Skip to main content

East Asia’s Rising Geoeconomics and the Strategy for Japan

RESEARCH Report by Saori N. Katada
Akihabara Electric Town, Tokyo, Japan.

Amidst economic uncertainty, Japan must create a robust regional order that supports continued prosperity regardless of the US administration or China’s geopolitical ambitions.

Key Findings

In the 21st century, great power rivalry unfolds not only in security and military affairs, but more prominently through economic interactions such as trade and investment. Geoeconomics, therefore, has become a vital component of power politics. This constitutes a major departure from the time of the Cold War, where the United States and the Soviet Union competed politically and militarily without this competition spilling into economic governance. In today’s Asia, which is characterized by high levels of economic interdependence—the same interdependence which made China’s rise possible in the first place—economic statecraft has become the foreign policy instrument of choice for great powers. 

In times past, economic statecraft has taken place in the form of bilateral competition over trade, protection of foreign investment interests, or economic sanctions. However, what is more striking about recent initiatives advanced by the United States and China is their determination to define the global and regional economic order. In particular, recent introduction of mega free trade agreements (e.g. TPP, RCEP, or FTAAP) and the emergence of new financial institutions such as the Asian Infrastructure Investment Bank (AIIB) and BRICS’ (Brazil, Russia, India, China and South Africa) New Development Bank reveal fierce competition in rule-setting and institution-building dynamics in the region. In this landscape, the Japanese government has the opportunity to tip the balance between the two great powers.1

The election of President Donald Trump, with "America First" economic priorities and disdain for multilateral institutions, however, presents new challenges for Japan on two interrelated fronts. The first is the withdrawal of the United States from institutional competition, most clearly represented by Trump’s decision to withdraw from the Trans-Pacific Partnership (TPP). The second is China’s constant push to reconfigure regional geoeconomic and geostrategic order through the Belt and Road Initiative (BRI). 

Japan has both the motivation and the potential to influence the regional economic order. Its economic prosperity depends significantly on trade and investment in the Asia-Pacific, and as the world’s third largest economy, it is large enough to affect change. The opportunity for Japan continues to be its ability to shift the power balance in the region, while the challenges revolve around how Japan can independently lead rule-based institutions. As the shifting geoeconomic balance introduces greater uncertainty, the Japanese government must contribute to create a robust regional order that will support the region’s continued prosperity regardless of changes in the US administration or upswing in China’s geopolitical ambitions. 

  • 1. Saori N. Katada, "At the Crossroads: The TPP, AIIB, and Japan’s Foreign Economic Strategy," AsiaPacific Issues, No. 125. May 2016. East West Center.
About the Author
Saori N. Katada
Associate Professor, University of Southern California
Saori N. Katada, Associate Professor, University of Southern California