Whatever diplomatic and security challenges the next two or three decades may bring, Japan will confront them as an economic power in decline. As such, it will need to craft a sophisticated and multifaceted policy to maintain its global relevance and national security in an increasingly complex and dangerous world.

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In any discussion of foreign policy trends, one is inevitably handicapped by a limited ability to predict the sort of international environment that will exist 20 or 30 years from now. We cannot forecast with any confidence the status of the world economy, the distribution of power among major players, the role of international institutions and regimes, or the international norms that will prevail in 2030 or 2040. Yet these are all structural elements that could profoundly affect the future course of Japanese foreign and security policy.

Nor can we say with any assurance how relations will unfold between such major powers as the United States, Russia, China, India, and Japan. The development and management of these bilateral relationships could follow a number of different patterns. We might hope that they will evolve toward a “concert of power,” but we can also imagine any number of balance-of-power scenarios. This, too, will have profound implications for Japan’s future.

Relevant Trends

Nonetheless, there are some trends we can predict with relative confidence, especially as regards Japan itself. The first and foremost of these trends pertains to demographics. Japanese society is rapidly approaching what we call a super-aging society, with 40 percent of the population expected to be over 65 years old by 2050 or so. As there is no reason to suppose that this trend will reverse itself, we can be certain that these demographic pressures will constrain our public-policy options.

In respect to the economy, the is for slow growth. (Although a rate as high as 2–3 percent is possible, many predict around 1 percent or even less.) This makes it inevitable that Japan will lose some of its economic influence and prominence. Where the economy is concerned, Japan is a declining power.

For this reason among others, Japan will have to adjust to new rules of the game. As argued in a number of high-level reports, such as the Atlantic Council’s Global Trends 2025 and the National Intelligence Council’s Mapping the Global Future , the United States is likely to remain the dominant player in the international system, but the emerging powers—Russia, China, India, and Brazil —will have important seats at the international table. As Japan’s capability and economic strength decline, Tokyo will need to pursue a more complex and sophisticated foreign policy than in the past.

A final trend relates to changes in domestic norms and perceptions regarding Japan’s international role. My first-year students at Keio University were born in 1991, the year of the Persian Gulf War. They have no direct experience of the Cold War, and they were only 10 years old when the 9/11 attacks occurred. They are much less constrained than my generation by the pacifist norms that dominated Japanese society in the wake of World War II, and this gives them far greater freedom in their strategic thinking. As a result, we can be fairly certain that many of the taboos that have been embedded in Japanese security policy until now will be disregarded or at least given much lower priority. To some degree this has already occurred over the last decade, but as the new generation takes charge of Japanese security policy, we can expect a more dramatic shift that will throw off the constraints of the postwar era.

These, then, are the broader trends that can be expected to impact Japanese security policy. How might Japan’s policy makers respond to these changes in the coming decades?

Maneuvering to Stay Relevant

Recognizing the general trend toward marginalization, Japan can logically be expected to take steps to maintain its status in the international community, although the resources that it will be able to allocate will be relatively small. In fact, I believe that under Prime Minister Shinzo Abe, Japan was already maneuvering to maintain its status and relevance by adopting a new ideological framework, as seen in the “arc of freedom and prosperity” and the “values-driven diplomacy” advanced by Minister for Foreign Affairs Taro Aso in 2006 and 2007.

In my interviews with drafters of the “values-driven diplomacy” concept, I uncovered an assortment of interesting rationales for the policy. The first related to Japan’s role in global affairs. Given the growing constraints on its foreign aid budget, Japan needed a new conceptual framework to guide and justify the strategic allocation of its dwindling ODA budget. After World War II, the main rationale used to legitimize foreign aid was the notion of restitution or compensation to Asian nations. Now, more than 60 years after the end of the war, a new conceptual framework is needed to explain why Japan needs to help rebuild Iraq or Afghanistan, and more generally to justify our engagement in Eastern Europe and in Central, South, and Southeast Asia.

Another, more interesting rationale was competition with China. It seems that an important purpose of the values concept was to support an international system in which a coalition of democratic countries would play the leading role, and relations with those outside the coalition would be circumscribed by the goal of spreading democracy. The Abe administration proceeded to act on this concept with moves to develop a hub-and-spokes diplomatic network focusing on Australia and India, and by strengthening relations with NATO.

In a short time, however, this emphasis all but vanished from Japanese foreign policy. The most obvious reason was that Aso lost the 2007 Liberal Democratic Party election to Yasuo Fukuda, who had opposed Aso’s concept from the start. Soon after Fukuda came into office, the “arc” disappeared from government websites and the Diplomatic Blue Book. Nor has the concept reappeared as a guiding principle of Japanese foreign policy under the Aso cabinet, even though the prime minister has paid lip service to it from time to time.

The most fundamental reason values-driven diplomacy has fallen out of favor in Japan is that it was an approach that other major powers had already abandoned as impractical, particularly in relation to China.

In 2005, Deputy Secretary of State Robert Zoellick made a speech on US-China relations in which he introduced the notion of China as a "responsible stakeholder" in the international community, an inside player in international institutions and systems. He made it clear that Washington’s policy vis-à-vis China had gone beyond the idea of engagement. The concept of engagement emphasized by the Clinton administration in the 1990s, in the wake of the Tiananmen incident, implicitly viewed China as an outsider that should be encouraged to participate in international systems designed and controlled by the United States. However, Zoellick made it clear that China was already on the inside, influencing existing frameworks and creating its own to compete or collaborate. To some extent, even the 2007 Armitage-Nye Report echoed this inclusive approach. Although it emphasized first of all collaboration among traditional allies and friends, it also stressed a “triangle of US-Japan-China relations” as the key to regional stability.

The impact of this shift was evident. When Abe made a bid to include India in the Japan-Australia-US Trilateral Strategic Dialogue, he elicited a negative reaction, especially from the Australian Department of Foreign Affairs and Trade (DFAT) and the Indian business community, who were clearly concerned about the impact on rapidly expanding economic relations with China.

Over the past few years, two camps within the Japanese Ministry of Foreign Affairs have struggled for control of Tokyo’s China policy, one that views China as an outsider and the other committed to treating it as an insider. As foreign minister, Aso embraced a policy that was more or less predicated on the view of China as an outsider. As prime minister, Fukuda reversed Aso’s policy, and today there is no going back.

An interesting example of how this shift has played out in Japanese diplomacy can be seen in negotiations over the UN Security Council’s response to North Korean missile and nuclear tests. In 2006, many senior Japanese foreign policy officials assumed that Tokyo and Washington between them would draft the Security Council resolutions relating to North Korea’s July missile launch and October nuclear test. But China took a tough position, and Washington had no choice but to heed China’s opinion to achieve a consensus among the permanent members of the Security Council. Japan learned from this experience, and after the rocket launch in April this year, Aso met with Wen Jiabao in Pattaya, Thailand, and the leaders worked out a compromise whereby Japan gave up its insistence on a binding resolution condemning Pyongyang, and China agreed to signed on to a strong president’s statement. As a result, Japan was able to play an active role in facilitating a P5 consensus. We can see from this example how China’s growing influence and the changing distribution of power has influenced Japanese diplomacy.

Historic Turning Point in Defense Policy

Let us now look briefly at the for Japanese defense policy. In terms of constraints, I believe that legal issues and norms, as well as budgetary limitations, will be the biggest factors over the next 20 years.

The 2004 National Defense Program Guidelines, with their concept of “multifunctional and flexible defense,” marked a turning point in Japanese defense policy. These guidelines embraced not only the traditional objective of territorial defense but also the broader goal of international security, acknowledging for the first time that conflicts in areas outside Japan’s immediate environs were relevant to the nation’s defense. Of course, Japan had been participating in peacekeeping operations in remote parts of the world for some time, but until then the justification had been its responsibility to contribute to the international community. In 2004, against a background of heightened awareness of international terrorism and other global threats that cross political and geographical boundaries, Japan evinced a willingness to build its own defense agenda around such overarching threats.

This breakthrough concept became the basis for Japan’s mission in Iraq, the first deployment of SDF forces to an area where combat was ongoing, and the situation was expected to deteriorate. At the 2004 press conference announcing the mission, Prime Minister Jun’ichiro Koizumi articulated the traditional position that Japan would not use force unless attacked. At the same time, his justification for sending forces and risking the lives of SDF personnel—that Japan’s own security would be threatened if reconstruction failed in Iraq and the country became a hotbed of terrorism—represented a dramatic departure.

What direction the 2009 guidelines take will depend in part on the results of the upcoming national elections. However, regardless of which party controls the government, Japanese defense policy will need to address the following issues.

One is the balance of power in East Asia. The most pressing concern in this regard is North Korea’s nuclear weapons program and how best to deter, dissuade, and respond to Pyongyang, both militarily and diplomatically.

Another major regional issue is the rise of Chinese military power, particularly its fourth-generation fighters and submarine capability. By 2005–6, China’s fourth-generation fighters outnumbered Taiwan’s, and this year or next year they will surpass those of Japan’s Air Self-Defense Force. Japan must decide what level of capability it needs to maintain in the years ahead, taking into account the balance of power between China and Japan on the one hand, and between China and the United States on the other.

Another priority should be boosting Japan’s independent capability for dealing with lesser matters, such as defense of the disputed Senkaku Islands and Takeshima. Japan must consider above all how best to protect these territories during times of crisis, but also how to prevent politicization of these disputes from compromising peacetime defense.

A final issue relates to the strategy of US-Japan extended deterrence, nuclear and otherwise. Not long ago, President Barack Obama gave a major speech in Prague about nonproliferation policy, in which he officially committed the United States to the goal of eliminating nuclear weapons completely. However, Obama has also stressed that the United States will continue to maintain a strong nuclear deterrent until that goal is reached. Accordingly, Washington plans to work with Russia to reduce the number of strategic nuclear weapons on both sides by December this year, even while maintaining a prominent place for nuclear weapons in its strategic planning. It is still unclear how the United States will manage to maintain a strong nuclear and conventional deterrent for Japan with fewer nuclear forces, and it will doubtless involve a complex formula. In any case, it seems clear that Japan and the United States will need to coordinate doctrine and adjust their roles within the bilateral alliance to ensure that deterrence continues to function for Japan, particularly with regard to North Korea and China.

This article is based on a presentation delivered by the author on April 15, 2009, during the 17th session of the Japan-US future leaders policy dialogue (the Tokyo-Reischauer Group). The dialogue, co-organized by the Tokyo Foundation and the Edwin O. Reischauer Center for East Asian Studies (of The Johns Hopkins University's School of Advanced International Studies in Washington, D.C.), aims to build relationships between young professionals who will maintain and strengthen the Japan-US alliance.