A French Kiss From Japan

Its new leader is decidedly Left Bank.

By Peter Tasker | NEWSWEEK

Published Sep 11, 2009

From the magazine issue dated Sep 21, 2009

There's more to Japan's new first couple than meets the eye. The prime minister's wife, Miyuki Hatoyama, claims to have befriended Tom Cruise in a previous life when he was, apparently, Japanese. Meanwhile, the prime minister himself has been behaving like the reincarnation of a French intellectual.

The evidence is an article titled "A New Road for Japan" that prospective prime minister Yukio Hatoyama wrote for a Japanese magazine just before the election. In terms that would be familiar to any Gauloise-puffing black-turtleneck-wearing denizen of Paris's Left Bank, the future prime minister lambastes "U.S.-led globalization."

Hatoyama warns that under "immoral" financial capitalism, human dignity has been lost and people turned into accounting entries. But there is good news too. The era of U.S. unilateralism is coming to an end, "as a result of the failure of the Iraq war and the financial crisis."

Referencing the construction of the EU, Hatoyama proposes the creation of an Asian political bloc, built around a single currency for the region. Domestically, he recommends "a politics of fraternity" to protect Japanese citizens from "the winds of market -fundamentalism."

What about the future of the U.S.-Japan military alliance? Hatoyama sees Japan as "caught between" the two great powers of China and the U.S. Though the U.S. is a necessary counterweight for the time being, it has no role in Hatoyama's East Asian version of the EU. There is no hint of a commonality of values between Japan and the U.S.; no mention of democracy or human rights, let alone free trade.

When a summary of the article appeared in the foreign press, diplomats and alliance managers on both sides moved quickly to calm the resulting brouhaha. Hatoyama's comments had been taken out of context, we were told. It was a storm in a sake cup. The U.S.-Japan relationship was as strong as ever.

The problem with that view is that Hatoyama's article (a full-length English version is available on his Web site) is so obviously heartfelt. Furthermore, there is nothing radical about his views, though the style was unusually cerebral for a Japanese politician. Similar opinions are common across the political spectrum, from the conservative wing of the Liberal Democratic Party to the social democratic wing of Hatoyama's own Democratic Party of Japan.

Pessimism about U.S. economic prospects is rife, and an Asian currency bloc currency has long been a dream of the Japanese Ministry of Finance. Both the Japanese elite and public grudgingly accepted the introduction of -American-style capitalism as part of the grand bargain that tied the two countries together after World War II, but they have long been uncomfortable with its emphasis on shareholder value and massive differentials in pay.

The bargain worked like this. The U.S. offered Japan the shelter of its nuclear umbrella and access to the world's -highest-spending consumers, ever ready to pluck up the latest gadgets produced by Japanese companies. In return, Japan was an ever-loyal ally, willing to play host to U.S. military bases a few hundred miles off the Soviet Union's eastern flank.

The grand bargain lost its raison d'être with the end of the Cold War, but there were still enough common interests to keep it intact. Until now, that is. U.S. consumers are tapped out, and Japan's dependence on overseas demand has turned out to be a source of vulnerability. Energizing domestic demand is the new priority for Japan, just as rebuilding savings must be for the U.S.

Japan has to reconsider the bets it has placed on its chief ally. To put it bluntly, can a country with the massive and ballooning deficits of the postcrisis U.S. afford far-flung and expensive military commitments that have only vague justifications in terms of national interest? Or will the U.S. gradually disengage militarily in Asia, closing bases and leaving allies to handle their own security—as cash-strapped Britain did in the 1950s and 1960s? It all depends on whether the U.S. returns to healthy growth. In any case, Japan has to think further ahead than the next electoral cycle. Unlike the U.S., it is in Asia for keeps.

Asia's new geopolitical map is already being drawn. As China's economic presence grows, Japan will be tempted to hedge its bets, as Hatoyama hinted. And, as Japan suspects, it's likely that the U.S. will do some triangulation of its own. Would the U.S. really defend Japan's interests at the cost of its own relationship with China? The twists and turns of U.S. policy on North Korea—a minor irritant for the U.S., but a huge strategic challenge for Japan—give ample grounds for doubt.

Like it or not, these issues are not about to go away. We should be grateful to the French intellectual who has just taken over as Japanese prime minister for giving them an airing.

Tasker is a founding partner of Arcus Investment.