Prestowitz

More of the same stuff

More of the same stuff

During the 1980s trade conflicts with Japan, the Reagan administration initiated one series of negotiations under the rubric Market Oriented Sector Specific (MOSS) talks. The idea was to negotiate intensely at a high level to remove all the barriers to market entry in selected industry sectors in which it was believed U.S. exports were very competitive.

Some of us among the negotiators wondered if MOSS really meant More Of the Same Stuff. 

Now as I read of top U.S. officials and Japan wonks in the think tanks hailing the return to power of former Prime Minister Shinzo Abe and his long dominant Liberal Democrat Party (LDP) as a blessing for the United States, I wonder if they all have Alzheimer’s. I mean it’s so clearly a case of MOSS – More Of the Same Stuff.

I studied at Keio University in Japan in the 1960s, lived and worked in Tokyo as a business consultant in the 1970s, and served as one of the chief negotiators with Japan in the Reagan administration during the 1980s. With the exception of one roughly two year period, the LDP ruled Japan over that entire time. So I got to know the LDP. Indeed, my consulting office was on the same Nagata-cho block as the LDP headquarters.

One thing I learned is that the LDP is neither liberal nor particularly democratic nor a party.  It is significantly rooted in the nationalist groups that ruled Japan prior to and during World War II. Indeed, the early post-war LDP Prime Minister Nobusuke Kishi was at one time classified as a War Criminal. He was also the grandfather of just elected Prime Minister Abe. In his previous term as Prime Minister,  Abe, like many of his LDP predecessors, made a practice of regularly visiting the Yasukuni Shrine, a monument to Japanese nationalism whose museum continues to this day to present an erroneous , highly propagandistic version of the background and course of World War II. He has supported those who deny that the Japanese army forced Korean, Filippino, and other young girls into prostitution as "comfort women" for Japanese soldiers despite incontrovertible evidence that it did.

Just recently, Abe’s new government has said it is reviewing, with the possible intent of revising, the twenty year old official Japanese government apology to the Comfort Women. Given that it took nearly fifty years to get the apology in the first place, the mere announcement of a review is, at this point, an incredible manifestation of bad faith that should bring forth an outcry of revulsion from Washington.

The Party has only survived over the years because of its strong links to the countryside and Japan’s highly protectionist and highly over -represented agricultural interests. Think of the agricultural areas of Japan as the global epi-center of Gerrymandering, with each rural vote worth far more than an urban vote. This is the heart of LDP country.

Economically, the LDP has always at heart tended to be mercantilist and protectionist. It has championed government support of key industries like steel, semiconductors, ship-building, and electronics and has consistently pursued policies of manipulating the yen to keep it undervalued as an indirect subsidy to exports and an indirect tariff on imports. It has fed at the trough of the quasi cartels that control much of Japan’s economy and has fought to defend and protect them. It does not at all resonate to the free market vibes of Adam Smith and David Ricardo in the way that Washington and New York do.

For years, U.S. officials and analysts have called on Japan to "rebalance" by shifting from an investment and export led economic growth strategy to a domestic consumption led strategy and by halting manipulation of the yen. Indeed, at one point, Prime Minister Yasuhiro Nakasone vowed that Japan would become "an importing super-power."

It has taken many years and the extraordinary aging and shrinking of Japan’s population, but finally in the past year, Japan has begun to run a trade deficit, although it still accumulates current account surpluses because of the large earnings on its enormous stock of overseas investments.

So what is Abe proposing by way of stimulating the economy? Yup, you guessed it. He wants to drive up exports and get back to trade surpluses by again manipulating the value of the yen to drive its value down against that of the dollar. This, of course, would increase Japanese exports , especially to America, while holding down Japanese imports.

He also wants the Bank of Japan to further reduce Japan’s almost zero interest rates as a way of stimulating investment. In all his speeches is not a word about structural adjustment, reform, smart regulation, or measures to mitigate Japan’s inexorably advancing demographic disaster.

If this doesn’t sound to you like America’s dream new government for Japan,  you’re right. It’s not.

So why are so many American leaders and policy wonks extending open arms, kisses, and hugs to it? For starters, there’s just plain familiarity.  We’ve known them for a long time and the devil you know may be better than the devil you don’t know.

But the key factor is what it has always been — the great game of geo-politics. In the past, it was the Cold War and the U.S. and Japan against the Soviet Union. Now, it’s America and Japan against China. This new Abe gang supports and fosters America’s geo-political priorities and deployments in Asia. It enables and encourages Washington in its "pivoting to Asia" which appears, in fact, to mean containing China largely by means of a bigger American military presence.

Washington may warn China about currency manipulation but there has been no response to Abe’s calls for manipulation of the yen to foster Japanese exports. As in the past, the United States continues to subordinate its economic interests to its geo-political objectives

The names may have changed, but it’s as I told you at the beginning — More Of the Same Stuff — MOSS.