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Jang Jungsoo, English Editor of the Hankyoreh
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Japan faces tensions between its foreign, economic policy
By Jang Jungsoo
English Editor of the Hankyoreh
Finance ministers from Korea, China, and Japan met recently during the Asian Development Bank meeting in Hyderabad, India, and agreed to study the possibility of a common currency, an "Asian Currency Unit" (ACU) that could ultimately lead to Asian economic integration. The same agreement was made at the separately held Asean + 3 finance minister talks, where it was also agreed that member countries would consider the establishment of an Asian Monetary Fund for effectively dealing with financial crises in the Asian region.
Of course the three countries only agreed in principle, and the ACU would merely be a weighted average unit of Asian nations, not a single currency like the Euro. It would be a little bit much to see this as the real start of a process of Asian integration. But the very fact that the main countries behind the Asian economy and others in East Asia have started talking about the issue of integration will have no small effect on the global economy as time goes on, because the message is that Korea, China, and Japan might not have to go through the painful exercise of saving dollars, which are from their perspective falling in value.
Reportedly it was Japan that played a big role in the ACU agreement. It comes as a surprise that Japan should come out playing the East Asian economic integration card at a time when its relations with Korea and China are so poor, because regarding Dokdo, worship at Yasukuni shrine, and other issues, Japan has been thoroughly ignoring its East Asian neighbors while stubbornly pursuing its own interests. Even now, Japan shows no sign of being ready to change its provocative tone. On May 12, Japan actually began to officially claim that the Korean government is occupying Dokdo "illegally." That is essentially an expression of its intention to not even consider improving relations with Korea. It is standing by its position on worshipping at Yasukuni, which is the biggest obstacle to better relations with China.
The implication is that there will be no changes in the tone of Japanese diplomacy, which has sought to bet everything on Japan's alliance with the United States. It is here that you see their self-contradiction, as Japan is angering major East Asian states like Korea and China on the one hand while pursuing economic integration. Granted, there is no shortage of examples wherein issues of business and government are treated separately in international relations. China and Taiwan would be a case in point. Japan's provocative behavior, however, does not just trample on the pride of other Asian nations. It creates a substantial threat because of the resulting military buildup, and that will very likely be a major obstacle to economic integration.
It is highly likely that the increasingly rapid fall of the dollar will ignite a global economic slump with the U.S. as its epicenter. The three countries of Northeast Asia are all heavily dependent on American exports, and they would be dealt a major blow. You could have increased consumption reduce the shock but East Asia does not have much of a consumer market outside of the three Northeast Asian countries. The search for an Asian monetary organization and a common currency can be characterized as an attempt to prepare for the possibility of the end or weakening of the dollar's dominance. Should East Asian nations begin to use their massive foreign currency reserves to invest for the sake of increased regional consumption instead of to purchase U.S. Treasury Department bonds, it would naturally lead to a reduction in how many U.S. bonds are bought. That would deal a fatal blow to an American economy suffering from an astronomical trade deficit, and that is why the U.S. is reacting sensitively to the idea of a common Asian currency and why it looks like it is moving to stop it from happening. Previously, the U.S. did not stand by and watch Asian moves towards an integrated currency. In the 1980s, it pressured Japan into scrapping plans to internationalize the Yen. During the Asian financial crisis of 1997, Japan sought to create an Asian monetary fund that was to be under its leadership, but that that also fell apart because of American opposition. If the idea of an Asian currency is going to move ahead smoothly, there first has to be a fundamental change in the provocative tone of Japanese foreign policy. The problem lies with Japan's self-contradictory thinking, because it is simultaneously pursuing a purely pro-American foreign policy and an economic policy that conflicts with American interests. Japan has made its military buildup and the strengthening of its alliance with the U.S. its greatest priority because it feels threatened by the rise of China. One might say that its provocative attitude towards Korea and China is a deliberate move to increase tensions and then use them to legitimize its defense capabilities. The way it has magnified the issue of Japanese abductees in North Korea to a degree greater than necessary and stuck with a hostile policy towards Pyongyang may be understood in the same context. Japanese diplomacy that seeks to enjoy the best of both ways carries with it an inherent danger of, over time, making Japan shunned by both the U.S. and the nations of East Asia. "China by tradition has a universal outlook," said Henry Kissinger to Zhou Enlai in 1971. "But Japan has had a tribal outlook." The following year U.S. president Richard Nixon passed up Japan and visited Beijing, and by doing so brought his historical "detente" to fruition.
