Commentary: After its reconstruction with U.S. support after WWII, Japan became a major force in ship building, cameras, consumer electronics, and especially automobiles. The U.S. was supportive of Japan’s emerging success, as it wanted a stable and loyal ally in Asia to counteract Russia and China during the Cold War. The U.S. came out of WWII as the major economic force on the planet, whose economy and industries were booming. However, it needed trading partners to buy the myriad of products it was manufacturing that could not be absorbed by the national market. With healthy allies such as Japan, the U.S. could develop trade relationships that would allow American products to be exported globally.
However, the Japanese resurgence had become extremely problematic by the 1980s. The U.S. was running a multi-billion-dollar trade deficit with Japan, most of this being accounted for by car exports to the U.S., as American automobiles were ranked as less dependable compared to Japanese models. Furthermore, Japan was accused of intentionally using its huge foreign currency reserves to prevent the yen from reaching a fair market value against the U.S. dollar, thus keeping Japanese imports cheap in the U.S. and driving out competitors in its own country. At the same time, it was also accused of overtly keeping U.S. products out of the Japanese market by quotas, restrictions, permit requirements, and other means.
The U.S. relationship with Japan became a highly charged issue, with U.S. policymakers accusing Japan of not playing fair with the U.S. By the time I was in college, politicians were organizing rallies in which attendees took turns smashing Japanese cars with a sledgehammer. A Japanese investment group that wanted to purchase the Seattle Mariners baseball team was rebuffed, primarily because the group was from Japan.
In 1991 and 1992, what is referred to as the Japanese economic bubble burst, due to heavy speculation in stocks and real estate. The Japanese central bank lowered interest rates to zero percent, which failed to spark its economy. At the same time, the U.S. let the dollar lose value against the yen, making Japanese imports more expensive for Americans, and American exports to Japan cheaper for the Japanese. The burst of the bubble led to what economists call the “Lost Decade,” in which Japan struggled to stimulate its economy.
In the 1990s, China rapidly moved to replace Japan as Asia’s key economic power, and much like Japan, by using currency manipulation and trade restrictions on foreign imports. Today, China has replaced Japan as the new bogeyman in Asia. However, the U.S.’s situation with Japan was very different than what we are experiencing with China today. Our contention with Japan was for the most part an economic one. It centered on ballooning trade deficits, as Americans bought products such as Toyotas and Walkmans - there was no military issue, other than many U.S. politicians grousing that Japan enjoyed the protection from foes because the U.S. was footing the defense bill in Asia, while Japan grew wealthy,
During our scrape, Japan was still considered a strong U.S. ally and a stabilizing force in Asia for western powers. In contrast, the U.S. contention with China is three-fold. First is the balance of trade. In 2019, the U.S. trade deficit with China was $308.8 billion, the biggest among all U.S. trading partners. China adds to its trade surplus by utilizing tactics such as IP thievery, limiting Chinese markets to U.S. companies through red tape or outright restrictions, and in some cases treating labor like indentured servitude.
Second is China’s use of investment to establish influence throughout the world, particularly with countries in regions strategically located, such as Africa or South America, that have coveted minerals, raw materials, and deep seaports. In many cases, China funds infrastructure development for developing countries. When a country has a hard time paying back loans, China then controls the investment to its advantage.
Finally, and most disconcerting, is the rise of China as a military superpower that has used its might to bully neighbors, claim disputed territories and waters, and to generally flex its muscles. China has emerged to become a military adversary to the U.S., and the current trade war between the two superpowers has increased tension in the world.
China’s emergence as the new bogeyman, not only in the U.S. but in the world, is evidenced by a 14-country poll by the Pew Research Center showing the high unfavorable opinion by major economic powers. In the U.S., the 35 percent unfavorable opinion of China in 2002 has ballooned to 73 percent in 2020. In western Europe all of the major powers, except Spain and Italy, have more than a 70 percent unfavorable opinion of China – all of which have risen steeply during the past 18 years.
At an 86 percent unfavorable opinion of China, our Asian ally Japan has the highest rating of this type in the entire poll. Perhaps more than its own issues with China, it fully understands the value of letting another country face the ire of U.S. policymakers. As the U.S. continues to butt heads with China, a friendly political and trade relationship with Japan is more important than ever.