By Laura Southgate for Global Risk Insights
Sino-Japanese relations have gotten worse in recent years. A number of events have exacerbated this downward trend. First, territorial disputes in the East China Sea have caused a sharp increase in tensions. China and Japan have contending sovereignty claims over a small group of uninhabited maritime islands, called the Senkaku in Japan and Diaoyu in China.
As China’s military power has grown, Japan has increasingly sought to enhance its security in the region. The Abe administration’s military revivalism is a key component in Japan’s efforts to contain China.
China has responded with attempts to draw international attention to Japan’s militarism and perceived historical revisionism. In addition to these security concerns, Japan also views China as an economic threat. China overtook Japan as the world’s second largest economic power in 2010, and remains the Association of Southeast Asian Nations’ (ASEAN) dominant trading partner. Both states are locked in a competition for regional influence.
Enhanced regional defence ties
Faced with what it perceives to be an increasingly aggressive China, Japan has moved to enhance regional defence ties. This has been welcomed by certain Southeast Asian states, which are currently engaged in their own territorial disputes with China.
Brunei, Malaysia, the Philippines, and Vietnam all have competing sovereignty claims with China relating to maritime islands in the South China Sea. In an effort to curb Chinese expansion, Japan is working with these states to enhance defence cooperation.
Leaders from Vietnam and Japan signed an extensive strategic partnership in 2014 to expand maritime security relations. In March 2015, Japan and Indonesia signed a defence cooperation pact that involves Japanese capacity-building assistance for Indonesian forces. The two also agreed to launch a “Japan-Indonesia maritime forum” to look into maritime security.
In May 2015, Japan and Malaysia agreed to bolster defence ties. Japan’s Prime Minister Shinzo Abe confirmed that he had agreed with Malaysia’s Najib Razak “to raise our bilateral ties to [that of] strategic partnership…as a concrete step, we’ve agreed to cooperate in defence equipment,” and to “cooperate for maritime safety.”
Philippine President Benigno Aquino travelled to Japan in June 2015, with the intention of pursuing a weapons trade deal and closer military ties. A strategic partnership deal will see Japan provide the Philippines with military hardware and technology to help with coastal defence in the South China Sea.
Boosting bilateral investment and trade
The combined GDP of the ASEAN countries was calculated at $2.4 trillion in 2013. This makes it the seventh largest economy in the world, with the potential to move up to the fourth largest by 2050. With over 600 million people, ASEAN’s potential market is larger than that of North America or the European Union. This makes the region a vital source for potential investment.
China is currently the number one trading partner of ASEAN. According to recent statistics, ASEAN-China total trade is $366,541 billion. This can be compared with ASEAN-Japan total trade, which is confirmed at $229,076 billion.
Japan has sought to address this disparity and capitalise on the region’s growing economy by expanding regional economic cooperation. At a Japan-Mekong summit held in Tokyo in July, the Japanese Prime Minister pledged 750 billion yen ($6.1 billion) in financial aid to the Mekong countries of Cambodia, Vietnam, Laos, Myanmar and Thailand.
In a bid to compete with the China-led Asian Infrastructure Investment Bank (AIIB), Japan announced that it would invest $110 billion to support Asia’s infrastructure. China and Japan are also in competition to build Indonesia’s first high speed rail line. China has offered Indonesia $4 billion with an annual interest rate of 2 per cent. Hoping to undercut China, Japan has offered Indonesia $3.3 billion with a soft loan to cover 75 per cent of the funding needed for the project.
Japan and the states of Southeast Asia have much to gain from regional security and economic cooperation. However, there are also risks. Regional states are left treading a precarious tightrope between the two competing powers, hoping to enhance engagement with Japan while refraining from antagonising China. While this will require some careful maneuvering, it is unlikely to jeopardise relations, at least in the short term.