China-Japan ties twisted and tested by Indo-Pacific Framework

RUMI AOYAMA

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The Indo-Pacific Framework for Economic Prosperity was launched in May 2022 during Joe Biden’s first visit to Asia as president. Of the 13 participants, Japan is the only country to announce it will join all four pillars of the IPEF.

Why is Japan so determined to support this US initiative? Will this proactive move damage the fragile bilateral relationship between Japan and China — or will the newly launched initiative disrupt ongoing regional economic integration?

Japan-China bilateral trade reached a 10-year high of US$391.4 billion in 2021 and more than 30,000 Japanese companies currently operate in China. Yet Japan appears to be enthusiastically embracing Washington’s Indo-Pacific strategy — a move that irritates China.

Russia’s invasion of Ukraine reinforced the Fumio Kishida administration’s China policy, and rising public support for a solid deterrence policy suggests the current trajectory of Tokyo’s foreign policy is likely to continue.

It is widely recognized in Japan that most Asia Pacific countries think the framework — a trade agreement without the promise of US market access — is insufficiently attractive to have an immediate impact on regional trade.

But mainstream voices from within the Japanese government and business community argue that Japan should actively engage with the IPEF in the hope it will serve as a stepping stone for the United States to return to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The IPEF will also strengthen the US–Japan economic partnership.

Japan swiftly joined the US-led alliance that imposed punitive sanctions on Russia in February 2022. Tokyo’s decision was attributed to its security concerns about China — namely to ensure Washington and NATO’s support for Japan in the face of military pressure similar to that experienced by Ukraine.

The Russian invasion of Ukraine was a wake-up call to many pacifist Japanese that war could well happen overnight. Public support for a strong Japan-US alliance and a domestic military buildup is now on the rise.

This sentiment is even present in Okinawa, where opposition to US bases is among the highest in Japan. More than 93% of Okinawans view China as a national security threat and a growing number of Okinawans (69% in a May 2022 survey) believe that US military bases in Okinawa are necessary.

Anti-US airbase demonstrators protest the US Airbase relocation to Henoko at Ohnoyama General Athletic Field at the Ohnoyoma Park and Sports Complex in central Naha, Okinawa on June 19, 2016. Sentiment toward the US has since shifted. Photo: AFP via Anadolu Agency / Richard Atrero de Guzman

With domestic support for US engagement solidifying in Japan, the IPEF will likely take root in the Indo-Pacific. But it will have a limited impact on Sino–Japanese relations and regional geo-economic trends.

In the short term, the relationship between Japan and China will not deteriorate sharply, even if Japan has made minimal effort to stabilize Japan-China relations. Prior to Biden’s visit to Tokyo, Japanese Foreign Minister Yoshimasa Hayashi organized a video conference with his Chinese counterpart Wang Yi. The official statements following the online meeting were relatively confrontational, with both sides asserting their own diplomatic positions.

It is Beijing’s Japan policy that has maintained and will continue to maintain stable bilateral relations. While raising its tone when criticizing Tokyo’s China policy, Beijing has made relatively rational demands on Japan. Rather than asking Japan to significantly change its foreign policy, China urges Japan to better balance its relations with the United States and China and to develop bilateral trade.

Contrary to widespread fears that the Indo-Pacific Framework will lead to the decoupling of Asian economies, economic regionalism will continue to gain momentum in the Asia Pacific.

While the IPEF is a trade framework to advance Washington’s economic leadership, the Regional Comprehensive Economic Partnership (RCEP) is championed by both Japan and China. The launch of the IPEF has since prompted China to devote more diplomatic resources to RCEP.

While the IPEF may only have a limited effect on removing supply chains from China, China’s zero-Covid policy and deep economic woes have significantly eroded business confidence.

A Japan Chamber of Commerce and Industry survey reports that 14% of Japanese companies operating in Shanghai are seeking to “reduce or postpone” future investments in China.

This sentiment is relatively moderate compared with the results of a European Union Chamber of Commerce survey indicating that the “China Plus One” policy long pursued by Japanese companies — to avoid solely investing in China by diversifying into other countries — is catching on with the Europeans.

It is widely believed that the success of the Indo-Pacific Framework depends on ASEAN countries — but in reality, it depends on China, China’s economy and its foreign policy. Japan’s support for the IPEF will help it gain traction in the Indo-Pacific, but it will not loom large over long-established China-Japan relations.