Home   ODA, Economic Interdependence and Japan’s Foreign Policy

ODA, Economic Interdependence and Japan’s Foreign Policy

-Amrit Panda

After the Second World War and subsequent arrangements with the US, Japan seceded a large part of its military posture to the US. However, it established an excellent rapport with East Asian countries by disbursing Official Development Assistance (ODA), making substantial investments and improving trade relationships. A glance at the trends of Japan’s ODA confirms the fact that East Asia has been central to Japan’s aid disbursement. From the 1970s to the beginning of the new millennium, more than 50% of Tokyo’s aid flowed to East Asia. However, in the recent times it has decreased to 40%. This might be a consequence of the recognition that most of these countries have significantly improved their economic situation over the years.

To a certain extent, such a policy provided Japan a powerful leverage against many security threats. On the other hand, because of its heavy investments in the East Asia, Japan would have incurred huge losses in case of instability in the region. Contrary to the opinion among some scholars that Japan has not been an active security provider in the region, it had taken up security responsibilities on numerous occasions. It acted as a mediator and proposed various solutions in the Vietnamese and Cambodian conflicts. However, its primary instrument for regional security has always been its economic assistance and technological expertise. Japan seems to have operated on the principle of Natural Economic Territory (a concept put forth by Robert Scalapino), where economic interdependence created a natural deterrent for aggression. The translation of Japanese economic superiority into substantive development assistance contributed immensely to the East Asian miracle.

Security fears compounded with the perceptions about reduced US interests in the region, especially after the end of the Cold War. Until 1990, the equation: Japanese economic strength + American military strength=Asia-Pacific stability and security, was the accepted as an optimum for the

Figure 1. Regional Areas of Focus of Japan’s ODA from 1973-2009.


Source: (Menocal, Denney, & Geddes, 2011)

operation of the mutual security system. However, with the end of the Cold War and the subsequent rise of China, the security dimension underwent significant changes. The instability along the Korean peninsula and its complicated relationship with the US have also been a major influencing factor in the changing security dynamic of the region. Japan’s response to such imbalances has been very gradual and Japan has built up a deterrent of its own. Given the fact that Japan started slowly increasing its defence outlays immediately after the Cold War, the argument that Shinzo Abe is suddenly ramping-up Japanese defence forces is a specious argument. Moreover, considering Japan was the world’s second largest economy, its defence budget, which hovered around 1% of its GDP, was quite significant in absolute terms. Technologically, Japanese weapons and military equipment can be termed as cutting edge and of high standards.  Furthermore, to counter the growing Chinese influence, Japan has forged a strong relationship with Australia and India, which are both wary of the Chinese dominance. Such strategies definitely create a certain level of deterrence in the wider East Asian region.

In spite of above-mentioned policy adjustments, for Japan, the primary deterrence even in the post-Cold War era continues to be ‘economic interdependence’. Eight out of Japan’s top twenty export partners are East Asian countries, accounting for close to 45% of its total exports. In terms of imports, the share of East Asian nations is close to 40%. It is interesting to note here that Chinese share accounts for 19% and 22% in exports and imports respectively. Therefore, the economic interdependence will act as a strong deterrent for both the countries and minor provocations may not lead to anything disastrous. According to Zhu Feng (2009) the provocations, however, have the potential to intensify the arms race that began in the 2000s. Acquisition of weapon systems and flexing of military muscle may actually act as a deterrent, as all the stakeholders will have a clear understanding of the considerable economic loss that may be incurred given the economic interdependence. The recent Japanese willingness to sell weapons and increased defence spending might catalyse the process of the creation of such deterrence.

The end of the Cold War, the rise of China and the consequent erosion of the structure that led to the US-China reconciliation of 1972 have added new challenges to the regional security frameworks. With the erosion of such structures that led to bilateral treaties of the US and other frameworks of engagement, the threat to regional security order has been compounded. Japan’s New Security Strategy announced in December 2013 is a response to this growing uneasiness in the region. There is an urgent need to converge the economic engagement with the security order in a more integrated manner so as to address instability in East Asian security.

Amrita Panda is a student at the Tata Institute of Social Sciences, Hyderabad. The views expressed are personal.


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