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Opinion

US-China hostilities are moment of danger for Japan

Shinzo Abe must balance Washington's protection with Beijing's business

| Japan
Abe has struggled to juggle his affection for Trump and his need for Xi.   © Reuters

William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."

Japanese Prime Minister Shinzo Abe's acrobatic skills have never been tested more than by the events unfolding in Hong Kong.

In the past 10 days, China has said it will impose a chilling national security law on the city by fiat. That prompted U.S. President Donald Trump to say he would take action to "revoke Hong Kong's preferential treatment" as a separate economy. This puts Japan in an impossible situation, not wanting to take sides in a brawl that has few possible good outcomes for the world's third-biggest economy.

Since taking office in 2012, Abe has struggled to juggle his affection for Trump, his top geopolitical ally and sole military protector, and his need for Chinese President Xi Jinping, his most important trading partner. At a moment of maximum peril for the global economy, this challenge just morphed into a perilous high-wire walk. If Abe falls, Japan's economy will go with him.

Abe, of course, needs to take responsibility for where Japan finds itself. He has flagged his regard for Trump, flying to New York to become the first foreign leader to meet him after his election. At the same time, he came to office with a tough-on-China crouch that alienated Tokyo's biggest customer.

Certainly, Xi has stirred trouble with aggressive behavior and provocations in the South China Sea. But Abe has had to spend the last few years mending fences with Asia's superpower as Trump has shown himself unreliable. Even before this latest dust-up over Hong Kong, Abe's plan to welcome Xi to Tokyo in April was preempted by the coronavirus outbreak.

This latest front in Trump's trade war is fast becoming a threat to Japan's economic trajectory.

Japan entered 2020 in poor shape. Then came the COVID-19 shock, which has Abe scrambling to support growth. So far, his government has announced about $2 trillion of fiscal spending, roughly 40% of gross domestic product. Second-quarter growth might contract about 22%, the worst drop since the 1950s.

Now, with Hong Kong as a proxy, things may get worse for global trade and markets. With his poll numbers sliding ahead of the November election, Trump is desperate to cheer his base and deflect attention from botched coronavirus policies. That raises the odds of new tariffs that disrupt Asian supply chains.

Japan also risks angering Xi over Hong Kong. For Abe, the immediate worry is more than 1,400 Japanese companies operating there. As Beijing meddles with Hong Kong's press freedoms and legal system, Japan Inc. might consider relocating in ways that hurt corporate profits and infuriate China.

The opening ceremony of Shiseido in Hong Kong, pictured in August 2013: Japan Inc. might consider relocating in ways that hurt corporate profits and infuriate China.   © TopPhoto/AP

That would be its own blow to Tokyo. For all the geopolitical wrangling, economic ties between Japan and China are improving. From 2016 to 2019, Japan's foreign direct investment in China rose 37%.

If Abe appears to cozy up to Xi, this may lead to Trump implementing any number of policies that undermine Japan: tariffs on cars and auto parts; moves to weaken the dollar; demanding Tokyo agree to bigger trade concessions; targeting Asian companies more generally, not just mainland ones.

Abe is vulnerable at home too. Public disenchantment with his coronavirus response and money and favoritism scandals are chipping away at support. Approval for his cabinet fell 2.3 points to 39.4% in a recent Kyodo News survey. Political rivals smell blood in the water.

His desire to stay out of the fray hardly seems a workable solution. "Abe has to... demonstrate to the Japanese public he is not nearly as feckless as the opinion polls now indicate," says Jeff Kingston, head of Asian studies at Temple University's Tokyo campus. "He has bounced back before, but now he seems to have lost his mojo and seems distracted by political maneuvering rather than keeping his attention focused on urgent matters."

No matter is more urgent than forging deeper partnerships closer to home. Abe must increase damage-control efforts toward China. At the same time, Japan should be growing the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership trade deal.

South Korea, a top-12 global economy, is an obvious candidate. Yet here, too, self-inflicted wounds abound. Abe and Korean President Moon Jae-in are at loggerheads over enmities dating back to the second world war, culminating in a tit-for-tat on trade restrictions. There has never been a better time for Tokyo and Seoul to join forces to safeguard growth and markets.

Abe should be pulling large Southeast Asian economies into TPP. He would also be wise to continue deepening Japan's trade relationship with Europe.

As 2020 unfolds, Japan cannot afford to fall out with China any more than it wants to risk becoming a main attraction on the @realDonaldTrump Twitter feed. The China part is a difficult juggling feat on its own: supporting Hong Kong's autonomy without drawing Xi's ire.

Add Trump's unpredictability to the mix and Abe faces a near-impossible task of keeping his footing. He must step very carefully. It is not like there is a net below should Tokyo stumble.

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