[Senate Hearing 111-754]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 111-754

                          U.S.-JAPAN RELATIONS

=======================================================================

                                HEARING

                               BEFORE THE

                      SUBCOMMITTEE ON EAST ASIAN 
                          AND PACIFIC AFFAIRS

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 15, 2010

                               __________

       Printed for the use of the Committee on Foreign Relations










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                COMMITTEE ON FOREIGN RELATIONS         

             JOHN F. KERRY, Massachusetts, Chairman        
CHRISTOPHER J. DODD, Connecticut     RICHARD G. LUGAR, Indiana
RUSSELL D. FEINGOLD, Wisconsin       BOB CORKER, Tennessee
BARBARA BOXER, California            JOHNNY ISAKSON, Georgia
ROBERT MENENDEZ, New Jersey          JAMES E. RISCH, Idaho
BENJAMIN L. CARDIN, Maryland         JIM DeMINT, South Carolina
ROBERT P. CASEY, Jr., Pennsylvania   JOHN BARRASSO, Wyoming
JIM WEBB, Virginia                   ROGER F. WICKER, Mississippi
JEANNE SHAHEEN, New Hampshire        JAMES M. INHOFE, Oklahoma
EDWARD E. KAUFMAN, Delaware
KIRSTEN E. GILLIBRAND, New York
              Frank G. Lowenstein, Staff Director        
        Kenneth A. Myers, Jr., Republican Staff Director        

                         ------------          

         SUBCOMMITTEE ON EAST ASIAN AND PACIFIC AFFAIRS        

                  JIM WEBB, Virginia Chairman        

CHRISTOPHER J. DODD, Connecticut     JAMES M. INHOFE, Oklahoma
RUSSELL D. FEINGOLD, Wisconsin       JOHNNY ISAKSON, Georgia
BARBARA BOXER, California            JOHN BARRASSO, Wyoming
ROBERT P. CASEY, Jr., Pennsylvania   ROGER F. WICKER, Mississippi
KIRSTEN E. GILLIBRAND, New York

                              (ii)        








                            C O N T E N T S

                              ----------                              
                                                                   Page

Auslin, Michael, director of Japanese Studies, American 
  Enterprise Institute, Washington, DC...........................    30
    Prepared statement...........................................    34
Inhofe, Hon. James M., U.S. Senator from Oklahoma, prepared 
  statement......................................................     5
Katz, Richard, editor in chief, The Oriental Economist Report, 
  New York, NY...................................................    12
    Prepared statement...........................................    16
Packard, George, president, United States-Japan Foundation, New 
  York, NY.......................................................     6
    Prepared statement...........................................    10
Webb, Hon. Jim, U.S. Senator from Virginia, opening statement....     1

              Additional Material Submitted for the Record

Toland, Paul, Commander, U.S. Navy, prepared statement...........    45
Letter from Moises Garcia........................................    46
Letter from Shoko Matsuda........................................    48
Letter from Scott Sawyer, general secretary of Global Future: The 
  Parents Council on International Children's Policy.............    50

                                 (iii)



 
                          U.S.-JAPAN RELATIONS

                              ----------                              


                        THURSDAY, APRIL 15, 2010

                               U.S. Senate,
    Subcommittee on East Asian and Pacific Affairs,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 11:07 a.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Jim Webb 
(chairman of the subcommittee) presiding.
    Present: Senator Webb.

              OPENING STATEMENT OF HON. JIM WEBB,
                   U.S. SENATOR FROM VIRGINIA

    Senator Webb. Good morning. The hearing will come to order.
    The past 60 years have produced a dramatically different 
Asia from the region that had been ravaged by World War II. 
Europe's colonial powers withdrew from their colonies, the 
United States gave independence to the Philippines, Japan left 
the countries that it occupied and returned inside its 
historical borders. Whether in peace or war, new nations have 
been born. The governments of existing ones have risen or 
fallen, and on Asia's map, borders far and wide have been 
erased or redrawn. New political systems, too, have been 
created, while others have crumbled, and still others have held 
steady and matured. Good governments have formed, and bad ones, 
as well. And all of this change, along with the energy that it 
unleashed, has let loose, in untold millions, an immense store 
of aspirations, not always successfully. And, above all, it has 
kindled, in nearly the whole of Asia, a steady, and sometimes 
surprising, economic growth.
    Throughout, the United States has always been on hand, 
providing the region with a balance and a guarantee of 
stability that it had previously lacked. We fought two hard 
wars, in Korea and Vietnam, losing more than 100,000 American 
lives, as a measure of our commitment to this region's 
stability.
    The wars aside, our military strength has provided 
overarching regional security, while commercial, economic, and 
political ties have emerged and flourished. To no small extent, 
the American presence has quelled larger uncertainties when, 
from time to time, they have threatened to engulf Asia.
    In this sense, we have been an indisputable and 
indispensable partner, even as we ourselves have steadily 
become more of an Asian nation, in terms of commerce, military 
security, and with respect to our own culture here at home.
    In a region where the national interests of Russia, China, 
Japan, and the United States directly intersect, we've provided 
a rare historical balance that has allowed the people of East 
Asia to prosper and to advance further along a path leading to 
a better life than ever known before.
    Yet, change is a constant. Peace and stability are not to 
be found everywhere at any time, and certainly this holds true 
in today's Asia. China's emergence requires special care, both 
in the region and elsewhere, to communicate our strong national 
conviction that China's sense of responsibility in the world 
must match its increasing influence.
    We continue to face a truculent and reckless regime in 
North Korea. We look on with care and deep concern as our good 
friends in Thailand struggle to find a more accommodating 
political mechanism and broader opportunities.
    In Burma, we see early but clear signs of transition 
stirring. Where, or how far, it will go, no one can yet tell, 
but any evidence of change in Burma, however fashioned, is to 
be acknowledged, if only for the eternal--excuse me--if only 
for the eventual good it may hold.
    Also, in Japan, new elections have brought a new party to 
power for the first time in more than half a century, and along 
with that political change, we are seeing signs of deeper 
thought and concerns that infect the entire national mood. 
Predictably, this brings the prospect of some new policies, 
fresh priorities, and added perspectives. We should study the 
possible impact of these changes in order to ensure that this 
vital alliance remains both vital and an alliance. For, above 
all, it is to be remembered that the relationship between our 
two countries has endured the test of the many challenging 
decades since World War II, and, as a result, now rests firmly 
on a foundation of mutual and rock-hard trust and respect.
    This year, in fact, we and Japan celebrate the 50th 
anniversary of our Treaty of Mutual Security and Cooperation. 
This treaty, along with strong economic and political ties 
between our countries, has served us well. In many ways, we are 
more than allies. Indeed, the ties that bind Japan and America 
are sometimes overlooked because they have become so complete. 
It would be hard for either country to envision a future 
without consideration of the other.
    Today, even with the remarkable rise of China and its 
burgeoning economic growth, the largest economies in the world 
are in the United States and Japan, respectively. Combined, 
they account for nearly 30 percent of the world's GDP. And 
despite a global financial crisis, our trade last year reached 
$147 billion with over $50 billion in United States exports to 
Japan. Moreover, Japan is our fourth-largest trading partner 
and the largest holder of United States Treasury securities.
    Japan's military is often overlooked, but it is strong, and 
it is large, and it has taken a strong role in international 
security and humanitarian missions. It is participating in the 
Combined Task Force 151, a multilateral force protecting global 
shipping from Somali pirates. More recently, Japan dispatched 
160 members of its Self-Defense Force to Haiti to aid in the 
earthquake recovery there. Japan is a leading donor for 
Afghanistan reconstruction, contributing more than $2 billion 
in aid, thus far. Last year, it publicly committed to providing 
at least $5 billion more. Japan is also the second-largest 
contributor to Iraq's reconstruction.
    Many Americans tend to forget that Japan itself is host 
nation to about 85,000 American servicemembers, dependents, and 
civilians, also provides billions of dollars each year, $4.3 
billion in 2008 alone, for support and upkeep of these bases.
    Furthermore, Japan has committed an additional $6 billion 
to help pay for the restructuring of the United States military 
presence. Such significant monetary and force contributions 
clearly demonstrate, in real terms, that Japan remains 
stalwartly side by side and shares America's highest goals and 
aspirations.
    Naturally, relationships evolve. America and Japan are no 
different. One can find ready evidence of this in the attention 
presently trained on the future disposition of the Futenma 
Marine Corps Air Station in Okinawa. It's been widely reported, 
the new Japanese Government is in the midst of reviewing the 
provisions of a 2006 agreement to relocate this base to a 
northern portion of Okinawa, and we have heard that a decision 
would be forthcoming within the next month or so.
    Whatever the result, resolution of this issue will have a 
direct bearing on the larger consideration of America's defense 
posture in all of Asia.
    Thirty-five years ago, I was retained by the Government of 
Guam to assess our military strength as it existed then in the 
region, including looking at our forces in the Philippines, 
Korea, and in Japan, and to map out how our land, sea, and air 
forces should best be deployed a new strategic posture, 
including Guam, Tinian, and potentially Saipan.
    I continued to scrutinize this issue, both as Assistant 
Secretary of Defense and later as Secretary of the Navy, and on 
many occasions as a journalist traveling extensively in Asia. 
In February of this year, I visited Tokyo to meet with Japanese 
and U.S. officials in order to discuss our diplomatic, 
economic, and security relations. Following those meetings, I 
then visited Okinawa, Guam, Saipan, and Tinian to examine the 
restructuring of United States military forces now stationed in 
Japan. I heard from many stakeholders involved in the proposed 
relocation of the Futenma Marine Corp Air Station and the 
movement of 8,000 marines from Okinawa to Guam.
    And it's important to keep in mind that such a move would 
involve a nearly 50-percent reduction in what we call the 
Marine Corps footprint, the forward presence in Japan. If 
executed properly, I am confident that this relocation can keep 
us strong in Asia, can alleviate concerns of those affected by 
this change, and result in continuing to have the kind of 
forward and flexible force needed to keep overall stability in 
the region. The question, of course, is how to bring about a 
proper execution of this plan.
    The question before us today is, obviously, much larger 
than the basing issues that have drawn so much attention. Given 
the dynamic changes in the region and the inordinate amount of 
national attention that has gone into our complex and still-
evolving relationship with China, how do we best move forward 
on every level with our true and tested ally, Japan? What 
measures should be taken to ensure that Americans and Japanese 
alike understand the vital importance of a continued friendship 
and alliance? And how do Japan and the United States best move 
forward together to ensure our extraordinary bonds continue to 
grow even stronger and evermore interwoven?
    To discuss these issues today, I am pleased that we are 
joined by an incredibly well-qualified group of witnesses. I 
look forward to hearing their views on the strengths and 
challenges of our relations with Japan, and the future of that 
alliance.
    And, gentlemen, I very much appreciate all of you having 
taken the time to prepare testimony and also come and exchange 
ideas today.
    Our first speaker will be Dr. George Packard, who's 
president of the United States-Japan Foundation, former dean of 
the School of Advanced International Studies at Johns Hopkins 
University. He founded the Johns Hopkins Foreign Policy 
Institute, the SAIS Review, the Reischauer Center for East 
Asian Studies, the Hopkins-Nanjing Center in China. Dr. Packard 
is the author of 9 books on Japan and East Asia, maybe 10. He 
just gave me his latest book.
    Is this No. 9 or No. 10, Doctor? [Laughter.]
    Dr. Packard. Number nine.
    Senator Webb. I very much appreciate it.
    Second, Mr. Richard Katz, editor in chief of the Oriental 
Economist Report, veteran journalist with more than three 
decades of experience writing on Japan and United States-Japan 
relations. Mr. Katz has testified before congressional 
committees on United States-Japan and United States-Asian 
relations, as well as lessons from United States--for the 
United States from Japan's banking crisis. Mr. Katz is the 
author of two books on Japan's economy and is a frequent 
commentator on United States-Japan's relations.
    Our third speaker will be Dr. Michael Auslin, who is 
director of Japan Studies at the American Enterprise Institute 
for Public Policy Research. He is also resident scholar there 
in foreign and defense policy studies. Dr. Auslin was associate 
professor of history at Yale University, senior research fellow 
at Yale's MacMillan Center for International and Area Studies 
prior to joining AEI. He is the author of a book on negotiating 
with Japan, and is currently completing a book on the cultural 
history of United States-Japan relations.
    So, we have decades of experience here, from people who 
have examined the United States-Japan extensively and, by my 
count, 14 books, which is half a library.
    At this time, I would like to place in the record 
statements that we received here on the subcommittee on the 
issue of parental child abduction in Japan. This is an issue of 
continuing concern between American and Japanese relations. I 
met with a group of these parents when I was in Tokyo recently, 
and their testimony will be entered into the record at this 
time.

[Editior's note.--The statements mentioned above can be found 
in the ``Additional Material Submitted for the Record'' section 
of this hearing.]

    Senator Webb. And now, at this time, Senator Inhofe's 
statement also will be entered into the record. He may or may 
not be able to attend, but this is the appropriate place for 
his statement to be entered.
    [The prepared statement of Senator Inhofe follows:]

 Prepared Statement of Hon. James M. Inhofe, U.S. Senator From Oklahoma

    Thank you, Senator Webb, for chairing this subcommittee hearing 
today on United States-Japan relations.
    As we celebrate the 50th year of the United States-Japan Security 
Treaty, whereby Japan granted the United States military base rights on 
its territory in return for a U.S. pledge of protection, we are 
witnessing potential fundamental changes in our relationship with 
Japan. Much of this has to do with the historic victory in August 2009, 
of the Democratic Party of Japan (DPJ) which ended the almost 
uninterrupted rule of the Liberal Democratic Party (LDP) in postwar 
Japan. The impact of this victory is being felt across nearly every 
aspect of Japanese policymaking, from security alliance relations to 
Japan's budgetmaking process to the relationship between politicians 
and career Japanese civil and foreign service employees who served 
under the LDP--the present opposition party--for close to a half 
century.
     Clearly, a transition was expected and necessary. And it is 
expected that those who have been out of power for close to two 
generations, will need time to gain on the job training in running a 
government. Experienced observers, however, have remarked that this has 
not been a ``smooth'' transition by any standard. These same 
authorities have also suggested that part of the problem is driven by 
political instead of policy exigencies.
     It is a fact that in July 2010, half of Japan's Upper House seats 
will be up for election. The DPJ controls that chamber of the Diet by 
virtue of its alliance with two smaller parties, the left-of-center 
Social Democratic Party (SDP) and the populist/conservative People's 
New Party (PNP). The results of the July Upper House election may have 
a formative impact on a number of issues in United States-Japan 
relations. And it is in this present runup to this election that, in 
many observers' minds, politics is intruding into the national security 
decisionmaking process of the current leadership. There is no better 
example of this alleged intrusion, than in the controversy over U.S. 
military base realignment plans in Okinawa; the ``Futenma'' issue.
    As you know, beginning in the Clinton through the Bush and into the 
present administration, negotiations were successfully concluded to 
realign and expand our mutual security alliance with Japan beyond its 
existing framework. A key feature of this new arrangement includes 
relocating the U.S. Marine's Futenma Air Station from crowded Ginowan 
to Camp Schwab, in the less populated part of northern Okinawa. This 
realignment of U.S. forces in Japan also includes the redeployment of 
the III Marine Expeditionary Force (III MEF), which includes 8,000 U.S. 
personnel and their dependents (when at full capacity), to new 
facilities in Guam, and thus lead to the return of thousands of acres 
of land to the Japanese. This move will reduce the number of U.S. 
Marines on Okinawa by nearly half. United States and Japanese officials 
settled on Camp Schwab because of its far less populated and congested 
location.
    But now, after 13 years of negotiations, and an agreement signed in 
2006 by the United States and Japanese Governments, the present 
government has stated that it might not honor the agreement in part or 
whole. Why?
    Does the new government want to alter fundamentally the United 
States-Japan security alliance? Prime Minister Hatoyama has in the past 
made statements suggesting that U.S. troops in Japan either be 
significantly reduced or withdrawn altogether, though he backed away 
from these statements once he was elected, and confirmed the centrality 
of the alliance to Japan's security. Is it because the present 
government has a vision of a Japan that is more ``normal,'' in that it 
is more assertive and independent on the international stage? Members 
of the Hatoyama government have been quoted as supporting increased 
contributions in personnel and materiel to international security 
operations, but to do so only in missions that are authorized by the 
U.N. Security Council.
    The answer to this question at present is that there is no answer. 
The Hatoyama government has put off twice giving a definitive response 
whether it will honor Japan's treaty commitments relating to Futenma. 
Unsettlingly, there are those who confidently predict that a final 
decision will be further delayed until after the July 2010 Upper House 
elections. And even if the election brings a greater majority, the 
present government will find itself still bound to implicit domestic 
political promises that fundamentally alter our longstanding security 
relationship.
    I would be very interested in your responses to these troubling 
predictions, and what implication this politics-over-policy decision--
making process allegation might have on other security related issues 
in the region; e.g., future provocative actions taken by North Korea 
against Japan.
    I would like to raise another less visible, but no less important 
issue for discussion before this panel today on United States-Japan 
relations. It is the problem of parent child abduction.
    We are experiencing an increasing problem with Japanese citizens 
abducting their American children and successfully returning to a safe 
harbor in Japan. The Department of State reports that since 1994, 269 
American children have been kidnapped from America to Japan. 
Shockingly, it is my understanding that since 1952 when Japan regained 
its sovereignty, not a single kidnapped child from an American parent 
has ever been returned to the U.S. from Japan. In addition, I 
understand these American children living in Japan are often denied 
access to their American parent after a parental separation or divorce. 
And, to my knowledge, there are no joint custody or visitation rights 
in Japan. As a result, these children are alienated from their loving 
American parent, and the psychological trauma is extremely damaging. 
This tragedy for these American children and their left-behind American 
parents is overwhelming and must come to an end.
    The 1980 Hague Convention on the Civil Aspects of International 
Child Abduction has not been ratified by Japan. The United States, 
Great Britain, Canada, Australia, New Zealand, France, Italy, and Spain 
have all called upon Japan to ratify this treaty. Japan is a modern 
industrialized society, and ally of the U.S. American children, 
however, are kidnapped and denied access to their American parents, and 
no child has been returned. If Japan truly wishes to participate in the 
international community, it must follow international norms and ratify 
this treaty.
    In the past, private frankness followed by public discretion had 
been tried to resolve this issue on a case-by-case basis, but to no 
avail. Recently, however, the tragedy of Japanese child abduction has 
been made public. I applaud Assistant Secretary of State Kurt 
Campbell's extended public discussion of the problem of child 
abductions at a press availability at the U.S. Embassy in Tokyo on 
February 2, 2010. His comments can be found on the State Department's 
web page at: http://www.state.gov/p/eap/rls/rm/2010/02/136416.htm. In 
addition, he recently met with the American parents of abducted 
children last Friday, April 9, 2010, at the State Department here in 
Washington, DC. It is my understanding that a number of those parents 
who attended that ``Town Hall'' meeting with Assistant Secretary 
Campbell and other senior State Department officials are in the 
audience today. Their organizations, Bring Abducted Children Home (BAC 
Home), and American Citizen Children Kidnapped by Japan, can be found 
at: www.bachome.org and www.japanchildabduction.com.
    I encourage this panel to study this problem, if they have had not 
done so previously, and contribute their scholastic efforts to end the 
suffering of all concerned.
    Thank you again, Senator Webb, for chairing this subcommittee 
hearing on United States-Japan relations.

    Senator Webb. And, with that, I would like to welcome the 
panel. We normally have a 7-minute summary period, but I've 
read through these statements. I would like to say you can take 
up to 10 minutes, if you like, all three of you. There's a 
tremendous amount of experience and information in the 
statements and on the panel.
    So, Dr. Packard, welcome.

  STATEMENT OF GEORGE PACKARD, PRESIDENT, UNITED STATES-JAPAN 
                    FOUNDATION, NEW YORK, NY

    Dr. Packard. Thank you very much, Mr. Chairman.
    It is a great honor to have this opportunity to testify 
before your committee on the complex relationship between the 
United States and Japan. As requested, I will focus on the 
future of that relationship, particularly the political and 
security issues that face the two nations.
    Today, the United States and Japan are allied under the 
terms of a treaty that took effect in January 1960, more than 
50 years ago. Not a single word of that treaty has been changed 
for over a half a century, even though since 1970 either side 
could have called for its abrogation by giving 1 year's advance 
notice.
    The treaty commits the United States to come to the defense 
of Japan if Japan comes under attack from any country, and 
commits Japan to provide bases and ports for the United States 
to station its forces in Japan. It was correctly seen by both 
sides as a ``grand bargain.'' It enabled Japan to recover its 
independence, gain security from the most powerful nation in 
the world at low cost, avoid remilitarizing, stay out of the 
nuclear weapons race, and win access to the American market as 
it rebuilt its devastated economy after its defeat in World War 
II. It gave Japan time to nurture the seeds of parliamentary 
democracy that the United States planted during the occupation. 
It enabled the United States to project power into the western 
Pacific; its troops and bases in Japan could not only help to 
defend Japan but also lend credibility to its commitments to 
defend South Korea and Taiwan, and to contain the Soviet Union 
and Communist China.
    The treaty has clearly served the interests of both 
signatories; otherwise, it would not have survived. It has 
endured despite dramatic changes in world politics: the Vietnam 
war, collapse of the Soviet Union, the spread of nuclear 
weapons to North Korea, and the dramatic rise of China.
    But, I would suggest to the committee that we can't assume 
it will survive into the indefinite future. And I say this for 
the following reasons.
    First, the original treaty of 1952, predecessor to this 
one, was negotiated between victor and vanquished between a 
victor and an occupied nation, not between two sovereign 
states. Every Japanese voter knows that.
    Two, Japan, which had never in its history accepted foreign 
troops on its soil, today, 65 years after the end of the war, 
has had to accept the indefinite stationing of close to 100,000 
American troops, civilian employees, and dependents at some 85 
facilities in a nation that is smaller than the State of 
California. Some 75 percent of the U.S. forces are based on the 
small island of Okinawa, in the Ryukyu chain.
    Three, the U.S.--the continued presence of such a large 
U.S. military footprint brings with it environmental damage, 
crime, accidents, noise in crowded cities, and red-light 
districts.
    Four, the American presence is governed by a Status of 
Forces Agreement, a SOFA, which has never been ratified by the 
Japanese Parliament and which increasingly strikes thoughtful 
Japanese as an extension of the extraterritorial arrangements 
that characterized Western imperialism in Asia in the 19th 
century.
    Five, in order to soften the criticism of its mercantilist 
trade policies in 1978, Japan agreed to provide ``host-nation 
support'' which, Senator, you have already mentioned--that 
helps pay for the Japanese workers employed at U.S. military 
bases. That cost has run, as you mentioned, up to $4.3 billion 
a year. It is called in Japanese the ``omoiyari yosan'' or 
``sympathy budget,'' a term which should embarrass both sides. 
That budget paid, in 2008, for 76 bartenders, 48 vending 
machine personnel, 47 golf course maintenance personnel, 25 
club managers, 20 commercial artists, 9 leisure boat operators, 
6 theater directors, 5 cake decorators, 4 bowling alley clerks, 
3 tour guides, and 1 animal caretaker--I don't know what he 
does, but he's there.
    It is only natural that a new generation of Japanese who 
did not live through the cold war will increasingly question 
why they should put up with foreign troops and bases on their 
soil. The United States has reduced its military footprint in 
South Korea, Germany, and the Philippines, and it should not be 
surprising that a new generation of Japanese is growing restive 
in this situation.
    Of course, the United States has problems with the treaty, 
as well. It is not reciprocal. Japan is not obliged to come to 
the aid of the United States if the United States comes under 
attack outside Japan. And Japan, while admitting that it has 
the right to engage in ``collective self-defense,'' as provided 
in the U.N. Charter, has declared that it cannot exercise that 
right because of Article IX of its Constitution, which 
renounces war as a ``sovereign right of the nation and the 
threat or use of force in settling international disputes.'' 
Repeated efforts by the United States to persuade Japan to 
change this interpretation have, so far, failed.
    Japan has, in a gingerly and painstaking process, taken 
some steps to meet American concerns that it is enjoying a 
``free ride.'' It has taken steps to make its military 
equipment interoperable with that of the U.S. forces in the 
country, has engaged in joint planning and training exercises, 
currently has the seventh-largest defense budget in the world, 
and, as you know, sent 600 troops to Iraq from 2003 to 2006 to 
engage in noncombat operations.
    A critical turning point in the relationship between our 
two countries came last August when, after almost 53 years of 
uninterrupted rule by the Liberal Democratic Party, Japanese 
voters overwhelmingly threw out the LDP in Lower House 
elections, and gave a strong majority to the opposition 
Democratic Party of Japan, or DPJ. The new Prime Minister, 
Hatoyama Yukio, took office in September 2009, and he has a 
record of seeking closer relations with other nations in east 
Asia, and wishing to reduce the presence of the United States 
military in Japan. On his watch, Japan ended its refueling 
mission in the Indian Ocean.
    In October 2009, Secretary of Defense Robert Gates came to 
Tokyo and demanded the Hatoyama Cabinet should carry out a 
decision reached in 2006 between the Bush administration and an 
earlier LDP administration regarding the relocation of the U.S. 
Marine air base in Futenma. I believe this was a mistake. 
Hatoyama's Cabinet was unprepared to act on this demand; his 
party and coalition consists of a broad spectrum of views on 
that issue. Many Okinawans feel they have been treated as 
second-class citizens by both the Japanese and the American 
governments, and they resent having their small island treating 
as a kind of ``dumping ground'' for United States bases that 
are not welcome on the main islands.
    I believe the United States should have given Hatoyama more 
time to sort out these views. Even more important, I think the 
United States should have celebrated the rise in Japan of a 
two-party system, sure evidence that the roots of democracy 
that we helped to establish are robust.
    Public opinion counts in Japan, and the future of the 
alliance will depend on the degree to which Japanese voters 
accept military bases. This means that the United States and 
Japan need to hold new and broad-ranging talks on grand 
strategy, on roles and missions of United States forces, and be 
prepared to explain their decisions to the Japanese public.
    Until now, the United States has not made an effective case 
for why the U.S. Marine air base needs to be in Okinawa. What 
is the mission for those 8,000 marines? General Stalder--Marine 
General Stalder, it was reported recently, said that they were 
stationed in Okinawa to be ready for the possible collapse of 
the North Korean regime and to seize control of fissile 
material to prevent rogue elements of that government from 
gaining control. It strikes me as almost unthinkable that the 
South Korean and Chinese Governments would welcome such a 
mission.
    The main point is that Futenma should not be the primary 
determinant of the United States-Japan relationship. Far more 
is at stake. We are the two strongest democracies and economies 
in East Asia, as you have pointed out, Mr. Chairman. Peace and 
security in the region can only be maintained by our joint 
leadership. We are the only two nations of East and West who 
have successfully overcome huge cultural and historical 
barriers to forge a genuine partnership of friendship and 
shared values. The treaty rests on the strong bonds of 
friendship that have been forged in the last 50 years.
    But, there are disturbing signs that the new generation of 
young Japanese may be changing their views of America. The 
Washington Post reported on April 11 that undergraduate 
enrollment of Japanese students in United States universities 
has fallen by an astounding 52 percent since 2000. Graduate 
enrollment has fallen by 27 percent. This is happening at a 
time when enrollment from China is up by 164 percent; from 
India, up 190 percent. We can only speculate about why this is 
happening. Clearly it should focus our attention.
    The alliance, while crucial, is only one part of the 
overall partnership that has been built so carefully over the 
last 50 years. It would be a tragedy to allow Futenma--the 
Futenma issue to derail all of this.
    My bottom line, Mr. Chairman, is that there should be a 
reexamine of the entire alliance. And I am urging that a new 
``Wise Man''--or, I should say ``Wise Person's Commission'' to 
be set up similar to those that have played an important part 
in the past. The Commission should be charged, among other 
things, with devising new ways in which younger Americans and 
Japanese can communicate with each other. The foundation that I 
run has a United States-Japan leadership program that brings 
together two dozen of the most promising young leaders from 
both countries for intensive conversations. I am proud to say 
that Dr. Auslin, on my right here, has been one of those young 
leaders over the past 10 years.
    I believe the Commission should look into expanding 
educational, cultural, and scientific exchanges, figure out 
ways to reach out to young Chinese leaders, ensuring that there 
will be networks of communication between the future leaders of 
all three countries.
    Finally, Mr. Chairman, I am recommending that President 
Obama, during his November visit to Japan, would go to 
Hiroshima and use the symbolism of that place to declare his 
vision of a nuclear-free world. Then Prime Minister Hatoyama 
should visit Pearl Harbor and declare that his nation will work 
to create a world in which such an attack will never occur 
again. Neither leader should offer the hint of an apology, and 
both should praise the brave men, living and dead, who fought 
on both sides during World War II. I believe these symbolic 
gestures would go far to healing the remaining scars that are 
still painful to both nations, and would solidify the alliance 
for years to come.
    In conclusion, please let me repeat, the future of the 
alliance will depend on the degree to which it is acceptable to 
a majority of Japanese voters. Every Japanese politician knows 
that, and we Americans should respect and celebrate the fact 
that democracy is alive and well in Japan.
    Thank you very much, Senator.
    [The prepared statement of Dr. Packard follows:]

  Prepared Statement of Dr. George Packard, President, United States-
                     Japan Foundation, New York, NY

    It is a great honor to have this opportunity to testify before the 
Senate Foreign Relations Committee on the complex relationship between 
the United States and Japan. As requested, I will focus on the future 
of that relationship, particularly the political and security issues 
that face the two nations. [I have elaborated on these ideas in the 
current (March-April 2010) edition of Foreign Affairs magazine.]
    Today, the United States and Japan are allied under the terms of a 
Security Treaty that took effect in January 1960--50 years ago. Not a 
single word of that treaty has been changed for over a half century, 
even though since 1970 either side could have called for its abrogation 
by giving 1 year's advance notice of its intent to do so. The treaty 
commits the U.S. to come to the defense of Japan if Japan comes under 
attack from any country, and commits Japan to provide bases and ports 
for the U.S. to station its forces in Japan.
    It was correctly seen by both sides as a ``grand bargain.'' It 
enabled Japan to recover its independence, gain security from the most 
powerful nation in the world at low cost, avoid remilitarizing, stay 
out of the nuclear weapons race, and win access to the American market 
as it rebuilt its devastated economy after its defeat in World War Two. 
It gave Japan time to nurture the seeds of parliamentary democracy that 
the U.S. planted during the Occupation. It enabled the U.S. to project 
power into the Western Pacific; its troops and bases in Japan could not 
only help defend Japan but also lend credibility to its commitments to 
defend South Korea and Taiwan, and to contain the Soviet Union and 
Communist China.
    The treaty has clearly served the interests of both signatories; 
otherwise it would not have survived. It has endured despite dramatic 
changes in world politics: the Vietnam war, collapse of the Soviet 
Union, the spread of nuclear weapons to North Korea and the dramatic 
rise of China. It has also survived fierce trade disputes between the 
two allies from 1971-1990, and it remains strong in spite of the deep 
cultural and historical differences between the two nations.
    But I would suggest to the committee that we cannot assume that it 
will survive into the indefinite future. I say this for the following 
reasons:

   The original treaty that entered into force in 1952, 
        predecessor to the current treaty, was negotiated between a 
        victor and a vanquished, occupied nation, not between two 
        sovereign states. Every Japanese voter knows that.
   Japan, which had never in its history accepted foreign 
        troops on its soil, today (65 years after the end of the war) 
        has had to accept the indefinite stationing of close to 100,000 
        American troops, civilian employees and dependents at some 85 
        facilities in a nation that is smaller than the State of 
        California. Some 75 percent of the U.S. forces are based on the 
        small island of Okinawa, in the Ryukyu Island chain.
   The continued presence of such a large U.S. military 
        footprint brings with it environmental damage, crime, 
        accidents, noise in crowded cities, and red light districts.
   The American presence is governed by a ``Status of Forces 
        Agreement'' (SOFA) which has never been ratified by the 
        Japanese Diet (Parliament) and which increasingly strikes 
        thoughtful Japanese as an extension of the extraterritorial 
        arrangements that characterized Western imperialism in Asia in 
        the 19th century.
   In order to soften the criticism of its mercantilist trade 
        policies in 1978, Japan agree to provide ``host nation 
        support'' that helps pay for the Japanese workers employed at 
        U.S. military bases. That cost has run between $3-4 billion per 
        year. It is called in Japanese the ``omoiyari yosan'' or 
        ``sympathy budget,'' a term which should embarrass both sides. 
        That budget paid in 2008 for 76 bartenders, 48 vending machine 
        personnel, 47 golf course maintenance personnel, 25 club 
        managers, 20 commercial artists, 9 leisure boat operators, 6 
        theater directors, 5 cake decorators, 4 bowling alley clerks, 3 
        tour guides, and 1 animal caretaker.
   It is only natural that a new generation of Japanese who did 
        not live through the cold war will increasingly question why 
        they should put up with foreign troops and bases on their soil. 
        The U.S. has reduced its military footprint in South Korea, 
        Germany, and the Philippines, and it should not be surprising 
        that the new generation of Japanese is growing restive in this 
        situation.

    The United States, of course, has its own problems with the treaty:

   It is not reciprocal. Japan is not obliged to come to the 
        aid of the U.S. if the U.S. comes under attack outside of 
        Japan.
   Japan, while admitting that it has the right to engage in 
        ``collective self-defense'' as provided in the U.N. Charter, 
        has declared that it cannot exercise that right because of 
        Article IX of it's Constitution, which renounces ``war as a 
        sovereign right of the nation and the threat or use of force in 
        settling international disputes.'' Repeated efforts by the U.S. 
        to persuade Japan to change this interpretation have all 
        failed.

    Still, Japan has in a gingerly and painstaking process, taken some 
steps to meet American concerns that it was enjoying a ``free ride.'' 
It has taken steps to make its military equipment interoperable with 
that of the U.S. Forces in the country, and has engaged in joint 
planning and training exercises. It currently has the seventh-largest 
defense budget in the world. It sent 600 troops to Iraq from 2003-06 to 
engage in noncombat operations, and from 2001 to early this year, 
stationed naval vessels in the Indian Ocean to supply fuel to coalition 
forces fighting in Afghanistan. It has agreed to share its technology 
with the U.S. in the field of antimissile defense programs. It 
regularly engages in U.N. peacekeeping operations. Japan is second only 
to the U.S. in supporting the work of the United Nations.
    A critical turning point came last August when, after almost 53 
years of uninterrupted rule by the Liberal Democratic Party, Japanese 
voters overwhelmingly threw out the LDP in Lower House elections and 
gave a strong majority to the opposition Democratic Party of Japan 
(DPJ). The new Prime Minister, Hatoyama Yukio, who took office in 
September 2009, has a record of seeking closer relations with other 
nations in East Asia, and wishing to reduce the presence of the U.S. 
military in Japan. On his watch, Japan ended its refueling mission in 
the Indian Ocean.
    In October 2009, Secretary of Defense Robert Gates came to Tokyo 
and demanded that the Hatoyama Cabinet should carry out a decision 
reached in 2006 between the Bush administration and an earlier LDP 
administration regarding the relocation of the U.S. Marine Air Base in 
Futenma to a new location in Okinawa. This was a mistake. Hatoyama's 
Cabinet was unprepared to act on this demand; his party and coalition 
consists of a broad spectrum of views on the issue. Many Okinawans feel 
they have been treated as second-class citizens by both the Japanese 
and American Governments; they resent having their small island treated 
as a ``dumping ground'' for U.S. bases that are not welcome on the main 
islands (the NIMBY syndrome).
    The U.S. should have given Hatoyama more time to sort out those 
views. Even more important, the U.S. should have celebrated the rise in 
Japan of a two-party system--sure evidence that the roots of democracy 
that we helped to establish are robust. Public opinion in Okinawa 
generally favors moving the Futenma base out of Okinawa altogether. 
Hatoyama has delayed making any decision on this, but promises to put 
forward his own plan by the end of May.
    Public opinion counts in Japan, and the future of the alliance will 
depend on the degree to which Japanese voters accept the military 
bases. This means that the U.S. and Japan need to hold new and broad-
ranging talks on grand strategy, and on roles and missions for U.S. 
Forces, and be prepared to explain their decisions to the Japanese 
public. Until now, the U.S. has not made an effective case for why the 
U.S. Marine Air Base needs to be in Okinawa. What is the mission for 
those 8,000 Marines? General Stalder, it was reported recently, said 
that they were stationed in Okinawa to be ready for the possible 
collapse of the North Korean regime and to seize control of fissile 
materiel to prevent rogue elements of that government from gaining 
control. It strikes me as almost unthinkable that the South Korean and 
Chinese Governments would welcome such a mission.
    The main point is that Futenma should not be the primary 
determinant of the United States-Japan relationship. Far more is at 
stake. We are the two strongest democracies and economies in East Asia. 
Peace and security in the region can only be maintained by our joint 
leadership.
    We are the only two nations of East and West who have successfully 
overcome huge cultural and historical barriers to forge a genuine 
partnership of friendship and shared values. The treaty rests on the 
strong bonds of friendship that have been forged for the last 50 years. 
But there are disturbing signs that the new generation of young 
Japanese may be changing their views of America. The Washington Post 
reported on April 11, 2010, that undergraduate enrollment of Japanese 
students in U.S. universities has fallen an astounding 52 percent since 
2000. Graduate enrollment has fallen by 27 percent. This is happening 
at a time when enrollment from China is up 164 percent, and from India, 
up 190 percent. We can speculate about why this is happening. Clearly 
it should focus our attention on the future of the alliance.
    The alliance, while crucial, is only one part of the overall 
partnership that has been built so carefully over the last 50 years. It 
would be a tragedy to allow the Futenma issue to derail all of this. 
U.S. policy toward Japan should not be dictated solely by the needs of 
U.S. Marine Corps, however legitimate they may be.
    With the proper civilian leadership, we must work together to curb 
North Korean nuclear ambitions, and to bring about reunification of the 
Korean Peninsula. Together we can strengthen environmental protection, 
human rights, antipiracy measures, securing sea-lanes of communication, 
and combating terrorism.
    My bottom line, Mr. Chairman, is that there should be a 
reexamination of the entire alliance, taking a new look at the 
rationale for troops and bases, their roles and missions, and how Japan 
can contribute to our joint goals without violating its peace 
constitution. It should explore ways to create a permanent security 
organization along the lines of NATO for all of Northeast Asia. Then 
and only then can a wise decision, acceptable to both governments, be 
made regarding the future of the Futenma Air Base.
    I would urge that a new ``Wise Man's Commission'' be set up--
similar to those that have played an important role in past years--to 
conduct this examination and make recommendations to both governments. 
The Commission should of course include military leaders, but it should 
appointed by and report to, elected leaders in both countries.
    The Commission should be charged with devising new ways in which 
younger Americans and Japanese can communicate with each other. Our 
foundation runs a United States-Japan Leadership program that brings 
together two dozen of the most promising young leaders from both 
countries for intensive conversations, the creation of new friendships 
and continuing communication across the Pacific via the Internet. The 
Commission should look into expanding educational, cultural, and 
scientific exchanges. It should explore new ways to reach out to 
younger Chinese leaders insuring that there will be networks of 
communication between future leaders of all three countries.
    I am also recommending that President Obama, during his November 
visit to Japan, should go to Hiroshima and use the symbolism of that 
place to declare his vision of a nuclear-free world. Then Prime 
Minister Hatoyama should visit Pearl Harbor, and declare that his 
nation will work to create a world in which such an attack will never 
again occur. Neither leader need offer the hint of an apology, and both 
should praise the brave men, living and dead, who fought on both sides 
during World War Two. I believe these symbolic gestures would go far to 
healing the remaining scars that are still painful to both nations, and 
would solidify the alliance for decades to come.
    In conclusion, let me repeat: the future of the alliance will 
depend on the degree to which it is acceptable to a majority of 
Japanese voters. Every Japanese politician knows that, and we Americans 
should respect and celebrate the fact that democracy is alive and well 
in Japan.

    Senator Webb. Thank you very much, Dr. Packard.
    Mr. Katz, welcome.

   STATEMENT OF RICHARD KATZ, EDITOR IN CHIEF, THE ORIENTAL 
                 ECONOMIST REPORT, NEW YORK, NY

    Mr. Katz. Thank you much.
    If we were meeting about 15 years ago, the main topic on 
economics would be bilateral trade frictions and the fear among 
some Americans that Japan was a threat because it was too 
strong. If we were meeting 7 to 8 years ago, the main topic 
would be Japan's banking crisis, and alarmist talk about our 
government bond crisis, and the fear that Japan was a threat 
because it was too weak. Well, actually, as it turned out, it 
was the American financial system which caused the global 
crisis, not that of Japan.
    As we meet today, it seems to me the main focus is not--on 
economics--is not the bilateral relationship. It's whether or 
not the two nations can work together on global issues, such as 
the rise of China, such as moving into an era in which critical 
resources, like oil or water, are no longer cheap and abundant, 
but, rather, becoming expensive and scarce, which has economic 
and geopolitical implications.
    Yet, there are fears in both countries that we will not be 
able to have that cooperation. On the part of Japan, there is 
fear that the United States is bypassing Japan and moving into 
a so-called ``group of two'' relationship with China, it was 
symbolized, perhaps, by the different treatment of the 
President of China and Prime Minister of Japan during this 
week's nuclear summit. There is also a fear--one exaggerated, 
as I believe--on the part of Japan about the United States 
turning inward and becoming protectionist.
    There is a mirror-image fear in the United States about 
Japan. There is talk that Hatoyama wants to move away from the 
United States in both economics and security, and wants to 
orient toward China, a view which I think is unfounded, as I'll 
discuss later on.
    There's also fears that the government is so paralyzed that 
it really cannot make good decisions; and then, in both 
countries, the issue of whether the Futenma crisis will become 
the end-all and be-all of policy and spill over into other 
issues.
    So, what I'd like to go through is which fears are 
justified, which fears are not justified, and what assets the 
United States has to play in trying to build about this 
cooperation, and what obstacles and assets there are in Japan.
    First of all, I think one of the most important things to 
realize is the dog that did not bark. There was widespread fear 
that this recession would create protectionism all over the 
world. That has not happened. We have the remarkable spectacle 
that both General Motors and Chrysler went bankrupt, and nobody 
blamed Honda or Toyota. Think back to the 1980s, when we had 
import quotas against Japanese cars for years. The ``Buy 
America'' provisions in the stimulus bill was adopted in a way 
that has the United States adhering to the WTO rules with other 
countries that have government procurement codes, including 
Japan, Europe, and other major allies. So, we don't have this 
danger of protectionism.
    What we do have, I believe, in both countries, is a 
political obstacle to moving forward on trade liberalization as 
symbolized in this country by the United States-Korea Free 
Trade Agreement--I don't think could get ratified by Congress 
today--and, in Japan--the EU has just broken off talks with 
Japan on their FTA, because they don't think Japan is going to 
be forthcoming on negotiations. So, that's an issue.
    I think the biggest background context for all discussions 
of United States-Japan relations is the ongoing weakness of the 
Japanese economy. By conventional forecasts, it will not be 
until 2013 that Japanese GDP gets back to the level it had in 
2008. And then, going forward, the potential growth of the 
Japanese economy, once it reaches full employment and full 
capacity, is estimated at about 1 percent. So, we're talking 
about a country that's going to be mired in low growth, 
continued low growth, for years to come.
    And these are, basically, political problems. The Japanese 
Government, the DPJ, came into power with some very good ideas 
of realizing the core of Japan's short-term economic problems 
was insufficient household income. So, instead of consumer 
income and domestic demand driving the economy, Japan was 
inordinately dependent upon a rising trade surplus for growth. 
And when the world went into crisis, Japan went into really, 
really worse crisis; it had a recession far worse than that of 
the United States.
    The government has some very good programs to increase 
consumer income: child allowances, free high school education. 
Currently it's not free. But, because of fears about a bond 
government crisis, the government has really waffled--given 
with one hand, taken back with the other hand--and therefore 
does really have good macroeconomic policies to get Japan out 
of this mire of this deep recession.
    I believe, I should say, these fears about the Japanese 
Government bonds are way overdone. We've seen this alarmism 
before. It's unfounded. I can go into detail, if you want.
    Similarly, by the way, I think the fear in America, that 
the Japanese or the Chinese would pull out of United States 
treasuries, either as a political weapon, or because of fear of 
the United States budget deficit, are, again, way overdone. To 
pull out would be shooting themselves in the foot. It would 
raise their currencies, hurt their exports; it ain't gonna 
happen. If it did, the Fed could manage it. Again, I'll go into 
detail, if you want.
    On the longer term prospects, the political situation is 
that the DPJ faces the same dilemma as the LDP before it, which 
is that part of its base would be helped by reform, part would 
be hurt by reform, and so the party is divided between 
reformers and antireformers. There are lots of really smart, 
younger Diet members who have great ideas about reform, but the 
current leadership, because of the political weakness of the 
party, is sort of playing to the galleries of the special 
interest groups. It also needs a coalition with two very small 
parties of the Upper House of the Diet, and these are 
problematic both on reform issues and on security issues. And 
the chances are, in this election, the DPJ will not do well, 
and therefore become even more dependent upon antireformist 
groups. And so, its hands are tied a little bit in pushing 
reform.
    On the other hand, the pressures for reform are growing. It 
becomes increasingly impossible to solve political problems 
without economic growth. How do you finance social security or 
health care for the growing ranks of the elderly when your tax 
revenues are shrinking? How do you help out the farmers who are 
being hurt by imports without making urban--food prices so high 
when you don't have the budget to, say, give income subsidies? 
So, you get conflicts of interests among the different 
constituencies.
    In addition, too, the voter behavior has changed. As Dr. 
Packard mentioned--and I endorse his comments on this--we now 
have, finally, two-party democracy in Japan, instead of one-
part democracy. It was the last remaining one-party democracy 
in the advanced sector. That's good, because you need 
competition in politics as much as in business.
    And the voters are more volatile than ever. Instead of just 
concern about their local Diet member, they're concerned about 
which national party is going to run the country and what their 
performance is going to be. And therefore parties, in order to 
rule and win reelection, and members to rule and win 
reelection, have got to deal with economic performance. The 
pressures for reform will grow, but it's not going to come 
quickly; more years of political turmoil.
    The other issue which I would say is very, very important 
to consider--and I'd just say, in that era of economic weakness 
and political turmoil, it becomes more difficult for Japan to 
take decisive steps on the world stage, and that becomes their 
foray problem--the other issue is concern about the United 
States, that somehow there's a decoupling of Japan--and of 
Asia, in general--from the United States, and an orientation 
toward China. I believe this fear is way overblown. You could 
have very simplistic numbers that say, ``Look at the share of 
Japan's exports that are rising to China and shrinking to the 
United States.'' Yes, those numbers are true, but they're 
misleading, because most of those Japanese exports to China--
this is true of Korea and offshore Asia, as well--the exports 
to China are, in fact, inputs for China's own exports to the 
United States. So, I have some really snazzy diagrams here 
which show, if you look at the ups and downs of Japanese 
exports to China, they don't depend upon Chinese GDP, they 
depend upon China's own exports to the United States. The same 
thing is true of Japan's exports to offshore Asia; they depend 
upon Asia's exports to the United States. In fact, Japan's 
exports to Asia depend upon China's exports to the United 
States, because they have a whole integrated supply chain. But, 
at the end of the chain, the locomotive is the United States. 
So, Japan and Asia could not decouple from the United States, 
even if they wanted to; and from talking to people, they don't 
want to, anyway.
    And I would look at, for example, President--first of all, 
I've had my own talks to people in the DPJ and President Lee of 
Korea's interview in the Washington Post on this issue, of why 
they want strong reliance on the United States to diversify. 
It's solely dependent upon China.
    That being said, there is this integrated supply chain in 
Asia that China is increasingly the organizing hub. And 
therefore, nations and firms that want to be part of that 
supply chain have got to satisfy the needs of Chinese companies 
and Chinese standards. And that's a concentration that people 
don't like. So, yes, Asia, as a whole, can't decouple, but 
within Asia, China is becoming a hub. And to the extent that 
the United States and Japan are not able or willing to play an 
active role, that becomes more problematic, because people do 
want a balance there.
    Now, the U.S. asset, here, is our own huge market. We are 
the locomotive. We have this asset. But, because of our own 
political problems, we've been unable to leverage this asset to 
the extent that I think we ought to be able to. For example, I 
don't think KORS could pass the Congress today. And I think to 
have it rejected by Congress would be worse than not voting it 
at all. Hopefully, at some point, it will be able to be 
ratified.
    So, we're not able to leverage our own asset, which is 
unfortunate. We say we want a seat at the table if there's ever 
an East Asian economic community. Without fast-track, without 
being able to ratify agreements of Congress, what do you bring 
to the table?
    And finally, a quick word on Futenma. Now, I'm not a 
security guy, so I have no expertise on the security aspect. 
But, the first thing they teach you in Economics 101 is, 
``There ain't no free lunch.'' Economists have bad grammar. And 
the point is, if I accept the administration point of view, 
that there's no viable alternative to the 2006 agreement, 
there's still--the issue is, Are the benefits more than the 
costs? What are the costs?
    We have, for the first time, two-party democracy in Japan. 
That is something in the interest of both Japan and the United 
States. And while the DPJ is causing its own problems, we're 
adding some more straws to the camel's back through this sort 
of pressure. Polls show that half the people in Japan want 
Hatoyama to resign if he can't reach agreement with the United 
States on this, but that doesn't mean that they support the 
United States position. Half of the voters say they want the 
U.S. troops out of Okinawa altogether.
    We're also incurring the resentment of a government that 
campaigned on this thing. There's also the spillover effect, or 
the potential for spillover effect.
    So, what I'm saying is, I don't know the answer: Are the 
costs or the benefits more? What I am worried about is, I don't 
think there's been an open asking of the question and answering 
of the question: What are the benefits, what are the costs, and 
how do they match each other? And that should be asked and 
answered.
    Thank you very much.
    [The prepared statement of Mr. Katz follows:]

 Prepared Statement of Richard Katz, Editor of The Oriental Economist 
                          Report, New York, NY

     global cooperation, not bilateral relations, are now the pivot
    If we were meeting 15 years ago, the main theme of the economic 
discussion would be bilateral trade friction, the widespread fear in 
the United States that Japan's strength was a threat to the United 
States. If we were meeting 7-10 years ago, the main theme would be that 
Japan was a threat, not because it was too strong, but because it was 
too weak. Its weakness was a contributing factor, though certainly not 
the main factor, in the 1997-98 financial storms in Asia. In 2003, 
there were even some who feared global financial storms resulting from 
a crisis in Japan's banking system and/or its government bond market. 
As it turned out, it was problems in America's financial system which 
wreaked global havoc over the past 2 years. And, although there is some 
talk of an impending crisis in Japan's Government debt market, that 
fear is just as exaggerated today as it was 7 years ago, for reasons 
I'll detail below.
    Today, trade frictions with Japan are, for most part, little 
different from the occasional trade frictions we have with other 
allies--despite occasional exceptions like the beef episode of a few 
years back. The biggest fear these days is that the two nations are 
``decoupling,'' that neither one needs the other as much as it used to. 
If that were true, it would have big implications for cooperation 
between the two nations on economic as well as security matters.
    In the United States, there is fear among some that, under the new 
government led by the Democratic Party of Japan (DPJ), Japan is moving 
away from a focus on the United States to a focus on Asia, particularly 
China. This was fed by talk that Prime Minister Yukio Hatoyama wanted 
to form an East Asian Economic Community excluding the United States. 
There is also fear that Japan will be so lame economically and troubled 
politically that it will have neither the desire nor the resources for 
playing an activist role on the Asian or global stage.
    In Japan, there is fear that the United States has moved from 
``Japan-bashing'' to ``Japan passing,'' and that the United States and 
China are forming a de facto ``Group of 2.'' Ears perked up in Japan 
when Secretary of State Hillary Clinton, then a candidate for 
President, wrote in Foreign Affairs that, ``Our relationship with China 
will be the most important bilateral relationship in the world in this 
century.'' A couple decades earlier, that description was being applied 
to United States-Japan ties by then-Ambassador to Japan Mike Mansfield. 
There is also fear in Japan that the United States is turning inward 
and becoming more hawkish on trade, a fear symbolized by, among other 
things, the inability to push through the Korea-U.S. Free Trade 
Agreement (KORUS). Finally, there are fears that tensions over the 
Futenma base issue--symbolized by President Obama's refusal to have an 
official meeting with Prime Minister Hatoyama during this week's 
nuclear summit--could spill over into economic arenas.
    In both countries, there is concern that the two allies will not be 
able to cooperate in the face of a rising China and that, as a result, 
the rest of Asia will orient economically toward China. The goal in 
both capitals is not to contain China, but to integrate it as a 
``responsible stakeholder'' in the Asia-Pacific economic community of 
nations. That smooth integration becomes harder if the two nations 
cannot cooperate well, or are preoccupied with internal problems.
    The rise of China is not the only area where cooperation is needed. 
In the last couple decades, an era of relative peace and prosperity was 
fed by, among other things, cheap resources. But now, as India and 
other countries join China in achieving rapid growth, demand for energy 
and water is growing faster than supply. Rising prices and a potential 
scramble for resources has not only economic but also geopolitical 
implications. Then, there is the needed repair of the financial system. 
These are all areas where problems would be far more manageable to the 
degree that Japan and the United States can work together.
    Let us discuss a bit which concerns are justified, which are not, 
and the ability of the two nations to overcome the obstacles that do 
exist.
                protectionism: the dog that did not bark
    One of the most remarkable features of the recent global economic 
crisis is the dog that did not bark: protectionism. It was widely 
predicted that the sharpness of the recession would produce beggar-thy-
neighbor policies in country after country. In reality, a September 
2009 report by the World Trade Organization (WTO) showed no surge in 
the use of the ``safeguard clause'' or of ``antidumping'' cases, or 
similar measures.
    Many in Japan, misinterpreting some of the statements made by 
Barack Obama during the Democratic primary campaign, feared that he 
would be a trade hawk. Not only was that a misunderstanding of 
President Obama, but it failed to consider the relative lack of 
political pressure on the administration and Congress to take harsh 
protectionist measures. It is remarkable that, when both General Motors 
and Chrysler went bankrupt, no one blamed Toyota and Honda. No one 
called for a repeat of the 1980s when a far less severe crisis for the 
Detroit Three led to years of de facto quotas on imports of Japanese 
cars. On the contrary, by some estimates, half of the cars sold under 
the U.S. cash for clunkers program were Japanese brands, many of them 
made in the United States but many imported.
    This does not mean that there are no bilateral trade frictions. The 
rules of Japan's own cash for clunkers program, its continued partial 
restrictions on beef imports, and the move to roll back reforms of the 
banking and insurance operations of the government-owned Japan Post 
have all become contentious issues. Inward foreign direct investment in 
Japan, while higher than before, is still very low, partly because it 
remains harder than in other countries for foreigners (or Japanese) to 
acquire domestic firms. But most of these problems are akin to the 
frictions the United States has with many other allies. Moreover, it is 
Japan's low growth, rather than import barriers, which poses the 
biggest obstacle to an increase in U.S. exports to Japan.
    Similarly, Japan and other countries were concerned about the ``Buy 
America'' provisions that were added to the stimulus program last year. 
However, at the administration's request, Congress made sure that the 
provision complied with WTO rule and thus its implementation is 
governed by the Government Procurement Code signed by the United 
States, Japan, Europe, and others. There are some in Japan who see the 
Toyota recall case as an example of disguised U.S. protectionism, but 
that is not the predominant view.
    In short, bilateral trade frictions are no longer the keystone of 
United States-Japan economic relations, as they were in the past. What 
is the case, as we'll discuss below, is the political inability in both 
Japan and the United States to take further proactive governmental 
measures toward trade liberalization, such as truly substantive Free 
Trade Agreements (FTAs).
 prolonged economic stagnation; dpj targets only 1 percent real growth 
                           rate through 2020
    The biggest background factor is Japan's prolonged economic 
stagnation. I believe that Japan will eventually undertake the economic 
reforms it needs, because it can have neither economic vitality nor 
political stability without better growth. However, the medium-term 
picture is not encouraging.
    The conventional forecast is that Japan will grow at an annualized 
rate of around 2 percent for the next few years. But that is from a 
very low starting point. Japan's GDP suffered a peak to trough plunge 
of 8.4 percent, which is more than twice as bad as the U.S. downturn. 
At 2 percent, it would take Japan until mid-2013 just to get back to 
level of GDP it had reached 5 years earlier at the beginning of 2008 
(see Figure 1).




    Worse yet, once Japan reaches full employment and full capacity-
utilization, its potential for further growth is exceedingly mediocre, 
among the lowest in the OECD (see Figure 2). Conventional estimates are 
about 1 percent per year or so. The reason is twofold. GDP growth in 
any country is the sum of growth in the number of workers plus growth 
in output per worker; i.e., productivity growth. In Japan, the working 
age population is now shrinking. As a result, says the OECD, the labor 
force will shrink by about 0.7 percent per year during the coming 
decade. Meanwhile, trend productivity growth is only around 1.7 percent 
per year according to the OECD; 1.7 percent growth in productivity 
minus 0.7 percent due to fewer workers results in annual GDP growth of 
1 percent a year.




    The tragedy is that Japan could enjoy much higher rates of growth 
if it undertook productivity-enhancing reforms that brought it up to 
global benchmarks. While Americans tend to think of Japan as a high-
productivity country because we see the likes of Toyota and Sony, the 
reality is that there are two Japans. One is the high-productivity 
exporting sectors, which have to be efficient because they face fierce 
competition in the global market. But then there is the domestic Japan, 
which makes up the lion's share of the country. It neither exports nor 
faces much competition from imports or Foreign Direct Investment. 
Moreover, in many cases, firms in these domestic sectors face little 
domestic competition due to outmoded regulations that protect 
entrenched firms, a distribution and financial system that makes it 
hard for newcomers to displaced entrenched leaders, and weak antitrust 
enforcement. There can be no competitiveness without competition. The 
result is that overall output per worker in Japan is 30 percent lower 
than in the United States. That's lower than almost any other OECD 
country than Korea and Greece. U.K. productivity is 20 percent lower 
than in the United States; Germany's is 10 percent lower and France's 
only 4 percent lower (see Figure 3).




    Unfortunately, the Hatoyama administration, like its Liberal 
Democratic Party (LDP) predecessors seems unwilling and/or unable to 
undertake the necessary reforms. There are lots of smart, younger Diet 
members in the DPJ who have very good ideas about economic reform, but 
they are not running policy--at least not yet.
    The official ``growth strategy'' of the DPJ accepts low growth as a 
fait accompli. It offers little growth and no strategy. It says that 
its goal is 2 percent real growth per year through 2020. But its 
``fuzzy math'' counts from the depths of the recession. If one takes 
their target for 2020 and compares it to the prerecession peak GDP of 
early 2008, the reality is that the DPJ target is a low 1 percent a 
year over the entire 2008 2020 period.
     the political obstacles to economic reform and revitalization
    The DPJ, like its LDP predecessors, faces a big political dilemma 
regarding economic reform.
    On the one hand, there is great political pressure to undertake 
reform in order to raise the rate of growth. There are many political 
stresses that cannot be resolved without better growth. For example, 
how can Japan finance social security and health care for the growing 
ranks of the elderly without an increase in tax revenues and better 
returns to pension funds? In the absence of better growth, politicians 
will have to cut benefits, raise premiums, and/or let the government 
debt grow even bigger. The public wants reform, even if it cannot 
identify the content. In the last two elections for the Diet's Lower 
House (the House that chooses the Prime Minister and Cabinet), the 
public overwhelmingly voted for change. The only difference was their 
view of who could best deliver that change. In 2005, it was Prime 
Minister Junichiro Koizumi of the LDP; in 2009, it was the DPJ. 
Transport Minister Seiji Maehara's bold moves to downsize and 
rehabilitate the bankrupt Japan Air Lines are a good example of the 
reform spirit in parts of the DPJ.
    On the other hand, there are great political costs in implementing 
reform since it would hurt many of the special interest groups that the 
DPJ either already sees as part of its political base, or would like to 
wrest away from their past support of the LDP. Consider just one 
example among many: the intersection of trade and farm policy. Without 
being willing to put farm issues on the table, Tokyo finds it hard to 
negotiate genuinely substantive Free Trade Agreements. While Japan is 
engaged in a number of talks on FTAs, trade experts have raised 
questions about the ``quality'' of past agreements, and those being 
negotiated now, in terms of how much real liberalization will occur. 
Indeed, the European Union is balking at going ahead with Economic 
Partnership Agreement talks with Japan planned for this year. Whether 
this proves just a temporary setback or a lasting problem remains to be 
seen.
    And yet, increased trade is critical to hiking efficiency and the 
growth rate. Japanese companies increasingly import not just raw 
materials, but parts and machinery from the rest of Asia, often from 
their own subsidiaries there. So, they have a big interest in trade 
liberalization. Countries that trade more tend to grow faster as they 
benefit from the division of labor and increased competitive pressures. 
Japan has one of the lowest ratios of trade to GDP among rich 
countries, even adjusting for its population and distance from trading 
partners (see Figure 4). Due to malaportionment of election districts, 
the rural sector has a political influence way out of proportion of the 
number of farmers. A few years ago, many DPJ leaders supported in 
principle a very good policy on farm issues. Instead of old-style LDP 
price supports and import barriers to keep in place the dwindling ranks 
of aging inefficient farmers (more as voters than as farmers), the DPJ 
would give income support while opening up the import market. This 
would simultaneously lower the price of food to urban consumers/voters 
and enable Japan to negotiate substantial Free Trade Agreements. The 
income support part was put into the FY 2010 budget, but market-opening 
seems to be in limbo. Meanwhile, in its 2009 campaign manifesto, which 
set the goal of a United States-Japan FTA, the DPJ added an exclusion 
for farm products after the farm lobby protested. The DPJ got its 
reward when the powerful farm cooperative dropped its traditional 
nationwide endorsement of the LDP in this July's Upper House elections.




    The DPJ faces another dilemma. While it has an overwhelming 
majority in the Lower House, it lacks a majority in the Upper House. 
This forces it into an alliance with two smaller antireform parties, 
the Peoples New party (PNP) and the Social Democratic Party (SDP). 
Reformers had hoped that the DPJ could remove this burden by winning a 
single-party majority in the Upper House this July. That would give the 
DPJ a better chance of moving decisively on key issues. This now looks 
very unlikely. DPJ poll ratings are dropping like a rock, partly due to 
the indecisiveness of Prime Minister on a host of issues and partly due 
to the financial scandals surrounding party Secretary General Ichiro 
Ozawa. Depending on the outcome of the election, there could be 
internal DPJ pressure on PM Hatoyama and Ozawa to step down. There is 
even talk that Hatoyama may have to step down in May if he fails to 
reach agreement with the U.S. on the Futenma relocation dispute (see 
below).
    The DPJ could end even more divided and beholden to special 
interest groups and antireform coalition partners than it is already--
at least for a while.
    The upshot is that, far from ending Japan's long period of party 
realignment, the DPJ's landslide victory in 2009 is just another 
milestone in what will prove to be a long process. The LDP could, like 
the Italian Christian Democrats, simply evaporate. There is no 
guarantee that the DPJ will exist in its current form by the end of the 
decade.
    This is not an atmosphere conducive to bold moves on either 
domestic reform or on Japanese activism on the global economic and 
security fronts.
             good news: political pressure for reform grows
    While the short- and medium-term view may sound discouraging, the 
longer term view is far more optimistic. Yes, there are political 
obstacles to reform, but at the same time, there are also big and 
growing political pressures for reform. Without reform, the economy 
will continue to slide, raising popular discontent and frictions among 
the various political constituencies. There can be no political 
stability without a stronger economy and no stronger economy without 
deep and thorough structural reform. And so we will see continued 
efforts by reformers to find the right political combination to take 
control.
    For decades, the LDP had ruled in a one-party dominant democracy, 
the last one remaining among the rich countries. Its inability either 
to reform itself or to revive the economy brought its downfall, and 
perhaps its demise as well. That has broken a logjam, opening up new 
opportunities for institutional reform in the economy.
    This development both reflects and reinforces a big shift in voter 
preferences. In the old days of LDP dominance, voters tended to focus 
on their local Diet member rather than the national party. In recent 
elections, this has changed. Voters are putting higher priority on 
which party will run the country. Moreover, they are choosing the party 
based on expectations of performance. And finally, voters are more 
volatile than ever; they are willing to shift from party to party to 
get what they want. Formerly safe seats are safe no more. The LDP under 
Koizumi won in a landslide in 2005, and then, under his successors, 
lost in a landslide in 2009.
    As a result of this shift in voter attitudes, parties that want to 
win need to produce better economic performance on a national level. 
Individual Diet members who want to win want to be members of the party 
or coalition that can deliver that performance.
    Politics will be dominated by the effort to juggle the competing 
claims of assorted special interests (which is harder to do when there 
are not enough economic resources to please them all) as well as the 
balance between special interests and the national interest. In the 
absence of good growth, it is a very hard juggling act. That, too, 
produces pressure for politicians to deliver on economic performance, 
performance that can only be achieved through deep and thorough reform. 
But this is a long process. Japan is still in the midst of a political-
economic transition that began with the collapse of the bubble in 1990-
91. It has quite a ways to go.
                   paralysis on macroeconomic policy
    It is not only on issues of long-term growth that the Hatoyama 
administration seems as paralyzed as its LDP predecessors; there is 
also much confusion on short-term macroeconomic policies to bring about 
quicker recovery from the severe recession of 2008-09.
    The DPJ's 2009 campaign manifesto seemed to have great potential. 
It marked the first time any Japanese Government recognized that the 
heart of Japan's chronic problem of weak domestic demand was lack of 
sufficient consumer income. That's why Japan was inordinately dependent 
on a rising trade surplus to fuel growth in this decade's recovery: a 
rising trade surplus and business investment (itself often dependent on 
exports) accounted for two-thirds of all GDP growth during 2002-07. 
Consumption provided only another third (see Figure 5). The DPJ 
proposed a number of measures to increase household disposable income--
so as to fuel more consumer spending. The first step was to shift 
government spending from pork to people. This included, among other 
things, a child allowance of 312,000 ($3,300) per year per child; 
free high school tuition at public schools and aid for students in 
private high schools (currently parents pay as much as $5,000 per year 
at public high schools for tuition, fees, books, and so forth); cuts in 
highway tolls adding up to 0.4 percent of GDP (a few hundred mile car 
trip can cost as much as $250), and assorted tax reductions for 
individuals and small firms adding up to 0.5 percent of GDP. The total 
spending on transfer payments and tax cuts was to amount to 21 
trillion ($225 billion), or 4 percent of annual GDP, over 2 years.




    However, due to excessive fear over the rising government debt (see 
below), the DPJ has waffled on these plans. It has passed free high 
school tuition. However, the child allowance was, as planned, 
introduced at only half the planned rate this year and there is a fight 
among party leaders on whether or not to fulfill the campaign promise 
to raise it to the full amount next year. Many highway tolls may end up 
being raised rather than cut. Finance Minister Naoto Kan is talking 
about raising the consumption tax, and the Minister for National 
Strategy has talked about raising the tax soon, in violation of 
Hatoyama's campaign pledge not to raise it until at least 2013. This 
risks repeating the disastrous hike in the consumption tax in 1997, the 
trigger for the 1997-98 recession.
    Having ruled out additional fiscal stimulus, and even raising the 
possibility of fiscal tightening, the Hatoyama administration is acting 
as if deflation were the primary cause of Japan's stagnation and 
talking as if the Bank of Japan (BOJ) had a magic bullet called 
``inflation targeting,'' that could solve the problem. Neither 
proposition is true.
    What is required is a fiscal-monetary one-two punch, but that does 
not seem in the offing. Once again, Tokyo seems to be hoping a cheaper 
yen and rising global growth will rescue Japan.
                  no crisis in japan government bonds
    The risk for Japan is continued corrosion, not crisis. Just as in 
2003, there is a lot of unwarranted alarmism over the state of Japanese 
Government debt. It has been amplified by the Greek crisis. This 
alarmism is not only wrong; it's harmful. It inhibits the government 
from taking the aggressive action on fiscal stimulus that it needs to 
help break out of its stagnation.
    Japan's budget hawks and the bond market vigilantes point out that 
Japan's gross debt now equals more than 200 percent of GDP. However, 
the correct measure is not gross debt, which involves ``double 
counting'' of debts that one government agency owes to another; e.g., 
government bonds owned by the Bank of Japan (BOJ). The correct figure 
is net debt, which has now reached 100 percent of GDP. That's certainly 
worrisome. But there is no particular reason to believe that this is a 
magic limit. No more than was the case back in 1997 when the government 
raised taxes and triggered a horrible recession because net debt had 
reached 35 percent of GDP. No more than in 2003 when financial markets 
panicked because net debt had reached 76 percent of GDP. Other 
countries have run net debt at around 100 percent of GDP for as much as 
two decades without provoking crisis, among them Italy and Belgium. 
What raises concern over the long haul is not today's level, but the 
ever-rising trajectory. Structural problems in the economy, like weak 
household income, have made Japan a deficit addict.
    What distinguished Greece is not just its big government debt, but 
the fact that it ran a big current account deficit. When foreigners 
pulled out their money, that capital flight caused the crisis, as in 
the Asian crisis of 1997-98. But Japan's debt is almost entirely funded 
domestically. It need not fear an international capital flight.
    The key thing for sustainability in the medium term is not the 
level of debt, but the level of interest payments. In fiscal year 2010 
(which began on April 1), net interest payments are expected to amount 
to less than 1.5 percent of GDP. That's well below the level of the 
early 1990s (see Figure 6). The reason is that interest rates are so 
much lower today. Since the BOJ has the capacity to keep rates low for 
quite some time, Japan has plenty of breathing space to apply fiscal 
stimulus now and design a plan for debt reduction in the longer term. 
But there is no long-term solution to the mushrooming of government 
debt in the absence of better growth rates.




                 no retreat from u.s. government bonds
    Another fear in the market is that Japan and/or China might flee 
from U.S. Government debt, either due to fears about the U.S. budget 
deficit or as a political weapon in trade frictions. The fear is that 
this would cause U.S. interest rates to skyrocket. This fear, which has 
been around for years, is unfounded. Chinese and Japanese holdings of 
U.S. Treasuries in January 2010 were 20 percent higher than in January 
2009 (see Figure 7).




    Neither Beijing nor Tokyo would sell off U.S. Treasury bonds to 
make a political point. That would be shooting themselves in the foot. 
They don't buy U.S. bonds as a favor to the United States but in their 
own interests. To undertake a big selloff would cause the dollar to 
sink and the Japanese and Chinese currencies to rise. That, in turn, 
would cause serious damage to the exports of these export-dependent 
countries.
    Even if Beijing and private Japanese investors panicked over the 
U.S. budget deficit, their holdings are not big enough to cause a 
financial problem that the Federal Reserve could not manage. China and 
Japan together hold about 14 percent of U.S. Treasury debt. Treasury 
debt, in turn, is about a third of all marketable debt in the United 
States. Hence, Japanese holdings of Treasury debt add up to only 2.1 
percent of all marketable debt; Chinese holdings add up to only 2.5 
percent.
          no decoupling from united states; no shift to china
    A lot of ink has been spilled saying that the Hatoyama 
administration is seeking to shift the focus of Japan's international 
economic relations away from the United States to Asia in general and 
China in particular. I disagree. First of all, conversations with DPJ 
leaders indicate that there is no such intention. Second, it is not 
something that Japan could do even if it wanted to.
    The talk of ``decoupling'' is fed by simplistic figures that simply 
look at the rise in China as the chief market for Japanese exports, 
displacing the United States. Over the past decade, the U.S. share of 
Japanese exports has halved from 31 percent in 1999 to only 16 percent 
in 2009. Conversely, the Chinese share rose from 6 percent to 19 
percent.
    Such figures ignore the fact that a majority of those Japanese 
exports to China serve as capital goods or inputs for China's own 
exports to the United States. The same is true for other Asian 
countries. Many of the goods labeled ``Made in China,'' should instead 
be labeled ``Assembled in China with parts from Japan and other Asia 
countries.'' That's why, as U.S. imports from China rose as a share of 
total U.S. imports, the share coming from the rest of Asia fell. The 
total Asian share of nonoil imports is actually a bit lower than a 
couple decades ago (see Figure 8).




    The result of all this is that Japan's ability to export to China 
and the rest of Asia depends on Asia's ability to export to the United 
States. The ups and downs of Japanese exports to China correlate, not 
so much with the ups and downs of Chinese GDP, but of China's exports 
to the United States (see Figure 9). The same is true of Japan's 
exports to the rest of Asia; they depend on Asia's exports to the 
United States. Most interesting of all, Japan's exports to Asia ex-
China hinge on China's exports to the United States. So, there is a 
quadrilateral pattern of trade: Japan exports to Asia, which exports to 
China, which exports to the United States. While intra-Asian trade is 
enormous, two-thirds of Asia's trade--including a third of intra-Asian 
trade--consists of capital goods and parts and materials used to meet 
final demand outside of Asia. The United States is the main engine in 
this locomotive. This is why Japan and the rest of Asia were hurt so 
badly by the U.S.-originated global recession.




        engagement in asian economies: japan losing out to china
    Even though the United States and Europe are the final destinations 
for Asian trade, China is rapidly emerging as the organizing hub of the 
Asian supply chain. Dependence on China is growing and China has 
rapidly overtaken Japan in terms of Asian trade and direct investment. 
This results from two factors: (1) China's extremely rapid growth 
versus Japan's low growth; and (2) the very high dependence of China on 
international trade and inward Foreign Direct Investment (FDI) compared 
to the low levels of both trade and inward FDI in Japan.
    Japan's share of world GDP (measured in constant 2000 US $) hit its 
high point at the end of the bubble era in 1991 at 17.3 percent. As of 
2000, it was down to 12.8 percent and will undoubtedly be much lower by 
2020. By contrast, China' share, which was below 1 percent in the Mao 
era, hit 6.5 percent in 2008 and will be much, much higher 10 years 
from now. It is useful to use constant dollars to avoid the misleading 
distortions caused by gyrations in currency rates. But, just for the 
record, in current dollar measures, by 2008, China had almost caught up 
to Japan, with China at 7.1 percent of world GDP vs. 8.1 percent for 
Japan. By now, China has probably caught up.
    Of more direct importance to intra-Asia dependency relations, China 
is not just an export superpower, but an import superpower as well. 
Japan's imports equal 15 percent of GDP; this is less than half the 33 
percent ratio for China. Japan's manufacturing imports account for 
about 7 percent of Japan's GDP, about one-third of the 20 percent level 
for China. Moreover, the nature of Japan's trade is far more insular 
than that of China. For example, about 40 percent of Japan's 
manufacturing imports are from Japanese companies' own foreign 
subsidiaries, rather than from indigenous firms in foreign countries. 
By contrast, the majority of China's imports and exports are conducted 
by multinationals working in China, some of which are Asian 
multinationals.
    As a result, by 2008, China accounted for 6.5 percent of global 
imports (up from 2.3 percent a dozen years earlier). That beat out 
Japan, which bought only 4.6 percent of global imports (down from 6.8 
percent a dozen years earlier).
    For years now, China has been importing more from Asia than does 
Japan. In fact, among the newly industrializing and developing 
countries in Asia, Japan imports less than China, the United States, 
the EU or developing Asia. In 2008, Japan's share of total global 
imports from these countries was 8 percent, compared to 11 percent for 
the United States, 14 percent for the EU, 14 percent for China and 31 
percent for Asian developing countries ex-China. Given the smaller role 
played in manufacturing imports in Japan, when it comes to a more 
developed country like Korea, Japan plays an even lesser role. In 2008, 
it bought just 7 percent of all global imports from Korea, compared to 
11 percent for the United States, 13 percent for the EU, 22 percent 
from developing Asia, and 25 percent for China. It is notable that 
China has now surpassed all the rest of Asia ex-Japan put together as 
Korea's largest customer (see Figure 10, top and bottom panels).




    When it comes to sheer numbers, China's role is not dominant 
throughout Asia--most of Asia does more trade with itself than with 
China as seen in the top panel of Figure 10. However, because of its 
increasing role as the organizing hub of the intra-Asian production 
chain, other countries increasingly need to satisfy Chinese firms in 
order to participate in that chain. With that growing economic 
dependency come political ripple effects.
    Raising the level of trade to GDP could be a vital boost to Japan's 
own growth. As noted above, countries with higher ratios of trade to 
GDP tend to grow faster. They get to specialize in what they do best, 
import what they do not make efficiently and expose both their 
exporters and import competing sectors to fiercer competition. Those 
sectors in Japan with the least exposure to international trade tend to 
have the least domestic competition and the lowest productivity. At the 
same time, increasing trade and FDI would enable Japan to play a more 
active role in the Asian scene, providing a counterbalance to China.
     u.s. asset: its huge market--can it take advantage with ftas?
    One of the major assets that the United States has in dealing with 
Asia is its huge and open market. The United States is the engine of 
the trade locomotive, even if China appears to be the intermediary. As 
detailed above, the notion of an Asian economic bloc is unrealistic. 
Whether or not the United States is a formal member of this or that 
particular multilateral organization in East Asia, its indispensability 
to Asian economic growth is a reality that cannot be ignored by the 
nations of the area.
    However, at the present, the United States, like Japan, finds its 
ability to leverage its market hamstrung by domestic political 
difficulties. At a time when China and the European Union are moving 
ahead with assorted Free Trade Agreements (FTAs) with countries in 
Asia, the United States is unable to do so. Consider the Korea-United 
States FTA (KORUS). It was negotiated, and then to meet some objections 
on the part of U.S. automakers, renegotiated. If KORUS were submitted 
to the Congress today, it probably could not be ratified. And a 
rejection would have a worse political impact on United States-Korean 
relations than further delay until conditions are such that it can be 
ratified. If KORUS cannot be ratified, then the United States is in no 
position to negotiate the much more difficult issue of some sort of 
Economic Partnership Agreement with Japan, even if Tokyo were in 
position to do so (which it is not at the present time).
    The Obama administration has insisted quite strongly that, if any 
sort of East Asian Economic Community were to be formed, the United 
States would expect to be a member. It should be noted that the 
formation of any such community is years and years away. But the point 
remains: if the United States is not in position to negotiate on a fast 
track basis and if the United States cannot get already-signed FTA 
agreements ratified in Congress, then what does the United States bring 
to the table of any FTAs in Asia? What would be its leverage in shaping 
any such partnership to its liking?
    At present, in the face of a rising China, both the United States 
and Japan face big limitations in their ability to use their markets as 
leverage, either individually or in tandem.
                         a few words on futenma
    I happened to be in Tokyo in December when the issue of relocating 
the U.S. Marine air base at Futenma, Okinawa, heated up. What struck me 
was the degree to which so many of my meetings with economic officials 
and business people, both Japanese and American, were dominated by 
concern about possible spillover effects from the Futenma dispute.
    I am no expert on security matters and not competent to discuss the 
pros and cons of the relocation argument per se. However, the first 
thing we are taught in economics is that there is no free lunch. Let us 
accept the administration argument that there is no viable alternative 
to the agreement that Washington hammered out with the LDP government 
(although this is disputed among some security experts). The question 
remains: are the benefits of that agreement worth the political cost of 
getting it implemented over the stiff opposition of a DPJ government 
which has campaign against it for years and against public opinion in 
Okinawa. The polls show that the Japanese public is very upset at Prime 
Minister Hatoyama's mishandling of the issue; in one recent poll 49 
percent of respondents said he should resign if he fails to secure an 
agreement with Washington by the end of May. But that does not mean 
that the public supports Washington's position. On the contrary, in a 
poll taken a few months ago, half of voters wanted the bases moved out 
of Okinawa altogether. Some said out of Japan.
    What are some of the costs?
    For one thing, the new government in Japan represents the end of 
one-party democracy in Japan and the beginning of truly contested 
elections. Party competition is as important to a modern nation's 
political health as competition in business is to economic health. The 
United States has an interest that Japan's experiment in competitive 
democracy succeed. It does not serve the United States for Japan to 
have a government that is even more gridlocked by coalitions with small 
antireformist parties than it is today. After the DPJ took power last 
August, it had asked the United States to wait on Futenma until after 
this July's Upper House elections. However, Washington calculated that 
delay could be fatal to the plan, which may be accurate. The upshot is 
this: while the DPJ is mostly responsible for its current dismal 
political position, U.S. pressure on this issue has added several 
straws to this overburdened camel's back.
    Second, whether or not Prime Minister Hatoyama survives the crisis 
over Futenma or the July elections, Washington will be dealing with the 
DPJ for at least a few years to come, perhaps several years depending 
on the outcome of the 2013 Lower House elections. So, another cost is 
the resentment of Washington within a government whose cooperation on 
other fronts the United States will need to seek now and in the future.
    A third potential cost is a spillover of tensions around Futenma 
onto other issues. Various frictions on the economic side do come up 
from time to time, such as renewed discussion on Japan's restrictions 
on been imports due to the ``mad cow'' issue. Others are multilateral, 
such as new rules on finance in the wake of the financial cataclysm. 
Then, as noted above, is the need to cooperate vis-a-vis China, and in 
concert with China, on energy issues for example. When atmospherics at 
the highest level are so strained, it cannot help but shape how working 
level officials react on these day-to-day issues.
    Is it really the case, as suggested by a few former U.S. foreign 
policy officials, that changing the 2006 agreement endangers the entire 
United States-Japan security relationship? Does it help to raise the 
temperature of discussions in this way? Or is it the case, as one 
former U.S. Foreign Service officer said to me, ``One Marine base does 
not make an alliance?'' If in the end, Tokyo does not agree, what is 
Washington's plan B?
    In the days of LDP dominance, Washington often sacrificed economic 
interests to security interests. Was it worth selling a few more 
oranges to Japan if that caused the LDP to lose to the Socialists, thus 
endangering U.S. base rights in Japan? Once again, Washington faces a 
tradeoff between its preferences on security and economic issues vis-a-
vis Japan.
    I am by no means claiming that the costs of the effort to implement 
the 2006 Futenma agreement--or of failure to achieve it after applying 
so much pressure--are greater than the benefits. Not being a security 
expert, I am not equipped to make such a calculation. But it is a 
question that needs to be asked and answered.

    Senator Webb. Thank you, Mr. Katz.
    Dr. Auslin, welcome.

  STATEMENT OF MICHAEL AUSLIN, DIRECTOR OF JAPANESE STUDIES, 
         AMERICAN ENTERPRISE INSTITUTE, WASHINGTON, DC

    Dr. Auslin. Mr. Chairman, thank you for the opportunity to 
testify today on the current state of United States-Japan 
relations, and to look ahead at the role the relationship will 
play in future economic and security developments for both 
countries.
    Despite current difficulties in the relationship, close 
ties with Japan are essential for the United States to retain a 
credible strategic position in East Asia and for future 
economic prosperity in both Asia and America. Yet, we must also 
recognize that relations between the United States and Japan 
will be more tenuous over the next several years, requiring 
close communication and a frank assessment of how the 
relationship benefits each partner.
    The past 7 months of the United States-Japan relationship 
have been consumed, as we've discussed this morning, with the 
dispute over whether Japan will fulfill the provisions of the 
2006 agreement to relocate Marine Corps Air Station Futenma to 
a more remote setting on the northern part of the island of 
Okinawa. Given that the state of United States-Japan relations 
directly influences the larger strategic position of the United 
States in the Asia-Pacific region, any substantive changes in 
the United States-Japan alliance, or in the political 
relationship that undergirds it, could have unanticipated 
effects that might increase uncertainty and potentially 
engender instability in this most dynamic region.
    Last August, as we've noted, voters ended the rule of the 
Liberal Democratic Party, after 54 years of near-continuous 
power. The electoral victory of the Democratic Party of Japan 
was due equally to voter anger of the inability of the LDP to 
end Japan's nearly two-decade-long economic slump as it was the 
reflection of trends that have been reshaping Japanese society 
for decades. These trends include worries over demographic 
decline, the end of permanent employment, and a pervasive sense 
of isolation from its neighbors. Japan's stagnation, at the 
very time that China has burst onto the world scene, has added 
to the frustration of Japanese officials and citizens, alike.
    Many in Japan worry that the country is turning inward, and 
some statistics support this interpretation. Dr. Packard 
mentioned that the number of Japanese students studying in the 
United States has dropped by half in the last decade, to just 
29,000; this at a time when Chinese students in the United 
States have increased by 164 percent. It should also be noted 
that, today, Japan has just 38 members of the self-defense 
forces distributed around the world on peacekeeping operation 
missions sponsored by the U.N. versus over 2,150 for China at 
the same time.
    The DPJ, the Democratic Party of Japan, capitalized on 
these dissatisfactions and fears to win a resounding electoral 
victory. Yet, they have found governing more difficult than 
electioneering. And given its troubles, many of which Mr. Katz 
just talked about, Washington must be prepared for continued 
debates within the DPJ, in coming months, over foreign and 
domestic policy, as well as the high likelihood of leadership 
changes at the top of the party.
    These DPJ debates will occur at the same time that new 
political parties are forming and dissolving, many breaking off 
from the LDP. Rather than entering a period of two-party 
electoral democracy in Japan, we are entering one of multiparty 
electoral democracy, and Japanese domestic politics will become 
even more fluid and chaotic over the next half-decade or more.
    While I believe that Prime Minister Yukio Hatoyama is 
committed to United States-Japan relations, he does have a 
different vision of the future of our relationship than did his 
predecessors; hence the attempts here to understand whether his 
repeated calls for a more equal alliance with Washington mean 
more independent, and what such policies might lead to.
    We should take at face value his desire for Japan to play a 
more expansive global role, craft a closer relationship with 
the nations of East Asia, and take a lead in issues from 
nuclear disarmament to climate change, no matter how vague the 
specifics of his plans.
    Ironically, perhaps, our relations are further influenced 
by the continued worry in Japan over long-term trends in 
America's Asia policy. The main concerns are, first, that the 
United States will, over time, decrease its military presence 
in the Asia-Pacific, thereby weakening the credibility of its 
extended deterrence guarantee; and second, that Washington will 
itself consider China in coming decades as the indispensable 
partner for solving regional and global problems, alike.
    Despite this litany of problems, both real and perceived, 
the United States-Japan alliance, and the broader relationship 
it embodies, remains the keystone of United States policy in 
the Asia-Pacific region. America and Japan share certain core 
values, including a belief in democracy, the rule of law, civil 
and individual rights, among others. Our commitment to these 
values has translated into policies to support other nations 
and around the world--in Asia and around the world, that are 
trying to democratize and liberalize their societies.
    Today, Asia remains in the midst of a struggle over 
liberalization, as witnessed by the current tragic unrest in 
Thailand, and the willingness of both Tokyo and Washington to 
support democratic movements will remain important in the 
coming decades.
    To that end, Japan and the United States should take the 
lead in hosting democracy summits in Asia designed to bring 
together liberal politicians, grassroots activists, and other 
civil society leaders to discuss the democratic experiment and 
provide support for those nations bravely moving along the path 
of greater freedom and openness.
    Political development in Asia has benefited not only from 
the United States-Japan diplomatic engagement I've just 
mentioned, but also from the security burdens both countries 
have shouldered to maintain stability in the western Pacific, 
throughout the cold war and after. As has been noted, there are 
over 35,000 U.S. military personnel stationed in Japan, and 
another 11,000 afloat as part of the 7th Fleet, and three-
quarters of our military facilities are located in Okinawa.
    Yet, without the continued Japanese hosting of United 
States forces, this forward-based posture is untenable, and the 
role of the U.S. Navy in maintaining freedom of the seas, and 
the U.S. Air Force in ensuring quick and credible United States 
reach anywhere in the region, will become even more important 
as other nations in the Asia-Pacific continue to build up their 
national military capabilities.
    Beyond such traditional security concerns, Japan and the 
United States continue to be among the handful of countries 
that can act as significant first responders to humanitarian 
disasters as we did in Haiti this year and in the tsunami back 
in 2004. For any such actions in the Asia-Pacific region, our 
bases in Japan are indispensable to timely, effective 
intervention.
    It is clear that the presence of U.S. military forces is 
welcomed by nearly all nations in the Asia-Pacific and sends a 
signal of American commitment to the region. Today, for all its 
dynamism, the Asia-Pacific remains peppered with territorial 
disputes and longstanding grievances, with few effective 
multilateral mechanisms, such as exist in Europe, for solving 
interstate conflicts.
    Our friends and allies in the area are keenly attuned to 
our continued forward-based posture, and any indications that 
the United States was reducing its presence might be 
interpreted, by both friends and competitors alike, as a 
weakening of our longstanding commitment to maintain stability 
in the Pacific.
    Yet, when our alliance was signed in 1960, it was titled 
the ``Treaty of Mutual Cooperation and Security.'' Cooperation 
took precedence in the eyes of Americans and Japanese, and that 
should serve as our guidepost for the future as we contemplate 
how Japan and America can work together in economic and social 
spheres.
    Our common activities are undertaken to promote not just 
stability, but also well-being, as delineated in Article II of 
the treaty. Economically, of course, we are increasingly 
intertwined, with over 132 billion dollars' worth of trade last 
year, and with Japanese companies in 49 States, employing 
approximately 600,000 Americans in high-paying, skilled jobs.
    America's continuing economic recovery is dependent, in 
part, on Japan's willingness to continue to employ Americans 
and buy our debt, and as both countries seek to balance their 
export and import sectors, openness to trade is of vital 
importance, as are trade policies designed to reduce barriers. 
Here, both countries need to focus more attention on job growth 
and trade opportunities, helping with retraining programs, and 
promoting entrepreneurship by reducing bureaucratic 
impediments.
    Both our countries are leaders in scientific research and 
development and bred multinational corporations that continue 
to change the nature of global commerce. Current Ambassador to 
Japan, John Roos, has made it a priority to expand United 
States-Japan economic cooperation, particularly in the high-
tech areas with which he is so familiar. Joint research and 
development in energy-efficient and clean energy technologies, 
such as smart grids and nuclear power, will benefit not merely 
our two economies, but can bolster our export industries and 
promote better practices and higher growth in developing 
nations, thereby promoting stability in Asia and around the 
globe.
    With all of these suggestions, however, we must maintain 
our realism. The heady days of the 1980s are long over for 
Japan, when pundits breathlessly proclaimed it the next 
superpower. And today, while the Hatoyama administration is 
long on ideas, it is short on specific policies. Officials on 
both sides of the Pacific must seek to avoid mismatched 
expectations that will only lead to disappointment and more 
hand-wringing over the future of our relationship.
    For the foreseeable future, American policymakers must 
accept that Japan will be most focused on its internal politics 
and problems, even as we attempt to create new initiatives to 
leverage Japan's strengths and weaknesses--I'm sorry--Japan's 
strengths and interests.
    Japan will continue to play a major role in Asia over the 
next decades; and, as it does so, the role of a democratic 
Japan should become increasingly important in Asia as 
democracies young and old continue to evolve, and as 
authoritarian and totalitarian regimes oppress their own people 
and threaten others. Japan cannot, of course, play this role by 
itself, and the United States must fully embrace its role as a 
Pacific nation; one inextricably tied to Asia, but, most 
importantly, one with a vision for an Asia that is increasingly 
freer, more stable, and more prosperous. This means a renewed 
commitment to expending the human and material capital required 
to maintain our position in the Asia-Pacific region.
    In conclusion, as we look to the kind of Asia that we hope 
develops in the future, there is much that continues to commend 
Japan to the region's planners and peoples, much in the same 
way the United States-Japan relationship plays an indispensable 
role in ensuring our country's commitment to the Asia-Pacific 
and in providing a necessary stabilizing force to powerful 
tides of nationalism, competition, and distrust in that region.
    Our relationship with Japan is, indeed, a cornerstone of 
the liberal international order that has marked the six decades 
since the end of the World War as among the most prosperous and 
generally peaceful in world history. For that reason, among 
others, we should look forward to maintaining this relationship 
for years to come.
    Thank you, and I look forward to your questions.
    [The prepared statement of Dr. Auslin follows:]

   Prepared Statement of Michael R. Auslin, Ph.D., Director of Japan 
  Studies and Resident Scholar in Foreign and Defense Policy Studies, 
 American Enterprise Institute for Public Policy Research, Washington, 
                                   DC

    Mr. Chairman, Senator Inhofe, and members of the committee, thank 
you for the opportunity to testify today on the current state of United 
States-Japan relations, and to look ahead at the role the relationship 
will play in future economic and security developments for both 
countries. Despite current difficulties in the relationship, I believe 
that close ties with Japan are essential for the United States to 
retain a credible strategic position in East Asia and for future 
economic prosperity in both Asia and America. Yet we must also 
recognize that relations between the United States and Japan will be 
more tenuous over the next several years, requiring close communication 
and a frank assessment of how the relationship benefits each partner.
    This past January, Washington and Tokyo observed the 50th 
anniversary of the United States-Japan Alliance, one of the most 
successful bilateral agreements in recent history. Yet the past 7 
months of the United States-Japan relationship have been consumed with 
a growing disagreement over whether Japan will fulfill the provisions 
of a 2006 agreement to relocate Marine Corps Air Station Futenma from 
its current crowded urban location to a more remote setting on the 
northern part of the island. Given that the state of United States-
Japan relations concerns not only the economic relations between the 
world's two largest economies, but directly influences the larger 
strategic position of the United States in the Asia-Pacific region, any 
substantive change in the United States-Japan alliance or in the 
political relationship that undergirds it could have unanticipated 
effects that might increase uncertainty and potentially engender 
instability in this most dynamic region.
    All political relationships change, and that between Japan and the 
United States is no exception. Policymakers on both sides of the 
Pacific have continually adjusted the alliance to reflect national 
interests, capabilities, and perceptions of the strengths of each 
other. The strategic realities of maintaining a forward-based U.S. 
presence in the western Pacific have been intimately tied to the 
domestic political policies of administrations in Tokyo and Washington 
for the past half-century. Yet today, new governments in both countries 
have policies that seem, on the surface, to indicate goals different 
from their predecessors, thus raising anxieties in both capitals.
    Last August, Japanese voters ended the rule of the Liberal 
Democratic Party after 54 years of near-continuous power. For Japan, 
Asia's oldest and most stable democracy, this was a change of epochal 
proportions. The proximate cause of anger voter was the inability of 
the Liberal Democrats to end Japan's nearly two-decade long economic 
slump, which has seen the country's once unstoppable business sector 
stagnate, develop unevenly, and lose ground to emerging exporters such 
as China and South Korea. Numerous scandals and being out of touch with 
the voters also doomed the LDP and encouraged Japanese to cast their 
ballots for change.
    Yet the electoral victory of the Democratic Party of Japan equally 
was the reflection of trends that have been reshaping Japanese society 
for decades and leading to deep currents of unease. These include 
worries over Japan's falling population rate and demographic decline, 
the supplanting of permanent employment by temporary jobs, the 
shrinking number of married couples and families, and a pervasive sense 
of isolation from its neighbors and indeed the world. A two-decade 
period of stagnation, at the very time that China has burst on to the 
world scene economically, politically, and militarily has added to the 
frustration of Japanese officials and citizens alike. Many in Japan 
worry that the country is turning inward, leaving behind the goal of 
``internationalization'' that was the vogue two decades ago. Some 
statistics support this interpretation, as the number of Japanese 
students studying in the United States has dropped by half in the last 
decade, to just 29,000; this at a time when Chinese students in the 
U.S. have increased by 164 percent since 2000. In certain ways, these 
broad concerns have highlighted the importance of the relationship with 
the United States even as some have questioned the wisdom of continuing 
to tie Japan so closely to America.
    The Democratic Party of Japan capitalized on these dissatisfactions 
and fears to win a resounding electoral victory. Their election 
``manifesto'' spoke directly to Japanese voters, promising a new era of 
politics, in which business interests would be supplanted by citizen 
interests, in which creating an equitable economy would supercede a 
focus on corporate balance sheets, and in which Japan would privilege 
promoting global peace over unreflectively maintaining its status-quo 
relationship with the United States. Yet the DPJ has found governing 
more difficult than electioneering. Given that the DPJ itself is an 
uneasy coalition of ideological opposites, from former Socialists to 
pro-alliance realists, Washington must be prepared for continued 
debates within the DPJ in coming months over foreign and domestic 
policy, and for the likelihood of leadership changes at the top of the 
party that may push it in different directions and potentially create 
further instability in Japanese politics. These DPJ debates will occur 
at the same time that new political parties form and dissolve, many 
breaking off from the LDP, the former ruling party. Far from entering 
an era of stability last August, Japanese domestic politics are likely 
to become even more fluid and chaotic over the next half-decade or 
more.
    For the United States, Prime Minister Yukio Hatoyama's desire to 
consider a different location for the Futenma base has raised questions 
about his administration's overall commitment to United States-Japan 
relations. Such concern is overstated, I believe, but Prime Minister 
Hatoyama does have a different vision of the future of the United 
States-Japan relationship than did his predecessors. His repeated 
assertions that the alliance remains at the core of Japan's security 
policy is to be taken at face value, but so should his desire for Japan 
to play a more expansive global role, craft a closer relationship with 
the nations of East Asia, and take a lead in birthing a new East Asian 
Community, no matter how vague the specifics of his plan. With respect 
to the narrower issue of the Futenma relocation, the current Japanese 
administration has until now been equally influenced by the necessity 
to maintain its coalition with the Social Democratic Party in the Upper 
House of the Japanese Diet as it has been by a desire to listen to the 
voices of the people of Okinawa and reduce the Marine Corps burden on 
that island, which, ironically, the 2006 agreement was crafted to do.
    Unfortunately, however, the Futenma issue has been folded into 
larger questions about Mr. Hatoyama's foreign policy, thus raising 
doubts about the DPJ's commitment to maintaining the United States-
Japan relationship as the most important one for both countries in the 
Pacific region. Hence the attempts here to understand whether Prime 
Minister Hatoyama's repeated calls for a more ``equal'' alliance with 
Washington mean more ``independent,'' and what such policies might lead 
to. Much of the worry in the U.S. Government comes from the newness of 
the DPJ and the inherent uncertainties in dealing with any government 
that does not have a track record we can interpret and use for 
predictions. Such, I may add, is a constant source of concern among 
Japanese at our Presidential transitions, so we are, perhaps, now 
finding ourselves in Japan's shoes for the first time in over half a 
century.
    Our relations are further influenced, despite the laudable efforts 
of U.S. officials here and in Tokyo, by the continued worry of Japanese 
opinion leaders and policymakers over long-term trends in America's 
Asia policy, thereby fueling part of their interest in China. I will 
mention perhaps the two main concerns: first, that the United States 
will, over time, decrease its military presence in the Asia-Pacific, 
thereby weakening the credibility of its extended deterrence guarantee, 
and second, that Washington will itself consider China in coming 
decades as the indispensable partner for solving problems both regional 
and global. Both these concerns exist despite repeated U.S. assurances 
that our military presence will not shrink, and despite the very public 
problems cropping up in Sino-U.S. relations in recent years. 
Ironically, perhaps, these Japanese concerns almost exactly mirror U.S. 
worries, from frustrations over Japan's continued reluctance to 
increase its security activities abroad to our casting a wary eye on 
exchanges between Beijing and Tokyo.
    Despite this litany of problems both real and perceived, the United 
States-Japan alliance, and the broader relationship it embodies, 
remains the keystone of U.S. policy in the Asia-Pacific region. There 
is little doubt that America and Japan share certain core values that 
tie us together, including a belief in democracy, the rule of law, and 
civil and individual rights, among others, which should properly inform 
and inspire our policies abroad. Our commitment to these values has 
translated into policies to support other nations in Asia and around 
the world that are trying to democratize and liberalize their 
societies. Today, Asia remains in the midst of a struggle over 
liberalization, as witnessed by the current tragic unrest in Thailand, 
and the willingness of both Tokyo and Washington to support democratic 
movements will remain important in the coming decades. Indeed, I 
believe a political goal of our alliance with Japan must be a further 
promotion of ``fundamental values such as basic human rights, 
democracy, and the rule of law in the international community,'' as 
expressed in the 2005 United States-Japan Security Consultative 
Committee Joint Statement. To that end, Japan and the United States 
should take the lead in hosting democracy summits in Asia, designed to 
bring together liberal politicians, grassroots activists, and other 
civil society leaders, to discuss the democratic experiment and provide 
support for those nations bravely moving along the path of greater 
freedom and openness.
    Political development in Asia has benefited not only from United 
States-Japan diplomatic engagement, but also from the security burdens 
both countries have shouldered to maintain stability in the western 
Pacific, throughout the cold war and after. There are over 35,000 U.S. 
military personnel stationed in Japan, and another 11,000 are afloat as 
part of the 7th Fleet; three-quarters of our military facilities are in 
Okinawa. Without the continued Japanese hosting of U.S. forces, this 
forward-based posture is untenable, particularly in a period of growing 
Chinese naval and air power in which the acquisition of advanced 
weapons systems indicates increased vulnerability of U.S. forces over 
time. Similarly, options for dealing with any number of North Korean 
contingencies would be significantly limited without access to bases in 
Japan. The role of the U.S. Navy in maintaining freedom of the seas, 
and the U.S. Air Force in ensuring quick and credible U.S. reach 
anywhere in the region will become even more important as other nations 
in the Asia-Pacific continue to build up their national military 
capabilities.
    Beyond such traditional security concerns, Japan and the United 
States continue to be among the handful of countries that can act as 
significant first responders to humanitarian disasters. We did so 
jointly during the Boxing Day tsunami of 2004 and earlier this year in 
Haiti, and will remain the leading providers of such public goods well 
into the future. For any such actions in the Asia-Pacific region, our 
bases in Japan are indispensable to timely, effective intervention.
    Maintaining this presence is a full-time job for officials on both 
sides of the Pacific. Both Washington and Tokyo have revised the Status 
of Forces Agreement (SOFA) governing the U.S. military in Japan to 
respond to local concerns over judicial access to U.S. service members, 
and domestic pressures to reduce Japan's $4 billion annual Host Nation 
Support (HNS) are a continuing feature of bilateral discussions. The 
new Japanese Government has indicated its desire to consider further 
revision of SOFA and HNS, which portends continued, sometimes difficult 
negotiations between both sides, though I would be surprised by any 
significant changes in either.
    It is clear, however, that the presence of U.S. military forces is 
welcomed by nearly all nations in the Asia-Pacific and sends a signal 
of American commitment to the region. From a historical standpoint, the 
post-war American presence in the Asia-Pacific has been one of the key 
enablers of growth and development in that maritime realm. And today, 
for all its dynamism, the Asia-Pacific remains peppered with 
territorial disputes and longstanding grievances, with few effective 
multilateral mechanisms such as exist in Europe for solving interstate 
conflicts. Our friends and allies in the area are keenly attuned to our 
continued forward-based posture, and any indications that the United 
States was reducing its presence might be interpreted by both friends 
and competitors as a weakening of our longstanding commitment to 
maintain stability in the Pacific. The shape of Asian regional politics 
will continue to evolve, and while I am skeptical of what can 
realistically be achieved by proposed United States-Japan-China 
trilateral talks, it seems evident that we must approach our alliance 
with Japan from a more regionally oriented perspective, taking into 
account how our alliance affects the plans and perceptions of other 
nations in the region.
    Yet when our alliance was signed in 1960, it was titled the 
``Treaty of Mutual Cooperation and Security.'' Cooperation took 
precedence in the eyes of American and Japanese, and that should serve 
as our guidepost for the future as we contemplate how Japan and America 
can work together in economic and social spheres. Our common activities 
are undertaken to promote not just stability, but also well-being, as 
delineated in Article II of the treaty. Economically, of course, we are 
increasingly intertwined. Our bilateral trade last year was worth over 
$132 billion, making Japan our fourth-largest trading partner even 
despite a fall of nearly $80 billion in trade from 2008. Japanese 
companies in 49 States employ approximately 600,000 Americans in high-
paying, skilled jobs. Japan is also the world's largest purchaser of 
U.S. Treasuries, currently holding over 768 billion dollars' worth, 
more than China's official portfolio of $755 billion in American 
securities. America's continuing economic recovery is dependent in part 
on Japan's willingness to continue to employ Americans and buy our 
debt, and as both countries seek to balance their export and import 
sectors, openness to trade is of vital importance, as are trade 
policies designed to reduce barriers. Here, both countries need to 
focus more attention on job growth and trade opportunities, helping 
with retraining programs and promoting entrepreneurship by reducing 
bureaucratic impediments.
    Both our countries are leaders in scientific research and 
development, and bred multinational corporations that continue to 
change the nature of global commerce. Current Ambassador to Japan John 
Roos has made expanding United States-Japan economic cooperation, 
particularly in the high-tech areas he is so familiar with, a priority 
of his tenure. Joint research and development in energy efficient and 
clean energy technologies, such as smart grids and nuclear power, will 
benefit not merely our two economies, but can bolster our export 
industries and promote better practices and higher growth in developing 
nations. This, too, will help promote stability in Asia and around the 
globe, thus feeding directly into the security responsibilities of the 
United States-Japan alliance.
    With all of these suggestions, however, we must maintain our 
realism. The heady days of the 1980s are long over for Japan, when 
pundits breathlessly proclaimed it the next superpower. And today, 
while the Hatoyama administration is long on ideas, it is short on 
specific policies. Officials on both sides of the Pacific must seek to 
avoid mismatched expectations that will only lead to disappointment and 
more hand-wringing over the future of our relationship. For the 
foreseeable future, American policymakers must accept that Japan will 
be most focused on its internal politics and problems, even as we 
attempt to create new initiatives to leverage Japan's strengths and 
interests.
    Japan will continue to play a major role in Asia over the next 
decades, as that region continues to be the engine of global economic 
growth. As it does so, the role of a democratic Japan should become 
increasingly important in Asia as democracies young and old continue to 
evolve, and as authoritarian and totalitarian regimes oppress their own 
people and threaten others. Japan cannot, of course, play this role by 
itself, and the United States must fully embrace its role as a Pacific 
nation, one inextricably tied to Asia, but most importantly, one with a 
vision for an Asia that is increasingly freer, more stable, and more 
prosperous. That means a renewed commitment to expending the human and 
materiel capital required to maintain our position in the Asia-Pacific 
region.
    As we look to the kind of Asia that we hope develops in the future, 
there is much that continues to commend Japan to the region's planners 
and peoples. Much in the same way, the United States-Japan 
relationship, plays a currently indispensable role in ensuring our 
country's commitment to the Asia-Pacific and in providing a necessary 
stabilizing force to powerful tides of nationalism, competition, and 
distrust in that region. Our relationship with Japan is indeed a 
cornerstone of the liberal international order that has marked the six 
decades since the end of the Second World War as among the most 
prosperous and generally peaceful in world history. For that reason, 
among others, we should look forward to maintaining it for years to 
come.

    Senator Webb. Thank you very much, Dr. Auslin.
    And again, my appreciation to all three of you for the 
insights that you've brought.
    I would like to put, sort of, two or three general 
questions before the panel, and get your insights, in terms of 
how we can best address our future relations with Japan.
    Let me start by saying--I say this many times; I say it 
with my Japanese friends, as well--that the United States has 
bilateral relations around the world. Japan has its own set. We 
don't expect each country to have the same sorts of 
relationships with each other country. But, there is a vast 
difference that needs to be emphasized from time to time 
between a relationship and an alliance. You can be at peace 
with another country, and that country isn't necessarily your 
friend; you can be friends with a country, and that doesn't 
necessarily mean that country is your ally.
    And the alliance that we have with Japan, I think, is the 
essential tool for us to remain properly involved in this 
emerging dynamic in Asia. And it cannot be said often enough as 
we look at this.
    And with respect to this, we have a challenge. And all of 
you have mentioned it in different ways. Dr. Packard, you 
mentioned ``public opinion counts,'' and there are questions 
from all of you about this--and comments about the situation 
with the basing on Okinawa, and how we explain it, how we 
ourselves understand it in the United States, and also in 
Japan.
    I go back to a comment that was made years ago about, 
``National strategy is kind of like birth control. You know, if 
you cease taking the proper precautions, the possibility of an 
incident is elevated.''
    And so, we tend to take for granted the stability that 
comes from a relationship like this, when it's gone on for a 
very long period of time. And we don't properly educate our own 
people, or the Japanese people, about how important it is.
    When we're talking about public opinion--I was reminded, 
when I was in Japan, Dr. Packard, that 85 percent of the 
Japanese people have a positive opinion about the United 
States. That doesn't mean that they support the basing system 
or these other areas.
    And here, one of the worries that I have--and, Dr. Auslin, 
you mentioned it, and, Mr. Katz, you alluded to it, and the 
flip side of it--my worry, as an American, is not so much that 
Japan might decouple from the United States in favor of China; 
it's that, with so much attention on the relationship with 
China, we tend to forget the importance of the relationship 
with Japan. There are only so many issues you can talk about in 
any given day up here in the Congress, for instance.
    So, really, the first question I'd like to lay before the 
panel, really, is, How do we address, fairly, the importance of 
this relationship as it impacts the future of both countries' 
innovation?
    Dr. Packard, you did mention some of this in your 
testimony. I would appreciate it if you would begin.
    Dr. Packard. Yes, sir. I want to underscore your point. 
Japanese public opinion at the elite leaders or a Yakitori 
bar----
    Senator Webb. Is your mic on, Doctor?
    Dr. Packard. Japanese public opinion toward the United 
States is very strong and very enduring, and I want to 
emphasize your point. Whether it's A-league leaders or whether 
it's in a Yakitori bar in Kojimachi, you will hear the same 
thing, ``We cannot do without America.''
    And by the same token, the Chicago World Affairs Council's 
polls have shown that 80-some percent of ordinary Americans, 
and almost 92 percent, I think, of so-called ``elites,'' 
believe that Japan is a reliable ally. So, I'm not so much 
worried about that condition.
    But, the--there is, in the press today--and as an old news 
man, I'm embarrassed by this--there's a kind of a narrative 
that, ``Japan is a failed state, it's going downhill. We don't 
need to pay attention to it. It cannot recover.'' Richard Katz 
has mentioned some of those kinds of things. That is--all of 
it--is untrue, and there needs to be a counternarrative today.
    In the 1985 to 1990 period, we had so-called revisionists, 
who said, ``Japan is out to kill us, they're out to destroy our 
industry.'' You don't hear much from those guys today. And--
but, unfortunately, not many people challenged their 
assumptions.
    So, first of all, in the media, people who know Japan need 
to stand up and tell it like it is.
    Second, I think we need to concentrate on the younger 
generation. I mentioned there is a United States-Japan 
leadership program today which has sent 240 Americans and 
Japanese to intensive 1-week conferences, both in Kyoto and 
Seattle. And that continues now. And that results in lifelong 
friendships and continuous Internet communications and 
reunions, and so forth. And I could mention a number of these 
young leaders who are advancing into positions of real 
leadership.
    And finally, I would say I'm very optimistic, maybe even a 
little bit more optimistic than Dr. Auslin, about the coming 
generation of young politicians in their, say, early forties. A 
number of them have been my students or colleagues, and I see a 
situation where--there will be reshuffling of the parties--and 
I see a situation where the internationally minded younger 
politicians will create a new party at some point, not too far 
away, and will be firm, reliable allies of the United States. 
So, I remain optimistic on that score.
    Senator Webb. Thank you.
    Mr. Katz.
    Mr. Katz. Yes. First of all, I agree with the tenor of your 
remarks. I think it's very, very important. And I think one of 
the issues is that sometimes the alliance, at least the 
security side of the alliance, is often viewed in terms of 
Japan being an unsinkable aircraft carrier and a checkbook. And 
I think that is outmoded.
    What we need to think now, I think--given the fact, as I 
say, we're addressing global issues, some of which are 
political, some of which are security, some of which are 
intertwined--is the extent to which both countries can 
cooperate in a very active way to deal with all sorts of 
issues.
    I attended a conference where people in Southeast Asia were 
worried about being able to get water for fish. Fish were dying 
because of dams being built in China, across the border. Water 
has become a security issue. It's a new world. Not to mention 
the fights over energy.
    So, the two countries actively engage on the world stage? 
We need something much more than just an unsinkable aircraft 
carrier as part of the alliance.
    And, I think, therefore, what concerns me about the Futenma 
is sort of that it's viewed in one dimension. And I think we 
need to view it in a larger way. And I do think we need to 
recognize that the political change which has just occurred in 
Japan, this idea of actually having contested elections, is 
going to result in changes that make Japan--it's going to be a 
rough road getting there, but the end of the road will make it 
more responsive to its internal needs, and more able to play a 
role on the world stage; will make it a much more dynamic 
economy.
    And I share this optimism, actually, about this younger 
generation. You talk to politicians or people in the business 
world or the bureaucracy, in their 40s, who have grown up in a 
different atmosphere; they do have a different mindset. And I 
think that generational change is all to the good. But, I think 
as we focus on this or that issue, our stake in some of these 
larger changes sometimes gets lost in the shuffle.
    Senator Webb. Thank you.
    Dr. Auslin.
    Dr. Auslin. Mr. Chairman, I know you're a student of 
history. And as a historian, I can't help but think of the 
issues in a historical framework. And we face a couple of 
unique, I think, historical conditions right now.
    The first--and, I think, goes directly to the beginning of 
your question--is that, certainly for the United States--and, 
honestly, for Asia, as well--there's never been a time in 
history where there's been a strong Japan and a strong China at 
the same time. They've always alternated.
    And so, the pattern of international relations, either 
within the region or as the rest of the world dealt with the 
region, reflected that--those rises and falls. And that's been 
the rule for our engagement with the region since the 1840s.
    Today, we don't have that. We have two strong countries, 
one of which, as you note, is an ally, and the other one we 
have--with which we have an increasingly integrated 
relationship. And I don't think we've yet figured out how you 
manage that balance.
    I would actually argue, even though I'm a Japan person, you 
know, professionally, I think it's entirely natural that we, in 
the United States, are focusing on China. I don't think it's 
abnormal, in any way, that my former colleagues in the 
universities are focusing on China, or the think tanks are 
focusing on China. It is, economically and politically, a 
country that is evolving into a new role, and new roles that we 
need to take account of.
    So, the idea that there is some type of shift that is 
unnatural, away from Japan and toward China, I think is, 
itself, just not reflective of how we approach and think about 
the world.
    The other historical anomaly that I would mention here is 
the nature of the alliance itself. Historically, obviously, if 
you look at alliances, they are short-term political 
arrangements. They come about because of a political exigency, 
a military crisis, whatever you have. And when that situation 
is resolved, they break up and they reform in different ways.
    The type of alliance we have with Japan, as much as we 
celebrate the 50-year alliance, it is historically abnormal.
    We are in a multigenerational, open-ended relationship and 
political set of responsibilities and commitments to each other 
that I fully support, and yet, I think we need to recognize, is 
not the norm for how two states interact over the long term 
with each other. So, we are, in a sense, making it up as we go 
along every day.
    At one level, I think part of the problem is the broken-
windows theory. We are simply trying to take care of current 
problems in the relationship, which just means you're running 
ever harder to keep up. On the other end, all of the calls--and 
I'm certainly one who has made calls like this--for a new start 
to the alliance, a new vision for the alliance, I'm not sure is 
necessarily as politically realistic as we think it is, when 
you take into account all of the responsibilities that come 
with it.
    So, I don't know if there's necessarily an answer to your 
question. I agree that we need to educate our peoples better. I 
agree that without this alliance our position in East Asia is 
far more tenuous. And yet, the historical uniqueness of where 
we stand today means that there are no clear answers, and we 
will continue to muddle through for the foreseeable future.
    Senator Webb. Thank you.
    Let me offer two quick reactions to what you just said, and 
then I have a couple of other questions. I think we have a vote 
that's going to be called at 12:10, which means I can stay a 
bit longer than that, and I will.
    First of all, with respect to the amount of attention 
that's being given to China, I agree with you, that that is 
natural. It's an evolving relationship.
    There are a tremendous number of unknowns in that 
relationship. My concern is that, with the attention span of 
the Congress and of most people in the country, and the media, 
as Dr. Packard points out, we risk losing our appreciation of 
the essential nature of our relationship with Japan. It's not 
an either/or situation, here. In foreign policy, since I've 
been in the Senate, you're either talking about Iraq, 
Afghanistan, or China. And it's one of the reasons I put so 
much emphasis on Southeast Asia, where I spend a good bit of my 
time, the ASEAN countries--650 million.
    With respect to alliances, let's be careful with history, 
here. If you examine Japan's foreign relations since they 
opened up again, and with the 1854 time period, they either 
have developed an alliance with the dominant naval power of the 
region or they have attempted to become the dominant naval 
power of the region. They started with an alliance with Great 
Britain. And I would venture that this is not only an essential 
strategic axis for the United States in the region, but also a 
perfect fit between two countries, particularly with the 
evolution of China and the unknowns that face it. That's just a 
big parentheses to clarify my own reaction to what you said.
    I would like to get all of your views on another matter, 
and that is--another piece of this, anyway--and that is the 
prospect for our two countries becoming more interdependent, 
economically.
    Let me start by saying, Mr. Katz, your comment about water 
is one of my two great concerns when I look at Southeast Asia 
as they impact the unknowns with China, quite frankly. One is 
the issues of sovereignty in the South China Sea. We held a 
hearing on this. And it actually goes all of the way to the 
Ryukyus, in terms of, you know, unresolved sovereignty issues.
    The second one is inside the mainland of Southeast Asia 
with respect to the Mekong River. I just participated in a 
conference, last week at the Stinson Center, where they are 
raising issues of riparian rights--if you can call them 
riparian rights when you're talking other countries--where 
there's so much hydroelectric being put in China, and now 
Chinese companies moving into Laos and Cambodia; and the Mekong 
River is in danger of losing its vitality, when you get down 
into Vietnam and the southern end of it. And only the United 
States--and perhaps the United States with Japan, on the 
economics of financing dams--can create the multilateral 
environment in which to address--and I don't mean to use the 
environment as a--it's not supposed to be a pun--but the 
multilateral situation where that issue can be addressed. You 
can't address that issue bilaterally. I don't think these 
smaller countries can. So, these are real issues.
    And that goes to the question of the two areas where we 
might become more interdependent and, as a result, stronger as 
allies. One is working together. And that has an economic 
underpinning to it, if you're looking at financing for dams 
outside of China. But, the other is just the basic economies.
    And, Dr. Packard, I'd like to start with you on this. The 
Japanese, traditionally, have been very inward-looking, in 
terms of their economic systems. I believe it would be to their 
advantage and economic benefit, as well as our own, if there 
were areas where--and I think, Ambassador Roos, as you pointed 
out, Dr. Auslin, mentioned certain high-tech areas he's worked 
in. But, there were certain areas that were not directly in 
competition with existing bureaucratic structures, that we 
could have a more interdependent economy that would benefit 
both countries.
    Dr. Packard. At risk of stepping on Mr. Katz's territory, 
here, I will venture just a couple of thoughts.
    Japan's historical desire has been to maintain its own 
autonomy at home, control of the territory of the main four 
islands, since 1854, as you pointed out. And when you noted 
that they have made alliances with distant--with powers--the 
strongest power, they have always been distant powers; first, 
Great Britain, then Germany, tragically, and then--now the 
United States. With none of those powers did they have 
territorial disputes. So, I do not imagine a time when Japan 
could either make an alliance that is against our interest with 
China, because of the territorial disputes, or with Korea, 
because of history.
    So--but, I do think there is some need for independence. 
Perhaps it's a question, but I do not know why Japan cannot 
stimulate its own domestic demand and get its economy out of 
the doldrums. And maybe Richard Katz can talk about this. There 
is a tremendous need for housing. Anyone who's gone on a train 
and seen the apartment buildings, the so-called ``danchi,'' 
knows that there's a huge demand. There is a large supply of 
capital, in Japan, saved, due to a high saving rate by the 
older generation, and there is plenty of land if they take some 
of those rice fields out of cultivation. I know this is heresy 
in Japan, but I believe it's going to come, just because of 
economic necessity. And if you had a strong Japanese economy 
with high demand, it would, as Richard Katz said, release the 
nation from dwelling on its own economic problems and being--
making it willing to step forward and engage in diplomacy and 
economics abroad.
    Senator Webb. Thank you.
    Mr. Katz.
    Mr. Katz. On this river thing, which was, again, new to 
me--I learned about it last year--and it really is a 
geopolitical, as well as an economic, issue, when you're losing 
your ability to fish because of some dam across the border.
    And yet, you know, Japan has got a lot of technology. Japan 
has got one of the best records, for example, learning how to 
save energy, how to make steel with, I don't know, much, much 
less energy than, say, China does.
    And so, if you think about the role the United States and 
Japan, both as technology superpowers, trying to address this 
issue; yes, there's diplomatic answers to this issue, but, 
ultimately, people do need energy, and they do need the water, 
and you have--the more that resources are scarce, the more the 
countries are likely to take each-country-for-itself attitude. 
The more that you can apply to technology to lessen that sort 
of tradeoff, then you have the context of both peace but also 
cooperation and prosperity.
    And the technology assets of the United States and Japan, 
and their ability to work together, I think, is a perfect 
example of what I was talking about, is a mission for the 
alliance, beyond the unsinkable aircraft carrier. It's, how do 
we work together to solve these problems which could become 
huge problems?
    Now, on the openness issue, you know, Japan is--people talk 
about this Japan/Asian model of growth.
    Well, it's not exactly true. Most of Asia is growing so 
fast because they are incredibly open countries. You look at 
the ration of trade to GDP in Korea, China, and Malaysia, and 
Thailand, and all over the place--huge, huge ratios of trade to 
GDP. In Japan, it's about 30 percent; in Korea, it's 110 
percent.
    If you look at the role of foreign-directed investment 
inward; in Japan, it's minuscule. In China, two-thirds of their 
exports and imports are handled by multinationals. 
Globalization created prosperity throughout the region.
    One of the reasons Japan is growing so slowly is because 
it's not availing itself of the opportunities of openness the 
way that it could. It's better than it was 10 years ago; its 
got a long way to go. And here's an area we're bringing in 
foreign companies, bringing in imports, further integration in 
the region would help Japan. Some of the younger reformers see 
it that way; the special interests don't. That's one of the 
political dilemmas that the DPJ faces.
    Senator Webb. Agree. Do you have any thoughts as to where--
what would be your thoughts? Yes.
    Mr. Katz. You know what? The best successes that we've made 
is--you know, they have this term in Japan, called ``gyatzu,'' 
foreign pressure. And internal pressure is ``nyatzu.'' Well, 
the best things have worked when it's called ``ny-gyatzu,'' 
which is the combination of internal and external.
    For example, Toys ``R'' Us wanted to get into Japan. They 
had this large-scale retail-store law, which really meant small 
shopkeepers could keep out the really efficient, large stores, 
whether they're foreign or domestic. So, there was an alliance 
between Toys ``R'' Us and the large Japanese stores to get that 
law changed. That served the consumers. That's helped the 
economy grow. Motorola had some things in cell phones, which 
has made the cell phone industry huge in Japan, technologically 
advanced. Richard Fisher did some things as USTR, again, an 
alliance between United States interests and Japanese interests 
that want to reform.
    We've got to find Japanese interests who want to push, for 
their own reasons--they say in Japan, ``Sleep in the same bed, 
but dream different dreams''--who want the same thing, maybe 
for different reason, work together. So, ``ny-gyatzu'' is, I 
think, the way we get those kinds of changes.
    Senator Webb. Thank you.
    Dr. Auslin.
    Dr. Auslin. Mr. Chairman, I'll be brief. I fully second 
what Rick has just said. And I'm not an economist. I think that 
the issue is creating, or trying to figure out how we, 
together, can create, the political and social conditions that 
allow for that. But, anyone whose been in Japan knows that 
there really are two economies. And I'll--you know, won't want 
to get into areas that Rick knows better than I do, but you--
the leader of the exports, the world-beating Toyotas and Sonys 
and the like. And then the domestic economy, which is sheltered 
from competition, which is not very competitive, and which is 
the economy that most Japanese, themselves, deal with on a 
daily basis.
    So, there certainly is a wide gap to work with, in terms of 
what would benefit Japan's consumers, what would benefit 
companies that are domestically oriented in Japan.
    But, I think the answer is really, to wrap up, just what 
Rick mentioned, which is two things: the issue of global 
integration and this issue of competitiveness. I think that's 
why Japanese are worried, in part, about their growing sense of 
isolation from the world. If you don't have students going out 
and engaging, if you start shutting down your news bureaus 
abroad, and you start shutting down your offices abroad--last 
year, in Washington, Kadonrin, which is the equivalent of the 
Chamber of Commerce, more or less, closed down its Washington 
office, its only America office. If you don't have that type of 
engagement, let alone representation, not only will you feel 
more isolated, you will, in fact, be more isolated.
    And I think that that is a feedback in to the issues of 
where Japan does not necessarily seek to become competitive at 
the world level. And I think Rick's absolutely right, you have 
to find areas where it is in Japan's interests to do that. And 
there, they have taken leads in efficiency and the rest.
    As to the specifics, I can't speak to that, but I think it 
is the conditions that will lead, ultimately, to the end state 
that you so rightly point out is necessary.
    Senator Webb. Thank you.
    My thought on this, really, is that there are sectors where 
the Japanese don't do well, where we do well, where they would 
not view, you know, large-scale American involvement as 
directly competitive, in the same sense as they would if we 
were going to go and try to sell a car or some of these other 
things. And if there were a way for that to happen, the 
American people also would feel more invested in the future of 
their country. You know, there's a tremendous independent 
streak in the Japanese culture. We know that. It's a possible 
reason, when you're--Dr. Packard, when you were reading from 
the Washington Post article--I saw that article, too, and I 
immediately thought, ``This is a historic trend.'' You were 
talking about the trends. You know, we become insular again.
    And people in the United States don't feel the same risk 
with the success of the Japanese economy as they do in other 
places. And if there were sectors where the two countries could 
become economically interdependent--and that's probably not a 
word that the Japanese like to hear--but I think it would be 
healthy for the relationship, but also for the strategic bond 
that I believe is so essential to what we're doing in Asia.
    You've been a great panel. This has been a lot of fun.
    And I very much appreciate the time that all three of you 
have taken.
    And there are many people in offices, all throughout the 
Senate, who have watched good pieces of this, and I think 
you've really assisted in raising a level of understanding on 
these issues. Thank you very much.
    This hearing is closed.
    [Whereupon, at 12:20 p.m. the hearing was adjourned.]
                              ----------                              


              Additional Material Submitted for the Record


        Prepared Statement of Paul Toland, Commander, U.S. Navy

    Chairman Webb, Ranking Member Inhofe, and other Senators, thank you 
for calling this hearing and bringing attention to a hidden aspect of 
Japan that is gaining more traction daily within Congress and among the 
American people, International Child Abduction.
    My name is Paul Toland. I am a Commander in the United States Navy 
with over 20 years of active service, and I am the only living parent 
of Erika Toland, abducted nearly 7 years ago and wrongfully retained in 
Japan by her grandmother.
    My daughter Erika was abducted by my now deceased wife Etsuko on 
July 13, 2003, from our home at Negishi Navy Family housing in 
Yokohama, Japan. Etsuko and I were married for over 7 years before 
Erika was born. For the majority of our marriage, we were assigned to 
duty stations in the United States. Etsuko was a naturalized United 
States Citizen, and Erika is also a U.S. Citizen. Soon after Erika's 
birth, Etsuko sunk into a severe postpartum depression. She refused 
treatment in a military hospital and her untreated condition rapidly 
deteriorated. Our marriage, too, soon followed suit. Etsuko's mother 
lived alone in Japan, and did not want to move to the United States 
with us. Instead, she wanted Etsuko to stay behind in Japan. I was 
unaware of this and caught completely by surprise when I received a 
call from my neighbor in summer 2003, asking me if I was moving, 
because there was a moving truck outside our house. When I returned 
home, Etsuko, Erika, and our household goods were all gone.
    Soon after this I began my journey into the surreal world of 
Japanese family law. Japan is a haven for international child 
abduction. In the past 58 years, no child has ever been returned from 
Japan to ANY foreign country. Japan stands alone as more than just a 
haven for abduction, and is instead, quite literally, a black hole for 
abduction, from which no child ever returns.
    I first sought advice from the Navy Legal Services Office in 
Yokosuka, Japan. I was distraught and looking for help. My daughter had 
disappeared into the foreign country in which I was assigned, and I 
needed the Navy's help. Any attorney with a rudimentary knowledge of 
the dysfunctional Japanese family law system would have told me to 
avoid entering the Japanese legal system at all costs, and instead hire 
an attorney in my home state, contact the U.S. State Department and 
National Center for Missing and Exploited Children. Instead, the advice 
I was given by the young inexperienced Navy attorney was ``this is a 
private matter, I suggest you hire a Japanese attorney.'' That advice 
doomed me to years of unnecessary legal battles. Two years after that 
experience, Washington State family court did rule that they had 
jurisdiction over our marriage, but also ruled that since I had 
initially entered the Japanese family law system, I had forfeit my 
right to any U.S. jurisdiction over my case.
    I entered Japanese mediation in late 2003 in an attempt to maintain 
contact with Erika. The Japanese version of mediation is unlike 
anything you could possibly imagine. My wife and I never saw each other 
or met to discuss issues. Instead, we both waited behind frosted glass 
in separate waiting rooms, each spoke to a ``judge'' separately, and 
never discussed any issues of substance. Most importantly, the court 
completely avoided any discussion regarding visitation with Erika. When 
I said I wanted to see Erika on weekends, the judge and the attorneys 
in the room laughed. When I asked to see Erika to give her gifts on her 
birthday, I was advised to mail the gifts to my wife's attorney. This 
same advice was again repeated at Christmas. After 8 months of 
repeatedly asking to see Erika, I was finally granted 20 minutes of 
visitation in a small courthouse playroom while having both a court 
supervisor and Erika's grandmother present in the playroom with me. 
Meanwhile my wife, her attorneys and my attorneys all watched the 
visitation from behind one way glass, and the entire ``event'' was 
recorded on videotape. This is the type of visitation afforded to felon 
criminals in the United States, yet there I was, the victim of a crime 
and a highly respected military officer, subjected to this humiliating 
spectacle.
    My own Japanese attorney apologized for actions taken by the 
Japanese court, asking me in an e-mail to ``Please understand your case 
is not a piece of cake because of the racism and irrationalism of 
Japan. It might be something like defending Taliban in the U.S.''
    In summer 2004, I was transferred back to the United States, and 
spent the next 3 years trying in vain to maintain contact with Erika, 
spending approximately $200,000 in attorney fees in the process. Then, 
in late 2007, I received the tragic news that Etsuko had committed 
suicide, having never received proper treatment for her depression. 
Although devastated by her death, I had renewed hope to be able to see 
Erika. Our own U.S. Supreme Court has found that the rights of a parent 
supersede the rights of any third party nonparent, and I naively 
thought that other societies, such as Japan, would also respect the 
rights of a parent over a nonparent. However, I was wrong.
    Erika is today held by her grandmother Akiko Futagi in Japan, and I 
have absolutely no access to her. The U.S. State Department has asked 
to visit Erika, but the abductor Grandmother has said ``No.'' The 
Japanese Ministry of Foreign Affairs has asked to see Erika, but again, 
the abducting Grandmother said ``No.'' In the Japanese system, where no 
enforcement mechanisms exist and compliance is completely voluntary, 
all any government agency can say to me is ``We're sorry, we tried.'' 
Nobody can offer any remedies or solutions, because none exist.
    I flew back to Japan this past October to wait on a street corner 
and greet Erika on her way home from school and bring her birthday 
presents, because this is the only possible contact with dignity that 
is possible. I am left with no other choices. I knew if I tried to take 
Erika to the Embassy to attempt to get a passport, I would likely meet 
the same fate as Christopher Savoie met when he attempted to retrieve 
his children from Japan. I would likely be blocked at the gates of 
Embassy by a U.S. State Department more interested in preserving 
relations with Japan over the welfare of U.S. citizen children, and I 
would likely wind up in Japanese jail as Christopher Savoie did, for 
simply trying to bring Erika home.
    Nothing is more important and deep-seated in this world than a 
parent's love for his or her child . . . we all love our children. 
Equally important is a society's responsibility to ensure that their 
most vulnerable citizens, their children, have the opportunity to know 
and love their parents. This is where Japan and many other nations have 
failed, and this is why we are here today.
    I am left without any remaining options. Erika is essentially held 
captive in Japan, separated from her only living parent in a country 
that has never returned a child. I never dreamed that serving my 
country overseas in one of our allied nations would result in the loss 
of my only child. Japan is supposedly an ally of the United States, so 
why does the United States continue to tolerate this behavior from 
Japan? How can a nation that we call an ally be guilty of such 
despicable human rights violations and get away with it?
    I humbly ask that you take any and all actions within your power to 
make a difference for Erika and for all children wrongfully abducted 
and withheld in Japan from loving parents. I also ask that you act 
expeditiously. My own parents are ill and in their eighties. They hang 
on to life in the hope of meeting the granddaughter they have never 
met. Please act now, before it is too late. Thank you.
    The views expressed in this testimony are not the views of the 
Department of the Navy or the Department of Defense.
                                 ______
                                 

                       Letter From Moises Garcia

To: Senate Foreign Relation Subcommittee on East Asian and Pacific 
        Affairs
                    karina garcia abduction to japan
    I am writing this report to represent the facts and problems that I 
have been facing after the abduction to Japan of my daughter Karina 
Garcia on February 27, 2008, by her estrange Japanese mother Emiko 
Inoue. I have been represented since the moment my daughter was 
abducted by GLOBAL FUTURE whom has supported me emotionally and 
logistically.
                               background
    Karina was born in Milwaukee, WI, on August 27, 2002. She lived her 
whole life here and went to school at a suburb public school in Fox 
Point, WI, at the time of her abduction. She was a very happy and 
caring child. She enjoyed her multiple national cultural heritage as 
she liked eating Japanese food and dancing Hispanic music. In addition, 
she was getting fluent in all three languages Japanese, English, and 
Spanish.
                          marriage background
    I met my wife during my studies at the University of Oslo in 1998. 
She was working for Scandinavian Airlines and studying Norwegian, while 
I was taking a course on ``International Health System Development.'' 
Our relationship continued after I got a scholarship to study 
Gastroenterology in Japan from 1998-2001. Later, I returned to work as 
physician in 2001 in Milwaukee. During a vacation trip in Japan on 
December 2001, Emiko got pregnant. We married at the Milwaukee Court 
House in February 2002, and Karina was born in August. Our marital 
problems started after the baby was born when Emiko became very 
depressed. She went without treatment for many years and later in spite 
of psychological therapy things didn't improve. She filed for divorce 
in 2006, and temporary orders were in placed that included prohibition 
for my daughter Karina for traveling outside of U.S., and prohibition 
to obtain a passport either Japanese or Nicaragua for the risk of 
abduction. At that time, I was granted generous visitation with my 
daughter. In July 2006, we started a process of reconciliation 
initiated by Emiko and finally we closed this divorce action in 
December 2006. However, things went wrong again as soon as the divorce 
action was closed. In February 2008, I decided to file divorce and 
honestly notified Emiko. Because of the risk of abduction, I had been 
granted an ex-parte order of sole custody. A few days later, Emiko and 
Karina disappeared from my home, and later I find out that she had 
taken our daughter to Japan with a Japanese passport that apparently 
was illegally obtained. However, the local police didn't intervene 
properly and Amber Alert was not activated in spite of my insistence. 
The divorce action continued and the ex-parte orders became temporary 
orders. Emiko hired a U.S. attorney to represent her in U.S. to try to 
get property division and child support. However, she was ordered to 
return to the original jurisdiction with the child. At the end, she 
tried to delay the divorce trial by firing her own lawyer, however, the 
court proceeded with the final trial on June 2009, where I was granted 
sole custody and physical placement for my daughter and Emiko was 
ordered to return to U.S. She was also found in contempt and she is 
ordered to pay 500 USD daily for every day my daughter is out of 
country.
                       japanese court experience
    After obtaining my final U.S. divorce judgment, I was one of the 
few U.S. parents that could request a validation of such judgment in 
Japan, since my case is strong even in Japan. My judgment fulfilled the 
requirement requested by the Japanese civil code, which are:

    1. Judgment is Final (I had to wait 3 months to prevent any appeal 
from my former spouse).
    2. The Japanese part was properly served, or appear voluntarily in 
court. (My former wife had a U.S. attorney supporting her all the way 
to the end of the trial.) Please note that Japanese courts don't 
recognized service by publication and the service using the Hague 
convention could last up to 6-9 months. However, when Japanese courts 
decide to use such service in the U.S., the delay usually last only 4-6 
weeks.
    3. There is comity, meaning that a Japanese judgment should also be 
accepted in U.S. courts.
    4. U.S. judgment doesn't go against public policy, this is a big 
one that many failed to pass considering that U.S. laws are totally 
different than Japanese laws. For example, some parts of my judgment 
(especially the contempt and the fact that parental abduction is a 
crime in U.S.) are not recognized by the Japanese courts.
    I currently have also sole legal custody under Japanese law. 
However, I am still being denied access to my daughter. I opened a case 
for ``habeas corpus'' in Japan at the Osaka Supreme Court in October 
2009 and they ruled accepting U.S. jurisdiction and the previous U.S. 
custody orders. However, the return of my daughter has not been 
enforced. I found that Japanese courts don't work cohesive like 
American courts do. For example, I found out that my former wife filed 
for divorce action in March 2009 in spite of me never being served any 
summons and having an open process in U.S. She also filed for change of 
custody in the family court in June 30, 2009, in spite of U.S. judgment 
was not final contradicting one of the requirements for recognition and 
again without me being served any summons. Unfortunately, most of the 
divorce cases are handled by family courts where hearsay is allowed, 
there is not a professional evaluation in spite of using the standard 
``The best interest of the children,'' and favor the part possessing 
the child since they lack enforcement power.
    District and High courts, in the other hand, work more like normal 
U.S. courts. However, they handle very few cases per year, for example, 
my ``habeas corpus'' case is just the 9th case to be handled in Osaka. 
They still allow hearsay, however, evaluation includes an attorney at 
litem and pretrials. However, there is significant and well-documented 
biases and discrimination against foreigners and there is not 
enforcement power.
    My case for return of my child is still open at the Tokyo Supreme 
Court under two separate appeals: (1) Constitutional violation of Human 
rights and discrimination. (2) Violation of law procedures and review 
of evidence.
                         human right violations
    Karina and I have been prevented from seeing each other since 
February 21, 2008, when she was still in Milwaukee, in spite of 
outstanding U.S. court orders issued multiple times in U.S. I was able 
to secure a 90-minute visit in Japan after continued pressure from my 
U.S. and Japanese attorney. I saw my daughter in a yard of a local 
hotel surrounded with security. I had to give my passport to hold 
during the visit, to my wife. To my knowledge, only criminals have a 
supervised visitation like that.
    After the U.S. judgment became final in June 10, 2009, all 
communication has been cut by my former Japanese wife and her family. I 
have been even abused over the phone by her family saying that in Japan 
I don't have any rights.
    Karina is also being also brainwashed and alienated against me, my 
family and even her country of birth, the U.S. This represents another 
violation of her basic children rights to have contact with her parents 
and to keep her background.
    In addition, in March 26, 2010, while attending a hearing at the 
Kobe Family Court, I was allowed to see my daughter for only 20 minutes 
in a so-called ``trial visitation'' where the objective was to assess 
the degree of attachment of my daughter and me. At that time, I was not 
allowed to bring old pictures of my family member and friends in U.S., 
and a court officer opened and read all my letter and presents. 
Fortunately, my daughter Karina and I rebounded very quickly to the 
Japanese court officer and the abductors surprise, and they could not 
take away my bond with Karina, or my sole legal custody ruling.
                               conclusion
    In this report, I want to state clearly that I and my daughter have 
had stolen, our basic human right to stay together and have significant 
contact with her Japanese family and supported by the Japanese 
Government. In addition, I have found many difficulties in the U.S. 
legal system to address my needs. I have been fighting an unfair war 
against a strong law state as U.S. and a weak and racist system as the 
Japanese. I have found some support from the U.S. Government 
specifically from the Department of State; however, to achieve my goal 
to have my daughter back home the Department of State will need 
stronger tools. In the other hand, my former spouse has all of the 
support of her government to legalize the abduction of our daughter, 
while violating her human rights, and child abuse ongoing.

                                        Moises Garcia, M.D.
                                                      Fox Point, WI
                                 ______
                                 

                       Letter From Shoko Matsuda

                                                    April 16, 2010.
To: The Honorable Members of Senate Foreign Relations Sub-Committee.
    I am submitting this letter for the record of East Asian and 
Pacific Affairs subcommittee hearing on U.S.-Japan relations on April 
15, 2010.
    My name is Shoko Matsuda. I am the mother of two children age 15 
and 11 years old today. My children were abducted by their father from 
their habitual residence in VA to Mexico immediately after I filed 
divorce and custody at Fairfax court in March 2003. I spent almost one 
year searching for them in Mexico. Then I learned my ex-husband had 
covertly abducted our children to Japan. In March 2003, our children 
were 8 and 4 years old. I am Japanese citizen with a permanent 
resident. Both children have dual citizenship of Japan and U.S. Their 
father is dual citizen of Mexico and U.S.
    I was granted temporary custody of both children from Arlington 
court in VA in November 2003. I was able to locate my children in Tokyo 
in April 2004 with help from the U.S. State Department. In order to 
locate my children, and to pursue custody of them, I have been to the 
FBI, NCMEC and U.S. State Department seeking assistance. I hired 
private investigators in Mexico and Japan. I also have been to Tokyo 
children's welfare center, Tokyo government and consulted with Japanese 
attorneys seeking assistance. I have hired attorneys in U.S. and Japan 
to seek a resolution through the courts in Arlington VA and Tokyo.
    It took four years to reach final divorce and custody in the 
Arlington court. My ex-husband did not respond to the U.S. court for 
two and a half years and the Arlington court imposed a $500 per day 
fine for my husband's non-compliance and non-response. He then 
challenged jurisdiction in VA trying to move jurisdiction to Japan for 
the purpose of denying my VA ordered temporary custody, and in an 
effort to dismiss VA court ordered fines. His challenge was made in 
November 2005. At the same time he filed for divorce and custody in 
Tokyo family court. This attempt ended as a failure for him, but the 
long delayed court process clearly worked for advantage in his favor, 
as our children remained with him in Japan the whole time. In January 
2007, the judge in Arlington court suspended the court's fines against 
him, on the condition that he complies with the court orders and future 
orders, part of which is our visitation schedule. (The fines totaled 
$255,500 against him, for 511 days of non-compliance) The judge granted 
me visitation every summer in U.S., every other winter and spring in 
Japan. I trusted in the rulings of the court, I had every reasonable 
expectation that I would finally be able to see my children again on 
frequent and meaningful basis.
    This is a quote from our final divorce decree: ``The return of the 
children for the travel to the United States defined below is the final 
step in ending a cross continent dispute about which Court, or courts, 
had jurisdiction. The Father has accepted the continuing jurisdiction 
of the Virginia Courts over the parties' divorce and all issues raised 
in it, including child custody, visitation, support, and property 
division, by his appearances, Answer and cross complaint.''
    That first visitation was held for 10 days in the backyard of my 
ex-husband's parents' home in VA in May 2007. (I was not allowed inside 
the house, and my husband's brother guarded the gate the whole time.) 
It became very clear that my ex-husband was only intent on using this 
one visitation to dismiss the FBI's criminal charge against him. During 
the entire visitation, my children refused to talk to me and did not 
leave the premises. I requested Arlington court to keep my children in 
VA to address the alienation. The judge ordered for the children to go 
to psychological counseling. But my ex-husband ignored the court order 
and my children have never had a chance to receive proper psychological 
intervention or evaluation. My children went back to Japan after that 
one VA visitation only, and I have not been able to see them ever 
since. Unfortunately, it was the FBI's agreement to have the FBI arrest 
warrant dropped, if my ex-husband complied with that visitation. I 
requested to the FBI to postpone the agreement to help and enforce 
compliance of future visitation orders. However the FBI dropped his 
criminal charge after one visitation.
    Despite all of the U.S. court agreements, my ex-husband filed a 
motion to change the VA court order regarding visitation in the Tokyo 
family court in December 2007. He told the Tokyo family court that I 
had abandoned my children when they were very little, and children have 
been traumatized from that experience. I explained to the Japanese 
Judge that it was an abduction case, and my ex-husband was doing his 
best to alienate my children. However Tokyo family court paid no 
respect for my parental right and completely ignored the VA court 
order. In April 2009, Tokyo family court sent me their order stating 
that not only I couldn't have visitation in Japan, but also I was not 
allowed to contact my children at all . . . no written letters, no 
email, and no phone calls. It is very easy to manipulate the Japanese 
court system because they make no effort to investigate claims and 
allegations by a moving party, change status of custody, and they turn 
a blind eye toward abduction cases. Because there is no court order 
that they will enforce, there will never be a solution which includes 
shared parenting or joint custody.
    I am court ordered in VA to pay child support on a monthly basis. I 
have continued to send them child support every single month. I am 
sending international money order addressed to my children with a 
letter to tell them I miss them so much and I am praying every day and 
night hoping to see them soon. I am hoping my children will respond to 
me sometime soon. But I have not been able to see either of my children 
and I have not heard anything from them for more than 2 and a half 
years.
    This has been a terrible injustice. I haven't been able to be with 
my children simply because I wanted to protect my children through the 
divorce. Because I didn't want my children to lose either of their 
parents. Because I respected father's parental right and I had never 
prevented from my children from seeing their father. Because I believed 
in equal parenting, I wanted my children to grow up in the environment 
that they could see both parents anytime they wanted. Because I 
believed that the law would protect the people who would follow the 
law.
    In May 2007, the Arlington Judge could have kept my children here 
to provide proper psychological intervention for them that would have 
stopped all of this. In December 2007, the Japanese court could have 
made the decision to enforce U.S. visitation order. That would have 
maintained a relationship between my children and me, so they can grow 
up with knowing how much their mother loves them.
    I am asking the honorable members of the subcommittee to enforce 
the previously established U.S. court orders and to help U.S. 
government to establish the system between Japan and U.S., which leads 
to immediate resolution of these inhuman crimes.
            Sincerely,
                                                     Shoko Matsuda.
                                 ______
                                 

   Letter From Scott Sawyer, General Secretary of Global Future: The 
           Parents Council on International Children's Policy

Re (1) Wayne Sawyer and all other U.S. citizen children kidnapped to 
        Japan; (2) rethinking Japan.

    Dear Senator Webb: The following testimony is respectfully 
submitted for inclusion in the record of the EAP Subcommittee hearings 
on Japan.
    The story of my son Wayne's criminal kidnapping to Japan by his 
mother on December 15, 2008, includes transgressions and intrigue by 
Japanese diplomats on U.S. soil, passport fraud, the violation of Los 
Angeles Superior Court custody, travel ban and passport surrender 
orders, extortion, the failure of U.S. authorities to effectively 
support a parent's extensive efforts to prevent the crime, and Japanese 
governmental policies, which are ultimately responsible for inflicting 
cruelty and lifelong damage on my innocent child, who turns four years 
old on August 5 and remains captive in Yokohama, Japan.
    Besides the human tragedy such kidnappings represent, they also 
serve as case studies in the larger context of Japan's behavior within 
the overall U.S.-Japan relationship. Prior to the kidnapping, I 
followed the instructions of the Superior Court and the State 
Department's website and requested that the Japanese Consulate in Los 
Angeles withhold issuing a Japanese passport to Wayne. Aware of the 
Superior Court's custody and travel ban orders, Vice Consul Yamamoto of 
the Los Angeles Japanese Consulate and his assistant Suzuki, in 2007 
and 2008, gave my attorney and I (with a translator present) multiple 
verbal assurances that the Japanese Ministry of Foreign Affairs had 
placed a restriction on issuing Wayne a Japanese passport. Yamamoto 
refused our repeated requests to put this commitment in writing.
    I went even beyond the U.S. court system, but still could not 
prevent the kidnapping. Our case is the only one I know of in which 
Japanese diplomats, prior to the kidnapping, directly promised a U.S. 
parent that Japan would not issue a Japanese passport for a U.S. 
citizen child, but did so anyway. I have recently obtained written 
confirmation that the Japanese Consulate in San Francisco issued the 
passport, which identified Wayne with a false Japanese name. Wayne's 
mother had surrendered a duplicate Japanese passport to the Superior 
Court. It contained a different identification number than the one on 
her uncanceled original, which she used to leave the country with 
Wayne.
    That a U.S. parent must petition a foreign government to not aid 
and abet a criminal kidnapping is a Kafkaesque absurdity, yet this is 
exactly the procedure the US DOS recommends. At no point did any 
Japanese diplomats offer the courtesy of allowing U.S. officials to 
participate in the interfaces. At no point does the U.S. government 
help prepare ordinary Americans to interface with professional and wily 
foreign diplomats, who conduct those encounters under foreign rules of 
engagement. For example, one half hour after informing me of the MOFA 
passport restriction, Mr. Suzuki called me again and asked a series of 
questions about my commitment to raising Wayne with Japanese culture. 
At the time, I felt that the call was inappropriate, suspicious, tinged 
with ulterior motives and probably recorded without my permission.
    The objective of any diplomatic mission is to foster good relations 
with the host country. Japan's hustling and injury of ordinary citizens 
and innocent children of the host country are diplomatic incidents that 
should invite high scrutiny. Below we have written proof that instead 
of directing its nationals (especially its U.S. green card holders) to 
obey the laws of the host country, Japan's policy is to counsel its 
nationals to circumvent the laws of the United States. Had Japan chosen 
the more civilized former course, my son and our family would not be 
living this nightmare.
    Japanese Consulates in the U.S. posted the following instructions 
for Japanese nationals in the U.S. on their websites on March 17, 2010:

        In the United States, taking a child abroad without consent of 
        his/her spouse who has custody may be accounted to criminal 
        liability (Please see the National District Attorneys 
        Association). In fact, there are cases in which parent taking a 
        child was arrested of child abduction when he/she reentered the 
        United States, or that parent was placed on the international 
        wanted list of International Criminal Police Organization 
        (ICPO). To prevent Japanese citizens from such disadvantages, 
        (italics added) the Embassy of Japan and the Consulates General 
        are checking verbally to confirm the existence of agreement of 
        both parents on the application for child's passport, even if 
        there is no declaration of disagreement from one parent.

    Japan's insincerity, meaningless gestures and defiance regarding 
international kidnapping is a matter of longstanding record. Cleverly 
warning kidnappers against returning to the United States is just 
another example. It is instructive that the Consular posting does not 
read, ``The government of Japan urges all Japanese in America to obey 
the laws of the United States, especially regarding the kidnapping of 
children.''
    The facts of all the kidnappings worldwide prove that observance of 
other countries' laws is not a priority concern for Japan. Many of the 
U.S.-based kidnapping cases share similar facts and the emboldening of 
kidnappers by Japanese policy. Upon landing in Japan on December 16, 
2008, Wayne's mother emailed me to announce the kidnapping, using 
uncharacteristic prose which indicated she received coaching from 
experts. She claimed to have hired a criminal attorney to check for 
arrest warrants and threatened to cut off all contact forever if I 
contacted police. She demanded a $3,000 monthly extortion payment in 
exchange for allowing me to only see images of Wayne over an internet 
camera.
    As described above, Japanese policies foist real costs and injuries 
upon American citizens in the United States. Wayne has a speech delay 
problem, a lazy eye and red hair. In Japan, he is an especially easy 
target for intense bullying, a phenomenon in Japan that is well-
researched and documented. He is being subjected to classic parental 
alienation and psychological manipulation tactics. Kidnapping is a 
serious form of child abuse. The government of Japan has put him in 
this dangerous position.
RETHINKING JAPAN: WITH A FRIEND LIKE THIS . . .
    As the United States and Australia, Canada, France, Italy, New 
Zealand, Spain, the United Kingdom continue to jointly issue official 
demarches and call on Japan to resolve its outstanding cases of 
international child abduction, Japanese Prime Minister Yukio Hatoyama 
and other officials have stated an intention to reconsider various 
aspects of the U.S. alliance. Likewise, the Unites States other 
countries each have a responsibility to rethink their relationship with 
Japan.
    Japan's exhibition of little commitment to genuine reciprocity in 
bilateral matters, including trade, defense, human trafficking and 
kidnapping, among other issues, is turning Japan into a pariah state. 
International leaders are taking notice.
    Belgium's Deputy Prime Minister and Foreign Minister Steven 
Vanackere recently urged Japan to ease non-tariff trade barriers with 
the European Union.
    ``As far as barriers, especially the non-tariff barriers are 
concerned, in fact Europe is becoming wary, a little bit impatient,'' 
Vanackere said.
    U.S policy makers should also be concerned with addressing Japan's 
non-tariff barriers to exports of automobiles, machinery, beef and 
rice, among other products. The United States runs a dangerously high 
trade deficit with Japan due in large part to Japanese government 
policies, such as non-tariff barriers, then borrows heavily from the 
same foreign government to make up in part for the loss of export 
revenue.
    The same joint demarche group has an opportunity to convene and 
invite others, including Belgium and the EU, for a summit to 
comprehensively review and rethink the West's relationship with Japan. 
Each possesses some legitimate complaint or other with Japan. Each can 
ably assess the aggregate damage done by 60 years of LDP policies and 
work towards a new and improved partnership with Japan, which stands to 
benefit handsomely from embracing real, unqualified, unparsed 
partnership with the West. Labor and business markets worldwide, along 
with Japanese consumers and businesses, will also benefit. The 
alternative--the status quo--is not working well by comparison.
    Japanese government officials, especially the strongly anti-
American element among them, assertively and routinely complain about 
the behavior of U.S. service personnel in Okinawa. It is long past time 
that the U.S. reciprocates by complaining about the behavior of 
Japanese diplomats on U.S. soil, who encourage their nationals to evade 
U.S. law, while knowingly issuing Japanese passports to U.S. citizen 
children in violation of U.S. sovereignty, jurisdiction and court 
orders.
    In April 2010, Japan announced the extension of trade sanctions 
against North Korea, due to the latter's nuclear weapons policies and 
the kidnappings of Japanese citizens to North Korea in the 1970s and 
1980s. Likewise, the United States should consider appropriate 
sanctions for Japan's policies regarding the kidnapping of American 
citizen children from the United States.
    Over the last 20 years, Japan has ranked in the top three countries 
each year to which the U.S. issues student, work and diplomatic visas. 
However, Japan ranks 37th amongst countries whose nationals receive 
education on student visas in the U.S. and then remain in the country 
to establish careers or businesses in American communities.
    The protection of children is a fundamental issue for the world's 
advanced industrialized civilized democracies. If Japan cannot deal in 
good faith on the issue of innocent children it has kidnapped from the 
soil of the U.S. and other countries, on what other issues can its 
international partners trust it? Japan's longstanding resistance to 
enter into direct and meaningful bilateral treaties on child kidnapping 
demonstrates a general unwillingness to work sincerely with other 
nations for mutual benefit.
    A country that steals children from another's own streets and never 
returns any, while also showing consistent bad faith in so many 
bilateral matters, behaves more like a belligerent than a trusted ally 
and friend. Such a country invites reevaluation of its relationship 
with others. The global civil society must immediately and relentlessly 
press Japan to deal bilaterally and in good faith with each nation 
whose children Japan presently and unlawfully holds. The children and 
their parents have only one childhood to share together. It slips 
further away each day Japan fails to rectify these tragedies. The world 
must no longer tolerate the painful separation, stolen childhoods and 
broken lives that Japan has imposed on them. I hope you can assist us 
parents in the goal of elevating our kidnapped children in Japan to 
emergency, first-priority status. Quick success in this area will 
provide simultaneously provide a real and symbolic template for other 
Japan issues, from which the eintire world will benefit.
    Thank you for your time and review of this submission.
            Sincerely,
                                              Scott Sawyer,
                                Lawful U.S. parent of Wayne Sawyer.

                                  
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