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Thursday, August 29, 2013

Japan-U.S. Relations: Issues for Congress,Analyst in Asian Affairs August 2, 2013

http://www.fas.org/sgp/crs/row/RL33436.pdf

Japan-U.S. Relations: Issues for Congress
Emma Chanlett-Avery, Coordinator
Specialist in Asian Affairs


Mark E. Manyin
Specialist in Asian Affairs


William H. Cooper
Specialist in International Trade and Finance


Ian E. Rinehart
Analyst in Asian Affairs
August 2, 2013
Congressional Research Service
7-5700 www.crs.gov RL33436

CRS Report for Congress
Prepared for Members and Committees of Congress


Summary
Japan is a significant partner for the United States in a number of foreign policy areas, particularly in terms of security priorities, from hedging against Chinese military modernization to countering threats from North Korea. The post-World War II alliance has long been an anchor of the U.S. security role in Asia. The alliance facilitates the forward deployment of about 49,000
U.S. troops and other U.S. military assets based in Japan in the Asia-Pacific.
Until the recent parliamentary elections, Japan struggled to find political stability. Since 2007, six men have been prime minister, including the current premier Shinzo Abe, who also held the post in 2006-2007. His Liberal Democratic Party (LDP) returned to power in a landslide election in December 2012, and cemented their power in parliamentary elections in July 2013. Japan’s leaders face daunting tasks: an increasingly assertive China, a weak economy, and rebuilding from the devastating March 2011 earthquake, tsunami, and nuclear disaster. In recent years, opposition control of one chamber of parliament has paralyzed policymaking in Tokyo and made U.S.-Japan relations difficult to manage despite overall shared national interests. Abe is now more free to pursue controversial initiatives that the United States has encouraged such as joining the Trans-Pacific Partnership (TPP) trade pact and increasing its military’s capabilities and flexibility.
Comments and actions on controversial historical issues by Prime Minister Abe and his cabinet have raised concern that Tokyo could upset regional relations in ways that hurt U.S. interests. Abe is known for his strong nationalist views. Abe’s approach to issues like the so-called “comfort women” sex slaves from the World War II era, history textbooks, visits to the Yasukuni Shrine that honors Japan’s war dead, and statements on a territorial dispute with South Korea will be closely monitored by Japan’s neighbors as well as the United States.
The massive and immediate humanitarian relief provided by the United States following the March 2011 “triple disaster” bolstered the bilateral alliance, but difficult issues remain, particularly those related to the stationing of marines on Okinawa. Washington and Tokyo have agreed to relocate several thousand marines from Okinawa to Guam and other locations in the region, but the two governments have been unable to make tangible progress on implementing a 2006 agreement to relocate the controversial Futenma Marine Corps Air Station to a less densely populated location on Okinawa. In addition, the U.S. Congress has restricted funding for the realignment because of concerns and uncertainty about the cost of the realignment plans.
Japan is one of the United States’ most important economic partners. Outside of North America, it is the United States’ second-largest export market and second-largest source of imports. Japanese firms are the United States’ second-largest source of foreign direct investment, and Japanese investors are the second-largest foreign holders of U.S. treasuries. In April 2013, the United States and the 10 other countries participating in the TPP free trade agreement (FTA) negotiations completed discussions with Japan and invited Tokyo to join the talks. Japan’s membership in the TPP, if an agreement is reached, would constitute a de facto U.S.-Japan FTA. Congress must approve implementing legislation if the TPP is to apply to the United States. Japan’s participation in the talks could enhance the credibility and viability of the TPP, which is a core component of Administration efforts to “rebalance” U.S. foreign policy priorities toward the Asia-Pacific region. If successful, the negotiations could reinvigorate a bilateral economic relationship that has remained steady but stagnant, by forcing the two countries to address long-standing, difficult issues. On the other hand, failure to do so could indicate that the underlying problems are too fundamental to overcome and could set back the relationship.

Contents
Recent Developments ...................................................................................................................... 1July 2013 Elections.LDP Victory Gives Abe Control for Three More Years ......................... 1Abe’s Foreign Policy and Regional Relations ........................................................................... 1The TPP and Abe’s Economic Agenda ...................................................................................... 2Japan’s Foreign Policy and U.S.-Japan Relations............................................................................ 4Abe and History Issues .............................................................................................................. 4Yasukuni Shrine .................................................................................................................. 5Comfort Women Issue ......................................................................................................... 6Territorial Dispute with China ................................................................................................... 6China-Japan Trade............................................................................................................... 7Japan and the Korean Peninsula ................................................................................................ 8Japan’s Ties with South Korea ............................................................................................ 8North Korean Issues ............................................................................................................ 9Japan’s Nuclear Energy Policy................................................................................................ 10Exports of Liquefied National Gas (LNG) to Japan.......................................................... 11Japanese Participation in Sanctions on Iran ............................................................................ 12International Child Custody Disputes...................................................................................... 13
U.S. World-War II-Era Prisoners of War (POWs) ................................................................... 14Alliance Issues ............................................................................................................................... 14Futenma Base Relocation Controversy ................................................................................... 15Progress on Other Elements of Military Realignment and Alliance Transformation .............. 17Deployment of the MV-22 Osprey Aircraft to Japan............................................................... 17March 2011 Earthquake and Tsunami: U.S.-Japan Alliance Performance.............................. 17Constitutional Constraints ....................................................................................................... 18Burden-Sharing Issues ............................................................................................................. 19Extended Deterrence ............................................................................................................... 19Japan’s Counter-Piracy Mission in the Gulf of Aden .............................................................. 19Economic Issues ............................................................................................................................ 21Overview of the Bilateral Economic Relationship .................................................................. 21Bilateral Trade Issues .............................................................................................................. 23Japan’s Ban on U.S. Beef.................................................................................................. 23Japan and the Trans-Pacific Partnership Agreement (TPP)............................................... 24Insurance ........................................................................................................................... 26Japanese Politics ............................................................................................................................ 26The Stabilization ofJapanese PoliticsAround the LDP.......................................................... 27Abe’s Priorities ........................................................................................................................ 27The DPJ and Alternative Political Forces ................................................................................ 29Structural Rigidities inJapan’s Political System..................................................................... 30Japan’s Demographic Challenge ............................................................................................. 30Selected Legislation ....................................................................................................................... 30113th Congress ......................................................................................................................... 30112th Congress ......................................................................................................................... 31
111th Congress.......................................................................................................................... 31


Figures
Figure 1. Map of Japan .................................................................................................................... 3Figure 2. Map of U.S. Military Facilities in Japan ........................................................................ 20Figure 3. PartyAffiliation inJapan’s Lower House ofParliament................................................ 28Figure 4. Party Affiliation in Japan’s Upper House of Parliament ................................................ 29

Tables
Table 1. U.S. Merchandise Trade with Japan, Selected Years ....................................................... 21

Contacts
Author Contact Information........................................................................................................... 33


Recent Developments
July 2013 Elections.LDP Victory Gives Abe Control for Three More Years
Since 2007, Japan’s politics has been plagued by turmoil and short-term premiers, complicating U.S.-Japan relations. This period of political instability may have come to an end in July 2013 with the landslide victory of Prime Minister Abe’s Liberal Democratic Party (LDP) in elections for Japan’s Upper House of parliament, called the Diet. The LDP increased its seat total from 86 to 115 in the 242-seat chamber. The vote gives the LDP control of the Upper House, by virtue of a coalition it holds with the smaller, New Komeito party. Abe and the LDP already controlled the more powerful Lower House, which was won after a similarly dominant performance in December 2012 elections, a victory that swept the party back into power after three years in opposition. Elections for either chamber are not required to be held until 2016, which means that Abe and the LDP are likely to hold the reins of power at least until then.
Since assuming the premiership in December 2012, Abe has governed and campaigned on a platform of revitalizing Japan’s economy and strengthening its military. According to polls taken before and after the election, large majorities of Japanese support Abe’s economic policy moves to combat deflation and restore growth, a program he has dubbed “Abenomics” and consists of three main pillars: monetary stimulus, fiscal stimulus, and economic reform. Abe’s arguments for a more robust military posture have generated more controversy and debate within Japan. Abe has said his government will proceed this fall with a study of how Japan can participate in collective self-defense activities, combat cooperation in defense of another country that is prohibited under the current official interpretation of Japan’s constitution. However, because the July 2013 Upper House elections did not produce a two-thirds majority.a key legal threshold.Abe has said he will not prioritize his more far-reaching proposals to amend Japan’s constitution.1 The LDP’s reliance on the pacifist New Komeito party may give the latter increased influence in the debate over whether and how Japan should revise its legal structure to allow its military forces greater freedom of action.

Abe’s Foreign Policy and Regional Relations
Two of Abe’s major foreign policy goals are expanding Japan’s engagement in Asia and increasing Japan’s military capabilities. In particular, he has emphasized deeper engagement with Southeast Asia, as well as increasing security ties with India and Australia. At the Shangri-la security conference in Singapore, defense ministers from South Korea, Japan, and the United States met to discuss North Korean provocations. To attempt to pave the way for higher level talks with Beijing, he dispatched a top diplomatic aide to China shortly after the July elections.
China and Japan continue to be locked in a struggle over ownership of a small group of islets known as the Senkakus to Japan and the Diaoyu to China (see the “Territorial Dispute with China” section below for more details), with near-daily encounters between Japanese and Chinese
1 “Japan: Prime Minister Abe Pledges to Further Implement Economic Policies in News Conference,” NHK General Television in Japanese, as translated by the Open Source Center, JPO2013072212390999, 0500 GMT July 22, 2013.
vessels in the East China Sea that could escalate into a more serious conflict. Although the U.S. is officially neutral on the question of sovereignty, it otherwise has backed the position of Japan, which administers the islets. China has refused to hold high-level meetings with Japan, including a heretofore annual Japan-China-South Korea summit, unless Tokyo makes key concessions on the Senkakus/Diaoyu issue.
China and South Korea remain wary of Abe’s goal of expanding Japan’s military capabilities because of their lingering concern about how the Tokyo government treats Japan’s history of aggression in Asia in the first half of the 20th century (see the “Abe and History Issues” section below for background). Plans to adjust Japan’s constitution to loosen restrictions on the military and to develop Japan’s defense activities with other countries draw complaints or statements of concern from Beijing, and are unsettling to many in Seoul. Diplomatic meetings with both countries are routinely canceled or postponed when a Japanese official makes a statement on history that offends the other parties. U.S. officials, in general supportive of increasing Japan’s defense posture in the region, quietly voice their concern about historical disagreements affecting cooperative efforts, particularly in developing closer trilateral coordination with Japan and South Korea. A visit by Abe or members of his cabinet to a controversial shrine that honors Japan’s wartime dead (see the “Yasukuni Shrine” section below) on August 15, the sensitive anniversary of Japan’s surrender in World War II, could again spike tension in the region.

The TPP and Abe’s Economic Agenda
On April 24, 2013, Acting USTR Demetrios Marantis, in a letter addressed to House Speaker John Boehner, notified Congress of the Obama Administration’s intent to launch negotiations with Japan as part of the TPP no earlier than 90 calendar days hence. The notification followed the April 20, 2013, announcement by trade ministers from the United States and the other 10 TPP partners that they have formally invited Japan to join the TPP negotiations. Japanese officials would like Japan to be able to participate in an expected July round of TPP negotiations. On July 23, Japan formally joined the TPP negotiations and became the 12th participant.
Abe has made it a priority of his administration to grow the economy and to eliminate deflation, which has plagued Japan for many years. After assuming power, Abe’s government announced a three-pronged or “three arrow” program to boost economic growth and The first arrow consists of a $122 billion fiscal stimulus package aimed at spending on infrastructure, particularly in areas affected by the March 2011 disaster. While the package is expected to boost growth somewhat, it will also add to Japan’s already large public debt. The second arrow consists of monetary stimulus to arrest deflation. As a result, under pressure from Abe, the independent central Bank of Japan announced that it would undertake quantitative easing measures and raise its inflation target to 2% within two years. The Japanese yen then rapidly dropped in value against the U.S. dollar and other major currencies. The third arrow is to consist of economic reforms that will be aimed at restructuring the agricultural, medical services, and electricity sectors and to promote new services and new industries, according to Prime Minister Abe. For Abe, Japan’s participation in the TPP is a catalyst for those reforms.
Figure 1. Map of Japan

Source: Map Resources. Adapted by CRS.

Japan’s Foreign Policy and U.S.-Japan Relations2
The July 2013 election results mean that the LDP likely
Japan Country Data
will remain in power until the next Lower House
Population: 127.4 million
elections in 2016. To U.S. policymakers, continuity in
% of Population over 64: 24% (U.S. =
Tokyo’s leadership will be a welcome change from the
12.4%)
paralysis that has plagued Japan’s politics for the past
Area: 377,835 sq km (slightly smaller than
several years. The U.S.-Japan relationship is broad,
California)
deep-seated, and stable but has been handicapped by the

Life Expectancy: 84 years
annual replacement of prime ministers since 2006. The Obama Administration’s rebalancing to Asia strategy,
Per Capita GDP: $36,200 (2012 est.) purchasing power parity
also known as the “Pacific Pivot,” seeks a partner for long-term planning. Tokyo and Washington share the

Primary Export Partners: China 19.7%,
U.S. 15.5%, South Korea 8%, Hong Kong 5.2%, Thailand 4.6% (2011)
priorities of managing relations with a rising China, as
well as addressing the North Korean threat. Alliance cooperation at the working level has been strong, driven

Primary Import Partners: China 21.5%,
US 8.9%, Australia 6.6%, Saudi Arabia 5.9%, UAE 5%, South Korea 4.7% (2011)
closer by assertive Chinese behavior and North Korean
provocations. Although major basing issues in Okinawa remain stubbornly unresolved, other security matters
Yen: Dollar Exchange Rate: 79.42 (2012 est.), 79.81 (2011 est.), 87.78 (2010 est.),
such as ballistic missile defense cooperation have
93.57 (2009), 103.58 (2008)
progressed under both the LDP government and its immediate predecessors, which were led by the
Foreign Exchange Reserves: $1.351 trillion (December 2012 est.)
Democratic Party of Japan (DPJ). The DPJ is now Japan’s largest opposition party. The joint response to
Source: CIA World Factbook, February 2013.
the March 2011 disasters remains a vivid reminder to both sides of the underlying strength of the alliance.
It remains uncertain how Prime Minister Abe will fare as a steward of the relationship. On the one hand, he is known as a strong supporter of the U.S. alliance and promotes a number of security and economic positions that align with the United States. He is an advocate of building relations with fellow democracies, particularly advancing security ties with Australia and India. On the other hand, Abe faces questions about his ability to steer foreign policy away from divisive regional issues that could hurt U.S. interests. (See section below for discussion.) Abe faces a considerable challenge in convincing powerful sectoral constituencies to agree to some of the likely provisions of the Trans-Pacific Partnership (see “Economic Issues” section for more) and in allaying regional and domestic skepticism of Japan engaging in more advanced defense cooperation (see “Alliance Issues” section for more).




Abe and History Issues
During his year-long stint as prime minister in 2006-2007, Abe was known for his nationalist rhetoric and advocacy for more muscular positions on defense and security matters. Some of Abe’s positions.such as changing the interpretation of Japan’s pacifist constitution to allow for Japanese participation in collective self-defense.were largely welcomed by U.S. officials eager to advance military cooperation. Other statements, however, suggest that Abe embraces a
2 This section was written by Emma Chanlett-Avery.
revisionist view of Japanese history that rejects the narrative of imperial Japanese aggression and victimization of other Asians. He has been involved with groups arguing that Japan has been unjustly criticized for its behavior as a colonial and wartime power. Among the positions advocated by these groups, such as Nippon Kaigi Kyokai, are that Japan should be applauded for liberating much of East Asia from Western colonial powers, that the 1946-1948 Tokyo War Crimes tribunals were illegitimate, and that the killings by Imperial Japanese troops during the 1937 “Nanjing massacre” were exaggerated or fabricated.
Historical issues have long colored Japan’s relationships with its neighbors, particularly China and South Korea, which argue that the Japanese government has neither sufficiently appreciated nor adequately compensated them for Japan’s occupation and belligerence in the early 20th Century. Abe’s selections for his Cabinet include a number of politicians well-known for advocating nationalist, and in some cases ultra-nationalist views that many argue appear to glorify Imperial Japan’s actions. Many analysts say that Abe’s strengthened political position could lead him and/or his Cabinet Members to take steps or make statements about history that inflame regional relations, which could disrupt regional trade integration, threaten security cooperation among U.S. allies, and further exacerbate already tense relations with China.
During his second term, Abe backtracked on controversial statements that upset China and South Korea. In April 2013, he made comments to the Diet that suggested that his government would not re-affirm the apology for Japan’s wartime actions issued by former Prime Minister Tomiichi Murayama in 1995. The “Murayama Statement” is regarded as Japan’s most significant official apology for wartime acts. Abe stated to the Diet that his government may not uphold the statement “as is” and that the definition of “aggression” has not yet been “firmly determined.” Through his spokesperson, Abe later said, “during the wars of the 20th century, Japan caused tremendous damage and suffering to the people of many countries, particularly to those of Asian nations ... this understanding is an understanding that the Abe Cabinet shares with previous cabinets.”3
Yasukuni Shrine
The controversial Yasukuni Shrine has been a flashpoint for regional friction over history. The Tokyo shrine houses the spirits of Japanese soldiers who died during war, including several individuals who were convicted as “Class A” war criminals after World War II. Visits to the shrine by Prime Minister Junichiro Koizumi severely strained Tokyo’s relationships with Beijing and Seoul in the early and mid-2000s. The DPJ government generally refrained from visiting the shrine while in power. In April 2013, a large group of lawmakers, including three cabinet ministers, visited Yasukuni, again drawing protests from China and South Korea, who said the visits demonstrate Japan’s lack of remorse for Imperial-era aggression. The Japanese politicians say that they went to Yasukuni to pay respects to the nation’s war dead, as any national leader would do. Abe last visited the Yasukuni Shrine in October 2012, after he was elected president of the LDP but before the parliamentary elections that made him prime minister.
3 Press Conference by the Chief Cabinet Secretary, May 8, 2013. Accessed at http://www.kantei.go.jp/foreign/ tyoukanpress/201305/08_a.html.

Comfort Women Issue4
Abe’s statements on the so-called “comfort women”.sex slaves used by the Japanese imperial military during its conquest and colonization of several Asian countries in the 1930s and 1940s. have been criticized by other regional powers and the U.S. House of Representatives in a 2007 resolution. In the past, Abe has supported the claims made by many on the right in Japan that the women were not directly coerced into service by the Japanese military. When he was prime minister in 2006-2007, Abe voiced doubts about the validity of the 1993 “Kono Statement,” an official statement issued by then-Chief Cabinet Secretary Yohei Kono that apologized to the victims and admitted responsibility by the Japanese military. As the U.S. House of Representatives considered H.Res. 121 (110th Congress), calling on the Japanese government to “formally acknowledge, apologize, and accept historical responsibility” for forcing young women into military prostitution, Abe appeared to soften his commentary and asserted that he would stand by the statement. (The House later overwhelmingly endorsed the resolution.)
In recent years, Abe periodically has suggested that his government might consider revising the so-called Kono Statement, a move that would be sure to degrade Tokyo’s relations with South Korea and other countries. In May 2013, when questioned about the possibility of changing the statement, Chief Cabinet Secretary Yoshihide Suga said, “With regard to the ‘comfort women’ issue, when we think of the women who experienced immeasurable pain and suffering we are deeply pained. I have frequently stated the Government’s view that the Abe Cabinet shares the same recognition as that of previous cabinets” but left open the possibility of amending the statement by saying, “various scholars of history and experts in Japan and overseas are engaged in research on various themes and ... it would be a good idea for further consideration to be given from an academic perspective.”5
The issue of the so-called comfort women has gained visibility in the United States, due primarily to Korean-American activist groups. These groups have pressed successfully for the erection of monuments commemorating the victims, passage of a resolution on the issue by the New York State Senate, and the naming of a city street in the New York City borough of Queens in honor of the victims. In addition, former Secretary of State Hillary Clinton reportedly instructed the State Department to refer to the women as “sex slaves,” rather than the euphemistic term “comfort women.”6


Territorial Dispute with China7
Japan and China have engaged in a struggle over islets in the East China Sea known as the Senkakus in Japan, Diaoyu in China, and Diaoyutai in Taiwan, which has grown increasingly heated since summer 2012. The uninhabited territory, administered by Japan but also claimed by China and Taiwan, has been a subject of contention for years, despite modest attempts by Tokyo and Beijing to jointly develop the potentially rich energy deposits nearby, most recently in 2008
4 For a lengthier discussion of the comfort women issue, please request a copy of a 2007 CRS congressional

distribution memo on the topic authored by Larry Niksch.
5 Press Conference by the Chief Cabinet Secretary, May 27, 2013. Accessed at http://www.kantei.go.jp/foreign/tyoukanpress/201305/27_p.html
6 “‘Comfort Women’ Were Sex Slaves,” Chosun Ilbo, July 13, 2012. 7 For more information, see CRS Report R42761, Senkaku (Diaoyu/Diaoyutai) Islands Dispute: U.S. TreatyObligations, by Mark E. Manyin.
2010. In August 2012, the Japanese government purchased three of the five islands from a private landowner in order to preempt their sale to Tokyo’s nationalist governor Shintaro Ishihara.8 Although intended to tamp down the controversy, Japan’s “nationalization” of the territory upset the status quo, leading to massive Chinese protests, sharp objections from Beijing, and a drop in Sino-Japanese trade. In April 2013, the Chinese foreign ministry said for the first time that it considered the islands a “core interest,” indicating to many analysts that Beijing was unlikely to make concessions on this sensitive sovereignty issue.
Starting in the fall of 2012, China began regularly deploying China Maritime Surveillance (CMS) and Fisheries Law Enforcement Command (FLEC) ships near the islands and stepped up what it called “routine” patrols to assert jurisdiction in “China’s territorial waters.” Chinese military surveillance planes reportedly have entered airspace that Japan considers its own, in what Japan’s Defense Ministry has called the first such incursion in 50 years. In early 2013, near-daily encounters have escalated: both countries have scrambled fighter jets, Japan has threatened to fire warning shots, and, according to the Japanese government, a Chinese navy ship locked its fire-control radar on a Japanese destroyer and helicopter on two separate occasions.
U.S. administrations going back at least to the Nixon Administration have stated that the United States takes no position on the territorial disputes. However, it also has been U.S. policy since 1972 that the 1960 U.S.-Japan Security Treaty covers the islets, because Article 5 of the treaty stipulates that the United States is bound to protect “the territories under the Administration of Japan” and Japan administers the islets. China’s increase in patrols appears to be an attempt to demonstrate that Beijing has a degree of administrative control over the islets, thereby casting into doubt the U.S. treaty commitment. In its own attempt to address this perceived gap, Congress inserted in the FY2013 National Defense Authorization Act (H.R. 4310, P.L. 112-239) a resolution stating, among other items, that “the unilateral action of a third party will not affect the United States’ acknowledgment of the administration of Japan over the Senkaku Islands
The Senkaku/Diaoyu conflict embodies Japan’s security challenges. The maritime confrontation with Beijing is a concrete manifestation of the threat Japan has faced for years from China’s rising regional power. It also brings into relief Japan’s dependence on the U.S. security guarantee and its anxiety that Washington will not defend Japanese territory if it risks going to war with China. Operationally, Japan has an acute need for its military, known as the Japan Self Defense Forces, to build up their capacity in the southwest part of the archipelago. Similarly, many observers cite the lack of coordination and clear delineation of responsibilities between the Japanese Maritime Self Defense Forces and Coast Guard.
hina-Japan Trade
One of the side-effects of the China-Japan islands dispute has been the adverse impact on their bilateral trade, especially on Japanese exports to China. China is Japan’s most important trading partner.its largest export market and its largest source of imports.having overtaken the United States in that role long ago. The relationship developed as Japanese multinational companies
8 In April 2012, Tokyo governor Shintaro Ishihara announced in Washington, DC, that he intended to purchase three of the five islets from their private Japanese owner. Ishihara, who is known for expressing nationalist views, called for demonstrating Japan’s control over the islets by building installations on the island and raised nearly $20 million in private donations for the purchase. In September, the central government purchased the three islets for \2.05 billion (about $26 million at an exchange rate of \78:$1) to block Ishihara’s move and reduce tension with China.
established production facilities in China that assemble finished goods that are exported elsewhere, including to the United States. In addition, as Chinese citizens have become wealthier, China has become a growing market for consumer goods such as cars. Japanese exports to China declined 11% in 2012 with much of the decline occurring in the fourth quarter.9 These trends are similar to those with other major partners: Japan’s exports to the United Kingdom declined 18.8% and to Germany 14.6%, reflecting moderate economic growth or slowdown and the strong yen. However, observers have noted that the political tensions caused by the confrontations over the Senkaku/Daioyu islands may have spilled over in the commercial arena. During the height of the fracas in September 2012, nationalists in China called for a boycott on Japanese goods and defaced Japanese retail stores. Japanese auto manufacturers experienced sharp declines in sales in China beginning in September 2012.10 To what degree these trends are a function of politics or macroeconomic factors would require further analysis and more data.


Japan and the Korean Peninsula
Japan’s Ties with South Korea
After a period of relatively warm ties and the promise of more effective security cooperation, Tokyo-Seoul ties appear to have cooled anew. Under the DPJ governments and the Lee Myung-bak administration in Seoul, South Korea and Japan managed historical issues, cooperated in responding to North Korean provocations, and exchanged observers at military exercises. The two countries were on the verge of concluding two modest but significant bilateral security agreements on information sharing and military acquisitions until an anti-Japanese outcry in South Korea scuttled the signing. The new governments in both capitals appear less likely to reach out to each other, dimming U.S. hopes for more sustained trilateral cooperation among the three democracies. Policy toward North Korea has been the one issue where regular trilateral consultation persists.
In addition to the comfort women issue discussed above, the perennial issues of a territorial dispute between Japan and South Korea and Japanese history textbooks continue to periodically ruffle relations. A group of small islands in the Sea of Japan11 known as Dokdo in Korean and Takeshima in Japanese (referred to as the Liancourt Rocks by the United States) are administered by South Korea but claimed by Japan. Mentions of the claims in Japanese defense documents or by local prefectures routinely spark official criticism and public outcry in South Korea. Similarly, Seoul expresses disapproval of some of the history textbooks approved by Japan’s Ministry of Education that South Koreans claim diminish or whitewash Japan’s colonial-era atrocities.
Some of Abe’s cabinet appointments have raised concern among South Koreans. Minister of Education Hakubun Shimomura has criticized history textbook companies for being insufficiently patriotic by, among other items, giving undue deference to the concerns of China and South Korea in their presentation of Japan’s colonial past. Abe’s appointment of Shimomura appears to signal his intent to follow through on the LDP’s pre-election advocacy of reducing “self-torturing views of history” in education and of giving the central government greater authority over the content of history textbooks. Abe’s Cabinet also includes Internal Affairs Minister Yoshitaka
9 GTIS, Inc., Global Trade Atlas. 10 IHS Global Insight, October 12, 2012.
11 Koreans call the Sea of Japan the “East Sea.”
Shindo and Minister for Administrative Reform Tomomi Inada, who have aggressively asserted Japanese territorial claims, including a well-publicized attempt to visit South Korea in 2011 to advocate for Japanese sovereignty over the Dokdo/Takeshima islets.

North Korean Issues
Since 2009, Washington and Tokyo have been strongly united in their approach to North Korea. Although the U.S. and Japanese positions diverged in the later years of the Bush Administration over prioritization of the abductee issue (see below), Pyongyang’s string of provocations in 2009-2010 forged a new consensus among Japan, South Korea, and the United States. North Korea’s 2012 missile launches and the February 2013 nuclear test have helped to drive enhanced trilateral security cooperation between Washington, Tokyo, and Seoul. Japan also appeared to be at least somewhat in sync with the United States in late 2011 and early 2012 when the Obama Administration.with the blessing of the South Korean government.was negotiating agreements with North Korea over its nuclear and missile programs and food aid. Since those agreements faltered, multilateral negotiations over North Korea’s nuclear programs remain at a standstill.
Tokyo has adopted a relatively hardline policy against North Korea and plays a leadership role at the United Nations in pushing for stronger punishment for the Pyongyang regime for its military provocations and human rights abuses. Japan has imposed a virtual embargo on all trade with North Korea. North Korea’s missile tests have demonstrated that a strike on Japan is well within range, spurring Japan to invest in ballistic missile defense (BMD) capabilities and enhance BMD cooperation with the United States. In addition to Japan’s concern about North Korean missile and nuclear programs, the issue of several Japanese citizens abducted by North Korean agents in the 1970s and 1980s remains a top priority for Tokyo. Japan has pledged that it will not provide economic aid to North Korea without resolution of the abductee issue. The abductee issue remains an emotional topic in Japan. In 2008, the Bush Administration’s decision to remove North Korea from the list of state sponsors of terrorism in exchange for North Korean concessions on its nuclear program dismayed Japanese officials, who had maintained that North Korea’s status on the list should be linked to the abduction issue. Although the abductions issue has lost potency in recent years, Abe came onto the political scene in the early 2000s as a fierce advocate for the abductees and their families and could dedicate attention to the issue.
March 2011 “Triple Disaster”
On March 11, 2011, a magnitude 9.0 earthquake jolted a wide swath of Honshu, Japan’s largest island. The quake, with an epicenter located about 230 miles northeast of Tokyo, generated a tsunami that pounded Honshu’s northeastern coast, causing widespread destruction in Miyagi, Iwate, Ibaraki, and Fukushima prefectures. Some 20,000 lives were lost and entire towns were washed away; over 500,000 homes and other buildings and around 3,600 roads were damaged or destroyed. Up to half a million Japanese were displaced. Damage to several reactors at the Fukushima Dai-ichi nuclear power plant complex led the government to declare a state of emergency and evacuate nearly 80,000 residents within a 20 kilometer radius due to dangerous radiation levels.
In many respects, Japan’s response to the multifaceted disaster was remarkable. Over 100,000 troops from the Self Defense Forces (SDF), Japan’s military, were deployed quickly to the region. After rescuing nearly 20,000 individuals in the first week, the troops turned to a humanitarian relief mission in the displaced communities. Construction of temporary housing began a week after the quake. Foreign commentators marveled at Japanese citizens’ calm resilience, the lack of looting, and the orderly response to the strongest earthquake in the nation’s modern history. Japan’s preparedness.strict building codes, a tsunami warning system that alerted many to seek higher ground, and years of public drills.likely saved tens of thousands of lives.
Despite this response to the initial event, the uncertainty surrounding the nuclear reactor accident and the failure to present longer-term reconstruction plans led many to question the government’s handling of the disasters. As reports mounted about heightened levels of radiation in the air, tap water, and produce, criticism emerged regarding the lack of clear guidance from political leadership. Concerns about the government’s excessive dependence on information from Tokyo Electric Power Company (TEPCO), the firm that owns and operates the power plant, amplified public skepticism and elevated criticism about conflicts of interest between regulators and utilities.


Japan’s Nuclear Energy Policy
Japan is undergoing a national debate on the future of nuclear power, with major implications for businesses operating in Japan, U.S.-Japan nuclear energy cooperation, and nuclear safety and non-proliferation measures worldwide. Looking back to 2006, the “New National Energy Strategy” had set out a goal of significantly increasing Japan’s nuclear power generating capacity, partly as a way to decrease dependence on foreign energy supplies and partly to decrease emissions of greenhouse gases. By 2011, nuclear power was providing roughly 30% of Japan’s power generation capacity.
The policy of expanding nuclear power encountered an abrupt reversal in the aftermath of the March 11, 2011, natural disasters and meltdowns at the Fukushima Daiichi nuclear power plant. Public trust in the safety of nuclear power collapsed, and a vocal anti-nuclear political movement emerged. This movement tapped into an undercurrent of anti-nuclear sentiment in modern Japanese society based on its legacy as the victim of atomic bombing in 1945. As the nation’s 54 nuclear reactors were shut down one by one for their annual safety inspections in the months after March 2011, the Japanese government did not restart them.except for two reactors at one site in central Japan.
The drawdown of nuclear power generation resulted in many short- and long-term consequences for Japan: rising electricity costs for residences and businesses; heightened risk of blackouts in the summer, especially in the Kansai region; widespread energy conservation efforts by businesses, government agencies, and ordinary citizens; the possible bankruptcy of major utility companies; and increased fossil fuel imports (see next section). The Institute of Energy Economics, Japan, calculated that the nuclear shutdowns led to the loss of 420,000 jobs and $25 billion in corporate revenue in 2012.12
12 Masakazu Toyoda. “Energy Policy in Japan: Challenges after Fukushima,” Institute of Energy Economics, Japan, (continued...)
With prominent intellectuals and politicians calling for the end of nuclear power in Japan, the DPJ attempted to author a long-term energy policy. On September 14, 2012, the sub-Cabinet-level Energy and Environment Council announced an ambitious plan to eliminate all nuclear power generation in Japan by 2030. Leading voices in the Japanese business community harshly criticized the plan and warned of the hollowing out of Japanese industry. One week later, the Noda Cabinet announced a more flexible “Innovative Strategy for Energy and the Environment,” which pushed back the deadline for nuclear drawdown to 2040, continued the present nuclear fuel cycle policy, and allowed the completion of under-construction plants and possible reactor life-span extensions past 2040. American observers have raised concerns about losing Japan as a global partner in promoting nuclear safety and non-proliferation measures.
The LDP has promoted a relatively pro-nuclear policy, despite persistent anti-nuclear sentiment among the public. The LDP party platform for the December 2012 election called for the restart of nuclear reactors as soon as new safety regulations are implemented and promised to study Japan’s energy situation thoroughly before developing a national policy. In comments to the Diet on January 30, 2013, Abe called the DPJ’s zero-nuclear energy policy “groundless.”13 Yet, 48% of the population does not agree with the Abe Cabinet’s approach to reactor restarts, compared to 46% in favor. Temporary failures in the safety systems of the crippled Fukushima Daichi reactors caused nuclear safety fears to resurface in spring 2013. The Abe Cabinet faces a complex challenge: how can Japan balance concerns about energy security, promotion of renewable energy sources, the viability of electric utility companies, the health of the overall economy, and public concerns about safety?
Exports of Liquefied National Gas (LNG) to Japan
Japan imports more LNG than any other country and would be a large market for potential LNG exports from the United States. Due to the suspension of nuclear power at present, Japan has become increasingly dependent on fossil fuels for electric power generation (see previous section). Japan imported a record 87 million metric tons of LNG in 2012.an 11% increase on the previous year.14 Japanese utility companies are attracted to the large difference between global market prices for natural gas and the much lower price prevailing in North America. The lower price is largely a result of the recent expansion of natural gas production from shale.
The U.S. government must satisfy legal requirements before additional LNG exports from the continental United States to Japan are permitted (Japan currently imports less than 1% of its natural gas supply from Alaska). The 2005 Energy Policy Act requires that the Department of Energy (DOE) issue a permit to export natural gas to countries with which the United States does not have a free trade agreement (FTA), including Japan. DOE must also determine that export to non-FTA countries is in the public interest. A DOE-commissioned study concluded in December 2012 that LNG exports would produce net economic benefits for the United States, but the study has been controversial. Critics of increased exports have raised concerns about the environment and higher gas prices for domestic industries and consumers. The study completed a public comment period in early March 2013, and now DOE must make a decision on 16 pending permits
(...continued)presentation prepared for delivery on January 24, 2013.13 “Abe Aims for Japan to Join Child Custody Pact Soon,” Kyodo News Agency, January 31, 2013.
14 “Japan to Join Pacific Region Free Trade Talks,” Platts Oilgram News, Vol. 91 No. 54, March 18, 2013.
to export LNG to non-FTA countries. At present two permits have been approved, for the Sabine Pass terminal in Louisiana and the Freeport LNG Quintana Island terminal in Texas.
Members of Congress have joined the debate on LNG exports to Japan. On January 31, 2013, Senator John Barrasso introduced a bill (S. 192) “to enhance the energy security of U.S. allies” by having DOE automatically approve natural gas exports to U.S. treaty allies, regardless of their FTA status. Senator Lisa Murkowski reportedly wrote in a letter to the Secretary of Energy Steven Chu, “Exporting LNG, particularly to allies that face emergency or chronic shortages, but with whom we do not have free-trade agreements, is in the public interest.”15 On the other side of the debate, Senator Ron Wyden, chairman of the Senate Energy and Natural Resources Committee, wrote in a letter to Secretary Chu, “The shortcomings of the [DOE] study are numerous and render this study insufficient for the Department to use in any export determination.”16 In the 112th Congress, Representative Ed Markey introduced legislation (H.R. 4024) to suspend approval of LNG export terminals until 2025.


Japanese Participation in Sanctions on Iran
Over the past decade, growing concerns over Iran’s nuclear program have led to increased scrutiny of Japan’s long-standing trade with and investments in Iran. Japan is the third-biggest customer for Iranian oil, accounting for over 14% of the 2012 total.17 For most of the past decade Iran has been Japan’s third-largest source of crude oil imports, although it fell to sixth in 2012, accounting for 5% of Japan’s imports.18 As part of their efforts to enhance economic penalties on Iran, the Bush and Obama Administrations have pushed Japan to curtail its economic ties with Tehran. In general, although Japan has been a follower rather than a leader in the international campaign to pressure Tehran, Japanese leaders have in recent years increased their cooperation with the U.S.-led effort, reducing significantly what had been a source of tension between Washington and Tokyo during the 1990s and early 2000s. Japanese firms have withdrawn from energy sector investments in Iran, and some major companies such as Toyota Motors have ceased doing business there, viewing it as a “controversial market.”
In September 2012, the Obama Administration granted Japan a second exemption under P.L. 112-81, the National Defense Authorization Act for Fiscal Year 2012, which could have placed strict limitations on the U.S. operations of Japanese banks that process transactions with Iran’s Central Bank.19 Japan has reduced its imports of Iranian oil over the past several years, despite its increased need for oil imports with the shutdown of virtually all of its nuclear power industry. Japan’s crude oil imports from Iran fell by roughly 40% in 2012, and a further decline of 15% is projected for 2013.20 Iran’s share of Japan’s oil market has fallen by several percentage points, to
15 Geof Koss, “With Eye on Japan, Murkowski Makes Case for Gas Exports,” CQ Roll Call, January 25, 2013. 16 Office of Senator Ron Wyden, “Wyden Highlights Flaws in DOE Export Study,” press release, January 10, 2013, http://www.wyden.senate.gov/news/press-releases/wyden-highlights-flaws-in-doe-export-study-.
17 International Trade Agencies via Global Trade Atlas.
18 Japan Customs via Global Trade Atlas.
19 State Department Press Release, “Statement on Significant Reductions of Iranian Crude Oil Purchases,” March 20,2012. For more on Iran sanctions, see CRS Report RS20871, Iran Sanctions, by Kenneth Katzman. 20 “Corrected: Japan Nov Crude Imports from Iran Fall 20.3 Pct yr/yr.METI,” Reuters News, January 7, 2013.
less than 8%, a level not seen since 1988.21 Additionally, Japan has restricted the activities of 21 Iranian banks.22
New U.S. sanctions that went into effect on February 6, 2013, pressure banks that deal with the Iranian Central Bank to either prevent repatriation of Iran’s foreign currency (non-rial) assets or else be frozen out of the U.S. financial system. Iran can still use the funds to finance trading activities not covered by sanctions, but, since it runs a large trade surplus with Japan (and other Asian oil importers), a significant portion of its oil export earnings will likely be held in Japan and other importing countries.23

International Child Custody Disputes
Another prominent issue in bilateral relations is child custody cases involving overseas Japanese women in failed marriages taking children to Japan without the consent of the foreign husband or ex-husband. Sometimes, these women have acted in contravention of custody settlements and, after arriving in Japan, have prevented the children from meeting their fathers. In recent years, both Congress and the executive branch have urged Japan to address the problem, provide access to the children to the aggrieved parents, and join the 1980 Hague Convention on the Civil Aspects of International Child Abduction. The Hague Convention sets out rules for resolving child custody in failed international marriages.
The increased publicity has raised awareness of the issue in Japan, particularly among Diet members. The Japanese government in March 2012 submitted a bill that would have adjusted domestic law to allow Tokyo to accede to the Convention, but the Diet did not vote on the bill during that session. A year later, the Abe government submitted a similar bill, and the Lower House of the Diet passed it on April 23, 2013. On June 12, 2013, Japan formally ratified the treaty and pledged to seek full implementation within a year.
With cases involving approximately 100 American children, the United States reportedly has the largest number of such disputes with Japan.24 Legally, Japan only recognizes sole parental authority, under which only one parent has custodial rights, and there is a deep-rooted notion in Japan that the mother should assume custody. Japanese officials say that, in many cases, the issue is complicated by accusations of abuse or neglect on the part of the foreign spouse, though a senior U.S. State Department official has said that there are “almost no cases” of substantiated claims of violence.25 Some observers fear that, even if Japan signs the Hague Convention, it is unlikely to enforce the treaty’s provisions, given the existing family law system.26
21 Ministry of Internal Affairs and Communication, Historical Statistics of Japan, “Table 10-12 Imports of Crude Oil by Region and Country (F.Y.1970-2003),” http://www.stat.go.jp/english/data/chouki/index.htm; “Table 10-13, “Imports of Crude Oil by Region and Country,” in Statistical Yearbook of Japan, 2008, 2010, and 2012. Ministry ofEconomy, Trade, and Industry, “Preliminary Report on Petroleum Statistics February 2012,” http://www.meti.go.jp/english/statistics/tyo/sekiyuso/index.html.
22 Ministry of Economy, Industry, and Trade Press Release, “Addition of an Entity Subject to Accompanying MeasuresImplemented Pursuant to the UN Resolution Against Iran,” March 13, 2012.23 “Asian Buyers to Deepen Iranian Crude Import Cuts in 2013,” Metis Energy Insider, December 24, 2012.
24 “Child-snatchers: Parental Abduction in Japan,” The Economist, U.S. edition, January 21, 2012. 25 U.S. State Department, “Press Availability on International Parental Child Abduction, Kurt M. Campbell, Assistant Secretary, Bureau of East Asian and Pacific Affairs,” February 2, 2010.
26 Leah Hyslop, “Hope for Parents Denied Access to Children in Japan,” The Telegraph, March 19, 2012.

U.S. World-War II-Era Prisoners of War (POWs)
For decades, U.S. soldiers who were held captive by Imperial Japan during World War II have sought official apologies from the Japanese government for their treatment. A number of Members of Congress have supported these campaigns. The brutal conditions of Japanese POW camps have been widely documented.27 In May 2009, Japanese Ambassador to the United States Ichiro Fujisaki attended the last convention of the American Defenders of Bataan and Corregidor to deliver a cabinet-approved apology for their suffering and abuse. In 2010, with the support and encouragement of the Obama Administration, the Japanese government financed a Japanese/American POW Friendship Program for former American POWs and their immediate family members to visit Japan, receive an apology from the sitting Foreign Minister and other Japanese Cabinet members, and travel to the sites of their POW camps. Annual trips were held in 2010, 2011, and 2012.28 It is unclear whether the Abe government will continue the program. It is also unclear if Abe and other LDP politicians’ suggestions that past Japanese apologies should be reworded or retracted include the apologies to the U.S. POWs.
In the 112th Congress, three resolutions.S.Res. 333, H.Res. 324, and H.Res. 333.were introduced thanking the government of Japan for its apology and for arranging the visitation program.29 The resolutions also encouraged the Japanese to do more for the U.S. POWs, including by continuing and expanding the visitation programs as well as its World War II education efforts. They also called for Japanese companies to apologize for their or their predecessor firms’ use of un- or inadequately compensated forced prison laborers during the war.

Alliance Issues30
Japan and the United States are military allies under a security treaty concluded in 1951 and revised in 1960. Under the treaty, Japan grants the United States military base rights on its territory in return for a U.S. pledge to protect Japan’s security. Although defense officials had hoped that the 50th anniversary of the treaty would compel Tokyo and Washington to enhance bilateral defense cooperation, a rocky start by the Democratic Party of Japan (DPJ) government generated concern about the future of the alliance. The coordinated response to the March 2011 disaster by the U.S. and Japanese militaries made a strong statement about the strength and the value of the bilateral alliance, and commitment from top U.S. leadership to assist the nation in its
27 By various estimates, approximately 40% held in the Japanese camps died in captivity, compared to 1%-3% of the
U.S.
prisoners in Nazi Germany’s POW camps. Thousands more died in transit to the camps, most notoriously in the 1942 “Bataan Death March,” in which the Imperial Japanese military force-marched almost 80,000 starving, sick, and injured Filipino and U.S. troops over 60 miles to prison camps in the Philippines. For more, see CRS Report RL30606,

U.S.
Prisoners of War and Civilian American Citizens Captured and Interned by Japan in World War II: The Issue of Compensation by Japan, by Gary Reynolds, currently out of print but available from the co-authors of this report. Estimates of the death rates in German prison camps for POWs are in the low single digits, compared to rates near 40% for Imperial Japanese camps.


28 For more on the program, see http://www.us-japandialogueonpows.org/. Since the mid-1990s, Japan has run similar
programs for the POWs of other Allied countries.
29 S.Res. 333 (Feinstein) was introduced and passed by unanimous consent on November 17, 2011. H.Res. 324 (Honda)and H.Res. 333 (Honda) were introduced on June 22, 2011, and June 24, 2011, respectively, and referred to the HouseForeign Affairs Subcommittee on Asia and the Pacific.
30 For more information on the U.S.-Japan alliance, see CRS Report RL33740, The U.S.-Japan Alliance, by Emma Chanlett-Avery.
recovery may have assuaged fears that the alliance was adrift after a series of public disagreements. On the other hand, the crisis response did little to change the fundamental challenges of the thorny base relocation issue in Okinawa. Although the governments have now amended the plan to allow several thousand marines to depart Okinawa in order to ease local frustrations, fundamental questions about the existence of problematic military facilities and the political sustainability of the Marine Corps presence on the island remain.
Under the Abe Administration, Japan has pressed ahead with alliance initiatives and raised the defense budget modestly. A Defense Posture Review panel will complete a study to update Japan’s National Defense Program Guidelines by the end of 2013: an interim report suggests that the plan will call for developing additional capabilities in intelligence, maritime security, and disaster preparedness, as well as responding to threats from ballistic missiles and attacks on remote islands. In addition, Japan and the United States are considering revising the guidelines, last updated in 1997, that govern alliance operations to reflect the changing security environment in the Asia Pacific. Abe has advocated for changing the official interpretation of the Japanese constitution to allow for collective self-defense, a change that many U.S. officials have encouraged over the years. This change would allow Japanese forces to defend other countries that are under attack, such as striking down a missile headed for U.S. military vessel. Adjusting the interpretation will require changes to the National Security Basic Bill and is likely to generate controversy both within Japan as well as among Japan’s neighbors.

Futenma Base Relocation Controversy31
A prominent controversy over the relocation of a Marine Corps base in Okinawa has vexed the alliance for years. While a comprehensive resolution remains elusive, the two governments have adjusted the plan in a way that removes the issue from the center of the security relationship. The 2006 agreement between the U.S. and Japanese governments to relocate the Futenma Marine Corps Air Station from its current location in crowded Ginowan City to Camp Schwab, in a less congested part of the island, was envisioned as the centerpiece of a planned realignment of U.S. forces in Japan.32 Under this agreement, the United States would redeploy 8,000 marines and their dependents from Okinawa to Guam in exchange for permitting construction of a new Marine Corps facility at Camp Schwab, located offshore of the Henoko area of Nago City. Problematic from the start, the base relocation developed into a major point of contention between Tokyo and Washington after Yukio Hatoyama became prime minister in 2009; Hatoyama had promised Okinawans during his election campaign that he would oppose the relocation. Although Hatoyama and his DPJ successors all eventually endorsed the plan, local opposition and management missteps by Tokyo appeared to render the plan unworkable.
To remove impediments to the realignment of U.S. forces, the United States and Japan changed their agreement in April 2012 by “de-linking” the transfer of marines off Okinawa with progress on the new base in Henoko. In order to ease the burden on Okinawan residents, about 9,000 marines and their dependents would be transferred to locations outside of Japan: to Guam,
31 For more information, see CRS Report R42645, The U.S. Military Presence in Okinawa and the Futenma Base
Controversy, by Emma Chanlett-Avery and Ian E. Rinehart. 32 Per the agreement, the redeployment of roughly half of the III Marine Expeditionary Force (III MEF) to new facilities in Guam would lead to the return of thousands of acres of land to Japan. Japan agreed to pay around 60% of the $10.3 billion estimated costs. After years of negotiations, U.S. and Japanese officials settled on Camp Schwab because of its location in Henoko, a far less congested area of Okinawa.
Hawaii, on a rotational basis to Australia, and perhaps elsewhere. Alliance officials described the move as in line with their goal of making U.S. force posture in Asia “more geographically distributed, operationally resilient, and politically sustainable.”33 The official timeline for the reversion of U.S. base territory back to Japanese control indicates that substantial amounts of land will not be turned over to local authorities until the mid-2020s.
After the announcement, Senators Carl Levin, John McCain, and Jim Webb, who had together criticized the realignment plan as “unrealistic, unworkable, and unaffordable,”34 wrote in a letter to Defense Secretary Leon Panetta, “No new basing proposal can be considered final until it has the support of Congress.”35 Concern about the ballooning costs of the Guam construction and uncertainty about the future U.S. force posture in the Asia-Pacific region drove Congress to zero out the Administration’s request for related military construction funding in the FY2012 and FY2013 National Defense Authorization Acts, P.L. 112-81 and P.L. 112-239. The acts prohibit authorized funds, as well as funds provided by the Japanese government for military construction, from being obligated to implement the planned realignment of Marine Corps forces from Okinawa to Guam until certain justifications and assessments are provided. In April 2013, the Senate Armed Services Committee (SASC) issued a report that examined U.S. costs associated with the American military presence overseas, including in Japan.36 The report found that relocation of the Futenma base remained “unlikely” and that it would cost far more and take longer than the Department of Defense currently projects.
Significant obstacles remain in Japan as well. Public opposition has hardened considerably in Okinawa, with all the major political figures involved in the new base construction process declaring opposition to the plan. The deployment of the MV-22 Osprey tilt-rotor aircraft to the Futenma base in summer 2012 heightened safety concerns of nearby residents, and a string of crimes committed by U.S. servicemembers in late 2012 further inflamed local resentments. The grievances that the Okinawans have harbored for decades seem unlikely to fade, driven by the presence of foreign troops on a crowded urban landscape. The current controversy reflects a fundamental tension in the relationship between Okinawa and the central government in Tokyo: while the entire country reaps the benefits of the U.S. security guarantee, Okinawans bear a disproportionate burden. The April 2012 announcement that the U.S. and Japanese governments will undertake long-deferred repairs on Futenma raised suspicions that the base will remain indefinitely, and the 2013 SASC report expressed concerns that Japan’s contribution was in question.37 The process is now on hold as Okinawan governor Hirokazu Nakaima decides whether to sign a landfill permit allowing for construction of the base in Henoko.
33 “Joint Statement of the Security Consultative Committee,” State Department Media Note, April 26, 2012,
http://www.state.gov/r/pa/prs/ps/2012/04/188586.htm.
34 “Senators Levin, McCain, Webb Call for Examination of Military Basing Plans in East Asia,” Press Release fromSenator McCain’s office, May 11, 2011, http://www.mccain.senate.gov/public/index.cfm?FuseAction=PressOffice.PressReleases&ContentRecord_id=e00453cd-c883-65d2-f9c3-489463b38af1.
35 “Senators Levin, McCain and Webb Express Concern to Secretary Panetta Regarding Asia-Pacific Basing Tuesday,” Press Release from Senator Levin’s office, April 24, 2012, http://www.levin.senate.gov/newsroom/press/release/senators-levin-mccain-and-webb-express-concern-to-secretary-panetta-regarding-asia-pacific-basing/?section=alltypes.
36 Committee on Armed Services, United States Senate, Inquiry Into U.S. Costs and Allied Contributions to Support the
U.S. Military Presence Overseas, April 15, 2013. For full report, see http://www.armed-services.senate.gov/press/ releases/upload/RELEASE_SASCBasingReport_041713.pdf.
37 Ibid.

Progress on Other Elements of Military Realignment and Alliance Transformation
The relocation of Futenma air station is the largest and most controversial part of a broad overhaul of U.S. force posture in Japan and bilateral military activities, but it is not the only element. In 2002, the U.S. and Japanese governments launched the Defense Policy Review Initiative (DPRI) to review force posture and develop a common security view between the two sides. With the exception of the Henoko relocation, the plan has been largely successful. A training relocation program allows U.S. aircraft to conduct training away from crowded base areas to reduce noise pollution for local residents. U.S. Carrier Air Wing Five is being relocated from Atsugi Naval Air base to the Iwakuni base, where a new dual-use airfield is operational. In 2010, U.S. Army Japan established at Camp Zama (about 25 miles southwest of Tokyo) a forward operational headquarters, which can act as a bilateral joint headquarters to take command of theater operations in the event of a contingency. The SDF Air Defense Command facility at Yokota U.S. Air Base was recently completed. Since 2006, a bilateral joint operations center at Yokota allows for data-sharing and coordination between the Japanese and U.S. air and missile defense command elements. In June 2011, Japan announced a long-sought agreement to allow the transfer of jointly developed missile components to third parties, representing an exception to Japan’s ban on arms exports.

Deployment of the MV-22 Osprey Aircraft to Japan
The U.S. Marine Corps is replacing the 24 CH-46E “Sea Knight” helicopters stationed at the Futenma base with 24 MV-22 “Osprey” tilt-rotor aircraft. The deployment of the first 12 Osprey aircraft to Japan in mid-2012 created a public outcry in Okinawa and mainland base-hosting communities. Japanese politicians and civil society groups strongly opposed introduction of MV-22 to Japan due to the aircraft’s safety record.38 The crashes of V-22 tilt-rotor aircraft in training exercises in Morocco and Florida in early 2012 reminded Okinawans of the U.S. military helicopter crash on the grounds of a school near Futenma Air Station in August 2004. In response to these concerns, the Japanese Ministry of Defense conducted its own investigation of the aircraft’s safety. The investigation cleared the MV-22 for deployment, but Japan requested that Osprey pilots adhere to a set of operational guidelines to reduce the risk of accidents in populated areas. The introduction of these advanced aircraft to Okinawa reportedly will enhance the operational capability of the Marines based there, particularly in a rapid response scenario.

March 2011 Earthquake and Tsunami: U.S.-Japan Alliance Performance
Appreciation for the alliance surged after the two militaries worked effectively together to respond to the 2011 earthquake and tsunami. Years of joint training and many interoperable assets facilitated the integrated alliance effort. “Operation Tomodachi,” using the Japanese word for “friend,” was the first time that SDF helicopters used U.S. aircraft carriers to respond to a crisis. The USS Ronald Reagan aircraft carrier provided a platform for air operations as well as a
38 During its development phase, the Osprey suffered several highly publicized crashes. Since the aircraft achieved initial operational capability in 2007, the Class-A mishap rate is slightly better than the Marine Corps average. See the CRS Report RL31384, V-22 Osprey Tilt-Rotor Aircraft Program, by Jeremiah Gertler, for more information.
refueling base for Japanese SDF and Coast Guard helicopters. Other U.S. vessels transported SDF troops and equipment to the disaster-stricken areas. Communication between the allied forces functioned effectively, according to military observers. For the first time, U.S. military units operated under Japanese command in actual operations. Specifically dedicated liaison officers helped to smooth communication. Although the U.S. military played a critical role, the Americans were careful to emphasize that the Japanese authorities were in the lead.
The successful bilateral effort held several important consequences. First, it reinforced alliance solidarity after a somewhat difficult period of public disagreement over the Futenma base issue. It was also very well-received by the Japanese public, leading to exceptionally high approval ratings of both the SDF performance and the U.S. relief efforts. The operation demonstrated to others the capability of the alliance. It also illuminated challenges that the two militaries might face if responding to a contingency in the defense of Japan in which an adversary were involved, including having more secure means of communication as multiple agencies and services mobilized resources.39

Constitutional Constraints
Several legal factors restrict Japan’s ability to cooperate more robustly with the United States. The most prominent and fundamental restriction is Article 9 of the Japanese constitution, drafted by American officials during the post-war occupation, that outlaws war as a “sovereign right” of Japan and prohibits “the right of belligerency.” It stipulates that “land, sea, and air forces, as well as other war potential will never be maintained.” However, Japan has interpreted this clause to mean that it can maintain a military for national defense purposes and, since 1991, has allowed the SDF to participate in non-combat roles overseas in a number of U.N. peacekeeping missions and in the U.S.-led coalition in Iraq.
The principle of “collective self-defense” is also considered an obstacle to close defense cooperation. The term comes from Article 51 of the United Nations Charter, which provides that member nations may exercise the rights of both individual and collective self-defense if an armed attack occurs. The Japanese government maintains that Japan has the sovereign right to engage in collective self-defense, but a 1960 decision by the Cabinet Legislation Bureau interpreted the constitution to forbid collective actions because they would exceed the minimum necessary use of force to defend Japan itself. Participation in non-combat logistical operations and rear area support of other nations, however, has been considered outside the realm of collective self-defense. Prime Minister Abe has repeatedly proposed that this restriction be reconsidered, a move that has been welcomed by U.S. officials in the past.
During the deployment of Japanese forces to Iraq, the interpretation prevented the SDF from defending other nations’ troops. Some Japanese critics have charged that Japanese Aegis destroyers should not use their radar in the vicinity of American warships, as they would not be allowed to respond to an incoming attack on those vessels. As the United States and Japan increasingly integrate missile defense operation, the ban on collective self-defense also raises questions about how Japanese commanders will gauge whether American forces or Japan itself is being targeted. Under the current interpretation, Japanese forces could not respond if the United States were attacked.
39 See “Partnership for Recovery and a Stronger Future; Standing with Japan after 3-11,” http://csis.org/files/ publication/111026_Green_PartnershipforRecovery_Web.pdf.

Burden-Sharing Issues
According to the Department of Defense, costs to maintain U.S. forces in Japan in FY2012 was expected to total over $4.8 billion, in addition to the roughly $2 billion contributed by the government of Japan annually.40 This total includes approximately $2.75 billion in personnel costs and over $2 billion in non-personnel costs. In December 2010, Japan agreed to continue Host Nation Support (HNS), the funds provided to contribute to the cost of stationing U.S. troops in Japan, at current levels for the next five years, starting in FY2011. The agreement came as a compromise, as the government of then-Prime Minister Naoto Kan had been pressured to cut Japan’s contribution due to Japan’s ailing fiscal health. Japan pays for most of the salaries of about 25,000 Japanese employees at U.S. military installations. The current agreement calls for Japan to pay about 188 billion yen annually (about $2.2 billion at 82 yen to one USD) through FY2016 to defray the costs of stationing troops in Japan. The agreement also commits to reducing the number of Japanese nationals working for the U.S. military and affirms that the proportion of utility costs paid by the Japanese government will fall from 76% to 72% over a five-year period. The 2013 SASC report expressed concerns about a downward trend in Japan’ s contributions to Host Nation Support, compared to higher amounts contributed in the 1990s.41

Extended Deterrence
Another source of strategic anxiety in Tokyo concerns the U.S. extended deterrence, or “nuclear umbrella,” for Japan. The Bush Administration’s shift in negotiations with Pyongyang triggered fears in Tokyo that Washington might eventually accept a nuclear armed North Korea and thus somehow diminish the U.S. security guarantee for Japan. These anxieties have persisted despite repeated statements by both the Bush and Obama Administrations to reassure Tokyo of the continued U.S. commitment to defend Japan. However, Japan’s sense of vulnerability is augmented by the fact that its own ability to deter threats is limited by its largely defensive-oriented military posture. Given Japan’s reliance on U.S. extended deterrence, Tokyo is wary of any change in U.S. policy.however subtle.that might alter the nuclear status quo in East Asia.

Japan’s Counter-Piracy Mission in the Gulf of Aden
Japan’s military, known as the Self-Defense Force (SDF), has been engaged in counter-piracy activities in the Gulf of Aden since March 2009. Approximately 400 personnel are stationed in Djibouti and currently housed in Camp Lemonier, the large U.S. military base located close to Djibouti’s airport. In April 2010, the Japanese government announced plans to build its own $40 million facility in Djibouti, effectively establishing an overseas base for its military. Although this would be Japan’s first foreign base since World War II, the move has sparked little controversy among the generally pacifist Japanese public.
40 Office of the Under Secretary of Defense (Comptroller)/Chief Financial Officer, Operation and Maintenance Overview: Fiscal Year 2013 Budget Estimates (February 2012) at 201. 41 Committee on Armed Services, United States Senate, Inquiry Into U.S. Costs and Allied Contributions to Support the
U.S. Military Presence Overseas, April 15, 2013.
Figure 2. Map of U.S. Military Facilities in Japan

Source: Map Resources. Adapted by CRS.

Economic Issues42
Trade and other economic ties with Japan remain highly important to U.S. national interests and, therefore, to the U.S. Congress.43 By the most conventional method of measurement, the United States and Japan are the world’s largest and third-largest economies (China is number two), accounting for around 30% of the world’s gross domestic product (GDP) in 2012. Furthermore, their economies are intertwined by trade in goods and services and by foreign investments.

Overview of the Bilateral Economic Relationship
Japan is an important economic partner of the United States, but its importance has slid as it has been edged out by other partners. Japan was the United States’ fourth-largest merchandise export market (behind Canada, Mexico, and China) and the fourth-largest source for U.S. merchandise imports (behind China, Canada, and Mexico) at the end of 2012. These numbers probably underestimate the importance of Japan in U.S. trade since Japan exports intermediate goods to China that are then used to manufacture finished goods that China exports to the United States.
The United States was Japan’s second-largest export market and second-largest source of imports as of the end of 2012. The global economic downturn had a significant impact on U.S.-Japan trade: both exports and imports declined in 2009 from 2008. U.S.-Japan bilateral trade has increased since 2009 reflecting the recovery, albeit weak, from the economic downturn. (See Table 1.)
Table 1.U.S. MerchandiseTrade with Japan,SelectedYears
($ billions)
Year Exports Imports Balances
1995 64.3 123.5 -59.1
2000 65.3 146.6 -81.3
2003 52.1 118.0 -66.0
2004 54.4 129.6 -75.2
2005 55.4 138.1 -82.7
2006 59.6 148.1 -88.4
2007 62.7 145.5 -82.8
2008 66.6 139.2 -72.3
2009 51.2 95.9 -44.8

42 This section was written by William Cooper.
43 For a more complete treatment of U.S.-Japan economic ties, see CRS Report RL32649, U.S.-Japan EconomicRelations: Significance, Prospects, and Policy Options, by William H. Cooper.
Year Exports Imports Balances
2010 60.5 120.3 -59.8
2011 66.2 128.8 -62.2
2012 70.0 146.4 -76.3

Source: U.S. Commerce Department, Census Bureau. FT900. Exports are total exports valued on a free alongside ship (f.a.s.) basis. Imports are general imports valued on a customs basis.
Despite some outstanding issues, tensions in the U.S.-Japan bilateral economic relationship have been much lower than was the case in the 1970s, 1980s, and early 1990s. A number of factors may have contributed to this trend:
.
Japan’s slow, if not stagnant, economic growth, which began with the burst of the asset bubble in the latter half of the 1990s and continued as a result of the 2008-2009 economic downturn and the 2011 disasters, has changed the general U.S. perception of Japan from one as an economic competitor to one as a “humbled” economic power;

.
the rise of China as an economic power and trade partner has caused U.S. policymakers to shift attention from Japan to China as a source of concern;

.
the increased use by both Japan and the United States of the WTO as a forum for resolving trade disputes has de-politicized disputes and helped to reduce friction;

.
shifts in U.S. and Japanese trade strategies that have expanded the formation ofbilateral and regional trade areas with other countries have lessened the focus on their bilateral ties; and

.
the rise of China as a military power and the continued threat of North Koreahave forced U.S. and Japanese leaders to give more weight to security issues within the bilateral alliance.


Japan was hit by two economic crises in the last few years that affected U.S.-Japan economic relations. The first was the global financial crisis which began to hit in 2008 and intensified in 2009. Japan was hit hard by the decline in global demand for its exports, particularly in the United States and Europe. Japan had become dependent on net export growth as the engine for overall GDP growth, as domestic consumer demand and investment lagged.
The second crisis was the March 11, 2011, earthquake, tsunami, and nuclear accidents in northeast Japan. (See section on the March 2011 “Triple Disaster.”) The Japanese government has responded with a series of four supplemental fiscal packages to finance reconstruction. The implementation of the reconstruction efforts has been slower than expected, dampening the stimulus effect on economic growth. In addition the country has had to cope with electricity shortages and search for alternative sources of power, including increased fossil fuel imports.
The two crises and the economic problems in Europe, among other factors, have adversely affected Japan’s economic growth. Japan incurred growth rates of -1.1% in 2008 and -5.5% in 2009 but recovered in 2010 to expand by 4.7%. That recovery proved short-lived as Japan experienced -0.5% growth in 2011 and 1.9% in 2012. The Economist Intelligence Unit forecasts weak economic growth in Japan for the next few years.44
Prime Minister Abe has made it a priority of his administration to grow the economy and to eliminate deflation, which has plagued Japan for many years. On assuming power, Abe’s government announced a $122 billion stimulus package aimed at spending on infrastructure, particularly in areas affected by the March 2011 disasters. While the package is expected to boost growth somewhat, it will also add to Japan’s already large public debt.45 In addition, the ostensibly independent Bank of Japan (Japan’s central bank) announced a continued loose monetary policy with interest rates of 0%, quantitative easing measures, and a target inflation rate of 2%.46
A likely by-product of these measures will be weakening of the yen. For the past five years, the yen had exhibited unprecedented strength in terms of the dollar. In January 2007 the yen’s average value was \120.46=$1 during the month, but after rapid appreciation, it reached as high as \76.65=$1 in October 2011. Since that time, it has depreciated to \97.8=$1 on July 29, 2013. Some governments have already charged that Japan’s monetary actions will spark a currency war because other countries will try to counter the trade effects of a weaker yen.47

Bilateral Trade Issues
Japan’s Ban on U.S. Beef48
On February 1, 2013, the Japanese government loosened its restrictions on beef imports from the United States to allow beef from cattle 30 months or younger for the first time since December 2003. According to a joint press release from the Office of the United States Trade Representative and the Department of Agriculture, the Japanese government’s Food Safety Commission would continue to monitor shipments of U.S. beef and would consider the possibility of allowing U.S. beef from cattle of any age to be imported into Japan. These steps would appear to provide the opportunity for growth in U.S. beef imports to Japan and to resolve an issue that had been a major irritant in the bilateral trade relationship.
The issue arose in December 2003 when Japan imposed a ban on imported U.S. beef in response to the discovery of the first U.S. case of bovine spongiform encephalopathy (BSE or “mad cow disease”) in Washington State. In the months before the diagnosis in the United States, nearly a dozen Japanese cows infected with BSE had been discovered, creating a scandal over the Agricultural Ministry’s handling of the issue (several more Japanese BSE cases have since emerged). Japan had retained the ban despite ongoing negotiations and public pressure from Bush Administration officials, a reported framework agreement (issued jointly by both governments) in October 2004 to end it, and periodic assurances afterward by Japanese officials to their U.S. counterparts that it would be lifted soon.
44 Economist Intelligence Unit, Country Report: Japan, February 2013, p. 34.
45 Ibid., p.25.
46 Ibid., p.27.
47 Ferguson, Niall, “Global Currency Wars Are Best Fought on the Quiet,” Financial Times, January 26-27, 2013, p.7. 48 For more information, see CRS Report RS21709, Mad Cow Disease and U.S. Beef Trade, by Charles E. Hanrahan and Geoffrey S. Becker.
In December 2005 Japan lifted the ban after many months of bilateral negotiations but re-imposed it in January 2006 after Japanese government inspectors found bone material among the first beef shipments. The presence of the bone material violated the procedures U.S. and Japanese officials had agreed upon that allowed the resumption of the U.S. beef shipments in the first place.

Japan and the Trans-Pacific Partnership Agreement (TPP)
The TPP is an evolving regional free trade agreement (FTA). Originally formed as an FTA among Singapore, New Zealand, Chile, and Brunei (the P-4), the TPP is now an agreement under negotiation among the original four countries plus the United States, Australia, Canada, Mexico, Peru, Malaysia, and Vietnam. The current 11 TPP partners have conducted a number of rounds of negotiations. The negotiators envision a comprehensive arrangement to liberalize trade and to cover broad range of trade and trade-related activities. But they also envision the TPP to be a “21st century” framework for conducting trade within the Asia-Pacific region and, therefore, addressing cross-cutting issues that are relevant now and will be in the future. These issues include regulatory coherence; competitiveness and business facilitation, also known as transnational supply and production chains; issues pertaining to small and medium-sized companies; economic development; and the operations of state-owned enterprises. Therefore, while the 11 TPP countries negotiate the agreement, they expect other economies in the region will seek to join in those negotiations or will accede to the agreement after it has been concluded.
As the second-largest East Asian economy and a crucial link in the Asian production networks, Japan would seem to be a logical candidate for the TPP. Japan’s participation in the TPP is the subject of debate within the Japanese political leadership and among other Japanese stakeholders. On March 15, 2013, Prime Minister Abe announced that Japan would formally seek to participate in the negotiations to establish the Trans-Pacific Partnership (TPP). In making the decision to seek participation in the TPP, Prime Minister Abe had to confront influential domestic interests that argued against the move. Among the most vocal have been Japanese farmers, especially rice farmers, and their representatives. They have argued that Japanese agriculture would be severely harmed by foreign competition as Japan would have to negotiate away high tariffs and other protective measures on imports of agricultural products. Some Japanese health providers have argued that Japan’s national health insurance system would be adversely affected because, they claim, the TPP would force Japanese citizens to buy foreign-produced pharmaceuticals and medical devices. In his March 15 statement, Prime Minister Abe acknowledged those domestic sensitivities, but also insisted that Japan needed to take advantage of “this last window of opportunity” to enter the negotiations, if it is to grow economically. Other Japanese business interests, including manufacturers, strongly support the TPP.
The United States and Japan have been engaged in informal discussions since November 2011 when the government of then-Prime Minister Noda first expressed interest in the possibility of seeking to join the TPP negotiations. At that time, the Obama Administration identified three issues that Japan needed to address as “confidence building measures” if the United States were to support Japan’s entry into the TPP: Japanese restrictions on imports of U.S. beef; market access for U.S.-made cars; and insurance and express delivery issues. After further consultations with Japan following Prime Minister Abe’s announcement, acting USTR Demetrios Marantis announced that the United States would support Japan’s participation in the TPP negotiations on April 12, 2013. On April 20, 2013, on the sidelines of a APEC trade ministers’ meeting, the 11 current TPP partners announced that they have invited Japan to join the TPP negotiations, after the members have completed their respective domestic notification procedures, including U.S. presidential notification to Congress. On April 24, in a letter to Speaker John Boehner, Acting USTR Marantis notified Congress of the Administration’s intent to begin negotiations with Japan no earlier than 90 calendar days hence. On July 26, 2013, Japan officially joined the TPP negotiations.
The beef issue appears to have been addressed with the February 1, 2013, Japanese action to allow imports of U.S. beef from cattle younger than 30 months. Regarding the auto issue, Japan agreed to increase the number of U.S.-made vehicles that can be imported under its Preferential Handling Procedure (PHP) from 2,000 per vehicle “type” to 5,000 per vehicle “type.” In addition, the two countries agreed to address in parallel negotiations issues regarding non-tariff measures (NTMs) pertaining to auto trade, including transparency in regulations, standards, certification, “green” and other new technology vehicles, and distribution. The parallel auto negotiations are also to address the establishment of a special “safeguard” provision to deal with injurious surges in auto imports and of a special tariff “snap-back” mechanism to deal with a partner’s failure to fulfill the commitments on auto trade. Japan agreed that under the proposed TPP, U.S. tariffs on imports of Japanese motor vehicles will be phased out over a period equal to the longest phase-out period in the agreement.
The activities of the government-run Japan Post, subsidiaries of which sell insurance and express delivery services, were the main focus of USTR’s agreement with Japan on insurance. Japan announced that the government would not approve new or modified cancer insurance products or stand-alone medical insurance products for sale by Japan Post until it has been determined that a “level-playing field” has been established in competition between private insurers and Japan Post. The countries agreed to address additional “level-playing field” issues regarding insurance in the actual TPP negotiations.
Furthermore, the two sides agreed to hold negotiations parallel to the TPP negotiations to address issues regarding non-tariff measures (NTMs) in insurance, government procurement, competition policy, express delivery, and sanitary and phytosanitary (SPS) measures. The parallel negotiations are to achieve “tangible and meaningful” results by the completion of the main TPP negotiations and will be legally binding at the time a TPP agreement would enter into force.
Japan brings its own issues to the TPP negotiating table. Its negotiators are expected to seek consideration of sensitive products of its agricultural sector, especially sugar, beef and pork, dairy, rice, and wheat and barley and to address U.S. methods in determining antidumping duties and the use of Buy American laws.49
Japan’s membership in the TPP with the United States would constitute a de facto U.S.-Japan FTA. A large segment of the U.S. business community has expressed support for Japanese participation in the TPP, if Japan can resolve long-standing issues on access to its markets for
U.S. goods, services, and agriculture. However, the Detroit-based U.S. auto industry, the United Autoworkers union, and Members of Congress with a large auto-industry presence in their districts have expressed strong opposition. Other segments of the U.S. business community have expressed support for Japan’s entry into the TPP negotiations, although some have conditioned their support on Japan’s willingness to address long-standing issues.
Japan is also pursuing or considering other regional trade arrangements. On November 20, 2012, Japanese, Chinese, and South Korean trade ministers announced the launching of negotiations on
49 Bloomberg BNA, July 25, 2013, and Washington Trade Online, July 26, 2013.
a trilateral FTA. The negotiations are to begin in early 2013. The scope of the possible agreement remains undefined but would likely not match the ambition of the TPP. Market access for agricultural products will likely be a point of contention as the small but vocal agriculture interests in South Korea and Japan confront the possibility of increased rice imports from China under an FTA arrangement.50
In addition, Japan, along with the 10 members of the Association of Southeast Asian Nations (ASEAN), China, South Korea, Australia, New Zealand, and India, announced on November 20, 2012, their intention to begin negotiations to form a trade arrangement.the Regional Comprehensive Economic Partnership (RCEP). While not ostensibly in conflict with the TPP, some have suggested the RCEP could be a less ambitious alternative to the more comprehensive TPP. While RCEP would include some TPP partners, it is noteworthy for the absence of the United States and the inclusion of China.51

Insurance
Japan is the world’s second-largest insurance market, next to the United States. U.S.-based insurance providers have found it difficult to access the Japanese market especially in life and annuity insurance. They have been concerned about favorable regulatory treatment that the government gives to the insurance subsidiary of Japan Post, the national postal system that holds a large share of this market. For example, they cite subsidies to the insurance operations from revenues from other Japan Post operations. Also, Japan Post-owned insurance companies are not subject to the same regulations as other, privately-owned insurance providers, both domestic and foreign-owned. On October 1, 2007, the government of then-Prime Minister Junichiro Koizumi introduced reforms as part of a privatization process. However, the successor government, led by the Democratic Party of Japan (DPJ), took steps to roll back the reforms. On April 27, 2012, the Diet passed legislation that appears to loosen regulatory requirements, according to U.S. industry sources.52 The bill is reportedly a compromise package by the lawmakers from the DPJ, the LDP, and the Komeito Party.53 The United States is also concerned about insurance sold by cooperatives that, they claim, are regulated more leniently than private firms. The United States considers Japan’s treatment insurance to be a confidence-building measure that must be addressed if Japan is to be considered for participation in the TPP.


Japanese Politics54
In elections for the Lower House of the Japanese parliament (called the Diet) on December 19, 2012, the Liberal Democratic Party (LDP) scored a commanding victory that swept the party and its leader, Shinzo Abe, back into power. The LDP and its coalition partner won 324 of the chamber’s 480 seats, up from 141. The LDP has now ruled Japan for all but about four years
50 International Trade Reporter, May 31, 2012.
51 See, for example, Pakpahan, Beginda, “Will RCEP Compete with the TPP?” EastAsiaForum,http://www.eastasiaforum.org. 52 Inside U.S. Trade, April 27, 2012.
53 World Trade Online, April 5, 2012.
54 This section was written by Mark Manyin and Emma Chanlett-Avery. For more, see CRS Report R40758, Japan’s Historic 2009 Elections: Implications for U.S. Interests, by Weston S. Konishi.
since the end of World War II. Abe (pronounced “ah-bay”) was also prime minister for about a 12-month period in 2006 and 2007. The December elections toppled the Democratic Party of Japan (DPJ), which had been Japan’s ruling party since the previous Lower House vote in 2009. The DPJ’s seat total tumbled from 230 seats to 57. A new group, the Japan Restoration Party, led by two controversial figures known for their iconoclastic and generally hawkish views, won 54 seats to become Japan’s third-largest party. As discussed in the “Japanese Politics” section below, most observers interpreted the election more as a rejection of the DPJ than an endorsement of the LDP.

The Stabilization of Japanese Politics Around the LDP
Since 2007, Japanese politics has been plagued by instability. Six men have been prime minister, including the current occupant of the post, Shinzo Abe (born in 1954), who was also prime minister for a 12-month period from 2006-2007. The LDP’s dominant victory in December 2012 Lower House elections swept the party back into power. The LDP and its coalition partner, the New Komeito party, won 324 of the chamber’s 480 seats, up from 141 before the election. (See Figure 3.) The victory gave the premiership to the LDP and Abe (the Lower House selects Japan’s prime minister), and meant that the LDP has ruled Japan for all but about four years since the end of World War II.
In July 2013, Abe consolidated his political hold by leading the LDP-New Komeito coalition to a landslide victory in elections for half of Japan’s Upper House. The results appear to have brought an end to the divided Diet period that structurally paralyzed Japanese policymaking in recent years; since 2007, no party has controlled both the Lower and Upper Houses of the Diet for more than a few months. At the time of the election, Abe’s public approval ratings were generally in the 60%-70% range, which polls attributed to voters’ support for his economic policies. As mentioned earlier, the fact that parliamentary elections do not have to be held until the summer of 2016 presumably gives Abe and the LDP a relatively prolonged period in which to promote their agenda.

Abe’s Priorities
In statements after his Upper House victory, Abe said the results gave the LDP a “mandate” to push forward with its policies.55 For the remainder of 2013, Abe said that “implementing [economic] reforms” will be the “first and foremost political issue” the LDP will tackle in the fall of 2013. Abe has presented participating in the TPP negotiations as part of his structural reform efforts, and has said that the 2012 and 2013 elections have given the LDP now the “robust political power” to take on vested interests that are expected to oppose reforms, such as those likely to be required by the TPP negotiations.
On security issues, Abe has said he will proceed this fall with a study of how Japan can participate in collective self-defense activities, combat cooperation in defense of another country that is prohibited under the current official interpretation of Japan’s constitution. Abe has said he
55 Japanese Prime Minister’s Office, “Japan and ASEAN, Always in Tandem,” Speech Given by Shinzo Abe in Singapore, Friday, July 26, 2013; “Japan: Prime Minister Abe Pledges To Further Implement Economic Policies in News Conference,” NHK General Television in Japanese, as translated by the Open Source Center, JPO2013072212390999, 0500 GMT July 22, 2013.
will not prioritize his more far-reaching proposals to amend the constitution’s security-related clauses such as Article 9. This decision is likely based upon a number of political calculations. For one, the July 2013 elections did not give the LDP the two-thirds majority that Abe would need to amend Japan’s constitution. Second, the LDP’s coalition partner, New Komeito, opposes efforts to weaken or do away with Japan’s collective self-defense ban, though New Komeito leaders often have placed a greater priority on maintaining their coalition with the LDP than upholding the party’s principles in matters of national security. Thus, the LDP’s ruling coalition is unlikely to be in jeopardy if Abe pushed forward with his agenda of loosening or abandoning the legal and political restrictions on the operations of Japanese military forces. However, New Komeito’s stance means that Abe will have to rely upon votes from conservatives in other parties to make progress on his security agenda. Months before the July Upper House elections one such grouping, the Japan Restoration Party (JRP) was expected to be a partner with the LDP on security issues. But its political fortunes sank after its co-leader, Osaka mayor Toru Hashimoto, made statements in early May that many interpreted as condoning Imperial Japan’s “comfort women” system of sex workers. Finally, while public support for amending the constitution’s security provisions has increased in recent years, it remains a highly controversial topic that divides the Japanese electorate.
In 2007, Abe cited his poor health as one reason for his abrupt resignation. Days after he stepped down he was hospitalized for what was later revealed to be ulcerative colitis, a chronic and episodic form of inflammatory bowel disease in which ulcers and sores in the colon can cause pain and other symptoms. Stress can trigger flareups, and Abe’s symptoms reportedly became nearly unbearable in the weeks after he led the LDP to its 2007 Upper House defeat. Abe reportedly says that the disease is now under control thanks to medication that was not available in Japan until 2009.56
Figure 3. Party Affiliation in Japan’s Lower House of Parliament
The LDP and its partner, New Komeito, control the Lower House, which elects the prime minister

Source: Kyodo News, December 26, 2012.
56 Alexander Martin, “Japan’s New Leader Says Recovered From Illness,” The Wall Street Journal Online, December 16, 2012.
Figure 4. Party Affiliation in Japan’s Upper House of Parliament
The LDP-New Komeito coalition controls the Upper House



The DPJ and Alternative Political Forces
The December 2012 and July 2013 parliamentary elections drastically reduced the size of Japan’s largest opposition party, the Democratic Party of Japan (DPJ), which was the ruling party from 2009-2012. In the Lower House election, the DPJ’s seat total tumbled from 230 seats to 57, and a number of prominent DPJ leaders lost their seats. In the July Upper House election, the DPJ seat total fell by nearly half, from 106 to 59 seats.
Moreover, the prevailing narrative is such that the party’s actual power appears less than its numerical strength. Formed in the late 1990s by an amalgamation of former conservative and progressive politicians, the party continues to be riven by divisions among its more hawkish and dovish factions. It remains to be seen whether some of the DPJ’s advocates for a tougher security stance will break with the other members of their party and support some of Prime Minister Abe’s security initiatives.
Over the past 20 years, growing frustration with Japan’s political status quo has periodically given rise to small-to-moderate protest movements. One such wave resulted in the defeat of the LDP in the 2009 Lower House elections, ushering in the DPJ’s three-year reign. Until the spring of 2013, many Japanese seemed to embrace alternative leaders such as Osaka mayor Toru Hashimoto, who since mid-2011 has captured national attention as the de facto leader of a populist deregulatory and decentralization movement. Together with former Tokyo mayor Shintaro Ishihara, Hashimoto formed the Japan Restoration Party (JRP, also known as Ishin No Kai) in the fall of 2012 and captured enough seats to almost overtake the DPJ as the leading opposition party in the Lower House. Both Hashimoto and Ishihara are known to support nationalist positions on matters of security and history, and thus could perhaps be natural ad hoc allies for Abe on these issues. However, as mentioned above, the JRP’s poll numbers fell dramatically after Hashimoto’s May 2013 comfort women statement. Although the party gained seats in the July Upper House elections, its performance was weaker than many had expected before mayor’s remarks.

Structural Rigidities in Japan’s Political System
Compared to most industrialized democracies, the Japanese parliament is structurally weak, as is the office of the prime minister and his cabinet. Though former Prime Minister Junichiro Koizumi (who served from 2001 to 2006) and his immediate predecessors increased politicians’ influence relative to bureaucrats’, with important exceptions Japan’s policymaking process tends to be compartmentalized and bureaucratized, making it difficult to make trade-offs among competing constituencies on divisive issues. The result is often paralysis or incremental changes at the margins of policy, particularly during periods of weak premierships such as the one Japan experienced from 2006-2013. These difficulties were a major reason Abe took the unprecedented decision in early 2013 to house Japan’s TPP team in the Prime Minister’s office, in the hopes that this would help overcome the bureaucratic obstacles to making the trade-offs that are likely to be necessary to enable Japan’s joining a final agreement, if one is reached.

Japan’s Demographic Challenge
Japan’s combination of a low birth rate, strict immigration practices, and a shrinking and rapidly aging population presents policymakers with a significant challenge. Polls suggest that Japanese women are avoiding marriage and child-bearing because of the difficulty of combining career and family in Japan; the fertility rate has fallen to 1.25, far below the 2.1 rate necessary to sustain population size. Japan’s population growth rate is -0.1%, and its current population of 127 million is projected to fall to about 95 million by mid-century. Concerns about a huge shortfall in the labor force have grown, particularly as the elderly demand more care. The ratio of working age persons to retirees is projected to fall from 5:2 around 2010 to 3:2 in 2040, reducing the resources available to pay for the government social safety net.57 Japan’s immigration policies have traditionally been strictly limited, closing one potential source of new workers. Prime Minister Abe has discussed ways to mobilize greater women’s participation in the workforce through such means as improving the availability of child care.

Selected Legislation
113th Congress
H.R. 44 (Bordallo). Recognizes the suffering and the loyalty of the residents of Guam during the Japanese occupation of Guam in World War II. Directs the Secretary of the Treasury to establish a fund for the payment of claims submitted by compensable Guam victims and survivors of compensable Guam decedents. Directs the secretary to make specified payments to (1) living Guam residents who were raped, injured, interned, or subjected to forced labor or marches, or internment resulting from, or incident to, such occupation and subsequent liberation; and (2)
57 Lynann Butkiewicz, “Implications of Japan’s Changing Demographics,” National Bureau of Asian Research, Washington, DC, October 2012.
survivors of compensable residents who died in the war (such payments to be made after payments have been made to surviving Guam residents). Referred to House subcommittee on January 31, 2013. Status: Referred to the Subcommittee on Fisheries, Wildlife, Oceans, and Insular Affairs.
H.Res. 65 (Royce). Condemning the Government of North Korea for its flagrant and repeated violations of multiple United Nations Security Council resolutions, for its repeated provocations that threaten international peace and stability, and for its February 12, 2013, test of a nuclear device. Passed/agreed to in the House on February 15, 2013. Status: On motion to suspend the rules and agree to the resolution, as amended Agreed to by the Yeas and Nays: (2/3 required): 412-2 (Roll no. 45). Latest Action: 2/15/2013 Motion to reconsider laid on the table agreed to without objection.
S. 192 (Barrasso). Expedited LNG for American Allies Act of 2013; the exportation of natural gas to Japan shall be deemed to be consistent with the public ... during only such period as the Treaty of Mutual Cooperation and Security, signed at Washington January 19, 1960, and entered into force June 23, 1960 between the United States and Japan, remains in effect. Referred to Senate committee on January 31, 2013.

112th Congress
H.Res. 172 (Honda). Expressing heartfelt condolences and support for assistance to the people of Japan and all those affected in the aftermath of the deadly earthquake and tsunamis of March 11, 2011. Subcommittee hearings held.
S.Res. 101 (Reid). A resolution expressing the sense of the Senate relating to the March 11, 2011, earthquake and tsunami in Japan. Passed/agreed to in Senate on March 14, 2011.
S.Res. 333 (Feinstein). A resolution welcoming and commending the Government of Japan for extending an official apology to all United States former prisoners of war from the Pacific War and establishing in 2010 a visitation program to Japan for surviving veterans, family members, and descendants. Submitted in the Senate, considered, and agreed to without amendment and with a preamble by Unanimous Consent on November 17, 2011.
S.Res. 543 (Boxer). A resolution expressing the sense of the Senate condemning the international parental abduction of all children. Passed/agreed to with an amendment and an amended preamble in Senate on December 4, 2012.

111th Congress
H.R.
44 (Bordallo). Sought recognition of the loyalty and suffering of the residents of Guam who suffered unspeakable harm as a result of the occupation of Guam by Imperial Japanese military forces during World War II, by being subjected to death, rape, severe personal injury, personal injury, forced labor, forced march, or internment, as well as payments for death, personal injury, forced labor, forced march, and internment. Referred to Senate Committee on the Judiciary on March 5, 2009.

H.R.
423 (Mica). Sought to provide compensation for certain World War II veterans who survived the Bataan Death March and were held as prisoners of war by the Japanese. Referred to House Subcommittee on Military Personnel on February 6, 2009.

H.R.
2055 (Thompson) and S. 817 (Cantwell). The Pacific Salmon Stronghold Conservation Act of 2009. Among other items, authorized the sharing of status and trends data, innovative conservation strategies, conservation planning methodologies, and other information with North Pacific countries, including Japan, to promote salmon conservation and habitat. In April 2009, the House bill was referred to House Natural Resources Committee’s Subcommittee on Insular Affairs, Oceans and Wildlife, which held a hearing on the bill on June 16, 2009. The Senate bill was referred to the Senate Committee on Commerce, Science, and Transportation in April 2009.

H.R.
2647 (Skelton) and S. 1390 (Levin); P.L. 111-84. The National Defense Authorization Act for FY2010. Signed into law October 28, 2009. On July 21, 2009, the Senate passed (58-40, Record Vote Number: 235) an amendment (S.Amdt. 1469) to S. 1390, the FY2010 National Defense Authorization Act, that eliminated funding for additional F-22 aircraft production. In conference, this provision was deleted, but both chambers agreed not to authorize funding for additional procurement of the F-22 in FY2010. Section 1250 requires the Secretary of Defense to report to Congress on the potential for foreign military sales of the F-22A fighter aircraft. Section 2835 establishes an Interagency Coordination Group of Inspectors General for Guam Realignment, which among other items, is required to submit by February 1 an annual report on Japan’s budgetary contribution to the relocation of military personnel on Guam. The conference committee deleted the portion (in Section 2833) of the House version of H.R. 2647 that would have required construction firms that get contracts for projects associated with the expansion of


U.S. military facilities on Guam to pay their workers wages consistent with the labor rates in Hawaii.
H.Res. 933 (Dingell). Commended the Government of Japan for its current policy against currency manipulation and encouraged the Government of Japan to continue in this policy. Introduced November 19, 2009; referred to House Ways and Means Committee.
H.Res. 125 (C. Smith). Called on Brazil in accordance with its obligations under the 1980 Hague Convention on the Civil Aspects of International Child Abduction to obtain, as a matter of extreme urgency, the return of Sean Goldman to his father David Goldman in the United States; urging the governments of all countries that are partners with the United States to the Hague Convention to fulfill their obligations to return abducted children to the United States; and recommended that all other nations, including Japan, that have unresolved international child abduction cases join the Hague Convention and establish procedures to promptly and equitably address the tragedy of international child abductions. Passed/agreed to in House on March 11, 2009.
H.Res. 997 (Sutton). Expressed the sense of the House of Representatives regarding unfair and discriminatory practices of the government of Japan in its failure to apply its current and planned extension of the Government’s Eco-friendly Vehicle Purchase and scrappage program to imported vehicles made by U.S. automakers. Introduced January 5, 2010; referred to the Committee on Ways and Means, and in addition to the Committee on Foreign Affairs, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
S.Res. 388 (Stabenow). Expressed the sense of the Senate regarding unfair and discriminatory measures of the Government of Japan in failing to apply the Eco-Friendly Vehicle Purchase Program to vehicles made by United States automakers. Introduced January 20, 2010; referred to the Committee on Finance.
H.Res. 1464 (Ros-Lehtinen). Recognized the 50th anniversary of the conclusion of the United States-Japan Treaty of Mutual Cooperation and Security and expressing appreciation to the Government of Japan and the Japanese people for enhancing peace, prosperity, and security in the Asia-Pacific region. Passed/agreed to in House on June 24, 2010.
S.Res. 564 (Webb). Recognized the 50th anniversary of the ratification of the Treaty of Mutual Security and Cooperation with Japan, and affirmed support for the United States-Japan security alliance and relationship. Resolution agreed to in Senate without amendment and with a preamble by Unanimous Consent on June 29, 2010.
H.Res. 1326 (Moran). Called on the Government of Japan to immediately address the growing problem of abduction to and retention of United States citizen minor children in Japan, to work closely with the Government of the United States to return these children to their custodial parent or to the original jurisdiction for a custody determination in the United States, to provide left-behind parents immediate access to their children, and to adopt without delay the 1980 Hague Convention on the Civil Aspects of International Child Abduction. Passed in the House on September 29, 2010.

Author Contact Information
Emma Chanlett-Avery, Coordinator William H. Cooper Specialist in Asian Affairs Specialist in International Trade and Finance echanlettavery@crs.loc.gov, 7-7748 wcooper@crs.loc.gov, 7-7749
Mark E. Manyin Ian E. Rinehart Specialist in Asian Affairs Analyst in Asian Affairs mmanyin@crs.loc.gov, 7-7653 irinehart@crs.loc.gov, 7-0345


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