No. 4 — January 28, 2000

Feature Article


Barbara Wanner


Residents of Okinawa long have complained about being forced to bear the lion's share of the burden of hosting U.S. forces based in Japan. The September 1995 abduction and rape of an Okinawan schoolgirl by three U.S. servicemen, however, sparked such a virulent antibase outcry throughout Japan that Tokyo and Washington had little choice but to develop a plan to address the islanders' concerns.

Officials on both sides of the Pacific now have their fingers crossed that the alleged attempted rape of an Okinawan woman in mid-January by an American serviceman — the first such episode since the 1995 tragedy — will not so inflame the atmosphere as to set back a three-year effort to consolidate the U.S. base presence on the small Ryukyuan island chain that makes up Japan's southernmost prefecture.

As it is, implementation of the 1996 accord developed by the Special Action Committee on Okinawa, under which the United States agreed to return to residents approximately 21 percent of the land used by the American military, has been problematic. The islanders' tolerance for the daily intrusions caused by having U.S. military personnel and equipment literally in their backyards has reached the breaking point. Added to this, long-strained relations between Tokyo and Naha, the Okinawan capital, have complicated the central government's efforts to buy the islanders' cooperation with economic assistance.

The main sticking point continues to be the relocation of a major military heliport at the Futenma Air Station in crowded Ginowan to another site in the prefecture. The Japanese media hyped as a breakthrough Okinawan Gov. Keiichi Inamine's late November 1999 announcement that Nago, a small town on the northern shore of the main island, would host the heliport. But American observers have offered a more sobering assessment of this development, noting that such key issues as the facility's design and the conditions under which it would operate are controversial. Prime Minister Keizo Obuchi's selection of Nago to host the July 2000 summit of the Group of Seven industrial nations plus Russia and President Clinton's stated preference to have the heliport logjam resolved by then have turned up the heat under negotiators even more.

Defense experts stress that resolution of the Okinawan base conundrum is critical to continued U.S.-Japan defense cooperation and to peace and stability in the Asian Pacific. These analysts also note that Tokyo's manner of accommodating Naha will have important implications for the central government's dealings with other prefectures, whose support will be necessary to ensure that Japan effectively plays its part as spelled out in the 1997 U.S.-Japan guidelines for defense cooperation.

Given the Obuchi government's preoccupation with hosting a successful G-8 summit, Tokyo may be tempted to do nothing on the heliport relocation that would risk controversy. While such a strategy might keep the lid on the issue in the near future, it may not be in Japan's security interests over the longer term.

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Weekly Review

--- by Douglas Ostrom

Japan's economy may be on the mend, but the recovery is unnecessarily slow. That message, delivered by Secretary of the Treasury Lawrence Summers to Prime Minister Keizo Obuchi on the sidelines of the January 22 meeting in Tokyo of Group of Seven finance ministers and central bankers, overshadowed the G-7's relatively modest reiteration of concern about the strength of the yen. While Japanese policymakers could be expected to disagree with the hint that they were doing too little to jump-start sustained growth, they tend to agree that the economy is weak. Recently announced data support this view.


--- by Jon Choy

To the chagrin of financial institutions jockeying for advantage, the Liberal Democratic Party and its coalition partners, the Liberal Party and the New Komeito, have put out the yellow flag in the race to overhaul Japan's pension system. Government officials stress that their recent decision to delay the introduction of defined-contribution pension plans by three to six months does not mean a retreat from Tokyo's commitment to financial market reform. Some smaller financial institutions and the government-run National Pension Fund Association, they say, need more time to prepare for the revolutionary change. Market watchers are less charitable, asserting that Tokyo put off the reform for both financial and political reasons. Despite the delayed timetable, everyone agrees that a defined-contribution pension system will be implemented eventually.


--- by Barbara Wanner

Japan's financial support for U.S. military facilities within its borders, the most generous of any American ally, was a bright spot in bilateral security relations for many years. Of late, though, this star seems to be losing its luster, judging by the tenor of the January 5 discussions in Washington between Japan Defense Agency Director General Tsutomu Kawara and Secretary of Defense William Cohen (see JEI Report No. 2B, January 14, 2000) and the thrust of a January 22 follow-up meeting in Tokyo involving working-level defense officials.


--- by Marc Castellano

In what would amount to a dramatic policy reversal, Tokyo may agree to restructure nearly $1 billion worth of loans extended to Indonesia. The final decision will be made by the Ministry of Foreign Affairs and the Ministry of International Trade and Industry. The prospective restructuring plan covers loans from the Japan Bank for International Cooperation — the aid agency created from the October 1999 merger of the Export-Import Bank of Japan and the Overseas Economic Cooperation Fund — and trade insurance issued by MITI.



Japan and the United States are headed for a showdown over the internationally steep rates that Nippon Telegraph and Telephone Corp.'s two regional units charge competing communications carriers to access their local networks to initiate or terminate traffic. Working-level talks held in Washington January 18 and January 19 underscored once more that the definition of market-based pricing of interconnection fees adopted by the Ministry of Posts and Telecommunications is not on the same page of the dictionary as the U.S. government's. As part of the May 1998 status report on the U.S.-Japan Enhanced Initiative on Deregulation and Competition Policy (see JEI Report No. 20B, May 22, 1998), Tokyo agreed in effect to slash interconnection expenses before yearend 2000 by employing a so-called long-run incremental cost methodology to calculate these tariffs.

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