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Japan Refuses To Join China's Investment Bank

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The Asian Infrastructure Investment Bank that China is leading will launch with 57 founding members, but Japan isn't among them. Its dependency on the U.S. is a symptom of its outdated thinking, and will leave it badly isolated.

image_556160140.jpg

Shinzo Abe(Tomohiro Ohsumi-Pool/Jana Press/ZUMA)

by Daisuke Kondo
ECONOMIC OBSERVER/Worldcrunch

BEIJING — Despite a pointed meeting earlier this month between Japan Finance Minister Taro Aso and his Chinese counterpart Lou Jiwei, it appears Japan won't be among the 57 founding members of the Asian Infrastructure Investment Bank (AIIB) that China is establishing at the end of the year,.

The bank, initiated by Chinese President Xi Jinping to compete with Western-dominated financial institutions such as the International Monetary Fund, will include 37 Asian states led by India and another 20 from other parts of the world.

So why is Japan passing on this opportunity?

Fundamentally, it is because Japanese Prime Minister Shinzo Abe and his government are mired in 20th-century thinking. In the latter half of the last century, the Japanese economy was regarded as Asia's leader. Closely following Japan were the "four little Asian dragons" – Taiwan, South Korea, Hong Kong, and Singapore — followed by the ASEAN countries. Bringing up the rear was the world's largest developing country, China.

In the minds of most Japanese, this 20th century model still applies. Since Abe assumed office at the end of 2012, he has been striving under the banner of Abenomics to achieve "Japan's return to prosperity."

Meanwhile, the Chinese economy has made great progress over the last three decades. Since Xi took office, Asia's leading economy is China, followed by Japan and then India, which will soon have an even larger population than China. In fact, China has overtaken Japan in numerous ways. It surpassed Japan in 2010 to become the world's second-biggest economy behind the United States. China's GDP is more than twice Japan's. And as the only permanent member of the UN Security Council from Asia, China is involved in various Asian geopolitical issues, such as North Korea andIran.

That China initiated the AIIB's creation seems to indicate that the legacy machine of the Asian Development Bank, created in 1966 and centered on America and Japan, is no longer relevant to China. Under its charter, the AIIB will be located in Beijing and will have a Chinese president. China is realizing its One Belt, One Road project through the establishment of this bank.

As such, Abe is left with but two options. Either Japan joins the AIIB to collaborate with China and accept its Asian leadership position, or it refuses to join it, meaning that it confronts China and denies its economic dominance.

Abe has obviously chosen the second option, an isolationist approach that will probably turn Japan into Asia's lonely old man. It's all because ofJapan's dependence on the United States, where Abe visited in late April, once again confirming the unshakable Japan-U.S. alliance. He's convinced that as long as Japan sticks with the great Western power, it will have no worries. So if the U.S. isn't joining the AIIB, then Japan won't either.

A would-be alliance

"China has always attempted to expand its rights within the IMF and the World Bank without success due to America's opposition," says former Japanese ambassador to the UN, Makoto Taniguchi. "But so has Japan, which makes a large UN contribution just after that of America, and which can't become a permanent member of UN Security Council. In brief, both Japan and China have been striving to counter the West for this unjust treatment. But the real reason why Japan hesitates to join the AIIB is that since its creation, the presidency of the Asian Development Bank (ADB) has been held by the Japanese for nine consecutive terms."

Taniguchi says times have changed, that it's unreasonable for Japan to continue to dominate the ADB. Likewise, China shouldn't dominate the AIIB, he says. "As long as Japan and China work together to assure its success, this is an excellent chance for improving Sino-Japan relations."

I have always been skeptical of the Japanese idea, born during the Cold War era, that "as long as we hang on to the Americans, whatever happens it will be fine."

The Washington Post published an April piece by former U.S. Treasury Secretary Lawrence Summers. Entitled, "A global wake-up call for the U.S," Summers noted that the United Kingdom, Germany, France and Italy had one after the other showed their willingness to join the AIIB.

"This past month may be remembered as the moment the United States lost its role as the underwriter of the global economic system," he wrote. "No event since Bretton Woods is comparable to the combination of China's effort to establish a major new institution, and the failure of the United States to persuade dozens of its traditional allies, starting with Britain, to stay out."

Former Japanese Finance Minister Eisuke Sakakibara, a one-time Summers ally, said in April that it would be a mistake to underestimate Sino-U.S. relations. "The two countries have a deep connection beyond what Japan imagines," he said. "With reference to the AIIB, it's possible America will just bypass Japan to reach a deal with China. To avoid Japan being left as the only country refusing to join, it should closely communicate with the U.S."

This is entirely possible, and the 1971 Nixon crisis serves as an historical warning. Without first notifying Japan, President Nixon announced in a May 1971 statement that he would visit China, their common enemy. The decision created chaos within the Japanese government.

Forty-four years on, Japan hasn't changed. It's stillgrasping at that straw – America. Yet Sino-U.S. economic dialogue is to be held in June, and President Xi will visit the U.S. in September. And remember, U.S. Treasury Secretary Jack Lew visited China at the end of March.

In Asia, this century's trend is to bind oneself militarily with United States and economically with China. Japan's trade is about 20% dependent on China, which is Japan's largest trading partner.

At first glance, the AIIB issue seems just a question of whether to join a new bank. But in reality, it's the fork in the road for Japan's future, not that Abe and Aso recognize it as such. But it's not too late.

*Daisuke Kondo is a Japanese expert on China. He has worked and lived in Beijing and is the Deputy Chief Editor of Shukan Gendai, a Japanese general-interest weekly.

All rights reserved © Worldcrunch - in partnership with ECONOMIC OBSERVER
Photo by Tomohiro Ohsumi-Pool/Jana Press/ZUMA
Crunched by: Laura Lin

Worldcrunch
 
Poor bastards. Think about it, the average Japanese person and politician know damn well China is the future, or at least East Asian integration. Japanese businesses are top notch in infrastructure building and equipment making. I'm sure they've lobbied like crazy to get Japan to join. Abe probably WANTS to join. But no, the US didn't allow them. Make no mistake, Japan is occupied against it's will. Hurting their own economy. I hope they join later on. They want to.
 
Poor bastards. Think about it, the average Japanese person and politician know damn well China is the future, or at least East Asian integration. Japanese businesses are top notch in infrastructure building and equipment making. I'm sure they've lobbied like crazy to get Japan to join. Abe probably WANTS to join. But no, the US didn't allow them. Make no mistake, Japan is occupied against it's will. Hurting their own economy. I hope they join later on. They want to.

A lot of Japanese businessmen are down to earth pragmatic, even the Japanese author of the OP Daisuke Kondo see Abe's policy as outdated like "... his government are mired in 20th-century thinking ..."

Except an intentionally modest scale of military force, Japan is an all-rounded superpower, her moves will influence global geopolitics and geo-economics. Wish Japan can pursue a path that minimize unnecessary confrontations, and more business friendly.
 
A lot of Japanese businessmen are down to earth pragmatic, even the Japanese author of the OP Daisuke Kondo see Abe's policy as outdated like "... his government are mired in 20th-century thinking ..."

Except an intentionally modest scale of military force, Japan is an all-rounded superpower, her moves will influence global geopolitics and geo-economics. Wish Japan can pursue a path that minimize unnecessary confrontations, and more business friendly.

No.
 
A lot of Japanese businessmen are down to earth pragmatic, even the Japanese author of the OP Daisuke Kondo see Abe's policy as outdated like "... his government are mired in 20th-century thinking ..."

Except an intentionally modest scale of military force, Japan is an all-rounded superpower, her moves will influence global geopolitics and geo-economics. Wish Japan can pursue a path that minimize unnecessary confrontations, and more business friendly.


The reason for our hesitation is purely political. There are some behind the scenes politicization definitely.

I personally wish Japan to join the AIIB. But we'll see. I think in time we will see a policy change.
 
A lot of Japanese businessmen are down to earth pragmatic, even the Japanese author of the OP Daisuke Kondo see Abe's policy as outdated like "... his government are mired in 20th-century thinking ..."

Except an intentionally modest scale of military force, Japan is an all-rounded superpower, her moves will influence global geopolitics and geo-economics. Wish Japan can pursue a path that minimize unnecessary confrontations, and more business friendly.

I think it's even the highest levels of government: they know China isn't to be 'contained' or 'confronted'. The Japanese have a sense of history, they're not ignorant (even though history has been quite rocky). It's the US who is FORCING them to try to confront you. And perhaps they're a bit fearful of a nation 10 times the size of Japan. But even they know that Eastern Asian integration is a key part of further progress and might. Heck, Japan can be a lot stronger if they're an ally of China (like going on economical/trade adventures in Africa and Latin America) instead of trying to contain a giant that is already uncontainable.
 
Don't put Japan in a high position.
Nobody invite Japan to join the AIIB and Japan is not an independent country.It just follow its American Papa .
How can Japan refuse? Refuse whom?
 
A lot of Japanese businessmen are down to earth pragmatic, even the Japanese author of the OP Daisuke Kondo see Abe's policy as outdated like "... his government are mired in 20th-century thinking ..."

Except an intentionally modest scale of military force, Japan is an all-rounded superpower, her moves will influence global geopolitics and geo-economics. Wish Japan can pursue a path that minimize unnecessary confrontations, and more business friendly.

Agree

I think the reasons are mainly political. Japan led AIB has been the only financial leader in infrastructure aid/funding dominance in Asia. So obviously, they will be more cautious about joining a new competitor . I said it here even before the AIIB was finalised that japan will be the last cpuntry to join if it ever at all. Lol. Its normal though since every established power will always be wary of a new kid in the block who can steal its thunder. It was the same between my country and rising germany, u.s and soviet union etc etc. So doesnt matter which country it is, established powers will always try and undermine the upcoming one if thet can.In fact, even if china was in japans shoes it too will do the same.:p: No crime in that though. Just realpolitik:cheers::chilli:
 
Poor bastards. Think about it, the average Japanese person and politician know damn well China is the future, or at least East Asian integration. Japanese businesses are top notch in infrastructure building and equipment making. I'm sure they've lobbied like crazy to get Japan to join. Abe probably WANTS to join. But no, the US didn't allow them. Make no mistake, Japan is occupied against it's will. Hurting their own economy. I hope they join later on. They want to.

Agree on the part of japan being occupied, but make no mistake, many if not most japanese in fact have no wish to join, they are not as down to earth with their pride and prejudice defining their thoughts. On the other hand compared with others Japan is a master in turning pain and humiliation into pleasure, apparantly including foreign occupations as well.
 
Why didn't Japan join? Well Japan already leads the ADB (Asian Development Bank) which has a capacity of $350 Billion.

:)

Japan is the largest creditor nation on the earth. China , for example, has borrowed billions upon billions from the ADB. Much of their infrastructure was financed by the very instituiton. lol.

Oh short term minds.

:lol:
 
Agree

I think the reasons are mainly political. Japan led AIB has been the only financial leader in infrastructure aid/funding dominance in Asia. So obviously, they will be more cautious about joining a new competitor . I said it here even before the AIIB was finalised that japan will be the last cpuntry to join if it ever at all. Lol. Its normal though since every established power will always be wary of a new kid in the block who can steal its thunder. It was the same between my country and rising germany, u.s and soviet union etc etc. So doesnt matter which country it is, established powers will always try and undermine the upcoming one if thet can.In fact, even if china was in japans shoes it too will do the same.:p: No crime in that though. Just realpolitik:cheers::chilli:

Funny thing is Japan not joinongntge bank gives Chiba more power,a massive mistake on part of the Japanese
 
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