perhaps 100,000 Okinawan civilians. This historical experience has stiffened the pacifist resolve of Okinawans.
The current battle over Okinawa again pits the United States against Japan, again with the Okinawans as victims. But there is a good chance that the Okinawans, like the Na'vi in that great NIMBY film Avatar, will win this time.
A victory in closing Futenma and preventing the construction of a new base might be the first step in a potential reverse island hop. NIMBY movements may someday finally push the US military out of Japan and off Okinawa. It's not likely to be a smooth process, nor is it likely to happen any time soon. But the kanji (a form of Japanese writing) is on the wall. Even if the Yankees don't know what the Japanese characters mean, they can at least tell in which direction the exit arrow is pointing.
John Feffer is the co-director of Foreign Policy in Focus at the Institute for Policy Studies and writes its regular World Beat column. His past essays, including those for TomDispatch.com, can be read at his website.
(Copyright 2010 John Feffer.)
(Used by permission Tomdispatch)
Well, a lot of such precious taxes, including mine and yours, still go for military-related expenses in Japan, especially for US military bases! Here is a good story to think about it. Cheers, Kosuke
Okinawa and the new domino effect
By John Feffer
For a country with a pacifist constitution, Japan is bristling with weaponry. Indeed, that Asian land has long functioned as a huge aircraft carrier and naval base for United States military power. We couldn't have fought wars in Korea (1950-1953) and Vietnam (1959-1975) without the nearly 90 military bases scattered around the islands of our major Pacific ally. Even today, Japan remains the anchor of what's left of America's Cold War containment policy when it comes to China and North Korea. From the Yokota and Kadena air bases, the United States can dispatch troops and bombers across Asia, while the Yokosuka base near Tokyo is the largest American naval installation outside the United States.
You'd think that, with so many Japanese bases, the United States wouldn't make a big fuss about closing one of them. Think again. The current battle over the US Marine Corps air base at Futenma on Okinawa - an island prefecture almost 1,600 kilometers south of Tokyo that hosts about three dozen US bases and 75% of American forces in Japan - is just revving up. In fact, Washington seems ready to stake its reputation and its relationship with a new Japanese government on the fate of that base alone, which reveals much about US anxieties in the age of President Barack Obama.
What makes this so strange, on the surface, is that Futenma is an obsolete base. Under an agreement the George W Bush administration reached with the previous Japanese government, the US was already planning to move most of the Marines now at Futenma to the island of Guam. Nonetheless, the Obama administration is insisting, over the protests of Okinawans and the objections of Tokyo, on completing that agreement by building a new partial replacement base in a less heavily populated part of Okinawa.
The current row between Tokyo and Washington is no mere "Pacific squall", as Newsweek dismissively described it. After six decades of saying yes to everything the United States has demanded, Japan finally seems on the verge of saying no to something that matters greatly to Washington, and the relationship that Dwight D Eisenhower once called an "indestructible alliance" is displaying ever more hairline fractures. Worse yet, from the Pentagon's perspective, Japan's resistance might prove infectious - one major reason why the United States is putting its alliance on the line over the closing of a single antiquated military base and the building of another of dubious strategic value.
During the Cold War, the Pentagon worried that countries would fall like dominoes before a relentless communist advance. Today, the Pentagon worries about a different kind of domino effect. In Europe, North Atlantic Treaty Organization countries are refusing to throw their full support behind the US war in Afghanistan. In Africa, no country has stepped forward to host the headquarters of the Pentagon's new Africa Command. In Latin America, little Ecuador has kicked the US out of its air base in Manta.
All of these are undoubtedly symptoms of the decline in respect for American power that the US military is experiencing globally. But the current pushback in Japan is the surest sign yet that the American empire of overseas military bases has reached its high-water mark and will soon recede.
Toady no more?
Until recently, Japan was virtually a one-party state, and that suited Washington just fine. The long-ruling Liberal Democratic Party (LDP) had the coziest of bipartisan relations with that city's policymakers and its "chrysanthemum club" of Japan-friendly pundits. A recent revelation that, in 1969, Japan buckled to president Richard Nixon's demand that it secretly host US ships carrying nuclear weapons - despite Tokyo's supposedly firm anti-nuclear principles - has pulled back the curtain on only the tip of the toadyism.
During and after the Cold War, Japanese governments bent over backwards to give Washington whatever it wanted. When government restrictions on military exports got in the way of the alliance, Tokyo simply made an exception for the United States. When cooperation on missile defense contradicted Japan's ban on militarizing space, Tokyo again waved a magic wand and made the restriction disappear.
Although Japan's constitution renounces the "threat or the use of force as a means of settling international disputes", Washington pushed Tokyo to offset the costs of the US military adventure in the first Gulf War against Saddam Hussein in 1990-1991, and Tokyo did so. Then, from November 2001 until just recently, Washington persuaded the Japanese to provide refueling in the Indian Ocean for vessels and aircraft involved in the war in Afghanistan. In 2007, the Pentagon even tried to arm-twist Tokyo into raising its defense spending to pay for more of the costs of the alliance.
Of course, the LDP complied with such demands because they intersected so nicely with its own plans to bend that country's peace constitution and beef up its military. Over the last two decades, in fact, Japan has acquired remarkably sophisticated hardware, including fighter jets, in-air refueling capability, and assault ships that can function like aircraft carriers. It also amended the 1954 Self-Defense Forces Law, which defines what the Japanese military can and cannot do, more than 50 times to give its forces the capacity to act with striking offensive strength. Despite its "peace constitution", Japan now has one of the top militaries in the world.
Enter the Democratic Party of Japan (DPJ). In August 2009, that upstart political party dethroned the LDP, after more than a half-century in power, and swept into office with a broad mandate to shake things up. Given the country's nose-diving economy, the party's focus has been on domestic issues and cost-cutting. Not surprisingly, however, the quest to cut pork from the Japanese budget has led the party to scrutinize the alliance with the US. Unlike most other countries that host US military bases, Japan shoulders most of the cost of maintaining them: more than $4 billion per year in direct or indirect support.
Under the circumstances, the new government of Prime Minister Yukio Hatoyama proposed something modest indeed - putting the US-Japan alliance on, in the phrase of the moment, a "more equal" footing. It inaugurated this new approach in a largely symbolic way by ending Japan's resupply mission in the Indian Ocean (though Tokyo typically sweetened the pill by offering a five-year package of $5 billion in development assistance to the Afghan government).
More substantively, the Yukio Hatoyama government also signaled that it wanted to reduce its base-support payments. Japan's proposed belt-tightening comes at an inopportune moment for the Obama administration, as it tries to pay for two wars, its "overseas contingency operations", and a worldwide network of more than 700 military bases. The burdens of US overseas operations are increasing, and fewer countries are proving willing to share the costs.
Of dugongs and democracy
The immediate source of tension in the US-Japanese relationship has been Tokyo's desire to renegotiate that 2006 agreement to close Futenma, transfer those 8,000 Marines to Guam, and build a new base in Nago, a less densely populated area of the island. It's a deal that threatens to make an already strapped government pay big. Back in 2006, Tokyo promised to shell out more than $6 billion just to help relocate the Marines to Guam.
The political cost to the new government of going along with the LDP's folly may be even higher. After all, the DPJ received a healthy chunk of voter support from Okinawans, dissatisfied with the 2006 agreement and eager to see the American occupation of their island end. Over the last several decades, with US bases built cheek-by-jowl in the most heavily populated parts of the island, Okinawans have endured air, water, and noise pollution, accidents like a 2004 US helicopter crash at Okinawa International University, and crimes that range from trivial speeding violations all the way up to the rape of a 12-year-old girl by three Marines in 1995.
According to a June 2009 opinion poll, 68% of Okinawans opposed relocating Futenma within the prefecture, while only 18% favored the plan. Meanwhile, the Social Democratic Party, a junior member of the ruling coalition, has threatened to pull out if Hatoyama backs away from his campaign pledge not to build a new base in Okinawa.
Then there's the dugong, a sea mammal similar to the manatee that looks like a cross between a walrus and a dolphin and was the likely inspiration for the mermaid myth. Only 50 specimens of this endangered species are still living in the marine waters threatened by the proposed new base near less populated Nago. In a landmark case, Japanese lawyers and American environmentalists filed suit in US federal court to block the base's construction and save the dugong.
Realistically speaking, even if the Pentagon were willing to appeal the case all the way up to the Supreme Court, lawyers and environmentalists could wrap the US military in so much legal and bureaucratic red tape for so long that the new base might never leave the drawing board.
For environmental, political, and economic reasons, ditching the 2006 agreement is a no-brainer for Tokyo. Given Washington's insistence on retaining a base of little strategic importance, however, the challenge for the DPJ has been to find a site other than Nago. The Japanese government floated the idea of merging the Futenma facility with existing facilities at Kadena, another US base on the island. But that plan - as well as possible relocation to other parts of Japan - has met with stiff local resistance. A proposal to further expand facilities in Guam was nixed by the governor there.
The solution to all this is obvious: close down Futenma without opening another base. But so far, the US is refusing to make it easy for the Japanese. In fact, Washington is doing all it can to box the new government in Tokyo into a corner.
Ratcheting up the pressure
The US military presence in Okinawa is a residue of the Cold War and a US commitment to containing the only military power on the horizon that could threaten American military supremacy. Back in the 1990s, the Bill Clinton administration's solution to a rising China was to "integrate, but hedge". The hedge - against the possibility of China developing a serious mean streak - centered around a strengthened US-Japan alliance and a credible Japanese military deterrent.
What the Clinton administration and its successors didn't anticipate was how effectively and peacefully China would disarm this hedging strategy with careful statesmanship and a vigorous trade policy. A number of Southeast Asian countries, including the Philippines and Indonesia, succumbed early to China's version of checkbook diplomacy. Then, in the last decade, South Korea, like the Japanese today, started to talk about establishing "more equal" relations with the US in an effort to avoid being drawn into any future military scrape between Washington and Beijing.
Okinawa and the new domino effect
By John Feffer
Now, with its arch-conservatives gone from government, Japan is visibly warming to China's charms. In 2007, China had already surpassed the US as the country's leading trade partner. On becoming prime minister, Hatoyama sensibly proposed the future establishment of an East Asian community patterned on the European Union. As he saw it, that would leverage Japan's position between a rising China and a United States in decline. In December, while Washington and Tokyo were haggling bitterly over the Okinawa base issue, DPJ leader Ichiro Ozawa sent a signal to Washington as well as Beijing by shepherding a 143-member delegation of his party's legislators on a four-day trip to China.
Not surprisingly, China's bedazzlement policy has set off warning bells in Washington, where the People's Republic is still a focus
of primary concern for a cadre of strategic planners inside the Pentagon. The Futenma base - and its potential replacement - would be well situated, should Washington ever decide to send rapid response units to the Taiwan Strait, the South China Sea, or the Korean peninsula. Strategic planners in Washington like to speak of the "tyranny of distance", of the difficulty of getting "boots on the ground" from Guam or Hawaii in case of an East Asian emergency.
Yet the actual strategic value of Futenma is, at best, questionable. The South Koreans are more than capable of dealing with any contingency on the peninsula. And the United States frankly has plenty of firepower by air (Kadena) and sea (Yokosuka) within hailing distance of China. A couple thousand Marines won't make much of a difference (though the leathernecks strenuously disagree). However, in a political environment in which the Pentagon is finding itself making tough choices between funding counterinsurgency wars and old Cold War weapons systems, the "China threat" lobby doesn't want to give an inch.
Failure to relocate the Futenma base within Okinawa might be the first step down a slippery slope that could potentially put at risk billions of dollars in Cold War weapons still in the production line. It's hard to justify buying all the fancy toys without a place to play with them.
And that's one reason the Obama administration has gone to the mat to pressure Tokyo to adhere to the 2006 agreement. It even dispatched Secretary of Defense Robert Gates to the Japanese capital last October in advance of president Obama's own Asian tour. Like an impatient father admonishing an obstreperous teenager, Gates lectured the Japanese "to move on" and abide by the agreement - to the irritation of both the new government and the public. (See Gates gets grumpy in Tokyo, October 28, 2009)
The punditocracy has predictably closed ranks behind a bipartisan Washington consensus that the new Japanese government should become as accustomed to its junior status as its predecessor and stop making a fuss. The Obama administration is frustrated with "Hatoyama's amateurish handling of the issue," writes Washington Post editorial page editor Fred Hiatt. "What has resulted from Mr Hatoyama's failure to enunciate a clear strategy or action plan is the biggest political vacuum in over 50 years," adds Victor Cha, former director of Asian affairs at the National Security Council. Neither analyst acknowledges that Tokyo's only "failure" or "amateurish" move was to stand up to Washington. "The dispute could undermine security in East Asia on the 50th anniversary of an alliance that has served the region well," intoned The Economist more bluntly. "Tough as it is for Japan's new government, it needs to do most, though not all, of the caving in."
The Hatoyama government is by no means radical, nor is it anti-American. It isn't preparing to demand that all, or even many, US bases close. It isn't even preparing to close any of the other three dozen (or so) bases on Okinawa. Its modest pushback is confined to Futenma, where it finds itself between the rock of Japanese public opinion and the hard place of Pentagon pressure.
Those who prefer to achieve Washington's objectives with Japan in a more roundabout fashion counsel patience. "If America undercuts the new Japanese government and creates resentment among the Japanese public, then a victory on Futenma could prove Pyrrhic," writes Joseph Nye, the architect of US Asia policy during the Clinton years. Japan hands are urging the United States to wait until the summer, when the DPJ has a shot at picking up enough additional seats in the next parliamentary elections to jettison its coalition partners, if it deems such a move necessary.
Even if the Social Democratic Party is no longer in the government constantly raising the Okinawa base issue, the DPJ still must deal with democracy on the ground. The Okinawans are dead set against a new base. The residents of Nago, where that base would be built, just elected a mayor who campaigned on a no-base platform. It won't look good for the party that has finally brought real democracy to Tokyo to squelch it in Okinawa.
Reverse island hop
Wherever the US military puts down its foot overseas, movements have sprung up to protest the military, social, and environmental consequences of its military bases. This anti-base movement has notched some successes, such as the shut-down of a US navy facility in Vieques, Puerto Rico, in 2003. In the Pacific, too, the movement has made its mark. On the heels of the eruption of Mt Pinatubo, democracy activists in the Philippines successfully closed down the ash-covered Clark Air Force Base and Subic Bay Naval Station in 1991-1992. Later, South Korean activists managed to win closure of the huge Yongsan facility in downtown Seoul.
Of course, these were only partial victories. Washington subsequently negotiated a Visiting Forces Agreement with the Philippines, whereby the US military has redeployed troops and equipment to the island, and replaced Korea's Yongsan base with a new one in nearby Pyeongtaek. But these not-in-my-backyard (NIMBY) victories were significant enough to help edge the Pentagon toward the adoption of a military doctrine that emphasizes mobility over position. The US military now relies on "strategic flexibility" and "rapid response" both to counter unexpected threats and to deal with allied fickleness.
The Hatoyama government may indeed learn to say no to Washington over the Okinawa bases. Evidently considering this a likelihood, former deputy secretary of state and former US ambassador to Japan Richard Armitage has said that the United States "had better have a plan B". But the victory for the anti-base movement will still be only partial. US forces will remain in Japan, and especially Okinawa, and Tokyo will undoubtedly continue to pay for their maintenance.
Buoyed by even this partial victory, however, NIMBY movements are likely to grow in Japan and across the region, focusing on other Okinawa bases, bases on the Japanese mainland, and elsewhere in the Pacific, including Guam. Indeed, protests are already building in Guam against the projected expansion of Andersen Air Force Base and Naval Base Guam to accommodate those Marines from Okinawa. And this strikes terror in the hearts of Pentagon planners.
In World War II, the United States employed an island-hopping strategy to move ever closer to the Japanese mainland. Okinawa was the last island and last major battle of that campaign, and more people died during the fighting there than in the subsequent atomic bombings of Hiroshima and Nagasaki combined: 12,000 US troops, more than 100,000 Japanese soldiers, and perhaps 100,000 Okinawan civilians. This historical experience has stiffened the pacifist resolve of Okinawans.
The current battle over Okinawa again pits the United States against Japan, again with the Okinawans as victims. But there is a good chance that the Okinawans, like the Na'vi in that great NIMBY film Avatar, will win this time.
A victory in closing Futenma and preventing the construction of a new base might be the first step in a potential reverse island hop. NIMBY movements may someday finally push the US military out of Japan and off Okinawa. It's not likely to be a smooth process, nor is it likely to happen any time soon. But the kanji (a form of Japanese writing) is on the wall. Even if the Yankees don't know what the Japanese characters mean, they can at least tell in which direction the exit arrow is pointing.
John Feffer is the co-director of Foreign Policy in Focus at the Institute for Policy Studies and writes its regular World Beat column. His past essays, including those for TomDispatch.com, can be read at his website.
(Copyright 2010 John Feffer.)
(Used by permission Tomdispatch)
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