Neighborhood bullies keep picking on Japan

Are the vultures circling Japan? Early evidence suggests yes. A few days after a humiliating retreat in a standoff with China over control of a chain of oil-rich islands in the East China Sea, Japan is now fending off Russian covetousness for another island group.

Normally cautious Russian President Dmitry Medvedev plans to become the first Russian leader — apparently ever — to visit the Kuril Islands. The Kirils, located north of the Japanese island of Hokkaido, are claimed by both Russia and Japan, in a dispute going back to the aftermath of World War II. Medvedev was supposed to land there earlier this week, but was turned away by bad weather. This hubris triggered a fiery demarche from Seiji Haehara, Japan’s foreign minister, who told Russia’s ambassador to Tokyo that any such trip would have a “grave impact on bilateral relations” between the nations, according to Yuka Hayashi and Greg White at The Wall Street Journal. That terrified Medvedev, who said, “I will definitely go there in the near future.”

Medvedev’s casual brashness is predictable. China got Japan to climb down from their two-week confrontation by going directly for the jugular — Beijing cut off the export of rare-earth minerals, a key component in Japan’s life-giving electronics and hybrid automobile industries. As my FP colleague Tom Ricks notes today, that demonstrated  Japan’s — and everyone else’s — utter and naked reliance on China. 

Not everyone sees the rare-earth embargo as a game-changer in international treatment of China. Donald Lindsey, chief investment officer for The George Washington University Endowment, told me last night that, as with the Gulf of Mexico oil spill, we will soon be back to business as usual. The embargo, he said, has no

long-term significance. China is feeling a great deal of pressure right now, particularly from the U.S. This event was simply a way for the Chinese government to assert its economic and political influence around the world.  Make no mistake, they have a laser-like focus on the economic health of the country. Even though China is the world’s second-largest economy, it is still a very poor country with GDP per capita of only $3,700. The income gap between urban and rural China is 65 times. These rare earths are important component of China’s continued economic growth. I expect to see China as the global leader in production of plug-in hybrid vehicles within the next 15 years. They will not have an all-out rare earth embargo.”

That’s not the way Toyota sees it. The world’s largest car manufacturer, and the maker of the best-selling hybrid, the Prius, Toyota, Bloomberg reports, has formed a task force to figure out how to deal with its rare earth dependence.