Gambling on Japan

Japan’s efforts to become a regional leader are hampered by doubts about the political principles that lie behind its generosity towards the rest of Asia. In a keynote speech delivered at a little-noted symposium on the “Mobilization of Financial Resources for Development in Myanmar”, held in Rangoon late last year, Setsuya Tabuchi, chairman of the Sasakawa Peace Foundation, made an observation that may express Japan’s best hope for a more prominent role in Asia’s future economic evolution. In his address, Tabuchi noted that there were things that change and things that do not change; and in the latter category, he maintained, was the “gambling mind”. Then, as if to challenge his audience of Burmese officials and regional economists to share his vision of a brave new Asia—a sort of Japanese-led, latter-day version of the WWII-era Greater East Asia Co-Prosperity Sphere—he added: “Asians are considered to have a gambling mind, don’t you agree?” As the chairman of a private foundation that derives most of its financial support from the motorboat racing industry, one of the largest legal gambling concessions in Japan, Tabuchi undoubtedly has some insight into the “gambling mind.” One aspect of this mentality would certainly be a tendency to bet big when the chips are down. And in a region still struggling to recover from a financial meltdown that struck nearly three years ago, the allure of easy money has probably never been stronger. As Japan continues to pump funds into crisis-stricken Asian economies in a bid to increase their reliance on the yen, Tokyo may be coming closer to its goal of institutionalizing Japanese pre-eminence in the Asian economic sphere. But many doubts remain. With its economy still mired in a decade-long downturn, Japan has also had difficulty taking real political initiative. This has, in part, been due to its relationship with the United States; but beyond this, many wonder what Japan really stands for, besides its own economic survival. Japan’s attempt to establish and generously endow an Asian Monetary Fund in the immediate aftermath of the currency crisis that hit most of Asia in mid-1997 may have been the country’s boldest move to assert itself in the post-Cold War era, if not since the end of the Second World War. When Washington and the US-led International Monetary Fund shot down Tokyo’s proposal, arguing that the creation of a regional fund would discourage prospective recipients from carrying out IMF-prescribed reforms, Japan was left licking its wounds over what its officials described as a diplomatic humiliation. But this has not prevented Tokyo from working hard behind the scenes to keep the idea alive. With criticism of the IMF and other global agencies mounting, the appeal of alternative, regional mechanisms for combating crises has grown considerably, and Tokyo may believe it is just a matter of time before the proposed AMF gains acceptance. Apart from constraints imposed upon it by the US, one of the greatest obstacles to Japan’s ambition of establishing itself as a recognized regional leader has been its handling of its domestic economy. Tokyo’s reputation for being soft on pushing reforms is well earned, given that Japan’s entrenched ruling party has for the past decade fought off the inevitable electoral fallout of unpopular restructuring efforts by running a massive deficit to stimulate the country’s sclerotic economy. At present, Japan’s public debt, the world’s largest, stands at $6.15 trillion, while the country’s current budget deficit is approaching 40%. But in the latest demonstration that Japanese policymakers still seem to have more yen than sense, the government recently proposed a plan to dump US$ 92 billion on the Tokyo Stock Exchange after a dramatic tumble, the fifth largest in the exchange’s history, threatened to put a dent in support for the ruling Liberal Democratic Party ahead of elections slated for June 25. Considering Japan’s limited success in pulling itself out of its current economic quagmire, other Asian countries have been understandably circumspect about embracing plans emanating from Tokyo. But support for some of Japan’s initiatives, or for its efforts to expand the scope of pre-existing arrangements, such as a regional currency swap that would inevitably enhance the status of the yen by diminishing reliance on the US dollar, have been gaining credence in the region, thanks largely to Tokyo’s largesse.