Tokyo Report

Security or Investment: Balancing Japan’s Long-Term Foreign Policy

Sea lane security and new partners are key to protecting Japan’s far-flung assets.

Security or Investment: Balancing Japan’s Long-Term Foreign Policy
Credit: tsuna72 via

Part of Japan’s new push to normalize its military stems from a long-term imperative to ensure its sea lines of communication (SLOC) and to protect its deepening interests in Southeast Asia and the greater Indian Ocean. Recent investments and partnerships show how Japan sees this interaction unfolding. While the U.S. has been Japan’s (and indeed the world’s) guarantor of blue water navigation and access since the end of the Cold War, some nations now question its long-term commitment and ability to fulfill that role. Even as Japan seeks to draw itself closer to the U.S. within their alliance, it is looking for new regional partners to not only generate economic growth (which will continue to stagnate domestically as the population declines), but also to protect Japanese trade and energy imports through waters that are increasingly contested with China.

While The Diplomat has noted Japan’s latest moves to build security relationships in Southeast Asia with countries like Australia, the Philippines and Vietnam, mainly through the sale of military hardware and technology, it is also attempting to do the same in the Indian Ocean. During Indian Prime Minister Narendra Modi’s visit to Japan next week, the two leaders are expected to strengthen their security relationship by signing a “two-plus-two” mechanism to ensure regular meetings between their foreign and defense secretaries. The two will also likely sign deals for sea lane cooperation, joint navy drills, and the sale of Japanese hardware like the US-2 amphibious aircraft.

On Tuesday the Nikkei reported that Japan plans to offer aid for maritime security to Sri Lanka during Prime Minister Shinzo Abe’s visit next month. This strategy is mainly intended to counter China’s already large investments in the country and elsewhere in the region, particularly in infrastructure like ports. Japan plans to offer advisors to Sri Lanka’s coast guard as well as making assessments about the possible supply of patrol ships at a later date. A friendly Sri Lanka could help protect future Japanese natural gas imports from Mozambique once they come online, as well as mineral exports from central and eastern Africa.

In addition to finding new security partners in the Indian Ocean, Japan’s coast guard is looking to double its current budget in fiscal 2015 to 50.4 billion yen ($485 million) in order to acquire four new high-performance patrol vessels and three more jets. The acquisitions will enable it to accelerate “efforts to create an around-the-clock air patrol system and to enhance maritime policing of the area around the Senkakus.” These actions, along with its new remote island defense plan, show that Japan is looking to increase its security profile along the entirety of its supply chain through the Indian Ocean and to its home islands.

Japan’s latest security efforts are partially to protect its own SLOC, and also to enhance regional security in places where its largest companies are steadily increasing investment. There are two recent examples that highlight the scale of this trend. The first comes from Bangladesh where Japan has announced it will provide 600 billion yen over the next four or five years to develop an industrial area that will include major infrastructure projects linking the capital of Dhaka with a port near the city of Chittagong. The deal will also create special economic zones for new (read Japanese) enterprises as well as industrial parks. The details of the deal will be discussed when Abe meets with Prime Minister Sheikh Hasina next month. This level of investment would put Bangladesh at or near the same level of development assistance currently received by Japan’s largest recipient, Vietnam, as Tokyo is seeking to increase its influence to the same scale before China also makes significant inroads.

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The second example is in Indonesia, where one of Japan’s three largest banks, Sumitomo Mitsui Banking, is seeking to tap the country’s large pool of citizens who currently don’t have a bank account, estimated to be between 60 and 70 million people. The Japanese bank’s local affiliate will allow these people to use its services (such as withdrawals, transfers and deposits) by using their cell phones as proof of identity. Sumitomo Mitsui is making a long-term bet that this portion of the population will become profitable as it begins to have better access to dependable and previously unavailable banking services, and that their loyalty will provide the bank with a consumer base that could become vastly more profitable if Indonesia continues on its current growth path.

Japan’s investments and partnerships in the wider Indo-Pacific region can be expected to continue throughout the near to medium-term. The challenge will be keeping government investments at the same level as private or corporate investments, and thus attempting to grow its security profile in order to protect its ever widening economic profile. While Japan’s banks and largest corporations sit on enormous pools of assets and capital with no real way to profitably invest domestically over the long-term given the country’s shrinking population, their only real option is to look abroad. However, as the national government becomes increasingly burdened by its own debt (already at 240 percent of GDP) and an aging population that requires more resources without a widening tax base to pay for it, its ability to continue supplying aid to Japan’s partners will decrease. Given Japan’s growing economic presence abroad, the government will need firm partnerships in place before its own abilities diminish.