Asia first glimpsed its future in 1997 when Japan and the United States renegotiated their long-standing defense arrangements and China tried to sway Taiwan's elections by lobbing missiles into the Taiwan Strait. As the US Pacific fleet positioned itself to stop the missile exercises, Beijing realized how much more latitude the new defense arrangements gave Japan. Suddenly, Tokyo factored into China's calculations. The leadership in Beijing felt it necessary to demand Japanese assurances concerning Taiwan. In a dramatic break with past Japanese passivity, China received an almost challenging response when Prime Minister Ryutaro Hashimoto told Beijing, "This is not the sort of situation where we can draw a line on the globe and say, 'up to here.' It is not that simple."
As this incident demonstrated, a Sino-Japanese rivalry has been building, and it will surely intensify in coming years. Japan's recent assertiveness is not an aberration. It stems from economic and demographic imperatives that will increasingly force that nation to engage the rest of Asia more fully than at any time since World War II. The contest between these old enemies will confront US policy with new challenges that neither a continuation of the Clinton administration's laissez-faire approach nor a return to Cold War rigidities can adequately answer.
Although the pressure on Tokyo to raise its profile elsewhere in Asia will have profound foreign-policy implications, its origins are strictly domestic. One source of pressure lies in Japan's economic woes. Despite government stimulus efforts, the Japanese economy has been stagnant, growing at less than half the pace set by the United States in recent years. Under this strain, Japanese reformers argue that the country needs a new economic model that is more open to the rest of the world and particularly to Asia.
Reinforcing the impetus for change is Japan's unfolding demographic problem. The country's population is aging rapidly, and within 15 years one in four Japanese will be 65 years of age or older; the nation will have fewer than two working people for each dependent retiree. This scenario precludes any return to Japan's former status as the world's leading manufacturer and exporter. Under these pressures, Japanese industry will have to move abroad, and with a limited domestic labor force, Japan will become more dependent on imported goods--perhaps from Japanese firms operating in Malaysia, China, Korea, Thailand, the Philippines, Vietnam, and other Asian states. The domestic economy will cease to emphasize manufacturing and exporting and increasingly will become a center for management, design, and finance.
These changes will stretch beyond economics and force an equally radical shift in Japanese diplomacy and foreign policy. Unlike earlier Japanese business expansions into North America and Europe, the expansion into Asia will demand official government support from Asian nations. In the West, well-developed legal structures and respect for contract law have allowed Japanese businesses to protect their interests in local courts with little intervention from Tokyo. But in Asia, where underdeveloped legal structures permit political influence to trump contracts, diplomatic support is essential to secure equitable treatment. The more the nation's productive power moves abroad, the more vulnerable Japan will become to the economic policies, corruption, incompetence, and expropriation of other countries. No nation can stand by and simply accept such vulnerabilities. Faced with such circumstances, Tokyo will eagerly seek to increase its foreign influence and begin to anticipate extreme situations, enhancing its abili ty to back diplomacy with the threat of military force.
It will be a wrenching change for both Japan and its neighbors. Since World War II, Tokyo has been content, indeed anxious, to maintain an extremely low diplomatic profile and to stay in the United States' shadow on most foreign policy issues except for the most straightforward trade issues. …