Chairman Leach, distinguished committee members, it is an honor and a privilege to appear before you today, courtesy of modern telecommunications technology, to discuss Northeast Asia in the wake of the Sept. 11 terrorist attacks. For many Americans, it seems like the world became a different place after those vicious and horrific attacks. While the United States may seem more vulnerable than ever before, it is vital that we recognize that history did not begin anew on that fateful day. In Northeast Asia in particular, old animosities and tensions persist. If anything, the aftermath of Sept. 11 has the potential to sharpen that ill will. The economic impact of the attacks creates new urgency for Japan to get its economic house in order. While there are more distinguished panelists here to comment on that particular problem, I am not optimistic. Even in the best of scenarios, recovery will take several years and will require difficult and courageous choices. I am skeptical of the Japanese government’s ability to do just that.

In the comments that follow, I would like to examine Japan’s reaction to the Sept. 11 attacks, both what it has and hasn’t done, the outstanding issues Tokyo has with regional governments, and the questions they pose for U.S. policy in the region.

Japan’s response to Sept. 11

Japan responded to the terrorist attacks on the World Trade Center and the Pentagon with unprecedented speed. Upon hearing of the strikes, Prime Minister Koizumi Junichiro condemned the attacks, pledged $10 million in aid and said he would stand beside President Bush when the U.S. retaliated. Within a week, the Japanese government had cobbled together a seven-point program to respond to the crisis. It included measures allowing the Self-Defense Forces to provide logistical support to the U.S. military in the event of a retaliatory strike; strengthening security measures at important facilities in Japan; dispatching Japanese ships to gather information; strengthening international cooperation over immigration control; provision of humanitarian and economic aid to affected countries, including emergency assistance to Pakistan and India; assisting refugees fleeing areas that might be hit by U.S. retaliation; and cooperation with other countries to ensure stability in the international economic system. Pursuant to that plan, Japan provided $40 million in emergency assistance to Pakistan, and dispatched envoys to Iran and Pakistan to help build support for the U.S.-led coalition against terrorism.

In addition, the Japanese government announced that it would send warships to collect intelligence in the Indian Ocean and would provide support for U.S. vessels heading for battle stations. The Prime Minister also promised to push enabling legislation through the Japanese Diet that would allow the government to implement that package in its entirety

Nearly two weeks after the attacks, Mr. Koizumi went to the United States to meet President Bush and pay his respects to the victims. Some advisers were concerned about the delay; the Prime Minister was one of the last U.S. allies to visit Washington and offer support to the U.S. Nonetheless, his meeting with President Bush went extremely well. Mr. Koizumi said, “we Japanese firmly stand behind the United States to fight terrorism.” To emphasize the point, he spoke in English. In a statement designed to banish the ghosts of the Gulf War, the Prime Minister was explicit: “It will no longer hold that the Self-Defense Forces should not be sent to danger spots. There is no such thing as a safe place.”

The speed and deftness of Mr. Koizumi’s response were stunning. Adm. Dennis Blair, commander in chief of the Pacific Command, called it “magnificent.” But there were also worries that the Prime Minister would prove unable to deliver on his promises. There is powerful opposition in Japan to high-profile action in support of the U.S.-led coalition, or any moves that might entail a military response. Many in Japan are acutely sensitive to anything that could undermine Article 9 of the Japanese Constitution, the famous “no war” clause. That resistance comes not only from the “official” opposition (those parties outside of the ruling three-party coalition that is made up of the Liberal Democratic Party (LDP), the Conservative Party and New Komei), but also from powerful elements within the coalition itself.

And yet, Mr. Koizumi delivered. The Japanese Diet last month passed legislation that allows the government to do all that it has pledged. Japan watchers, worried about a repeat of Tokyo’s response to the Gulf War, were dumbstruck.

There are several reasons for this unprecedented response. The first is the Gulf War fiasco itself. That memory shaped the reactions of supporters of the alliance in both Tokyo and Washington. Few administrations have had as many well-connected and knowledgeable Japan hands as this one. There are close personal ties between those individuals and Mr. Koizumi’s team in Tokyo. They have worked behind the scenes in both capitals to ensure that there was no missed communications and no confusion. That process was facilitated by the efforts of Japanese governments that have implemented legal and institutional changes since 1991 to ensure that Tokyo is not caught off-guard again.

Then there is the matter of personalities. Mr. Koizumi has shown the right instincts. He is a long-time supporter of the U.S.-Japan alliance. He has established a personal rapport with President Bush and understands the importance not only of being a loyal ally, but also of being seen as a loyal ally. Both the U.S. and Japan are fortunate to have him in office in these trying times.

Mr. Koizumi’s performance is even more remarkable given the disarray and chaos that has descended upon Japan’s Ministry of Foreign Affairs. There is internecine warfare between ministry bureaucrats and Foreign Minister Tanaka Makiko. While the events themselves sound like farce, the result is deadly serious: The Foreign Ministry has been marginalized at a critical time. Given the complexities of Ms. Tanaka’s relationship to the Prime Minister and the signals that would be sent by her dismissal, this situation may continue for some time. It is important that U.S. policymakers recognize the constraints that Japan is operating under when its Foreign Ministry is seemingly paralyzed.

Clouds on the horizon

That said, and I don’t mean to be ungrateful, there are still some serious problems ahead. The first concerns popular support for the coalition. There is public support in Japan for the fight against terrorism. A recent poll shows 66 percent of people surveyed support to some degree U.S. military retaliation for the terrorist attacks. I am not sure how deep that support goes, however, since only 8 percent are in favor of Japanese military cooperation. Japan’s response to Sept. 11 has many roots, but it is often viewed through the prism of the U.S.-Japan relationship. That is, after all, what the Gulf War fears are about. Of course, some people, Mr. Koizumi among them, understand that terrorism is a threat to Japan’s national interests. Many others, however, worry that ties to the U.S. are a potentially “entangling alliance.” There is a danger that Japanese support for the U.S. campaign could evaporate if Japan itself becomes a target.

That provides the context for some of Mr. Koizumi’s comments after Sept. 11. While showing his support for the U.S., he was careful to insure that there would be no misunderstanding about what Japan would do for its ally. Mr. Koizumi made it clear that Japan would be bound by its constitutional limits. According to the Prime Minister, “we are making preparations for a new law that will enable Japan to make all possible contributions on the condition that they do not require the use of force.”

In this situation, it is extremely important that the U.S. not be seen as “pushing” Japan to move too far, too fast on the defense front. There is no consensus for bold steps toward what the Japanese call “normalcy.” Here too, the administration deserves credit: It has repeated at every opportunity that, U.S. preferences notwithstanding, the administration will support whatever the Japanese people decide.

The second area of concern is in economic policy. Since other panelists are far more capable of commenting than I on this topic, I will be brief.

The U.S. economy was slowing even before the Sept. 11 attacks. The strike at the heart of the U.S. financial industry and the blow to the nation’s confidence, as well as that of consumers, will magnify recessionary pressures. The world needs Japanese growth now more than ever. I take heart from the comments of LDP Secretary General Yamasaki Taku, who has noted that revitalizing the economy is as important as the terrorism bill in terms of global welfare in the wake of the Sept. 11 attacks. “Japan's role in preventing a global economic slide is as important as dispatching the SDF overseas,” he has said. The Japanese government has promised to ensure stability: immediately after the attack, the Bank of Japan, the United States Federal Reserve and the European Central Bank pumped extra liquidity into markets and worked together to ensure financial stability and security. That is not going to be enough.

The world economy needs a boost – it needs Japan to regain its footing and to become an engine of growth. There is little likelihood of that in the near future. The Bank of Japan has revised its forecast for 2001 from 0.8 percent growth to negative 1 percent. It also expects negative growth next year. Worse, it expects deflation of about 0.8 percent over those two years. In September, industrial production registered the largest decline in 26 years and has declined for three consecutive quarters. Unemployment hit a record high 5.3 percent with 3.57 million people officially unemployed. However, Japan's Ministry of Public Management has conceded that the real unemployment rate may be as high as 10.4 percent, or more than twice the official figure.

At this point, the outlook for Mr. Koizumi is grim. The Prime Minister had promised to end the government's reliance on massive public works spending to try to stimulate the economy, which coincidentally provides money for his party’s traditional constituencies. One of his few concrete electoral pledges was a cap on government spending at 30 trillion yen. The terrorist attacks make such restraint look unlikely as the call for stimulation comes from virtually every quarter.

Moreover, reform as envisioned by the prime minister -- or at least as many think it would be envisioned -- would necessitate restructuring, including the closure of unprofitable businesses and inefficient public sector organizations. In other words, there would be significantly more unemployment. That is unlikely after Sept. 11.

There is rising concern about Japan's unwillingness to tackle its bad debt problem, which threatens to overwhelm its banking sectors. The administration is rightfully concerned that vulnerability in Japan's financial system could become a global weakness as well. But I worry that complaints about Japanese inaction will be seen as ingratitude on the part of the U.S. “after all that Japan has done on behalf of the coalition.” When U.S. Trade Representative Robert Zoellick voiced his mounting frustrations three weeks ago and blasted Japanese policy in the lead up to the Doha trade talks that was one of the main responses. The U.S. needs to be concerned about this kind of perceived tradeoff between security and economic policy. It is certainly part of the Japanese domestic political calculus.

Politics in Japan

While Japanese politics can be esoteric – or numbing – it is important to understand Mr. Koizumi’s position. He is a weak Prime Minister; all Japanese Prime ministers are. But he is perhaps weaker than usual because he has relied on public support to claim the top rung. That is virtually unheard of in Japan.

The Prime Minister presents himself as a reformer, and revels in his image as a rebel, but it is unclear what he really believes in. He has spoken passionately about dismantling the postal savings system and has supported limits on government spending (which would end the pork barrel politics that has been the foundation of LDP rule), but the details of his reform agenda have been hard to find. Part of that is politics: The Prime Minister has not gotten specific to avoid antagonizing supporters who might be adversely affected by his plans. Others question whether Mr. Koizumi really believes in much; he is said to be guided by instinct and has little inclination for the nitty gritty and the down and dirty of Japanese politics.

But real “reform” means fighting the vested interests that have been the mainstays of LDP support. In other words, the LDP has been riding the coattails of the man who is committed to undermining its existence. The LDP old guard is well aware of this irony, and has muted its criticism to exploit Mr. Koizumi's popular appeal. They are now showing their gratitude by opposing his agenda; having used the prime minister to their advantage in last July’s Upper House elections, they have dispensed with the niceties and are getting down to business.

The bottom line is that Mr. Koizumi is now going to be tested because the real opposition to his program is emerging -- and that opposition comes from within his own party. Mr. Koizumi will have to genuinely believe in reform and be willing to fight for it if he is to prevail.

The Prime Minister's determination is necessary, but it is not sufficient to change Japan. To do that, the Japanese people have to support real reform. After a decade of stagnation and scandals, and a year of hapless Prime Minister Mori Yoshiro, the Japanese public says it wants change.

The readiness to actually stomach the pain that change will bring is another matter, however. Survey data from the Dentsu Institute for Human Studies has shown increasing ambivalence about market-oriented reforms in Japan in the latter half of the '90s as calls for change have been matched by rising levels of unemployment. Recent polls show similar doubts about the wisdom of reform. In short, the Prime Minister's stratospheric support levels notwithstanding, public support for a hard-hitting plan is open to question.

Complicating the picture is the likelihood of a realignment of domestic politics in the future. Just as parts of Mr. Koizumi's reform agenda alienate members of his own party, they appeal to members of the opposition -- the Liberal Party and the Democratic Party of Japan. Many of these politicians were members of the LDP and are eager to return to power; their reformist inclinations could overcome whatever animosity still lingers as a result of their leaving the party in the first place. The Democratic Party is especially vulnerable to a split, since it retains ties to the labor unions (half of its winners in the last election in July were union representatives), which are likely to bear the brunt of reform. The behind-the-scenes maneuvers to line up support will intensify as the stakes grow.

The many uncertainties and the one real certainty (spirited opposition from the LDP old guard) guarantee that the reform process will be slow. The Prime Minister and his team are talking about two- to three-year time horizons.

In other words, patience is going to be more than a virtue -- it will be a necessity. Hopefully, Japan's long-suffering citizens are ready for the wait. The U.S. must be patient too. There will be no quick fixes and Washington must be prepared for glacial progress on economic issues, or any other contentious items on the bilateral agenda. The opposition (both within his party and outside) will use every issue they can to beat the Prime Minister and the constellation of security concerns, including constitutional reform, is a big stick. The stakes are high, which means the fighting should be vicious. The U.S. should be ready to support its ally no matter what it chooses to do, but Washington cannot allow itself to be drawn into the fray.

Korea problems

One important aspect of 9-11 is the way that it has shifted the diplomatic momentum in Northeast Asia: Mr. Koizumi has been the chief beneficiary of the new dynamic in the region. The calls for action on behalf of its American ally have given Japan and the Koizumi government the cover they need to make controversial decisions on security policies. To his credit, the Prime Minister has responded well: his desire to act as a good ally to the United States has been matched by unprecedented diplomatic efforts to allay the concerns of Japan's neighbors.

Japan's relations with its two most important neighbors, China and South Korea, have been troubled since the spring. There were many sources of friction: a controversy over middle-school history textbooks, trade disputes, fishing disputes, and the prime minister's trip to the Yasukuni Shrine in August. The difficulties virtually paralyzed diplomatic relations between Tokyo and Beijing, while relations between Seoul and Tokyo seem to be unraveling. Both governments had rebuffed the Prime Minister's attempts to meet and explain his positions. The situation had reached the point where Mr. Koizumi was even prepared to skip the annual opening session of the United Nations General Assembly, preferring instead to go to Southeast Asia where he would have received a warmer welcome.

All that changed on Sept. 11. Complaints and objections by Japan's neighbors became less important in the face of demands from its key ally. Equally important, neither China nor South Korea wanted to be seen as blocking U.S. efforts to build a coalition against terrorism. That simple fact overcame resistance in both Seoul and Beijing to Tokyo's overtures to resume more normal relations.

Of course, each country has its own concerns. In Beijing, the chief focus was the Asia Pacific Economic Cooperation Leaders' Meeting that was held in Shanghai last month. China wanted the meeting to go well and tense relations between Tokyo and Beijing would have undermined its success. “Necessity” gave the Chinese leadership the excuse it needed to break the diplomatic logjam with Japan. And it got some valuable items in return when Mr. Koizumi visited the Marco Polo Bridge, a site that is rich in symbolism, and he issued apologies for Japanese wartime behavior that were unlikely in other circumstances.

South Korean concerns were more difficult to assuage, as was made abundantly clear by the protests that greeted the Prime Minister during his one-day visit to Seoul last month. There too Mr. Koizumi visited sites that commemorated Japan's occupation and he made a “heartfelt apology” and expressed remorse for the “pain and damage Korean people suffered during Japan's colonial occupation.” Korean President Kim Dae-jung welcomed the apology, but asked the Prime Minister to match his words with deeds. On the sensitive issue of Japan's efforts to assist the U.S. coalition against terrorism, President Kim asked Mr. Koizumi to make sure the activities would remain within the boundaries of the Japanese Peace Constitution. Indeed, by agreeing to meet with the Prime Minister and resume relations, Mr. Kim ensures that his country has some influence in Japan's national debate.

It is difficult to appreciate the anger and hurt that Koreans feel toward Japan. Not only is there pain over the Japanese occupation of Korea, but there is a more recent betrayal as well. President Kim made a courageous offer to then Prime Minister Obuchi Keizo in 1998 when the two men signed a historic agreement to put the past behind them. The controversies over middle school textbooks and the Prime Minister’s visit to Yasukuni Shrine have raised basic questions about Japan’s commitment to that agreement.

This antagonism is a critical feature of Northeast Asian diplomacy. Korean mistrust of Japan has intensified. Moreover, Koreans are asking the U.S. to get involved. They see the U.S. as encouraging Japanese efforts to assume a larger role in regional security affairs. As a result, they want us to nudge Japan “to do the right thing.”

Mr. Koizumi has made the right gestures. His visits and his speeches have been unprecedented. But words will no longer suffice. He must translate them into deeds if there is to be any real progress in relations between the two countries – and progress is essential.

Troubles ahead?

The Korean Peninsula is in transition. The process will take years, probably decades, but unification of the two Koreas is inevitable. When that occurs, there will be a fundamental rethinking of Northeast Asian security arrangements, and the U.S. presence will be a basic element of the debate. The United States, Japan and South Korea are natural allies, with shared values, a half century of cooperation, and similar social, political and economic systems. Tensions between Tokyo and Seoul threaten to undermine any long-term security agreement for the region. A unified Korea that leans toward China would be a shock to Japan.

Japan has made little progress in attempts to normalize relations with Russia. They continue to be held up by the dispute over Northern Territories, islands seized by Russia after World War II. Tokyo thought it had struck a deal with former President Boris Yeltsin that would have resolved the problem by 2000. Unfortunately, President Vladimir Putin has shown no willingness to follow up on those negotiations and has backed off from any reputed deal. Japan’s insistence on putting the Northern Territories dispute at the heart of relations with Russia ensures that there will be no substantive progress in the relationship. It also guarantees that there will be disputes with other nations, such as occurred Russia granted fishing rights around the islands to Korean fishing boats, and Japan protested.

And then there is China. I believe that relations between the two countries will become more contentious in the years ahead. I do not anticipate military tensions, although Japanese defense planners have become more blunt about the potential threat posed by China. Rather, China’s rise goes to the heart of Japanese national identity. Japan has prided itself as the leading Asian nation, and has offered itself as a bridge between East and West, a sometimes spokesperson for Asian interests at gatherings such as the G-8. It has led the way in economic development; its model has been copied throughout the region.

China’s return to the world stage threatens to eclipse Japan. It dwarfs the country in sheer size and population and its nuclear arsenal distinguishes its military capabilities. China has a permanent seat on the United Nations Security Council, a position to which Japan aspires. And Japan’s own Ministry of Economics, Trade and Industry acknowledged in a white paper issued earlier this year that “the flying geese model” of industrial development, that posited Japan as the leading goose, was no longer applicable. In every sense China is a country of growth and possibilities; Japan’s most recent legacy is “the lost decade.” (I realize this is an overly rosy picture of China’s future, but the general point is valid.)

In brief, Japan seems “stuck” while other countries in Northeast are moving forward in their relationships. Each of the regional governments is developing new political and economic ties, and that dynamic creates momentum of its own. Japan, it seems, is left out. I am concerned about the long-term consequences of this situation and worry about the response it could create in Japan.

Challenges for the U.S.

Japan faces real tests in the future. The magnitude of the challenges will strain the country’s decision-makers and its ally and friends. The U.S. has to understand the pressures that the Tokyo government is under – no matter who is in charge – and help deal with them. On the economic front, that means prodding the Japanese to reform, but without the hectoring that has so frequently characterized bilateral dialogue. On the security front, it means accepting the limits imposed by the Japanese Constitution and resisting the impulse to push Tokyo farther than the Japanese people are willing to go. We have performed well so far, but pressures will mount in the future.

It will be critically important to push for a coordinated dialogue with Japan and its neighbors. A U.S.-Japan-China trilateral dialogue can help ease China's concerns about Japan's role in the region and the mission of the U.S.-Japan alliance. Intelligence sharing and coordination of anti-terrorism efforts could provide a foundation for more cooperation in the future.

A similar sort of effort is already underway with South Korea in the Trilateral Coordination and Oversight Group (TICOG) that deals with policy toward North Korea. But the agenda with South Korea must be wider since Japan’s relations with Korea should be more intimate than those Tokyo has with China. The depth of Korean anger toward Japan that has been demonstrated in recent months reveals that building better relations between the two countries must be broad based and include as wide a cross-section of the two societies as possible. One positive element is the decision to have the two countries co-host the 2002 soccer World Cup. That will force the two countries to work together and force a degree of interaction that should help take some of the wrinkles out of relationship.

The U.S. has to encourage the two governments to work together to overcome the past. Ultimately, despite our desire to stay out of this dispute, the U.S. is involved: Both countries are allies and we them to have good relations if we are to realize our own policy objectives in the region.

An essential element in this process is track two dialogue. My organization, Pacific Forum CSIS, is a key player in the track two process in East Asia. These meetings have played an important role in facilitating dialogue among various countries of the region and helping move ideas from the formative stage to the official level.

The goal is assuaging fears of Japanese intentions among its neighbors and proving that talk of peace is not cover for more calculated strategies. At the same time, we must assure the Japanese of U.S. support as it goes through a period of wrenching adjustment. As always, patience will be critical. As will perseverance. It promises to be a frustrating process.

Mr. Chairman, members of the committee, thanks you for giving me the opportunity to address these critical questions and for taking the time to hear my thoughts. I would be happy to address any questions you might have on these or any other issues.