MIKE M. MOCHIZUKI

A number of external shocks have buffeted Japan in recent
years. The Iraqi invasion of Kuwait in 1990 shocked the Japanese
into realizing the international inadequacy of their brand of paci-
fism. To the last moment until American-led air forces struck Bagh-
dad, most Japanese did not think a large-scale multinational war
would really happen. The collapse of the Soviet Union also has
been a shock of sorts. It brought the Cold War to a definitive end,
and with it the bipolar system that had provided the international
stability (albeit an uneasy one) and predictability essential to
Japan's prosperity as a trading nation. Now the United States has
been asking Japan to aid a former enemy--just when Japan had
begun to take more seriously the Soviet threat. With the geopoliti-
cal glue that held the U.S.-Japanese relationship together gone,
Japan has to search for new ways to revitalize the trans-Pacific al-
liance. It also faces tougher American policies for dealing with bi-
lateral economic disputes. Finally, yen appreciation has shocked
Japan's economic system. Earlier, the Japanese successfully weath-
ered the yen appreciation in the wake of the 1985 Plaza Accord by
shedding productive capabilities in uncompetitive areas, by invest-
ing abroad and at home, and by using their financial clout to open
up new external markets. But the 1993-94 yen appreciation has
been different. The bursting of the so-called bubble economy se-
verely weakened the Japanese financial system and plunged the
country into one of its worst recessions since World War II. Given

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