Why Japan changed its attitude towards the Belt and Road Initiative?

By Miao Wang

Since the Chinese leaders proposed to jointly build the Belt and Road Initiative (BRI), Japan, as the neighbor in the region, has been paying a lot of attention and its policy changes accordingly. Currently, while shifting to cooperate with China in the framework of BRI, Japan still sets a variety of restrictions to maximise its self-interest and increases hedging outside the framework. Japan’s policies are influenced by many factors at home and abroad, reflecting the complexity of the relationship between the two countriesin terms of cooperation and competition.

Japan has experienced the following stages of its attitudes towards the BRI:

First, Japanese government believed that the BRI was more close to the relations with Southeast Asian and Central Asian countries since the policy slogan wasnot clear. There is no need to study it. Itgave up to join Asian Infrastructure Investment Bank (AIIB)and started to become vigilant towardsthe BRI.

Japanisskeptical about China’s ability to promote the initiative since it may lack organisational experience as well as the transparency in operations, which will frustrate the participating countries. Also, it believes that China will use the BRI as geostrategic tool to expand its regional economic influence through establishmentofthe AIIB. Its implementation will have an adverse impact on Japan’s economic interests, especially on the market share—it will surely divert the Japanese overseas market, which will increase the competition between the two sides in the investment to regional infrastructure construction. Then China will escalate its influence to the political level to weaken the regional control of the United States and Japan.

Therefore, besides not joining in the AIIB, Japan adoptedmultiple measures to counter the promotion of the BRI. For example, it revised the outline of Official Development Assistance (ODA) to increase the aidsto the countries along the BRI route such as Thailand, Cambodia, and Vietnam. Japan also broadenedits ODA financing channels and extendedthe area of the aidsto national defence projects. Prime Minister Abe, acted as an Asian free trade leader, jointtheTrans-Pacific Partnership(TPP)and encouraged other countries to sign the negotiation. At the same time, he visited Turkey, Mongolia, and Central Asian countries from 2013 to 2015 to promote Silk Road Diplomacy. He added the concept of “Free and Open India-Pacific Strategy” to the joint statement of Japan-India Summit, and actively recommended this concept to president Donald Trump.

Then from the second half of 2015, Japanese government has tried to engage with China.The dialogue between Chinese and Japanese financial ministers was restarted and they reached an agreement on promoting the financing cooperation between AIIB and ADB. At the Asian Development Bank Annual Meeting in May 2016, ADB and AIIB signed a memorandum to initiate a cooperative financing process, and decided that high-level consultations between member states should be held regularly.

Beginning with the spring of 2017, the Japanese government’s attitude towards the BRI has turned to positive and shown its willingness to cooperate with China in the framework. During May, 2017, Toshihiro Nikai, the previous Minister of Economy, Trade and Industry,visited China to attend the Belt and Road Forum For International Cooperation, in which he made a goodevaluation of the prospects of the BRI. On June 5, Prime Minister Abe spoke highly of the BRI at Asia Future Conference in Tokyo, indicating that the initiative has the potential to connect Japan withWestern Ocean regions. During the G20 summit in Hamburg, Abe expressed his willingness to cooperate with China on BRI for the first time.

After that, Japanese government entered the period of exploring further cooperation with China on BRI. On November 11, 2017, President Xi Jinping once again met with Prime Minister Abe during the 25th APEC Economic Leaders’ Meeting in Vietnam. Abe said that the Japanese government hopes to strengthen the mutually beneficial economic and trade cooperation, and actively explore the cooperation within the BRI. The China-Japan CEO Summit held in Tokyo issued a joint statement proposing that Japan and China will work more closely on infrastructure development of Asia in the BRI. Besides, the cooperation amongChinese and Japanese communitieshas become more active: Japaneseenergy, transportation and logistics companies have taken the lead in announcing their initial investment plans to the BRI projects of finance and technology. And in January 2018, the Ryukyu Economic Strategy Research Association and the Chinese Enterprise Consortium held the One Belt, One Road Okinawa Forum and signed a memorandum of cooperation. These events reflect that the Japanese economic community has practically begun to look for business opportunities in the BRI framework.

Japan’s change in attitude towards the Belt and Road Initiative has emerged under the combined effectsof domestic and international reasons. Among them, Japan’s economic interest is the fundamental motive, and Trump administration’s trade protectionism hascontributed to this change. Besides, the rapid progress the BRI achieved has also attracted Japan’s growing attention.

First of all, the overseas market is an important role for the Japanese economy since the monetary easing policy implemented by Abenomics in the past few years is based on it. Therefore, Japan must continue to protect and expand its overseas market. After president Donald Trump took the office, US trade protectionism was rising and hence Japan was involved in a tough situation in foreigntrade export. Driven by the BRI, market demandsofdeveloping countries along the route is gradually increasing. According to the latest assessment of the Asian Development Bank, from 2016 to 2030, the capital needs for infrastructure construction in Asia will reach 26 trillion US dollars, of which more than 80% will be needed for electricity and transportation. It is predicted that half of the projects will have insufficient funds and will need international cooperative financing. Obviously, if Japan actively participate in the BRI projects, it will gain huge benefits such as the opportunity to expand its overseas market.

Secondly, the Trump administration pursues the policy of trade protectionism, making Japan’s export-oriented trade strategy that promotes economic growth unsustainable. According to the data from US Department of Commerce, in the 2016, the US trade deficit with Japan  accounts for 9.4% of all foreign trade deficits in the US.  In March, 2017, the United States reported to the World Trade Organization (WTO), requesting Japan to open up the automobile and agricultural products markets, and complaining aboutJapan’s non-tariff barriers to cars and high tariffs on agricultural products. The US Secretary of Commerce emphasized that “automobiles occupy an important part of the US trade deficit”, requiring Japanese automakers to increasethe production of vehicles and parts in the United States, and to reduce imports from Japan and Mexico. Trump did not hesitate to withdraw from theTPP and began to focus on the  bilateral trade relations with US economic interests as the center. The pressure from the deterioration of external economic environment forced Japan to get engaged in the BRIfor exploring alternative business opportunities.

Thirdly, by 2016, China’s investment in 53 countries along the route reached14.53 billiondollars, accounting for 8.5% of China’s total foreign investment. 2,905 new enterprises from the BRI countries were established in China, accounting for 10.4% of the total number of foreign enterprises in China. 56 overseas economic and trade cooperation zones, covering more than 20 countries along the route, have a cumulative investment of 18.55 billion dollars and their total production amount is50.69 billiondollars, which create a tax of 1.07 billiondollarsfor the host countriesand increase 177,000 jobs. In July 2017, Moody’s awarded AIIB with the highest credit rating. As a result, AIIB will be able to issue low-interest bonds and complete new financing targets based on paid funds. In the future, it is expected to become aninternational platform for development projects. The achievements of BRI have greatly shocked Japan and encouragedit to get involved to improve the trade environment.

While Japan is enhancing the cooperation, its awareness of competition is also increasing. The Asahi Shimbun criticised the BRI as new colonialism. It believes that China will seek economic hegemony through this initiative and China will use the infrastructure investment to stimulate foreign demands of Chinese products, which will increase China’s export and start the cross-border electronic trade. In the end, China will dominate the international rules related to e-commerce and the processing of digital information.

The cooperation under the framework of the Belt and Roadbetween China and Japan has provided an important opportunity for the Abe cabinet to change its negative attitude towards China. However, due to the lack of mutual trust between the two countries, Japan’s cooperation is still full of uncertainty. However, since Japan’s attitude has become positive and the BRI created a platformfor Sino-Japanese communication, they are expected to gradually establish specific channels within the framework and deepen the economic relations as well as the political relations.

Miao Wang is Assistant Researcher of Renmin University of China, Master in Asian Studies of the George Washington University