I told you so...

I wrote this at the beginning of 2009. This is what is happening at the moment across the Pacific, a tug-of-war between Japan and the US.

Japan gets a feel for Asian integration
By Kosuke Takahashi

TOKYO - If you believe Japan will always be an unswerving "lap dog" of the United States, then 2009 may bring a rude awakening. This year could be the beginning of Tokyo's swift shift in its axis of cooperation toward other Asian nations. Early signs are already beginning to show.

More than 130 years ago, the great Japanese philosopher Yukichi Fukuzawa - whose portrait adorns 10,000 yen bills - put forward the idea of disassociating Japan from dormant Asia and integrating with the West to protect its independence. The notion of "Leave Asia and enter the West" proposed by the samurai-turned-scholar became the spiritual and intellectual foundation of modern Japan.

Japan then stood in Fukuzawa's symbolic shadow for more than a century - discriminating against and underestimating the rest of Asia. First, the Japanese Imperial Army invaded large swaths of the region. Then, in the post-World War II period, right-leaning Japanese politicians, especially in the ruling Liberal Democratic Party (LDP), often humiliated formerly occupied countries by alternately denying and justifying its wartime atrocities.

Now, with Japan plunging into trade deficits and facing startling rises in unemployment and suicides, the West-leaning philosophy is proving detrimental. This is especially true of the single-track Japan-US alliance. Tokyo needs to diversify diplomatic and economic relations - and soon.

Japan's population of more than 120 million is at a critical stage. The nation's recession is deepening and economic growth is expected to slow further. Long-term demographic trends indicate a rapidly aging society that is producing fewer children.

Japanese intellectuals are worried about Japan's marginalization in future global competition. With that concern in mind, this year could be a chance for Japan to regain diplomatic diversity, especially as the US president-elect Barack Obama advocates international cooperation over the unilateralism characterized by the George W Bush administration.

A highly possible change of government in national elections - from the ruling LDP to the main opposition Democratic Party of Japan (DPJ) - would also accelerate such a move. The DPJ has advocated policies of multilateral cooperation while calling for a more equal partnership with the US. The DPJ has often refused to support US policies, notably on the war in Iraq.

Moreover, with the financial crisis triggered by the collapse of America's "casino capitalism", Japanese politicians and intellectuals are increasingly looking to the East Asian Community (EAC) - a proposed economic and political bloc equivalent to the European Union. This potential grouping is aimed at deepening economic ties and addressing problems with food, energy and the environment. It would definitely broaden Asia's influence in the world and protect its members from external economic shockwaves.

"Asia will continue to be an epicenter of world growth in the 21st century and will be modernizing further," Kazuo Mizuno, chief economist at Mitsubishi UFJ Securities Co in Tokyo, told Asia Times Online. "With more middle-class people emerging in Asia, Japan should target them as end-consumers."

Economic upheaval is shaking American hegemony in many quarters of the globe. In Japan, many believe "Pax Americana", backed by US capitalism, the US dollar-based international monetary system and so-called Washington Consensus policies, has already reached its end. If not, some believe, the US will soon lack the financial resources to maintain it.

According to a New York Times report, Obama warned on Tuesday that the US faced the prospect of "trillion-dollar deficits for years to come, even with the economic recovery that we are working on". He also said he was troubled by the staggering $1 trillion figure, adding: "I'm going to be willing to make some very difficult choices on how we get a handle on this deficit."

Pressure is building for Japan - as well as China and South Korea - to accelerate the integration of Asia. In an epoch-making event on December 13, the leaders of the three nations held their first-ever three-way summit in Fukuoka, Japan. The summit signals a new phase of cooperation between the North-East Asian neighbors.

East Asia's three biggest economies are now showing a united front to counter the adverse effects of global financial turmoil. They are now calling for enhanced "regional cooperation" and stressing the need for strengthening the "surveillance mechanism" to monitor regional financial markets. Japan and China expanded credit lines for currency agreements with South Korea, where Seoul is struggling to shore up the buffeted Korean won.

Leaders of the three countries hadn't held such a formal summit since the aftermath of World War II. In fact, regional relations have mostly been tense. Old animosities between Japan and China, and Japan and South Korea, were inflamed by former Japanese prime minister Junichiro Koizumi's visits to the controversial Yasukuni Shrine memorializing Japan's war dead. There have also been divisive sovereignty disputes in the East China Sea.

But business-oriented leaders in the region are now looking beyond the old wounds. The three nations now account for nearly 17% of the world's economic output and almost 75% of the Asian economy.

East Asia unites
According to Eiji Yamashita, an economics professor at Osaka City University, even before today's global financial crisis, the integration of Asia had been accelerated by two previous regional economic crises.

The first was the sharp increase in foreign direct investment to the Association of Southeast Asian Nations (ASEAN) countries by Japanese firms. This corresponded with the sharp appreciation of the Japanese yen after the Plaza Accord in 1985, Yamashita told The Council on East Asian Community (CEAC) in late November. This triggered the creation of cross-border production networks in East Asia, which closely connected different stages of production in manufacturing industries. Yamashita said this informal economic integration was now an invaluable asset to the regional economy.

The second was the Asian financial crisis of 1997 which propelled the formal integration of Asia, according to Yamashita. The Chiang Mai Initiative of May 2000 - a move to create a network of bilateral currency swap arrangements among ASEAN and Japan, China and South Korea (ASEAN+3) - ushered in a new stage of integration, Yamashita said.

According to Yamashita, the momentum for Asian integration has been slowed since 2005 with two regional frameworks - the ASEAN+3 and the East Asia Summit (EAS) comprising 16 countries, including India, Australia and New Zealand - dissipating its importance.

Japan has advocated the idea of the EAS while China has supported the expansion of the ASEAN+3. The result has been a leadership struggle between the region's two largest economies.

"It is expected that the current crisis will put an end to this stagnation period and the momentum will be regained for the regional integration of Asia," Yamashita said. "The last thing the Japanese government should do is, of course, impede this move in the right direction."

The social and cultural integration of China, Japan and Korea trade is also developing rapidly, especially among the young. A new catchphrase in East Asia translates to "Let's feel Japan."

Post-war Japanese diplomatic policy has been often described as "toeing the US line". But the current economic crisis is bringing about a sea-change in the world order.

Japan's efforts to establish the East Asian Community by reconciling with Asian neighbors could lead to regional peace and security. The US, which spiked Japan's proposal during the 1997 economic crisis for an Asian Monetary Fund, should not hamper Tokyo's efforts to build an Asian community. That is, if Washington really wants to increase prosperity in East Asia.

Kosuke Takahashi is a Tokyo-based journalist.

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