The Land of the Sinking Sun

Since returning to office in December, Japanese Prime Minister Shinzo Abe has done little to reassure his neighbors that Japan comes in peace. Within his first two weeks of office, he ordered a review of his country’s defense guidelines, which his defense minister, Itsunori Onodera, described as "a priority we must work on with no letup." On July 26, Japan’s Defense Ministry released interim results of the review, urging significant military upgrades. It included plans to create an amphibious island defense force, and hinted at the possibility of preemptive strikes against foreign military targets.

Over the last seven months, Abe’s staunchly nationalistic views and desire to revise Japan’s post-war constitution, which prohibits the use of military capabilities except in self-defense, have exacerbated tensions with China and South Korea. A Pew Research Center poll, released in July, found that 85 percent of Chinese and South Koreans view Abe unfavorably, and that sentiment towards Japan has worsened sharply. The now regular flare-ups over the disputed Senkaku islands in the East China Sea have increased the risk of conflict between Japan and China, which calls the islands the Diaoyu. And Abe’s decisive victory for the Liberal Democratic Party in late July’s upper house elections brought him closer to the two-thirds legislative majorities in both houses of the Diet required to initiate constitutional reform.

There is a paradox at the heart of Abe’s bluster. Although his calls for a stronger military have worried his neighbors, a decade of budget cuts and a struggling economy means that Japan’s military is surprisingly feeble. Despite Abe’s bluster, the real threat posed by Japan is not that its military is growing too strong, but that it is rapidly weakening.

Even accounting for the 0.8 percent increase contained in Abe’s 2013 budget, Japan’s annual defense budget has declined by over 5 percent in the last decade. During the same period, China’s defense budget increased by 270 percent (South Korea’s and Taiwan’s grew by 45 percent and 14 percent, respectively.) In U.S. dollar terms, Japan’s defense budget was 63 percent larger than China’s in 2000, but barely one-third the size of China’s in 2012. In fact, since 2000, Japan’s shares of world and regional military expenditures have fallen by 37 percent and 52 percent, respectively. Japan’s defense review will likely frighten its neighbors more than it will improve the military.

These figures understate Japan’s predicament. Steady declines in defense expenditures over the past decade forced Japan into a series of measures that are beginning to take a toll. In a nation where lifetime employment is the norm, aversion to layoffs and pension cuts have made personnel expenditures virtually impossible to reduce. Consequently, much of the burden fell on the equipment procurement budget, which has declined by roughly 20 percent since 2002. Japanese defense policymakers have coped by extending the life of military hardware, such as submarines, destroyers, and fighter jets. As a result, Japan’s focus has shifted from acquisition to preservation, and maintenance costs have skyrocketed: at the end of the Cold War, maintenance spending was roughly 45 percent the size of procurement expenditures; it is now 150 percent.

Because of declining procurement budgets and higher unit costs, Japan now acquires hardware at a much slower rate: one destroyer and five fighter jets per year compared to about three destroyers and 18 fighter jets per year in the 1980s. In the coming decade, Japan’s fleet of destroyers stands to be reduced by 30 percent. Although Japan plans to order 42 F-35 fighter jets in the next decade to replace what remains of its aging F-4EJ aircraft, project delays and cost overruns will likely lead to the order’s reduction or postponement.

There is significant concern in U.S. policy circles that Abe’s aggressive remarks, coupled with Japan’s waning military power, could undermine U.S. interests. Power transitions are notoriously destabilizing: Japanese defense officials now publicly fret about the threats posed by China’s improving maritime capabilities, while vessels from both countries patrol the waters around the disputed islands on a daily basis, raising the likelihood of unintended escalation. The United States, as Tokyo’s principal ally, risks being drawn into a military confrontation. Japan’s decline also threatens to undercut the Obama administration’s "pivot" towards Asia, as the United States now needs to compensate for Japan’s decline.

The United States expects Japan to support its efforts in East Asia and to help ensure that China’s rise is peaceful. Indeed, Tokyo played a similar role in the late 20th century, when, despite constitutional restrictions on the use of force, Japan was a respectable military power: as recently as 2002, Japan had the third largest defense budget in the world, with particularly robust, albeit defensive, naval capabilities. Japan’s forces in East Asia helped the United States focus its military assets elsewhere without risking instability in the Asia-Pacific region.

Getting back to that place won’t be easy, and might even be impossible. A deep structural and economic malaise is at the heart of Japan’s military austerity. Japan suffers from the highest public debt levels of any major nation — 235 percent of GDP — and a severe budget deficit of 10 percent of GDP in 2012. It has the most rapidly aging population in the world, which means its tax base is shrinking, and its pension and healthcare costs are rapidly mounting. The Japanese government now spends more on debt service and social security than it raises in tax revenues: all other spending, including national defense, is effectively financed through unsustainable debt. Whether fiscal consolidation comes through draconian austerity or a debt crisis, defense spending will continue to be squeezed.

To compensate for the growing gaps in the Japanese military, the United States needs to cooperate ever more closely with Japan. Outstanding issues that threaten to undermine relations, such as Futenma air base relocation and host-nation support, must be resolved quickly. Joint capabilities need to be adapted in anticipation of further fiscal troubles, which may make it impossible to replace aging hardware such as Japan’s Asagiri- and Hatsuyuki-class destroyers and F-4EJ fighter jets.

Abe would be wise to use his new, large legislative majorities to pursue pragmatic reforms instead of ideological ones. A constitutional revision that relaxes constraints on Japan’s military will be a hollow victory if the country’s economy and military capabilities sink into oblivion. Japan would be better served if Abe’s party expands the prime minister’s bold economic plan into a long-term reform program that addresses the country’s enduring problems: economic stagnation, public debt, and demographic decline. Indeed, Abe’s attempts to boost defense spending are unsustainable unless these underlying structural issues are resolved.

Tackling these issues will do far more to restore Japan’s international status and credibility than symbolic gestures that stoke nationalism and antagonize Japan’s neighbors.