Waves of change -- geopolitical, technological and demographic -- have been sweeping across the world, and Japan is among the countries experiencing challenges on all those fronts. Amid a steady but slow economic recovery since he took office in 2012, Prime Minister Shinzo Abe has also seen his skills at international diplomacy tested, given his country's close ties with the United States.
With US-China relations turning sour in recent years, Japan has inevitably been affected, along with other Asian countries, on the economic front. Meanwhile, Tokyo fears the prospect of greater Chinese influence on the Korean Peninsula, at time when its ties with South Korea have greatly deteriorated as World War II grievances surface once more.
South Korean President Moon Jae-in has made clear his mission to reunify with North Korea, which has complicated relations between the US and its two main allies in Northeast Asia, according to Japanese politicians and experts.
"Basically our idea is that South Korea should be in the camp of the US-Japan but they have decided to be in the camp of China-North Korea," says Suzuki Keisuke, Japan's State Minister for Foreign Affairs.
Speaking to journalists from Thailand, Malaysia and Indonesia who visited Tokyo recently at the invitation of the Keizai Koho Center, 42-year-old Mr Suzuki, the second youngest member of the Abe administration, observed that international politics are often driven by domestic policies, especially in South Korea.
"I think that the general public understands this. What is important is that they don't involve the general public in that kind of political show," he said. "The momentum (however) is changing a bit because many countries including the US have sent the message to President Moon not to make our situation complicated."
Bilateral ties between Japan, the world's third largest economy, and South Korea, which ranks 11th globally, have been frayed over what constitutes proper contrition and compensation for two groups of Koreans: those conscripted to work in factories and mines that supplied Japan's imperial war machine, and those euphemistically called "comfort women" who were forced to work in military brothels.
Japan contends all claims were settled under a 1965 bilateral treaty and a fund set up in 2015. It has rejected a South Korean proposal for a joint compensation fund to resolve the forced-labour dispute, seeing it as a breach of international law.
As the argument dragged on, it took on an added trade dimension. Tokyo in July tightened the export of chemicals critical for the huge South Korean semiconductor industry. Seoul denounced the measure as "economic retaliation".
Seoul then removed Tokyo from its list of most-trusted trading partners and said it would withdraw from a military intelligence-sharing agreement. It also filed a complaint at the World Trade Organization, however, the complaint was withdrawn temporarily.
"South Korea is a problem. They don't listen to the US. They don't listen to us. They are with North Korea," said Urata Shujiro, a professor of economics at the Graduate School of Asia-Pacific Studies at Waseda University.
"President Moon's dream is to reunify with North Korea. That would be an authoritarian system dominating South Korea. It would be a very scary situation."
Both Mr Suzuki and Mr Urata reiterated that as geopolitical stresses intensify, Japan has no other choice but to stand by the US. Mr Abe, according to the minister, has a very close relationship with US President Donald Trump.
Through many channels, he said, Japan has persuaded Mr Trump that a strong and stable commitment in Asia is "in the United States' own national interest". "We need to make them understand this again. And I think many of those in Washington are seeing this. That kind of role as a bridge between those countries is what we need to be, I think.
"For regional stability, a strong Japan-US commitment is very vital and we would like to continue that. I think our prime minister is doing a very good job in this context. His communication with President Trump is very something very positive for the region, Asia and Southeast Asia."
The rising influence of China has led to concern that if "the strongest country behaves in a very selfish manner, that will trigger devastation", the minister continued.
"China's economic invasion comes with other situations that are not good for people in the long run. That's what we are worried about."
Prof Urata agreed, saying that Japan seems to have no other choice but to ally with the US given the fact that the country doesn't have a strong military.
"We really depend on the US for national security," he said. "Besides, the US is strong in its support for the democratic system. These is no reason we have to go against the US.
"I think we really have to rely to the US if we want democracy. No other choice."
Japan worries that as China grows stronger, it is behaving "in a very selfish manner", says Suzuki Keisuke, State Minister for Foreign Affairs. SUPPLIED
SLUGGISH RECOVERY
Prof Urata, also senior research adviser at the Economic Research Institute for Asean and East Asia (ERIA), said Japan's steady but frustratingly slow economic recovery since 2012 reflected a lack of local demand, low consumption, and weak investment and productivity growth.
The country is also burdened with government debt as high as 250% of GDP while US-China trade friction has added uncertainties to future prospects. There are some favourable developments, nonetheless, such as low unemployment and a large increase of foreign tourist arrivals, surpassing the government's target of 20 million.
Since Mr Abe took office in late 2012 and began introducing his "Abenomics" policies, Japan has had economic growth averaging 1% a year. The demographic challenge is very serious, with a low birth rate and declining population, prompting companies not to invest locally. The solution, Prof Urata says, is to improve productivity and increase overseas investments.
"Since domestic demand is not growing, for the Japanese economy to grow, it is important to increase the relationship with a fast-growing region which is Asia. That's one challenge. Not only through trade and investment but also through human exchange, increasing the exchange of people of all levels -- young, the corporate sector and students -- is one possible solution," he pointed out.
That also means taking part in an open, transparent and stable rules-based trade and investment environment though cooperation with faster-growing economies, he said. That means teaming up with Asean to conclude the Regional Comprehensive Economic Partnership (RCEP), and championing the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), as Mr Abe did when Mr Trump pulled the US out of the original TPP.
Another solution is to help East Asian countries achieve high economic growth by providing economic assistance such as building high-quality infrastructure, developing human resources and transferring technology.
For example, Japan has provided assistance to enhance Asean connectivity through development of two economic corridors: East-West linking Ho Chi Minh City, Phnom Penh, Bangkok and Dawei, and the Southern Corridor from Da Nang to Mawlamyine in Myanmar. The Asean Maritime Economic Corridor also has received support from Japan.
"Such a policy will result in a win-win outcome, helping East Asian countries get out of the middle-income trap, which in turn provides business opportunities for Japanese companies. That is the cycle we should try to reignite," said Prof Urata.
And while China's rise is a challenge to Japan's security, it also provides the opportunity for its economy to grow, he added. "Although it is a challenge when it comes to technology, thanks to China's growing economy, we can expand our exports to China. For all the countries in East Asia, China is the number-one export destination. China is a big export destination."
Urata Shujiro, professor of economics at the Graduate School of Asia-Pacific Studies, Waseda University SUPPLIED
STARTUPS AND SOCIETY 5.0
To Nakanishi Hiroaki, chairman of the business federation Keidanren, the existing international order is suffering from systemic fatigue. While challenges that cannot be resolved within the current frameworks are accumulating, there are increased expectations for Japan to play its part and show leadership.
And while Japan has been dealing with domestic challenges of an ageing population and low birth rate, the tide of digitisation continues to sweep the world, transforming corporate activity and bringing dramatic change to people's lifestyles.
"Growth is happening differently in this era of digitisation," said Mr Nakanishi, also executive chairman of Hitachi Ltd.
Digital technologies, he said, such as robotics, blockchain, AI (artificial intelligence), and IoT (internet of things) are being combined with human imagination and creativity to resolve social issues and create new value. "It is from these activities that new economic growth will emerge," he added.
As a result of technological disruption, the Japanese tradition of lifetime employment has changed considerably. By deploying new technologies, companies can automate parts of their human workforce, making employees feel less secure about their jobs, while new graduates are concerned about long-term prospects.
"Typical jobs may be decreasing," said Takashi Yoshimura, director of the Keidanren Industrial Technology Bureau. "But instead there might be new kinds of jobs that may require creativity that humans can't accomplish without the use of advanced technology like AI," he said.
"Systems have to be maintained and that will mean new kinds of jobs. Given the current situation, the educational system may have to change as well as the way we train people. This is a new challenge that has to be resolved."
In the past, new graduates from universities joined a big corporation and stayed there until the end of their careers. As long as they worked hard, their job would be secure. "It is changing. Jobs are not secure even when you are working with large corporations nowadays," said Mr Yoshimura.
"What I have observed is that new grads from famous universities don't want to go to work for big corporations and many of them desire to be hired by startups, or at least they want to start their own business," he said.
"When you are young, usually the jobs given to you are quite limited because they are such big corporations. In the meantime, if they join startups, they might be able to improve their capabilities as a whole by working in a small company."
Statistics show that the total amount of financing for Japanese startups fell sharply after the 2008 global financial crisis, but it has been expanding rapidly in recent years and is now at a record high, according to Mr Yoshimura. But there is still a big gap between the number of unicorns -- companies valued at $1 billion or more -- in Japan (1) and those in other major economies including the US (151) and China (85).
Keidanren, he said, tries to create connection between startups and people at decision-making levels of big corporations. "Many startups said that there are few opportunities for them to get in touch. That's exactly what we can do at Keidanren."
At the same time, he believes, the tax system needs to change to get big corporations interested. "They really want a tax incentive system when they invest in startups."
On a broader front, Keidanren has spearheaded the concept of Society 5.0 for SDG, a vision that combines the United Nations Sustainable Development Goals (SDGs) with the idea of next-stage human society, Mr Horoaki said.
Society 5.0 involves using digital technologies and data to create a better society for the future where people lead diverse lifestyles and pursue happiness in their own ways. In this creative society, humans will require imagination to change the world and creativity to materialise their ideas.
The aim is to bring about a society where anyone can create value anytime, anywhere, in security and harmony with nature and free from various constraints that currently exist. In healthcare, for example, new approaches can provide care tailored to individual health at the preventive stage. Individuals will use and manage life-stage data on their own initiative.
"Society 5.0 will help solve an array of societal challenges and pave the way for the achievement of SDGs that the UN has declared as targets for realisation by 2030," the Keidanren chairman said.
"Therefore, it is imperative that Japan's business community assumes a leading role in bringing about the creation of Society 5.0, a vision for a 'super-smart' society that will fully harness innovative technologies to achieve optimal improvements in society as a whole."
Keidanren chairman Nakanishi Hiroaki says Japan must work toward a creative and innovative "Society 5.0". HILOHUMI KUDOH
