The redefinition of the Japanese foreign policy

For nearly eighty years, the American and Japanese people have enjoyed a friendship like few others, across the vast oceans. We have found ourselves united by bonds of history, commerce, culture, mutual admiration and great respect¹.

On the 7th of February 2025, it is with these words that Donald Trump welcomed Ishiba Shigeru, Prime Minister of Japan, to the Oval Office. Nominated at the head of the Liberal Democratic Party (LDP) a few months prior, Ishiba Shigeru might have seen in the establishment of ties with the new American administration a rather daunting task. Yet, at the end of the diplomatic visit, the Nippo-American friendship seemed unfazed by the change of leadership.

The joint statement released after the meeting proved as much. Despite some ongoing disagreements such as the imposition of tariffs on foreign goods or the rising costs of Japan's defence, the Japanese-American ties remain strong. Reaffirming the American commitment to defend the disputed Senkaku-Diaoyu islands in the South China Sea as well as the pursuit of the strategic “Okinawa Consolidation Plan”, the document designated China as a rising threat, much to the Japanese diplomacy's delight.

Additionally, the statement emphasised the need for a sustained economic cooperation in "critical technologies" (meaning artificial intelligence, quantum computing and leading-edge semiconductors) and collaborative diplomatic efforts to stabilise the Indo-Pacific region. Altogether, the joint statement checked every box of the Free and Open Indo-Pacific (FOIP) strategy² , which has been driving Japan’s foreign policy since 2013. So what more could the Japanese ask for, one might wonder?

Well, to the trained eye, it is clear that Japan’s innate challenges have become much more acute in the past few years. Since 2013, the geopolitical order in Asia has changed dramatically. Russia invaded Ukraine, setting a precedent for states around the world to act on their expansionist ambitions. Similarly, China and North Korea have ramped up their military operations in the region, directly threatening Japan’s security and autonomy.

Within the archipelago, the same structural issues continue to plague Japanese society. Unable to curb the ageing economy, the Ishiba Cabinet struggles to reignite growth after the devastating asset price bubble from the 1990s. Furthermore, the LDP, which has ruled for most of the post-war era - suffers much like other democracies from a legitimacy crisis, resulting in a political standstill.

In the face of these multifaceted challenges and the collapse of the international community, the necessity to reassess and redefine Japan’s foreign policy seems evident. The direction it will take may indeed prove essential in safeguarding Japan’s security, prosperity and stability.

Japan’s security dilemma

As part of the reconstruction and democratisation efforts of the post-war era, Japan embedded pacifism in its new Constitution, weaving it into the very fabric of its society. The famed Article 9 revokes Japan’s right to belligerence, a unique feature only shared by a few other states in the world. As a consequence, military operations in Japan are carried out by the Japanese Self-Defence Forces (SDF), an institution created in the 1950s to enhance Japan’s disaster relief capabilities. Deployed overseas for the first time of Japan’s history in the wake of the Gulf War, the SDF incrementally acquired broader responsibilities, encompassing peacekeeping operations (i.e the Cambodian elections of 1993), humanitarian relief (i.e. cyclone in Mozambique in 2019) and vigilance operations along the Japanese coasts and airspace.

Yet, as threats to the global order arose, the necessity to revise the Constitution became evident. Through successive reinterpretations of article 9, such as the Peace Keeping Operation Law of 1992 and more recently the Peace and Security Legislation of 2015, Japan has sought to amend its conception of constitutional pacifism. Relying heavily on the American defence apparatus, Japan’s defence budget remained unmoving for most of the post-war period, its growth stunted by a fear that a rapid militarization might once again lead to authoritarian rule.

Starting from the Miki administration (1974-1976) onward, an unofficial rule guided the government's budget, stating that no more than one percent of the Gross Domestic Product (GDP) ought to be allocated to defence every year. In Takeo Miki's words, ''for the meantime we make it our goal that 1 percent of the GDP shall be a suitable amount not to allow defence expenditures to exceed each fiscal year³.''

Although that principle has been scrapped off under Shinzo Abe, the ''culture of restraint'' still seems to drive Japan's defence strategy. Fumio Kishida's plan to increase his country's defence spendings to 2 percent of the GDP by 2027 was welcomed with lukewarm enthusiasm within the Diet. Such investments would bring Japan’s defence budget to 55.1 billion dollars, a figure that some analysts perceive as already obsolete given the size of China’s own budget, which is set to reach 245 billion dollars (7,2 percent of its GDP) in 2025. As he follows his predecessors' steps, Shigeru Ishiba might therefore be inclined to further strengthen Japan's militarisation project, especially with the return of Donald Trump in the Oval Office.

Military spendings have been a contentious issue for the new American administration, Donald Trump threatening to pull out of NATO if states do not raise their own spending to an acceptable level.

The reelection of Donald Trump - and the appointment of famously anti-China officials like Marco Rubio as Secretary of State - might provide Japan with a unique opportunity to gain the upper hand in its disputed territories with China in the South China Sea. An increase of Japan’s defence budget would thus bode well for the stability of the American-Japanese relationship. On the other hand, Donald Trump's complacent stance towards the North Korean and Russian regimes might prove a challenge to the American-Japanese military cooperation. The acquisition of counter strike capabilities and advanced technologies will therefore play an essential role in safeguarding Japan's future.

Furthermore, due to its insular nature, the Ishiba administration must make supply chain resilience a key feature of its foreign policy. Imports of hydrocarbons and electronics are essential to Japan's sustenance, and the resurgence of geopolitical tensions across the Indo-Pacific region may disrupt key trade routes for the archipelago. Japan's reliance on China and the United States to fulfill its energy and technology needs represents a persistent issue that upcoming administrations must address to reinforce the country's self-sufficiency in critical areas.

As the tariffs impact the Japanese economy, the diversification of its suppliers will therefore be quintessential, exploring enhanced partnerships with countries such as Malaysia, Australia and Indonesia which possess large quantities of oil and natural gas. In that regard, the establishment of new partnerships will be beneficial to Japan, not only to enhance its security, but also to spurt a long awaited wave of economic growth.

Growth ignition after decades of stagnation

From the post-war era to the end of the 1980s, Japan experienced an unprecedented economic boom. The reconstruction efforts, supported by the United States, ushered Japan in a new epoch of prosperity which brought Japan to the forefront of international trade. Despite being often deemed to be a miracle by economists, the drivers of Japan's explosive growth are well-known.

At the end of the Second World War, the United States and the USSR faced off in an economic, technological and military race. In that context, the Americans saw in Japan a fertile ground to establish another capitalist success story in Asia, a region of growing importance in Truman's containment strategy. The United States' military presence until 1952 was quintessential in the soar of Japan's economy. Temporarily freed from defence preoccupations, the Yoshida administration (1946-1954) fully dedicated all of its efforts to rebuild a country torn by war and militarism.

First, the Japanese government re-envisioned its institutional system. The "keiretsu" (系列) system, characterised by a network of companies sharing resources and know-how to ward off outside competition, replaced the antiquated "zaibatsu" (財閥) conglomerates. Simultaneously, the Bank of Japan engaged in a "window guidance policy", kindly nudging commercial banks into lending money to key sectors such as coal, electric power, ship building and steel production. Through these policies, Japan's production exploded, Japanese goods flooding the American market.

The international monetary system engineered by the United States also favoured Japan, whose yen was set at a lower exchange rate relative to the dollar in 1949. But the Japanese economy grew exponentially, far beyond the American economists’ expectations, upsetting the trade balance with the United States. By the beginning of the 1980s, Japan benefited from a trade surplus, much to Washington's displeasure. In order to safeguard its relationship with the United States, Japan therefore agreed to a revision of the favourable conditions of the Bretton Woods system. In 1985, the New York Plaza Accords marked a significant appreciation of the yen's value.

However, the yen grows at a quicker pace than analysts expected. As Japanese companies splurged on extravagant purchases (i.e., Japan bought the Rockefeller Centre in 1987), the stock market and real estate market became greatly inflated, giving way to a bubble economy. When the stock market crashed in 1991, Japan was forced into a slowdown that it has not yet fully recovered from.

Nowadays, Japan is no longer seen as the blueprint for economic growth. In 2023, the country lost its seat to Germany as the third-largest economy in the world, after decades of slow growth and a weak currency. Nonetheless, Japan has shown evidence of recovery in recent times. The real GDP has been steadily rising while wages have increased for the first time in years⁴. Since the “Abenomics”, the Japanese government has sought to stimulate consumption while tackling structural issues, including the low participation of women in Japan's workforce.

To build on this momentum and reignite a sustainable economic growth, the Ishiba administration will therefore have to modernise the Japanese economic model, stunted by low productivity compared to other large economies, while simultaneously opening new international channels of trade. Japan’s reliance on exports seems to be a hindrance to its economic recovery, especially at times of great geopolitical turmoil. As China pursues its military actions in the South China Sea, Japan will be forced to reassess the scope of its “decoupling” strategy. Similarly, Donald Trump’s tariffs will take a toll on Japan's exports.

Since trade with its two main commercial partners will be greatly impeded in the upcoming months, Japan has begun to explore other opportunities. Ishiba Shigeru’s one-on-one meeting with Keir Starmer on the sidelines of the APEC conference of November 2024⁵ might be a sign of such a trend. The development of the EU-Japan Economic Partnership Agreement, in effect since 2019, may represent another.

All in all, one thing is certain: if Japan genuinely desires to break out of the deflationist cycle it has been stuck in for the past decades, it must, of course, act on the structural issues weighing down its economy, but it should also expand its commercial ties, beyond its American and Chinese partners.

Weaving resilient diplomatic ties

Finally, to accomplish its military and economic objectives, the Ishiba administration may want to follow in its predecessor's footsteps. Under Fumio Kishida (2021-2024), Japan experienced a period of enhanced diplomatic relations, both at the multilateral and bilateral levels. In May 2023, Japan hosted the G7 summit in Hiroshima, proving that despite its eroding position, the country remained at the forefront of key diplomatic issues.

Fumio Kishida was also the first Japanese leader to attend a NATO summit in July 2024, signaling a potential extension of the organisation beyond its geographical boundaries. Last but not least, during his mandate, Kishida made substantial progress in rekindling the Japanese-South Korean relationship after years of neglect under Shinzo Abe. A normalised relationship between the two countries would be highly beneficial to Japan, both from an economic and defensive standpoint.

However, building upon the momentum launched by Kishida and Yoon Suk-yeol might prove difficult. Ever since Yoon Suk-yeol’s impeachment in December 2024, South Korea has been suffering from chronic political instability. His successor, Han duck-soo, was already under an impeachment threat merely two weeks after his inauguration⁶. The strengthening of the bilateral relationship with its neighbor might therefore not be immediately on the South Korean agenda, leaving room for Japan to take a proactive stance on the matter and, for once, be the herald of change.

Memory remains an underlying issue plaguing the reconciliation of the two countries. Contrary to the German government, which acknowledged its war crimes by making it a key feature of its national memory and educational system, the Japanese have been less apologetic about their misdeeds. Shinzo Abe’s multiple visits to the Yasukuni shrine, wherein lie the names of 1,078 culprits of war crimes, did nothing but add fuel to the fire. One might argue that his brazen assertions on thorny topics such as the “comfort women” were at the heart of the rapid deterioration of the relationship between the two Asian states.

To build more resilient bonds with the South Korean government, the Ishiba administration could therefore offer an olive branch, once more officially apologising for the Japanese crimes committed under the colonial era. The Liberal Democratic Party could, for instance, directly address the complaints from former ''comfort women'' who denounced Japan's colonial rule in Korea. The party could also distance itself from ultranationalist lobbies like Nippon Kaigi, which actively campaign for a revision of history textbook, and more broadly a revised narrative and perception around Japan's exactions in Asia. Such actions would serve well in repairing a relationship that may be fundamental for its security and prosperity in South East Asia, strengthening the American-South Korean and Japanese collaboration in the region.

In today's evolving geopolitical and macroeconomic context, Japan must therefore reinvent itself, rethink its alliances and establish new partnerships. Donald Trump's reelection and political turmoil in South Korea have simultaneously been sources of uncertainty and opportunity, which the Ishiba administration could capitalise on to fulfil its foreign policy objectives. Whether it will have the leverage to do so remains in question. Weakened by successive scandals, the Liberal Democratic Party lost 56 seats within the Diet⁷, and again during the July elections, signalling a clear shift in electoral preferences. Meanwhile, opposition parties such as the Democratic Party for the People (DPP) and the Sanseitō garnered solid support from the Japanese electorate, dissatisfied with stagnant political and economic policies.

In order to substantially raise Japan’s defence spendings, the party will thus need to form a coalition with the opposition. It will also have to convince a reluctant population to accept another revision of the pacifist mindset which has guided Japan's foreign policy since the end of the Second World War. Whether the Ishiba Cabinet manages to build upon the growth spurt and his predecessor’s diplomatic efforts will also be the subject of great scrutiny, within and outside of Japan.

Achieving or failing to meet these goals will determine Japan’s status in our ever changing global order, as a world power or a state of crumbling influence.