gaiatsu and japan's foreign aid: rethinking the reactive-proactive debate

Gaiatsu and Japan's Foreign Aid: Rethinking the Reactive-Proactive DebateAuthor(s): Akitoshi MiyashitaSource: International Studies Quarterly, Vol. 43, No. 4 (Dec., 1999), pp. 695-731Published by: Wiley on behalf of The International Studies AssociationStable URL: http://www.jstor.org/stable/3014027 .

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International Studzes Quarterly (1999) 43, 695-732

Gaiatsu and Japan's Foreign Aid: Rethinking the Reactive-Proactive Debate

AKITOSHI MIYASHITA

Drake University

This article examines the role of the United States in Japan's foreign aid policy. The Japanese government often alters its course of action under U.S. pressure even if doing so would apparently undermine its own interests. Japan's unusual responsiveness to U.S. preferences appears counterintuitive given the fact that at least in the realm of foreign aid Japan's power clearly surpassed that of the United States. This article posits thatJapan's responsiveness stems in large part from the asymmetry of interdependence between the two countries. After critically reviewing the existing literature, it conducts two case studies to examine the validity of the argument. The article concludes that the United States played a crucial role but Japan's responsiveness to American pressure reflects an act of will rather than a lack of coherent policy stemming from bureaucratic politics. The findings have important implications to the ongoing debate over whether Japan is a "reactive state."

The Puzzle

The rise of Japan's foreign aid power is truly remarkable. In 1972, the size of its official development assistance (ODA)1 was roughly four fifths of West Germany's, half of France's, and one fifth of the United States' (Development Assistance Committee, 1974:201). Throughout the 1980s, however, Japan's ODA spending grew at a higher rate than any other items in the national account. This budgetary increase, helped by the revaluation of the yen, significantly narrowed the gap between Japan and other advanced industrial nations in the size of its ODA program. In 1989, Japan surpassed the United States and became the largest foreign aid donor in the world for the first time in post-World War II history. In 1996, it spent $9.4 billion on ODA, or 17.1 percent of the total official development assistance disbursed by the members of the Organization for Economic Cooperation and Development (OECD). Although Japan's ODA budget has declined since 1992

Autho 's note. I am grateful to Francis Adams, RobertAngel, Gerald Curtis, Debra DeLaet, Anne Emig,James Morley, Masayo Ohara, Hugh Patrick, Yoichiro Sato, David Skidmore, Gerald Sorokin, Robert Uriu, Ming Wan, Michael Young, and the three anonymous reviewers for their comments. Earlier versions of this article were presented at the 1997 Annual Meeting of the American Political Science Association and at the 1999 Annual Meeting of the International Studies Association.

I In this article, I use "ODA" and "foreign aid" interchangeably, although the two terms are not exactly the same The Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD) defines ODA as grants or loans to developing countries that are (1) undertaken by the official sector, (2) with promotion of economic development and welfare as the main objective, and (3) on concessional terms of at least 25 percent grant element (DAC, 1994 114). Foreign aid, on the other hand, has broader implications in terms of forms, purposes, and conditions of assistance While important for some other purposes, the distinction is of little significance for the aims of this article I thus make no particular attempt to separate the two terms.

i 1999 Inter national Studies Association. Published by Blackwell Publishers, 350 Main Street, Malden, MA 02148, USA, and 108 Cowley Road, Oxford OX4 IJF, UK



696 Gaiatsu andJapan's Forezgn Aid

due to the ongoing recession triggered by the collapse of the bubble economy, Japan is likely to retain the top donor status in the near future, given the sharper budgetary decrease and severe "aid fatigue" in other advanced industrial nations.

As Japan achieved the status of the world's largest aid donor, the purpose of its ODA gradually diversified. Japan's postwar foreign aid program grew out of reparations payments, designed primarily to help rebuild Japan's industrial capac- ity and reestablish economic ties with its wartime "Co-Prosperity sphere" in Asia. In the 1950s and '60s, thus, the objective of Japan's foreign aid (or "economic cooperation," as the Japanese preferred to call it) was essentially economic. Much of its aid money was explicitly or tacitly tied to the purchase ofJapanese goods and services, and the need for developing overseas markets and securing a stable supply of foreign raw materials largely dictated the regional allocation ofJapanese aid. The strong commercial orientation, however, began to change, if not diminish, in the late 1970s and early 1980s when Tokyo launched "strategic aid" to countries that were considered critical for the security interests of the Western alliance (Yasutomo, 1986). During that period, Japan also used a portion of its ODA to help resolve the Third World debt problems (Yanagihara and Emig, 1991:62-68). Since the early 1990s, the Japanese government has readily used aid as a diplomatic weapon. The recent examples include the provision of aid to build a nuclear waste treatment plant in Vladivostok to prevent Russia from dumping in the Sea ofJapan (1995) and the partial suspension of aid to China (1995), India (1998), and Pakistan (1998) in protest of their nuclear testing. Japan has also actively used ODA to seek support from developing countries for its permanent membership in the United Nations Security Council. While enhancing economic security continues to be an important rationale (Arase, 1996), Japan's aid has increasingly become an instrument of foreign policy.

One striking feature of Japan's foreign aid policy is the role played by external (especially American) pressure, known as gaiatsu. Specifically, Tokyo is highly sensitive to U.S. reaction to its foreign aid policy, and it often changes the course of action under explicit or tacit pressure from Washington. One example is Japan's policy toward Vietnam. Recognizing the country's potential as an emerging market, Japan sought to end the isolation of Vietnam by gradually expanding economic and diplomatic relations. After Hanoi withdrew its troops from Cambodia in 1989, Tokyo expressed strong intention in resuming ODA, which it suspended in the aftermath of the Vietnamese invasion of Cambodia in 1979. But Washington applied pressure on Tokyo to sustain the suspension of aid, and it was not until late 1992 that Japan finally restored an aid relationship with Vietnam under tacit consent from President George Bush. Another example is Iran. In order to enhance its energy security, Japan ended its 17-year-old halt on financial assistance to Iran in 1993 by providing Tehran with a $386 million yen loan to help build a hydroelectric power plant. The $386 million yen loan constituted the first installment of a three-stage loan totaling $1.5 billion. However, theJapanese government was forced to suspend from the project under strong pressure from the United States. Although Tokyo resumed the loan in 1999 albeit on a much smaller scale than originally planned, the decision came only after an improvement in U.S.-Iran relations.

Why is Japan so responsive to American pressure? Why does it often change its course of action in accordance with U.S. policy preferences? Japanese behavior appears puzzling given its rising position in the international system. Power transition theory leads us to expect that Japan pursues a more independent foreign aid policy. Although the overall power disparity still exists between the two countries today, the gap has significantly narrowed at least in the economic area, with Japan becoming the world's largest creditor nation and major financier of America's national debt. Moreover, within the confines of foreign aid, Japan's power has surpassed that of the United States. As such, Japan should be more willing, and able,



AKITOSHI MIYASHITA 697

to resist U.S. pressure. The puzzle ofJapanese behavior becomes even more obvious in a comparative context. With the size of its ODA budget less than 80 percent of Japan's, France was far more independent in its pursuit of aid diplomacy toward Vietnam. In early 1993 President Fran?ois Mitterrand of France visited Vietnam as the first Western head of state to call upon the nation since the end of the Vietnam War and openly criticized the United States for its continuation of the embargo on Vietnam. Resumption of French aid to Vietnam came much faster than Japan's. Similarly, Germany was willing to diverge itself from the United States on policy toward Iran. Despite the keen American accusation that Tehran supported international terrorism, Bonn offered trade insurance to Iran to facilitate the bilateral trade in 1993. Moreover, Germany, along with other Western European nations, refused to follow the U.S. lead in imposing a trade embargo on Iran. Instances such as these make one wonder why Japan remains sensitive to U.S. reaction in formulating its foreign aid policy.

In this article, I explore the issue of gaiatsu (hereafter, no italics) in Japanese foreign aid. Gaiatsu literally means "external pressure" and is defined here as an explicit or tacit attempt by foreign countries to make Japan do what it would not otherwise do. Because the central focus of this study is pressure exerted on Japan by the United States, I use "gaiatsu" synonymously with "Amerncan pressure" unless otherwise indicated. I first present my own argument as to why Japan is responsive to gaiatsu, using the notion of "asymmetric interdependence." Second, I review the two major works on this subject by Robert Orr and Dennis Yasutomo. In so doing, I point to their common methodological problem and suggest an alternative approach to the question. Third, I conduct two case studies: (1) resumption of aid to China after Tiananmen and (2) economic assistance to Russia. Finally, I discuss how the findings of the case studies might contribute to the ongoing debate over whether Japan is a "reactive" state.

A Source of Japan's Responsiveness

Why does the United States play an important role in Japan's foreign aid policy? Why is Japan so sensitive to U.S. preferences? It is possible that Japan follows the United States because "what is good for the United States is good for Japan." In other words, it is in Japan's interests to pursue what the United States is pursuing. The problem with this argument, however, is twofold. First, the interests of Japan and of the United States do not always converge. While there are many cases of the "harmony of interests," there are equally many cases of divergence of interests. The aforementioned policies toward Vietnam and Iran are examples of those cases where preferences of the two countries were clearly conflictive. The United States and Japan were also at odds on the issue of whether to impose sanctions against China after the military crackdown of pro-democracy demonstrators in Tiananmen Square and whether to expand financial assistance to Russia under Yeltsin. Thus, one cannot explain Japan's responsiveness to gaiatsu by a confluence of interests. Second, as will be elaborated later, one cannot evaluate the role of gaiatsu inJapan's foreign aid policy by looking at the cases of the harmony of interests. Japan's behavior then becomes no longer counterintuitive, and the conclusion drawn from such cases would remain biased. The puzzle, and the empirically more interesting question, is, Why doesJapan often alter its preferred course of action under pressure from Washington, even if doing so would apparently undermine its own interests?

I argue thatJapan's responsiveness to U.S. pressures stems in large part from the asymmetry of interdependence between the two countries. Simply put, Japan is more dependent on the United States than vice versa, and this asymmetric interdependence has provided the United States with substantial bargaining leverage over Japan. The idea of asymmetric interdependence as a source of power is best



698 Gaiatsu andJapan's Foreign Aid

elaborated in Albert 0. Hirschman's classic study, National Power and the Structure of Foreign Trade (1945). Observing the ways in which Nazi Germany influenced the behavior of Eastern European nations during the 1930s through manipulation of the terms of trade, Hirschman (1945:16) argued: "A country trying to make the most out of its strategic position with respect to its own trade will try precisely to create conditions which make the interruption of trade of much graver concern to its trading partners than to itself." This is because "the power to interrupt commercial or financial relations with any country ... is the root cause of the influence or power position which a country acquires in other countries." In other words, if country A can sustain smaller losses than its trading partner B in the event of a disruption of their trade relationship, then, other things being equal, A is in a stronger bargaining position over B than vice versa.

Later scholars on economic instruments of power have drawn upon Hirschman's insight. For example, in his study on economic leverage, Klaus Knorr (1977:102) argued: "If B is highly dependent on A for something of great economic value to him, and A is not similarly dependent on B, the latter is vulnerable to the threat of having the receipt of the valued object suspended." Similarly, Robert Keohane and Joseph Nye (1977: 10-11) note: "It is asymmetries in dependence that are most likely to provide sources of influence for actors in their dealings with one another. Less dependent actors can often use the interdependent relationship as a source of power in bargaining over an issue and perhaps to affect other issues" (their italics). A recent study on U.S. retaliatory trade policy by Thomas Bayard and Kimberly Ann Elliott (1994) seems to confirm these arguments. By examining cross-national, cross-sec- toral cases of American trade negotiations in which the U.S. government demanded market opening of its trading partners with a threat of retaliation, the authors discover that "vulnerability of the target to U.S. trade retaliation, as measured by its dependence on the U.S. market for its exports, is an important factor in explaining outcomes" (1994:86). Interestingly, the study also shows that the countries with larger trade surplus with the United States are more likely to cave in to the American demand than those with smaller surplus. Similarly, Joseph Grieco (1996) looks at the varying degrees of dependence on the U.S. market by Germany and Japan to explain the contrasting strategies pursued by these two nations toward the formation of regional economic institutions. He argues that Germany's low degree of dependence on the U.S. market led Bonn to take an aggressive stance toward a creation of EC (later EU) that excludes the United States, while Japan's high degree of dependence on the U.S. market led Tokyo to be reluctant to pursue any regional economic group in East Asia that would exclude the United States.

As discussed below, Japan continues to depend on the United States for two crucial "commodities": (1) export market and (2) security. Both are fundamental for Japan's national survival, and no other nation can provide Japan with these "commodities" to the degree that the United States can. The reverse is not the case. As such, it is certainly Japan that is likely to suffer more if the bilateral relationship is severely strained. This asymmetry of interdependence has made Japan more sensitive to U.S. pressures than Japan's rising status in the international system would otherwise suggest.

Export Market

The United States and Japan are roughly equally dependent on trade. Japan's dependence on trade (measured in terms of the total volume of trade divided by GDP) from 1990 to 1996 was on average 16.0 percent. The comparative figure for the United States was 17.2 percent. Yet the importance of the United States in Japanese exports is far greater than vice versa. In 1996, for example, the United States accounted for 27.2 percent ofJapan's total exports, whereasJapan accounted




for 10.8 percent of U.S. total export. Moreover, while the United States is by far the single most important market for Japan, Japan is only the second largest market for the United States after Canada, whose share in the U.S. market is more than twice as large as Japan's (Figures 1 and 2). This clearly implies that the cost of terminating the bilateral trade is higher forJapan than for the United States. The significance ofJapan's dependence on the U.S. market can be shown in another comparative context. As Figure 3 indicates, while the share of the United States in Japan's exports in the early 1990s was well over 25 percent, the comparable figures for Germany and France were approximately 7 percent each. Moreover, Japan's dependence on the U.S. market for its overall economic growth is higher than is true for these European nations. For example, during the same period, about 2.6 percent ofJapan's GDP came from its export to the United States, whereas export to the United States accounted for only 1.5 percent of Germany's GDP (Grieco, 1996:8). The lesser degree of dependence on the U.S. market may

45

40

3 5

430

China ( including Hong Kong ) as

5h

S. Korea

~ 0-

Year

FIG. 1. Three Largest Markets for Japan's Exports (Source: United Nations, Internataonal Trade Statastacs Yearbook, various years)




25

2 0

0 Canada

15

O Japan

1 10

5

Mexico

,: 0 L aLL. ' ______

Year

FIG. 2. Three Largest Markets for U.S. Export (Source: United Nations, International Trade Statistics Yearbook, various years)

well have allowed Germany and France to pursue a more independent policy toward Iran and Vietnam, respectively, in defiance of the United States.

A point can be made thatJapan would not suffer from a disruption of trade with the United States since its dependence on export in general is not particularly high. After all, the share of exports in Japan's GDP in 1996 was 8.9 percent, whereas the comparable figures for Germany and France were, respectively, 22.1 percent and 18.8 percent (Keizai Koho Center, 1998:52). Two points are in order. First, the high degree of dependence on trade by Germany and France is due largely to the development of the European common market. The volume of trade outside the European Union remains substantially lower for both countries. Second, while the share of trade in Japan's overall economy may not be so high in the comparative context, the industries that manufacture high-technology and capital-intensive products are strongly




45

40

35

30

? 25 Share of the U.S. in Japan's Total Exports

c)

P 20

Share of the U.S in Germany's Total Exports

15

10

5

Share of the U.S. in France's Total Exports

Year

FIG. 3. Dependence on the U.S. Market by Japan, France, and Germany

dependent on foreign trade. For example, 83.4 percent of general machinery (such as robots, generators, and office and construction machinery), 35.8 percent of electrical machinery (such as semiconductor devices, audio- visual apparatus, and household electrical appliances), and 41.8 percent of transportation equipment (such as automobiles, auto parts, and vessels) produced in Japan in 1996 were sold overseas. Of the foreign sales of Japanese products in those three categories, the United States accounted for 29.8, 25.3, and 35.5 percent, respectively (Keizai Koho Center, 1998:25, 46-47). These industries play an important part in the Japanese economy, employing roughly 20 percent of Japan's labor force. Given the fact that no other foreign market is capable of absorbing Japan's high-technology/ capital-intensive products as much as the United States, a disruption of the bilateral trade would still incur significant cost to Japan than its overall trade dependence might otherwise suggest. Indeed, if the future growth of the Japanese economy lies in the area of high-tech, high-value-added industries, the importance of the U.S. market for Japan is likely to continue. The




asymmetry of export dependence between Japan and the United States is a long-term trend and likely to continue at least for the foreseeable future.

Security

The second area of asymmetric interdependence that defines U.S.-Japan relations is security. Despite Japan's growing contribution in burden-sharing, the bilateral alliance remains essentially unequal in terms of capability and commitment. Currently, the size of the Japanese defense force is less than one fifth of that of the United States. Under the U.S.-Japan security treaty, the United States is obliged to defend Japan when the latter is under attack, but Japan has no reciprocal obligation. In addition to providing military protection against potential external threat, the bilateral security treaty allowed postwarJapan to stay lightly armed while putting efforts and resources into economic recovery from the devas- tation of World War II. Inside what Donald Hellmann (1988) called the "American greenhouse," Japan concentrated on the "low politics" of economic growth and enjoyed an unprecedented level of prosperity. Even today, as Japan's per capita GDP exceeds that of the United States by 27 percent, its per capita defense spending is less than half the comparable figure for the United States. The benefits of the U.S. military protection (including nuclear assurance) for Japan extends well beyond the Cold War. As a number of analysts have pointed out (Betts, 1993/94; Friedberg, 1993/94; Roy, 1994; Ross, 1995), the security environment of East Asia continues to be unstable despite the demise of the Soviet Union. North Korea's nuclear ambition and its conventional military buildup pose a serious threat to Japan, while the political implications of China's rising power in the entire region remain unclear. In such a volatile security environment, the U.S. military forces remain crucial in East Asia. "The U.S. presence," as Joseph Nye (1995:91) notes, "is a force for stability, reducing the need for arms buildups and deterring the rise of hegemonic forces."

The significance of the bilateral security treaty to Japan is not only military and economic but also political. The security treaty saves theJapanese government from confronting the difficult question of Japan's large-scale rearmament (and, by implication, its past) on both the domestic and international fronts. Given the existing security environment in East Asia, a termination of the security treaty and a subsequent pullout of American troops from Japan would force Tokyo to alter its defense policy rather drastically toward substantial remilitarization. Domestically, such redefinition of defense policy will be politically costly due to the strong antimilitary sentiment (including the so-called nuclear allergy) that persists in Japan. Most Japanese are still haunted by the trauma of World War II. "Remem- bering what happened the last time the nation ventured abroad," argues Masaru Tamamoto (1990:498), "the Japanese are afraid of what they might do once they reenter the international political-strategic arena." Indeed, more than five decades after the end of World War II, the government in Tokyo today still finds it extremely difficult to revise the constitution so that it can send troops overseas to fully participate in peace-keeping operations of the United Nations.

Japan's drastic remilitarization would also draw strong antagonism from its Asian neighbors, many of whom suffered enormous atrocities ofJapanese militarism during the 1930s and '40s. Part of the Asian resentment for Japan's larger military role stems from Japan's continued reluctance to come to terms with its

2 It must be noted thatJapan has an important obligation: the offer of the military bases, which can be used to ensure not only the security ofJapan but also the peace and stability of the entire Far Eastern region. Until the security treaty negotiation began in 1950, the Japanese government had believed that this obligation would make the treaty "equal," but the idea was rejected by the U.S. government. See Hara, 1988, and Toyoshita, 1996.




own past. As demonstrated by the school textbook and the "comfort women" controversies, Tokyo has not been sincere about recognizingJapan's responsibility for the war and not forthcoming about apologies, especially in comparison with Germany. The alliance with the United States has helped "conceal" the issue as it not only made a substantial remilitarization ofJapan unnecessary but also served as a reassurance for Japan's Asian neighbors who fear a resurgence of Japanese militarism. A withdrawal of U.S. troops would inevitably force Japan to revisit and redefine its past to become more "accepted" in the Asian community.

To be sure, the bilateral security treaty has benefited the United States as well. During the Cold War, Japan served as a forefront of American containment strategy in Asia. The naval and air bases in Japan were of vital importance to the American military operations in the Korean and Vietnam Wars. As the volume of trans-Pacific trade well exceeds that of trans-Atlantic trade today, the United States has high stakes in maintaining political stability in East Asia. Given the fact that Tokyo pays almost all the yen-based costs of the 50,000 American forces, or roughly 70 percent of the troops' overall costs, maintaining the military bases inJapan has become increasingly cost-effective to the United States. Nonetheless, the asymmetric character of interdependent relationship still remains: it isJapan that would suffer more if the bilateral alliance were to be abandoned. There is simply no alternative to the United States as the provider of security toJapan, and substituting the American military protection (including nuclear assurance) by its own remilitarization is politically too costly for the Japanese government to sustain at least for the foreseeable future.

The Nature of American Influence andJapanese Response

Japan's survival as a trading state depends on access to external markets and a peaceful security environment.3 And it depends on the United States for provision of these two crucial "commodities" more than it does on any other country. Although interdependence, not dependence, better characterizes the nature of the bilateral relations today, this interdependent relationship remains essentially asymmetrical: Japan depends on the United States more than the United States depends onJapan for trade and security, and availability for substitute providers is much more limited for Japan than for the United States.4 As such, the cost of foregoing the bilateral relationship is much higher for Japan than for the United States. This asymmetric interdependence provides the United States with a stronger bargaining leverage vis-'a-vis Japan, making the latter responsive to pressure from the former.

The desire to avoid a major disruption in U.S.-Japan relations has often led Tokyo to back down from its original position when the two countries were at odds on a given policy issue. For example, faced with a strong American opposition to a formation of an East Asian trading bloc that would exclude the United States, Japan not only refrained from supporting the East Asian Economic Caucus proposed by Malaysian Prime Minister Mahathir Mohammed but also sought to suppress any similar proposals for regional institutionalization. The chief cabinet secretary, Kato Koichi, defended Japan's decision to reject the Caucus by referring to America's critical role in the region's economics and security. Another high government official was quoted as saying that "at a time when close cooperation with Washington is vital in dealing with North Korea, diplomatic wisdom dictates Japan should not do anything that could unsettle its relations with the U.S."5 Similarly, as noted

3 On the notion of the "trading state," see Rosecrance, 1986. 4 Dependent relationship is commonly defined by two variables: (1) an actor's need for the goods to be provided by

the other actor and (2) availability of substitute goods or providers. See Emmerson, 1962:32, and Richardson, 1981:91-93.

5 Quoted in Grieco, 1996:6.



704 Gaiatsu andJapan's Forezgn Azd

earlier, under the strong pressure from Washington, Tokyo suspended the loan aid to help build a hydroelectric power plant in Iran in 1995. Although the Japanese government initially refused to cave in by arguing that the aid would mitigate Iran's hard-line stance toward the West, it gradually changed its position as the U.S.-Japan economic relations deteriorated over the auto issue in the spring of 1995. The two sides reached a compromise just hours before the U.S. sanction of 100 percent tariff onJapanese luxury cars was due to come into effect. But the auto dispute eventually forced Tokyo to back down on the decision to give aid to Iran. At the height of the dispute, a Foreign Ministry official explained Japan's decision to suspend aid to Iran: "We don't want to create any unnecessary strains in Japan-U.S. relations."6

Cases such as these demonstrate Japan's unusual sensitivity to the stability of the overall bilateral relationship and strong concern for not provoking the United States. WhileJapan is capable of formulating independent policies based on its own definition of national interests, whether and to what extent it will pursue such policies depends on the strength (as the Japanese government perceives it) of U.S. objection to them. Consideration of how much damage its defiance might inflict on overall U.S.-Japan relations has always been an important factor in Japan's foreign policy decisions. The Japanese behavior during the Persian Gulf War is a notable example. As many analysts have pointed out, the war did not become a real crisis toJapan untilJapan's reluctance to contribute to the war efforts beyond money was severely criticized by the United States and other allies. Indeed, it was the sense of crisis in U.S.-Japan relations, more so than the Iraqi invasion of Kuwait, that forced theJapanese government to put its act together to legislate the so-called PKO bill, which allowed the Japanese Self-Defense Forces for the first time in the post-World War II history to move beyond Japan's national borders to participate in U.N.-sponsored peace-keeping operations, though their mission was limited to noncombatant activities.

American pressure on Japan's foreign aid policy can be explicit or implicit. Explicit pressure involves the United States specifically requestingJapan to alter its policy through diplomatic channels. For example, the United States urged Japan to halt its loan aid to Iran first at low level meetings around 1993 and eventually stepped up the pressure when President Bill Clinton told Prime Minister Murayama Tomiichi to reconsider the loan at a meeting held in Washington in January 1995. Implicit pressure involves the situation where the United States does not specifically request Japan to alter its aid policy, but, knowing what Washington wants, the Japanese government voluntarily alters its policy in accordance with U.S. wishes. In the power literature, this is known as the rule of "anticipated reactions." Jack Nagel (1975:16) defines anticipated reactions as a situation in which "one actor, B, shapes his behavior to conform to what he believes are the desires of another actor, A, without having received explicit messages about A's wants or intentions from A or A's agents." Anticipated reactions are especially commonplace in dependent relationship. Indeed, this type of gaiatsu is widespread and often as equally important in U.S.-Japan relations as are explicit influence attempts.

My central argument, then, is that the asymmetry of interdependence makes Japan sensitive to U.S. preferences and allows gaiatsu to play an important role in Japan's foreign aid policy. Although perceived interests may lead the Japanese government to pursue independent policy initially, in the end the fear of alienating the United States will force it to back down and alter its policy according to U.S. wishes. This line of argument has much in common with the work on dependent foreign policy. The central question posed in this literature is whether economic dependence leads to foreign policy compliance. A number of studies have examined whether (or to what extent) economically dependent Third World

6 Quoted in Daily Yomzurz, May 10, 1995




countries (usually in LatinAmerica andAfrica)would implement the foreign policy preferences of their principal trade/aid/investment partner in the "core," most notably the United States.7 Most studies, especially those employing quantitative analysis, have concluded that only a weak relationship, if at all, exists between economic dependence and political compliance (Richardson, 1976, 1978; Menk- haus and Kegley, 1980; Rai, 1980; Richardson and Kegley, 1980; Armstrong, 1981; Moon, 1983, 1985; Kegley, 1988; Kegley and Hook, 1991).

Despite the parallel in causal argument, there are at least two key differences between my study on Japan's foreign aid and the literature on dependent foreign policy. First, most studies on dependent foreign policy focus on economic variables in measuring dependence, whereas my study considers security, as well as economic, dependence. Security dependence is crucial for Japan as any attempt to achieve autonomy in this realm (such as acquisition of nuclear weapons) is politically and diplomatically costly to Tokyo. Second, the political economy ofJapan is certainly different from that of Third World countries. Poverty, unequal distribution of wealth, existence of powerful socialism (or nationalism), chronic political instability, and other factors said to have led many Third World dependent nations to pursue defiant foreign policy against the United States (Singer, 1972; Biddle and Stephens, 1989; Hey, 1993; Hey and Kuzma, 1993) are largely absent in Japan. These differences make my work on Japan incomparable with many existing studies on U.S.-Third World nations, but insights drawn from my study could contribute to the broader literature on dependence and foreign policy in general.

Indeed, the security dependence and political/economic stability are the key to understanding why Japan, which many consider a quite powerful nation, continues to be so sensitive to policy preferences of the United States. This paradox can be best explained by the logic of alliance politics so eloquently developed by Glenn Snyder (1984). Among other things, Snyder argues that a fear of abandonment by an alliance partner increases one's commitment to the alliance while a fear of entrapment weakens it and that reducing one fear tends to increase the other. During the early postwar period, when Japan was economically vulnerable and politically unstable, the fear of abandonment was stronger for the United States than for Japan. On the one hand, Japan was America's indispensable Cold War ally in Asia, especially after the "loss of China" in 1949 and the outbreak of the Korean War in 1950. The strong "need" by the United States of the military bases in Japan assured the conservative government in Tokyo that the United States was unlikely to abandon Japan. On the other hand, the U.S. government was not certain whetherJapan would remain a U.S. ally. At that time, the leftist/progressive movement was gaining momentum in Japan, and there was a possibility that the nation might fall under the socialist regime, whose political platform included abolishing the U.S.-Japan security treaty. This fear led the United States to increase its "commitment" to the alliance by providing many "favors" to Japan to prevent its "defection." These favors included allowing Japan to remain lightly armed; agreeing to revise the security treaty (which it did in 1960) to make it more "equal" as requested by the Japanese government; and granting Japan greater access to the U.S. market, technology, and financial resources. The United States also provided campaign funds to Japan's Liberal Democratic Party (LDP) through the CIA to strengthen the conservative and pro-American government in Japan.8 Prime Minister Yoshida Shigeru was well aware of the U.S. concern and played the "socialist card" by secretly encouraging the anti-American movement in Japan to draw more concessions from the United States during the Peace and Security Treaty negotiations (Igarashi, 1986:250-53).

7 For a helpful review of the literature on dependent foreign policy, see Hey, 1995. 8 New York Times, October 9, 1994; see also Schaller, 1997:135-136, 159, 165.




After the "security treaty crisis" of 1960, however, the situation gradually re- versed. By that time the Japanese economy had not only stabilized but also started to experience exponential rates of growth. The LDP had established its political dominance while the Japan Socialist Party, the largest opposition party in Japan, settled into permanent opposition. Meanwhile, there was growing evidence that seriously undermined (at least in Japanese eyes) the reliability of American defense commitments to Japan: President Nixon's 1969 Guam Doctrine (suggesting a decrease in American military commitment in Asia); the Sino-American rapprochement in 1971; the American defeat in the Vietnam War in 1975; and President Carter's proposal to withdraw U.S. troops from Korea by 1982 (aborted later by a strong domestic opposition), among others. The fear of abandonment led Japan to increase its commitment to the alliance, including expansion of the roles and missions of Japan's Self-Defense Forces, participation in the U.S.-Japan joint military exercises in the Pacific, and greater financial contribution to the U.S. bases in Japan. Although Japan's skepticism waned somewhat with the emergence of hawkish President Ronald Reagan in the 1980s, the end of the Cold War renewed its fear of abandonment as more Americans came to challenge the wisdom of maintaining the military bases in Japan (Johnson and Keehn, 1995; Carpenter, 1997/98). Snyder's theory of alliance politics helps explain why Japan continues to be accommodating to U.S. wishes even though the power gap between the two countries is substantially narrower today than it was in the 1950s.

Is asymmetric interdependence really a source ofJapan's responsiveness to U.S. pressure? How does my argument stand against the empirical evidence? Before conducting case studies to test the validity of my argument, however, I will briefly review the existing studies on gaiatsu and Japan's foreign aid policy. The literature presents sharply contrasting views, and the role of gaiatsu remains contested. In the following section I examine the two major works on this subject and address their common methodological problem.

The Common Methodological Problem Although a number of analysts have addressed the issue of gaiatsu inJapan's foreign aid, Robert Orr (1990) and Dennis Yasutomo (1995) offer the most comprehensive treatment of this question. In essence, the two scholars disagree over the extent to which gaiatsu shapes Japan's aid policy. Orr emphasizes the role of the United States. He argues that "when the Secretary of State or the President requests Japan to increase aid to certain countries or regions, there is a much greater likelihood that Tokyo will agree since it is assumed that Washington places relatively high priority on the matter" (1990:107). Yasutomo, on the other hand, downplays gaiatsu as a major determinant of Japan's aid policy. He observes Japan's rising influence in international development banks, such as the World Bank and the Asian Devel- opment Bank, and asserts that in those institutions Japan's policy has become far more "proactive" and assertive than suggested by the proponents of the gaiatsu thesis. While not totally denying the role gaiatsu plays, Yasutomo (1995:42-58) dismisses the notion that Tokyo is only passively reacting to foreign pressure and contends that it has its own agenda and strategy in its pursuit of foreign aid policy.

In addition to the role gaiatsu plays, Orr and Yasutomo sharply differ on the significance of bureaucratic politics in Japan's aid decision-making. Orr characterizes Japanese foreign aid policy largely as an outcome of pulling and hauling among the Ministries of Foreign Affairs (MOFA), Finance (MOF), International Trade and Industry (MITI), and Economic Planning Agency (EPA). As he notes (1990:3), "Each ministry approaches the aid process largely from its own parochial interests and therefore policy is subject to intense bargaining." For Orr, this intra-governmental conflict is the major reason that gaiatsu plays an important role




inJapan's foreign aid policy. In his account, gaiatsu plays a role because the Ministry of Foreign Affairs intentionally uses it to "augment the ministry's clout in pushing a policy position through the system" (1990:12). Lacking a strong domestic con- stituency, MOFA often relies heavily on gaiatsu as one of the few instruments available to it in its battle with the Ministry of Finance over budgets necessary for its foreign aid program. In contrast, Yasutomo sees Japan's aid decision-making to be far more centralized. He clearly characterizes the Japanese government as a purposive entity, capable of defining the "national interest" and pursuing consistent and coherent foreign aid policy (1995:42-48, 146). Yasutomo emphasizes the autonomy and proactivity ofJapan's foreign aid policy based on his observation that Japan defines its own interests, rather than merely responds to external pressures in formulating policies. It appears, then, that the competing analytical frameworks of Orr and Yasutomo (bureaucratic politics vs. rational-actor) critically affect their assessment of the role gaiatsu plays in Japan's foreign aid policy.

My own argument comes closer to Orr's with respect to the role of gaiatsu.Japan's foreign aid policy is not as "independent" or "assertive" as Yasutomo contends. Japanese leaders are unwilling to pursue policy goals in the face of serious objections from the United States. Japan's foreign aid policy thus remains fairly constrained by U.S. desires. Yet I share with Yasutomo the view that the Japanese government is far more unified than Orr describes. I contend that gaiatsu plays an important role in Japanese foreign aid policy, but the reason Japan is reactive to gaiatsu is not because the government is incapable of pursuing a coherent policy due to bureaucratic politics, but because Tokyo is concerned about a major disruption in U.S.-Japan relations. As I noted in the previous section, the asymmetry of interdependence makes Japan sensitive to American preferences. The higher degree of dependence on the United States makes it costly for Japan to forego the bilateral relations. Concern for a deterioration of the bilateral relations thus alters the cost-benefit calculations of Japan's policy options and leads Tokyo to modify its initial policies. My argument thus is twofold: First, gaiatsu continues to shapejapan'sforeign aid policy; second, Japan's responsiveness to gaiatsu derives not from the bureaucratic politics but from the asymmetric interdependence between the United States and Japan and the resulting fear by Tokyo of a major disruption in thle bilateral relations.

Aside from the key differences between my argument and those of Orr and Yasutomo, one fundamental issue needs to be raised. Both Orr and Yasutomo fail to conduct a methodologically rigorous analysis. As a result, their conclusions provide only a partial answer to the question of gaiatsu inJapan's foreign aid policy. I will explain their problems in turn.

As noted, Orr stresses the role of gaiatsu in Japan's foreign aid policy. He argues that the complexity ofJapan's foreign aid decision-making invites gaiatsu to play a significant role. There is, however, a bias in his case selection. He conducts several case studies where Japan either started or increased its ODA to a given recipient country under U.S. pressure. The cases include Jamaica (1981 and 1983), the Caribbean Basin countries (1982), Sudan (1982), Egypt (1982), Pakistan (1982), and the Philippines (under both Marcos and Aquino). Orr also examines the cases where Japan was under pressure to cut aid, including Vietnam (after 1978) and Nicaragua (after 1982). In all cases, U.S. pressure "worked" in the sense that it produced the results Washington wanted from Tokyo. Nonetheless, most of the cases he selects fall into either one of the two categories: (1) Japan had relatively weak interests in the country in question (amaica, Sudan, Pakistan, and Nicaragua), or (2) the interests of Japan and of the United States were largely consistent (Egypt and the Philippines). In the first category, Japan is likely to yield to U.S. pressure because the cost of giving aid to a country where Japan has few interests is outweighed by the risks of damage toJapan's relationship with the United States. Because the cases in this category are not important to Japan, Tokyo is more likely to opt for




cooperation than confrontation with the United States. In the second category, we should also expect Japan to act in accordance with U.S. wishes. But the cases in this category cannot strictly be called examples of gaiatsu since U.S. "pressure" required changes injapan's policy that are largely consistent withJapan's own interests. While not a source of oil import, Egypt was perceived as a key political player in the Middle East, whose stability was crucial for resource-poor Japan. The significance of the Philippines was largely commercial, although Tokyo had strong interests in the political stability of the nation for regional security reasons.9 It is difficult to assess the effects of gaiatsu by examining the cases where U.S. and Japanese interests largely converged. Concentration of the cases in those two categories led Orr to overestimate the significance of gaiatsu.

Yasutomo suffers a similar problem, only in the opposite way. He examines Japan's policy in multilateral development banks (MDBs) and finds its behavior more proactive and assertive than is normally depicted in the literature. As he notes (1995:61), "Multilateral diplomacy emerged as a particularly active and conspicuous feature of Japanese foreign policy from the mid-1980s through the mid-1990s. Tokyo's activities in the International Bank for Reconstruction and Development (IBRD, or World Bank), Asian Development Bank, and European Bank for Recon- struction and Development serve as the core of this activism in the international financial institutions." However, Japan's interests in the MDBs are largely consistent with those of the United States. Despite its rising status in the MDBs, Japan has shown no intention to challenge the U.S. dominance; rather, its central goal remains to play the role of a supporter, which is largely what the American expectation of Japan in those institutions has been. As Yasutomo himself writes (1995:70), "A U.S. Treasury Department official who worked with the Japanese in the IBRD during the late 1980s reports that the United States and Japan were the "anchor" on many policy issues and worked together closely. He observes that both countries agreed on policies 80 to 90 percent of the time." Although there have been occasional disagreements, such as the debate over the role of government in economic growth as reflected in the World Bank study EastAsian Miracle (1993), they hardly constitute a serious source of diplomatic contention between the two countries. In the absence of fundamental conflict of interests, it is easier forJapan to pursue "proactive" and "assertive" policy, or at least to appear to be doing so. The focus on multilateral development banks necessarily leads Yasutomo to overemphasize "independence" and "assertiveness" in Japan's foreign aid policy.

It should be noted that Yasutomo has a chapter examining economic assistance to the former Soviet Union, a case whereJapan's interests apparently diverged from those of the United States. Washington, especially under the Clinton administration, was a strong supporter of Russian aid, while Tokyo remained a reluctant player due to the Northern Territories dispute. But here, Yasutomo makes a rather confusing argument. He attributes Japan's changing attitude toward greater participation in multilateral aid packages to Russia to the pressure from the United States and the other G7 countries (1995:163). Nonetheless, he refuses to call Japan's behavior "reactive," saying that "the external environment plays a significant role in shaping Japanese behavior, but not because Japan lacks a policy or is particularly vulnerable to external pressure" (1995:176). This article also examines Japan's economic aid to Russia as a case study but will present a different interpretation than the one offered by Yasutomo.

Yasutomo's contribution is that he revealed the more dynamic and strategic (in the sense of ends-means calculation) nature of Japan's foreign aid policy than is

9 In addition, both countries were considered critical for the security interests of the Western alliance during the Cold War, and thus became major recipients of Japan's strategic aid in the 1980s. See Yasutomo, 1986.




depicted by the foreign pressure thesis and the bureaucratic politics model. Yet his definition of "activism" appears too inclusive to allow useful comparison between his arguments and those he criticizes, especially Orr's. For example, while asserting thatJapan's MDB policy moved toward greater activism in the 1980s and 1990s, he notes (1995:143) that such activism was driven in part by the foreign pressure calling for a reduction ofJapan's huge trade and current account surpluses. What Orr would call Japan's reactivity, then, Yasutomo calls the case ofJapan's proactivity. This leads us to think that the cleavage between Orr and Yasutomo is largely a matter of definition rather than substance. Yasutomo defines "activism" and "autonomy" in terms of the ability oftheJapanese government to "define" its own national interests rather than the ability to "pursue" policies that are inconsistent with U.S. wishes. While the two are closely related, they need not be contradictory: the Japanese state can be highly purposive and still responsive to U.S. pressure. Moreover, following Yasutomo's definition, Japan's "proactive" and "assertive" foreign policy approach is not a recent phenomenon but a stance that has been in practice ever since Prime Minister Yoshida Shigeru "defined" Japan's postwar national interests as the alliance with the United States and the concentration of economic recovery rather than substantial remilitarization.

A review of Orr's and Yasutomo's analyses reveals a common methodological pitfall. They both focus on the cases that are more, rather than less, likely to prove their own arguments. As a result, their analyses are insufficient to assess the extent to which gaiatsu influences Japan's foreign aid policy. In evaluating the role of gaiatsu, one must look at cases where U.S. pressure required changes in Japan's policy that are costly for Japan to make. Only in such cases does Tokyo feel "pressure" and the true effects of gaiatsu can be measured. Consideration ofJapan's interests in a recipient country (actual or potential) is thus fundamental to an analysis of gaiatsu in Japan's foreign aid policy.10

A Framework for Case Studies

The common methodological problem in Orr's and Yasutomo's analyses seems to be stemming from the failure to think gaiatsu in terms of power relations. From getting Japan to open its rice market to making it contribute more to the Persian GulfWar efforts, gaiatsu is a pressure exerted onJapan by a foreign actor (normally, but not exclusively, the United States) to act in a way thatJapan would not otherwise do. As such, gaiatsu is a form of influence attempt. To measure U.S. influence over Japanese behavior, it is imperative to know Japan's preferences. As David Baldwin notes (1985:22), "Power analysis always requires consideration ofcounterfactual conditions. If power relations involve some people getting other people to do something they would not otherwise do, the question of what would otherwise have been done cannot be ignored" (his italics). If, for example, sufficient support already existed within Japan for liberalization of the rice market (and therefore the government perceived that it was in Japan's interests to alter the protectionist policy anyway), then it is difficult to say that American pressure was the main cause for the change in Japan's rice policy.

This has been one of the major problems with the statistical studies employing U.N. voting data to measure compliance by dependent states in the Third World. Two distinct motivations are commonly at work when a dependent state pursues a foreign policy that is in line with the desires of the dominant state: consensual and

10 The difficulty of measuring/defining the "national interest" is well known. But the literature on foreign aid from the perspective of donor's national inter-est is quite extensive. See, e.g., works by Liska (1960), Morgenthau (1962), Feis (1964), Baldwin (1966, 1985), Burnett (1992), Hook (1995), and Schraeder, Hook, and Taylor (1998).




compliant. In the former, the behavior is the result of a confluence of interests. In the latter, the dependent state is pursuing a course of action that it would not otherwise have pursued. Only in the case of compliant behavior can we speak of a successful influence attempt on the part of the dominant state. However, as Ray (1981), Richardson (1981), Hey (1995), and others have pointed out, most studies on U.N. voting agreement lumps the cases of consensual and compliance behavior all together in their analyses. As a result, their assessment on the success of influence attempts by the dominant state remains inconclusive. This is exactly the problem with Orr and Yasutomo. Because neither pays sufficient attention to Japanese preferences in their case selections, the conclusions reached by each author are not necessarily compelling.

In order to evaluate the effect of gaiatsu, then, one must look at the cases where the interests of the United States and Japan diverged. In the following section I examine two such cases: (1) resumption of aid to post-Tiananmen China and (2) economic assistance to Russia under Yeltsin. In the former, Japan had interests in not suspending aid (and once it did, it had strong interests in resuming aid) for economic and geo-strategic reasons, while the United States insisted that economic sanctions be imposed on China as a punishment for the military crackdown and applied pressure on Japan to cooperate. In the latter, Japan had strong interests in not giving aid because of the unresolved territorial dispute, whereas the United States felt it critical to support Yeltsin's economic reform financially and pressured Japan to extend economic aid to Moscow. In both cases, there is a dissimilarity of interests between the United States and Japan; hence, if Japan acts in accordance with American wishes, then the United States has successfully influenced Japanese foreign aid policy behavior.

It must be noted that there is an inherent problem in trying to make a strong causal inference from so few case studies. "The more evidence we can find in varied contexts," argue Gary King, Robert Keohane, and Sidney Verba (1994:30), "the more powerful our explanation becomes, and the more confidence we and others should have in our conclusions." Nonetheless, the problem of "too many variables, too few cases" cannot easily be avoided in most political analyses (Lijphart, 1971). To alleviate this problem at least partially, I employ a method called "structured, focused comparison" suggested by Alexander George (George, 1979; George and McKeown, 1985). George argues that a researcher's confidence in causal inferences from small-N, nonstatistical studies can be enhanced if she "defines and stan- dardizes the data requirements of the case studies ... by formulating theoretically relevant general questions to guide the examination of each case" (George and McKeown, 1985:41). Such a strategy allows the researcher to focus on "those aspects of each case that are believed to be relevant to the research objectives" (ibid.). The following five questions will guide my two case studies: (1) What are the Japanese preferences and original position/policy? (2) What are the U.S. preferences and position/policy? (3) What is the nature of American influence attempts and how did Japan's policy change? (4) To what extent can Japan's policy change be attributed to bureaucratic politics? (5) To what extent can Japan's policy change be attributed to gaiatsu? Questions (1) and (2) examine the extent to whichJapan's and America's interests diverged. Question (3) investigates the American influence attempt and Japan's response. Question (4) asks whether and how much Japan's policy change can be explained by intra-governmental conflict, an alternative account of why Japan is responsive to U.S. pressure. Question (6) examines the plausibility of my own argument-that policy change was brought about by American pressure.




Resumption of Aid to Post-Tiananmen China The resumption of aid to China after the 1989 Tiananmen Square incident represents a case of gaiatsu where Tokyo was forced to act against its own interests. The military crackdown of pro-democracy demonstrators in Beijing led the major powers in Europe and North America to impose economic and diplomatic sanctions against China. As the largest aid donor to China (accounting for more than 50 percent of all the bilateral ODA China receives annually), Japan was under great pressure to join, and then sustain, Western efforts to punish Beijing.

Japan's Preferences and Original Position

Japan, however, was highly reluctant to pursue a confrontational approach to Beijing. China is an important neighbor for Japan, and the government in Tokyo felt that it was not in its best interest to jeopardize the relationship with Beijing by imposing severe sanctions. First and foremost, Japan had much larger economic stakes in China than did other advanced industrial nations. China has been a significant trading partner for Japan, providing a rapidly expanding market, a source of raw materials, and an off-shore production base for Japan's declining industries. Second, the geographic proximity meant that Japan also had strong security interests in internally stable and externally moderate China. In particular, officials in Tokyo were concerned about a massive outflow of refugees and arms build-ups as possible consequences of a politically unstable and economically stagnant China. As China remains a key source of peace and stability in the Asia-Pacific region, it was essential for Tokyo to maintain a stable and friendly relationship with Beijing. 1I

Japan's initial response to the bloody massacre at Tiananmen Square was thus fairly restrained. Although the Japanese government declared the military oppression "regrettable," it did not accuse the Chinese authority directly. Instead, it stressed Japan's "special relationship" with China. Prime Minister Uno Sosuke told a press conference two days after the incident that "Japan-China relations is different from U.S.-China relations or U.K.-China relations. When I was a foreign minister, I clearly stated that Japan invaded China. China is our neighbor and we share bitter history. At least at this moment I have no intention to impose sanctions."'12 TheJapanese government maintained that sanctions were counterproduc- tive. Officials in Tokyo argued that punitive measures would only strengthen hard-liners in Beijing and provoke nationalistic reactions. The measuresJapan took immediately after the incident were essentially nonpunitive. They included urging Japanese nationals to leave Beijing, calling for voluntary travel restrictions to China-bound Japanese tourists, and granting visa extensions to Chinese students in Japan.

U.S. Preferences and Policies

In contrast, the American position on the Tiananmen Square incident was more critical. Soon after the military crackdown, President George Bush stated: "The United States cannot condone the violent attacks and cannot ignore the consequences for our relationship with China." Although Bush cautioned against a hasty

II There is also the psychological factor. The sense of guilt, stemming from its prewar and wartime atrocities in China, continues to play a role in the conduct ofJapan's policy toward China. There has been an implicit understanding on both sides that Japan's ODA to China serves as a defacto reparations for the war, the claim declined by the Chinese government as a sign of goodwill when the Peace Treaty was concluded between the two countries in 1978 Since then, China has been one of the largest recipients ofJapan's ODA ForJapan's stakes in China, see works by Whiting (1992), Watanabe (1993), Zhao (1993), and Wang (1993)

12 Quoted in Nihon Ketzai Shinbun, June 6, 1989



712 Gaiatsu and Japan's Foreign Aid

and imprudent move in light of America's long-term interests in China, he nonetheless halted arms export and military personnel exchange and granted visa extensions to Chinese students studying in the United States. European countries took a similar stance. For example, British Prime Minister Margaret Thatcher expressed "utter revulsion and outrage" at the slaughter. Two days after the incident, the British government suspended arms sales and postponed governmental exchanges with China. West German Chancellor Helmut Kohl noted: "The rulers in Beijing will have to realize sooner or later that economic progress is impossible without human and civil rights. The call for freedom cannot be squashed by tanks in the long run." In addition to the ban on military sales, Bonn suspended export credit guarantee and DM500 million in bilateral development aid. French President Fransois Mitterrand declared: "A regime which has to fire on the youth it has created ... in order to survive has no future," and froze all links of bilateral ties with Beijing except for peace negotiations on Cambodia. 13 The European nations later prepared a list of sanctions to be imposed collectively upon Beijing. The list, announced at the EC council meeting held in Madrid onJune 27, included: (1) ban on arms sales, (2) suspension of high-level official contacts, (3) freeze on new official credits and economic aid projects, (4) reduction of cultural and technological cooperation programs, (5) call for a suspension of World Bank loans, and (6) prolongation of visas for Chinese students studying in Europe.

Nature of Influence Attempts and Japan's Policy Change

As the United States and the European Community maintained strong criticism of the Chinese authority for the June 4 mass killings and for the subsequent arrests of leaders of the pro-democracy movement, Japan found it increasingly difficult to sustain its moderate stance on Beijing. Tokyo was accused of being mild on the human rights abuses in China in order to protect its economic interests there. Indeed, by June 10 some Japanese companies had begun sending their staff back to China to manage existing contracts and gather information. The move was severely criticized by foreign sources who claimed that Japan was attempting to dominate the China market by taking advantage of the temporal evacuation of the Western businesses from China. This caused the Ministry of Foreign Affairs to instruct Japanese firms to take precautions in their action and not to be seen as if they were trying to monopolize the Chinese market. The Japanese government's reserved stance was also under attack at home. Two days after the incident, the chairman of the Nissan Co., Ishihara Takashi, told a press conference that the crackdown was a "threat against humanity" and that the record of the oppression and atrocities the Japanese military committed to the Chinese people during World War II should not keep the present government from taking a tougher position on China. Those pressures eventually forced Tokyo to change its initial position on sanctions. OnJune 20 theJapanese government announced it would postpone new ODA, including the $5.4 billion loan program, and suspend high-level contacts with Chinese officials. As figure 4 indicates, the suspension of new aid caused the temporal decline ofJapan's aid flow to China in subsequent years. Meanwhile, the Japanese government pursued a quiet diplomacy, trying to lift the sanctions and to normalize its relations with Beijing as quickly as possible. But rather than moving alone, it sought to realize the goal within a collective framework. At the Group of Seven summit meeting held in Paris a month after the crackdown, the Japanese delegation tried to restore China's broken ties with the Western world. Prime Minister Uno and Foreign Minister Mitsuzuka Hiroshi told their counterparts that outright criticism would only stiffen the Chinese government. They emphasized the

13 For the West European response, see Washington Post,June 7, 1989; Financial Times,June 30, 1989.




1200

1000

800L

0

600-

400

200 r

0, __

1985 1986 1987 1988 1989 1990 1991 1992

Year

FIG. 4. Japan's Aid Flow to China (Source: Ministry of Foreign Affairs,Japan's ODA: An Annual Report, various years)

danger of isolating China from the international community, noting that a continuation of relationship would be the best way to promote democracy in the country. At the working level, Japan's Foreign Ministry engaged intensively in the ground- work to prevent harsh wording from being inserted in the political declaration to be announced at the end of the summit. In the end, the vigorous lobbying efforts brought at least a partial victory to Japan. While the political declaration criticized the Chinese government openly, no new sanctions were introduced. The declaration only restated the sanctions that had already been announced by the individual members. Moreover, it expressed the G7's strong desire to avoid China's international isolation, although it was Beijing that was expected to initiate a move toward that end.

For a large part, Japan's partial "success" at the Paris summit stemmed from the fact that the Bush administration was also reluctant to impose severe sanctions against China. From the outset of the incident, the U.S. government was divided




over how strongly Beijing should be punished. Congress took a hard-liner approach. Soon after the incident, the House and Senate passed concurrent resolutions condemning the Chinese government for the suppression of pro-democracy demonstrators. On June 29, the House unanimously passed an amendment to the foreign aid bill, introducing new sanctions in addition to those previously announced by President Bush. The new sanctions included: (1) suspension of new and previously authorized funds by the Overseas Private Investment Corporation and Export-Import Bank, (2) a ban on the export of satellites and crime control equipment, and (3) halt in nuclear energy development cooperation. President Bush, on the other hand, took a soft-line approach. While declaring the incident intolerable, he opposed taking any measures that could lead to a total break of the U.S. relationship with China. "I want to see us (the United States and China) preserve the relationship," Bush told a press conference, "because it was this relationship and the relationship of other Western countries that brought some economic openness and some change toward more individual expression in China."14 Although Bush eventually approved the new sanctions introduced by Congress, he succeeded in adding a provision that allowed him to wave any sanctions if he determined it was in the "national interest" of the United States to do so. 15

The division in Washington, however, did not necessarily leave Japan with more options with respect to policy toward China. Despite President Bush's soft-line approach, the tension between Washington and Beijing increased over the treatment of Fang Lizhi, the Chinese physicist and pro-democracy activist (and the most wanted by the Chinese authority). The United States had granted refuge to Fang in the U.S. embassy in the aftermath of the military crackdown. The Chinese government responded by issuing an arrest warrant for Fang, demanding a surrender of the dissident. Bush refused. Over the course, the Fang Lizhi question became a symbolic and emotional matter between the two nations. For the United States, granting refuge to Fang meant more than saving the life of a political dissident. It was a test for American commitment to democracy and human rights, a failure of which would seriously undermine U.S. credibility abroad and President Bush's political standing at home. For Beijing, the Fang Lizhi question was a case of foreign interference into domestic affairs and therefore a source of national humiliation. As the tension grew between Washington and Beijing over the fate of the dissident, Bush pressured Japan to sustain its economic sanctions, especially the postponement of the $5.4 billion loan program to China. In October 1989 Under-Secretary of State Robert Kimmitt told Japan's Deputy Foreign Minister Owada Hisashi that the United States would not abruptly lift the ban on economic assistance to China. In March 1990 Secretary of State James Baker told Foreign Minister Nakayama Taro that the United States was negative about the idea of resuming aid to China except for humanitarian assistance. As late as May 1990 President Bush's national security advisor Brent Scowcroft warned former Foreign Minister Mitsuzuka Hiroshi that "the United States does not want to see the loans to China being restored too quickly." 16

The Tiananmen incident also occurred during a politically sensitive period in U.S.-Japan relations. Just a few weeks before the incident, the U.S. government named Japan an "unfair" trader under the Super 301 provisions of the 1988 U.S. Omnibus Trade Bill. In addition, there was a growing resentment and fear in the United States ofJapan's "buying up America," triggered by the purchases of Colum- bia Pictures by Sony (September 1989), of the Rockefeller Center by Mitsubishi

4 New York Times, June 27, 1989. 15 On Bush's struggle with Congress over China policy after the Tiananmen Square incident, see Skidmore and

Gates, 1997. 16 Nihon Keszaz Shinbun, October 5, 1989, and March 5, 1990; Asahi Shmnbun, May 19, 1990




(October 1989), and others. By the end of 1989, there were more than ten major acquisitions by Japanese firms of American assets, totaling over Y2,400 billion.17 The fear of Japan's economic power led to the rise of "revisionism" in the United States. Revisionists generally portrayed the Japanese capitalism as functioning under different rules and norms from those of the West and insisted that the rise of Japan's economic power should be contained before it would further undermine the U.S. economy. 8 Under these circumstances, the Japanese government had to be concerned about how its conduct of China policy might affect overall U.S.-Japan relations. In particular, the fear of provoking the U.S. Congress imposed tacit yet powerful constraints on the timing of Japan's resumption of aid relations with China. In the end, the Foreign Ministry concluded that Japan should not move ahead of the other G7 countries on the issue of sanctions' removal.19

Ironically, while Japan sustained the aid suspension to concur with President Bush's request, the Bush administration started to relax its sanctions against China. As early as July 7, 1989, President Bush gave Boeing permission to sell to China four 757-200 commercial jets, whose navigation system was on the State Depart- ment's munitions control list. In August, Bush allowed Hughes Aircraft to provide China with information on the launch of American-made satellites. In December, Bush approved the sale of three communication satellites worth $300 million to China and waived a congressional ban on Export-Import Bank loans. Two month later, the Exim Bank issued two loans to China for the first time since the Tiananmen incident-$9.8 million to finance a natural gas development project in Liaoning and $23 million to finance a subway project in Shanghai.20 The United States also relaxed the ban on high-level official contact faster than any other G7 country. In July 1989, National Security Advisor Brent Scowcroft and Deputy Under-Secretary of State Lawrence Eagleberger secretly flew to Beijing to discuss how to improve bilateral relations. The two officials re-visited Beijing in December 1989 for a similar mission, but this time their trip was made public by the Bush administration.

Other countries gradually lifted their sanctions against China as well. Canada approved a $83.4 million loan for the purchase of telecommunications equipment in August 1989 and offered a $24.1 million official credit for a chemical plant construction project in December 1989. West Germany signed a contract with Beijing to provide technical assistance on an energy development project in July 1989 and offered an official development loan worth $230 million to help finance a Shanghai subway project in November 1989. In April 1990, Bonn ended the ban on export insurance. France offered a $130 million official loan for seven infrastruc- ture-related projects in July 1989 and approved $500,000 of financial aid for an automobile joint venture in January 1990. In the following month, Paris resumed medium-term lending and in May 1990 it granted a new official loan for a telecommunications project in Human and Heilongjiang Provinces.21 The aid sanctions imposed on China by the West were to apply only to new loans and grants and not old ones, that is to say, the grants and loans that were officially agreed upon with Beijing before the Tiananmen incident were not to be affected. In reality, however, the distinction between "new" and "old" aid was often blurred and their definition a matter of political interpretation. The gradual relaxation of aid sanctions by the other G7 countries eventually led Japan to resume the ongoing aid projects beginning in December 1989. Nonetheless, Tokyo kept its ban on new aid, including the so-called Third Yen Loans worth $5.4 billion, until November 1990.

'7Japan Economc Journal, November 11, 1989 18 For revisionist arguments, see, e.g , Fallows, 1 989,Johnson, 1988, 1989, Prestowitz, 1988, and van Wolferen, 1989 19Asahz Shtnbun, September 23 and October 9, 1989, Nzhon Kezzai Shzn&un, August 6, 1989, and April 10, 1990. 20 New York Times, July 8 and December 20, 1989, February 6 and 9, 1990, Ni/hon Kezza: Shinbun, February 10, 1990 21 On the relaxation of sanctions by the Western nations, see, e.g, International League for Human Rights, 1991




The turning point came two weeks before the July 1990 Houston summit. On June 25 the Chinese government allowed Fang Lizhi to leave the country. Although Beijing stressed a health problem as the reason for Fang's departure, the decision was clearly political: by allowing the departure of the dissident at this point, the Chinese government sought to soften the G7's (especially American) position on China to be discussed at the Houston summit. While the release of Fang did not immediately lead to a removal of sanctions by the United States due to strong opposition from Congress, it made a favorable environment for Japan to resume yen loans to China. By the time of the Houston summit, President Bush had decided to endorse, if tacitly, Japan's move toward normalization of an aid relationship with Beijing. He told a press conference thatJapan is a sovereign state and, as such, can make its own decisions on many issues. Later, Bush toldJapan's new Prime Minister, Kaifu Toshiki, that the United States would not oppose Japan's plan to resume the $5.2 billion loan program to China. If Beijing's decision to let Fang go was political, so was Bush's decision to endorse Japan's resumption of yen loans to China. Bush felt it necessary to reciprocate when Beijing permitted the departure of the dissident, but the hostility toward China prevailing in Congress prevented him from taking any action that would appear too conciliatory. By endorsing Japan's plan to resume yen loans, Bush sought to send a positive signal to Beijing.

In Houston, Prime Minister Kaifu officially announced Japan's decision to resume yen loans to China. Bush immediately endorsed the decision. The European leaders followed Bush in giving tacit endorsement to Japan's resumption of yen loans. Nonetheless, they insisted that their sanctions would remain unchanged. Consequently, the summit's political declaration was ambiguous enough for each participant to claim victory at least to its domestic constituents. The European and North American members contended that sanctions remained in force. Japan, on the other hand, emphasized the summit meeting's approval for its plan to resume the $5.2 billion loan program to China.

The Houston summit left a misleading impression to many that Japan openly diverged from the other G7 nations on policy toward China. In fact, it was hardly the case that Japan took an independent move in lifting aid sanctions. Despite Kaifu's announcement in July in Houston, Tokyo did not resume aid to China until November 1990. By that time, most G7 countries had already normalized their aid relations with China. As noted, the Bush administration had waved the congressional ban on Exim Bank loans to China. France had offered a new official loan to China prior to the Houston summit. In October 1990, West Germany also granted China new loans worth DM5 million. The World Bank resumed humanitarian loans in February 1990 and nonhumanitarian loans in December.22 Despite their strong criticism of the Chinese government, most other G7 countries did not strictly adhere to their stated commitment to punish Beijing for its human rights violations. They made many exceptions in their application of economic sanctions whenever their private firms were in danger of losing business opportunities to their foreign competitors in China.

The Extent to Which Japan's Policy Change Can Be Attributed to Bureaucratic Politics

As other nations began relaxing their sanctions against China, the domestic pressure grew on the Japanese government to resume the $5.4 billion loan program. Within the ruling Liberal Democratic Party (LDP), Secretary General Ozawa Ichiro urged Foreign Minister Nakayama Taro to move quickly on the issue of resumption of the loan, suggesting that Japan should act independently of the other G7 countries if

22Asahz Shznbun, November 3, 1990, New York Times, December 5, 1990.




necessary. Two days later, former chairman of the LDP's Policy Research Council Watanabe Michio in a TV interview said that "Japan need not consult the United States on matters that concern the well-being of the Chinese people." Similarly, Gotoda Masaharu, an influential LDP politician and a vice chairman of the Japan- China Association, urged Prime Minister Kaifu to resume full loans to China before the G7 summit in Houston. Within Japan's bureaucracy, the Ministry of Finance (MOF) was most enthusiastic about resuming aid to China. Because it oversees Japan's Overseas Economic Cooperation Fund (OECF), an implementing agency of loan aid, MOF had strong interests in, and influence over, the loan component of Japan's ODA. Suspension of yen loans was troublesome for OECF as it would cause the problem of unspent budget, which could undermine the organization's standard operating procedures and long-term lending schemes. Although MOF and OECF were initially quiet about the suspension of yen loans, their concern and frustration grew when it seemed inevitable that the sanctions were to continue beyond April 1990 when the new yen loans to China (The Third Yen Loans) were scheduled to start.23 Finally, the business community expressed frustration toward the government's nonaction. In particular, contractors of Japan's ODA projects in China were concerned about, and lobbied against, prolongation of aid sanctions. The Japan-China Association on Economy and Trade, an influential business association composed of Japan's leading companies, submitted letters to Prime Minister Kaifu, requesting an early resumption cf yen loans to China.24

The domestic voices calling for a lifting of the aid sanctions, however, fell short of changing the existing policy sustained by the Ministry of Foreign Affairs (MOFA). While frustrated, MOF did not openly challenge MOFA's handling of the China question. As one observer noted (Awanohara, 1995:171), "MOF officials did not feel human rights and other non-economic factors were their kind of issues, belonging more to their Foreign Ministry colleagues." MOF was well aware that when to lift sanctions was a political decision, requiring diplomatic coordination among G7 countries, and as such it was well beyond its jurisdiction. The business community also did not pose a major challenge to MOFA's leadership. Although the business sector hoped for an early resumption of yen loans, it did not necessarily want the government to move ahead of the other advanced industrial countries if that would isolate Japan from the international community. Moreover, its primary patron in the government, the Ministry of International Trade and Industry (MITI), remained cautious on the issue. Concerned about the deteriorating U.S.-Japan economic relations, MITI was reluctant to take measures that would potentially provoke Washington.25 In the end, the growing domestic pressure did not lead to a major change in Japan's China policy led by MOFA.

The Extent to Which Japan's Policy Change Can Be Attributed to Gaiatsu

Despite growing frustration at home for continuation of aid sanctions on China, it was the consent of the U.S. government that allowed Tokyo to normalize aid relations with China. Although MOF and the Japanese business sector were particularly anxious to see an early resumption of Japan's ODA to China, they, too, felt that maintaining a stable and smooth relationship with Washington was more important.

Many analysts have characterizedJapanese policy toward post-Tiananmen China as active and autonomous. For example, Quansheng Zhao (1993:162) argues: "Clearly, the Japanese action in regard to aid issues with China was significantly

23 Nihon Kezza: Shinbun, May 14, 1990. 24 See NMcchu kezza: kyoka: kazho, February 21, 1990. 25 Nihon Kezza: Shunbun, January 28, 1990.




ahead of other Western countries, particularly the United States." Qingxin Wang (1993:634-35) maintains: "The growing assertiveness of [Japan's China] policy was evident at the Houston G-7 summit in the summer of 1990, where Prime Minister Kaifu took a bold step in declaring that Japan would resume its third package of yen loans to China." In a similar vein, Yasutomo (1995:74) asserts that "Japan did not merely follow the lead of or respond to American and international pressure on the China issue"; instead, "Japan exhibited a rare aggressiveness in distinguishing its views from those of other G-7 nations." The interpretation given by these scholars is largely consistent with the official view presented by Japan's Ministry of Foreign Affairs. The 1990 Diplomatic Bluebook (Ministry of Foreign Affairs, 1990:20) states that "[it] was symbolic of the present era that Japan decided to act on Asia-Pacific issues on its own initiative and responsibility and that the other leaders [in Houston] respected this decision."

A closer look, however, reveals that Japan's actual behavior does not fit these interpretations. To be sure, Japan was the strongest advocate for engagement (as opposed to confrontational) strategy and lobbied intensively for the sanctions' early removal. But it cautiously followed the measures taken by the United States and other advanced industrial nations both in time and substance. Gaiatsu was instru- mental in Japan's decisions to impose economic sanctions and to lift them. On the former, Tokyo was initially reluctant to take punitive measures on grounds that they would push China toward further isolation. It nonetheless suspended the $5.2 billion five-year loan program as the United States initiated its sanctions and after the criticism grew thatJapan was attempting to dominate the China market. On the latter, it was only after U.S. President George Bush gave the green light that Tokyo announced its plan to resume aid. Moreover, contrary to the common view, Japan was not the first among the advanced industrial nations to lift economic and diplomatic sanctions on China. The resumption ofJapan's yen loans and high-level official contacts came only after the United States and other G7 members began to relax their sanctions. The story ofJapan's policy toward post-Tiananmen China tells us that gaiatsu played a significant role in shaping Japan's behavior. In the absence of gaiatsu, Japan's policy toward China certainly would have been different from what it actually was.

Economic Assistance to Russia Aid to Russia represents another case of gaiatsu demanding Japan to act against its own will. Assistance to the then Soviet Union became a major agenda at the G7 summit in Houston inJuly 1990. West German Chancellor Helmut Kohl urged the other Summit participants to extend a unified financial assistance to Gorbachev to help carry out his economic and political reform programs in the Soviet Union. West Germany had strong interests in offering immediate and direct financial assistance as the reward for Gorbachev's acquiescence to the coming reunification of Germany.

Japan's Preferences and Original Position

The issue of Soviet aid, however, split the summit members. Japan was strongly opposed to the idea of extending financial assistance to Moscow. Tokyo had long taken the position that no full-scale assistance would be forthcoming until the "Northern Territories" (the four islands north of Hokkaido), which were acquired by the Soviet Union at the end ofWorld War II, were reverted toJapan. The position, known as "seikeifukabun," or "non-separation of politics and economics," constituted the core of Japan's Soviet policy for many years. Japan thus objected to Kohl's proposal. At the summit meeting in Houston, Prime Minister Kaifu and Foreign




Minister Nakayama told the other leaders that except for limited humanitarian assistance Japan would not give aid to Moscow until the reversion of the Northern Territories.

U.S. Preferences and Policies

While not as strongly opposed as Japan, the United States was also reluctant to provide aid to Moscow. The U.S. government was not fully convinced by the prospect of reform in the Soviet Union. The Bush administration remained skeptical about Gorbachev's commitment to reconstruct the Soviet economy according to market principles. It maintained that large-scale financial assistance would be wasted until economic reform in the Soviet Union progressed enough to create a working market economy. In the end, the split among the G7 countries on, and especially the U.S. reluctance to, joint aid to the Soviet Union allowed Japan to continue its hard-line stance on aid without being isolated within the G7.

The U.S. position, however, began to shift in 1991. The aborted coup attempt to oust Gorbachev in August that year made Washington realize that the cost of not supporting Gorbachev's liberal regime in Moscow could be quite high. The political imperative for supporting Gorbachev and his reform efforts through provision of aid became veiy imminent. Then, in December 1991, the Soviet Union collapsed. The event accelerated the Western momentum for extending support to its former Cold War enemy. In particular, the dissolution of the Soviet Union into a dozen independent republics led the United States to tilt toward the pro-assistance camp as loosened central control in the former Soviet Union posed the danger of a spread of nuclear weapons abroad. The Bush administration began to play an active role in the Western efforts to assist Russia and the other republics. InJanuary, the United States hosted a donor conference in Washington, attended by forty-seven nations and seven international organizations, to discuss assistance to the Commonwealth of Independent States (CIS).

Nature of Influence Attempts andJapan's Policy Change

The growing U.S. enthusiasm for Russian aid sent an alarming signal to Tokyo, as it would undermine the basis ofJapan's linkage strategy. Although President Bush expressed sympathy to Japan's position on the Northern Territorial dispute and supported its early resolution, such support increasingly came more in the form of words than deeds. In February 1992 Secretary of StateJames Baker announced U.S. support for a plan to establish a multi-billion-dollar fund to stabilize the Russian ruble. The plan became materialized in March, when the G7 members agreed to create a $6 billion ruble stabilization fund to be financed through IMF. Japan reluctantly joined the project. The agreement forced the Japanese government to re-define its nonseparation doctrine. Tokyo now maintained that it would not oppose financial aid to Russia if it were channeled through multilateral institutions.

A further blow for Tokyo, President Bush and Chancellor Kohl on April 1 abruptly announced a $24 billion aid package to Russia as a G7 commitment. The package was unprecedented in its amount. It consisted of the $6 billion ruble stabilization fund that had already been agreed upon as well as $18 billion in balance-of-payment relief. Although the Japanese government insisted it had been notified of the aid package prior to the announcement, it was certainly a surprise to Tokyo in that the pledge included specific figures that had not yet been finalized by the G7 countries. To its annoyance, the pledge indicated that $11 billion of the $18 billion balance-of-payment relief would be funded by bilateral aid from individual donors. Japan warned that it had no intention to offer bilateral aid to Russia. Meanwhile,Japan's Deputy Foreign Minister Saito Kunihiko was sent to Washington




to "discuss" the issue of Russian aid with the U.S. government. The $24 billion aid package and the details of its allocation was subsequently determined at the G7 summit held in Munich in July 1992. Japan agreed to participate but refused to make any contribution other than those through multilateral institutions such as the IMF and the World Bank. However, as Japan started to provide Russia with substantial financial assistance under the multilateral framework, the prospect for a territorial settlement between the two countries grew dim.

By this time, the territorial issue had become deeply entangled in Russia's domestic politics. As was the case for Gorbachev, it was exploited by Yeltsin's political opponents to undermine his power. The conservative legislators who were opposed to any territorial concession to Japan accused the Foreign Ministry of attempting to strike an unacceptable deal with Tokyo and called for a cancellation of Yeltsin's trip to Japan scheduled in mid-September. Although the Russian Foreign Ministry was initially willing to honor the 1956 Joint Declaration, in which the Soviet government had pledged to return the two smaller islands (Shikotan and the Habomai group) upon the conclusion of a peace treaty, that position became increasingly difficult for Yeltsin to uphold by the summer of 1992. On its part, Japan demanded not only the Russian affirmation of the 1956 Joint Declaration but also a recognition of Japan's residual sovereignty of all four islands. Thus, as the two countries began the working-level negotiations on the territorial issue, they soon discovered the gap between them was much wider than they both had expected.

Four days before his departure, Yeltsin announced a postponement of his trip. The announcement and his blaming of Japan for the cancellation infuriated the Japanese government. Nonetheless, the international climate was more sympathetic to Yeltsin than to Japan. Most non-Japanese commentaries, while regretting the missed opportunity for Russo-Japanese rapprochement, were critical of Japan's strategy of linking aid and the return of the northern islands. The New York Tzmes, for example, carried an editorial criticizing Japan's "righteous, unbending course" of action and said "Boris Yeltsin deserves sympathetic understanding for his decision not to visit Japan" (September 11, 1992). The growing international criticism put Japan on the defensive: contrary to its expectation, it was Japan, not Russia, that was becoming isolated from the international community.

Meanwhile, the political struggle between Yeltsin and his opponents in the Russian Congress became fierce beginning in February 1993. Yeltsin attacked the communist-written constitution, which gave the Congress of People's Deputies the supreme law-making power. He attempted to limit the jurisdiction of the Russian Congress in order to minimize obstructions to his reform programs. The Congress resisted such pressure and sought to undermine the president's authority. The battle reached a high point on March 20. Yeltsin declared emergency rule to assume virtually unlimited powers. At the same time, he called for a national referendum on his campaign for domestic reforms as well as on his leadership. The Russian Constitutional Court ruled Yeltsin's declaration unconstitutional, and the Congress called for the resig- nation of the president. Although Yeltsin narrowly survived a secret ballot to impeach him in the Congress, his political fate was to be determined by the referendum scheduled on April 25.

In light of Yeltsin's weakening political base, Western nations once again united to support the Russian president. It was widely regarded that a fall of Yeltsin would mean a defeat of reformism and a possible return to the communist regime in Russia. The emphasis of Western assistance thereby shifted from helping Russia to helping Yeltsin personally. President Francois Mitterrand called for an emergency summit meeting by the G7 leaders. The aim of having such an ad hoc summit conference separate from the scheduled July G7 summit in Tokyo was obviously




political: to send a strong signal of support for Yeltsin and his reform efforts before the scheduled national referendum.

Japan initially objected to the idea as it would depreciate the Tokyo summit it would host in July. Moreover, officials in Tokyo maintained that the time was too short to finalize a new aid package, arguing that the $24 billion pledge that had been made a year earlier was not yet fully disbursed. In addition, the Japanese government at that time was urging Yeltsin to pay a visit to Japan before the July Tokyo summit, where he was likely to be invited as a guest. Japan was not prepared to participate in full-scale financial assistance to Russia unless some progress was made in Russo-Japanese relations. YetJapan was under growing pressure to extend full support for Yeltsin's domestic reform. At ajoint news conference with President Clinton on March 9, President Mitterrand openly criticizedJapan as "not recognizing the importance of assistance for Russia." German Foreign Minister Klaus Kinkel went so far as to argue that Japan was the major obstacle to stronger support for Yeltsin by the G7.26 Western leaders repeatedly reminded theJapanese government that supporting Russia's transition to democracy and a market economy was of vital interest to the West, and that failure to support Yeltsin's democratic regime would have disastrous consequences for the world. As oneJapanese diplomat retrospected: "We were getting pressure from all over the world and ... did not want to be blamed for 'Who lost Yeltsin?' "27 In the end, Japan proposed a cabinet-level meeting of finance and foreign ministers in Tokyo to preempt the effort toward holding an emergency G7 summit. The other G7 countries eventually accepted Japan's proposal, and a joint ministerial conference was scheduled in Tokyo on April 14, ten days before the national referendum in Russia.

Prior to the Tokyo conference, President Clinton met with Boris Yeltsin in Vancouver for the first time. Clinton pledged an offer of bilateral aid worth $1.6 billion to Russia. At the same time, he called on the other G7 nations to follow suit so that a unified aid package could be announced at the forthcoming G7 ministerial conference in Tokyo. Clinton was particularly anxious to have Japan play a leading role in coordinating a new G7 aid package. Prior to his meeting with Yeltsin, Clinton telephoned Japan's new prime minister Miyazawa Kiichi and told him that the ministerial conference should come up with a comprehensive aid package with specific figures. A day before the Clinton-Yeltsin summit, the Paris Club of creditor nations had decided to give Russia an extra ten years to repay $15 billion worth of debt. The rescheduling agreement was essential as it would enable Russia to obtain credits from bilateral and multilateral donors. Indeed, much of the $24 billion G7 aid package announced earlier remained undisbursed due to Russia's debt problem. The agreement was expected to help keep the aid flowing and pave the way for a new aid package to Russia.

The G7 joint ministerial conference held in mid-April decided on a new aid package, totaling $43.4 billion. It was nearly double the size of the April 1992 package. Of the $43.4 billion, however, only about $21.4 billion (or 49 percent) represented new funding. The rest of the package were carryovers from the April 1992 package, most of which remained unalloted due to the failure of the Russian government to implement the reform programs called for by the IMF. According to one observer (Michalopoulos, 1994:26), the new G7 aid package was little more than "a stew of various multilateral and bilateral programs widely different in concept and substance that seemed to be put in the same pot primarily for the purpose of making its total size appear unusually impressive." As was the case for the 1992 package, the amount of the new aid package was made to appear

26 Nthon Kezzat Shzlntbn, March 10, 1993, Daily Yonizurz, March 19, 1993 27 Asian Wall Street Journal, March 29, 1993




impressive to demonstrate strong Western determination to support President Yeltsin and his reform policies. Among the G7 countries, the United States made the largest contribution, pledging $5.4 billion, which included the $1.6 billion announced at the Vancouver summit. Japan also announced that it would offer bilateral aid, totaling $1.82 billion ($320 millions in grant and $1.5 billion in loans). This became the first major bilateral aid Japan pledged to Russia.

During the G7 conference in Tokyo, the Japanese government virtually abandoned the linkage strategy. On April 15, Chief Cabinet Secretary Kono Yohei told a press conference that the principle of nonseparation of politics and economics would no longer dictate Japan's Russian policy. While noting that a territorial resolution was still a precondition for a full normalization of Russo-Japanese relationship, he suggested that Japan would not make aid and other forms of economic cooperation contingent upon reversion of the northern islands. Instead, Kono emphasized, Japan would expand its economic ties with Russia more flexibly in order to facilitate changes in Russian attitude toward Japan and the territorial dispute.28

The Extent to Which Japan's Policy Change Can Be Attributed to Bureaucratic Politics

How much did bureaucratic politics affect Japan's decision to provide a large-scale aid to Moscow in 1993? During the negotiations of the Russian aid, the Japanese government remained largely monolithic. The Ministry of Foreign Affairs (MOFA) took the leading role in formulating Japan's policy toward Russia, and other ministries supported, or at least did not openly diverge from, the basic policy pursued by MOFA. MOFA had taken a hard-line approach on the issue of Russian aid. As embodied in the principle of nonseparation of politics and economics, MOFA's key stance was that Japan would not expand economic cooperation with Russia (including provision of official aid) until Moscow returned the contested Northern Territories to Japan. This position remained essentially unchanged until 1993 when the pressure from the United States and the fear of isolation in the G7 forced MOFA to abandon the linkage strategy. Of course, MOFA could have provided aid to Russia as an inducement, as Kohl did to secure German unification from Gorbachev in 1989 (Newnham, 1999). Nonetheless, MOFA was highly skeptical of the idea that aid could simply "buy" territories from Moscow given the long history of antagonism and animosity between the two countries. There had been a deep-rooted mistrust toward the Russians within MOFA, established and reinforced by such incidents as Moscow's declaration of war againstJapan in 1945 in violation of the Neutrality Pact, the deportation of an estimated 760,000 Japanese prisoners of war to harsh labor camps in Siberia, the refusal to even acknowledge the existence of the territorial dispute between the two countries after 1960, and the arrogant and less compromising bargaining style at the fishery negotiations. In the end, the low expectation of aid "return" gave MOFA little incentive to extend financial assistance to Russia.

It should be noted that an attempt to "buy" the four islands from the then Soviet Union was secretly made by a leading Japanese politician in 1991. Ozawa Ichiro, the secretary general of the ruling Liberal Democratic Party, visited Moscow less than a month before Gorbachev's scheduled visit to Japan and allegedly promised to offer $26 billion in economic packages in exchange for Moscow's surrender of the islands. Ozawa's attempt was aborted, however, as Gorbachev was politically too weak by that time to accept the offer: the Soviet leader was under severe attack at home for the loss of the Soviet empire, the disruption of the Soviet economy, and

28 Nihon Kezzaz Shznbun, April 15, 1993.




the disintegration of the Soviet state (Gelman, 1993:21-26). While Ozawa's move was a departure from the traditional hard-line approach held by MOFA, it was still a form of linkage strategy: the promise of aid was explicitly linked to the reversion of the territories. In sharp contrast, what the Japanese government did in 1993 was clearly a reversal of policy: it offered aid to Russia without the actual or promised return of the islands-something that even Ozawa would not have done.

Japan's Defense Agency (JDA) also took the hard-line approach to the Soviet Union/Russia. It did not perceive that Gorbachev's "peace initiatives" had been fully extended to East Asia to create a stable security environment in the region. Even after it stopped, somewhat reluctantly, calling the Soviet Union a "potential threat" in the White Paper on Japan's Defense for the first time in 1990, theJDA continued to view the Soviet Far East forces as a destabilizing factor for the security of the region. While acknowledging the quantitative reduction in Soviet armed forces, the JDA maintained that enormous nuclear stockpiles still existed in the Far East region (JDA, 1990). Thus, the JDA did not share the urgent need felt by some European nations and later the United States to support Russia's reform for security reasons. While Gorbachev's peace initiatives convinced the other G7 members of the utility of aid as a means of encouraging further changes in Soviet/Russian policy, the JDA (along with MOFA) remained skeptical of the political benefit of providing assistance to Moscow.

Less concerned about the territorial and security issues as MOFA and JDA, the Ministry of International Trade and Industry (MITI) nonetheless saw no compelling reasons to provide aid to Moscow. Japan did not have large economic stakes in Russia or the former Soviet Union. To be sure, it has historically been interested in Siberian oil, and after the 1973 oil crisis MITI sought to stimulate joint ventures in the Soviet energy sector by providing trade insurance and export credits (Curtis, 1977; Carlile, 1994; Mochizuki, 1995). Nonetheless, the Soviet Union never accounted for more than 2 percent of Japan's trade, and the cumulative figure of Japan's direct investment in that country from 1951 to 1989 amounted to only $222 million, or 0.09 percent ofJapan's total foreign direct investment during that period (apan External Trade Organization, 1991:479). Moreover, by the end of May 1991 the Soviet Union owed Japan $515 million in unpaid bills, and MITI suspended trade insurance for virtually all large new Japanese commercial contracts with the USSR (Gelman, 1993:45). The chronic delay in import payment, inconvertibility of the ruble, insufficient legal system, and political uncertainty turned many potential Japanese traders and investors away from Russia. As Gelman (1994:xi-xii) observes, "the business community was on the whole not interested enough in trade and investment opportunities in Russia to be motivated to exert strong pressure on the government to change course." Finally, the Ministry of Finance (MOF) was also reluctant to provide economic assistance to Moscow. Worried about the growing debt crisis and other pressing economic problems in Russia, MOF officials insisted that large-scale financial assistance from Japan should wait until more progress was made in Russia's transition to a market economy.

In short, no governmental agency in Japan was enthusiastic about the idea of offering full-scale aid to Russia. MOFA and JDA had strong reasons not to give aid due to the unresolved territorial dispute. While MITI and MOF were not as strongly committed to a resolution of the territorial dispute as MOFA and JDA, the relative lack of economic interests, coupled with Russia's domestic instability, gave them little incentive to challenge MOFA's hard-line policy toward Moscow. Given these, it is difficult to attribute Japan's decision to give up the linkage strategy to bureaucratic infighting, which was virtually absent in this case.



724 Gaiatsu and Japan's Foreign Aid

The Extent to Which Japan's Policy Change Can Be Attributed to Gaiatsu

In the end, gaiatsu played the key role in bringing the change inJapan's long-standing policy toward Russia. Japan's hard-line approach on aid was severely criticized by the major Western powers, whose stake in the political and economic reform in Russia and in the survival of Yeltsin's reformist regime was much higher than that of Japan's. As the voices for extending aid to Russia grew louder, Japan gradually modified its position, first by providing humanitarian aid and then by extending nonhumanitarian aid through multilateral institutions. At the G7 ministerial conference in April 1993, Japan pledged a substantial amount of bilateral aid to Moscow. Figure 5 shows the sudden expansion ofJapan's aid to Russia in the early 1990s when Tokyo agreed, under pressure, to join the G7 aid packages to Moscow. Although the fear of isolation within the G7 was crucial for Japan's policy change, it was really the shift in the U.S. stance that made the difference. When assistance to Moscow first appeared on the agenda of the G7 in 1990, the United States was still skeptical about the effects of such assistance. The turning point obviously was

350 -

300 -

250 /

0 .H 4 200

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

Year

FIG. 5. Japan's Aid Flow to Russia (Commitment Basis)

( 150

100

50

(Source: Ministry of Foreign Affairs, Japan's Dzplomatzc Bluebook: 1998, Japanese edition, p. 396)




the collapse of the Soviet Union. The event led the initially reluctant United States to recognize the urgency of providing substantial economic assistance to its former Cold War enemy. By the time Bill Clinton came to power, the United States became a vocal supporter of a large-scale aid package to Russia. As one observer (Carlile, 1994:431) puts it, "External pressure, and in particular pressure from the United States, has made it virtually impossible ... for Japan to not expand its commitments." The shift in U.S. position had a critical impact on Japan's subsequent decisions on aid to Russia. Had Washington been more antagonistic on the issue of Russian aid, Japan would probably have sustained the principle of nonseparation of politics and economics.

Rethinking the Reactive-Proactive Debate The cases examined above demonstrate that gaiatsu was a significant factor in shapingJapan's policy. Although Tokyo attempted to resist U.S. pressure on various occasions, in the end it backed down and altered its policy according to U.S. wishes. In the absence of gaiatsu, Japan would have acted differendy from what it actually did. In the case of China, Japan probably would have refrained from freezing ODA, or, as it did in protest to China's nuclear testing in 1995, would have halted only grant aid, which is less significant than loan aid in terms of amount. In the case of Russia, Japan would have continued the strategy of linking the provision of aid with the reversion of the Northern Territories. In this sense, the gaiatsu thesis presented by Orr provides a valid explanation of at least an important aspect ofJapan's foreign aid policy.

Why didJapan change its policy according to U.S. wishes? Why was it so responsive to American pressure? My case studies reveal that the reason gaiatsu worked is not so much that the Japanese government was divided or fragmented. Although governmental agencies and private actors had their own organizational interests, Tokyo was largely unified under the leadership of the Ministry of Foreign Affairs. It appears that the high costs of foregoing the bilateral relations stemming from the asymmetric interdependence made Japan reluctant to pursue a defiant policy vis-'a-vis the United States. In both cases, the Japanese government was worried that a pursuit of an independent policy might cause a major disruption in U.S.-Japan relations. Concern for a deterioration of the bilateral relations altered the cost-benefit calculations of Japan's policy options and eventually led Tokyo to modify its initial positions.

The case studies' findings have some important implications for the ongoing debate over whetherJapan is a "reactive state." The concept was developed by Kent Calder in a 1988 article, in which he argued that foreign pressure often plays a crucial role in Japan's decision-making. To date, criticism of Calder's reactive state thesis has centered around three key issues: (1) analytical utility, (2) empirical accuracy, and (3) sources of reactivity. In this final section I briefly review these criticisms in turn and comment on their validity in light of the findings of my case studies.

The first criticism challenges the analytical utility of the concept "reactive state." According to Stephen Anderson, Calder draws on systemic approach in international relations theory, whereby state behavior is essentially seen as reactions to the actions of other states. In this states-as-billiard-balls model, he contends, Japanese foreign policy becomes "reactive" almost by definition, and even purposive and aggressive behavior by Tokyo is seen as simply an active form of reaction to the international environment (Anderson, 1993:499-500; see also Yasutomo, 1995:44 and 49). Calder, however, uses the word "reactive" in a slightly different manner from what is ordinarily used in international relations theory. From recalling ambassadors and imposing economic sanctions to forming alliances and engaging in arms races, most state actions are some kind of reaction to the actions initiated




by the other state(s).29 Yet this was not exactly what Calder meant when he called Japan a "reactive" state. Calder's central puzzle is the apparent reluctance by the Japanese government to take policy initiatives even when doing so seems to serve Japan's own interests. He seeks to solve his puzzle by looking atJapan's fragmented political structure. Specifically, he argues that strong sectionalism in the bureaucracy, the unique electoral system (which he contends has been responsible for parochialism inJapanese politics), and weak political leadership (over bureaucracy), among others, have made Japan slow in realizing changes in the international environment and in taking appropriate measures to cope with the new realities. Calder (1988:518) conceptualizes Japan as a "reactive state" because the government is crippled by these domestic constraints, and as a result, "impetus to policy change is typically supplied by outside pressure."30 The questions that need be addressed, then, are whether Japan indeed has strong incentives to take policy initiatives as Calder claims, and whether the domestic political structure actually constrains the Japanese government in such cases, topics dealt with in the third criticism discussed below.

The second criticism faults Calder for overstating the role of gaiatsu while failing to recognize growing activism in Japan's foreign policy stance (Anderson, 1993; Yasutomo, 1995: ch. 2 and 6). Critics in this group argue that the passive, low-profile character ofJapanese postwar foreign policy has been eroding. They point to recent instances where Japan took leadership and demonstrated greater activism, such as in the Asia Pacific Economic Cooperation, Asian Development Bank, and the new Asian Industrial Development plan (AID), and claim that "proactivism" better capturesJapan's foreign policy stance today. "Japan," as Yasutomo (1995:45) writes, "is shedding the reactive, passive, unidimensional, derivative cast of its foreign policy [and] is embarking on a more active, involved, and independent diplomacy more appropriate to the new era."

Critics are right to point to Japan's growing foreign policy activism, especially since the late 1980s when Japan emerged as the world's largest creditor nation. However, there are at least two problems associated with this criticism. First, those who emphasize Japan's activist foreign policy tend to focus their analysis on Asia, where American opposition to Japan's activism remains relatively weak. As men- tioned earlier, it is only natural thatJapan's policy appears "proactive" and "autonomous" in the absence of strong American opposition. Second, critics resort to different criteria from those used by Calder when they characterizeJapanese foreign policy as being proactive. Calder describes Japan as a reactive state because he sees gaiatsu playing a key role in shapingJapanese policy. Instead of dismissing the role of gaiatsu, critics focus on demonstrating how purposive Japanese foreign policy is. For critics, Japan is proactive not because gaiatsu is insignificant but because Tokyo has interests and objectives that are domestically determined. While true in its own right, such a conceptualization blurs, rather than clarifies, the controversy because there are instances where gaiatsu plays a crucial role but the Japanese government still remains purposive, as my case studies show. By adopting inconsistent criteria, critics run the risk of turning the whole debate into a matter of semantics.

The third criticism of Calder's reactive state thesis concerns the sources ofJapan's reactivity. Critics in this group do not necessarily deny thatJapan is reluctant to take

29 For systemic approaches in international relations theory, see, e.g., Rosecrance, 1963, Kaplan, 1957, and Waltz, 1979. For the states-as-billiard-ball model, see Wolfers, 1962.

30 His line of argument is consistent with the approach taken by international relations theorists who tend to view Japan as an anomaly. International relations scholars are generally puzzled by Japan's reluctance to have the militaiy capability commensurate with its economic/financial power or to assume the greater burden of maintaining the liberal international economic order. Like Calder, they typically look at domestic-level variables for explanation. See Katzen- stein, 1996, for security and Gilpin, 1990, for international political economy.




policy initiatives and assume global leadership commensurate with its power. Rather, they question Calder's reasoning. As noted, Calder attributes Japan's reactivity to domestic constraints. Critics contend that Japan's reactive stance is an act of will (Tamamoto, 1990; Curtis, 1992:18-20; Pyle, 1992; Pharr, 1993). They argue that Japan in fact does not have strong impetus to act as what Calder says it should. They hold that the existing international order based on the American hegemony has served Japan's interests very well and that, despite its ascendance as an economic power, Japan has few incentives to take a high-profile foreign policy stance as long as the United States, declining relatively but still the most powerful nation in the world, is willing to lead (Inoguchi, 1986). Even the conflict-prone bilateral relationship benefits Japan as the United States continues to provide crucial security guarantee and the single largest market for Japan beyond the Cold War. What Japan should do, and has actually done quite successfully, critics argue, is to share the minimum burden of system maintenance necessai-y to keep the United States from becoming isolationist. For critics, then, Japan's reactive policy stance is not so counterintuitive: such behavior appears rather natural given the existing international environment and the incentives it provides toJapan. Because of its nonstrategic connotations, some critics have been reluctant to call Japan "reactive." Instead, they prefer to use such concepts as "defensive state" or "willful innocence."31

The heart of the debate thus is whetherJapan's reactivity is a reflection of inability to take policy initiatives or an act of will. My case studies clearly support the view that attributesJapan's reactivity to its will. The reason gaiatsu worked is not so much that theJapanese government was divided and fragmented as Calder and Orr would lead us to expect. No major bureaucratic fighting broke out, and the government in Tokyo remained relatively unified in seeking to resume aid relationship with post-Tiananmen China and refraining from extending large-scale economic aid to Russia. This is not to suggest that bureaucratic politics was totally absent. As noted, the key governmental agencies and private actors had conflicting interests and took different positions on howJapan should respond. Yet, as Japan's aid policy toward these two countries became entangled in U.S.-Japan relations, thus turned into a realm of "high politics" forJapan, no domestic actors openly challenged the Foreign Ministry's leadership in handling the issues.

Japan's concession to gaiatsu stemmed rather from the need to avoid major confrontation with the United States, Japan's most important ally and essential economic partner. In both cases, concern for a deterioration of the bilateral relations altered the cost-benefit calculations ofJapan's policy options and eventually forced Tokyo to modify its initial positions. Japan's sensitivity to gaiatsu reflected the changes in perceived national interests rather than a lack of a coherent policy deriving from bureaucratic strife.

Conclusion

The role of American pressure has been a contested issue in the study of Japanese foreign aid policy. Yet the literature provides only a partial assessment of this variable due to the lack of methodologically rigorous analyses. Past studies on this subject have failed to takeJapan's own interests into consideration. As a result, their conclusions tend to be biased one way or another. The true effects of gaiatsu cannot be understood unless we look at the instances where American and Japanese interests diverge. The resumption of aid to post-Tiananmen China and the economic assistance to Russia under Yeltsin represent such cases. In the former, Japan's

31 On the notion of the "defensive state," see Pharr, 1993. On "willful innocence," see Tamamoto, 1990.




desire to continue a friendly relationship with China was inconsistent with the U.S. policy to impose economic and diplomatic sanctions against Beijing after the Tiananmen incident. In the latter, Japan's long-standing position of linking provision of aid with reversion of the Northern Territories was at odds with the American interests in assisting Russia's political and economic reform. In both instances,Japan was under strong pressure to change its position, and despite its initial resistance, Tokyo eventually bent its policy in response to U.S. pressure. In the absence of gaiatsu, Japan would have behaved differently from what it actually did.

My case studies provide strong evidence to support Kent Calder's reactive state thesis. Because the impetus to policy change was indeed supplied by outside pressure, Japan can be called a reactive state as Calder defines it. This article, however, challenges Calder's reasoning. As noted, Calder attributes the special role of gaiatsu toJapan's domestic political constraints. In his view, gaiatsu works because the Japanese government is incapable of pursuing a coherent policy due to bureaucratic and interest group politics. My case studies reveal, however, that the reason gaiatsu worked is not so much that the Japanese government was divided or fragmented. Although governmental agencies and private actors had their own organizational interests, Tokyo was largely unified under the leadership of the Ministry of Foreign Affairs. Rather, Japan's sensitivity to gaiatsu stemmed from the desire to avoid major disruption in U.S.-Japan relations. In both cases, concern over deterioration of bilateral relations altered the cost-benefit calculations of Japan's policy options and eventually led Tokyo to modify its initial positions. Especially important was the desire of the Japanese government to prevent the aid controversy from exerting negative influence on the ongoing bilateral economic issues. The picture that emerges from this study is that Japan is responsive to U.S. pressure but the responsiveness is a result of choice rather than inability to act on the part of the Japanese government.

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gaiatsu and japan's foreign aid: rethinking the reactive-proactive debate

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