The Changing Political Economy of Japan's Economic Relations with Russia: The Rise and Fall of Seikei Fukabun

Author(s): Lonny E. Carlile Reviewed work(s): Source: Pacific Affairs, Vol. 67, No. 3 (Autumn, 1994), pp. 411-432 Published by: Pacific Affairs, University of British Columbia Stable URL: http://www.jstor.org/stable/2760418 . Accessed: 08/03/2012 11:38
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.

Pacific Affairs, University of British Columbia is collaborating with JSTOR to digitize, preserve and extend access to Pacific Affairs.

http://www.jstor.org

The ChangingPoliticalEconomy ofJapan'sEconomic Relations withRussia:The Rise and Fall of Seikei Fukabun
LonnyE. Carlile*

cussions of Russo-Japaneserelationswith the observation that frigid diplomaticrelationsbetween the twocountriesstemming fromhistorical animositiesand the territorial dispute over the Southern Kurile Islands (the Northern Territories)have prevented the consummation of what lucrative economic relamightotherwisebe a highly and complementary tionship.Onlywhen the territorial issue is resolved,it is implied,can their economic relationshope to attain theirrich potential.Withoutdenying the importanceof the NorthernTerritories issue and historicalanimosito ties in shaping Russo-Japanese articleattempts relations,the following build a case forthe argumentthata resolutionof the bilateralterritorial be dispute maynot necessarily a prerequisitefora significant deepening of the bilateraleconomic relationship forthatmatter, or, greaterJapanese economic assistance. It does this by moving away from a monolithic 'Japan, Inc. "-typemodel of Japanese foreigneconomic policy making. 'Japan" is disaggregatedinto several subnational actors whose concerns and interests divergeand who tend to operate in relatively independent political and economic policy spheres. By doing so, the paper hopes to show thatJapan's so-called "non-separationof economics and politics" relationshas been the (seikeifukabun) approach to Soviet/Russo-Japanese productof a distinctive conjunctureof forcesthatis currently eroding.In turn,thiserosion, facilitated sociopoliticalchanges in Russia, is transby the political economy of Russo-Japanese economic relations. forming Part 1 of the article presentsan overviewofJapan-Soviet economic relationsprior to the rise of seikei and introducesthe keyactors fukabun
* An earlier version thispaperwaspresented of beforetheRole oftheNewRussiain theAsiaPacificWorkshop, of of Institute Asian Research,University British Columbia (November13, Brian Robert 1993). The author wouldliketo thank North, job, Paul Marantz, Wadajun'ichi,and and thestaff for comments assistance. ofJETROVancouver helpful

IN RECENT YEARS has become virtually riguer writersto open disit de for

411

Pacific Affairs involved.Part2 describesthe riseof seikeifukabun the 1980s and the facin torsthatcontributedto thatrise. Part 3 delineates more recent developmentsthatprecipitated de factoabandonmentof thatpolicywhilepart4 a discusses currentdevelopmentsthat would appear to make a revivalof The articlecloses seikeifukabun unlikely, leastforthe foreseeablefuture. at witha set of concluding,summationalcomments. I. THE SEPARATION POLITICSANDECONOMICS OF Althoughanti-Russian sentimentin Japan has deep historicalroots,' theJapanese government's hard line, all-or-nothing diplomaticstance on the NorthernTerritories issue emerged relatively late in its postwarhistory.In 1956, upon normalizationof bilateral diplomatic relations,the Japanese governmentsigned a joint communique with the Soviets in which it in effect acknowledged that it was amenable to a returnofjust twoof the fourdisputed islands.It was onlyafterit became clear thatthe U.S. was going to end itsoccupation of Okinawa (accomplished in 1972) thattheJapanesegovernment began to actively promotethe returnof the And it was not until September 1973 thatthe Diet NorthernTerritories. adopted a pan-partisanresolution- which has been renewed periodically and to which subsequentlyinstalled prime ministersclaim to be bound - demanding the returnof all fourislands.2Nor did the lack of progresson the NorthernTerritories dispute hinder a dramaticexpansion of bilateraleconomic relations.As figure1 shows,trade betweenthe two countriesgrewrapidlyeven aftera hard line stand on the Northern issue was adopted. Rhetoric aside, what the Japanese in fact Territories practiced during the 1960s and 1970s withrespect to relationswiththe USSR was a de facto "separation of economics and politics" (i.e., the antithesisof seikei fukabun)thatwas not unlike thatwhich theypursued were pursued byone withChina at the time.Bilateraldiplomaticrelations set of actorswhile economic relationswere managed more or less indein pendentlybyanother group. In addition,since the bulk of the growth rawmateJapanese importsfromthe SovietUnion consistedof industrial withthe Sovietsreflected anotherattribute rials,itseconomic relationship found inJapan's foreigneconomic policy- namely, focuson "resource a

in 1 See J. Stephan,'Japanese-Soviet and Prospects," H. Ellison,ed.,Japan Relations: Patterns and the Colorado:Westview, (Boulder, 1987), pp. 135-59. Pacific Quadrille 2 Gerald L. Curtis,"The TyumenOil DevelopmentProject and Japanese Foreign Policy of Japan (Berkeley, Los Decision-Making," RobertA. Scalapino,ed., TheForeign in Policy Modern Angelesand London: University California of Press,1977), pp. 147-73.

412

Japan'sRelations with Russia Political Economy: diplomacy"aimed at securing an uninterruptedsupplyof inputs for its industrial complex.3 concernedwithdiplomaticrelaThe bureaucratic agencymostdirectly tionsis the Ministry Foreign Affairs of (MOFA). Its Soviet desk has been for describedas "thefortress opposing Sovietdesignson Japan" and a site where "an intenselyadversarialrelationship [withthe Soviets] has prevailed."4From 1961 onward,in retaliationforJapan'srenewalof itssecuritytreaty with the United States,the Soviet Union backtrackedon the thatit took in the 1956 communique and refusedto even acknowlstand dispute. Since thattime,MOFA consisedge the existenceof a territorial tently resistedthe expansion of economic ties in the absence of a settlement of the NorthernTerritories issue. Also concerned with the Soviet and generallyopposed to expanded Union/Russia's impact on security economic ties has been the Defense Agency.Right leaning politicians inside the ruling (until the summer of 1993) Liberal Democratic party (LDP) represented a furtherconstituencysupportive of a hard line stance. It is these three actors that have been most activelyinvolvedin whatmightbe termedthe bilateraldiplomaticrelationsarena. Bilateraleconomic relations,on the other hand, have been the province of a separate set of actors.Japan granted the Soviet Union mostfavored-nation statusin 1957 but during the decade thatfolloweda very modest level of trade with the Sovietswas conducted initially largelyby and coastal communitiesalong theJapan small and medium-sizedfirms Sea. Trade with the Soviet Union during that period constitutedunder 1 percentof theJapanese total.Interest tradewiththe SovietUnion on in the part of big businesswas stimulatedlater in the mid-1960s when the the Sovietsbegan to put forward possibility ofJapaneseaccess to Siberian visits the SovietUnion to and RussianFar Easternrawmaterials."Private" of business delegations led eventuallyto the establishment byJapanese the Japan-SovietEconomic Committee (JSEC) in 1965 as an arm of Keidanren,Japan'speak businessassociation.TheJSEC became both the primarylobby group for governmentpolicies to assistthe expansion of bilateral economic ties (eclipsing the small business-dominatedJapanecoconduit foradministering SovietTrade Committee) and the primary nomic relationsbetweenthe twocountries.The more or less annual joint meetings between the JSEC and its Soviet counterpart, the SovietJapanese Economic Committee- thejoint meetingshave been giventhe rubric 'Japan-Soviet JointCooperation Committee" (JSJCC)- became
3 ChalmersJohnson, in Japanand the Pacific Relations, 1952-1982," Ellison, 'Japanese-Chinese Qyadrille, pp. 107-34; Robert S. Ozaki and Walter Arnold, eds., Japan 's ForeignRelations:A Global

1985);JohnCalabrese,'Japanin the Search Economic for Security (Boulderand London: Westview, MiddleEast,"Pacific Review, 3, no. 2 (1990), pp. 100-12. vol.
4

Press,1992), pp. 30-31. Declining (Princeton, One NewJersey: Princeton University

Viewsa Gilbert Rozman, Japan 's Responseto theGorbachev Era, 1985-1991: A Rising Superpower

413

Pacific Affairs the place where major trade deals were negotiated and the basic frameworkof bilateraleconomic relationsestablished. Two pointsare especiallynoteworthy about theJSEC and itsaffiliated firms. The first that theyrepresenta rathersmall and specialized segis ment of the Japanese big business community. Trade with the Soviet Union has been dominated by a small number of general tradingcomIn panies, steel makers,and heavyequipment manufacturers. 1981, for instance, 84 percent of Japan-Soviettrade was conducted byjust seven companies.5Economic relationswiththe Soviet Union have traditionally been a highly and theJSEC itself virtual a fiefdom a of personalized affair small clique of business executives led by New Japan Steel's Nagano Shigeo and Kawai Yoshinariof the heavyconstruction equipment manufacturerKomatsu. Personal connections between Soviet trade officials andJapanese tradingcompanyofficials governedtraderelationson a daybasis.6Administrative on to-day arrangements the Soviet side were particin ularlyimportant sustainingthe big businessbias in bilateraleconomic relations.The Soviet system state tradingmeant that Soviet trade was of administeredby large, centralizedbureaucraticagencies - specifically, of the Ministry Foreign Trade and itsproduct-specific foreigntrade organizations (FTOs) - and integratedinto the command economy apparatus. Only the largestofJapan's tradingcompanies had the organizational capacityand the financialresourcesrequired to handle the large orders and the long time framesthatwere associated withdoing business with the Soviet foreigntrade bureaucracy.The big business bias was further encouraged by the factthat Soviet planners tended to utilize trade with Japan as a medium forresource developmentin Siberia and the Russian Far East. From the late 1960s onward,the SovietUnion concluded a number of verylarge compensation trade deals in whichJapanese producers would providethe plant and equipment (produced byJapan'slarge manufacturers)needed in Siberian and Russian Far Eastern resource develcoal, opment projectsin exchange fora specifiedamount of the timber, naturalgas and otherresourcesderivedfromthe projects.Such "develop and import"projectswere the specialtyofJapan's large sogoshosha(general tradingcompanies). This narrow, big business-dominatedstructure contrastswith a greater presence of small firmsin WesternEuropean trade withthe SovietUnion.7
5 Leslie Dienes, "Soviet-Japanese Economic Relations:Are They Beginningto Fade?" Soviet vol. Geography, 26, no. 7 (September 1985), pp. 509-25. 6 SuzukiKeisuke and Matsumoto Akio,"Sengonihonzaikaino sorenkoshoshi"(3 parts),Will, nos. 109-111 (January-March 1990), pp. 69-76, 136-43, 137-44; Nagata Minoru,"'Odoriba' no in SoshikiIinkai,ed., Tenki tatsu ni nissokeizaikankei," KokusaiShinpojiumu to kokusaijosei nisso no SoshikiIinkai,1990), pp. 333-41. kankei tenbo KokusaiShinpojiumu (Tokyo: 7 Dienes, "Soviet-Japanese EconomicRelations," 516. See Kokumin nenkan p. (1987), pp. seiji in 196-98,fora discussion therolesofspecific shosha Japan-Soviet of sogo trade.

414

Political Economy: Japan'sRelations with Russia The second point thatdeservesnote is the factthatthe bilateraleconomic relationshipwas consciouslyconstructedupon what theJapanese referto as a "privatesector base." This was done in spite of strenuous Soviet efforts engineer an official to Japanese governmentalrole. One can see in thisJapanese insistencea concerted effort sustaina formal to separation between economic and diplomatic relationsfor the sake of preventing economic relationsfromgetting entangledin diplomaticconcerns like the NorthernTerritoriesdispute. The "separationof politics and economics" in theJapan-Soviet relationshipdid not mean, however, the totalabsence of ajapanese governmental in presence. The ministries factcloselymonitoredtheJSEC and itsactivities and were invariably present atJSJCCmeetings.Furthermore, Ministry InternationalTrade the of and Industry(MITI), over the objection of MOFA and hawkishelements in the LDP, played a criticalrole in facilitating the rapid expansion of trade thatoccurred duringthe 1970s. As the agencycharged Japan-Soviet witheconomic "parametermaintenance,"or the assurance of an internationalenvironment favorabletoJapanese economic activity,8 MITI during the late 1960s was concerned aboutJapan's capacityto supplyits rapidly expanding, heavyindustry-based economy withthe energysources and raw materialsthat it needed. Motivated by these concerns, and at the request of firmsassociated withtheJSEC, it authorized trade insurance and low-costExport-Import Bank financingfor a number of verylarge compensationtradedeals (see table 1). Bythe early1980s itwas estimated thattheJapanese government had committeda sum of $4 billion to such an projects.The trade generated by these projectsconstituted estimated 32 percent ofJapanese deliveriesto and 25 percent of importsfromthe SovietUnion between 1969 and 1981.9 The formalseparation of politicsand economics in theJapan-Soviet immune relationshipdid not mean that economic relationswere totally to the impact of developments on the diplomatic and securityfront. However,prior to more recent developmentsto be discussed below, the litimpact of "politics"on Japan-Soviet economic relationshad relatively tle to do with the Northern Territoriesissue. As Tetsuya Kataoka has argued, if there is one single variable that has most strongly shaped Japan's relationswiththe SovietUnion it has been Japan's relationswith the United States.10 During the late 1960s and the early 1970s, the overt impact of theJapan-U.S.relationshipon Japan-Soviet economic relations to was minimal. One reason for this was self-policing. Sensitivity "third
8 ChalmersJohnson, "MITI andJapaneseInternational in EconomicPolicy," Scalapino, Foreign Policy, pp. 227-80. 9 Allan S. Whiting, SiberianDevelopment and East Asia: Threator Promise?(Stanford: Stanford

University Press,1981), p. 137; Dienes,"Soviet-Japanese EconomicRelations," 512. p. 10 Tetsuya Kataoka,'Japan'sNorthern Threat,"Problems Communism, 23 (March-April of vol. 1984), pp. 1-16.

415

Pacific Affairs
TABLE 1 IN MAJORJAPANESE-SOVIET/RUSSiAN DEVELOPMENT PROJECTS THE FAREAST

Date

Project name

Credit/ capital (millions) $163 $50 $80

Principal Exports

Duration ofExports 1969-73 1972-81

1967 1971 1971 1974 1974 1974 1975 1981 1985 1991 1992

1stKS FarEastForest Development Project WoodChipand Pulp Development Project Vostochny Port

Timber and lumber Pulpand woodchip 7-year deferred payment and lumber Timber Coking coal Exploration Exploration, crude oil and gas Timber and lumber Woodchips Timber and Lumber Exploration, crude oil and gas

2ndKS FarEastForest $550 Development Project SouthYakutian Coal $540 Development Project Yakutian Gas $50 Natural Development Project (50%US) Sakhalin Continental $185 Shelf Project(Sakhalin * I) 3rdKS FarEastForest Development Project WoodChipAgreement 4thKS FarEastForest Development Project Sakhalin Continental Shelf II)* Project(Sakhalin $910 $200 loan $1,400

1975-79 1983-98

1981-86 1981-95

*involves participation US and/orEuropeanfirms. by Far Sources:MichaelJ. "Soviet Eastern Bradshaw, Trade,"p. 252; NihonKeizaiShinbun(April 22, 1993).

exporting Japanese firms might have done "informally," the JSEC has scrupulously avoided projects that might involve exports of Cocom-regulated items. In projects with significant politico-strategic implications such as the Yakutian Natural Gas Development Project, the Sakhalin Continental Shelf Gas and Oil Project, and the aborted Tyumen oil proposal, bothJapanese government officials andJapanese businessmen insisted on the involvement of U.S. partners as a means of circumventing potential security-related complications." The "separation of politics and economics" in Japan-Soviet relations, in other words, was a policy sustained until
11See Curtis, "Tyumen Development Oil Project" thispoint. on

party" implicationshad become second nature to the segmentof the big business community overseeing Japan-Soviet trade. Thus, whatever

416

Political Economy: Japan'sRelations with Russia the 1980s through considerable conscientious effort and self-discipline on the part of theJapanese businesscommunity. Also significant U.S. was policy towardJapan. At the time, the Japan-U.S. relationshipwas still describedbyDonald Hellman, or a U.S. enjoyingthe "greenhouseeffect" willingnessto maintain a benign neglect regardingJapanese business in alliance.12 activity order to sustaina bilateralsecurity Detente, furthermore, tended to reduce U.S. concern about expandingJapanese tieswith the Soviet Union, therebyallowingJapanese business interests considerable latitudein theirdealings withthe SovietUnion. If anything, was the SovietUnion thatwas prone to use the bilateral it relationshipas a means of exercisingdiplomatic and political leverage. One concreteexample of such manipulationoccurred in the fallof 1976 when the Sovietscanceled a scheduledJSJCCmeetingin order to protest of the defectionof a MiG fighter pilot in Hokkaido. The history JapanSovietfisheries negotiationsis repletewithother examples. Such manipulations were in fact systematic and lay at the veryheart of the Soviets' As economic relationships. Gerald Segal argues: "The Sovietstrategy, in as tradewithWesternEurope, was to take advantage of Westerntechnology and to some extentto build politicaltiesthatwould eventually undermine U.S. alliances on eitherside of the Soviet Union."113With a state trading systemlinked to a centralized command economy,Soviet officialshad much greaterabilitythan theirJapanese counterparts link trade and to diplomacy.
II. POLITICS AND ECONOMICS AS INSEPARABLE

During the 1980s the factorsthat held back pressuresfor a linkage and sustaineda separationof economics and politicsinJapan-Soviet relaof tions eroded, opening the wayfor seikei fukabunor an "inseparability politicsand economics" stand along the lines championed byMOFA and LDP hard-liners. The first variable to undergo a change was the U.S. attitude towardJapan'srelationswiththe Soviets.Throughoutthe 1970s,the aforementioned "greenhouse effect"weakened as the decline of U.S. global hegemony progressed and the Soviets built up their naval and in ground forcesin the Far East. When SoviettroopsinvadedAfghanistan late 1979, the U.S. insistedthatJapan,along withits other allies, impose economic sanctionson the Soviets.A second round of sanctionsfollowed the declaration of martial law in Poland in 1981. In response to these
12 Donald C. Hellman, 'Japanese Politicsand ForeignPolicy:Elitist Democracywithinan in American Greenhouse," TakashiInoguchiand Daniel K Okimoto, eds., ThePolitical Economy of

Japan, Vol. II: The Changing International Context(Stanford: Stanford University Press, 1988),

pp. 345-78. 13 GeraldSegal,The Soviet Union the and Pacific (London: Royal Institute International of Affairs, 1990), p. 149.

417

Pacific Affairs pressures,and in what one analystdescribesas "the first overtly political use of economic or traderesourcesbyJapanin the postwarperiod,"114 the canceled $1.4 billion worthof creditsto the Soviet Japanese government the Union. Subsequently, Reagan administration also insistedon a tightening up of Cocom regulations, thereby effectively banning the exportof a number of products thatJapanese tradingcompanies had been shipping to the USSR. Althoughthese actionsdampened the growth ofJapanof Soviettrade,a look at the implementation these sanctionssuggests that therewere countercurrents workas well. As described in a newspaper at account, the Japanese government'spolicy was one wherein "a flexible approach would be adopted where it appears thatthere mightbe an adverse effecton domestic industryshould approval [of a deal] not be granted."15 One instancewhere such "flexibility" in evidence was in was the oil and gas explorationprojectin Sakhalin.Japanese creditwas cut off to new projectsonly.Since the Sakhalin explorationwas an ongoing projThe first of sanctionscreated difficulties the set ect itwas not affected. for of projectnonethelesswhen theyresultedin the nondelivery criticalU.S. had embargoed. After equipment and servicesthatthe U.S. government intercessionby MITI, the Japanese governmentsuccessfully convinced to the Reagan administration liftthe ban on these goods. However,the project was impacted once again in December 1981 when the U.S. imposed sanctionsto protestthe impositionof martiallaw in Poland. The and drillingultimately had Japanese protestedthe action unsuccessfully withSoviet equipment.16 A second illustration pressure to be resumed of to reseparatepoliticsand economics could be seen in the behaviorof the The close scrutiny the U.S. made it inadof Japanese businesscommunity. visable fortheJSEC to convene aJSJCCmeetingscheduled to be held in Tokyoduring1980. The meetingwas therefore postponed at Keidanren's request and it was not until 1984 that theJSJCCreconvened. This, however,did not mean thatbilateralcommercialnegotiationsceased. As the of testimony an ex-JSECofficialmakes clear, a number of alternative to channels were utilized in an effort sustainthe bilateraltrade relationvisitto the Soviet Union - over the savage ship, including a "private"

14

Dimensionsin a MultiJapan," in Rodger Swearingen, ed., Siberia and theSovietFar East: Strategic

with Kataoka,'Japan'sNorthern Threat,"p. 14. Also Kazuo Ogawa, "EconomicRelations

on Geographical Perspectives Development (London and New York: Routledge, 1990), pp. 239-68; Kokuminseili nenkan (1982), pp. 184-85.

California: HooverInstitution Press,1987), pp. 158-78. national Perspective (Stanford, 15 Kokumin seiji nenkan (1982), p. 185. 16 Michael Bradshaw, "Soviet EasternTrade,"in Allan Rodgers, Far Far ed., TheSoviet East: J.

418

Political Economy: Japans Relations with Russia protests MOFA and the anti-Soviet of element in the LDP - by the president of the Japan Chamber of Commerce.17 Japanese exports to the Soviet Union continued to grow during the period of sanctions - by 12.9 percent, 17.3 percent, and 19.7 percent in 1980, 1981, and 1982, respectively. $910 million privatesector-based forestry A developmentrelated compensation deal - the Third KS Far Eastern Forest Development Project- was in factsigned in March 1981. Total bilateraltrade,however, drop after1981 and it is clear from did figure1 thatthe initialcause of thiswas a reductioninJapanese imports, and onlylatera drop inJapanese exports.The primary factordriving this factors trendwas economic ratherthan political- cyclicaland structural were significantly reducing theJapanese demand forSovietrawmaterials during the firsthalf of the 1980s, therebyforcingthe Soviet Union to reduce itsimportsfrom Japan in order to conserveforeignexchange. As in the other advanced industrialized countries,the Second Oil Crisiswas followedbya markedslowdownof theJapanese economy.A major structuraltransformation also under wayin the formof a shift froma high was growth,resource-intensive, heavy industry-basedeconomy to an economy characterizedby moderate growthrates and knowledge-intensive, resource-conserving production.Japan no longer consumed the kindsof near rawmaterialsthatthe SovietUnion had been exportingat anywhere the rapidlyexpanding rate thatit used to. Also, qualityand delivery problems were beginningto sourJapanese importers towardSovietraw mateon rials exports.The interest the part of the tradingcompanies and the heavyindustrial firms assuringaccess to Russian rawmaterialsthathad in earlierdriventhe expansion of bilateraleconomic relationson theJapanese side was no longer as keen as it had once been. Soviet proposals of new developmentprojectsatJSJCCmeetingsand elsewherewere therefore met with Soviet officials Frustrated, Japanese indifference. began to turn increasingly European partners.18Likewise,MITI's bureaucratic to in tradedeclined as a consequence of the interest expandingJapan-Soviet MITI successfulimplementationof its programof supplydiversification. with the began to focus on more pressingissues such as trade frictions United Statesand the integration the East Asian economies. Together, of these developmentsreduced the level of domesticresistanceto the sortof linkage of politicsand economics preferred MOFA and itsallies. by
17 Suzukiand Matsumoto, no. Will, 109 "Sengonihonzaikaino sorenkoshoshi (saishukai)," "Dai 10 kai nissokeizaigodo iinkaio oete,"Keidanren (March 1993), pp. 137-44; KawaiRyoichi, geppo, 34, no. 6 (June1986), pp. 22-27. Anotheralternatechannel was the 'Japan-Soviet vol. intothepolitical dynamics bilateral of economic Roundtable Conference." fascinating For insight a 1980Moscow relations during periodsee thetranscripts speechesgivenduring November this of 1981). meeting thisgroupinJiyu, 23, no. 2 (February of vol. 18 Ogawa, "EconomicRelations with Japan";Gordon B. Smith,"RecentTrendsin JapaneseSoviet vol. 1987), Trade,"Problems Communism, 26 (January-February pp. 56-64; Dienes,"Sovietof JapaneseEconomicRelations."

419

Pacific Affairs
FIGURE 1 JAPAN-SOVIET TRADE, 1956-1992

(thousands dollars) of
- *-. - -- -.--

4,000,000

-- -.
.

.-.

- - - -. --. - r-.

- r - -.--

-.

r - -.-

7 -.-

3,0 , 0
3,500,000 4,000,000

. .

.******.****.******.

11

. . .

3,500,000 ...................

... 2,500,000_

../. . . . .

. . .

I I

2,000,000

1~,00 ,,,,, ., . . . . . . . . . . . .,.

-: --

. . . . .'. ' / ' ' . . . , , , . , . e. , . , ,.A. . . . . . . . . . . , , , ,

1500,0000

_:

t-

t-

a')

a')

.,,,,,,,,,, 1,000,000t-,X ,~~~~~~~~~~~~~

.1

5,00,000

-,--' ---.-'-

-------------

1--------------

lfth eciin

~~~~~ ,0

ppa , ,
Expots

, 0

ih7h xpnedeonmc 00 '/'

mpots romUSS

eatos
fro

00

o USR

, Exot

toUSS USSR''''

Imot

If th delnn apea of exane 1 ''''''''' ecnoi reain wit the '''''' lie it wa the Soviets ' Jaa gav th caact 'eke to efecI'' a fuau Gobahe nd0 potGrbce reor prcs tha mad th poic at-_'_'_' '_'_ trativ.Presroia ad orbche's newthikig" pperedto ignl Soviet iners inimr' n ecnoi reain own,,, wit Jaa forthi sake~,,, tha as aX rahe men to a lage staei en as ha bee th case''' ''' 420
40
*

/,\

_,,,

Political Economy: with Russia Japan'sRelations previously. The Sovietscommunicatedtheirstrongdesire to initiatetechas nological exchanges and hostJapanese investment a wayof furthering on reforms. There were also signs of an apparent willingness the part of the Gorbachev leadership to make concessions on the NorthernTerritoriesissue in order to attainthis.Coming at a timewhenJapanese busiin ness and MITI interest the SovietUnion was at a low point,MOFA was able to seize the opportunity and use this Soviet desire for economic to cooperation as a lever in an effort extractSoviet concessions on the Northern Territoriesissue without making commensurate diplomatic concessions on its part. The basic Japanese stance that emerged at this timewas cogentlyexpressed in the following: One ofthegoalsofSoviet Asianpolicy normalizing is relations as withJapan, nationto provide Soviet the Unionwith Japanis themostappropriate capital and technological know-how desperately needed to improve the economicsituation the Soviet Eastern in Far and otherprovinces. Meanwhile, theSoviet Unionshouldunderstand there a long-term is in that problem the of of with we concessions on way normalization relations Japan; need certain the problemof the Northern Territories. Untilthereis progress the on Northern Territories problem, Soviet the Unioncan not [sic]expectto normalizeitsrelations withJapan.19 The subsequent deteriorationof the economic and political situationin the Soviet Union, and then in Russia, simplyencouraged MOFA and its allies further since it appeared thatwhathad earlierbeen a Soviet interest inJapan's assistancewas takingon the characterof a dire need. The resultwas the complex,nowwell-documented seriesofultimately initiatives and responsesto Sovietinitiatives aimed unsuccessfulJapanese at makingJapanese economic cooperation contingentupon progressin the Northern Territoriesissue. These ranged from outrightinsistence thatthe Soviet Union (Russia) cede controlof the territories before any aid is given (the iriguchiron "entranceapproach") to an incremental or "expanded equilibrium" (kakudai kinko) formula wherein both sides could dividetheirconcessionsinto smaller, incremental packages. In both economic assistance linkedto a quid was versions, however, officialJapanese pro quo on the territorial dispute.20 The ironyof Soviet/Russian-Japanese
19 Heiwa Anzen Hosho Kenkyujo quoted in AlexeiV. Zagorsky, as "Soviet-Japanese Relations The in UnderPerestroika: Territorial Disputeand ItsImpact," TsuneoAkahaand Frank Langdon,
20 See SusanL. Clark, 'Japan'sRole in Gorbachev's Agenda," Pacific Review, 1,no. 3 (1988), vol. LevineFalkenheim, "Moscow and Tokyo:SlowThaw in Northeast pp. 276-89; Peggy Asia,"World PolicyJournal, 8, no. 1 (Winter vol. 1990-91),pp. 159-79;TsuneoAkaha,"The Politics ofJapanesein Soviet/Russian Economic Relations," Akaha and Langdon,Japanin the Post-Hegemonic World;

eds., Japan in thePost-Hegemonic World(Boulder, Colorado: Lynne Rienner, 1993), p. 141.

FutureoftheUS-Japanese Relationsand the Alliance (Santa Monica, Ca.: Harry Gelman, Russo-Japanese

in Rand Corporation, A. 1993); Tsuyoshi Hasegawa,'Japan," RameshThakurand Carlyle Thayer,

eds., ReshapingRegional Relations:Asia-Pacific theFormer and SovietUnion (Boulder, San Francisco and

Oxford: Westview, 1993), pp. 101-23;Zagorsky, "Soviet-Japanese Relations UnderPerestroika."

421

Pacific Affairs
economic relations,however, was thatperestroika the verycatalyst a for - set in motion a chain of developments full-fledged seikeifukabun policy undermined thatpolicy. thatultimately

III. THE COLLAPSEOF SEIIEIFuKABUN

Following the August 1991 coup attempt against Gorbachev, the tremendous international securityand economic implications of the breakup of the Soviet Union2"became evidentto the leaders of the various advanced industrialized countriesof the West and theybegan to acknowledgethe need forsubstantial economic assistance.Not surprisingly, to the first actively champion such assistancewere the EC countries(most affectedas a consequence of notablyGermany) thatwere most directly theirgeographic proximity and close economic ties. The United States but was initially cool towardsuch European initiatives became more forthobvious thatBorisYeltsin's coming as itbecame increasingly politicalposition in Russia was slipping badly.The symbolicculminationof the U.S. change of heartwas the Vancouversummitduringthe springof 1993. resisted Throughout thisperiod theJapanese diplomaticcommunity the entreatiesof its G7 partnersfor a substantial Japanese contribution and tenaciously insistedthatitscontributions would require some kind of Soviet/Russianconcession on the Northern Territoriesdispute. At the 1990 Houston summit,for instance,Japan agreed to provide technical to assistanceonly on the condition thatthe Sovietscommitthemselves a resolutionof the territorial dispute. Modest levels of technical assistance were authorizedduringGorbachev'sApril 1991 visittoJapan in acknowlto edgement of the new Soviet willingness at least discuss the Northern Territories issue. The aborted coup attemptagainstGorbachevin August calls forJapan to join the other G7 countriesin proprompted further was vidingassistance.TheJapanese diplomaticcommunity, however, careful to stipulate that its share of the resultingemergencypackage was "humanitarianaid" rather than "economic cooperation." In October, Japan announced a $2.5 billion package forthe USSR withoutanyapparent link to concessions on the NorthernTerritories issue. This apparent was less of a divergencefromexistingdiploexception to seikei fukabun matic stance than it mightfirst appear. As Harry Gelman and Tsuyoshi Hasegawa detail in their separate studies, the Japanese offerwas announced in the wake of a series of initiatives regardingthe resolutionof of the territorial dispute by representatives the increasinglypowerful Russian federation.22 incidentalso illustrates kindsof diplomatic The the
21 For discussion see the variousessaysin TrevorTaylor, ed., The Collapse of theSovietEmpire: I Managing theRegionalFall-Out,Volume (London: Royal Instituteof International Affairs and Inter-

nationalInstitute GlobalPeace, 1992). for 22 Gelman, Russo-Japanese Relations, 47-49; Hasegawa,'Japan," 105-10. pp. pp.

422

Political Economy: Japan's Relations with Russia crosspressuresthatwere beginning to affect MOFA and the hard-liners' policy of diplomatic-economiclinkage. The $2.5 billion announcement was designed for presentationat an upcoming G7 meeting in Bangkok and intended to placateJapan's advanced industrialized as partners much as to rewardRussia. In themeantime, bilateraltradelevelsrecovered following Gorbachev's installation.Perestroikacreated a strong Soviet demand forJapanese high-techmachineryand equipment as well as, interestingly, consumer in exportswas the apprethe goods such as automobiles.Also driving rise ciationof the yen following the 1985 Plaza Accord. (The Toshiba Scandal of 1987 resultedin a temporary decline inJapanese exportsbutJapanese exportsreturnedto theirpre-scandallevelsin 1988.) On the importside, Japanese purchases of coal, wood and other raw materials increased from1986 onward. Between 1987 and 1990 Japanese importsatsteadily tained record levels. The so-called Heisei Boom was one source of the increased demand for Soviet commodities.Another,it seems, was the Sovietreform process itself. In 1987 industrial ministries and a large number of Sovietenterprises A weregrantedthe rightto deal directly withforeignexporters. wholesale reshuffling trade officials of occurred. (The bulk of Soviet export commoditiesremained under the controlof the foreigntrade bureaucracy.) A further of reformsin April 1989 resulted in an expansion of the set number of Soviet enterprisesallowed to engage in foreign trade and to authorizedsuch organizations obtain hard currency credits.23 Although in far froma complete liberalization,these reformswere instrumental inducing expanded trade since theyeliminated or abated a number of basic trade-suppressive, cumbersome bureaucraticobstacles inherentin the earlier system state trading.By breakingthe trade monopoly and of the lock that specific Japanese companies had on the interpersonaland relationswith the Soviet foreigntrade bureaucracy, interorganizational theyalso expanded the number ofJapanese tradingcompanies activein bilateraltrade.Furthermore, incompletemanner in whichprice conthe trolswere liftedmeant thatthe pricingof Soviet exportswas oftenquite on 3 competitive theworldmarket.Sovietcoal was reportedly percentless expensive than Australiancoal in spite of its 13 percent greatercaloric content.Also fuelingincreasedJapanesepurchasesof Sovietcommodities were economic sanctionsimposed againstSouth Africaand, later,China.24 Even withthe increasedJapanese purchases,however, Sovietsran the a trade deficit, theydid in tradewiththe otheradvanced industrialized as
23

Routledge, 1993). 24 Kokumin seijinenkan (1987), pp. 196-97; ibid. (1990), pp. 162-63; TakashiSato, Toshiaki Business Today, 58, vol. Momose,and DavidWilliams, "TheGorbachev Revolution andJapan," Tokyo no. 3 (March1990), pp. 26-31.

See Alan Smith, Russia and theWorld Economy: Problems Integration of (London and New York:

423

Pacific Affairs countries.During 1990-91, the chronic trade deficitdeterioratedinto a full-fledged balance of paymentscrisis,and a rapidlyincreasingnumber of Sovietfirms behind on payments exporters. earlyas the fallof fell to As 1990, a consortiumoffive Japanese bankswas forcedto providethe Soviet ForeignEconomic Bank witha $400 millionemergency loan to coverpaymentsdue toJapanese creditors.25 May 1991, the Sovietshad rackedup By an estimated$515 million in unpaid bills.Japanese banks suspended all new loans to the country.Likewise,MITI suspended governmenttrade insurance formajor contracts.26 During the fall,in the face of mounting Yeltsinissued a decree requiringRussianfirms remitforcapital flight, to the eign exchange earningsto the government, decreasingfurther ability of Russian importersto repay theirforeigncreditors.Large trade deals became virtually unfeasiblein the absence of some kind of externalofficial financing.At the end of the year outstandingSoviet trade liabilities had to vis-a-visJapan grownfurther $800 million.Not surprisingly, exports to the SovietUnion from Japan and elsewhereplummeted.In the meanwere pushingthe Soviet/Russian time,politicaland economic disruptions economyon a downwardspiralthatwas exacerbated by the lack of access to critical imports. Industrial production, which had begun declining in modestly 1990, declined by8 percentin 1991 and thenbynearly20 percent the following year.With an absolute decline in production,Soviet also plunged, and along withthemthe foreign exports exchange earnings thatmighthave been applied to paymentsto creditors.27 In the face of these developments, Japanese big businesscommuthe nity'scomplacency about bilateral economic relations evaporated. The delinquent commercial paymentsbecame the primarytopic of concern in the variousbusinessforumsdealing withSoviet and Russian relations, includingmeetingsof theJSJCC.Business' desire forsome sortofJapanese governmentintervention rectify situationwas clearlycommuto the nicated to government officials and, although difficult document,was to also undoubtedly the object of strenuous behind-the-scenes lobbying. loans to ease the Soviet/ Among the itemsbeing demanded were official Russian credit crunch,Japanese infrastructural development assistance Russian exportstoJapan, and (in the Far East in particular) to facilitate expanded technical assistanceto expedite the Russian economic reform process.28
25 26

no. 3 (March 1991), pp. 26-29; Yoshida Susumu,"Taiso boeki-toshi genjo to mondaiten," no TsusanJournal, 24, no. 11 (November vol. 1991),pp. 24-27;Yamashita Isamu,Kimura Akio,Ogawa Kazuo and Okamatsu Sozaburo,"Zadankai:Sorenno henkakuto nihonno taisoseisakuno kihon vol. sutansu,"Tsusan Journal, 24, no. 11 (November1991), pp. 9-13; Suzuki and Matsumoto, "Sengonihonzaikaino sorenkoshoshi (saishukai)."

27 Figures from Keidanren Geppo, 41, no. 9 (September vol. 1991),p. 11. 28 TakenakaHayao, "Dai 13 kai nissokeizaigodo kaigino kekkagaiyo" Boeki sangyo, 3, to vol.

Kokumzn Economy, pp. 138-76. seiji nenkan (1991), p. 175; Smith, Russia and theWorld Gelman, Russo-Japanese Relations, 45. p.

424

Political Economy: Japan'sRelations with Russia Whether directlyinduced by the Japanese business communityor a autonomouslyinitiated, closer look at the details ofJapanese assistance packagesrevealsthattheJapanesegovernment make an effort tailor did to its policies to at least partiallyaddress some of these big business concerns. For instance, the Japanese governmentmade the release of the funds associated withthe October 1991 $2.5 billion package contingent Folof upon a Sovietguarantee of repayment any trade debts incurred.29 lowingthe collapse of the Soviet Union in late 1991, MITI froze a large sum of fundsthathad been allocated fortransfer the Soviet Union in to order to cover paymentsowed to Japanese firms,and suspended new creditsuntilthe question of who would be liable forpast Sovietdebtswas sorted out. In July 1992, when the IMF agreed to release a $1 billion trancheto Russia, Japan insistedthatitssharewould have to take theform of tradeinsuranceforJapanesemachinery exports.That same monththe governmentauthorized a $360 million loan to the Russian Bank of Economic Affairs help pay unpaid bills owed to nine Japanese trading to firms.30 The Japanese government neverthelesscontinuously resisted increased contributions variousmultilateral at forums where assistanceto Russia was discussed,leading to complaintsfromthe European countries as well as, of course, Russia - thatJapan was unwillingto contribute itsfairshare. The year 1992 turned out to be a particularly disastrousyear for Japan's Russia policy.The Japanese diplomaticcommunity quicklyrecognized Russia followingthe dissolution,once it was ascertained that it would be the diplomaticsuccessorstateof the old SovietUnion. However, like Gorbachev before him, the initially Russian president forthcoming BorisYeltsinsoon found himself under attackfromnationalist forcesand forced to take a more intransigent stance on the territorial dispute. In the meantime,G7 sentimentin favorof aid to the formerSoviet Union To grewstronger. make matters worse,all of thiswas occurringat a time when the Japanese Foreign Ministry was in the hands of the hawkish Watanabe Michio. Worriedabout being completely"isolated"withinthe announced a paltry G7, theJapanese government $50 millionemergency humanitarianaid package for Russia in January.Later in the month, Foreign MinisterWatanabe, a well-known proponent of the "entrance approach," sufferedthe ignominyof having a scheduled meeting with
29 As theAsahi shinbun (October9, 1991) commented itsreview thepackage'scontent: in "In of of and trading thattheSovietUnion thatJapanese companiesareworried light thefact producers willfallbehindon debtpayments, aim is to expeditetradebyhavingthegovernment the absorb thelossin the eventofa default." 30 Gelman, Russo-Japanese Relations, pp. 49, 61. 31 Yakov Zinberg and Reinhard Drifte, "Chaosin Russiaand theTerritorial DisputewithJapan," in Pacific Review, 6, no. 3 (1993), pp. 278-84; and Leszek Buszynski, vol. "Russia'sPriorities the Pacific," ibid.,pp. 285-90.

425

Pacific Affairs Yeltsincanceled duringa visitto Moscow.Subsequent negotiationson the in territorial issue resulted,if anything, a backtracking both sides. At by the Munich summitin July, aftergeneratingconsiderable ill will on the part of Germany's Chancellor Helmut Kohl and France's Francois of Mitterand opposing expanded economic assistanceand otherforms by Japan support to Russia,Japan concluded a "deal" withthese countries. would withdraw objection to G7 aid in exchange for a clause on the its NorthernTerritories the summitcommunique. However,as Tsuyoshi in Hasegawa comments,"althoughtheJapanese government congratulated itselffor scoring a diplomatic victoryfor having the territorialissue the included in the G-7 PoliticalStatement, Japanese conduct in Munich was actuallyrevealedhow fartheJapanese sense of reality at variancewith canceled "32 the restof the Westernworld. In September, Yeltsinabruptly a visitto Tokyojust four days before his scheduled arrival.Yeltsinsubseto successful quentlyfound the time,however, make a highly tripto Seoul for where he obtained commitments a sizable package of South Korean set credit.In earlyDecember, the Russiangovernment offan alarm in the when itwas learned thatplans were afoot Japanese diplomaticcommunity to turn the Kurilesinto a free enterprisezone and to inviteforeignreal estatedevelopmentinto the NorthernTerritories.33 obvious thatJapan'sRussia policywas, as By late 1992, it was patently 34 one analyst it,"plunging into disaster. In characteristic howput fashion, ever, the direct catalystfor a turnaround in Japanese policy was U.S. action. The newlyinstalledClinton administration began to take the iniin tiative organizingG7 supportas Germany'spost-unification economic woes decreased its abilityto sustaincontributions Russia. In mid-April to affirmed at 1993, shortly afterthe new U.S. commitment symbolically was a Clinton-Yeltsin summitin Vancouver,an unprecedentedlylarge $43.4 billion multilateral package of economic assistancewas announced at a G7 foreignand finance minister'smeeting in Tokyo. The bulk of the fundswere to be channeled throughsuch organizationsas the IMF, the European Bank of Reconstructionand Development, and the World a share. In addiBank, to whichJapan would be contributing substantial tion to these contributions, Japan announced a $1.8 billion package of new bilateralaid.35 Accordingto accounts of internaldevelopmentswithintheJapanese as government, late as the latterpart of March theJapanese diplomatic
Hasegawa,'Japan," 115. p. was real estatedeal witha Hong Kongfirm subsequently canceled after Japanesepresat surewas exerted.Similar pressures weredirected SouthKorea in orderto assurethata fishing on Territories. Zinberg See deal with Russiawouldnotcompromise Japan'sposition theNorthern and Drifte, "Chaosin Russia," 282. p. 34 Hasegawa,'Japan," 116. p. 35 Asahi shinbun, April16, 1993,p. 2.
32

33 The

426

Political Economy: Japans Relations with Russia community expressingitsunwillingness supportan expanded assiswas to tance package thatwas discussed duringthe preparationsforthe upcoming G7 meeting. The first formalsignallingof change occurred in late March when acting LDP secretarygeneral Kato, a close lieutenant of Prime MinisterMiyazawa,stated as followsin a speech beforea trilateral commissionmeetingin Washington:"The stability Russia is extremely of criticalforthe ultimateresolutionof the NorthernTerritories issue. The onlyaction thatJapancan take is to assistRussia in itstransition a marto ket economy and in its democratization."36 other words, In Japanese aid was to create conditionsfor an eventualresolutionof the issue rather the thanserveas a rewardforgood Russianbehavior.The statement quite was significant, it marked the first for public statement a keyJapaneseoffiby cial in which economic assistancewas delinked fromconcessions on the territorial as issue,and aiding Russiawas put forward a desirablepolicyin its own right.Kato's speech had apparentlybeen cleared beforehandby the prime minister and had the blessingof the LDP. This apparent shift in LDP stance was followedbya chorus of similarstatements the same to effect other prominent officials includingMr. Watanabe. by Japanese The need to support the Russian reform process economically now became the officialline in both officialand semiofficial documents.37 it was widelyrecogJapanese governmentprotestations notwithstanding, nized in the press that this marked a de facto abandonment of seikei fukabun.
IV. THE CHANGING POLITICALECONOMYOF SOVIET/RussO-JAPANESE ECONOMICRELATIONS

For all its shortcomings, the economic reformprocess initiatedby Gorbachev in 1986 did resultin a major decentralizationof trade relationsbetween the two countriesand thishad the effect bringingnew, of interests into theJapan-Russia economic potentially politically significant relationsissue arena. Whereas the earliersystem statetradingvirtually of mandated that the bulk of bilateral trade be administeredthroughbig firm-dominated centralized negotiations of the sort conducted by the JSJCC,the reformprocess,which was accelerated following the breakup of the SovietUnion, opened thewayfordirecttransactions betweenfirms fromboth countries.Assistedbya newjoint venturelaw and the opening up of Russian portsin the Far East, duringthe 1990s therewas a dramatic growthof what used to be called border trade, and in particulartrade

36

surunoka," Gaiko Forum, vol. 6, no. 7 (July 1993),pp. 4-10; NakagawaIchiro,"Shinsekaichitsujo kochiku no kadai,"Jiyu e minshu, 484 (July no. 1993),pp. 44-57.

37 See, forinstance, SaitoKunihiko, "Nihonwasnaze Roshiani enjo o

Nihon keizaishinbun, April17, 1993,p. 1.

427

Pacific Affairs involving smallerfirms theJapanese prefectures in closest to Russia.38 To take Hokkaido as an example, in 1992 trade between Hokkaido and Russiagrewbysome 28.6 percentin a yearin whichoverallRussoJapanese trade shrank by 39.9 percent. Hokkaido's share of total bilateral trade grewto 12.6 percentfrom5.9 percent in the preceding year,withabout of Some 2,730 Russian four-fifths thattradeconsisting seafood imports. of ships docked in the prefecture's ports thatyear.Figuresfor the first part of 1993 suggestthat thistrade will probablygrowby another 25 percent per annum. By 1992, an estimated 75 percent of Russian Far Eastern exportswere being directed to Japan. Jointventuresin the Russian Far on East also grew steadily, withthe bulk of such venturesinvolving, the Japanese side, smallbusinessesfromtheJapanSea region.OnJanuary31, of 1991,theJapan-Russia Trade Association(an organization smallerfirms) reached a forestry compensationagreementwiththe Russian republic of the Buryatmodeled after earlierbig business-dominated Siberianforestry agreements.39 The political impact of thisexpansion of small firmtradewas apparent in a numberofways.The concept of a 'Japanese Sea Economic Zone" in linkingthese areas economicallywiththeircounterparts Russia and the has otherneighboringcountries40 been enormously popular in thesepreand during the past threeyearshas helped spawn semigovernfectures, at mentalorganizations the local levelaimed at promotingeconomic relationswiththe Russian Far East in itsname. Among the mostactivein this regard has been the prefecturalgovernmentof Niigata, traditionally Japan's gatewayto the Russian Far East. In March 1991, a Soviet Investment Environment ImprovementCorporationwas establishedin Niigata and citygovernments well as a as Citywithfundingfromthe prefectural The firmsubsequently local bank and fifty-eight interested firms. helped a number of joint ventures get off the ground, including hotels in Khabarovskand Vladivostockand a "Russianvillage"amusementpark in of Niigata.The prefecture Aomorifollowedsuitwithitsown 'Japan-Soviet line of business is the export of used Trading Company"whose primary cars to the Soviet Far East. A number of other prefectures the region in
38 SergeiManezhenev, "The RussianFar East" (RoyalInstitute International of Affairs, 1993). 'The Russian East,"Current Far See alsoJohn Stephan, T. no. History, 576 (October1993),pp. 331-36; Far Ed Paisley and Jeff Lilley, "BearNecessities," Eastern Economic Review, 8, 1993,pp. 40-42; July and Leonid Polishchuk, "Siberia and Russian East:EconomicReform, Far Political and Crisis, New Regionalism"(paper presentedat the Role of the New Russia in the Asia-Pacific Workshop, Institute AsianResearch, of University British of Columbia, November 1993). 13, 39 Asahi "The Russian East,"p. 43; Nihon Far keizaz shinJuly shinbun, 4, 1993,p. 4; Manezhenev, bun, February 1993. 1, 40 Hisao Kanamori, vol. the "Developing Sea ofJapan," EconomicEye, 9, no. 4 (December1988), for Tradeand pp. 24-27; Kazuo Ogawa, 'Japan Sea Rim: Catalyst Growth," Journal Japanese of Industry (May1991), pp. 15-16;TwuJaw-Yann, ComingEra oftheSea ofJapan," "The Japan Echo, vol. 19 (Special Issue 1992), pp. 6-13.

428

Political Economy: Japan'sRelations with Russia have establishedsimilarventures. Ajoint Deliberation Council on JapanRussian Far Eastern Exchange (Nichiro Koryu KyokutoGodo Kyogikai) was formedin April 1992 as an economic and culturalexchange forum representinglocal governmentsand commercial interestsfrom both announced the establishcountries.And in July1993, Niigata prefecture ment of a large-scalethinktank devoted to the studyand promotion of the Sea ofJapan economic zone. The electoraland pork barrelpotential of thisgrowing in interest tradewithRussiawas not lostonJapanese politiwithinthe LDP of a 'Japan Sea Diet cians, as reflectedin the formation of 1991.4' MembersLeague" in the fall As long as the Russianforeignexchange crisiscontinues,the big firms tradewillcontinue to act as thathad earlierdominatedJapanese-Russian a constituency deepened bilateraleconomic relationsin the formof for of Japanese financialassistance.As in the otherG7 countries,the transfer pledged Japanese assistance has been delayed due to the inabilityof Russia to meet the conditionsimposed forthe release of allocated funds. The Russian government, its part, has so far been either unable or on unwillingto establisha repayment arrangementthatwill satisfy Japanese business interests. This has meant that the amount owed by Russia to in thesefirms continued to mount.As ofJune1993, payments arrears has have toJapanesefirms totaled$1.5 billion.42 Beyond this,these same firms a built-ininterestin having theJapanese governmentassistRussia in its economic reformssince their Russian business is unlikely to recover unless Russia can attainpoliticalstability, generate and improvethe qualfor ityof itsexports,and establisha secure institutional environment foreign investment. One further actor in the expanding constituency key favoring deeper of economic relationsirrespective progresson the Northern Japan-Soviet economic relationship Territories MITI. The prospectof a transformed is withits resource-rich neighbor once again captured MITI's imagination in the following initiationofperestroika the late 1980s. Gorbachev'svisitto Japan in the springof 1991 spawned severalMITI-sponsoredmissionsto variousaspects of the Sovieteconomy.This was followedby a widestudy rangingseries of technical exchange programswiththe Soviet Union in the followingissue areas: energy, nuclear safety, production,the conoil version of defense industries,small business, the distributionsystem, productstandardization, productivity, industrial policy,trade,intellectual What appears to propertyand regional development in the Far East.43
41 Nihonkai Ken KeizaiKenkyukai, "Kan nihonkaikeizai"no mikata(Tokyo: Sochisha,1992),pp. 91-92,97-98, 101; Asahishinbun, 24, 1993;ibid., May July 1993. 13,
42

to For reports TsusanJournal see (November 1991); Boeki Sangyo (April1991,October1991); to Boeki sangyo, 33, no. 4 (April1992), pp. 44-47. vol. SugitaSadahiro,"Nihon-CIS keizaikankei,"
43

Asahi shinbun, June 3, 1993.

429

Pacific Affairs have emerged fromMITI's involvement such exchanges is a perspecin reformthatdivergesconsiderably fromthe liberal ecotiveon economic nomics-oriented policies thathave tended to predominatein discussions of the subject in North America and the UK Instead of laissezfaire prethe definitive featureof the MITI viewpoint itsassertionthat is scriptions, stateagencies need to play an activeguiding role in the process of buildIt ing marketinstitutions. is widelybelieved thatJapan's own transition froma wartimecontrolled economy to a marketeconomy and its subsequent rapid growthrepresentan appropriate model for Russia.44 Interthis of estingly, emphasis on the "software" economic institution-building and a prominentrole for the stateis shared by the big business community, is evidenced in a recentround-tablediscussionof corporate execas One further utivesorganized by Keidanren.45 recurringtheme in MITI and other pronouncementsthatis also shared bythe businesscommunity groups is the idea thatJapan should concentrate its resources on the developmentof the Russian Far East. To this end, there is considerable talkoffuture sizableJapaneseassistancein infrastructural developmentin linked to this,an idea implicitly associthe region.Althoughnot formally ated with these proposals is the 'Japan Sea Economic Zone" that is so strongly championed by local governments seeking to expand economic tieswiththe RussianFar East. Lurkingbehind the concept,it seems,is the recentexperience of SoutheastAsia and the South China Sea where ecoin nomic integration precipitated economic reforms Communistcounby tries appears to have dramaticallyreduced cold war tensions and enin hanced international security thatregion.46
V. CONCLUSION

During the second week of October 1993, aftermore than a yearand a half of false starts, two cancellationsand the violentsuppressionof his visitedTokyo. In a press parliamentary opponents, Boris Yeltsinfinally his conferencefollowing summitmeetingwiththe newlyinstalled Japanese prime minister, Hosokawa Morihiro,the Russian presidentappeared to recognize the validityof the 1956 Japan-Sovietcommunique, even though thiswas simply somethingthatwas indicated in a verbal response in to a reporter'squestion and not spelled out directly thejoint commuin of nique. Althoughgivenless attention the press,anotherhighlight the
44 Sakakibara vol. Takashi,"Soren ryutsu keizai misshonhokoku,"Boekitosangyo, 32, no. 4 (April1991), pp. 16-23. 45 Yamashita Isamu,KawadeJiro,Rokkawa Jiro, AikoJiro,and NukazawaKazuo, "Kongono nichiro kankeio tenbosuru,"Keidanren geppo, 41, no. 9 (September vol. 1993),pp. 10-21.See also Yukitsugu Nakagawa,"Reflections Restoring on the FormerSoviet Union: Can the Japanese Experience Help?" IIGP Policy Paper 92E (June1992); and KenichiIto, 'The West's Mad Rushto ThrowAid at Russia," Economic vol. 14, no. 2 (Summer1993), pp. 15-18. Eye, 46 See thefeatured articles thesubjectinJournal on Trade Industry and (May1991). ofJapanese

430

Political Economy: Japans Relations with Russia bilateralsummitwas the adoption of an "economic declaration."In the declaration,the twogovernments describedthe integration Russia into of the global economy as somethingthatwas intrinsically the interest in of all countries of the world.Japan's postwareconomic development was raised as a model for Russia's transitionto a marketeconomy and the Japanese government indicated itsreadinessto shareJapan's expertisein industrialpolicy in order to assist that process. A number of sectors in which economic cooperation would be pursued were listed, including energy,forestry, transportation and communication,the conversion of military plantsto civilianuse, the peacefuluse of outerspace and the environmentally friendly management of the fishery resourcesof the Northwestern Pacific. Economic relations between local regions of the two countrieswas specifically In stressed. a separate agreement, was decided it that newJapanese consular officeswere to be establishedin the coastal cities of Vladivostockand Khabarovskwhile Russia would open a consulate in Niigata.47 the surface,it appeared thatthe "expanding equiOn librium"versionofJapan's seikei since fukabun stance had been affirmed a Russian "concession"had been attained in exchange forJapanese supportforthe Russian economic reform process.The wide scope ofJapan's commitment,however,seems well out of proportion to Yeltsin's quid pro quo. As implied by the preceding discussion,the outcome of the Tokyo summitcan be interpreted yetanother sign ofJapan's decliningability as sustain its linkage of economic assistance and progress on the to NorthernTerritories issue. External pressure,and in particularpressure fromthe United States,has made itvirtually impossibleforthe timebeing forJapan to not expand its commitments. This pressure has been reinforcedby the crisisin commercialrelationsinvolving the country'slarge in and large exporters.More significantly, the longer term, tradingfirms it would appear thatdeepening local level linksbetween the Russian Far East and Japanese communitiesfacing the Sea ofJapan are creatingan interest insideJapan thatwillmake a reversal this of electorally significant trend toward greater economic interactionincreasingly difficult politically. This is being reinforcedfurtherby the assignmentof technical exchange functionsto a central governmentministry thathas traditionally maintained a high degree of independence fromMOFA even as it played a prominent role in the determinationof Japan's foreign economic policies. Concepts like the Sea ofJapan Economic Zone, in turn, are reinforcingthese trends by establishingan internationalrelations rationaleforpromotingbilateraleconomic relations.

47

Asahi shinbun,October14, 1993,p. 4.

431

Pacific Affairs Each of these trendswas initiatedbyGorbachev'sadoption of a more economic policy.Priorto perestroika,Japan's outward-looking Sovietpolicy and the level and content of bilateral economic relations were determined bythe impactof externaleventson the balance of influenceof sepand economicallyoriented domesticgroups. Recent arate diplomatically in developmentsseem to have tipped the balance significantly favorof the latter and are redefiningthe political economy of Japan-Russianeconomic relations.Ultimately, strength these internaltrendswill be the of affected the degree and formatof Russia's - and in particucritically by lar the Russian Far East's - integration into the global economy. UniversityHawaii at Ma-noa, of April1994

rT R A N S

A C

T I 0

N|

journal Of
asian
VOLU.E 1X ....ER.2 SUMM.E.

northeast
t
-3 y,

studes
1990Security

Recent Articles: Decline Governmental of Authority, Political Cynicism, Political and inHong Ineffidency Kong

LauSu-kal

in Asia: CooperationNortheast Problems Studies and

Andrew Mack

V. s

As

* f *
<

of Tumen Political River Economy the Basin Development: Problems Prospects and
Eulkon Kim

08 5 7

After Regional Military Separatism Deng Xiaoping? U.S. Policy Taiwan's and Reintegration the into Glbal Community Taiwan's 1991SecondNational Election Assembly
John F. Copper Dennis Van Vranken Hickey Peter Kien-hong Yu

ILt t

Young

Gaston J. Sigur
EDITORIS

C. Kim and

China's Environment: Trade Investment and Foreign andInternational Organizations

KimberlyAnne Wilhelm

The GastonSigurCenter East for AsianStudies GeorgeWashington University Journal Northeast of Asian Studies publishes analysesofsocial,political, and economic, military developments in post-World 11 War Northeast Asia and ofexternal factors to likely have a significant on impact China, Japan, and Korea.

Published Quarterly Subscription rates: Individuals: $421yr; $802yrs; $114/3yrs Institutions: $15212yrs; $204/3yrs $84/yr; Domestic first-class add$24/yr mail Foreign surface add$24/yr mail airmail $44/yr add Foreign (Rates to subject change annually.) Publishers Transaction JNAS Department Rutgers-The University State New Brunswick, NJ 08903

trti

432