Among the big countries vying for power and influence in the fluid and contentious geostrategic arena, Japan faces the most daunting challenges. Most of the recognised major powers in Asia, from China and India to Indonesia and South Korea, are rising and aspiring for bigger roles and grander objectives, while Japan's place in the global pecking order has been in decline. The last time Japan had to confront such an existential threat to its place in the world may have been in the 1860s when the Western powers shook up and threatened to take over the isolated and inward-looking martial society.
That period led to Japan's geostrategic awakening and the Meiji reforms that modernised Japan and turned it into a rich and powerful state in the ensuing decades. Japan now needs a similar wake-up call with a bold plan of action to secure and renew its global position in the face of external challenges and internal constraints.
As is widely known, post-Meiji Japan became so strong and militant that it became the region's aggressor during the Second World War, having attacked the United States and invaded other Asian countries. When Japan was eventually defeated, it came under the tutelage of the US, and its society became patently pacifist in reaction to the atrocities and violence committed during the war. As the US supervised Japan's postwar constitutional order and political institutions, the Japanese regained their footing and became an economic powerhouse throughout the 1960s-80s during the Cold War.
Being constitutionally mandated not to have a strong military enabled Japanese leaders to divert resources to concentrate on economic prowess. As is well known, Japan built global brands during this period as its multinational companies in automobile, electronics, and other industries spread their wings around the world economy. The Japanese economy became so formidable by the early 1980s that it was pushed back by none other than the US, its hitherto patron state. Reliant on the US security guarantee as the junior ally in a postwar bilateral system, Japan conceded in 1985 by revaluing the yen to reduce its trade surplus and relieve pressure on the American economy that was being outcompeted. From being on course to surpass the US's economic size, the Japanese economy was sapped and relatively diminished.
Japan soon peaked economically. Its real estate and stock market price bubbles deflated over the next several years, leading to what is depicted as a "lost decade." For Japan, after the Cold War, the initial lost decade became extended. Over the past three decades, the Japanese economy lacked the dynamism of the earlier booming era. Still, its accumulated wealth was immense, and its national income was still robust even while its economy expanded much more slowly. Japan's net foreign assets from decades of investing abroad still made it rich and prosperous.
But looking back over three decades, Japan is nowhere near where it used to be in Asia. Unsurprisingly, the biggest and most consequential difference in Japan's geostrategic equation has been China. From nowhere, China has shot up and supplanted Japan as the second-largest economy in the world. By 2030, India's economic size is projected to overtake Japan's. During the 2030s, if its dynamic rate of annual economic growth holds up, even Indonesia may outpace Japan in overall economic size.
In Southeast Asia, Japan's role was paramount in wide-ranging domains, from trade and investment, overseas development aid, and technology and tourism. In the Mekong region, in particular, Japan was instrumental in setting up the Greater Mekong Subregion project to build infrastructure in mainland Southeast Asia. That dominant role has now been taken by China in ways not preferable to the downstream Mekong riparian countries. For example, China's unilaterally built upstream dams have adversely affected downstream Mekong countries, particularly Vietnam.
Wherever Japan used to be big and important, China has largely taken its place. Moreover, technological development is no longer on Japan's side. Unlike in the 1970s and 80s when the Japanese were pioneers and architects of advancing industrial and information technologies, the digitalisation era has favoured latecomers and newcomers. From quantum computing and artificial intelligence to dominant big-tech companies, China is in stiff competition with the US as Japan has fallen behind. In the cutting-edge electric vehicles or EV industry, for example, China is taking up market share where Japan used to dominate with the earlier generation of internal combustion engines.
These challenges are not meant to put down Japan. On the contrary, Southeast Asian governments and societies broadly support Japan to rise up to the challenge. In the annual surveys of Singapore's Institute of Southeast Asian Studies -- the most credible and recognised poll among the region's strategic analysts -- Japan has scored the highest in trust and partnership, while respondents have viewed China as an indispensable economic partner but also the most alarming security concern, with the US seen as the counterbalance to China on security and stability.
These challenges are not lost on Japanese strategic planners. Last year, they came up with an upgraded National Security Strategy, National Defence Strategy, and Defence Buildup Plan to address pressing geostrategic issues. The Japanese defence budget is in the process of doubling over the next four years from one to two per cent of GDP, although questions remain about where the additional resources will come from.
Yet Japan is constrained on key fronts. On security, it has to rely on the US as its guarantor for nuclear deterrence in view of a dangerous Northeast Asia where North Korea and China possess nuclear capabilities. On the new economic dynamism of the digital age, Japan is being outcompeted by China. At home, the Japanese population are older and ageing, with a preference for unimaginative political parties and leaders who lack the boldness, game plan, and footwork Japan urgently needs, such as the late prime minister Abe Shinzo. Japan's postwar pacifist roots also have kept the Japanese people from the kind of new thinking and risk-taking their country needs.
Amid this predicament, the first step ahead for Japan in the eyes of its regional friends and partners is to face up to the fact that its geostrategic environment is no longer benign, and that it can no longer be complacent about its prospects. The next step is to become more assertive, even at the risk of being aggressive in a very un-Japanese fashion.
With China's regional ambition and belligerence, Japan's assertiveness is likely to be welcomed by the Southeast Asia neighbourhood as a countervailing power not just to Beijing but also as a hedge vis-à-vis Washington. For many in the region, Japan represents a third-way alternative for organising and promoting regional peace and order, neither dominated by China nor the US.