Japan is on the cusp of two big decisions: the extent to which it can expand its defense capabilities and where to find the money to pay for it. The belligerent region Japan inhabits requires more resources devoted to national security, regardless of the ambivalence voters have historically felt toward a more assertive military.
Japanese Prime Minister Fumio Kishida must reconcile competing strategic, electoral and budget priorities. In his favor are important shifts in Japan’s internal politics. Issues related to defense and diplomacy that were no-go zones a generation ago are now freely aired by politicians. Japan’s late former prime minister Shinzo Abe was as much a reflection of the transformation as its driver.
Is the Japanese economy ready for a steep defense bill and how does the nation buttress its armed services with a contracting population? I spoke with Sheila A. Smith, senior fellow for Asia-Pacific studies at the Council on Foreign Relations and the author of several books on Japanese diplomacy and politics. The conversation has been edited for clarity and length.
Daniel Moss (DM): How has Japan’s strategic posture changed in the past two decades? Did Abe instigate that or merely channel it?
Sheila A. Smith (SS): He was always hawkish and wanted Japan to be more self-reliant. There are several pieces that came together during his time in office. One was the rise of China, which is a very significant shift in the balance of power. Japan’s complex relationship with its own past is baked into that, along with differences in the political systems of the two countries. So Japan had to rethink its approach. It also has to contend with a more assertive Russia and North Korea.
Abe is often portrayed as a right-winger. I’m not sure that’s the right way to understand him. He was on the conservative side of interpreting Japan’s post-war experience. He was deeply uncomfortable with the US-written constitution and didn’t think Japan should always have to apologize. From 2012 until he stepped down in 2020, you saw a man who was coming to terms with his aspiration to lead and, critically, a Japan that is confronting a world that is changing. There was an intersection.
DM: To what extent has the ruling Liberal Democratic Party [LDP] changed? Center-right parties globally have become more right wing and nationalist.
SS: The conservative right in many democracies has also become populist and less establishment. That is the difference with the LDP. The party has become more conservative in recent years without embracing the populist bit. You see now, after Abe, a fairly large swathe of people in the LDP who want a stronger military, want to lift defense spending to 2 percent of gross domestic product. They don’t support nuclear weapons, but want to be able to reach out and touch an adversary with conventional weapons as a means of deterrence.
These used to be very right-wing views. Not anymore. You have generational change, a leadership in the LDP that is much more assertive about bringing up what used to be taboo. That reflects a region where everyone is demonstrating military capabilities and inviting questions about whether self-restraint is the best way for Japan to protect itself.
DM: I still meet people who think Japan has no military to speak of and that everything has been outsourced to the US. In substance, how big a player in the defense industry is Japan?
SS: Traditionally, Japan’s leaders hadn’t seen the global defense industry as a place where Japanese companies ought to play. There were restrictions adopted in the 1950s that said Japan shouldn’t sell weapons. Abe opened that up. During the Abe era they were encouraged and urged to participate in the arms market. Could they be significant? We’ll see.
For Japanese industrial companies, defense is only a small part of their operations. But now they are expected to be out and about, showing what they can do. I don’t think executives are fully on board. They feel there’s a lot of reputational risk with their brand being too associated with the military.
More broadly, it’s not true that Japan has delegated everything to the US. Credible estimates of defense spending and investment tend to show Japan, depending on what the yen is doing, consistently in the top 10. Not that different from, say, France or the UK. Japan is around the same as the NATO allies.
DM: The government has begun a comprehensive review of Japan’s defense strategy. Why is that important and what are the likely outcomes?
SS: A new national security strategy document is going to be issued. The first leader to issue one was Shinzo Abe in 2013. So this will be only the second statement by Japan, ever. It’s significant this is all together in one place, not just bombs and bullets. It’s about what Japan needs to do to achieve its interests in the world and how to proceed. In 2013, the language on China was pretty benign compared with what I think we will see in the next one. Russia will be near the top of concerns after the Ukraine invasion. North Korea continues to be a problem, given its missiles and the ability to launch them undetected.
There will also be a Cabinet decision in December on the next 10-year defense plan. This is where we will see how serious Kishida is about defense. Within the 10-year plan will be a five-year plan on how much Japan spends and on what. The other issue that needs to be handled deftly is that of counterstrike capability.
DM: Japan is one of the most indebted economies. How does all this get financed?
SS: I don’t know how they pay for it. Debt servicing is somewhere near 23 percent of Japan’s budget. Social security is about one-third. The budget doesn’t have a lot of latitude. I’m not convinced about 2 percent of GDP, but let’s use that as a reference point. Last year, Japan spent about 1.3 percent of GDP on defense. You get to 2 percent, you are basically doubling it. That’s big.
Kishida may back off a specific number and instead talk about substantial spending over a period of time. We will have to watch his maneuvering. He will have to show that spending goes up in a way that is demonstrable. He promised [US President] Joe Biden. So where does that come from? It is zero sum. It’s not like Japan’s economy is about to really take off.
DM: Article 9 of Japan’s constitution renounces war as a sovereign right and a means to settle disputes. It also says that to accomplish that aim, forces won’t be maintained. Is the constitution misunderstood?
SS: People have this idea that Article 9 means Japan can’t do anything, which isn’t correct. There needs to be some kind of self-defense. How much is necessary? That is the political elasticity and where Abe tried to push the envelope. If we read the parliamentary deliberations in the early 1950s when Japan was creating the self-defense force, they never used the word nuclear, but they do talk about modern weapons, which was code for nuclear. They aren’t banned, if needed for self-defense. That is where interpretation come in.
That aside, there is an acutely sensitive antennae among the Japanese public that pays great attention when weapons systems are discussed. Even in the conventional strike debate, the public reaction is going to be very interesting. You might have some people who say China has missiles, North Korea has missiles and so does Russia, so we need them, too. But there will be a lot of people who say this takes us way beyond where we are ready to go and increases the chances of war. We shouldn’t dismiss the balancing act required here.
DM: Japan has huge demographic challenges. How do you reconcile a shrinking population and limited appetite for immigration with boosting the military?
SS: There is the fiscal burden of an aging population, which gets us back to the tug-and-pull on the budget. Pension reform in the name of higher military spending is a tough sell. So you will see more automation, you will see more emphasis on women serving. You are just now starting to see women take on command positions. There will be more robotics. That is where the opening to the international arms market will happen, the use of Japan’s technological ability to get economies of scale. There will be much more emphasis on battle drones, undersea drones, surveillance and reconnaissance. There are recruitment problems. Big challenges, demographically. That has implications for how quickly Japan can deploy.
Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously, he was executive editor of Bloomberg News for economics. Ruth Pollard is a Bloomberg Opinion editor. Previously, she was South and Southeast Asia government team leader at Bloomberg News and Middle East correspondent for the Sydney Morning Herald.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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