Japan's Economic Power and Security: Japan and North Korea (Sheffield Centre for Japanese Studies Routledge)

Japan’s Economic Power and Security The world is faced with a diverse range of security challenges in the post-Cold War era. As globalisation continues apace, alternative options, other than the military, are needed to counter these challenges and ensure greater peace and stability. This new book is concerned with the security policy of Japan and in particular how it can exert its economic strength to alleviate military tension on the Korean Peninsula and in surrounding region. It also provides a thorough analysis of new trends in Japanese security policy, the strengthening of its role in the region, and the changing nature of the alliance with the US. Japan’s Economic Power and Security is the first study to investigate, in depth, Japan’s reaction to the diplomatic, military, and economic security crises generated by North Korea. Christopher W.Hughes reinterprets conventional views of Korean Peninsula security, Japanese foreign and security policy, and the function of economic power in ensuring peace and stability. Christopher W.Hughes is British Academy Postdoctoral Fellow at the Centre for the Study of Globalisation and Regionalisation, University of Warwick.

Sheffield Centre for Japanese Studies/Routledge Series Series Editor: Glenn D.Hook Professor of Japanese Studies, University of Sheffield

This series, published by Routledge in association with the Centre for Japanese Studies at the University of Sheffield, will make available both original research on a wide range of subjects dealing with Japan and will provide introductory overviews of key topics in Japanese studies. The Internationalization of Japan Edited by Glenn D.Hook and Michael Weiner Race and Migration in Imperial Japan Michael Weiner Japan and the Pacific Free Trade Area Pekka Korhonen Greater China and Japan Prospects for an economic partnership? Robert Taylor The Steel Industry in Japan A comparison with the UK Hasegawa Harukiyo Race, Resistance and the Ainu of Japan Richard Siddle Japan’s Minorities The illusion of homogeneity Edited by Michael Weiner Japanese Business Management Restructuring for low growth and globalization Edited by Hasegawa Harukiyo and Glenn D.Hook Japan and Asia Pacific Integration

Pacific romances 1968–1996 Pekka Korhonen Japan’s Economic Power and Security Japan and North Korea Christopher W.Hughes

Japan’s Economic Power and Security Japan and North Korea

Christopher W.Hughes

London and New York

First published 1999 by Routledge 11 New Fetter Lane, London EC4P 4EE Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 Routledge is an imprint of the Taylor & Francis Group This edition published in the Taylor & Francis e-Library, 2005. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” © 1999 Christopher W.Hughes All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Hughes, Christopher W. Japan’s economic power and security: Japan and North Korea Christopher W.Hughes. p. cm. Includes bibliographic references and index. 1. Japan—Relations—Korea (North) 2. Korea (North)—Relations— Japan. 3. Security, International. 4. Japan—Military policy. 5. Korea (North)—Military policy. I. Title. DS849.K7H85 1999 98–48298 303.48’25205193–dc21 CIP ISBN 0-203-02240-8 Master e-book ISBN

ISBN 0-203-22402-7 (Adobe eReader format) ISBN 0-203-25748-0 (OEB Format) ISBN 0-415-20183-7 (Print Edition)

For my parents

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Contents

1 2 3 4 5

List of tables Acknowledgements Map 1 Map 2 Glossary Introduction Global and Japanese conceptions of power and security policy in the postCold War era Theory of economic power and security Military and economic conceptions of the North Korean security problem Japanese economic power and North Korea The Japanese policy-making process and economic versus military security policy Conclusion References Index

ix x xii xiii xiv xviii 1 29 47 107 150 193 199 217

Tables 3.1 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13 5.1 5.2

The military balance on the Korean Peninsula 1997–98 Official North Korean figures for industrial output during economic plans Targets and results for the Second Seven-Year Plan (1978–84) Targets for the Third Seven-Year Plan (1987–93) and estimates of attainment by North Korean and South Korean sources Annual growth rates in North Korea by sector according to South Korean sources The mutually complementary economic resources of Northeast Asian states and regions involved in TRADP North Korea’s external debt by creditor at the end of 1989 North Korea’s main trading partners for selected years between 1986–96 Proportion of North Korean trade by region and country 1955–85 North Korea-Japan Trade 1961–96 Composition of Japan-North Korean trade for selected years between 1984–96 Actual and ‘natural’ North Korean trade shares North Korean primary energy supplies and coal production 1988–94 North Korean oil imports from China and USSR/Russia 1988–95 Comparison between the organisation and primary equipment scales of 1976 and 1995 NDPOs Functions and fields and examples of items of cooperation in areas surrounding Japan

71 120 123 124 125 128 135 140 141 142 143 147 151 152 190 196

Acknowledgements The task of writing about Japan—North Korea relations and Japanese security policy is one greatly complicated by the paucity of information concerning the former and the speed of change of contemporary events relating to both. I have been fortunate, though, to receive the active support of many friends and colleagues in Japan and the UK who have assisted me throughout the writing of this book. In Japan, initial fieldwork for the doctoral dissertation upon which this book is based was carried out at the Graduate School of Law and Politics, The University of Tokyo. I would like to thank all the academic staff and students of that institution for support during my stay there. Special thanks go to Takahashi Susumu for his wise and kind supervision, to Tanaka Akihiko for helping me to get some key interviews, and to Kimura Masatoshi for his patient tutoring and for helping me to navigate my way around the world of Japanese politics and scholarship. Hugo Dobson read drafts of the book manuscript and gave invaluable advice. The conversion of the dissertation into a book was carried out mostly at the Institute for Peace Science, Hiroshima University. I would like to express my gratitude to Matsuo Masatsugu, Ogashiwa Yōko, and the other members of the institute for providing me with such an excellent research environment to finish the book. I am only sorry that I was unable to stay longer. I am also grateful to the many scholars, government officials, politicians, and businessmen who spared their time to talk to me about my research and the often rather delicate subject of Japan—North Korea relations. In addition, Mark Aldred deserves thanks for his skill in helping in the preparation of maps. On the UK side, although not involved directly in the dissertation or book, James Campbell and Harry Pitt have been constant intellectual influences. The dissertation was submitted in 1997 to the School of East Asian Studies, The University of Sheffield, and Reinhard Drifte, Julie Gilson, Richard Higgott, and Robert Taylor all took the trouble to read the original version and give incisive comments on how to change it into a monograph. I also want to thank Victoria Smith, James Whiting, and the anonymous referees at Routledge for giving me the opportunity to publish my work. However, the greatest share of thanks has to go to my former dissertation supervisor and the series editor, Glenn Hook, who read and commented on all drafts of the dissertation and book. If it were not for Glenn Hook’s exceptional supervision and guidance, this project could never have been completed. I have learned a great deal from all of those mentioned above, but I alone am responsible for any errors of fact or interpretation contained in this work. Funding for research was kindly provided by the Japan Foundation Endowment Committee, the Japanese Ministry of Education, Chūbū Electric Power Company, and the British Academy. Parts of Chapters 3 and 5 first appeared in Survival (vol. 38, no. 2, 1996) and The Pacific Review (vol. 11, no. 3, 1998), and I thank the editors of these journals for allowing me to use the material here.

Finally, I wish to thank my parents for their unstinting support and faith in me during the whole process of the PhD, and my wife, Chiyako, for her love and patience in tolerating my preoccupation with this book. C.W.Hughes Hiroshima, September 1998

Map 1 Regional distribution of the contituencies of Diet members visiting North Korea on joint governing party missions 24–28 September 1990, 11–14 November 1997.

Map 2 Japan, Northeast Asia, and Tumen River Area Development Programme.

Glossary List of acronyms

ACSA Acquisition and Cross-Servicing Agreement ADB Asian Development Bank ARF ASEAN Regional Forum ASDF Air Self-Defence Forces ASEAN Association of South East Asian Nations ASEAN-PMC ASEAN Post Ministerial Conference CBM Confidence Building Measure CIA Central Intelligence Agency COCOM Consultative Group and Coordinating Committee for Multilateral Export Controls CTBT Comprehensive Test Ban Treaty DMZ Demilitarised Zone DPJ Democratic Party of Japan DPRK Democratic People’s Republic of Korea EAEC East Asian Economic Caucus EBRD European Bank for Reconstruction and Development ERINA Economic Research Institute for Northeast Asia ERM European Exchange Rate Mechanism EU European Union FAO Food and Agriculture Organisation FDI Foreign Direct Investment FEFTCL Foreign Exchange and Foreign Trade Control Law FETZ Free Economic and Trade Zone FEZ Free Economic Zone G-7 Group of Seven Most Industrialised Democracies GATT General Agreement on Trade and Tariffs GNP Gross National Product GSDF Ground Self-Defence Forces IAEA International Atomic Energy Agency

IATA International Air Transport Association IMF International Monetary Fund IPE International Political Economy IR International Relations JCP Japan Communist Party JDA Japan Defence Agency JETRO Japan External Trade Organisation JNCC Joint Nuclear Control Committee JSP Japan Socialist Party KCIA Korean Central Intelligence Agency KDD Kokusai Denwa Denshin Telecommunications Company KEDO Korean Peninsula Energy Development Organisation KEPCO Korean Electric Power Company KMAG Korean Military Advisory Group KWP Korean Workers’ Party LDP Liberal Democratic Party MFN Most Favoured Nation MIA Missing in Action MITI Ministry of International Trade and Industry MNC Multinational Corporation MOF Ministry of Finance MOFA Ministry of Foreign Affairs MOPT Ministry of Posts and Telecommunications MOT Ministry of Transport MSDF Maritime Self-Defence Forces MTCR Missile Technology Control Regime NAFTA North American Free Trade Agreement NATO North Atlantic Treaty Organisation NDPO National Defence Programme Outline NEARDA Northeast Asian Region Development Area NEC National Economic Council NEP New Economic Policy NFP New Frontier Party NGO Non-Governmental Organisation NPA National Police Agency NPT Non-Proliferation Treaty NWD Navy-Wide Defence ODA Official Development Assistance OECD Organisation for Economic Cooperation and Development

OPEC Organisation of Petroleum Exporting Countries PARC Policy Affairs Research Council PKF Peacekeeping Force PKO Peacekeeping Operations PMC Programme Management Committee POL Petroleum, Oil and Lubricants RIMPAC Rim of the Pacific ROK Republic of Korea SACO Special Action Committee on Facilities and Areas in Okinawa SCAP Supreme Command for the Allied Powers SCC Security Consultative Committee SDF Self-Defence Forces SDI Strategic Defence Initiative SDPJ Social Democratic Party of Japan SEZ Special Economic Zones SII Structural Impediments Initiative SLOC Sea Lanes of Communication SRC Security Research Council TMD Theatre Missile Defence TNC Transnational Corporation TRADP Tumen River Area Development Programme TREZ Tumen River Economic Zone UN United Nations UNDP United Nations Development Programme UNSC United Nations Security Council US United States WB World Bank WFP World Food Programme WTO World Trade Organisation Japanese terms used repeatedly in the text Nihonjinzuma Japanese-born spouses of North Korean citizens resident in North Korea racchi jiken alleged incidents of the abduction of Japanese citizens by North Korea renkei linkage between improvements in Japan—North Korea and North Korea—South Korea relations seikei bunri separation of politics and economics seikyūken right under Article 4 of the 1951 San Francisco Peace Treaty to negotiate private claims relating to property during the colonial period and war years

shūhen areas surrounding Japan yūji hōsei legislation for emergency situations A note on the text In line with Japanese convention, names in the text and notes are given with the family name followed by the given name. The exceptions are Japanese authors of works in English, whose given name is placed first. Macrons are used to indicate long vowels in Japanese words, except for well-known place names such as Tokyo, Osaka, and Kyoto, where macrons have been omitted.

Introduction Post-Cold War security challenges The basic function of all states throughout history has been to ensure the security of their populations from threat. States that have failed in their security responsibilities are usually the ones that have eventually fallen by the wayside as they lose legitimacy in the eyes of their population. Hence, security has always been at the centre of the policymaking agenda of individual states and between states. The populations and policymakers of states have learned by harsh experience that the creation of a viable security policy is a complex task, fraught with risk, and which requires imaginative and comprehensive approaches. It is therefore ironic that during the Cold War, just as states and the international system faced the greatest destructive risks, in some ways the making of security policy became relatively easier. For while nuclear weapons posed the greatest and most immediate destructive threats in history, the bipolarity that accompanied these weapons systems also gave policy-makers the confidence—whether misguided, or not— that they could identify clear enemies and clear strategies and procedures for dealing with the prevention of conflict. Of course, these conceptions of security did not mean global peace, as the superpowers and other major developed powers fought out their struggles through intervention in low-intensity conflicts in the developing world. Likewise, even for states like Japan that may have been in the frontline of US containment policy but were not engaged directly in Cold War conflict, the superpower tensions of this period gave an air of certainty to security policy. Debate over security policy in Japan in the post-Cold War period has been particularly fierce due to the attachment to the norms of pacifism and antimilitarism, and, as the 1960 US-Japan security treaty crisis showed, has demonstrated the capacity to provoke great domestic political unrest. But after the 1960 crisis passed, and despite other periodic crises, Japan’s earlier incorporation into the US alliance system ensured that in many ways it could delegate its responsibility as a state for security policy-making to the US, and the issue of security could be swept under the domestic political carpet to be awkwardly disregarded. Even in the 1980s, as Japan increased its military support for the US alliance, the incremental expansion of Japan’s defence role meant that security remained suppressed as a political issue. As long as Japan stayed beneath the US’s nuclear umbrella and bilateral cooperation proceeded with the objective of containing the USSR as a common Cold War enemy, the security issue could be tamed. The problems of security policy-making also have long been central to the study of International Relations (IR), and vice versa. IR was established as a field of academic study after the First World War in an attempt to solve the perennial puzzle of why nations continued to go to war, when, as the events of 1914–18 had clearly indicated, the costs outweighed the gains. Moreover, the study of IR was not intended as a purely academic exercise. Its findings were thought to contain lessons for policy-makers, and, indeed, a

number of leading academics have been called upon to devise security policy in states such as the US. However, during the Cold War it was also clear that the field of IR often became subject to the same type of over self-assurance that also affected the approach of state policy-making communities to security matters, and which only the extraordinary circumstances of the bipolar world could have afforded. Hence, the debate on security in IR became polarised between its opposing dominant paradigms of realism and liberalism. Despite the apparent passion of the academic debate on security, much of it had a tendency to become ritualistic and to sacrifice objective evaluation of the essential truths of each school of thought in favour of maintaining rigid theoretical and ideological divisions. The end result of this polarisation was that few academics were willing to think outside of their respective paradigms, and thus that the field of IR would be ill-equipped initially to assess the changed security environment after the end of the Cold War. In this way, the academic debate had neglected its core purpose of providing new and innovative ways to consider the causes behind conflict and to provide the type of flexible thinking about security matters which would be of benefit to policy-makers. The end of the Cold War has challenged policy-makers across the globe and in Japan, and academics in the field of IR to rethink their approach to security. For it is clear that after the passing of the unique bipolar structure, security problems and security policy have reverted back to an age of uncertainty and risk. Although the likelihood of nuclear war has been greatly reduced, the post-Cold War period has seen the outbreak of one fullscale conventional war in the Persian Gulf, the spread of a number of low-intensity conflicts in Africa and Europe, and the threat of conflict in the Asia-Pacific region. As will be demonstrated in Chapter 1, many of the military approaches to security policy employed during the Cold War period no longer fit the increasingly opaque security conditions after its end. Policy-makers of the major states now have to begin to reconsider their notions of security and to devise once again complex and comprehensive approaches to deal with the post-Cold War security agenda and to ensure global stability. Japanese policy-makers have also had a rude awakening with the end of the Cold War. The certainties of the Cold War and its allies and enemies have faded, and policy-makers in Japan have been forced, even if at times reluctantly, to think about the security responsibilities which they have so long been able to avoid behind the shield of US military hegemony in the Asia-Pacific region. Following its recovery from defeat in the Second World War, and despite its current financial difficulties, Japan has come to possess the second largest national economy in the world and now stands as a regional and global economic superpower. At the same time, Japan is also a potential military great power in the Asia-Pacific, with modern armed forces comparable in size to those of the United Kingdom, and as of 1996 the fourth largest defence budget in the world in raw dollar terms.1 In the post-Cold War period, Japan both economically and militarily clearly matters once again in regional and global security. As the experience of the Gulf War of 1990–91 confirmed, demands for a greater Japanese contribution to international security are bound to grow and Japan will inevitably need to fulfil some kind of role in global security. The kind of role that Japan eventually chooses, and how successfully it performs it, will have significant implications for world stability and peace. The field of IR also needs to change in response to the post-Cold War security agenda. The existing paradigms when used in exclusion of each other have been insufficient to

explain the reasons behind the end of the Cold War and the changes in the security environment that have followed it. IR undoubtedly has a crucial role to play in helping to understand post-Cold War security, not just in order to provide detached academic analysis of events, but also as a body of thought which can assist policy-makers to think flexibly about how to tackle the post-Cold War security agenda. In this sense, the end of the Cold War is an opportunity for the study of IR to breakaway from narrow theoretical stances, to mix the best of theories from all schools of thought, to use this as a way to search for new approaches to post-Cold War security, and to return to the essential purpose of prescribing theoretical models and insights to policy-makers to help them form security policy.

Questions and objectives This set of observations about the challenges for security policy-making after the Cold War, Japan’s role within global security policy, and the study of IR for understanding security policy, brings forward the fundamental questions and objectives that will be explored throughout this book. First, after the Cold War, security remains as the most vital issue for states and the international political system, but, as Chapter 1 will show, the whole issue of security policy-making has been made more complex in this period by the re-emergence of low-intensity and non-specific threats. Many of these threats cannot be adequately handled by means of military power alone, and instead require solutions involving the exercise of economic power. This reinforces the argument that a fresh and innovative approach is required to the issue of security after the Cold War. Therefore, this work is concerned with investigating the future shape of global security policy, and, based upon the belief that complex and innovative approaches are necessary to deal with the post-Cold War security agenda, examines the utility of economic power as the way forward in security policy. Related to this first question is a second one concerned with the role of Japan in postCold War security. As noted above, Japan is a vital player in regional and global security after the Cold War, and this book analyses the policy-making debate in Japan to reveal what is likely to be this state’s future role in security. More specifically, the question that is asked, and which links in with the first question above, is whether Japanese policymakers can create a viable security policy based primarily on economic rather than military power, or which at least carefully balances economic and military power in a comprehensive approach, and what are the implications of this for global security as a whole in the post-Cold War period. The intention of this question is then to go even further, and to ask what are the opportunities and obstacles for Japanese policy-makers in articulating a conception of Japan as a new type of power, or global civilian power, which uses economic power for security purposes. To help ask the first and second questions above concerned with the importance of economic power in post-Cold War security and Japan’s role as a global civilian power, a third question is explored, which again is linked to the observations made at the start of this Introduction about the importance of IR theory for understanding post-Cold War security policy. This question asks what types of insights can be gained into post-Cold

War security by combining different perspectives from the field of IR, and whether these insights can be used to provide a testable model of economic power in the service of security policy, which then can be employed to give more specific shape for the first time to the conception of global civilian power and Japan’s performance of that role.

Approaches and case study In order to reach these overall objectives and to explore the question of Japan as a global civilian power, both thorough theoretical and empirical approaches are required. For it is clear that, despite the obvious importance after the Cold War of the issues of security and economic power, Japan’s global security role, and the need for IR theory to aid in the understanding of security, as yet modern scholarship has failed to produce studies of these issues which explain them with sufficient interlinking theoretical and empirical sophistication. For instance, as explained in Chapter 2, in the field of IR there are individual studies which offer an overarching and useful theoretical framework of economic power. However, whilst these frameworks do offer insights into the role of economic power in the post-Cold War world and will in part be incorporated into the theoretical approach of this book, they often lack an empirical basis, untested as they are against specific case studies and constructed largely from anecdotal evidence. In addition, even though these models have implications for security problems, their analysis rarely is carried over to make explicit the link between economic power and security, or to offer models which can be used to investigate this link. With regard to the case of Japan and IR theory, there have been a number of studies that, as outlined more fully in Chapter 1, have pointed to the important role that Japan could play in security based upon its economic power. But again, few of these studies have attempted to take this point to its logical conclusion and to construct an overall theoretical model of Japanese economic power and to investigate empirically its use in the service of security policy. In many ways, the impression is that for the study of IR Japan remains as a source of convenient examples with which to illustrate wider and disparate points about economic power and security, but that the case of Japan has not yet been treated as one which in its own right could help to deepen our understanding of the connection between economic power and security. As will be seen in Chapter 2, even the concept of global civilian power highlighted in this book, which offers a new way to understand economic power and security after the Cold War, still remains very much in its ‘prototype’ stage in IR theory and needs expansion of its theoretical aspects to turn it into a model which to some extent can be tested empirically. The field of Japanese studies itself has not produced adequate theoretical and empirical work on the relation between Japanese economic power and security policy after the Cold War. To be sure, there has been plenty of speculation about Japan’s security role after the Cold War, and, as the next chapter will show, much of this has pointed to the importance of Japan’s exercise of economic power for security purposes. There have also been many excellent empirical case studies of Japanese security policy-making, and some of them have focused on the use of economic power, and especially economic aid, for security. But even though all Japan specialists are aware that the particular characteristics of

Japanese post-war history mean that the problem of economic power is essential to understanding any aspect of Japanese foreign policy, it is puzzling that not more scholars have tried to produce a comprehensive theoretical and empirical overview of the connections between Japan’s economic power and security policy. Still fewer scholars have tried to bridge the gap between Japanese studies and IR, and shown the significance of Japanese economic power for global security after the Cold War. The notable exceptions to this have been the proponents in Japan of the idea of global civilian power, and Reinhard Drifte’s attempts to show how in the 1990s Japanese foreign policy has achieved its ends chiefly through economic power.2 However, as has been seen, the idea of global civilian power requires further theoretical and empirical elaboration, and Drifte’s work, whilst ground-breaking in many ways by linking questions of economics to security in the case of Japan and inviting us to throw away our preconceptions when looking at Japanese foreign policy, could arguably be expanded theoretically and applied to a specific case study to give greater empirical detail on the policy-making problems of mobilising economic power for security ends. This book, in seeking to answer the question of Japan’s role as a global civilian power, will build upon much of the existing and valuable work in IR and Japanese studies outlined above, but will also attempt to acquire a harder theoretical and empirical edge. The aim is to produce a structured model of global civilian power that can be operationalised and used to analyse empirically the utility of Japanese economic power for security purposes after the Cold War. In line with the need mentioned above to escape from overly restrictive theoretical divisions in the post-Cold War era, this model will borrow deliberately from different theoretical schools in both Japan and the West, and avoid categorisation as belonging to one theoretical school or another. Following the example of John Lewis Gaddis, this book is designed to be a ‘consumer’ of theory: selecting theories from a variety of sources according to their utilitarian value, but refusing to ‘buy into’ any one school of thought that would restrict its ability to explain events and policy.3 No excuse is made for this lack of intellectual purity, as theory, especially after the Cold War and when concerned with the critical issue of security, should be used to open rather than close doors to comprehending problems of security and their solutions. However, at the same time as this book aims to create a theoretical model of Japanese economic power, it will also subject the model to rigorous empirical tests by presenting an extensive case of Japan-DPRK (Democratic People’s Republic of Korea; hereafter referred to as North Korea) security relations in Chapters 4–6. The case study reassesses traditional interpretations of the North Korean security problem and outlines the potential utility of Japanese economic power in assisting its resolution in the post-Cold War period. Detailed documentary and interview evidence will be used to reveal the interactions between various policy-making actors, their conceptions of the North Korean security problem, and what barriers this imposes upon Japan’s use of economic power for security ends in this case. North Korea has been chosen for the case study not only because of the enhanced theoretical and empirical understanding of Japanese security policy that it offers, but also because it is an intrinsically important security problem in itself. As Chapter 3 will show, the North Korean security problem is one which incorporates the key post-Cold War and

global security issues of the proliferation of weapons of mass destruction technology, including nuclear and ballistic missile technology, and was of great enough significance in mid-1994 to almost provoke all-out conventional war between the major regional powers. Since 1994, the North Korean security problem has taken on the added dimensions of possible internal political collapse, guerrilla warfare, economic and energy crises, and famine. Thus, despite its oft-labelling as a remnant of the Cold War, North Korea runs the whole gamut of post-Cold War security problems and is of vital importance to security policy-makers in neighbouring Japan, the Asia-Pacific region, and globally. Moreover, the hope is to demonstrate that the approaches used to deal with the North Korean security problem carry practical policy lessons for handling other postCold War security problems around the globe.

Structure Chapter 1 examines the post-Cold War security debate globally and in Japan, and notes the increasing importance of economic power-based conceptions of security policy, but also the seeming paradox of Japan’s move in this period towards a greater role in military security despite its economic power resources and traditions of economic security policy. Seeking to examine whether Japan could contribute to global security by the utilisation of economic power, Chapter 2 outlines a model of global civilian power and economic security policy to be tested in the case study. Chapter 3 introduces the case study of the North Korean security problem in the post-Cold War period and elucidates the growth of policy-making conceptions that see it as addressable by means of economic power. Chapter 4 examines the economic power capacity of Japan to assist in a resolution of the North Korean security problem. Chapter 5 then examines the key issue as to whether Japanese policy-makers have the will to instrumentalise economic power for security ends in the case of North Korea. Finally, the Conclusion draws together the arguments of the book and returns to the questions in the Introduction concerned with the role of theory, the function of economic power for security, and the future direction of Japanese security policy.

Notes 1 The International Institute for Strategic Studies, The Military Balance 1997–98, pp. 292–7. 2 Drifte (1996a). 3 Gaddis (1992, p. 169).

1 Global and Japanese conceptions of power and security policy in the post-Cold War era Conceptions of military security after the Cold War The Gulf War and military power The end of the Cold War has wrought great changes in the global security environment and reopened the policy-making debate concerned with the most effective means of ensuring the security of the international system, states, and their individual citizens. The initial reaction in some quarters following the end of the Cold War was that the collapse of the USSR and global communism represented a decisive victory for the superior military power of the US and its alliance partners. The decision of President Ronald Reagan’s administration in the early 1980s to seek strategic parity (or even superiority) over the USSR by embarking on a quantitative and qualitative build-up of US military forces through such programmes as SDI (Strategic Defence Initiative) appeared to be vindicated. The Reagan administration’s defence policy was thought to have convinced Soviet leaders of the futility of expansionism and forced them to try to match increased levels of US defence expenditure, which in turn crippled the USSR’s economy and forced it out of Cold War competition.1 Following on from the assumption that the outcome of the Cold War had been decided by the crushing weight of US military power, the expectation was that the post-Cold War peace and security environment would also be determined to a large extent by this factor. Although President George Bush’s administration, which oversaw the end of the Cold War, was certainly conscious of the need for retrenchment in defence spending and overseas military commitments in order to reap the benefits of the ‘peace dividend’, the events of the Gulf War of 1990–91 confirmed for the Bush administration the central role of military power in post-Cold War security, and encouraged the President to lay out in his 1991 State of the Union address a vision of a ‘New World Order’ in which national and global security would be guaranteed by collective military intervention under US leadership.2 The lessons of the Gulf War and Bush’s vision of military power as the future of global security policy did not go unnoticed in other parts of the world. The perception amongst the defence communities of many middle-ranking and rising regional powers was that military power, and especially the technologically advanced military power possessed by the US, was the key to national security in the post-Cold War world, so giving rise to a number of arms races in the Middle East and East Asia.3 Even the thinking of the United Nations (UN) was affected by the belief in the primacy of military forms of security in the immediate post-Cold War and Gulf War periods. Spurred on by the success of military action in the Gulf War nominally under UN control and President Bush’s

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apparent enthusiasm for a reformed and reinvigorated UN, one of the first acts of the then newly appointed UN Secretary General, Boutros Boutros Ghali, as laid out in his June 1992 Agenda for Peace, was to seek the creation of a UN standing force to allow for rapid intervention in the early stages of international conflicts and civil wars and to undertake peace building and enforcement missions.4 Boutros Ghali’s permanent UN force failed to materialise, but the UN in early post-Gulf War operations in Somalia between 1992 and 1994 did allow itself to be pushed towards a more aggressive use of its military mandate. What began ostensibly as a peace keeping operation (PKO) mission became in practice one of peace enforcement, with the UN involved in an ultimately unsuccessful effort backed by the Bush and then the Clinton administrations to impose a settlement on the Somali factions through the use of ever-escalating degrees of military force.5 However, the reverses suffered by the multinational forces and the US in Somalia soon cooled the enthusiasm of the UN, the Clinton administration, and the policy-makers of other states towards the type of ‘muscular multilateral’ intervention outlined above. These doubts were reinforced by the experience of UN and North Atlantic Treaty Organisation (NATO) operations in Bosnia. Even the success of later efforts by NATO to use force in Bosnia and the Dayton Peace Accord since late 1995, and the US’s application of heavy military pressure on Iraq in early 1998 to ensure its compliance with UN weapons inspections, have not dispelled doubts within the Clinton administration and the US Congress about the risks of foreign military engagement and the problems of military power in resolving post-Cold War security problems, especially when channelled through the agency of UN PKO and peace enforcement operations.6 The Clinton administration, therefore, has backed away from the interventionist, US-led collective security vision propounded by President Bush only a few years previously, and tended to resist international demands for it to intervene militarily in regional hotspots such as Liberia, Haiti, and Albania. This reversal or hesitancy in US policy thus gives grounds for civilian and military security strategists in the US and elsewhere to carry out a general reappraisal of security policy in the post-Cold War era and to question the value that can be attached to military power as the sole or primary means with which to ensure global stability. The post-Cold War security agenda and limitations of military power Recent events in Somalia and Bosnia have demonstrated that, after the Cold War, and despite the democratic and liberal peace in Europe, there remain security problems elsewhere in the world capable of threatening international, state, and individual security, and of spilling over into violent conflict.7 But at the same time as Somalia and Bosnia have highlighted a number of key security dangers in the post-Cold War world and the necessity for states and international organisations to take concerted action to address them, it is also arguable that the UN, US, and NATO’s experience of military intervention has revealed the limitations of military power in dealing both with these types of violent conflict and other post-Cold War security phenomena. The first limitation is concerned with the nature of violent conflicts after the Cold War, and the declining effectiveness of military power to contain and resolve them due to

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problems of mismatched military strategies and escalating costs. During the Cold War period, the US, USSR, and their respective allies devoted much of their policy-making energy and defence budgets to preparing for the eventuality of inter-state nuclear and conventional war. Following the end of the Cold War, and despite the retention of considerable nuclear arsenals by the major powers and the desire of regional powers such as India and Pakistan to acquire these talismans of international status, the prospect of nuclear war has receded. The outbreak of the 1990–91 Gulf War showed that the possibility of inter-state conventional warfare in areas such as the Middle East between democratic and non-democratic powers (even if the protagonists’ power capabilities are unequal) cannot be entirely ruled out.8 However, this is not to say that Gulf War-style conventional conflicts fought out between highly specific adversaries and over clear-cut questions of territorial sovereignty are likely to be the predominant type of military conflict in the post-Cold War period. Instead the evidence from Chechnya, Bosnia, and Somalia suggests that post-Cold War conflicts, even if driven in part by well-articulated nationalist groups seeking to create an independent state of their own, are often more likely to involve non-state, quasi-state, or even tribal actors, and thus to assume the characteristics of guerrilla and low-intensity conflicts. The increasing importance of lowintensity conflict as part of the post-Cold War security agenda is also shown by concerns about the enhanced threat from sub-state terrorist groups seeking to obtain weapons of mass destruction, as in the case of Japan’s Aum Shinrikyō; and the rising power of organised crime groups, many of which rival small states in their destructive capabilities.9 Indeed, as Martin Van Creveld argues, by far the most significant, or ‘real’, form of warfare since 1945 in terms not only of casualty numbers but also in bringing about lasting political change has been low-intensity conflict and wars of ‘national liberation’ in Indochina, Africa, and Central Asia.10 These conflicts generally have been fought out between, on the one side, the conventional armies of major ‘colonial’powers or superpowers with access to highly destructive and sophisticated weaponry, and, on the other, the comparatively low-tech guerrilla and ‘insurgency’ armies of the developing world. In nearly all cases, and as demonstrated most vividly by the examples of the Vietnam War and Afghanistan, it has been the latter set of combatants which have emerged as the victors and confounded the view of those in the developed world who believed that a resolution to the conflict could be imposed, or peace ‘made’, through the application of ever-greater levels of military force. Hence, when viewed from this perspective, it appears that the Gulf War is in fact atypical of the nature of contemporary warfare, and that the conflicts in Somalia, Bosnia, and Chechnya described above are part of a longer-term trend towards the spread of low-intensity conflict. This trend, then, explains the declining utility of military strategies and power for dealing with many contemporary forms of violent conflict. The history of low-intensity conflicts indicates that they do not readily lend themselves to containment, resolution, or peacemaking by military force. Therefore, it is understandable that UN, US, and NATO efforts to deploy in the low-intensity conflict environments of Somalia and Bosnia the same types of sophisticated weaponry which crushed Iraqi resistance during the Gulf War, and which were developed for conventional warfare, should have proved to be relatively unsuccessful. The functional mismatch between the existing military power and strategies of the major developed nations and the types of regional low-intensity conflicts

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with which they have to deal was well illustrated by the UN/US debacle in Somalia. The use of helicopter gunships and massive firepower by the UN and US proved impotent when employed against Somali factions which held no fixed positions or territory, and were able to withdraw in the face of overwhelming odds, only to regroup later. The near indistin-guishability of one faction from another and from the civilian population, meant that concentrations of firepower produced the type of indiscriminate ‘collateral’ damage that turned the population against the UN/US force and further complicated its tasks. Operations in Bosnia confirmed many of the lessons of Somalia and the difficulties associated with using military power to contain low-intensity conflicts. The ‘stand-off weapons and ‘smart bombs’ seen to have been used with such effect in the Gulf War, and developed by the US after the Vietnam War to avoid the need to commit US troops to another costly ground war, when used in Bosnia gave NATO a clear psychological edge and did damage key Bosnian—Serb military installations. But as NATO operations continued it became clear that massive rather than surgical airstrikes would have to be used to bring the Bosnian-Serbs to heel. Moreover, in the end it was only by NATO’s acceptance of the need to deploy large numbers of troops and the risks of involvement in a low-intensity ground war—the very strategy which the US had hoped its high-tech weapons could help it avoid all along—that the Bosnian conflict could be contained and the Dayton Peace Accord implemented. To some extent the limitations of military power in dealing with these conflicts can be accounted for by political, diplomatic, and humanitarian restraints upon the freedom of commanders to exercise to the full the capabilities of the forces at their disposal. But even the relatively unfettered use of military power and the devotion to a conflict of overwhelming amounts of troops, materiel, and firepower are no guarantee of a successful outcome. This was demonstrated by Russia’s ignominious defeat at the hands of Chechen rebels between 1995 and 1997, which occurred despite its deployment of over 40,000 troops, 1,000 tanks and armoured vehicles, and the expenditure in the conflict of billions of dollars.11 Consequently, the problems of Somalia, Bosnia, and Chechnya all point to the same essential truth that in the post-Cold War period, as during the Cold War period and the history of US intervention in Vietnam, the conventional force strategies and weapons of the major powers remain limited in effectiveness when faced with low-intensity conflicts. This limitation upon the effectiveness of military power in dealing with violent conflicts is compounded by the knowledge that after the Cold War the human, political, and economic costs of intervention in both conventional and low-intensity conflicts have greatly escalated. The operations in Somalia and Bosnia have illustrated the continued high cost of intervention in terms of military and civilian casualties. As seen above, the belief at the end of the Cold War that wars in the future could be fought and contained largely by relying upon air power and high-technology weapons with a minimal commitment of ground troops and limited casualties—as with others in the past that have stressed the potential of air power to win wars—has been disproved by the failure of this strategy in Somalia and Bosnia.12 The inescapable reality of PKO in these two conflicts was that high numbers of military and civilian casualties are inevitable if a military solution is being sought. These human costs also highlight the growing domestic and international political costs of military intervention. Domestic political opinion in the US and other developed

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nations—having suddenly become accustomed to the deceptively low casualty rates of the Gulf War—is not prepared to endanger the lives of its military forces in anything other than a conflict which is perceived to threaten vital national interests.13 International political opinion also remains an important factor which affects the success of military intervention. For although the demise of the Soviet Union and the loosening of gridlock in the UN Security Council (UNSC) have given the US and other developed nations potentially greater freedom to exercise military power on a unilateral or multilateral basis, international opinion has shown itself to be highly wary of the risks of intervention, whether they are human, commercial, political, or involve questions of sovereignty. Hence, even the US, which once acted with a confident international mandate in using military power against Iraq during the Gulf War, in recent years and as illustrated by the showdown over UN weapons inspections in 1998, has had to pay an increasingly higher domestic and international political price, and risk international diplomatic isolation in its sporadic attempts to use military power to pressure the Iraqi regime. The hugely escalating economic costs of military intervention were first made clear by the Vietnam War, estimated to have cost at least US$150–175 billion (and over three times that amount in today’s dollar prices) over a nine-year period.14 But it is the colossal costs of the Gulf War which seem finally to have borne out Norman Angellesque predictions that in the twentieth century the economic price of inter-state warfare has risen to the point of becoming almost prohibitive.15 Even excluding indirect costs upon the economies of the developed world and the Middle East, the seven-month Gulf War campaign amounted to approximately US$80–100 billion in direct financial military costs to the coalition allies.16 That the war had to be paid for through the contributions of the US’s allies in Asia, the Middle East, and Western Europe (Japan alone contributing US$13 billion) demonstrated that the economic costs of military intervention now restrict even the freedom of a superpower to exercise military force.17 Moreover, as the case study of the Korean Peninsula in the 1990s in Chapters 3 to 5 will show, in many instances policy-makers are aware that high degrees of military interdependence have made the human, political, and economic costs of warfare too great to countenance, and that they are left essentially ‘muscle bound’ in any attempt to use military power to deal with contemporary forms of conflict. The declining effectiveness of military power to contain or resolve many contemporary forms of violent conflict can, therefore, be explained by the high costs of intervention, and, as the US’s National Defence Panel noted in 1997, the essential asymmetry between the strategies and weapons of developed states and the type of threats faced.18 The argument here is not that military power is redundant in dealing with the problems of the post-Cold War security agenda; for the developed states may yet produce new non-lethal weapons suited to the nature of low-intensity conflict, and it is clear that more than ever in an uncertain post-Cold War world there is a need for states to commit their military forces to regional policing and PKO actions. But rather the indications are that there is a need to acknowledge the shortcomings of the use of military power after the Cold War and that there are likely to be few clear-cut Gulf War-style victories, and even fewer opportunities to use military power as a tool for peacemaking.19 Instead, the prevalence of low-intensity conflict will mean that states will be compelled to commit their ground forces to protracted PKOs, and that, as in the case of Bosnia, unable to seek a quick

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resolution or create peace, the best they can do is to attempt to ‘smother’ the conflict until a political solution can be achieved. Thus the realisation of policy-makers after the Cold War is—and in many ways as they have known since the Vietnam War, if not before— that military power offers few quick resolutions to contemporary forms of violent conflict and is declining in its ability even to contain and keep a lid on them. The second obvious limitation of military power concerns its inability to address the root causes of post-Cold War security problems—whether they take the form of violent conflict or belong to what can be termed a ‘wider’ security agenda.20 As can been seen from the above descriptions of the conflicts in Somalia, Bosnia, and Chechnya, even though these and many other conflicts are highly militarised, and, as a consequence, may require the measured application of military force in order to pacify them initially, their underlying causes are to be found in problems such as ethnic, nationalist, and religious strife, and thus cannot be dealt with by military power alone. In turn, a set of related but broader security issues has re-emerged after the Cold War, which, although they have the potential to generate violent conflict and have military implications, are non-military in origin and require from the start non-military approaches for resolution. These security problems include: the spread of epidemic diseases; the proliferation of weapons of mass destruction and production know-how due to the collapse of the military-industrial complex in the former Soviet Union and the economic migration of weapons specialists to ‘rogue’ states in the Middle East; international migration and economic refugees; rival claims to water, energy, and other natural resources; environmental destruction; and economic crises and dislocation.21 Many of these issues existed prior to the end of the Cold War, but have been given fresh impetus in the 1990s due to the processes of globalisation and intensified economic competition, and the resulting increased fluidity of the international political economy. The potential impact of environmental destruction upon international, state, and individual security was well illustrated by the forest fires in Southeast Asia between 1997 and 1998 which endangered the long-term health of millions of people. Likewise, economic dislocation and the currency crises in Northeast and Southeast Asia during the same period generated the internal security threats of the undermining of the political legitimacy of governments in Thailand, Malaysia, and South Korea; brought about the downfall of the Suharto regime in Indonesia in May 1998, and triggered violence directed against the overseas Chinese community resident there. The currency crises also threatened to have an external security impact due to rising Southeast Asian inter-state tensions over the expulsion of migrant workers. The above discussion reveals the limitations of the utility of military power for security policy after the Cold War both in terms of its declining effectiveness to enforce peace upon or contain violent conflicts, and its low degree of applicability to a number of nonmilitary issues prominent on the post-Cold War security agenda. The combined effect of these doubts about the utility of military power has been to cause academic commentators and policy-makers in the US and elsewhere to reconsider the relative worth of its position amongst the tools of foreign and security policy.22 Clearly, again the argument here is not that the US policy-making community is advocating the abandonment of military power as a vital means of ensuring national security. This is obviously because in the eyes of many US policy-makers and their counterparts in other regions of the world, military power, and especially nuclear weapons, still remain in the last resort the most powerful

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guarantors of the integrity of national borders and the survival of states, and because, as outlined above, military forces and PKOs continue to perform a key function in attempts to contain conflicts. Furthermore, as seen in the case of the confrontation between the US and Iraq over weapons inspections in early 1998, and the US bombings of suspected terrorist facilities in Afghanistan and the Sudan as a reprisal for terrorist outrages in Tanzania and Kenya in August 1998, states and internal bureaucratic and political actors are always likely to be tempted to reach for the palliative of military force as a seemingly quick fix to many security problems that may require longer-term and non-military solutions. However, despite policy-making inertia and the hard-to-shake addiction to military views of security, it is apparent that the confidence expressed in military power by US policy-makers as the primary or most effective means to tackle many post-Cold War security phenomena has evaporated. Instead, the realities of the changing nature of the security agenda outlined above have dictated that policy-makers begin to search for and upgrade alternative tools of security policy which can be used to complement and even supersede problematic military ones, and which address the need not just to contain conflicts but also to deal with their root causes. This process is far from complete, and as will be discussed in Chapters 3 and 5 and the case study of the US approach to the North Korea security problem, there are still important differences in opinion between US security policy-makers in the Department of State and the Pentagon as to the relative utility of military versus other tools of security policy. But even so, the process of questioning the utility of military power and the search for alternative forms of security policy is under way. In particular, the changing nature of the international political economy mentioned above, and the growing importance of security problems generated by economic dislocation, has obliged policy-makers to reconsider the role of economic power in finding a pathway to peace and security.

Economic power and security The focus upon the importance of economic power as a component of security policy is not a new phenomenon and again can be traced back to the failure of US military strategy in Vietnam. By the late 1960s and early 1970s, the administration of President Richard Nixon perceived clearly that the costs of military engagement in Vietnam were undermining US economic strength and hence the very basis of national security. The administration’s response was to scale down US military commitments in Asia under the 1969 Guam Doctrine, to seek eventual withdrawal from Vietnam, and to prioritise the revitalisation of US economic power through the New Economic Policy (NEP) of 1970. These important beliefs about the ‘primacy of economics’ and economic power were obscured rather than discredited during the period of the second Cold War from the late 1970s until the late 1980s.23 The Soviet invasion of Afghanistan and limited success for the use of conventional military power by the Reagan administration in Grenada and Libya distracted the attention of policy-makers away from questions of economic security and back to military ones.24 However, the renewed Cold War did not halt the trends towards global economic interdependence that had been set in motion in the 1970s, or

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alter the fundamental importance of economic power as one of the key ‘multidimensional’ elements in the establishment of national power.25 The globalisation of trade, investment, and especially financial markets, facilitated by advancements in information technology, has meant that national wealth is manifested increasingly in these intangible components of economic power which military power is unable to seize, destroy, control, or augment. The implication of this is that the security of states and their individual citizens is increasingly determined more by economic vitality and the command of market shares than by the acquisition of national territory and command of raw materials.26 Given these conclusions, the preoccupation of the Bush and Reagan administrations with military-oriented conceptions of security policy can actually be regarded as a radical departure from the conceptions of security premised upon economic power that had been established since the conclusion of the Vietnam War in the early 1970s.27 In turn, it is only natural that with the end of the military pressures of the second Cold War policymakers should have refocused their attention on the long-running question of economic power as a central element of national security policy. Even the Bush administration in its later stages began to emphasise the importance of economics amongst the tools of national power, and started to grope for a policy to restore US economic vitality in the run-up to the 1992 Presidential elections. Evidence of this is provided by the administration’s more aggressive stance on trade policy towards Japan with threats to apply the Super 301 clause of the 1988 Omnibus Trade Acts; the Structural Impediments Initiative (SII) of 1989; and the rush to complete the signing of the North American Free Trade Agreement (NAFTA) in 1992. But it is the Clinton administration which has recognised most fully the primacy of economics and articulated national security in terms of national economic goals.28 The importance that the administration has attached to economic conceptions of power was first revealed by Clinton’s 1992 campaign pledge, ‘to elevate economics in foreign policy, [to] create an economic security council similar to the National Security Council’.29 The intention of the Clinton presidency to honour this pledge was subsequently shown by the establishment of the National Economic Council (NEC) in 1993; the presence in the first administration of Robert Reich as Labour Secretary, one of the chief proponents of industrial policy; the persistence with ‘framework talks’ and market-opening initiatives towards Japan; and by its determined manoeuvring to place the US at the head of the two NAFTA and Asia Pacific Cooperation (APEC) trading blocs, and thereby reposition the US as the leader of the global economy. Moreover, in a major speech in January 1995, Warren Christopher, the then US Secretary of State, confirmed the US’s increasingly ‘neo-mercantilist’ policy stance, when he stated that: A core premise of our domestic and foreign policies is that our economic strength at home and abroad are mutually reinforcing. I believe that history will judge this emphasis to be a distinctive imprint and a lasting legacy of the Clinton administration.30 The Clinton administration’s view of economic power as the foundation of national strength and security contrasts strongly with that of the Reagan and early Bush

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administrations which saw military power as primarily fulfilling that role, and explains why in its early years the administration invested such great diplomatic and political effort in trade policy, but backed away from military engagement in areas such as Bosnia in which it perceived no immediate national economic or security interest. During the Clinton administration’s second term, the concentration upon questions of economic over military security has been rebalanced to some extent. Renewed US economic growth but also domestic political gridlock have combined to encourage the administration to redirect its policy-making energies to issues such as the restructuring of NATO and, as will be seen in Chapter 5, the US—Japan military alliance. Nevertheless, the emphasis placed upon economics has remained an important feature of the Clinton administration’s foreign policy and has served to confirm the view that not only is economic power the foundation of national security, but also that it can serve as an instrument of security policy in its own right. The US has a long tradition of using economic power as a means with which to pursue its foreign and security policy objectives. Included amongst the various instruments of economic power that it has used are trade tariffs and quotas, embargoes and boycotts, and the provision of military and economic aid.31 But there are signs that under the Clinton administration the US may be growing more reliant than in the past upon instruments of economic power to supplement and even act as a substitute for military power in an era in which the costs and effectiveness of military power have been called into question. Hence, the Clinton administration has appeared willing to invoke economic sanctions against those competitor nations that it feels will not reciprocate with it on free-trade issues.32 Threats of trade wars against Japan and China can be dismissed to some extent as political rhetoric or as unrealistic appraisals of the US’s ability to damage competitor economies without damaging its own. But at the same time, these threats are a demonstration of the Clinton administration’s confidence that US economic power can be manipulated for foreign policy ends. The Clinton administration also seems to be more willing than its prede-cessors to rely heavily or wholly upon economic instruments of power to deal with specific security issues. Hence, where the Bush and Reagan administrations might have seen intervention in Haiti as politically advantageous and militarily feasible, the Clinton administration’s first preference was for economic sanctions rather than military action in order to obtain a favourable outcome. Haiti is a relatively minor security problem, but even with regard to larger security issues the instinct of the Clinton administration has often been to avoid reliance upon military force in favour of economic power. Although the Clinton administration has periodically taken limited military action against Iraq, such as to threaten the use of massive military force as in early 1998, its optimum policy has been to persist with international economic sanctions. There was also an initial desire to use economic sanctions to pressure the Serbian side in the Bosnian conflict, and the Clinton administration has left the embargo on Cuba firmly in place and even allowed it to intensify with the passing of the Helms-Burton Act in 1996.33 The Clinton administration has continued with the policy of the economic engagement of China, and, as will be examined in Chapter 3, has utilised economic power to both pressure and open up North Korea since the mid-1990s.

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The balance of economic and military power, and comprehensive security policy The Clinton administration could be accused of simply a lack of political resolve and a desire to avoid foreign military entanglements in its preference for using instruments of economic power to address post-Cold War security problems. This criticism may in part be valid, as buffeted by domestic and international political pressures the Clinton administration has sometimes appeared to waver between military and economic conceptions of security. But these criticisms do not alter the fact that the distinctive characteristic of the Clinton administration’s security-policy thinking has been to recognise the limitations of military power and to promote economic power as an effective tool of security policy for dealing with the complexities of the post-Cold War security agenda. The problem that US security policy-makers face is really one of balance, and the relative weight of importance to be attached to military and economic power for security purposes. US policy suggests that in some cases, such as the Asian currency crisis starting in 1997, economic power is capable of serving as the primary means with which to contain and resolve security problems; whilst in others, such as PKO and peace-building operations in the Former Yugoslavia, economic and military power will have to be used in careful support of each other. But even though after the Cold War economic power cannot always be the exclusive or primary tool of security policy, it is certain that at the very least it has to rank equally alongside military power in terms of importance and effectiveness, and requires equal policy-making vigour and inventive-ness in its usage, if post-Cold War security problems are to be resolved satisfactorily. The transformation in US security policy-making conceptions thus argues that it is not necessarily those states which dispose of large conventional military power capabilities which can most effectively guarantee their own security and contribute to international stability after the Cold War, but instead those states which wield economic power or employ a prudent mix of economic and military policy tools. This demand for economic and comprehensive approaches to security in the post-Cold period then raises the question discussed next as to what is to be the future security role of Japan, given its position as an economic superpower and the originator of the concept of comprehensive security policy.

Japanese security policy after the Cold War The end of the Cold War, the Gulf War, and Japanese military policy Japan’s military contribution to international security has been the most highly contentious issue in post-war Japanese politics. This is a combined product of the catastrophic defeat in the Pacific War and the experience of the atomic bombings of Hiroshima and Nagasaki; the adoption of the 1947 ‘peace Constitution’; Japanese government prohibitions on the use of its military forces; the opposition by the Social

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Democratic Party of Japan (SDPJ; known as the Japan Socialist Party from 1945 until 1995) in most of the post-war period to the constitutionality of the Japan Self-Defence Forces (SDF) and the US-Japan security treaty; and lingering suspicions of Japanese militarism by neighbouring Asian countries. Defence and security issues have formed the fault lines of government and opposition politics, and have always had the capacity to generate internal crises such as that over the revision of the security treaty in 1960.34 But despite the highly sensitive nature of the security debate and the obstacles to Japan’s fulfilment of a military security role, by the period of the second Cold War it was clear that the cautious and incremental approach of successive conservative Liberal Democratic Party (LDP) governments towards defence issues had enabled Japan to assume an increasingly militarised security posture in a fashion similar and indeed complementary to that of the US.35 The Reagan era in the US of rising defence budgets and military build-up was paralleled to some extent by the activities of the Suzuki Zenkō and Nakasone Yasuhiro LDP administrations in Japan. Pressure from the US for Japan to end its alleged ‘free-rider’ status, and to increase military support for the containment of the USSR following the end of détente and the invasion of Afghanistan in 1979, provided the legitimisation for the Suzuki administration to assume responsibility for the protection of 1,000 nautical miles of the Sea Lanes of Communication (SLOC) around Japan in 1981; and for the Nakasone administration to scrap the 1 per cent Gross National Product (GNP) ceiling on defence spending in 1987, to exempt the US from Japan’s ban on the export of defence-related technology by the signing of the Exchange of Technology Agreement in 1988, to increase burden sharing and financial support for US forces stationed in Japan, and to embark upon the quantitative and qualitative upgrading of the military capabilities of the SDF.36 Many Japanese and international commentators felt that the outcome of Japanese policy would be the further and dangerous remilitarisation of Japanese society.37 But although these policy developments did demonstrate that LDP policy-makers were intent on enhancing Japan’s military contribution to international security, at the same time fears about Japanese remilitarisation were moderated by the knowledge that Japan’s defence spending still remained low in comparison with most other developed nations; that Japan did not attempt to acquire offensive weapons, such as aircraft carriers, long-range bombers, or nuclear weapons; and that the legal restrictions on the overseas despatch of the SDF remained in place. However, just as in the case of the US, it is events after the end of the Cold War and the occurrence of the Gulf War which have re-ignited the smouldering debate on security, and given initial support to military conceptions of Japan’s contribution to international security. Under pressure from the US and its allies to participate in the multinational effort in the Persian Gulf in some way other than purely the provision of economic assistance and its perceived ‘chequebook diplomacy’, the government of Prime Minister Kaifu Toshiki began to look for ways to make a ‘human’ contribution to the allied forces. In effect this meant the overseas despatch of the SDF and acceptance of the argument that military power was the most useful contribution that Japan could make to international security. The main attempt made during the Gulf War to despatch the SDF overseas was the submission to the Diet in October 1990 of the United Nations Peace Cooperation bill (Kokuren Heiwa Kyōryoku Hōan), sponsored by Ozawa Ichirō, the then Secretary

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General of the LDP, and which if passed would have allowed the limited despatch of the SDF on UN operations.38 This bill was eventually defeated due to poor preparation and SDPJ opposition in the Diet, and the governing LDP was frustrated in its attempts to send the SDF overseas during the Gulf War itself. But later on, after the end of hostilities, the LDP government was able to despatch minesweepers to the Persian Gulf on the basis that the clearance of mines from sea lanes in peacetime did not represent the exercise of force.39 The failure to pass the bill and the international criticism that Japan had been subject to over its purely financial contribution to the war effort, only strengthened the determination of sections of the LDP to amend the SDF Law and even possibly the Constitution in order to allow the despatch of the SDF on UN PKO missions. The government established a Special Study Group on Japan’s Role in International Society under the chairmanship of Ozawa which concluded that it would be possible for Japan to participate in multilateral and UN military operations by adopting the concept of ‘international security’, or kokusai anzen hoshō—really coded language for the exercise of the right of collective self-defence.40 However, as international debate shifted to focus on UN PKO, the issues of the revision of the government’s interpretation of the constitutional ban on collective security and the revision of the Constitution itself were shelved. Instead, the government’s energies were concentrated on revision of the SDF Law, and the PKO Bill was subsequently passed in June 1992. This led to the overseas despatch for the first time of the SDF to participate in non-combat PKOs in Cambodia between October 1992 and September 1993. Although the PKO Bill placed more restrictions upon the despatch of the SDF than certain factions of the LDP may have hoped for, it did mark further progress in the development of Japan’s military security role, and demonstrated that sections of the LDP were in accord with President Bush’s future vision of international security based upon collective military intervention.41 Thus, as Yamaguchi Jirō comments with regard to the United Nations Peace Cooperation bill: ‘[it] implanted in the realm of public debate the concept that Japan’s contribution to international security could be linked to the despatching of the SDF in one form or another.’42 The regional security environment, the US-Japan alliance, and domestic politics The trauma of the Gulf War, though, has proved to be just the first stage in the intensifying debate on Japan’s contribution to international security following the end of the Cold War: a debate which has been given added impetus by the interrelated factors of changes in Japan’s strategic environment, the US-Japan alliance, and domestic Japanese politics, and which subsequently has created the conditions for the further advancement of Japan’s military security role. For Japan, the end of the Soviet threat and Cold War bipolar structure in Northeast Asia has produced both new strategic opportunities and uncertainties. Japanese policymakers are generally optimistic about the prospects for stability in the region due to growing economic interdependence and the progress of government-level multilateral security dialogue through the ASEAN Regional Forum (ARF). But on the other hand,

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they are also aware that the end of bipolarity and the accompanying fluidity of the international system in the Asia-Pacific has produced a number of non-specific but potential threats to Japan’s security.43 Security policy-makers in the Japanese Ministry of Foreign Affairs (MOFA) and Japan Defence Agency (JDA) have identified a series of low-intensity and non-military threat phenomena, including transnational terrorism, the narcotics trade, environmental destruction, and economic dislocation.44 In addition, although Japan’s exclusively defence-oriented (senshū bōei) posture means that it tends to eschew the direct and public designation of particular states as threats to national security, policy-makers remain concerned about the possibility of interstate rivalries in the region which could generate nuclear, conventional, and low-intensity conflicts. Hence, political instability in the still heavily militarised Russian Far East is a major concern, and, as will be seen in later chapters, the rise of the North Korean nuclear crisis has also had a crucial influence upon the Japanese security debate. But above all, the modernisation of China’s military capabilities has generated the same types of discussion amongst the Japanese policy community as in other countries in the Asia-Pacific region, about the potential threat from China.45 China’s possible progression towards economic and military superpower status has certainly persuaded Japanese policy-makers of the need to redouble their existing efforts to strengthen cooperative relations and economic inter-dependence with China. At the same time, though, the magnitude of the potential threat to Japan and the region’s security, and the need to hedge against it by strengthening Japan’s security relations with the US, has been brought home by recent events. China’s military intimidation of Taiwan with missile tests and military exercises in the run-up to presidential elections on the island in March 1996, which drew the response from the US of the despatch of the aircraft carrier Independence based in Japan to the Taiwan Straits to illustrate US resolve to intervene in any military crisis there, demonstrated to Japanese policy-makers the possibilities for conflict between the US, China, and Taiwan close to Japan’s own territorial waters, and how China’s irredentist ambitions could be extended to the Sino-Japanese dispute over the Senkaku Islands (or Diaoyu Islands in Chinese). More importantly still, the events surrounding Taiwan indicated China’s growing willingness to project military power in defence of its national interests, and how in the future, even if armed with a minimal blue-water naval capacity, China could disrupt Japan’s SLOCs to Middle Eastern oil supplies and beyond. The security debate in Japan has been further complicated by doubts about the future of the US-Japan military alliance. The end of the Soviet threat which formed the original rationale for the US-Japan security treaty, coupled with increased US-Japan bilateral trade friction, has undermined the political, military, and economic legitimacy of the alliance. In particular, and as will be demonstrated in Chapter 3, strains in the US-Japan alliance were made apparent by the North Korean nuclear crisis of 1994, during which time Japan was unable to define the extent of military support that it could provide to its ally in the event of a contingency on the Korean Peninsula or elsewhere in the region. Moreover, a Japanese domestic political crisis has emerged over renewed opposition to US bases in Okinawa. Since the return of Okinawa to Japanese administration in 1972, around 60 per cent of the 37,000 US troops in Japan have continued to be stationed in Okinawa, with US bases accounting for close to 10 per cent of the total land area of the prefecture. The necessity of this high concentration of US forces in Okinawa came into

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question with end of the Cold War, and long-term frustration in the prefecture regarding its disproportionate burden of bases reached a critical point with the incident of the rape of a Japanese schoolgirl by three US servicemen in the prefecture in September 1995. In spite of official US apologies for the incident and the arrest and imprisonment of the servicemen responsible, the incident became the occasion for large-scale protests in Okinawa against the presence of US bases. These protests were supported by the governor of Okinawa, Ōta Masahide, who was disinclined to allow the prefectural land use committee to force landowners to renew leases for land upon which US bases are located, thereby threatening that, with the expiry of leases held by a group of around 3,000 antiwar activists, the presence of US troops in Okinawa would become illegal. The largest demonstration on 21 October 1995 was attended by 85,000 people, and protests continued through to the holding of a prefectural referendum on 8 September 1996, in which a majority of residents voted for the realignment, consolidation, and reduction of US bases. The problems of North Korea and Okinawa badly shook the US-Japan relationship between 1994 and 1996, and only served to encourage a mix of commentators from both the left and right of the political spectrum—including pacifist thinkers, the Japan Communist Party (JCP), Japanese Gaullists, and die-hard nationalists such as Ishihara Shintarō—to step up their calls for the eventual dismantlement of the military alliance.46 Opinion polls indicate that the bulk of the Japanese public still remains broadly supportive of the US-Japan security treaty and status quo in defence policy. But government policy-makers have been deeply unnerved by recent crises over security policy, and accept that in order to head off further criticism of the alliance and consequent weakening of the fundamental basis of Japanese security policy there is an urgent need to renew the alliance’s political and military legitimacy. Domestic political turmoil, triggered initially by the Gulf War and now reinforced by the uncertainties of the post-Cold War security situation and problems in the US-Japan alliance, has continued to impact upon the security debate in Japan and to produce the necessary conditions for Japan to assume a greater military role in security. The process of political change began with the collapse of the 1955 political system and LDP oneparty rule brought about by the defection in 1992 and 1993 of groups of LDP members to form a number of smaller conservative political parties.47 This fragmentation of the conservative parties was ostensibly the result of dissatisfaction over the LDP’s handling of domestic issues such as the involvement of faction boss Kanemaru Shin in the Sagawa Kyūbin corruption scandal and the related demand for electoral reform. But the break-up of the LDP was also motivated by the desire of some former LDP members, the most notable of whom was again Ozawa Ichirō, to create the domestic political conditions which would enable Japan to make a greater military contribution to international security than was possible at the time of the Gulf War. For Ozawa this has meant the investigation of constitutional change to allow for an expanded Japanese military role in UN PKOs, the independent despatch of the SDF overseas, and the SDF’s possible involvement in combat operations. After breaking away from the LDP, Ozawa took the lead in engineering two short-lived coalition governments between August 1993 and June 1994. These coalitions consisted varously of the conservative splinter parties, the SDPJ (later to become the Social Democratic Party, or SDP) and other smaller parties, and were

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under the premiership of first Hosokawa Morihiro and then later Hata Tsutomu. The coalition succeeded in passing measures on electoral reform, but collapsed before the issue of Japan’s international contribution could be addressed fully. The SDPJ along with the smaller and moderate New Party Sakigake then entered into a coalition with the LDP in June 1994, whilst the conservative parties eventually merged to form the NFP (New Frontier Party, or in Japanese the Shinshintō), which came under the leadership of Ozawa in January 1996. The LDP-SDPJ coalition lasted until the Lower House elections of October 1996, to be then replaced by a LDP single-party government, although the SDPJ and Sakigake continued to work with the LDP outside the cabinet on issues of financial reform and security policy until June 1998. In the meantime, the main opposition parties have regrouped again, with moderate former NFP members and splinter groups of the SDPJ and Sakigake creating the centrist and main opposition Democratic Party of Japan (DPJ) in April 1998. The rump of the NFP and Ozawa’s followers then reconstituted themselves as the Liberal Party; the third largest opposition party after the DPJ and reformed Kōmeitō (Clean Government Party). As a result of these changes in the domestic political situation the security debate in Japan has reached an important new stage. Certain commentators are probably pleased to see the break-up of the NFP and the believed political marginalisation of Ozawa whom they see as a false internationalist bent on the remilitarisation of Japan, and as having manipulated the domestic political scene to achieve this end over the long term.48 Others, including Ozawa himself, have portrayed NFP and Liberal Party policy in a less radical light. They argue that it is only natural that Japan as an important global economic power and developed democracy should act to support the international community by the commitment of men as well as money to any future military crisis. Ozawa, setting the example of other Western nations as the criteria by which to judge, defines this new military role for Japan as a ‘normal’ one.49 In order to carry out this role without intimidating its neighbours, it is argued, Japan should debate openly matters of security and establish firm constitutional rules to both free up and set limits to the use of Japan’s military power. The security policy of Ozawa’s NFP and Liberal Party is, then, controversial, and at times has made Ozawa (by his own admittance) the most disliked figure in Japanese politics. But what is clear is that, similar to the period of the Gulf War and the UN PKO Bill, even though Ozawa has not been able to control government policy directly, he has been able to influence the parameters of the debate on security in Japan in the 1990s due to his role in the restructuring of the 1955 political system. For despite his failure to maintain the coalition government between 1993 and 1994, and the eventual disintegration of the NFP in late 1997, his efforts to create a second conservative party, the subsequent drop in support for the SDPJ, and the return to power of the LDP, have all acted to strengthen the domination of domestic politics by conservative parties which are predisposed to support the expansion of Japan’s military contribution to international security.50 Hence, as a result of Ozawa’s political machinations, between 1995 and 1997 Japan had two major parties committed to the maintenance of the USJapan alliance and overseas despatch of the SDF, and which increasingly equated Japan’s contribution to international security with the exercise of some kind of military power, although the extent and speed of the move towards this policy differed between the two parties. Indeed, the common ground between the two parties on security matters was

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shown in the autumn of 1997 with the aborted attempt by certain factions of the LDP to build an informal conservative coalition (hoho rengō) with Ozawa’s supporters in order to ensure the smooth implementation of the revised Guidelines for Japan-US Defence Cooperation discussed later in Chapter 5. Ozawa’s part in the break-up of the 1955 political system has also meant that the SDPJ, the traditional self-proclaimed guardian against the remilitarisation of Japan, has been forced to abandon many of its principles on security policy, and has then been eliminated from its position as the main opposition party. After joining the coalition government with the LDP, on 20 July 1994 the SDP broke its own post-war ‘taboo’ on security by acknowledging for the first time the constitutionality of the SDF, and has since been co-opted into LDP policy on many defence issues. The catastrophic loss of seats by the SDP in the October 1996 House of Representatives and July 1998 House of Councillors elections (leaving it with a mere fourteen and twelve seats in both houses respectively) may not spell the complete end of SDP influence on the security debate, as under the leadership of Doi Takako it seeks to restructure and re-adhere to its traditional policies. But for the time being, the defeat of its pacifist ideology and the reduction in its political strength has removed one more obstacle towards the enhancement of Japan’s post-Cold War military security role. Meanwhile, the new opposition DPJ that has emerged in the wake of the collapse of the SDP, although more moderate on issues of security than the NFP or Liberal Party, looks set to back an expanded role for the SDF in PKO and the strengthening of the US-Japan alliance. Ozawa has also been able to influence LDP policy and the wider debate on security in the mass media. While the LDP is far more cautious than the NFP in its pronouncements on security policy and is highly sensitive to domestic and international criticism engendered by any attempt to expand the role of the SDF, certain elements of the LDP are sympathetic to their former Secretary General’s view and willing to propagate further the debates on security that Ozawa initiates, with the aim of preparing and conditioning public opinion for the further incremental expansion in the SDF’s military role which is the hallmark of LDP policy on security. The most notable examples of this type of situation whereby the LDP and NFP/LP debates on security mutually reinforce each other have been the hoho rengō proposals already discussed, and debates since 1996 on Japan’s exercise of the right of collective self-defence, and support for the US in the event of a Far East contingency, to be explored in Chapter 5. Finally, the ability of Ozawa and his supporters to shake up the debate on security in Japan has been demonstrated by the debates on constitutional revision that have hit Japan periodically since the Gulf Crisis, and which have been promoted by Ozawa’s book laying out his vision for Japan, Nihon Kaizō Keikaku (Blueprint for a New Japan). Thus, the Yomiuri Shimbun, a leading national newspaper reputedly close to Ozawa, in 1992 and 1994 produced controversial proposals for revisions of the Constitution, both of which affirmed the constitutionality of the SDF and contained an article on ‘International Cooperation’ to allow the despatch of the SDF overseas.51 The debates on collective security and constitutional revision look set to end in stalemate, but again their very existence shows that among certain sections of policy-makers there is growing support for an expanded military role for the SDF. Changes in regional security, the US-Japan alliance, and the domestic political environment, in turn, have fed through into official government policy on defence and

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security. Japanese policy was generally slow to react to the end of the Cold War, and even as late as 1991 the USSR was still listed as the main potential source of military threat to Japan in the JDA’s Defense of Japan white paper.52 But changes in Japanese military security policy were put in train with the publication in August 1994 of the report of the Prime Minister’s Advisory Group on Defence, known as the Higuchi report, which called for Japan to re-adapt its traditional defence policy to the post-Cold War security environment. The report recommended that Japan should do this not only by strengthening military cooperation with the US, but also by rationalising the SDF’s force structure to make it more flexible to deal with low-intensity conflicts, by taking initiatives to increase support for UN PKO, and by promoting multilateral security dialogue in the Asia-Pacific Region.53 MOFA and JDA security policy-makers have responded in part to these demands by authorising SDF participation in PKO in Mozambique between May 1993 and January 1995, in Kenya and Zaire to assist Rwandan refugees between September and December 1994, and in the Golan Heights since January 1996. Demands for greater Japanese participation in PKO missions may also grow as it seeks a permanent seat on the UNSC. The MOFA, supported by politicians from all parties, has also emerged as an important sponsor of multilateral security dialogue, with the then Foreign Minister Nakayama Tarō’s proposal in 1991 that the ASEAN-PMC (Association of Southeast Asian NationsPost Ministerial Conference) should become a ‘forum for political dialogue’ leading to the first meeting of the ARF in July 1994 as the first post-Cold War multilateral governmental body in the Asia-Pacific to discuss security concerns.54 Evidence of the expanded range and scope of Japanese military activity has also been provided by the SDF’s continued participation along with the US and South Korea in RIMPAC (Rim of the Pacific) exercises, and the Japanese government’s steady promotion at the lower subregional level of bilateral security dialogue with the ASEAN nations, South Korea, and China.55 However, the principal response of the Japanese government to the changing post-Cold War security environment has been to strengthen and relegitimise the bilateral security alliance with the US. Policy-makers have tried to defuse the political crisis over Okinawa by passing special legislation in April 1997 to ensure the provisional legality of US bases while the prefectural land-use committee continued its deliberations, but also by establishing with the US in November 1995 the Special Action Committee on Facilities and Areas in Okinawa (SACO) (comprising officials from the MOFA, JDA, US Department of State, and US Department of Defence) to look into ways of reducing the size and number of US bases in the prefecture. SACO issued a mid-term report on 15 April 1996, timed to coincide with the visit of President Clinton to Japan, and which recommended the return of the Futenma Marine air station, and a general reduction of around 20 per cent in the land area of US bases in Okinawa. This was followed by the committee’s final report on 2 December 1996 which proposed that the Futenma facilities should be transferred to a floating heliport to be constructed off the coast of Okinawa. The huge estimated costs of the heliport and the large economic stimulus package that the Japanese central government offered Okinawa Prefecture at the same time to persuade it to move ahead with the construction of the project demonstrate the lengths that the Japanese government was prepared to go to in order to keep a lid on the Okinawa base

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problem and to prevent the release of any new domestic political crisis centring on security issues. But although Japanese government initiatives have gone some way to placating anti-base sentiment in Okinawa, the problem still clearly remains unresolved. Nago City, one of the cities in Okinawa which first indicated its willingness to accept the heliport site, eventually rejected the project in a local referendum in December 1997, and Governor Ōta confirmed prefectural opposition to the transfer of the Futenma facilities within Okinawa in February 1998. As a result, prospects for the return of Futenma have diminished; the base issue remains a nagging political thorn in the side of the US-Japan alliance; and both sides have been forced to wait for the outcome of the Okinawa gubernatorial elections in November 1998, in the hope that this might bring about a less anti-base prefectoral government. In addition to the problems in Okinawa, the Japanese government has tackled political and military deficiencies in the alliance revealed during the North Korean nuclear crisis by joint planning with the US to increase Japanese logistical support for US forces in the event of a military contingency in the region involving North Korea, China, or any other state. These plans include the revised National Defence Programme Outline (NDPO) of November 1995, the Acquisition and Cross Servicing Agreement (ACS A) of April 1996, and the revision of the Guidelines for Japan-US Defence Cooperation between April 1996 and September 1997. All of these are dealt with in more detail in Chapter 5, but at this point it is important to note that what they demonstrate is that the main thrust of Japanese security policy after the Cold War has been a continued emphasis on an indirect military contribution to security through the device of the bilateral US-Japan alliance and support for the US’s power projection capacity in the region and beyond. The overview of developments in Japanese security policy debate in the post-Cold War period has shown that its military aspects have come increasingly to the fore. The Gulf War and changing security environment have propelled the political and public debates on security towards sanctioning a greater military role for Japan, and even though Ozawa’s supporters look unlikely to gain significant power in the immediate future, his vision of Japan as a ‘normal’ country in its watered-down version and as accepted by large sections of the LDP has set the agenda for much of the thinking about security in Japan. Changes in policy-making opinion in Japan have produced government backing for a new Japanese role in UN PKOs, in multilateral security dialogue, and, as will be seen, the US-Japan alliance. The extent of the changes in Japan’s security policy should not be overstated, given that Japanese defence budgets in the post-Cold War, in contrast to many other Asia-Pacific countries, have continued to rise at a slower rate, and that most of the constitutional restrictions on Japan’s military activity remain in place.56 The PKO Bill was a radical change, but the natural caution of most policy-makers in Japan and the culture and norms of anti-militarism among the general population means that further changes in Japan’s defence role, barring another major global or regional security crisis, are likely to remain incremental.57 Nevertheless, it is clear that since the end of the Cold War, the strongest trend to emerge in the Japanese security policy-making debate is one which mirrors those conceptions of security in the US immediately after the Gulf War, and has thus looked to carve out a greater military security role for Japan, both independently by the despatch overseas of the SDF and in cooperation with the US. This trend in the debate emphasising the gradual remilitarisation of Japanese security

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policy has at times seemed relentless. But it is also clear that, just as in the US under the Clinton administration, there exists in Japan a countertrend in the debate on security policy which stresses alternative conceptions of security revolving around notions of economic power. The next section will examine these traditions of alternative security policy in Japan, and how they have reacted to the end of the Cold War and sought to outline another path to security reliant chiefly not upon military but upon economic power.

Economic power and Japanese security policy Economic security policy during the Cold War The tradition in Japan of seeing economic power as the foundation of national power and as an instrument of security policy is a relatively old one. The longheld conception of Japan as a resource-poor and economically vulnerable country has meant that in large part Japanese diplomacy and security policy from the Meiji period until the contemporary era has been driven by the search for economic and technological security.58 In the immediate post-war period, Japanese policy-makers were quick to realise that in the future Japanese power would have to be expressed through economic rather than military means. The intellectual and political debate over pacifism was one cogent expression of doubts about the utility of military power for security ends, and the SDPJ’s opposition to the existence of the SDF and US-Japan alliance during the Cold War meant that it advocated alternative forms of security policy, including pacifism, neutralism, and economic cooperation.59 LDP conservative politicians during this period, as has been seen, were supportive of the US-Japan alliance and the gradual expansion of Japan’s own military defence capabilities, but also did not lose sight of the possibilities of economic power in the service of security policy. For instance, the so-called ‘Yoshida doctrine’ of twice Prime MinisterYoshida Shigeru (1946–47 and 1948–54), which laid down the basic path of Japanese diplomacy in the post-war period of maintaining the security alliance with the US whilst Japan concentrated upon economic recovery, did not seek to deny the utility of military power but merely to entrust the role of exercising military power for security purposes to the US. But the Yoshida doctrine’s emphasis upon rebuilding the Japanese economy and economic growth set in a motion a train of thought concerning the primacy of economic power that has persisted into the 1990s. The income-doubling ‘economism’ policies of Ikeda Hayato’s administration between 1960 and 1964 were partly designed to mitigate the domestic political chaos caused by the revision of the USJapan security treaty in 1960, but were also an attempt to reformulate notions of national power in the language of economics. Arguably, both the Yoshida doctrine and the discourse of economism were crucial stages in the development in Japan of conceptions of security that have attempted to give primacy to economic power and to minimise military power. The development of this type of thinking in Japan about security matters can be seen by the comments of Fukuda Takeo, the then Japanese Foreign Minister and later Prime Minister, when he stated, in 1972, that:

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We wish to employ our own economic strength to gain an increasing voice in the international community. The tradition was that a nation used its economic power to become a military power, but this is not the case with us today.60 Realist thinking might criticise Fukuda’s comments and the type of moderate Japanese pacifism that it represents as naïve, arguing that this type of security policy had only been made possible in the first place by the luxury of having entrusted to the US the role of protecting Japan from military threat during the Cold War. Others may posit that the language of economic security policy is indeed realist, as it disguises or is a reflection of neo-mercantilist and technonationalist policies.61 But regardless of whether commentators choose to interpret Fukuda’s remarks as fitting a realist framework or otherwise, there can be no doubting the durability of the attachment of Japanese policy-makers to conceptions of security based on economic power, and that when formulating these conceptions they have simply been acknowledging, in the same way as their US counterparts since the 1970s, the changing nature of the international political economy and the now central importance of economic power. Thus, as William Nester comments, ‘Tokyo’s was the first government to understand that military power was becoming increasingly irrelevant in an increasingly interdependent world.’62 Moreover, from these early beginnings, Japanese policy-makers have gone on to formulate more detailed conceptions of the role of economic power within security policy. The concept of Comprehensive National Security Policy (Sōgō Anzen Hoshō), which emerged during the administration of Ōhira Masayoshi (1978–80) and was adopted as national policy under his successor Suzuki Zenkō, with the establishment of a new Comprehensive National Security Council in December 1980, represented the first conscious attempt to attach a specific security function to economic power. Under the original concept, diplomacy, military power, and economic power were ascribed equal roles in national security. The main focus upon economic power and economic security policy was with regard to efforts to ensure, in the event of the deterioration in the international situation surrounding Japan, the continued supply of vital metal, energy, and food resources. However, the report did suggest a more active role for Japanese economic power in attempts to alleviate sources of international tension before they escalated into major conflicts. The role of economic aid in Comprehensive Security was not clearly articulated, but the report indicated that the use of Japanese Official Development Assistance (ODA) and support for North-South economic cooperation would help to maintain the stability of the international order.63 Comprehensive Security and the placing of economics within it was criticised by many inside and outside Japan as simply being a means to further Japan’s own economic interests and to evade international military responsibilities. For example, the late Kōsaka Masataka, an eminent scholar of international relations and an original member of the study group that devised the concept under government direction, later claimed that, ‘Though excellent in theory, it [a comprehensive security capability] has actually been an excuse, even a lie, to avoid greater defence efforts.’64 Others have taken an alternative line, and have criticised the concept of comprehensive national security for its lack of conceptual clarity and as a pretext for the extension of Japan’s military power. Comprehensive National Security has been seen as making the remilitarisation of

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Japanese security policy more palatable for the Japanese public by cloaking this process in the appealing language of economic security.65 Critics point out that the presence of such ‘realist’ thinkers as Kōsaka Masataka and Inoki Masamichi in the study group undermines its credentials as a truly alternative view of security, note that the Comprehensive National Security Council has never really functioned effectively, and are suspicious of the enthusiastic adoption of the concept by politicians such as Nakasone who are regarded as ‘hawkish’ on defence matters.66 But it is apparent that despite the criticism that it has received, Comprehensive Security has inculcated considerations of economic power into mainstream Japanese conceptions of security policy. Even as late as 1994 the Higuchi report was still advising that Japan should lay out a vision of security, ‘making full use of all policy means, such as diplomacy, economy and defence. That is to say it is necessary to build a coherent and comprehensive security policy.’67 Moreover, despite attempts by some policy-makers in the 1980s and early 1990s to increase Japan’s military contribution to international security, economic conceptions of security have continued to develop and remain prominent in Japanese security policy-making debate.68 In particular, the possibility that economic power may be used for security purposes has been demonstrated by Japan’s ODA policies. Ōhira and Suzuki, the first Japanese leaders to adopt the concept of Comprehensive Security, were also the first to link explicitly Japan’s economic aid to its security policy, by stating in 1980 and 1981 respectively that in future Japanese ODA would be provided to those ‘countries bordering areas of conflict’, and which were ‘important to the maintenance of peace and stability in the world.’69 Successive Japanese governments in the latter stages of the Cold War followed these guidelines for the use of ‘strategic aid’ by directing ODA to states such as Pakistan, Turkey, and Somalia which were considered by the US and Japan to be vital to Western security.70 By 1989 Japan had surpassed the US to become the largest ODA donor in the world and an ‘ODA Great Power’ (enjo taikoku).71 Furthermore, despite the economic downturn in Japan and the fall in value of the yen, Japan since the mid-1990s has continued to disburse close to US$ 10 billion annually in bilateral ODA and US$4 billion via multilateral institutions including the Asian Development Bank (ADB).72 Japanese policy-makers are aware that ODA constitutes a powerful economic instrument of security policy, and this was confirmed by the new ODA Charter, or ODA Taikō, laid down by the Kaifu government in 1992. The Charter stated that in the future Japanese policy would consider prior to the disbursement of aid trends in the recipient country relating to human rights, military spending, and the development of weapons of mass destruction.73 The Japanese government has at times acted on the principles of the ODA Charter, as with its suspension of grant aid to China in 1995 and to India and Pakistan in 1998 in protest at these countries’ nuclear tests. Japan also cut off all aid except debt relief to Burma for one year following the 1988 military coup, and yen loans to China for the same period following the 1989 Tiananmen Square incident. But for the Japanese government, rather than using aid as a ‘stick’ to coerce China and other states into altering their domestic and security behaviour, the preferred ODA strategy seems to have been one of offering aid ‘carrots’ and maintaining economic relations with isolated states in Asia and other regions. One obvious factor pushing this strategy has been the commercial interests of Japanese corporations which seek a slice of ODA contracts, but just as importantly the

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belief of government policy-makers is that the most effective use of ODA is to coax states out of isolation, to enhance their economic development, and to build links of economic interdependence which bring them into line with the norms of international behaviour. Hence, this explains the Japanese readiness to maintain aid contributions to at times internationally reviled states such as China and Burma. Post-Cold War Japanese conceptions of economic security policy The examples of Comprehensive Security and ODA indicate that there have long been strains of Japanese policy-making thinking which view Japan as able to perform the role of a global security actor, based on the utilisation of economic power but eschewing reliance on military power. In the post-Cold War period, policy-makers have continued to view economics as one of the central components of security policy. Even Ozawa Ichirō, at present the most vocal advocate of an enhanced military role for Japan, acknowledges the importance of economic power. Ozawa sees economic power functioning in the service of Japanese security in two ways. First, a contribution is made to Japanese and international security due to the fuller participation of Japan in and stabilisation of the global economy. Second, economic power is viewed as giving the Japanese government policy instruments with which to deal with specific security problems that may arise in the post-Cold War world. These instruments of economic power are considered to be ODA, Foreign Direct Investment (FDI), capital, trade, energy supplies, technology, and education.74 Katō Kōichi and Yamasaki Taku, senior LDP members whose role in the making of security policy towards North Korea will be examined in Chapter 5, have in the past both pointed to the growing importance of the financial power of Japan as a form of security guarantee in the post-Cold War world as compared with the declining importance of military power.75 Encouraged by the growing prospects for multilateral security cooperation and economic integration in the Asia-Pacific, policy-makers from other reaches of the political spectrum also have continued to argue for the importance of economic power as forming part, if not the major part, of Japan’s contribution to international security. The SDP leader Murayama Tomiichi’s assumption of the premiership in 1994 showed that the contest between military and economic conceptions of power and security is still ongoing. Even though the SDPJ had acknowledged the constitutionality of the SDF the previous year, Murayama in his January 1995 Diet speech persisted with a vision of security unreliant upon military power: The path to peace that Japan should follow is not one for its achievement based upon the exercise of armed force. Instead the painful experience of the past has taught us that the way to achieve peace and prosperity for the world is through technical knowledge and economic cooperation.76 Other politicians such as Takemura Masayoshi, leader of the Sakigake and Finance Minister from 1994 to 1995, have also sought to keep attention in Japan focused on alternative forms of security policy. Whilst accepting that the Gulf War demonstrated the need for Japan to increase its contribution to international security, Takemura has argued

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that Japan should reject the military option, preserve the peace Constitution, and look to use its economic and technical power to promote stability. In particular, he has argued for increased assistance by Japan to developing countries, and a form of ‘Green PKO’, whereby Japan plays a major role in protecting the global natural environment.77 Conclusion: the future of Japanese security policy and global civilian power The debate on the future direction of security policy in Japan is, then, as heavily divided and contested as it is in the US and other countries. The end of the Cold War followed by the shock of the Gulf War have caused policy-makers in Japan to reconsider the basic tenets of Japanese security policy since the end of World War II and have left them searching for a means to make an effective contribution to global stability. There has emerged on one side of the debate conceptions of security that stress the utility of military power as the way forward for Japan to contribute to international security after the Cold War. This conception ranges from the radical approach proposed by the likes of Ozawa Ichirō, through to the more incremental approach of mainstream LDP policy. Either way, though, the consolidation of conservative and centrist politics in Japan can be taken as an indication of a strong movement in policy-making which is looking to expand Japan’s independent military capabilities, its support for the UN, and most especially support for the US-Japan alliance. On the other side of the debate is the alternative tradition which emphasises the rejection of military power in favour of conceptions of security founded on economic power. In practice the split in the past between the military and economic conceptions of security has not been so great, and has often been hard to identify as some conservative policy-makers have deliberately obscured their true position with the language of economics, and opposition politicians have softened their resistance to incremental changes in defence policy in return for compensationary pledges from the government of adherence to antimilitaristic principles. Furthermore, as already seen, many policymakers in Japan have attempted to articulate forms of security policy which combine both military and economic approaches—the best known of which has been Comprehensive Security. Indeed, certain commentators now feel that after the Gulf War Japan is closer to being able to realise this policy than at any other time. For instance, in 1995 the Yomiuri Shimbun attempted to revitalise this concept with a new proposal for comprehensive security; although its interest in collective security, PKO, and crisis management seemed to outweigh considerations of economic security policy.78 But a number of influential Japanese academics, including Tanaka Akihiko, Nakanishi Hiroshi, Etō Shinkichi, and Yamamoto Shinobu have argued for a policy of comprehensive security which balances more effectively military and economic power.79 But it also is arguable that despite the opportunities after the Cold War to blend carefully military and economic conceptions of security, in fact the trends in domestic politics and policy-making identified so far demonstrate that approaches to security policy based on military power are increasingly exerting their dominance over those based on economic power. The ascendancy of the conservative parties following the Gulf War has meant that those who argue for a security policy based primarily on economic

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power, or at least one which balances the elements of economic and military power in a truly comprehensive form, are really only engaged in a rearguard action to slow the onset of the remilitarisation of Japanese security policy. However, the paradox of this situation is that the example of the US and those longterm trends in security thinking since the 1970s already described above, have demonstrated that the relative utility of military power and its contribution to international security, especially with the rise of new post-Cold War problems, is actually declining. This paradox is made even greater by the fact that Japanese policy-makers have been aware of this throughout the post-Cold War period, and that as the Japanese government moves slowly towards a de facto abandonment of notions of comprehensive security policy, other countries, including the US, are moving to create their own versions of comprehensive security, which emphasise the key role of economic power and which in many cases may have been inspired by the example of Japan in the beginning. In turn, the above observation raises the question as to whether the greater militarisation of Japanese security policy is inevitable or whether Japan can find an alternative pathway to discharging its international security responsibilities that relies more on economic than military power. In part, this question is prompted by attachment to the normative values of Japan’s traditions of constitutional pacifism. But just as importantly, it is motivated also by an objective evaluation of the nature of the post-Cold War security environment, which demands that states make a contribution to security through diverse and innovative means and the application of economic power, and thus the practical argument that seemingly the most effective way for Japan to deal with the security problems which cannot be adequately addressed by military means alone is by the use of its economic power. This then brings the discussion back to two of the fundamental questions raised in the Introduction concerned with the future of global and Japanese security policy. As has been seen, the aim of this book is to examine whether it is possible to conceptualise a security policy based on economic power, what are the policy-making obstacles to it, and what this reveals about the nature of power and security after the Cold War. The above examination of the characteristics of the post-Cold War security agenda and the strong tradition of thinking in Japan about economic forms of security indicates that, even though in the 1990s the strongest impulse in Japanese policy-making is towards the acquisition of a greater military role, there may still also be opportunities for Japan to contribute to security based on economic power, and that it is a subject worthy of investigation. The following chapters on Japan-North Korea security relations will be devoted to testing these possibilities in detail. However, it is also arguable that in a postCold War security environment characterised by the need for innovative thinking there is a need to make use of theoretical models in order to assist fuller understanding of the significance of Japan’s usage of economic power for its security ends after the Cold War. As a consequence, it is necessary to turn to the other fundamental question presented in the Introduction concerned with the function of IR theory in helping to construct conceptions of security policy and to ask whether it can offer a model which can be used to test empirically the opportunities and limitations of the use of economic power in the service of security. This model has been alluded to in the Introduction, and is that of global civilian power.

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Notes 1 The Reagan administration’s defence build-up is detailed in Posen and Van Evera (1987). For a revisionist view which counters the assumption that the Reagan administration’s policy led to an increase in USSR defence spending, and instead argues that it actually prolonged the Cold War, see Ned Lebow and Gross Stein (1994, pp. 369–76). 2 Tucker and Hendrickson (1992, pp. 6–7); Ambrose (1993, p. 396). 3 For an appraisal of the post-Gulf War arms race in the Middle East, see Cordesman (1993). The arms races in the Asia-Pacific are analysed in Mack and Ball (1992); Klare (1993); Buzan and Segal (1994, pp. 8–9). 4 Boutros Ghali (1993). 5 Lewis and Mayall (1996). 6 Isaacs (1995, pp. 80–2). 7 Russett (1993, pp. 3–23, 119–38). 8 Chubin and Tripp (1993–94). 9 Hughes (1998); Clutterbuck (1994, pp. 88–94). 10 Van Creveld (1991, pp. 21–2). 11 SIPRI Yearbook (1996, p. 336). 12 Pape (1996, pp. 314–31). 13 Nelan (1995); Haass (1997, p. 112). 14 Van Creveld (1991, p. 23). 15 Angell (1972). 16 Willett (1993, p. 172). 17 Pfaff (1990–91, p. 37). 18 Report of the National Defense Panel, Transforming Defense: National Security in the 21st Century, December 1997, p. 11. 19 Freedman (1998, p. 61). 20 Buzan, Waever and de Wilde (1998, pp. 2–3). 21 For environmental security, see Myers (1993). For the security effects of migration and water resource competition: Weiner (1992–93); Gleick (1993). 22 For examples of these concerns, see Borrus and Zysman (1992). 23 Bergsten (1992, pp. 3–24). 24 Nye (1990a, p. 176). 25 Gaddis (1997, p. 284). 26 Strange (1996, pp. 8–9). 27 Mandelbaum (1991, p. 12). 28 Nivola (1997). 29 Rosenberg (1994, p. 37). 30 Vital Speeches of the Day, 1995, vol. 61, no. 10, p. 293. 31 Hastedt (1991, pp. 239–47). 32 As C.W.Maynes notes, since 1993 the US has imposed or threatened to impose economic sanctions sixty times on thirty-five countries which represent 40 per cent of the world’s population (Maynes, 1998, p. 44). 33 Luttwark (1995, p. 117); Rich Kaplowitz (1998, pp. 178–84). 34 Article 9 of the 1947 ‘peace’ Constitution states:

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Aspiring sincerely to an international peace based on justice and order, the Japanese people forever renounce war as a sovereign right of the nation and the threat of or use of force as a means of settling international disputes. In order to accomplish the aim of the proceeding paragraph, land, sea, and air forces, as well as other war potential, will never be maintained. The right of the belligerency of the state will not be recognised. From the mid-1950s onwards, Article 9 has been interpreted by successive Japanese governments as prohibiting the right to maintain forces to wage offensive war, but allowing the maintenance of forces for self-defence. The result of this interpretation has been that Japan has avoided the acquisition of the types of offensive weaponry that would provide it with an obvious power projection capacity in the region, such as aircraft carriers and in-flight refuelling capabilities. However, the flexibility of interpretation that the Constitution has allowed for in the past means that its role as an obstacle to the expansion by Japan of its security responsibilities in the future is dependent upon the prevailing political will and how far political parties are prepared to stretch the limits of interpretation. In addition to Article 9, the following constitutional interpretations and antimilitaristic principles have limited the extent of Japan’s defence contribution to international security. (1) Collective self-defence. The government has maintained that, in accordance with international law and the UN Charter, Japan does possess the right of collective self-defence. But despite the acknowledgement of the possession of this right and the statement of this in the preamble to the 1960 US-Japan security treaty, the government has argued that it cannot exercise the right due to its interpretation of Article 9 of the Constitution which only allows for the exercise of the right of individual self-defence. (2) Overseas despatch of the SDF. A 1980 cabinet decision by an LDP government interpreted Article 9 of the Constitution as prohibiting the despatch of the SDF overseas only on operations that would require the use of force. But it also noted that the SDF law does not provide for this function. Thus, until the PKO Bill of 1992, the position of the government was that SDF’s overseas despatch was not unconstitutional but illegal. (3) Three non-nuclear principles—not to produce, possess, or introduce nuclear weapons into Japan—were established in 1967. The first two principles have been maintained, and strengthened additionally by Japan’s ratification of the NPT (NonProliferation Treaty) in 1976. But, according to some interpretations, the third principle has been breached by the introduction into or transit through Japanese ports of nuclear weapons on US naval vessels. (4) Bans on the export of arms and defence technology were introduced by the administrations of Satō Eisaku in 1967 and Miki Takeo in 1976. The 1967 measures prohibited the export of arms to communist countries, and the 1976 measures ordered restraint in the case of other countries and prohibited the export of all weapons-related technology. In 1988, though, the administration of Nakasone Yasuhiro made an exception to these prohibitions by signing the Exchange of Technology Agreement Between Japan and the United States, which allows for the export of defence-related technology from Japan to the US. (5) The 1 per cent GNP limit on defence spending established by the Miki administration in 1976. In effect, this prohibition was scrapped by the Nakasone administration which pushed defence expenditure above the 1 per cent limit for the first time in 1987. For complete details of these constitutional constraints and government interpretations, see Asagumo Shimbunsha (1995, pp. 388–456). 35 George (1988). 36 Hook (1996, pp. 45–73). 37 Gordon (1986).

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38 The United Nations Peace Cooperation bill proposed that Japan should create a UN Peace Cooperation Corps to support UN PKO based on resolutions of the Security Council. The Peace Cooperation Corps was to be composed of volunteers from various agencies, including the SDF. The responsibilities of the Corps were to monitor truces; to provide administrative assistance to governments after conflict; to help manage and monitor elections; to provide transport, communications and medical support; to rescue refugees; and to help in reconstruction. 39 Woolley (1996). 40 Tanaka (1995, p. 95). 41 The conditions of the PKO Bill for Japan’s participation in UN PKO are as follows: (1) agreement on a ceasefire should have been reached by all parties in the conflict; (2) the parties involved in the conflict should give their consent to the deployment of PKO forces and the participation of Japan in the operation; (3) the PKO force shall remain impartial, and not favour any party in the conflict; (4) should any of the proceeding guidelines be broken, Japan may withdraw its contingent; (5) the use of weapons is limited to that necessary to protect directly the lives of personnel. Hence, the SDF troops despatched to Cambodia were engaged in non-combat operations such as road repair and construction. 42 Yamaguchi (1992, p. 166). 43 Sakanaka (1993, p. 76). 44 Ministry of Foreign Affairs, Diplomatic Bluebook (1993, pp. 108, 110–11, 118). 45 For an examination of China’s military power, see Shambaugh (1994). 46 Mochizuki (1997, pp. 59–68). 47 For accessible accounts in Japanese and English of the end of the 1955 political system and its impact on the security debate, see Kitaoka (1995, pp. 228–73); Renwick (1995, pp. 151– 9). 48 For an example of arguments from the left of the political spectrum that see Ozawa’s brand of conservatism as leading to a dangerous remilitarisation of Japan, see Asai (1993, pp. 67– 162). 49 Ozawa (1993, pp. 127–37). 50 Ozawa’s strategy to restructure the Japanese political system is described in Ōtake (1997, p. 21). 51 Yomiuri Shimbun Constitutional Studies Group, ‘A proposal for a sweeping revision of the Constitution’, Japan Echo, vol. 22, no. 1, Spring 1995, pp. 26–9. 52 Bōeichōhen, Nihon no Bōei (1991, pp. 44–57). 53 Advisory Group on Defense Issues (1994, pp. 43–5). 54 Interview with MOFA official, Tokyo, 3 December 1996. 55 For details, see Hughes (1996b). 56 Hummel (1996). 57 Berger (1993); Katzenstein and Okawara (1993). 58 Crowley (1966, p. xvi); Ozaki (1985); Samuels (1994, pp. 33–56). 59 Stockwin (1968). 60 Cited in Langdon (1973, p. 2). 61 Heginbotham and Samuels (1998). 62 Nester (1993, p. 10). 63 Sōgō Anzen Hoshō Gurūpu, Sōgō Anzen Hoshō Senryaku (1980, pp. 65–78); Chapman, Drifte and Gow (1983, pp. 151–217); Akaha (1991, p. 325). 64 Cited in Pyle (1989, p. 62). 65 Watanabe Osamu, for instance, argues that the emphasis of Comprehensive Security on the

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procurement of economic resources demonstrates Japan’s continued ambition to extend its security sphere into Asia, and thus the continuity of pre-War and post-War imperialism (Watanabe, 1996, pp. 245–9). Yasutomo (1986, pp. 35–6). Advisory Group on Defense Issues, (1994, p. 7). For examples of the attachment of Japanese bureaucrats and politicians to the concept, see Barnett (1984). Yasutomo (1986, pp. 42–50). Inada (1990, p. 103). Igarashi (1990). Asahi Shimbun, Japan Almanac (1998, p. 122). Rix (1993, p. 34). Ozawa (1993, pp. 153–5, 164). Katō, Oyama and Yamasaki (1991, p. 50). Gaimushōhen, Gaikō Seisho (1996, p. 150) [Author’s translation]. Takemura (1994, pp. 174–200). Yomiuri Shinbunsha (1995). For the views of these academics, see Nihon Keizai Shimbun, 20 October 1997, p. 7; Nakanishi (1997); Yamamoto and Etō (1991).

2 Theory of economic power and security Global civilian power The question of the connection between Japan’s economic power and its future role in security has exercised the minds of scholars working in the fields of IR and the connected field of International Political Economy (IPE), who, regardless of nationality and theoretical perspective, have come to view economic power as the key form of power in the post-Cold War world. As academic debates on US hegemonic decline in the late 1980s and early 1990s showed, even though scholars from the realist, liberal and Marxist camps may diverge in their conclusions about which state remains dominant in the international system, they do converge in their implicit assumption that after the Cold War and in an interdependent world military power is declining relative in value to economic power, and that it is the possession of the latter which is the decisive factor in determining the rise to dominance of states.1 Thus, Japan’s economic strength means that it has been discussed as breaking the mould of traditional great power status and (possibly prematurely) as a future candidate for hegemony.2 Following on from these assumptions about the importance of economic power and its likely provision to Japan of greater influence in the international system, it then becomes possible to view Japan’s acquisition of greater military power as a move in apparent contradiction to general trends in security and the international political economy. The result has been that scholars from the fields of IR and IPE also have begun to ask if it would not be more rational for Japan to seek to contribute to international security primarily by means of economic power. The most notable manifestation of this move in IR and IPE towards advocating a security role for Japan based on economic power is the concept of global civilian power. The concept has been latent in much of the IR and IPE literature in Japan and elsewhere, but the first scholar to give theoretical shape to it has been Hans Maull, who has argued for a new type of great power characterised by active cooperation with other states to achieve international objectives, and the concentration upon economic means to secure national goals. Maull does not reject the residual instrument of military power altogether, and accepts that in the last resort it may be employed in order to ‘civilise’ relations between states. But he sees the civilian power as able to exercise force only with a clear international mandate, and approaching the use of military power with a healthy diffidence. Above all, the global civilian power looks to make an active contribution to international security through the use of economic power. In turn, Maull declares that it is Japan with its unique pacifist Constitution and high level of economic resources which is most suited to perform the role of the global civilian power.3 The theme of global civilian power has also had great resonance for and been taken up

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by Japanese scholars from differing IR theoretical backgrounds. For instance, the leading realist scholar Kōsaka Masataka, even whilst arguing in the post-Cold War period for the maintenance of the US-Japan alliance and greater Japanese participation in PKO operations, also accepted that Japan’s chief contribution to international security should be as a civilian great power (bunminteki taikoku) and through the use of economic power.4 The most faithful proponent of the concept of global civilian power in Japan, though, has been the Asahi Shimbun and liberal journalist Funabashi Yōichi. Funabashi, not unlike Kōsaka, acknowledges the need for Japan to support UN PKOs and maintain the US-Japan security alliance. But Funabashi sees the alliance purely as a stop-gap measure to allow Japan to build a post-Cold War UN-centred and regional security system. Funabashi argues that Japan should seek to act as a new type of global civilian great power (chikyū minsei taikoku), and that its economic power resources are tailormade to deal with the post-Cold War, low-intensity security problems of environmental destruction, refugee crises, environmental damage, economic dislocation, and the proliferation of weapons of mass destruction.5 The concept of global civilian power therefore envisages a security role for Japan in the 1990s which is reliant on economic power and relevant to many of the challenges of the post-Cold War security agenda. However, at present global civilian power stands more as an ideal than a set of concrete principles to guide Japanese security policy. Consequently, the task of the following sections is to use IR and IPE theory in order to build and operationalise a model of civilian power, which can then be applied to a particular case to test the limits of Japan’s contribution to international security based on economic power.

The nature of security and qualities of global civilian power Security definitions and the role of the state Security can be defined as the protection of welfare from all forms of potential or actualised threats. The dominant characteristic of security policy is that it has been and continues to be essentially the prerogative of the state. By this it is not meant that the discussion is concerned exclusively—as certain neorealists thinkers would posit—with the survival and security of states themselves. For both peace researchers in Japan and realist scholars such as Barry Buzan agree that it is necessary to take a ‘holistic’ view of security, to think of it above and below the level of the state, and to consider how to ensure the security of the international system and individuals as well.6 Instead, the reason for concentrating upon the state-centred concept of global civilian power is simply because the state has served traditionally as the main vehicle for mediation and adjustment between the different levels of security, and because it is the one actor which has been able to concentrate and wield power to form a consistent security policy. The provision of justice and security through the control of the legitimate means of violence have been the core responsibilities of states since the Middle Ages. Despite the gradual erosion of the state’s monopoly on force and the ‘democratisation’ of the means of violence, marked most significantly by the phenomenon of terrorism in the contemporary

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period, the state still has access to the most powerful military weapons and retains its function as the provider of external military security and internal policing. Likewise, it can be argued that despite a corresponding erosion of the state’s functions in the sphere of economics and the rise of competitors for influence such as transnational corporations (TNC), the major states continue as the largest economic actors, individually or in concert, and therefore will also be dominant in matters of economic security. This does not mean that states are the sole actors in economic security and that other non-state and economic actors will be excluded from a role altogether. For, as outlined later in this chapter, even though states remain the leaders in articulating security policy, they also need to work in close partnership with and ‘farm out’ some of their security functions to non-state actors such as TNCs or even NGOs (non-governmental organisations). Qualities of global civilian power If a state is to conform to the model of global civilian power, arguably it needs to possess three indispensable qualities which are discussed next: conception, capacity, and policymaking will. The first quality of conception is concerned with the ability of a state to look beyond military power and to perceive the opportunities presented to it to handle a particular security threat by means of economic power. The second quality of capacity is the possession by a state of the necessary economic power resources that provide it with the potential to follow one of the economic security policy options. Finally, the third quality of global civilian power can be termed as the policy-making will to pursue consistently and instrumentalise economic security policy options.

Economic security policy conceptions States can conceive of two types of security policy which utilise primarily economic power in order to deal with economic, political, and military threats. The first can be termed as economic security policy to prevent or minimise the occurrence of conflict between states. Given that general economic hardship or economic friction between states can generate domestic and international instability which can then feed through into interstate economic and even military conflict, the basic objective of this type of policy is to eliminate within and between states the sources of conflict that originate from economic problems. Hence, this policy is characterised by efforts to promote cooperation and wealth creation, and to stabilise both the international economic system and the economies of individual countries. Examples of this type of policy include the US Marshall Plan of 1946, which supplied capital for the reconstruction of the war-torn European economies and thus to prevent the spread of communism; and G-7 financial assistance for the reform of the post-Soviet Eastern European economies, clearly designed to raise living standards, to check the reemergence of communism, extreme nationalism, and ethnic separatism, and so eliminate the related risks of military adventurism.7 Moreover, Japanese comprehensive security and its concern for creating a favourable international security environment through the extension of economic cooperation can be seen to fit with this policy, as can Japan’s

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participation in the North Korean ‘soft-landing’ policy analysed in Chapter 3. The second type of economic security policy is designed to protect a state in the event of an economic, political, or military conflict coming close to or actually occurring, and has two subdivisions in its aims and activities. The first of these subdivisions is concerned with defending against the economic costs and deprivations of welfare that other states may attempt to impose during a conflict situation. These costs may include the sudden denial of the supply of the strategic commodities necessary for a state’s economy to function, and the embargoes, sanctions, and blockades that typically accompany political confrontation and war. The response of states to these external economic shocks can take the form of attempts to stockpile and diversify supplies of vital goods, as Japan has done since the first oil shock in 1973 and in line with comprehensive security policy; or attempts such as that of the US following the first oil shock to organise a consumer’s cartel in order to reduce the control of developing nations over energy and raw material supplies. The second subdivision concerned with protecting a state in the event of a conflict reverses the position of the state as the bearer of economic costs and makes it instead the imposer. Thus, a state follows a policy which aims or threatens to inflict economic damage on another state in order to force it to desist from a course of economic, political or military action which threatens the security of the framer of the policy. Essentially this policy is one of economic pressure in pursuit of security ends, and revolves around the denial of key economic resources to another state, such as access to strategic commodities, technology, trade, and capital. The resulting deprivation of welfare from this denial of economic resources denudes military potential and coerces the state into altering its behaviour. The results of this policy, though, can be counterproductive. It is arguable that economic pressure, as in the case of economic sanctions imposed on Japan by the US in the period preceding the outbreak of the Pacific War in 1941, or, as will be seen in Chapter 3, the planned blockade of North Korea at the height of the nuclear crisis in 1994, can often simply harden the resolve of states subjected to economic pressure to embark on the path of conflict. As mentioned above, the usual tools of economic pressure are embargoes, sanctions, and blockades, which historically have often relied in part for their effectiveness and enforcement upon military power in order to halt physically economic transactions. But whilst it is true that these forms of economic pressure have often been used in tandem with military power, it is also reasonable to argue that there may be instances where economic pressure on its own over the long term can have a cumulative impact in moderating the political and military behaviour of certain states, as in the case of UN and other negative sanctions imposed on South Africa between 1977 and 1994.8 Economic security policy capacity Indirect economic power The second requisite quality of a global civilian power is capacity, or the possession of economic power and its various constituent components. Scholarship on power in the

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fields of philosophy and social science presents seemingly endless definitional permutations, but it would appear that IR and IPE literature has reached a rough consensus on a twofold typology of power.9 The first type of power identified by IR and IPE scholars reflects the growing awareness of the interdependence of the global political economy since the 1970s and that the very weight and presence of a state’s economy can provide it with what Funabashi Yōichi terms as latent power (senzairyoku) over other states.10 The argument is that a state does not necessarily have to manipulate economic power in the conscious service of national policy, but that the scale and extent of its economic linkages, as expressed through international markets, and economic regimes and institutions, can be sufficient to shape the environment and hence the policy options and behaviour of other states in the international system. Klauss Knorr termed this type of power as ‘noncoercive influence’, and Robert Keohane and Joseph S.Nye Jr. when elaborating complex interdependence theory referred to it as the ‘control over outcomes’.11 Moreover, Nye later drew attention to the idea of ‘soft power’, which he saw as responsible for the maintenance of US hegemony, and manifested in dominance over information flows; the setting of norms in the world economy, such as free trade and the management practices of TNCs; and the production and dissemination of universal culture.12 The conviction that states can indirectly derive power and achieve national goals resulting from the economic penetration of other states has been given greatest theoretical coherence with Susan Strange’s elucidation of structural power. Strange defines structural power as the ability of an actor ‘to change the range of choices open to others, without apparently putting pressure directly on them to take one decision or to make one choice rather than others’, and, more specifically, that it is the power to ‘shape and determine the global economy in which other states, political institutions and enterprises operate’.13 If combined, these intangible concepts of non-coercive, soft, and structural power give rise to the idea of indirect power, which can be defined as the acquisition by a state, consciously or unconsciously, of the capability, through the size and diversity of its economic linkages, to influence indirectly the actions of another state by establishing the environment in which it operates and the range of its possible behaviour. In essence, as Kamo Takehiko argued, it is the ability of a state to establish the ‘rules of the game’ and norms of action for other states.14 In terms of security effects, the attainment of indirect power by one state over another is likely to be characterised by a degree of economic interdependence and integration, which raises the economic costs of non-cooperation and conflict between states, and which should then moderate also their social, political, and military behaviour. Of course, the growth of interdependence between states can also give rise to new tensions, as in the case of the US-Japan trade friction. But the depth of interdependence is usually sufficient to mean that disputes are settled by means of political negotiation rather than by military threats. Direct economic power The second type of power referred to in IR and IPE literature has been categorised variously by Funabashi as revealed power (meijiryoku), by Knorr as coercive power, and

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by Strange as relational power.15 An all-encompassing term for these categories is direct economic power, which can be defined as the conscious manipulation by a state of economic power resources in order to influence directly the behaviour of another state and change it to a course of action that it would not normally take of its own volition. Direct power thus is characterised by the use of both economic persuasion and pressure to achieve state interests, and takes the form of the provision by one state to another of positive and negative economic inducements and sanctions. The hoped for security effects of direct power are that positive sanctions and economic benefits, such as the extension by one state to another of trade and aid privileges, will provide incentives for cooperation between states; whereas negative sanctions and economic costs, such as threats to remove MFN nation status or the imposition of an economic embargoes, will force states into compliance with the interests of other states. Conceptions of security policy and the relation to the typology of economic power The first conception of economic security policy is that intended to prevent the outbreak of conflicts between states by eliminating sources of economic instability or tension, and both direct and indirect economic power should be amenable to these ends. The provision of positive economic sanctions and promotion of economic exchange between states can produce cooperative relations, which then also generate ties of interdependence and the stabilising effects of indirect power. In a sense, the entire project of the European Union (EU) was originally conceived as a means to bind the states of the region into a set of direct and indirect power relationships and so remove economic and political sources of tension which had been responsible for the outbreak of two world wars. On a smaller subregional scale, the EU’s extension of positive sanctions and trade privileges to Turkey has obviously been conceived as a means of extending direct and indirect power links to this neighbouring power, of stabilising its internal economic and political situation, and thus of removing one potential source of insecurity on the EU’s eastern borders. The second conception of economic security policy is that concerned with the protection of a state in the event of an actual conflict, the first subdivision of which is designed to defend against deprivations of welfare and the possible adverse effects upon social and political stability. Direct economic power clearly plays a key role in this policy because it allows states to marshal and redistribute effectively their economic resources in order to weather the effects of political, economic, or military security crises. Indirect power also plays a role, as the weight of a state’s economy and the diversity of its connections in the international economic system allow it to procure economic resources from alternative sources. Thus, the US has been able to overcome the impact of the oil shocks since the 1970s due not only to its ability to open up new sources of energy, but also because of its central position in global energy markets which forces producers to deal with it on favourable terms. The second subdivision of economic security policy in the event of a conflict makes the state the imposer of economic costs in order to force other states to desist from a course of action which is perceived to be threatening, and direct economic power assumes the most prominent role in this policy. Direct economic power allows a state to

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manipulate economic resources and impose negative economic sanctions such as embargoes. However, indirect economic power is also likely to increase the ability of a state to mobilise direct economic power, as with the example of the US’s efforts to use its dominant position within the international financial system to impose punitive sanctions on Iranian capital following the 1979 revolution. Vulnerability and the factors determining the effectiveness of economic power As has been mentioned above, the effectiveness of the deployment of economic power in the service of security policy hinges upon the depth of economic links between states and the known benefits of these, or by inverse definition the degree of actual or potential costs that may arise from damaging or failing to initiate economic links. Complex interdependence theory and the concept of vulnerability can be used to help explain degrees of economic cost and the effectiveness of economic power in altering the behaviour of states.16 Vulnerability refers to the ability (or again inversely, inability) of actors or states to suffer the costs imposed by external forces, and thus it can be seen that those states with a low level of vulnerability or economic pain threshold are more likely to alter their economic, social, political, and even military behaviour over the long term in response to changes in direct and indirect power relationships with other states. Funabashi has indicated four factors which dictate levels of vulnerability and provide ‘tremor-proofing’ (taishinsei) for a state’s economy. The first is resilience (danryokusei), and is the ability of an economy to withstand the initial shock of the curtailment of economic links and to suffer the consequent deprivation of welfare over the long term without changing its behaviour. The Iraqi government, if not the Iraqi population, has shown a remarkable degree of resilience in its willingness to endure UN sanctions imposed since 1990. The second factor is adjustment (chōseiryoku), or the ability to make up for the loss of economic links and welfare by the use of the state’s own resources. Examples of this include stockpiles of strategic commodities held by developed nations to cope with sudden supply shortages. The third factor is substitution (daisansei), and is the ability to cope with the denial of access to economic activity and resources by substituting for them with domestically produced forms. An example of this was South Africa’s ability to manufacture sophisticated weapons despite embargoes on the export of arms and technology. These first three factors indicate that a state possesses a measure of self-sufficiency (jikyūsei).17 Funabashi’s concept corresponds to that of autarky found in the work of realist political scientists, which suggests that states seek to reduce vulnerability so as to be able to resist economic pressure.18 However, as Funabashi argues, too great a degree of jikyūsei and avoidance of dependence on economic relations with other states may in the end have negative results. As a state strives for selfsufficiency, this can rob its economy of the vibrancy derived from external contacts and competition, weakening its economic power, and, paradoxically, placing the state in a position where it may have to become more dependent on other states.19 The case study of North Korea’s economic difficulties presented later on illustrates clearly this type of situation. The final factor is availability (aberābiriti) and refers to a state’s capability to create alternative forms of economic links and sources of activity when they are denied to it by certain states. Since 1960 and the imposition of the US embargo, Cuba has ensured

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this factor of availability by forging trading links first with the Soviet bloc during the Cold War, and then afterwards with a variety of nations in Europe and Asia.20 Components of economic power Having laid out typologies of economic security policy, economic power, and the factor of vulnerability which governs their effectiveness, next it is necessary to categorise the components of economic power in order to create a framework to analyse the direct and indirect economic power relations between Japan and North Korea in Chapter 4. Production Production, agricultural and industrial, is the source of wealth creation and the material basis for the formation of all societies. Wealth creation endows states with the resources, welfare, and public goods that on a domestic level allow it to generate stability and support, and on the international level translate into direct and indirect economic, political, and military power. Thus, any change in the production and wealth creation structures is likely to be accompanied by changes in the power relations within and between states. Following industrialisation, the major change in the production structure of most states since the late nineteenth century has been the internationalisation of production and the rise of TNCs, or MNCs (multinational corporations). TNCs can be defined as firms that own and manage economic units in two or more countries, and consist of three main types: extractive, manufacturing, and services.21 The trend towards the internationalisation of production is shown by the fact that by 1969 US TNCs accounted for US$140 billion worth of goods, more than any economy at the time except for the USSR and the national economy of the US, and that by 1987 TNCs employed 30 million of the 90 million manufacturing workers in the OECD (Organisation for Economic Cooperation and Development) countries.22 Furthermore, it is estimated that in 1992 there were 35,000 TNCs operating close to 150,000 subsidiaries and affiliates worldwide, with a total FDI book value of US$1,700 billion.23 The internationalisation of production and the penetration of a host state by a home state’s TNC in the form of FDI, subsidiaries and joint ventures, creates a relationship of economic interdependence which has clear power implications. A TNC acquires a degree of control over the wealth-creation structure of the host state due its position as the provider of new technology, capital and access to foreign markets, and thus is able to influence also the economic and political behaviour of the host state and its various levels of government. TNCs have an indirect power impact because FDI brings with it external production links and norms of wealth creation which integrate the host state into the economy of the TNC’s home state and the international political economy as a whole, and which thus establish the economic and political domain that governs the limits of the behaviour of the host state. The direct power impact of TNCs is, as Robert Gilpin notes, that the penetration of a host state’s economy by a TNC opens up the ‘possibility of home states utilising and manipulating [TNCs] in order to achieve foreign policy and other objectives’.24 Hence, the US government has long attempted to collude with US-based

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TNCs or to coerce them into participating in the state’s security policy, one notable example being the Reagan administration’s efforts in the 1980s to pressure TNCs into denying the USSR technology required for the construction of the Trans-Siberian pipeline. The direct and indirect power of TNCs and FDI and their contribution to economic security policy are potentially very great, but there are also limits to the extent to which this power can be harnessed effectively by the policy-makers of states. The first consideration is that in the contemporary period TNCs have become increasingly independent actors capable of conducting diplomacy with states in their own right—as seen in the 1990s with negotiations between Japanese automobile manufacturers and local and central governments in the UK and France seeking to attract inward investment—and that the ‘multinationalisation’ of their management personnel as well as production activities means declining ties of loyalty to the national goals of their ‘home’ state.25 Moreover, as the barriers to production on a global scale and mobility of capital are lowered this allows TNCs not only to evade economic obligations to the home state such as the payment of taxes on profits, but also to escape the legal means at a state’s disposal for cajoling TNCs into following security policy aims. As a result, the policymakers of the home state may only be able to tap the direct and indirect power of production and enlist TNCs as allies in their security policy if they can persuade these corporations of the commercial advantages of cooperation. This is most likely to occur when the policy-makers of states take the steps necessary to clear away barriers to economic exchange between the home and host state, and thereby encourage TNCs to exploit economic complementarities, to institute flows of FDI, and to build the ties of interdependence that generate direct and indirect economic power and their associated security benefits. Conversely, the limits of the power of production are determined by the attitude of the host state to FDI and its level of vulnerability. Elite groups in host states often view FDI as a threat to their vested interests, fear that it represents ‘neo-imperialism’ and an invasion of sovereignty, and that it leaves the state ‘naked’ to external economic and political influences.26 Hence, in the past India tried to select and restrict flows of inward investment, and China attempted to concentrate FDI in its coastal Special Economic Zones (SEZ) which offered the advantage of promoting economic growth whilst restricting the spread of foreign democratic influences. In addition, states may threaten to nationalise foreign-owned subsidiaries in order to counter the power of TNCs, as was the case with Libya and the oil industry in 1969, or other more isolated states may attempt to exercise resilience by rejecting FDI entirely. As will be seen in Chapter 4, North Korea was one such state until the mid-1980s, when it first began to seek FDI to restructure its economy. Finance The creation and flow of credit through the agency of financial institutions is essential for the functioning of all developed and developing economies. Credit enables borrowing and lending for investment and consumption, and capital to be moved to the wealthcreating and most productive areas of the domestic and international economy. The

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structures of the political economy which create credit can be thought of as private banks, international institutions, and the governments of states which can create credit in their own right and attempt to regulate the workings of the first two structures. The instruments typically used to create credit are loans and bonds, and the importance of these financial flows is indicated by the fact of their having already exceeded by several times the total value of world trade. The creation and flow of credit has important distributive effects upon the power of states. Direct power is derived from the provision of loans or investments which initiate a relationship of interdependence between creditor and debtor. In theory, a loan can provide a creditor with direct power over a debtor, either on the private institutional or on the state level. This is because the debtor is now dependent upon the creditor for the necessary supply of credit, and because the creditor has the ability both to set the loan terms and to terminate the loan if it deems the terms not to have been fulfilled. If a private bank in state A lends to the private banks or government of state B, it then acquires the ability to cut off or expand the credit of state B and potentially influence its economic and political behaviour. The private bank of state A can then be said to possess a measure of direct economic power. This arrangement may also provide the government of state A with direct economic power; albeit through the agency of the private creditor based in its territory. The private bank or creditor is likely to some degree to be subject to the laws and regulations of state A, and if state A can use this regulatory power to exert control over the creditor, it can also influence the behaviour of state B by proxy, and provide itself with a component of direct economic power. Indirect power is derived from the weight of the presence of a state in the international financial system and how the system works to its advantage. For example, Strange points out that even though the European Bank for Reconstruction and Development (EBRD) was founded with the original aim of the US stepping aside in order to give the EU the prime responsibility for assisting the economic reform of ex-socialist countries in Europe, the bank’s lending strategy was designed in conformity with US Treasury procedures, and in the end the EBRD could only function effectively with US participation and guidance.27 This case thus illustrates how the US’s presence in the international financial community is sufficient alone to delimit the boundaries for independent action by the European states, and the integrative effects of indirect economic power by informally binding together US and EU financial policy. In practice, though, the direct and indirect power states draw from the component of finance is complicated by questions of control and vulnerability. The liberalisation and globalisation of finance since the 1970s, and the accompanying qualitative change in the velocity and volume of credit flows, in part the product of deliberate state policies, means that the states themselves are increasingly unable to control the financial system and to use it in the service of security policy.28 The unsuccessful battles that several European central banks fought with the money markets in late 1992 in order to stave off the de facto collapse of the Exchange Rate Mechanism (ERM), were one indication that private banking institutions move too fast for effective regulation and can exercise greater collective economic power than the governments of states. Certain commentators may decry the decline of state regulation, but the implications for security policy are clear.29 Again, as with the component of production, if states cannot at present easily backtrack

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on their policies and re-impose tight controls over finance to serve their security interests, then the main avenue open to them may be to try instead to use the political and diplomatic tools at their disposal to at least shape the channels for financial flows, and so influence also the direction of flows of indirect economic power and the security benefits this may bring. Similarly, although the initiation of a loan does create conditions of interdependence between the creditor and debtor, this does not automatically produce direct power for the creditor due to the varying levels of vulnerability of debtors. As the case of North Korea will reveal in Chapter 4, the debtor may refuse to pay back the loan and exercise resilience in the face of the probable loss of access to further credit. In extreme cases the direct power of the creditor might be broken or reversed completely. For if the creditor overstretches itself by committing too large a proportion of its resources to the loan, this may encourage the debtor to exploit the creditor’s obvious fear of its own financial collapse and refuse to pay back the loan, so forcing the creditor to renegotiate the loan terms. These types of threats of mutually assured economic destruction can shift direct power from the creditor to the debtor, and were witnessed to some extent during the debt crisis of the early 1980s when developing countries threatened to default on debt repayments and forced the lending banks to reschedule the loans.30 Trade Trade is one of the oldest forms of state-to-state interaction, and as such it is an inherently political process. States throughout history have received financial benefits from their right to tax trade, and have sought to negotiate the terms of trade to their advantage. This process of negotiation determines the access of trading partner states to the resources, markets, and technology of other states, and so their access to wealth creation. The result of this is that states that dominate the terms of trade may also acquire power over other states, but also that states engaged in a trade relationship can be drawn into one of trade interdependence. Direct power is given to a state through its ability to manipulate actively the terms of trade on the bilateral and multilateral levels and to offer positive and negative sanctions to other states in order to influence their economic and political behaviour. The provision of MFN status is one form of positive trade sanction, or what Knorr terms the ‘carrot’ of foreign trade. The Clinton administration has clearly used the renewal of MFN status as one means of inducing China to cooperate on a range of issues such as human rights, and, as will be seen later, has offered the carrot of trade to secure North Korean cooperation on the nuclear inspections issue.31 Conversely, the threatened withdrawal of MFN status or continued blocking of Chinese entry into the World Trade Organisation (WTO) have been used as negative trade sanctions and ‘sticks’ in an attempt to force China to comply with US-centred and international political, economic, and security norms. Indirect power is derived by those states that can establish the rules of international or regional trade orders, and thereby draw other states into longterm conformity with its economic and political norms, and also interdependent trade relations. The US can be said to have acquired indirect power on the international level by having used the General Agreement on Trade and Tariffs (GATT) and then the WTO to establish widely accepted

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principles of free trade which keep markets open for US corporations, and the Clinton administration has continued to propagate these norms at the regional level by the promotion of APEC. Thus, with regard to engagement policy towards China, the eventual aim of US policy seems to be not just to reward or punish it periodically with trade sanctions, but more importantly to embed it permanently within a system of regional and international trade frameworks, which then tie China and the US to each other and the larger international community politically and economically, and may moderate China’s security behaviour. Many states, including China, may rail at these US-inspired norms of free trade and seek to create alternative regional trading orders, as is apparent from the contest in the Asia-Pacific between APEC and Malaysian proposals for an all-‘Asian’ and Japanese-led East Asian Economic Caucus (EAEC). But regardless of whether regional trading blocs are US or Japan-led, the shared consciousness is that it is those states which are capable of creating a stable environment for trade and integrating other states into this which exercise indirect economic power and accrue the related political and security benefits. International trade usually consists of exchanges of material goods, the flow of which can be physically controlled at state borders, and thus can be more closely regulated than the components of FDI and capital. However, the potential ability to control flows of trade does not always translate into direct power, as many states are aware that interdependent trade relations make the costs for their own economy of imposing negative sanctions and halting trade flows almost unacceptable, and hence rules negative sanctions out as a viable policy option. Furthermore, for most states the majority of foreign trade is conducted by private corporations and TNCs which are likely to object to government efforts to increase or curtail trade with other states as part of a trade sanctions package unless it can be shown that these advance or at the very least do not harm severely their commercial interests. Therefore, again, rather than attempting to use direct economic power to halt flows of trade, states may find it more advantageous for security purposes to assist trade and the stabilising ties of interdependence that this can eventually bring. The effectiveness of indirect and direct power from trade also depends on the vulnerability level of individual states. States with a low rate of dependency on foreign trade for key resources or markets are likely to be able to exercise resilience, and may sacrifice entry into trading systems if they feel that it conflicts with their own economic and political interests. Also, in the past states such as South Africa and North Korea exercised a measure of substitution and supplied from their own resources those that were denied to them by international trade restrictions. Communications The economic component of communications consists of land, sea, and air transport systems, and mass media and telecommunication networks, such as satellites links, radio, and television broadcasts, and the Internet. Transport systems convey the flows of people, physical goods, and information vital for economic activity and wealth creation. Likewise, although telecommunication networks cannot carry physical economic resources, they do allow the dissemination of economic information and facilitate the

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mobility of capital. States derive direct power from communications due to their ability to deny or provide to other states access to transport systems and telecommunication networks, with resultant costs for economic development. The most extreme example of a negative communications sanction is an economic embargo and the closing of one or several countries’ borders to trade with another. Positive communications sanctions may take the form of agreements between states to open up new telecommunications links and promote economic interdependence, such as the agreement by the US to install direct telephone links with North Korea in 1994, explored in Chapter 3. Indirect power may accrue to a state due to its dominance over a transport market or the simple fact of its geographical location. Hence, the US enjoys indirect power in the air transport market due to its near total monopoly until recently over the manufacture and specifications of civilian jet aircraft, the size of its domestic market, and its position as a central transport node for the carriers of many foreign states. Even more importantly, the information carried via transport systems and telecommunications networks from one state to another brings with it perceptions and beliefs, which, as Strange notes, ‘influence value judgements and through them, political and economic decisions and policies’.32 Hence, it seems that one of the reasons that the US is so willing to see the liberalisation of the Internet and related electronic media markets is that it knows that most consumers of these networks have to function within an essentially US-dominated environment. For even if it is the case that consumers may not consciously associate the Internet with US values or influence, their use of English and acceptance of the standards set by corporations based in the US in order to operate the network means that to some extent they are subconsciously buying into a set of US norms—all of which reinforces US ‘soft power’, assists economic integration between the US and other economies, and brings indirect power and its related security benefits. The direct power of communications is limited due to doubts about how far states can control transport systems and telecommunication networks. States are certainly able to close their territorial land, sea, and airspace to many forms of transport. But as many of the failed examples of negative economic sanctions or efforts to prevent drug trafficking demonstrate, state borders are porous and may not be sufficient to regulate trade by private corporations or entrepreneurs which seek to exploit economic complementarities regardless of political boundaries. The control of media and telecommunications networks is also uncertain. A common expectation is that the Internet and ‘information revolution’ has empowered individuals because the complex nature of these communications systems makes it hard for states to control. On the other hand, though, the interest of governments in disseminating information on their own homepages shows that they are able to master and augment their power through the Internet, in the same way as in the past they mastered new communication systems such as the railway, telegraph, and satellite. Added to this, the impact of communications on power is uncertain due to differing levels of vulnerability. For instance, some states such as North Korea, China, and Iran may exercise resilience by trying to restrict access to the Internet and satellite television, and thus limit the foreign political influences which are often imported with them. Other states may seek availability, such as the newly independent republics of Central Asia

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which have reduced reliance on Russia for exporting their oil production by building new pipelines across the Caspian Sea. Energy No economy—planned, mixed, or market—can function without energy. The generation and supply of energy is essential for industrial production, the running of transport systems, and to meet the demand of domestic users for heating and light. The absence of stable supplies of energy, as the case of North Korea demonstrates in Chapter 4, can even precipitate the economic collapse of states with serious implications for security. Knowledge of the importance of energy has led states to try to control its supply since the beginning of the industrial age and has provoked inter-state competition and conflict. The Gulf War was one demonstration of the continued willingness of the developed states to fight a war to ensure the supply of oil, and the prediction of some observers is that as the demand for energy in East Asia begins to outstrip supply this could also become a new source of conflict in the region.33 Direct power from energy comes in the form of a state’s ability to control consciously the energy supplies and generation capacity of other states. Offers to supply energy or the technology that will increase energy-generation efficiency and economic development are positive sanctions, such as the US agreement to sell advanced nuclear technology to China in 1997. Moves to restrict energy supplies of new energy technologies, such as US objections to the sale by China of nuclear technology to Iran in the same year, represent negative sanctions. Indirect power is acquired by a state due to the size of its share of the global energy market. The US as the world’s largest single consumer of energy clearly has a power effect on other states, because enhanced demand in the US for energy resources raises prices for other states which then affects their economic and political policies. The ability of states to control the component of energy for direct power is mixed. States have often imposed energy embargoes on other states in order to coerce them into changing their domestic and international policies, as with the case of the UN oil embargo on Rhodesia in 1966. But outside the realm of multilateral sanctions legitimated by international institutions, the ability of states or groups of states to control energy supplies long-term is questionable. The Organisation of Petroleum Exporting Countries (OPEC) showed in the late 1960s and 1970s that producers were able to use oil price rises to secure diplomatic concessions from Japan and oil-dependent countries in Europe. But in the contemporary period it appears that the ability of OPEC to influence oil prices has declined due to internal policy splits, and that the control of the oil market has become divided between producers, TNCs, and the market.34 This confused picture of control means that in order for states to control energy supplies, as either producers or consumers, they again need to work in concert with private corporations. However, states can control with more effect the provision of energy-generation technology to other states because of their legal and financial control over power corporations, many of which are still domestically based and are partly government-owned. In particular, states have shown the greatest determination to control nuclear power technology due to its obvious security implications, and this has been done through a mix of tight domestic restrictions

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on its overseas export and the international regimes of the NPT and International Atomic Energy Agency (IAEA). All states are vulnerable to the deprivation of energy supplies but can exercise in response a degree of resilience, adjustment, substitution, and availability. Hence, Japan since the first oil shock has sought to reduce overall energy demand; to stockpile reserves of fossil and nuclear fuels; to seek to reduce dependence on external supplies of energy by researching into alternative energy supplies and breeder reactor technology; and to diversify energy supplies as far as possible away from over-dependence on Middle Eastern oil.35 Economic aid Foreign aid is the ‘concessionary transfer of resources from one government to another’.36 Resources take the form of goods, equipment, or technology, and can be transferred bilaterally, or multilaterally through international institutions such as the EBRD and ADB. Economic aid can be divided into two categories: humanitarian aid intended for short-term relief from natural and man-made disasters; and economic development aid designed for long-term growth and economic stability. The conditions for the provision of aid can be either ‘tied’, with the recipient state obligated to use the aid for a specific project and to procure goods and services for the project from the corporations of the donor state; or ‘untied’, and containing a large grant element. Economic aid generates direct power because the donor state is able to offer negative and positive aid sanctions to the recipient state and draw it into a dependency relationship. For instance, as has been seen in Chapter 1 and the case of its ODA programme, Japan at times has used threats of negative sanctions and cuts in aid as a means to protest against Chinese nuclear tests. Similarly, humanitarian aid can be employed as a positive economic sanction to prop up regimes in economic and political crisis, and so prevent the fall-out from these problems affecting the security of neighbouring states; whereas development aid is used to alleviate and stabilise the root economic causes of many conflicts and security issues. Chapter 3 demonstrates that the US and its allies have used both forms of positive aid sanctions to address the North Korean security problem in the 1990s. Aid is probably the easiest component of economic power for states to use actively for security ends, as it is generally within the ‘gift’ of governments. But the freedom of states to distribute aid on a bilateral basis is limited in democratic societies by public and NGO opinion which may oppose assisting those recipient states perceived to be threats to security or to have a poor record on issues such as human rights. Chapter 5 will show public opinion to be one of the factors restricting Japan’s provision of aid to North Korea in the 1990s. Moreover, the flexibility of donor states to manipulate aid for security purposes on a multilateral basis is restricted in accordance with the degree of influence possessed within international institutions. The US was certainly able to use its authority within the World Bank (WB) to discourage loan aid to the government of Salvador Allende in Chile in the early 1970s, but other states may not be able to throw their weight around in international institutions with such effect. States may also experience difficulties in deploying aid power because they lack expertise concerning the recipient

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country and the form of aid, or the recipient state is reluctant to be seen to take direct assistance from external governments. In these cases, states may be tempted to use the expertise of neutral NGOs to assist in the distribution of the aid and try to co-opt them into its security policy. Finally, the ability of states to utilise aid for security policy is dependent upon how willing donor states are to bear the costs of providing aid over the long term. Certainly aid can gain the goodwill of the recipient state, but it also raises expectations which the donor will find hard to satisfy on a continued basis, and the early curtailment of aid before it has had an opportunity to contribute to the economic development and stabilisation of the recipient state will mean that its security effects soon wear off. The other main limit to the effectiveness of aid power is vulnerability, and states may exercise resilience and refuse aid rather than be seen to be reliant on other states or have to sacrifice their perceived security interests. Hence, both India and Pakistan continued with their nuclear tests in early 1998, even when faced with the threat of (albeit) limited Japanese sanctions. The North Korean government has accepted various forms of aid since 1994, but has also been prepared to forgo aid and endure famine conditions if it believes that the aid heightens irrevocably its dependency on its neighbours. Still other states may exercise availability and seek alternative aid sponsors, as with the case of Egypt during the Cold War which switched from reliance on the US to the USSR in the 1950s in order to receive aid for the construction of the Aswan High Dam.

Economic security policy-making will Following on from conceptions and capacity of economic security policy, the third key quality of the global civilian power is the policy-making will to actually galvanise and channel direct and indirect economic power in the service of security policy. The pursuit of economic-based forms of security policy is arduous given that compared with military power, which is relatively easy to mobilise and can quickly satisfy domestic and international political demands for action, the beneficial effects of direct and indirect economic power may only become apparent over the longer term. Hence, it can be imagined that for a global civilian power to effectively instrumentalise conceptions of economic security policy a high degree of policy-making cohesion and energy is required. Policy-making will itself is dependent upon the nature of the internal policy-making processes of states and the interaction between their principal security policy actors. Chapter 5 explores in detail the example of the Japanese policy-making process with regard to the North Korean security problem, but at this point it is sufficient to note that, although internal policy-making processes differ from state to state and in accordance with the type of security problem faced, it is likely that for liberal democracies the main internal actors are political parties and bureaucrats and that the policy-making differences between them will probably complicate efforts to instrumentalise economic power. Furthermore, as has been seen by examination of the restrictions on the utilisation of the economic power components, TNCs are also key possessors and facilitators of economic power. Thus, it can be expected that if a state is to act as a global civilian power it needs

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to bring on board its security programme not just the politicians and bureaucrats, but also most crucially TNC non-state actors.

Conclusion This chapter has introduced the concept of global civilian power from IR and IPE theory which offers a guiding principle for Japan to use its economic power for security ends in the post-Cold War period. Linking together much of the previously disparate material on economic power and security in Western and Japanese scholarship, this chapter has then gone on to construct a fuller model of global civilian power. The model suggests that to fulfil the role of a global civilian power it is essential for a state to possess the qualities of the conception, capacity, and policy-making will to address security problems with economic power. In terms of conception, the global civilian power will seek primarily to use economic power to remove the sources of conflict among states by offering positive and negative sanctions and building interdependent power links. With regard to capacity, the global civilian power will need to command both direct and indirect economic power—subject to the factors of vulnerability—across a wide range of economic components. Finally, in terms of policy-making will, large sections of the policy-making community of the global civilian power will not just have to be able to perceive that a security problem is answerable by economic power, but also will require the strength of conviction to work with state and non-state actors and take the necessary steps to actually mobilise economic components in the service of security. Having outlined a model of global civilian power, the task of the next chapter is to apply this framework to the case study of Japan-North Korea security relations, and to assess to what degree Japanese policy-makers are capable of conceiving North Korea as a problem relevant to economic security policy, and thus how far Japan meets the first credential of global civilian power.

Notes 1 The academic debate which arose concerning the decline or maintenance of the US’s position as a global hegemon is a good example of the essential unity in much of academic scholarship concerning the prime importance of economic power after the Cold War. For it is clear that even though scholars may have disagreed about the degree of the decline of US dominance, they were in agreement that what would ultimately be responsible for it would be the failure of US economic power. Thus, neo-realists and supporters of Gramscian theories of hegemony, such as Paul Kennedy, Robert Gilpin, and Robert Cox, found themselves on the same side in arguing for the decline in US hegemony because of the US’s loss of leadership in the international economic system (Gilpin, 1987; Kennedy, 1988; Cox, 1987). In contrast, other realists such as Samuel Huntingdon, Gramscian supporters such as Stephen Gill and David Law, and liberal scholars such as Joseph Nye, Susan Strange, and Bruce Russett, found themselves opposed to the view of US decline because they saw US power as having been guaranteed by its transformation into various forms of ‘soft’ and structural power, which reflected the US’s position at the centre of the global economy (Huntington, 1988–89, p. 82; Gill and Law, 1988; Nye 1990b; Strange, 1987. pp. 51–74; Russett, 1985, pp. 207–32).

Japan’s economic power and security 2 3 4 5 6 7 8 9

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Williams (1994); Rosecrance (1986); and Vogel (1986). Maull (1990–91, pp. 92, 105). Kōsaka (1996, pp. 329, 336, 348). Funabashi (1991–92, p. 67; 1995, pp. 170–1, 197–201). Takahashi and Nakamura (1979); Buzan (1983, p. 247). Strange (1994, p. 104). Doxey (1996, pp. 25–6). For example, Kenneth Boulding presents three definitions: threat power, economic power and integrative power. John Kenneth Galbraith puts forward condign power, compensatory power and conditioned power. Dennis H. Wrong prefers the four categories of force, manipulation, persuasion and authority power (Boulding, 1989, p. 10; Galbraith, 1983, pp. 4– 6; Wrong, 1979, p. 22). Funabashi (1978, p. 189). Keohane and Nye (1977, p. 11); Knorr (1973, pp. 4, 7). Nye (1990b, p. 169). Strange (1994a, p. 31); second citation in Helleiner (1990, p. 23). Kamo (1995b, p. 64; 1995a, p. 157). Funabashi (1978, p. 189); Knorr (1973, p. 4); Strange (1994a, p. 24). Keohane and Nye (1977, p. 12). Funabashi (1978, pp. 211–12). Carr (1951, p. 120). Funabashi (1978, p. 214). Hufbauer and Schott (1985, pp. 315–23). Gilpin (1987, p. 231). Gilpin (1987, p. 239); Gill and Law (1988, pp. 193–4). Strange (1996, p. 46). Gilpin (1987, p. 238). Strange (1994b, p. 107). Vernon (1971, p. 3). Strange (1996, p. 27). Pauly (1995, p. 373). Martin and Schumann (1997, pp. 40–95). Gilpin (1987, pp. 317–28). Knorr (1973, p. 158). Strange (1994a, p. 120). Calder (1996). Strange (1994a, pp. 197–202). Donelly (1993, pp. 179–201). Knorr (1973, p. 165).

3 Military and economic conceptions of the North Korean security problem This chapter begins to introduce the case study of Japan-North Korea security relations used to investigate the opportunities for Japan to act as a global civilian power in the post-Cold War period. The aim of the chapter is to trace changes in policy-making conceptions of the nature of the North Korean security problem, and the attendant shift from military power-dominated approaches, to ones which ascribe also a major role to the use of economic power and comprehensive security measures. The historical overview of the international relations surrounding the Korean Peninsula from the nineteenth century until the end of the Cold War will show that they were characterised by a series of great power and inter-Korean conflicts, the approach to the containment of which took the form of the application of military balance-of-power and alliance politics. Moreover, detailed analysis of the North Korean nuclear crisis demonstrates that after the end of the Cold War, the Korean Peninsula still retains the potential for great power and interKorean conflict and that all sides have continued to protect their security interests through the use of military power and alliance manoeuvring. However, at the same time as the involved powers have pursued military approaches to security on the Korean Peninsula, the unfolding events of the North Korean nuclear crisis and its aftermath have indicated the growing limitations of military power as an effective means to contain or resolve the North Korean security problem. In turn, policy-makers have begun to conceive of the North Korean security problem as one generated by economic insecurity and which requires a resolution based on economic power. Hence, this chapter then argues that the case of North Korea is an ideal and vital one for testing Japan’s use of economic power for security purposes.

The Korean Peninsula conceived as a problem of military security policy Historical overview: from the Chinese World Order to the Western Imperial World Order The nature of the Korean Peninsula security problem has been and continues to be dictated by its position as the centre of convergence for the geostrategic interests of the major regional and global powers of the day. All of the regional powers—China, Japan, Russia/USSR, and later the US—have sought over time to defend their perceived individual strategic and security interests on the Korean Peninsula, and to lock first the kingdom and colony of Korea, and then the divided North Korea and ROK (Republic of Korea; hereafter referred to as South Korea), into their respective world views. The

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various phases of Northeast Asian and Korean history have witnessed a repetition of this process, marked by diplomatic and military competition between the great powers, which has then spilled over into armed conflict, with highly destablising implications for both regional and international security. Caught in the midst of this great power rivalry, the Korean people have often lacked the ability to assert their independence and to break out of the seemingly endless historical cycle of military confrontation.1 China has contributed to this pattern of international politics surrounding Korea by the assertion of its traditional interests on the Korean Peninsula from the establishment of the Chinese World Order through to the mid-twentieth century. The Korean kingdoms of Silla (676–935 AD) and Koryo (935–1392 AD) accepted Chinese suzerainty, and the import of Chinese culture and modes of government based on Buddhism and Confucianism. For China, the Korean Peninsula represented both an invasion route to Japan and a barrier from Japanese aggression, and it was careful to exclude other powers from influence on the Korean Peninsula. This geopolitical reality has continued to shape Chinese policy towards Korea in later periods. Even as Chinese influence waned in East Asia and was replaced in the nineteenth century by the onset of Western-oriented imperialism, China retained its interest in a Korean Peninsula free from domination by hostile powers. The Sino-Japanese War of 1894–95 (fought entirely on Korean soil) was provoked by rivalry between the two powers over influence in Korea.2 The Japanese occupation of Korea, and internal divisions within China itself, reduced Chinese influence on the Korean Peninsula during the early twentieth century. But China’s strategic interests in Korea were still recognised as late as the Teheran Conference of 1944, during which the Allied Powers made the initial proposal that, after liberation, Korea should be placed under the trusteeship of the USSR, US, Great Britain, and China. The late nineteenth century saw the entry of imperial Tsarist Russia into great power competition on the Korean Peninsula. Russian strategy in a similar fashion to that of China was designed to prevent the domination of Korea by a hostile power, and was mindful of Japan’s possible exploitation of the Korean Peninsula as a route to threaten Vladivostok and other newly acquired territories in the Russian Far East. Although Russian and then later Soviet strategy was frustrated by Japan’s advance into Korea in the early twentieth century, the USSR’s continued interests in Korea were also recognised by the Teheran Conference. Japan’s strategic outlook on the Korean Peninsula has resembled that of China and Russia, and its policy-makers also have long been aware of the Korean Peninsula serving as an invasion route to and from Japan and continental Asia.3 The attempted Mongol invasions of Japan in 1274 and 1281 were launched from Korea, and, conversely, Toyotomi Hideyoshi launched his offensives against China in 1592 and 1598 via the Korean Peninsula. Hence, by the time of Japan’s initial participation in the Western imperial world order in the nineteenth century, the strategic aim of its policy-makers had become to prevent other imperialist rivals from seizing control of Korea and threatening Japan’s security. Japanese influence in Korea was subsequently confirmed by victory in the Sino-Japanese War of 1894–95 and the Treaty of Shimonoseki. Likewise, Japan fought the Russo-Japanese War of 1905 in order to halt Russian encroachment on its Korean sphere of influence, and under the Portsmouth Peace Treaty of September of the same year Russia was forced to acknowledge the paramount political, military, and

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economic interests of Japan in Korea. Japanese strategic gains in Korea were consolidated first by the Taft-Katsura agreement of 1905 under which Japan accepted US control of the Philippines in return for recognition of its own position in Korea, and then by the approval of Great Britain for its annexation of Korea in 1910. Korea remained a focal concern of Japan’s imperial strategy in the run-up to and during World War II, and Japanese advances in Manchuria were in part a reaction to the perceived need to protect Korean possessions from the expansion of Soviet power. A brief overview of these phases of Korean history reveals, then, that each one was dominated by the interplay of the geopolitical security interests of the great powers. The uncompromising logic of these interests continued to generate tension and regional conflict right up until 1945. In turn, the end of World War II and the onset of the Cold War can be seen as putting the cycle of history into motion once again due to renewed strategic rivalry on the Korean Peninsula amongst the great powers. But during the Cold War, the Korean Peninsula also took on new strategic dimensions in size and scope, with a reduced role for Japan, and the direct entry into Korean politics of the USSR, and, for the first time, the US. The Korean War and Cold War The US has been a relative latecomer to great power conflict and strategic rivalry on the Korean Peninsula. US policy-makers did express a concern with the balance-of-power in Korea and Asia as whole in the period before World War II, as shown by the TaftKatsura agreement of 1905, but the main purpose of this had been to protect the US’s own sphere of influence in the Philippines. In 1945 the US agreed to the temporary division of the Korean Peninsula and to accept the trusteeship of the southern half of Korea, but by 1947–48 the decision had been taken to withdraw US troops. The US did continue to deploy a 500-man KMAG (Korean Military Advisory Group) and to provide the South Korean army with military and economic aid. Nevertheless, the limited US interest in Korea was shown by Secretary of State Dean Acheson’s infamous January 1950 description of the Korean Peninsula as outside the US security perimeter. The outbreak of the Korean War six months later on 25 June immediately transformed the US’s strategic priorities, and Korea became the front line of US diplomatic and military containment policy. Henceforth, even though the US is geographically distant from Korea, its power projection capabilities and its position as an Asia-Pacific and global power have made it functionally a regional power in connection with Korea. Although, as Bruce Cumings argues, the origins of the outbreak of the Korean War may be found in civil and revolutionary tensions between North and South Korea, the US’s involvement along with the other big powers of the USSR and China, broadened the nature of the Korean conflict.4 The big powers continued to assert their traditional and historical strategic interests. This was shown by China’s intervention in the war in October 1950 to prevent the threatened advance of US and UN forces across the Yalu River, so denying the Korean Peninsula as an invasion route to China and restoring North Korea as a buffer state. But the traditional strategic interests of the major powers became overlain also by the new military, economic, and ideological struggles of the Cold War, and Korea became the site of a conflict with both regional and global security

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implications. The Korean War, as with the Vietnam War in the next decade, served as an extension of Cold War struggles in Europe, and formed the outlet for a ferocious ‘hot war’ which claimed up to 2 million military and civilian lives. Superpower conflict in Korea meant limited but direct clashes of the US and USSR’s conventional military air forces, as well as threats by the US in the later stages of the conflict to use nuclear weapons against North Korea.5 The cessation of the Korean War, marked by the signing of an armistice in July 1953 but no peace treaty between the US and North Korea, meant the continuation of superpower rivalries on the Korean Peninsula but also an attempt to contain any further conflicts by incorporating the two Koreas into the respective halves of the US-USSR bipolar military and security systems. On one side, the USSR and China cemented alliances with North Korea to guarantee their joint strategic and security interests. North Korea signed a Treaty of Friendship, Cooperation and Mutual Assistance with the USSR on 6 July 1961, and a similar treaty with China five days later. Both the USSR and China provided military and economic assistance to Kim II Sung’s North Korean regime, and the USSR extended its nuclear umbrella over the North. The alliance relationship between North Korea and its giant neighbours during the Cold War was far from smooth, and was damaged by the Sino-Soviet split in the 1960s and by the excesses of China’s Cultural Revolution. As a result, North Korea felt forced to build up its own independent defence capabilities: evidenced by its announcement in 1962 of an equal emphasis to be placed upon military preparedness and economic development, increased military expenditure, and Kim II Sung’s propounding of juche, or self-reliance, ideology.6 But although the North’s relations with the USSR and China during the Cold War were fraught with difficulty, the twin alliances were sufficient to guarantee its security against any feared US or South Korean military attempt to ‘roll back’ communism on the Korean Peninsula. South Korea was incorporated into the US half of the bipolar structure with the conclusion of the US-ROK Mutual Defence Treaty on 1 October 1953. The treaty provided security pledges to South Korea that were backed up by the physical presence of US troops in the South and close by in Japan and US-administered Okinawa. The US also extended its strategic nuclear umbrella to cover the South, introduced tactical nuclear weapons into its South Korean bases, and facilitated the build-up of South Korea’s independent conventional defence capabilities. The Korean Peninsula’s position at the centre of superpower tensions and military alliance systems meant that it continued as a potential source of instability for Northeast Asian security during the Cold War. President Nixon’s decision to seek détente with the USSR and China, and the issuing of the Shanghai Communiqué on 27 February 1972 which implied that the question of Korean unification should be decided by the Koreans themselves, did allow also for a brief period of détente between the two Koreas. This resulted in the Joint Statement on North-South dialogue of 4 July 1972 and a series of North-South Coordination Commission meetings to promote further inter-Korean negotiations.7 But apart from these diplomatic initiatives and US Secretary of State Henry Kissinger’s 1974 proposal for ‘cross-recognition’ of North and South Korea by the involved states of the region, the system of superpower politics and military alliances surrounding the Korean Peninsula did little to create the conditions to resolve the root

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causes of the Korean conflict. South Korean President Park Chung Hee’s imposition of martial law in October 1972 soured the atmosphere of North-South negotiations, and neither Park nor Kim Il Sung were prepared to make the political compromises necessary to achieve the goal of national reunification. Moreover, despite the desire of the major powers in the region to encourage a degree of North-South reconciliation as a means of reducing tensions on the Korean Peninsula, their general satisfaction with the status quo as long as it preserved relative stability in the region meant that they were less inclined to push actively for North-South dialogue. Consequently, the sources of inter-Korean conflict remained unresolved and the two Koreas continued to devote much of their foreign policy energies to attempts to outflank each other in the battle for diplomatic recognition in the Third World and UN. The Korean Peninsula thus retained its potential as a military flash-point, shown by North Korea’s agitation against the US with the seizure of the USS Pueblo informationgathering ship in January 1968, and tension along the Demilitarised Zone (DMZ) following the axe-killing incident of US servicemen at Panmunjon in August 1976.8 But at the same time, the tensions generated by the system of inter-Korean and great power rivalries were also capable of generating a measure of stability during this period. That the major powers were content with the status quo meant they were at least willing to rein in the hostilities of the two Koreas towards each other. The USSR refused to supply the conventional weaponry that would tip decisively the military balance-of-power in the North’s favour, and although both the USSR and China assisted its nuclear research programme, they were not prepared to see the North acquire nuclear weapons. In 1985 the USSR pressed North Korea to join the NPT, and in November 1991 the Chinese Foreign Minister, Qian Qichen, no doubt aware of the possible security risk on China’s southern border of a nuclear-armed North Korea, stated that it was ‘not desirable’ for the North to possess nuclear weapons.9 Likewise, the US has armed its South Korean ally with conventional weapons but suppressed its nuclear ambitions. South Korea’s possible initiation of a nuclear programme in the 1970s was halted by US pressure, and the South acceded to the NPT in 1974.10 During the Cold War, therefore, as tension ebbed and flowed on the Korean Peninsula, the two Koreas threatened to unsettle the security situation in Northeast Asia. But the military and diplomatic alliance systems on either side of the Cold War divide also managed to neutralise the Korean security problem and to create an effective if not entirely stable balance-of-power. Thus, apart from the isolated incidents of 1968 and 1976, North Korea felt little need to challenge stability on the Korean Peninsula in this period, and as Peter Polomka notes during the Cold War the ‘Korean Peninsula was an inert feature of the East Asian security landscape.’11 The Korean Peninsula and Japanese security during the Cold War The role of Japan with regard to the bipolar system and great power politics on the Korean Peninsula was necessarily limited during the Cold War. Although Japan had been the colonial power in Korea until 1945, its surrender meant that it was stripped almost instantaneously of its possessions and influence on the Peninsula. Japan also lost the physical capability to intervene in the politics of the Korean Peninsula due to its

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demilitarisation and Article 9 of the Constitution. This exclusion from direct involvement in Korean affairs was reinforced by the colonial legacy of anti-Japanese feeling in both Koreas. Japan remained indirectly involved in Korean politics and security, though, due to its central position within the US’s military containment strategy in Asia. The amphibious assault of US-led UN forces at Inchon in September 1950 was launched predominantly from bases in Japan, and the Korean War was influential in bringing about the ‘reverse course’ in Supreme Command for the Allied Powers (SCAP) policy. This led to the beginnings of Japanese remilitarisation, the formation of the National Police Reserve in 1950, and the service of elements of the Maritime Safety Force on minesweeping duties in Korean waters during the Korean War.12 Japan was a net beneficiary of the Korean War in that US demand for military supplies stimulated a Japanese economic boom, and because it enabled Japan to end the Occupation and to sign the San Francisco Peace Treaty with the UN powers in September 1951.13 The simultaneous signing of the US-Japan security treaty further bound Japan into US containment strategy, obligated as it was after prior consultation to provide bases for the US to use for the ‘maintenance of the international peace and security in the Far East’, which inevitably included the US war effort in Korea. Following the cessation of hostilities in the Korean War, and the deepening of the Cold War, the Korean Peninsula continued to influence Japanese security policy, as US pressure and Japan’s traditional strategic concerns about the preservation of stability on the Korean Peninsula compelled it to enhance its contribution to US containment policy. Article 6 of the 1960 revised US-Japan security treaty affirmed Japan’s obligation to provide bases to the US for the maintenance of security in the Far East. In the same year, Prime Minister Kishi Nobusuke gave the government’s official definition of the scope of the Far East which stated that, although the Far East was not necessarily a precisely delimited geographical region, and that the range of the US-Japan security treaty would not necessarily be restricted to it, it did broadly include the areas north of the Philippines and areas surrounding Japan (shūhen), and the areas under control of the Republic of China (Taiwan) and South Korea.14 The revised US-Japan security treaty, therefore, was designed to further underpin the US security presence in South Korea and Northeast Asia, and constituted an indirect Japanese contribution to South Korean security. During the 1960s and in preparation for the increased military burden of intervention in Vietnam, the US encouraged active Japanese support for containment policy in Asia by requesting that it provide economic aid to South Korea and move ahead with Japan-South Korea normalisation talks. The outcome was that after thirteen years of negotiations, interrupted six times, Japan and South Korea concluded the Basic Treaty on the normalisation of relations in June 1965. Under the treaty Japan recognised South Korea in accordance with UN resolutions as the ‘only lawful’ government in Korea, and at the same time Japan and South Korea also signed three separate agreements covering fishing rights, the legal status of South Koreans resident in Japan, and property claims. In the last of these, the Japanese and South Korean governments forged a political compromise to abandon their respective rights (seikyūken) under Article 4 of the 1951 San Francisco Peace Treaty to negotiate private claims relating to property during the colonial period and war years, and instead agreed that Japan should make a comprehensive settlement by providing to South Korea US$500 million of grants and low-interest loan aid in the form

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of ‘economic cooperation’.15 The Japanese government regarded itself as under no formal international legal obligation to provide to South Korea compensation for the period of colonial rule or war reparations because it argued that the annexation of Korea was a legally recognised act in accordance with the 1910 Japan-Korea Treaty, and that as a colony during the Pacific War and later a non-signatory of the San Francisco peace treaty South Korea was not a belligerent power and so undeserving of reparations. Hence, the official position of the Japanese government since 1965 has been that the ‘economic cooperation’ provided was not compensation for colonial rule but simply a settlement of the seikyūken issue. But despite there being no compensation agreement and the understanding that the aid was to be used to contribute to South Korea’s economic development, this could not prevent the South Korean government itself from viewing ‘economic cooperation’ as a form of compensation, and creating domestic laws to use part of the grant aid to compensate those it saw as victims of Japanese colonial rule. Japan was also persuaded by the US to acknowledge officially the link between South Korea and its own security. The so-called ‘Korea clause’ in the November 1969 communiqué between Prime Minister Satō Eisaku and President Nixon noted that the ‘security of the Republic of Korea is essential to Japan’s own security’. Even though Japan made no specific security commitments to the South, Prime Minister Miki Takeo restated this principle in August 1975, as have the JDA’s annual defence white papers in subsequent years. Further evidence of the importance of South Korea to Japanese security was provided by the Three Arrows incident of 1965 which revealed secret SDF plans to intervene in a military crisis scenario on the Korean Peninsula, and by the strong Japanese opposition to President Jimmy Carter’s eventually aborted 1977 plan to withdraw US ground forces from Korea.16 Thus, during the Cold War, Japan contributed indirectly to the military and diplomatic containment of the Korean security problem due to its position within the US alliance system, and formed an integral part of a ‘four plus two’ balance-of-power equation involving itself, the US, the USSR, China, and North and South Korea.17 The flip-side of Japan’s support for containment policy was the circumscribed nature of its relations with North Korea. The Japanese government and the MOFA acknowledged the practical reality of the existence of the North Korean government, but Japan’s strategic ties to South Korea, Japan-South Korea normalisation talks from 1952 onwards, and Japan’s acceptance under the Basic Treaty of Seoul’s claim to be the sole legitimate government in Korea necessarily restricted the degree of Japan-North Korea rapprochement and any attempts to normalise relations. The Japanese government clearly was not prepared to abandon its security interests and diplomatic support for the South in this period, and could only have contemplated normalisation with the North if its relations with Seoul remained intact at the same time. This in turn was dependent upon the remote possibility that during the Cold War and in the midst of a battle for international legitimacy with North Korea, Seoul would be willing to give up its status as the sole legitimate government in Korea, to recognise Pyongyang, and so open the way for Japan to maintain diplomatic relations with both Koreas. Hence, as detailed later in this chapter and Chapter 5, the pattern and progress of Japan-North Korea normalisation since the Cold War has been linked effectively to Seoul’s willingness to deal with Pyongyang, fluctuations in North-South relations, and the subsequent room for

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diplomatic negotiations with the North that this has provided to Japan. North Korea, for its part, periodically hinted at a desire to normalise relations with Japan, but was unprepared to take steps to do so if the Basic Treaty and Japan’s recognition of South Korea remained in place, as normalisation under these conditions would have amounted to the North’s dropping of its claim to sole legitimacy and an acceptance of the division of Korea. But despite the Japanese government’s and the MOFA’s one-sided support for South Korea, during and since the Cold War there has always been a diverse but significant body of policy-making opinion in Japan which has favoured some form of improved bilateral relations with North Korea. On the right of the political spectrum it is certainly true that there have been elements of the LDP which balk at what they see as Japan’s overly-strong diplomatic commitment to successive anti-Japanese South Korean regimes and hope to utilise improved Japan-North Korea ties in order to balance the two Korea’s against each other and so suppress South Korea’s diplomatic freedom. But, as will be seen later in this chapter and Chapter 5, more mainstream LDP opinion, whilst conscious of the link between Japanese and South Korean security and prudent not to undermine the South’s position versus the North, also has valued cautious moves to improve JapanNorth Korea relations as a means to begin to clear up the bitter legacy of colonial history, to contribute to the alleviation of tensions between North and South, and to aid the process of reunification. On the left of the political spectrum, SDPJ members have opposed the Japanese government’s and the MOFA’s support for the military containment of North Korea, and refused to recognise the Basic Treaty which they see as prolonging the division of Korea. Instead, throughout the Cold War, SDPJ Diet members maintained close personal links with the North’s Korean Workers’ Party (KWP) and government elites, and tried to improve Japan-North Korea relations by the practice of opposition diplomacy, or yatō gaikō.18 In the meantime, North Korea itself also saw potential benefits in improved relations with Japan. The North continued to chastise Japan for its resurgent militarism, but by the mid-1950s also had begun to hint at the acceptance of ‘coexistence’ with Japan, and saw Japan-North Korea dialogue as a means of achieving leverage over the South in its struggle for the liberation of the entire Korean Peninsula. Thus, Japan-North Korea relations did witness some improvements during periods of the relaxation of Cold War tensions. The restoration of USSR-Japan diplomatic relations in 1956 encouraged also the growth of Japan-North Korea contacts, shown by JapanNorth Korea Red Cross talks in April of the same year which negotiated the return to Japan of 36 Japanese citizens resident in the North, and by the start of small-scale indirect Japan-North Korea trade via China. Further Red Cross talks produced an agreement in August 1959 to allow Koreans resident in Japan to return permanently to their homeland in North Korea. Between 1959 and 1984, encouraged by Japanese media reports of North Korea’s seeming economic prosperity and socialist egalitarianism, approximately 93,000 Korean residents made the ferry trip from the port of Niigata in Japan to North Korea. Included amongst this number were 1,831 Japanese-born spouses of Koreans resident in Japan; the majority of whom were women and were to become known as Japanese wives, or Nihonjinzuma. Although the Nihonjinzuma actually gave up their Japanese citizenship upon entering North Korea, as will be seen in Chapter 5, in later years their right to visit

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relatives in Japan has become a humanitarian and diplomatic issue between the Japanese and North Korean governments. However, North Korean and Japanese government interest in improved bilateral ties was to prove short-lived. This resulted from North Korea’s decision to embark upon a rapid military build-up from the mid-1960s onwards because of its twin fears of Soviet revisionism and US imperialism in Vietnam; the general deterioration in North-South relations in the same period following the initiation of the Park military dictatorship; and the North’s support for what it saw as the domestic revolutionary struggle in the South originating in protests against Japan-South Korea normalisation talks. In addition, the conclusion of the Basic Treaty in 1965 ruled out the establishment of Japan-North Korea diplomatic relations, and the latter’s suspicion of Japanese militarism was heightened by the ‘Korea clause’ of the Satō-Nixon communiqué which emphasised Japan’s role in the US alliance system and containment of the North. The general climate of détente in international and inter-Korean relations in the early 1970s provided the next opportunity for the upgrading of Japan-North Korea ties. In a September 1971 interview with the Asahi Shimbun newspaper, Kim Il Sung shelved much of his anti-Japanese militarism rhetoric and expressed hopes for deeper economic and cultural ties with Japan, and in an interview with the Yomiuri Shimbun the following January he hinted that the Basic Treaty might not be an insurmountable obstacle to JapanNorth Korea normalisation, as after the establishment of Japan-North Korea relations the Basic Treaty and Japan-South Korea relations could be expected to ‘naturally extinguish’.19 Japan-North Korea relations were given a further boost in this period by the formation of the Tanaka Kakuei administration in July 1972 and subsequent normalisation of Sino-Japanese relations in September of the same year. The Tanaka government promoted private cultural, sports, media, and humanitarian ties with North Korea, and Japan-North Korea trade expanded rapidly (for details see Chapter 4). Nongovernmental level political dialogue was sponsored by the establishment in November 1971 of the Dietmen’s League for the Promotion of Japan-North Korea Friendship (Nicchō Yūkō Sokushin Giin Renmei), an all-party group comprising 240 members from both houses of the Diet and headed by Tanaka faction member Kūno Chūji. The group first visited North Korea in January 1972 to sign a trade deal and then later concluded a private Japan-North Korea provisional fishing agreement in 1977.20 This more flexible Japanese approach towards North Korea has been interpreted as the start of a ‘two Koreas’ policy under which the Japanese government gradually weakened its commitment to the South as the one legitimate government of Korea, accepted the fact of the division of the Korean Peninsula, and intended to strike a balance between North and South based on a policy of ‘equidistance’.21 But while the Tanaka administration’s policy certainly did reflect continued Japanese recognition of the practical existence of a government in the North, rapprochement with the North was designed more as a means to foster the general atmosphere of détente in the region than as an attempt to balance North and South. Thus, in spite of Pyongyang’s obvious desire to attract Japan away from its attachment to the South, the Tanaka administration retained its exclusive support for the South’s legitimacy and made clear its refusal to consider normalisation with the North. Japan-North Korea relations once again began to worsen from the mid-1970s onwards due to disputes over the failure of North Korea to repay debts owed to Japanese

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companies; public suspicion of North Korea’s involvement in at least seven incidents of the believed abduction of Japanese citizens from the Sea of Japan coast and Kyushu between 1977 and 1980, known as racchi jiken; the general breakdown in North-South dialogue; and the gradual onset of the second Cold War in Northeast Asia. Relations further deteriorated following North Korea’s terrorist bomb attack on the South Korean cabinet in Rangoon in October 1983.22 Japan was obligated to impose limited sanctions on the movement of North Korean shipping and citizens between Japan and North Korea in November of the same year, and in the same month North Korea retaliated by detaining and then later imprisoning on charges of spying two crew members of the Japanese fishing vessel Fujisanmaru 18. Japan removed its sanctions against North Korea in January 1985, but North Korea refused to reciprocate on the Fujisanmaru crew issue. Japan then re-imposed limited sanctions between January 1988 and September 1989 as a protest against the North’s alleged involvement in the terrorist destruction of a South Korean airliner in November 1987 and its use in the incident of a North Korean agent disguised as a Japanese citizen. Thus, during the mid-1970s and 1980s, as progress in relations with Pyongyang ground to a virtual halt, the Japanese government continued to focus its diplomatic attention on relations with Seoul. Japan-South Korea relations in this period were plagued with problems such as the South Korean Central Intelligence Agency’s (KCIA) kidnapping of opposition leader Kim Dae Jung from Tokyo in August 1973; the assassination attempt on President Park in August 1974, believed to have been instigated by the North Korean loyalist Chōsensōren (General Association of Korean Residents in Japan); the controversy from 1982 onwards over the correct reporting in Japanese school textbooks of Korean colonial history; disputes over fishing rights and the sovereignty of Takeshima Island (Tok-do in Korean); and Japanese efforts to prevent the execution of Kim Dae Jung for his alleged role in the incitement of the May 1980 Kwangju uprising. But the fact that the Japanese government worked to overcome these problems in order to repair relations with Seoul was a clear demonstration of where it saw its strategic and security priorities as lying.

The nuclear crisis and post-Cold War military security on the Korean Peninsula Nuclear and military crises As the Cold War drew to a close in the late 1980s and early 1990s, the Korean Peninsula once again showed signs of re-emerging as a source of regional conflict in Northeast Asia, with possible ramifications for global security due to concerns about North Korea’s role in the proliferation of nuclear and ballistic missile technology. Moreover, the security crises generated on the Korea Peninsula in this period, and in particular the North Korean nuclear crisis which reached its zenith in mid-1994, can be interpreted in many ways as replicating the history of earlier Korean conflicts in that they follow the pattern of states attempting to attain their security interests through containment, military pressure, and alliance manoeuvring. The next sections will illustrate these continuing

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trends, but will also prepare the ground for later sections to show how the events of the North Korean nuclear crisis marked a watershed stage in Korean Peninsula security and the dawning realisation of the states involved that the nature of the North Korean security problem was undergoing a fundamental shift and could no longer be tackled exclusively by military power. The build-up of tensions on the Korean Peninsula in this period took place despite signs in the late 1980s of the waning of Cold War pressures and of the two Koreas moving towards mutual recognition and coexistence. Inter-Korean dialogue was initiated with preliminary joint North-South parliamentarian talks in 1985, to be followed by the first prime ministerial-level talks in September 1990. In an important address on 7 July 1988, President Roh Tae Woo of South Korea proposed the improvement of trade ties between North and South, and in his New Year address of 1989 Kim Il Sung responded with his own proposals to create a North-South council on economic exchange. This new phase of détente between the two Koreas culminated in the signing on 13 December 1991 of the Agreement on Reconciliation, Non-aggression, Exchange and Cooperation, under which both sides agreed to respect their respective political systems; to adhere to the principle of non-interference; not to slander or attack each other; to cease confrontation on the international stage; and to increase bilateral cooperation. This agreement was followed on 31 December by a Joint Declaration on the Denuclearisation of the Korean Peninsula. Even though concerns had already been raised by the US and South Korea concerning the North’s nuclear programme, the North agreed along with the South not to test, construct, produce, accept, store, deploy, or use nuclear weapons, and to use nuclear energy only for peaceful purposes, and a Joint Nuclear Control Committee (JNCC) was set up to implement the agreement. Furthermore, in September 1991 both North and South Korea agreed to simultaneous entry into the UN. Pyongyang only acceded to UN membership in order to obstruct Seoul from gaining sole representation and so avoid the North’s international de-legitimisation.23 Nevertheless, the North and South’s acceptance of UN seats implied mutual recognition of the existence of two governments on the Korean Peninsula and the dropping of respective claims to sole legitimacy—all of which should have created the basis for further inter-Korean rapprochement. But these hopes for lasting stability on the Korean Peninsula in the post-Cold War period were dashed by the increasing importance that all the concerned powers attached to the issue of North Korea’s nuclear programme.24 Fears about the North’s nuclear ambitions had surfaced as early as 1984, with the discovery by US intelligence satellites of the North Korean regime’s construction at its Yongbyon nuclear plant of a second reactor believed to be capable of reprocessing plutonium suitable for nuclear weapons. In order to obstruct possible moves by North Korea to build a nuclear bomb, the US persuaded the USSR to pressure the North into signing the NPT on 12 December 1985. North Korea, though, resisted signing the IAEA Safeguards Agreement and the acceptance of regular IAEA inspections at its nuclear facilities. From the early 1990s onwards pressure mounted from the US, South Korea, Japan, and China for North Korea to allow inspections. The US took initiatives to persuade the North to comply with inspections by announcing in September 1991 the withdrawal of all US tactical nuclear weapons from South Korea (although US policy had never been to confirm or deny their deployment), and then in November of the same year the cancellation of US-South Korea

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Team Spirit military exercises scheduled for 1992. The Team Spirit exercises typically involved up to 200,000 troops and had always been regarded by the North as a highly provocative threat to its security. The US also made clear via back channels its willingness to conduct one-off high-level talks with North Korea some time in 1992. The US initiatives and promise of talks seem to have played a role in the North’s decision to conclude the Joint Declaration on Denuclearisation, and its official announcement on 7 January 1992 that it intended to sign the IAEA safeguards agreement. However, USNorth Korea talks on 22 January made little progress towards a resolution of the nuclear issue as US representatives were only mandated to reiterate the demand that North Korea unconditionally accept IAEA safeguards. In return for North Korea’s compliance, US negotiators were unable to offer any specific diplomatic or economic rewards, and only the negative security assurance that US nuclear weapons would not be used to threaten the North. Despite the limited progress of the US-North Korea talks, the North did sign the safeguards agreement on 30 January and began to permit IAEA inspections in May of the same year. These inspections found evidence of plutonium reprocessing, and in February 1993 the IAEA demanded special unscheduled inspections of two other suspect North Korean nuclear sites. North Korea refused these special inspections on the grounds that they were unprecedented, sought access to secret military installations, and were an infringement of its sovereignty. Meanwhile, dissatisfied with the pace of North Korean compliance, the US-South Korea Security Consultative Meeting increased the pressure on the North by announcing in October 1992 the resumption of planning for Team Spirit exercises to be held in March 1993 unless the North made satisfactory progress on inspections. Pyongyang took the announcement as a new provocation, and, in the run-up to preparations for Team Spirit, moved the inspections issue towards a full-blown nuclear crisis with its decision on 12 March 1993 to give ninety days’ notice of its withdrawal from the NPT. Tensions were raised further by the North’s own military behaviour, including the assumption of a ‘semi-war’ status and the test-firing of ballistic missiles in the Sea of Japan in May. The first reaction of the incoming Clinton and Kim Young Sam administrations in early 1993 was to intensify diplomatic pressure on North Korea by threatening support for a UN resolution on the imposition of economic sanctions. But at the same time, the US also agreed on 22 April to resume high-level talks with the North on the nuclear issue. On 11 June these talks produced a joint US-North Korea statement in which Washington repeated its negative security assurances, and Pyongyang agreed to suspend its withdrawal from the NPT. But during the talks the US negotiators still had no mandate to offer North Korea substantial diplomatic and economic concessions, and the North did not agree to accept IAEA special inspections. On 9 July further US-North Korea talks produced another joint statement in which the US offered for the first time the concession of exploring North Korea’s request for the replacement of its existing graphite-moderated nuclear reactors with light-water reactors (LWR). These reactors are less efficient at producing weapons grade plutonium, and their eventual provision to the North under the Agreed Framework of October 1994 was to later prove to be one of the keys to starting to resolve the nuclear crisis. However, the IAEA’s continued insistence upon and North Korea’s obstruction of

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special inspections and continuity of inspections safeguards only served to heighten tensions once again and ushered in a period of North Korean nuclear brinkmanship from late 1993 onwards. The IAEA ratcheted up the diplomatic pressure on Pyongyang with a UN vote on 1 November demanding immediate North Korean compliance with inspections, and US and South Korean officials talked publicly of renewed steps to implement sanctions. North Korea regarded sanctions as a form of conflict and responded on 5 November that it would meet ‘war with war’, and US intelligence sources reported that the North had begun to reinforce its military forces on the DMZ. During US-North Korea talks in January and March 1994, the North succeeded in bargaining its acceptance of IAEA continuity of safeguard inspections (although not special inspections) and new North-South dialogue in return for the cancellation of Team Spirit and another round of US-North Korea talks. When IAEA inspectors returned to North Korea for the regular inspection in the same month they discovered that the North had expanded its plutonium reprocessing facilities and they were obstructed in their attempts to gather inspection samples. The IAEA withdrew its inspectors, whilst the US and South Korea resumed planning for Team Spirit and began to reconsider moves to impose sanctions. The IAEA then became additionally concerned about the North’s decision in the spring to begin unloading fuel rods at the Yongbyon reactor. The North was prepared to allow the IAEA to observe de-fuelling and the surveillance of the rods afterwards to ensure no diversion of fuel for reprocessing, but not to permit sampling which would have revealed to what extent North Korea had reprocessed plutonium in the past. The IAEA rejected this offer and on 10 June suspended all technical assistance to the North. The US and South Korea, disturbed that the North by the removal of rods without safeguards would move one step closer to the acquisition of a nuclear weapon, began to lay out specific plans for UN sanctions. The sanctions were to be developed in three stages: the first was to involve the stoppage of all technical and economic aid to the North; the second the cessation of remittances to North Korea from its citizens resident in Japan estimated to total anything between US$40–400 million annually; and the third and final stage called for the interdiction on the high seas of all shipping traffic to the North.25 Pyongyang responded with the statement that sanctions would be regarded as a ‘declaration of war’, and on 13 June informed the US that it intended to withdraw from the IAEA and expel all inspectors. The US, South Korea, and North Korea placed their military forces on high alert, and there seemed to be a real possibility of a repeat of the catastrophic military conflict of the Korean War. The fear on the US side was that North Korea might launch a full-scale offensive across the 38th parallel, whereas the North Korean side seemed to dread a US-led pre-emptive strike employing the sophisticated weaponry of the Gulf War, such as the Stealth bombers and Patriot missiles deployed in South Korea and Japan. The diplomatic and military impasse was finally broken on 15 June by the visit of exPresident Jimmy Carter to North Korea in an act of ‘track two diplomacy’, but with the White House’s backing. Carter reached an agreement in personal discussions with Kim Il Sung that the North would allow IAEA inspectors to remain, that it would engage in presidential-level talks with the South, and that it would freeze its nuclear programme in exchange for new negotiations with the US. The sudden death of Kim Il Sung in July placed the future of US—North Korea talks in doubt, but talks resumed in August and by

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October had produced the ‘Agreed Framework’. Under this agreement North Korea confirmed that it would freeze its nuclear programme in return for US promises to create an international consortium that would supply the North with two 1,000 megawatt LWRs—the same reactors that had been mooted as one means to resolve the nuclear crisis back in July 1993. The LWRs were projected to be completed by 2003 at an estimated cost of US$5 billion. The US agreed also to supply the North with crude oil to make up for energy shortfalls in the interim period before the LWRs were operational. Even more importantly for North Korea, the US confirmed its promise not to use nuclear weapons against the North, and to move towards the full normalisation of political and economic relations. In January 1995, the US lifted some restrictions of the economic embargo imposed upon North Korea since the outbreak of the Korean War, and allowed the installation of telecommunications links between the US and North Korea; the opening of offices by US journalists in Pyongyang; the use of credit cards in the North for personal travel; the export to the US of North Korean magnesite; and financial transactions via the US banking system provided that they did not originate or terminate in the US. For its part, North Korea was to engage in North—South dialogue, implement the Joint Declaration on Denuclearisation, accept IAEA safeguards, and, upon completion of the LWRs, allow regular and special IAEA inspections.26 The Agreed Framework’s provisions were then put into effect by the negotiation of the Korean Peninsula Energy Development Organisation (KEDO) Treaty which was signed in December 1995. The treaty formed a consortium to construct the two LWRs, with participation from the US, South Korea, Japan, and later the EU, and pledges of support from ASEAN and Australia.27 Although the reactors were based on an original US design, the main contractor for their construction was the South’s Korean Electric Power Company (KEPCO). Following site surveys, ground-breaking for the LWRs began at Sinpo, North Korea, in August 1997, and an agreement was reached to move ahead with the construction of the reactors themselves in September 1998. The establishment of KEDO marked the beginning of the resolution of the nuclear crisis, but the nuclear issue has not been eradicated entirely as a potential source of conflict. This is due to problems such as North Korea’s unfulfilled threat in June 1995 to withdraw from the Agreed Framework over its initial refusal to accept LWRs designed in South Korea, and the constant difficulties of the US, South Korean, and Japanese governments in obtaining funds for the project. In particular, US congressional opposition to the Agreed Framework has impeded the ability of the US government to secure funds for and deliver on time crude oil supplies to North Korea. Consequently, the fear by mid-1998 was that North Korean dissatisfaction with delays in crude oil supplies and the perceived failure of the US to meets its obligations under the Agreed Framework could lead it to resume its nuclear brinkmanship. At the time this was indicated by North Korea’s suspension of work on canning spent fuel at Yongbyon, and its construction of an underground facility at the same site believed to be possibly for reprocessing fuel. The funding of crude oil supplies and North Korean brinkmanship, then, remain constant headaches for the successful implementation of KEDO. But following further US-North Korea talks in September 1998 and US promises to meet its oil supply commitments, North Korea agreed to restart canning and up to the present time has maintained an

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effective freeze on its nuclear programme. But even if the nuclear issue itself has been declining as an immediate source of conflict, there are still other factors which could plunge North and South Korea and the major powers into a new military crisis. The Korean Peninsula remains one of the most heavily militarised areas in the world, and both North and South Korea still perceive each other as capable of provocative military behaviour. Viewed from the North Korean perspective, the continued hostile intent of the US and South Korean military forces since the Agreed Framework has been shown by its need to shoot down a US army helicopter which entered its airspace in December 1994, and the fact that regular large-scale USSouth Korean naval and amphibious exercises have continued to take place even though Team Spirit has remained suspended. For the US and especially South Korea, North Korean aggression has been demonstrated by its unilateral announcement in April 1996 that it would no longer observe the ceasefire arrangements on the DMZ, its expulsion of UN observers, and the bringing of heavy weapons into the DMZ. The North has also allowed its patrol boats to cross over into South Korean waters and North Korean guerillas infiltrated the DMZ in October 1995. The most dramatic example of the continuing potential for a serious military clash between North and South came, though, with the discovery on 18 September 1996 that a North Korean submarine had entered South Korean waters and accidentally beached itself at Kangnung on the eastern coast of the Peninsula. Although the submarine was probably on a routine reconnaissance mission with no particularly unusual aggressive intent, and the December 1991 North-South Agreement of Reconciliation contained provisions for dealing peacefully with such an incursion, the South Korean government chose to regard it as a deliberate provocation and mobilised over 40,000 troops to hunt down the submarine’s crew, with twenty-four North Korean soldiers killed in the process. South Korea refused to return the bodies; demanded an apology from the North; considered the cut-off of all aid to the North including financing for the KEDO LWRs; and reviewed its military preparedness against North Korea and the options for a resumption of Team Spirit. In turn, North Korea refused to apologise; demanded the return of the submarine and its crew; raised the level of its warlike rhetoric against the South; threatened to withdraw from the Agreed Framework; and signalled preparations for a new test of its Nodong-1 missile in October of the same year. The US supported the South Korean stance with a UN Security Council on 15 October which expressed ‘serious concern’ over the submarine intrusion, and agreed to hold large-scale military exercises with the South in November of the same year to demonstrate US—ROK alliance solidarity. But the US was also concerned that the South Korean government’s hard-line approach was an over-reaction designed to appeal for domestic support in the run-up to presidential elections scheduled for late 1997, and was determined that the incident should not undo the progress of the Agreed Framework. Hence, the US called for restraint by both sides and remained engaged in talks with the North in an attempt to solve the crisis. As a result, the US managed to dissuade the South from abandoning its commitments under the KEDO treaty, and coaxed an apology of sorts from the North on 29 December 1996 when it expressed ‘deep regret’ to the South over the incident. South Korea returned the remains of the twenty-four North Korean soldiers, and the way was cleared for the resumption of work on the LWR planning in January 1997.

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Thus, as the submarine incident proves, even after the passing of the 1994 nuclear crisis an atmosphere of mutual mistrust still exists that could trigger another Korean Warstyle conflict. There were also fears that the defection of a leading North Korean official Hwang Jan Yop to South Korea in February 1997 could have provoked North Korean military reprisals. Moreover, the fears that a North Korean regime under pressure as in the nuclear crisis or submarine incident could initiate a new Korean conflict through the deliberate aggressive use of its military power to secure new concessions from the US and its allies, or the ‘explosive’ aspects of the North Korean security problem, have been added to in recent years by anxieties about the ‘implosive’ aspects of the problem. Commentators and strategists have been concerned that the death of Kim Il Sung in 1994 and doubts about the succession of his son Kim Jong Il could produce a domestic power vacuum and struggle, and that this, coupled with the decline of the North Korean economy and severe food shortages since 1995, might then lead to the internal collapse of the North Korean state. Kim Jong Il’s apparently steady consolidation of power since 1994, and his elevation to the positions of Secretary General of the KWP in October 1997 and Chairman of the National Defence Commission in September 1998, and thus his effective appointment as head of state, have ameliorated concerns about the internal political stability of North Korea. But policy-makers in surrounding countries can still not afford to rule out entirely the possibility of an implosion in the North as long as harsh economic conditions persist. Hence, according to this scenario, North Korean military factions, faced with the collapse of the regime and loss of their own power, might seize control entirely of the state apparatus and independently provoke a conflict with the South, or large refugee flows might start border clashes as they attempt to escape across the DMZ to Korean enclaves in China, and even to Japan.28 USSR/Russia, China, and the shifting balance-of-power The above account has demonstrated that the Korean Peninsula has remained an area of intense military confrontation in the post-Cold War period. Moreover, the continuity between the post-Cold War and historical patterns of conflict on the Korean Peninsula can be seen in the fact that much of this conflict has again been generated by the regional powers which have sought to guarantee their security interests by the manipulation of balance-of-power strategies and the use of military power. Specifically, it can be argued that the contemporary North Korean security problem has in part resulted from the loosening and eventual near dismantlement of the bipolar structure around the Korean Peninsula following the end of the Cold War. The decline of the bipolar system which had for so long suppressed the Korean Peninsula as a regional and global security problem, now presented North and South Korea with new strategic freedom to assert their own interests, and in the process of doing so to undermine further the balance-of-power on the Korean Peninsula and create new tensions. The result was to be that by the late 1980s the Korean Peninsula had ceased to be an inert feature of Northeast Asian security, and the involved powers were obliged to revert to diplomatic and military strategies (albeit with only limited success) in order to try to contain anew the security problem. The end of the Cold War in Europe and US-Soviet global confrontation also produced more fluid international politics in Northeast Asia. President Mikhail Gorbachev

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signalled an end to the Sino-Soviet split with his visit to Beijing in May 1989, the reduction of Soviet troop levels on the Chinese border, and the scaling back of the Soviet naval presence in Vietnam. The revision of the USSR’s strategic priorities, and as a result the diminished importance of the US-USSR-China strategic triangle, inevitably had a crucial impact upon the Korean Peninsula security situation, and especially the USSR’s ally North Korea, which in the past had benefited not only from the USSR-US military confrontation and the guarantees of military protection that it afforded to Pyongyang, but also from the Sino-Soviet split and the ability to engage in a hazardous game of trading one power off against the other in order to secure economic aid.29 Soviet policy towards the Korean Peninsula underwent an abrupt change of direction as economic assistance to North Korea was dramatically curtailed and the USSR switched its emphasis to improved trade and investment links with South Korea. The Soviet Union effectively abandoned North Korea as a close ally following its decision to normalise relations with South Korea on 30 September 1990 and to move USSR-North Korea trade to a hard currency exchange basis in the same year. In November 1991, the Russian Federation emerged as the successor state to the Soviet Union and treaty partner of North Korea, but the relative impoverishment of its military and economic capabilities meant that it became marginalised in the Northeast Asia balance-of-power equation. Russia has attempted to remain an important player in Korean Peninsula affairs, but the extent of its disengagement has been shown by its exclusion from the KEDO agreement and the fourparty peace talks held amongst the US, China, North Korea, and South Korea, first proposed in April 1996, and described in more detail later.30 The gradual breakdown of the Cold War structure of international politics in Asia also encouraged China to take a more flexible policy line towards North Korea. Deng Xiaoping’s return to power in 1978 meant the adoption of a foreign policy with a less ideological content and a reassessment of Sino-North Korean relations. The ‘special relationship’ with the North of the Mao Zedong-Zhou Enlai era became less central to Chinese policy, and China cut military aid from US$44 million in 1972 to US$23 million by 1980, forcing the North in the late 1980s to look increasingly towards the USSR for military protection.31 The military aspects of China-North Korea relations were deemphasised in favour of a more economics-oriented policy towards the Korean Peninsula as a whole. China moved trade with North Korea to a foreign currency exchange basis in January 1992. In the meantime, China-South Korea economic relations expanded rapidly, with total trade increasing from US$220 million in 1981, to US$2 billion in 1986, and to US$11.7 billion in 1994.32 In 1995 South Korea and China became respectively each other’s third and sixth largest trading partners. Dramatic progress in bilateral economic relations was also matched by progress in political relations as China followed the USSR in normalising relations with South Korea on 24 August 1992. But in spite of China’s close relations with South Korea in this period, in contrast to Russia it has not entirely abandoned North Korea or disengaged from its traditional geopolitical interests in Korea. In terms of public rhetoric at least, China and North Korea remain as ‘close as lips and teeth’, and China is still intent on preventing instability on its southern border with Korea. It has remained opposed to the introduction of nuclear weapons into Korea by either the US or North Korea, and to the domination of the Korean Peninsula by what it sees as the hegemonic ambitions of the US. China has also

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continued to reject the use of coercive force or military power as a solution to Korean security problems, and so blocked attempts during the nuclear crisis to impose economic sanctions on North Korea. But although China has eschewed a military solution to the Korean security problem, it has retained the military ability to intervene if its traditional interests are threatened.33 China’s policy towards the Korean Peninsula since the mid-1980s, then, has combined a mix of traditional strategic and newer economic interests. China has developed what has been termed an even-handed approach to the two Koreas, and has been in favour of dialogue between North and South and the other powers in the region in order to ease tensions. There has been some debate over whether or not China really favours reunification for the two Koreas, and is content with a divided Korean Peninsula as a way to continue to exclude from its traditional sphere of interest US influence and the possible US military presence that might come with a South Korean-led absorption of North Korea. China has thus provided sufficient economic aid to tide North Korea over recent economic crises and prevent its collapse, but not enough to allow it to recover the strength to upset the balance-of-power on the Korean Peninsula. China’s official position and actions, though, suggest that at the very least it has been looking for a peaceful solution to any North Korean security problem, and that it supports the laying of the groundwork for reunification.34 Consequently, China assented to the joint entry of North and South Korea into the UN in September 1991, worked hard to defuse North-South tensions over the detection of Hwang Jan Yop, and has aimed to take a ‘constructive’ role in the four-way peace talks. South Korean ‘nordpolitik’ and policy during the nuclear crisis The erosion of North Korea’s alliances with the USSR and China were both a product of and a further spur to deliberate South Korean attempts to assert its perceived national interests vis-à-vis North Korea by manipulating the balance-of-power on the Korean Peninsula. The rapid growth of the South Korean economy from the late 1960s onwards ensured that by the early 1990s it had established superiority over North Korea in nearly all traditional indicators of power, and was well placed to exploit to its own advantage the loosening of Cold War divides and to engage the major regional powers in alliance politics. In 1991 South Korea’s GNP had reached US$280 billion compared with an estimated US$23 billion for North Korea, and whereas the South’s economy was growing at a rate of 8 per cent a year, the North’s had begun to contract by around 5 per cent. The military balance had also swung in the South’s favour by the 1990s. In terms of expenditure, North Korea was devoting up to 20 per cent of its GNP to the armed forces, compared with 4 per cent for the South. But despite North Korea’s massive concentration of resources in this area, South Korea’s total military expenditure of US$15.5 billion in 1996 still comfortably outstripped the North’s total of US$5.4 billion in the same year.35 North Korea continued to maintain a quantitative military advantage over the South in numbers of personnel and frontline battle equipment (Table 3.1). However, many analysts noted that by the late 1980s the North’s superiority in this regard was being increasingly cancelled out by the South’s qualitative advantage in military equipment due to access to sophisticated weaponry and support from the US alliance, and due to the

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North’s declining ability to bear the costs of maintaining and training its huge armed forces.36 The general

Table 3.1 The military balance on the Korean Peninsula 1997–98 Military item North Korea South Korea Total armed forces 1,055,000 672,000 Army troops 923,000 560,000 Main battle tanks 3,000 2,130 Armoured personnel carriers 2,500 2,490 3,500 3,500 Towed artillery 4,500 1,040 Self-propelled artillery Multiple rocket launchers 2,600 156 Air defence guns 7,800 600 Surface-to-air missiles 10,000 1,020 Combat aircraft 607 461 Armed helicopters 50 75 Submarines 26 6

US 35,920 .. 100 100 .. .. .. .. .. .. .. ..

Source: International Institute for Strategic Studies, The Military Balance 1997–98, pp. 183–6. awareness since the late 1980s of outside commentators, South Korean policy-makers, and probably also the North Korean regime as well, has been that the military and economic power balance has swung decisively in the South’s favour. The South began to exploit these power advantages and the changing international environment in order to undertake a series of diplomatic manoeuvres against the North from the late 1980s onwards. Seoul’s diplomatic strategy was based upon simultaneous efforts to improve North-South relations—as shown by the inter-Korean agreements of 1991—and to work towards the normalisation of political and economic relations with the socialist states of Europe, and then eventually the major prize of the socialist states of the USSR and China. The aim of this strategy was to open an initial channel of negotiation with the North, but at the same time to undercut the North’s international position and so to cajole it into further direct talks with the South, or as Okonogi Masao notes an attempt to ‘enter Pyongyang via Moscow’.37 Undoubtedly the South Korean diplomatic strategy succeeded brilliantly as relations were established with Hungary and Poland in 1989, Czechoslovakia and Bulgaria in 1990, the USSR in September 1990, and China in August 1992. South Korea’s ‘northern policy’, or nordpolitik, isolated the North from its former Cold War allies, the USSR and China, and radically altered the balanceof-power on the Korean Peninsula by in effect deleting one side of the relatively stable balance-of-power equation. The two-plus-four arrangement of the Cold War, under which North Korea on one side had been able to look for backing from the USSR and China, and South Korea on the other side had looked for support from the US and Japan, had been replaced with one that now had moved all the external powers closer to South Korea. This top-heavy equation and the exposure of Pyongyang’s strategic vulnerability then provoked a North Korean counter-reaction, which was designed to restore something

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akin to the balance-of-power politics that had safeguarded its security in the past, and was to be manifested in diplomatic and military tensions provoked by North Korea between itself and the major powers. North Korean diplomatic and nuclear strategy South Korea’s series of diplomatic triumphs forced North Korea to devise a strategy to restore its strategic and security position. The USSR’s recognition of Seoul and reductions in bilateral economic assistance confirmed for Pyongyang that it had been abandoned by its chief military, political, and economic ally. The Soviet Union’s collapse in 1991 and Russian disengagement from the Korean Peninsula only served to compound North Korea’s security anxieties. Likewise, the establishment of China-South Korea relations and reductions in aid discredited China as a reliable ally in North Korean eyes. North Korea has had little choice but to maintain ties with its more powerful northern neighbours, and it has continued to receive some security benefits because of China’s reluctance to see North Korea collapse or coerced by the other powers in the region. But as China-North Korea relations have become increasingly distant since the late 1980s, North Korea has begun to search for new supporters to enable it to break out of its diplomatic isolation, to counter South Korean pressure, to establish a new balance-ofpower, and ultimately to ensure its own survival. The closed nature of the North Korean political system means that outside observers cannot always ascertain its policy-making motivations with total accuracy. However, judging from the relatively consistent pattern of North Korea’s external behaviour, the strategy that it appears to have adopted has been to restore the diplomatic, military, and economic balance-of-power against the South by establishing links with those powers traditionally on the South’s side in the two-plus-four equation, namely the US and Japan. This has involved North Korean attempts to muster all the diplomatic and military pressure it can in order to detach the US and Japan from the South’s side, and to weaken the US security system in the region which had for so long contained the North. In pursuing this strategy, North Korea has lacked the power resources of the South, but what diplomatic and military power the North does possess has been boosted by the same strategic fluidity that the South has utilised for its own advantage. In the early stages of North Korea’s unfolding balance-of-power and survival strategy, the concentration was upon the normalisation of Japan-North Korea relations. The motivations, problems, and process of the normalisation negotiations are detailed later in the chapter. But at this point it is sufficient to note that Japan was a prime target for North Korean diplomatic initiatives due to hopes of access to economic assistance and possible opportunities to upset Japan’s delicate bilateral relationship with South Korea. Normalisation talks stretching to eight rounds were held between January 1991 and November 1992. Despite the eventual failure of these talks over the issue of nuclear inspections, North Korea did achieve some initial diplomatic successes, appearing to draw Japan closer to the North, and raising South Korean concerns that Japan would push ahead with normalisation before progress in North-South dialogue, or in effect allow Pyongyang to ‘enter Seoul via Tokyo’. The fears of South Korean policy-makers that Japan-North Korea rapprochement would erase the diplomatic advantages gained from

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nordpolitik, free North Korea from its diplomatic isolation, and allow North Korea to trade Japan off against the South in a new balance-of-power struggle were well illustrated by President Roh’s insistence to Prime Minister Kaifu Toshiki in January 1991 that Japan should only push ahead with Japan-North Korea normalisation talks in conjunction with an improvement in North-South relations—a demand that was later to become a de facto condition of all Japan-North Korea normalisation attempts. The second and most important target of North Korean strategy was an attack upon the political solidarity of the US-South Korean security alliance in an attempt to sabotage the basis of South Korea’s security, and thus debilitate the platform which had supported Seoul’s attempts to isolate and coerce Pyongyang. In order to prise apart the alliance, the North chose to use conventional and later nuclear military threats and brinkmanship to undermine US and South Korean confidence in the alliance, and to extract political and economic concessions from the US. In its military challenge to the US-South Korean security alliance, North Korea has employed bellicose rhetoric, such as its famous taunt during North-South talks in March 1994 that it would turn Seoul into a ‘sea of fire’, and these threats have been backed up by military power, which, although not necessarily sufficient to secure an outright victory, is judged to be sufficient to inflict severe damage on South Korean and US forces, to devastate the city of Seoul, and to provoke an all-out war. By the 1980s, the conventional military balance had tipped towards the South, but Table 3.1 demonstrates that North Korea still possesses formidable military power. At the height of the nuclear crisis in mid-1994, US military simulations suggested that a massive North Korean offensive across the DMZ could overrun much of the South within a two-week period, and that after the arrival of reinforcements the US and South Korea would be forced to fight a protracted war to recover lost territory in a similar fashion to the first Korean War.38 Any military conflict with North Korea was also likely to be complicated for the US and South Korea due to the North’s employment of guerrilla forces, the potential effectiveness of which were later demonstrated by the 1996 submarine incident. North Korea would be unlikely to triumph in a conflict over the long term, but US estimates put the cost of repelling any North Korean offensive at around 50,000 US and 490,000 South Korean military casualties, and between US$60 billion and US$1 trillion in military financial outlays.39 North Korea is able to back its conventional forces with the threat from weapons of mass destruction. Chemical weapons production started in North Korea with the assistance of the USSR in the 1960s, and by the 1980s the North was able to manufacture a range of offensive chemical weapons, including sarin gas. North Korea has assisted countries such as Syria with the production of chemical weapons for mounting on Scud-B and C ballistic missiles, and with a capacity to produce up to 4,500 tons of chemical agents per year is believed to possess the world’s third largest stockpile of chemical weapons.40 North Korea is also known to be engaged in a programme to manufacture and proliferate ballistic missile technology, and thus also to be a transgressor of the Missile Technology Control Regime (MTCR). The North Korean programme was initiated in the late 1970s and early 1980s, with first Egyptian and then Iranian collaboration, and based upon the reverse engineering of Scud missiles systems obtained from the USSR. In 1987

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North Korea agreed to export to Iran 320–340 kilometre-range Scud-B missiles, and in 1991 produced a new 520–780 kilometre-range Scud-PIP missile capable of striking all of South Korea and parts of Japan. On 29 May 1993, North Korea test-fired its ScudC/Nodong-1 missile, estimated to have a range of 1,000–1,300 kilometres, allowing it to strike most of Japan and deep into China. North Korea is also developing a Taepodong-1 missile with a range of 1,000–1,500 kilometres. The North conducted another missile test in the Sea of Japan on 31 August 1998, which it claimed was for peaceful purposes and had successfully placed a satellite in orbit. Immediately after the launch, US, South Korean, and Japanese defence officials were unable to confirm the presence of a North Korean satellite in orbit, although by 14 September the US had reached the conclusion that the North had attempted to launch a satellite which had then failed to reach orbit. But regardless of whether the test was for peaceful or military purposes, the general agreement was that the missile was a Taepodong-1, given that its secondstage rocket had sufficient range to cross over Japan and land in the Pacific Ocean. In addition, the North is believed to be engaged in the development of a Taepodong-2 missile with a range estimated by the US to be 3,500–6,000 kilometres, enabling it to reach possibly even Alaska. All these North Korean missiles are capable of carrying conventional highexplosive, biological and chemical warheads, and according to Central Intelligence Agency (CIA) reports the Taepodong-1 and -2 may be capable of delivering nuclear warheads.41 There are doubts about the accuracy and reliability of North Korea’s ballistic missiles. Nevertheless, it is certain that the ballistic missile programme has given North Korea an effective, if crude, weapon of power projection in the region which cannot be easily defended against. The main North Korean tool of military pressure, though, has been its nuclear programme. It is important to note that during and after the nuclear crisis, the outside world has never proved beyond doubt that North Korea was attempting to manufacture a nuclear bomb. Despite various US intelligence estimates which suggested that the North was engaged in or close to perfecting the production of nuclear weapons, proof of this activity was limited to the circumstantial evidence that North Korea appeared to have acquired the necessary facilities to produce a bomb, had reprocessed unknown quantities of plutonium, and had obstructed IAEA inspections. However, North Korea has never declared openly a nuclear weapons programme, and instead seems to have chosen deliberately to deepen and play upon international suspicions that it may have been engaged in one. The North’s brinkmanship tactics with the international community over the issue of nuclear inspections served to deepen the external perception of North Korea as a threat to regional security and a ‘nuclear threshold’ state, and, regardless of whether the North was actually intent upon the physical acquisition of a nuclear weapon, handed it a highly effective tool of diplomatic leverage and means of regime survival. A number of motives—none of which are exclusionary—seem to explain the North Korean use of its ‘nuclear card’. It is quite conceivable that the North Korean regime has viewed the acquisition, or at least its perceived acquisition by the outside world, of a nuclear bomb as a useful form of security insurance which has a deterrent value and could restore the military balance on the Korean Peninsula. North Korea has been exposed to US nuclear threats since the Korean War and the North was aware of the South’s efforts in the 1970s to produce nuclear weapons. Thus, North Korea cannot have

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overlooked the significance of the possession of its own nuclear bomb as a relatively cheap ‘equaliser’ in the military struggle against the South. Further impetus for a North Korean nuclear deterrent was provided by the effective withdrawal of the USSR’s nuclear umbrella following the normalisation of relations with South Korea in 1990. North Korean officials at the time are reported to have warned USSR Foreign Minister Andrei Shevernadze that USSR-South Korea normalisation would leave for the North, ‘no other choice but to take measures to provide for ourselves weapons for which we have so far relied on the alliance’—a clear reference to North Korea’s need to acquire some kind of guarantee against nuclear threats after the loss of Soviet protection.42 North Korea may also have pursued its nuclear strategy for reasons of internal regime legitimisation. As James Cotton has pointed out, North Korea probably saw some advantage in using the nuclear issue to engineer a security crisis with the US and South Korea in which they could be portrayed as aggressors, and then using the external threat as a means of renewing the internal legitimacy of the regime.43 Deterrence and regime legitimisation are both plausible explanations for North Korean policy. But an even more important motive for North Korea’s predilection for the game of nuclear bluff was the attempt to drive a diplomatic wedge between the US and South Korea, whilst at the same time seeking to improve its own relations with the US. North Korean actions during the nuclear crisis suggest that the whole thrust of its strategy was to style the nuclear issue as one between itself and the US, and to engage the US in direct talks whilst avoiding dialogue with Seoul. In the early stages of the crisis in April 1993, North Korea declared that the inspections issue was a problem to be resolved not in the arena of the UN but ‘through negotiation between the DPRK and the US’, and doggedly refused to accept IAEA nuclear safeguards unless these were first brokered in US-DPRK talks.44 Hence, it was only after the promise of the conduct of direct talks with the US that North Korea agreed to sign the IAEA safeguards agreement in January 1992, to suspend its withdrawal from the NPT in June 1993, to accept IAEA continuity of safeguards in March 1994, and to freeze its nuclear programme in June 1994. As the crisis progressed a pattern emerged of Pyongyang clearly using its nuclear programme and other forms of military pressure as bargaining chips to initiate direct dialogue with and to secure concessions from Washington. North Korea’s strategy proved to be remarkably successful as the US conceded negative security assurances not to use nuclear weapons against the North; the withdrawal of tactical nuclear weapons and cancellation of Team Spirit in 1990; and finally, under the Agreed Framework of 1994, to organise the provision to the North of up to US$5 billion in nuclear energy assistance, and to move towards the normalisation of US-North Korea political and economic relations—all secured with only a minor commitment from Pyongyang to resume North-South dialogue and freeze its nuclear programme. In turn, the North’s strategy managed to inflict considerable political damage on the US-South Korea alliance. Policy-makers in Seoul became concerned that they were being sidelined in nuclear negotiations with Pyongyang, that the US had submitted to North Korean nuclear blackmail by seeming to hand out so many concessions, and that, despite US assurances to the contrary, US-North Korea normalisation might proceed before any substantial improvement in North-South relations. Consequently, during the nuclear crisis and the negotiations for the Agreed Framework, South Korean opposition parties and government officials expressed

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occasional and strong public criticism of the US stance towards North Korea, so exposing serious divisions in the US-South Korea alliance.45 Seoul eventually proved supportive of the Agreed Framework and KEDO because the project promised the renewal of NorthSouth dialogue and a major role for the South in the construction of the reactors. But South Korean concerns about improvements in US-North Korea relations with no corresponding progress in North-South ties were later compounded due to Pyongyang’s continued evasion of direct dialogue with Seoul following the Agreed Framework, and due to Pyongyang’s insistence from March 1996 onwards that it would refuse to observe the cease-fire conditions on the DMZ unless the US was prepared to conclude a lasting peace treaty with North Korea which excluded South Korea as a non-signatory to the 1953 armistice. The outcome of President Kim Young Sam’s frustration with the North’s success in gaining access to dialogue with the US but without fulfilling its obligations under the Agreed Framework to restart inter-Korean talks was that his administration drifted increasingly towards a hard-line policy on North-South relations—illustrated by the strong military reaction to the 1996 submarine incident. However, South Korean policy was also often at variance with that of the US, which condemned the submarine incursion as a military provocation but also preferred a negotiated approach to its resolution. Therefore, both during and after the nuclear crisis, North Korea succeeded in raising tensions within and attacking the political unity of the US-South Korean alliance. The damage to the alliance should not be overstressed, and in the long run North Korea’s diplomatic victories may prove to be somewhat pyrrhic, given that the concessions it has received from the US have initiated a dependency relationship which will serve only to undermine the regime’s diplomatic freedom. Furthermore, the game of nuclear bluff extracted economic assistance from the US, but it may have also cost the North valuable time in its efforts to revive its economy. These issues are explored in later sections, but at this point it is important to note that nuclear and other military threats enabled North Korea to weaken the US-South Korea alliance, to draw the US closer to its side, and to attempt to restore its own security position and the balance-of-power on the Korean Peninsula which had been undermined by South Korean nordpolitik. At the same time, though, North Korea’s freedom during the nuclear crisis to engage in this type of diplomatic and military manoeuvring was an indication of how far the balance-of-power had deteriorated on the Korean Peninsula, and of the declining effectiveness of both it and the US alliance system in Korea and Northeast Asia as devices to contain the North Korean security problem. In much the same way as South Korea had exploited the fluidity of the international system to its advantage through the policy of nordpolitik, so North Korea by the early 1990s in its diplomatic campaign to improve relations with Japan and the US had also escaped the traditional restraints upon its security behaviour and was relatively free to run amok in the region in pursuit of its national interests. Thus, as the out-going commander of US forces in South Korea, General Robert Riscassi, told a Congressional hearing in April 1993, ‘we must disabuse ourselves of the confidence we gained during the Cold War that Korea was manageable...North Korea is no longer manageable.’46 The US and South Korean diplomatic-military response

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The US and South Korea initially failed to develop a clear response to North Korea’s nuclear strategy due to alliance tensions, domestic political opposition, and doubts over whether the policy objective should be to ‘roll-back’ entirely the North’s nuclear programme or merely to seek to prevent its further extension. But over time, and recognising the North Korean challenge to the regional balance-of-power and the US security system, the US and South Korea formulated a policy response which aimed to halt the continuation of the North’s nuclear programme and was based on the strategy of offering diplomatic, military, and economic ‘carrots’ and ‘sticks’ to the North Korean regime. In the early stages of the nuclear crisis the US and South Korea did experiment with the offering of various ‘carrots’ to induce North Korean cooperation on inspections, such as the Bush administration’s withdrawal of nuclear weapons in 1991 and cancellation of Team Spirit in 1992, and the Clinton administration’s offer in July 1993 to explore the supply of LWRs. However, as the crisis developed, the US and South Korea came to rely increasingly on the ‘stick’ in order to coerce North Korea back into the NPT regime. The economic ‘stick’ was the threat of international sanctions imposed via the UN, and the US maintained this option between 1992 and 1994. The military ‘stick’ took the form of the reaffirmation of US security guarantees to South Korea. President George Bush and his successor Bill Clinton pledged a continuation of the US military presence in South Korea during their visits in January 1992 and July 1993. The Pentagon’s February 1995 East Asian Strategic Review, known as the ‘Nye initiative’ due to its authorship by Joseph Nye Jr, the then Assistant Secretary of Defence for International Security, also confirmed that the US would maintain 100,000 troops in the Asia-Pacific region for the foreseeable future.47 On the occasion of his visit to the DMZ in July 1993, Clinton used tough rhetoric towards the North Korean regime, stating that: When you examine the nature of the American security commitment to Korea, to Japan, to this region, it is pointless for them [the North Koreans] to try to develop nuclear weapons, because if they ever use them it would be the end of their country.48 The US backed its words with a degree of military pressure on the North. The planning of Team Spirit exercises was linked to North Korean progress on nuclear inspections, and as a military conflict looked increasingly likely in 1993 and mid-1994 the US reinforced its presence in the South through the deployment of Patriot missiles and by the movement of a carrier battle group closer to the Korean Peninsula. Even since the Agreed Framework and the beginning of a resolution to the nuclear crisis, the US and South Korea have continued to emphasise the military aspects of the North Korean threat and to hold large combined land and naval exercises such as those that followed the submarine incident of September 1996. But, despite the often overt military challenge from North Korea, US and South Korean options for dealing with it on a military basis have been limited. During the nuclear crisis some commentators argued for Gulf War-type airstrikes on North Korean nuclear sites as a quick solution to the problem.49 However, not only can the feasibility of attacks against well-defended nuclear facilities be questioned, but also the wisdom of

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launching attacks that could provoke an all-out war with the North, the devastating consequences of which have already been discussed. The result of these difficulties has been that while the US and South Korea have continued to plan for the worst-case scenario of war and to augment their military power, they have had to look more to diplomatic and other means in order to suppress the North Korean security threat. The initial diplomatic strategy of the US and South Korea between 1993 and 1994 concentrated upon attempts in conjunction with Japan to persuade China not to veto any UN resolutions for economic sanctions against North Korea, and that it should use its supposed influence over the North to ensure its compliance with inspections. But whilst China was as concerned as the other regional powers about North Korean nuclear proliferation and did exert some pressure on North Korea to comply with IAEA demands, it stressed also the limits of its influence over North Korea and made it clear that it would not accept the imposition of economic sanctions. The second major diplomatic effort launched after the nuclear crisis by the US and South Korea was the April 1996 proposal for four-way talks between the US, South Korea, China, and North Korea, the stated objective of which is to discuss without preconditions the creation of a new system to guarantee permanent peace on the Korean Peninsula. In response to North Korean demands for the replacement of the 1953 Korean War armistice with a permanent peace treaty between the US and itself, the US has indicated that it will not consider signing a separate peace agreement with North Korea, and thus by implication that South Korea must be included in any final peace settlement. This US diplomatic reassurance to the South has been confirmed by China, which has taken the position that even though South Korea is a non-signatory to the armistice it should be included as a direct participant in peace talks. North Korea, after a period of ‘studying’ the proposal, indicated in February 1997 that it was prepared to join the talks. Preparatory talks were held on 5–7 August, 18–19 September, and 21 November 1997, and plenary talks on 9 December 1997 and 16–21 March 1998. During US-North Korea negotiations in September 1998, the North agreed that it would again restart talks the following month. Although the talks process is expected to take a number of years, some early progress has been achieved with the agreement at the second plenary session to set up sectional working committees to discuss issues relating to the establishment of a peace system and confidence-building measures (CBM). In addition, they have proved to be an important forum for North-South contacts and to assist in the resumption of direct interKorean talks held in April 1998 for the first time in nearly four years. Thus, the four-way talks have undoubtedly made a contribution to stability on the Korean Peninsula and have provided the opportunity for the regional powers to engage North Korea in a security dialogue. But it is clear also that they have been designed as part of the US and South Korean efforts to re-impose restrictions upon North Korean diplomatic activity. From the perspective of the Kim Young Sam administration, the proposal had the merit of designating South Korea as an equal participant in any peace talks, of placing US-North Korean and North-South dialogue in the same context, and thereby in effect making the progress of both contingent upon each other. In this way, and with North Korea reluctant to talk to the South, Kim Young Sam’s administration was able to slow the pace of US-North Korea relations and the confidence-sapping effects upon the US-South Korea alliance. Furthermore, the two-plus-two formula of the

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talks with the inclusion of China also seems to have been perceived by certain elements of the policy-making community in the US and South Korea as a means to repair or resurrect in a modified form the status quo and the two Koreas-great power strategic balance which had traditionally ensured stability on the Korean Peninsula. For reasons explored later in the chapter, North Korea for its part has resisted the fourway peace talks as a means to restrict its diplomacy or to return to the status quo on US and South Korean terms. The North was originally suspicious of the proposal as a means to corral it into direct talks with the South, and although it has been obliged to participate in order to maintain dialogue with the US, it has also chosen at certain times to deliberately obstruct the progress of the talks. Thus, both during the preparatory and plenary talks, North Korea has persevered with its strategy to split the US and South Korea by demanding a separate US-North Korea peace deal, the withdrawal of US forces from the Korean Peninsula, and new promises of food aid.

Post-Cold War Japanese diplomatic and military policy towards North Korea Japan-North Korea normalisation Japan is the other major regional power concerned with developments on the Korean Peninsula in the post-Cold War period, and in the same way as the US and South Korea has faced a series of North Korean diplomatic, military, and political security threats. The Japanese response to the North Korea security problem has also been similar to that of the US and South Korea (and indeed has often been planned in conjunction with these powers) because it too has been forced to consider diplomatic and military strategies in order to guarantee its security interests and moderate the North’s security behaviour. The main North Korean diplomatic challenge to Japan in this period was the conduct of normalisation negotiations between 1991 and 1992. As noted above, North Korea’s willingness to consider the establishment of diplomatic relations with Japan was a reaction to the success of South Korea’s nordpolitik and a desire to restore the strategic balance on the Korean Peninsula. Likewise, Japan’s undertaking of normalisation talks with North Korea has been seen as a continuation of long-suspected efforts to manipulate the balance-of-power on the Korean Peninsula in its favour and to erase South Korean diplomatic gains. The following section argues that, although Japanese policy-makers were certainly aware of the implications for the balance-of-power and concerned about stability of the Korean Peninsula in this period, their motivations for carrying out normalisation talks were not to undermine South Korea’s international position or trade one Korea off against the other. Analysis of the talks process reveals that, in the same way as during the Cold War, the Japanese government continued to prioritise relations with South Korea in the run-up to the nuclear crisis, and was prepared only to improve relations with the North in such a way that ensured Seoul’s diplomatic interests would not be damaged. Indeed, analysis of Japanese diplomacy towards the Korean Peninsula in this period reveals that in fact its final outcome was to strengthen Japanese and South Korean government diplomatic coordination. Moreover, detailed discussion of Japanese

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diplomacy is necessary here because it helps to explain also the origin of diplomatic restraints upon Japan’s exercise of economic power for security purposes which are described in Chapter 5. An early non-government attempt to improve Japan-North Korea relations towards the end of the Cold War came with the visit to North Korea in September 1987 of Doi Takako, the then SDPJ Chairwoman, to discuss the Fujisanmaru crew issue. However, bilateral relations again worsened due to the November 1987 South Korean airliner bombing and the Japanese government’s imposition of limited sanctions on North Korea. The real starting point for improved Japan-North Korea post-Cold War contacts had to wait until Roh Tae Woo’s 7 July 1988 presidential address, which stated that Seoul, in order to create an atmosphere conducive to peace on the Korean Peninsula, and in parallel with its own efforts to improve ties with Moscow and Beijing, would cooperate in Pyongyang’s efforts to upgrade relations with Tokyo and Washington. The 7 July address and the concurrent progress in South Korea’s nordpolitik thus opened the way for limited Japanese government-level attempts to tackle the accumulated mass of JapanNorth Korea bilateral issues left over from the colonial period and the Cold War. Soon after the 7 July address, and seeking to resolve the Fujisanmaru issue, the Japanese MOFA communicated to North Korea its willingness to discuss without preconditions all outstanding bilateral issues. The MOFA repeated its offer the following January and issued a visa to allow the visit of a KWP delegation to a SDPJ party convention on 24 January 1989. On 26 January, members of the KWP delegation met with representatives from the LDP and so initiated a route for dialogue between the Japanese and North Korean governing parties. Following this, Prime Minister Takeshita Noboru, speaking in the Lower House of the Diet on 30 March, and in response to a question from the then obscure SDPJ member Murayama Tomiichi, offered an apology to North Korea for wartime damage committed by Japan. The same month Tanabe Makoto, former SDPJ General Secretary, carried a letter to Kim Il Sung from Kanemaru Shin, ex-deputy Japanese Prime Minister and head of the Takeshita and largest LDP faction. North Korea, clearly keen to establish contacts with one of the most powerful figures in Japanese politics, responded that it would accept a visit to Pyongyang of a joint LDP-SDPJ mission headed by Kanemaru. On 11 April, Kanemaru announced that he was prepared to visit North Korea to discuss the Fujisanmaru issue and other bilateral problems. The prospects for Kanemaru’s mission to North Korea suffered a setback between mid1989 and early 1990 due to rapid changes in the international and Japanese domestic political scene. The June 1989 Tiananmen Square incident and the collapse of the East German and Romanian regimes concentrated North Korea’s attention upon the maintenance of internal stability. Meanwhile, the fall of the Takeshita administration in April due to the Recruit bribery scandal, followed in rapid succession by the collapse of the Uno Sōsuke government in June, the LDP’s defeat in House of Representatives elections in July and the advent of the Takeshita faction-controlled Kaifu government, and the surfacing of media allegations that SDPJ members had received financial donations or pachinko money from the Chōsensōren, all served to divert Japanese policymaking energies away from efforts to improve ties with North Korea. North Korean interest in the Kanemaru mission and improved ties with Japan, though, was rekindled by South Korea’s moves to normalise relations with the USSR in 1990. In

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May of the same year, SDPJ House of Representatives member Fukada Hajime visited Pyongyang and received North Korean affirmation of its desire to resolve the Fujisanmaru problem and to receive the Kanemaru mission. In mid-July, SDPJ ViceChairman Kubo Wataru also paid a visit to Pyongyang and discussed with KWP officials the possibility of Japan-North Korea inter-governmental talks on various bilateral issues following the Kanemaru mission. On 4 September, the then LDP members Ishii Hajime and Takemura Masayoshi headed a LDP-SDPJ preparatory mission to North Korea. LDP-SDPJ-KWP consultations were held on the removal of passport restrictions for travel between Japan and North Korea, the establishment of satellite and direct postal communications, and the opening of liaison offices in Pyongyang and Tokyo. In addition, and most importantly for the Japanese delegation, the KWP indicated that after Kanemaru’s visit the Fujisanmaru issue would be resolved. The preparatory mission also discussed anticipated North Korean demands for colonial compensation from Japan, and in an attempt to head these off communicated the Japanese government’s position that it could not provide North Korea with special preference on compensation or in a manner divergent from precedents of compensation settlements with other countries; that negotiations for compensation could not be conducted between political parties, but only on a government-to-government basis; and that compensation could not be negotiated unless on the basis of seeking normalisation, and could only be paid after the completion of the normalisation process. In response, KWP officials intimated that as a sign of goodwill Japan should be prepared to pay compensation to North Korea even in a state of non-normalised relations and that it might still raise the issue during Kanemaru’s visit, but also stressed that Japan’s conditions for compensation were unacceptable because North Korea could not seek normalisation with Japan as this implied recognition of the division of the Korean Peninsula.50 This vigorous inter-party diplomacy paved the way for Kanemaru’s visit to North Korea between 24 and 28 September 1990 and a major breakthrough in bilateral relations. The forty-member LDP-SDPJ mission travelled to Pyongyang with the limited objectives of the release of the Fujisanmaru crew and of opening a window of dialogue with North Korea. However, KWP negotiators immediately stunned their Japanese counterparts with a sudden request for government-level normalisation talks—thereby reversing the North’s consistent position since the 1950s that it would not seek normalisation as long as Japan continued to recognise the legitimacy of the South because this would have implied acceptance of the division of the Korean Peninsula.51 KWP-LDP-SDPJ negotiations and private talks between Kanemaru and Kim Il Sung produced North Korean promises to release the Fujisanmaru crew and a Three-Party Joint Declaration on Japan-North Korea Relations.52 The Three-Party Joint Declaration promised to upgrade transport and telecommunications links between North Korea and Japan, as already agreed during the preparatory mission; urged the governments of both countries to move towards the normalisation of relations; and stated that Japan should not only apologise for colonial rule but also provide appropriate compensation for this period and for the ‘losses’ incurred during the forty-five year gap in bilateral relations since World War II. This last clause on compensation was included at the behest of Kanemaru after private talks with Kim Il Sung, and was intensely controversial because it contradicted the Japanese government’s stance that it would only conduct normalisation

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talks in line with past precedents. For if the Three-Party Joint Declaration were enacted, it would have represented a departure from the principles of the 1965 Basic Treaty under which Japan had avoided the payment to South Korea of colonial, wartime, or post-war compensation, and settled the problems of the seikyūken in the form of ‘economic cooperation’, and thus would have meant Japanese preferential treatment to the North over the South on the issue of compensation. The reaction in Japan to the Three-Party Joint Declaration upon Kanemaru’s return was mixed. Kanemaru received immediate criticism from sections of the media and his own party for the compensation promises made in an act of kojin gaikō or individual diplomacy. The MOFA was privately critical of the Three-Party Declaration because Kanemaru’s diplomacy had offered North Korea concessions at variance with the official position of the Japanese government, so creating a channel of nijū gaikō or ‘dual diplomacy’ for North Korea to exploit to its advantage.53 The MOFA’s response was to stress that the Three-Party Joint Declaration was a party-to-party agreement and so was non-binding on the Japanese government. Nevertheless, Kanemaru was obliged next to visit South Korea in order to allay President Roh’s concerns about the intent of the declaration. Roh did not object to the process of Japan-North Korea normalisation in itself, but he did gain assurances from Kanemaru that the Japanese government would bear in mind five South Korean principles for the conduct of the negotiations. These principles were that Japan should engage in prior consultations with South Korea regarding negotiations with North Korea; improve relations with North Korea in conjunction with similar progress in North-South dialogue; request North Korean acceptance of IAEA inspections; not extend economic cooperation to North Korea until after normalisation; and encourage North Korea to become a responsible member of international society. But despite South Korean and Japanese domestic concerns about the contents of the Three-Party Joint Declaration, Japanese policy-makers also recognised the value of the Kanemaru mission in having secured the release of the Fujisanmaru crew and creating the opportunity for talks on normalisation and a range of other troublesome bilateral issues. Prime Minister Kaifu announced on 1 October 1990 that Japan was ready for normalisation talks with North Korea, and Doi Takako and LDP Secretary General Ozawa Ichirō travelled to North Korea between 9 and 10 October in order to bring home the Fujisanmaru crew. The eight rounds of Japan-North Korea normalisation talks held between January 1991 and November 1992 in Tokyo, Pyongyang, and Beijing proved problematic from the outset. The North Korean government demanded that Japan should fulfil the pledges of the Three-Party Joint Declaration and provide up to US$ 10 billion in colonial, wartime, and post-war compensation.54 North Korea’s claims for the latter two were based on its argument that Kim Il Sung’s partisans were World War II combatants and entitled to war reparations, and that Japan by its support for South Korea during and after the Korean War was partly responsible for the division of the Korean Peninsula. In response, the Japanese MOFA repeated that it would not negotiate on the basis of the Three-Party Joint Declaration, and stressed that North Korea was not entitled to colonial or wartime compensation due to Korea’s position as a legally recognised colony prior to and during World War II, and that Japan’s support for South Korea during the Korean War and post-

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war period was wholly in line with UN resolutions. The MOFA also made clear that it wished to resolve the seikyūken issue based on the precedent of the 1965 Basic Treaty and provision of ‘economic cooperation’. The Japanese side is believed to have calculated this at around US$5 billion, and ignored North Korea protests by stating that in line with past precedents economic cooperation could only be extended after normalisation. The North gradually dropped its demands for post-war compensation, but both sides made little headway on reaching a mutually acceptable figure for economic cooperation.55 The progress of the talks was also impeded by the issues of North Korean debt repayments to Japanese companies; permission for Nihonjinzuma to visit Japan; the legal status of the North Korean community in Japan; and Japanese demands for North Korea to investigate and give assurances about the safety of a woman known as Li Un-Hye, believed to be a Japanese citizen (Taguchi Yaeko) abducted to North Korea and employed to teach the Japanese language to the agent involved in the 1987 South Korean airliner bombing. The North Korean government’s refusal to discuss Japanese inferences that it was involved in racchi jiken and terrorist incidents provided the occasion for North Korea’s unilateral walk-out from the troubled talks in November 1992. However, the principal reason for the failure of the negotiations was the growing Japanese insistence upon North Korea’s compliance with IAEA inspections. In September 1990, Kanemaru had promised President Roh that the Japanese government would raise the inspections issues in talks, but following increasing US concern over the issue and the January 1991 Japan-South Korea summit during which Kaifu again acknowledged Roh’s principles for the conduct of normalisation talks, the Japanese side began to raise the issue with greater consistency in the negotiations. North Korea countered, perhaps with some justification, that the Japanese government had offered normalisation negotiations with no preconditions, but that by its insistence on the acceptance of nuclear inspections Japan was making it a virtual precondition of further progress. The outcome of Japanese requests for North Korean compliance with IAEA safeguards was the eventual suspension of the talks—a condition which still persists at the time of writing. As already mentioned, the initiation of Japan-North Korea normalisation talks has been seen as an attempt by Japan to balance North and South Korea against each other and negate South Korea’s nordpolitik. Evidence for this view is derived from Japanese policy-makers’ apparent readiness to consider normalisation with North Korea, and thus to move officially to a ‘two Koreas’ policy; the Three-Party Joint Declaration’s extension of preferential treatment on compensation to the North, even though it was known that this would cause inter-Korean frictions; and that it was only after President Roh’s intervention and consultations with Kanemaru and Kaifu that Japan took into account South Korean views, and raised the nuclear issue consistently to slow the normalisation process. Jin Park echoed South Korean suspicions of Japanese motives at the time of the normalisation talks when he noted that ‘the key rationale behind Japan’s approach towards North Korea is to maintain the status quo in the divided Korean Peninsula, which has been in fact the central policy objective of successive Japanese governments concerning Korea since the end of the Korean War in 1953.’56 Examination of the events and motivations of the actors involved in the normalisation process, though, does not support this interpretation of Japanese policy. The first

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consideration is that even though Japan-North Korea normalisation implied the Japanese government’s official recognition of two governments on the Korean Peninsula and in effect what could be described as a ‘two Koreas’ policy, the initial opportunities for the talks were created not by Japan but by North and South Korea themselves. President Roh in his 7 July address opened the way for Japanese and North Korean attempts to improve bilateral ties and did not object to normalisation talks even after the issuing of the ThreeParty Joint Declaration. Similarly, it was North Korea which, even whilst it knew that Japan would simultaneously maintain recognition of Seoul, approached Japan with the unexpected proposal for normalisation talks, and thus performed a complete diplomatic U-turn by ending its refusal to recognise the existence of two governments in Korea. Moreover, even if Japan had achieved normalisation with North Korea in the early 1990s, it would have been doing nothing more than following international opinion and Pyongyang and Seoul’s own ‘two Koreas’ policy signified by their acceptance of separate UN seats in 1991. Therefore, Japan’s Korea policy in this period was largely reactive and it was North and South Korean diplomatic manoeuvring which had put in place the international framework for Japan-North Korea normalisation talks. The second consideration is that even within this framework most Japanese policymakers had minimal interest in intervening to adjust the balance-of-power on the Korean Peninsula, and still less in reversing South Korea’s diplomatic gains. The policy splits in the Japanese policy-making community regarding North Korea in this period should not be underestimated, as each section pursued normalisation with varying motivations and levels of enthusiasm. In particular, the LDP, SDPJ and MOFA displayed a range of subtle and major policy differences, and North Korea’s lack of appreciation of the policy divides between political parties and the government bureaucracy, coupled with its assumption that Kanemaru as LDP king-maker could simply push through normalisation on his own authority, accounts in part for why the North failed to understand the MOFA’s implacable resistance to the Three-Party Joint Declaration.57 Japanese politicians were certainly aware of the existence of the traditional balance-ofpower on the Korean Peninsula, and a minority of ‘hawkish’ LDP members may have seen Japan-North Korea normalisation talks as a means to create diplomatic discomfort for South Korea. However, other more influential LDP and SDPJ politicians involved in the normalisation process, such as Kanemaru himself, whilst conscious that one of the aims of the North’s new propensity to seek ties with Japan was to break out of its international isolation and attack the South’s international position, and therefore intent not to let improved Japan-North Korea relations damage the South’s security or JapanSouth Korea relations, were motivated to engage in dialogue with Korea for reasons unrelated to the exploitation of balance-of-power politics. As already described, the principal objective of the Kanemaru mission had been humanitarian and the release of the Fujisanmaru crew, and the genuinely expressed hope of the LDP and SDPJ participants was that even this limited Japanese approach to North Korea would enable both countries to alleviate bilateral tensions over the legacies of colonialism and the Cold War, and thereby contribute to peace in Northeast Asia and the progress of Korean reunification. In this way, LDP and SDPJ party-to-party diplomacy in the early post-Cold War era was consistent with the efforts of Japanese politicians since the early 1970s to upgrade ties with Pyongyang and which had been driven by the belief that it was unacceptable that

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North Korea as a neighbouring country and a former Japanese colony should be the only state in the world with which Japan has never maintained diplomatic relations.58 In addition to the desire to improve the general atmosphere of Japan-North Korea bilateral relations, certain Japanese politicians were also probably motivated to approach North Korea for narrower constituency and financial incentives. The pachinko money scandal that materialised before the Kanemaru mission was one indication that North Korea had channelled money to both SDPJ and LDP politicians in order to stimulate further their interest in improved bilateral relations. A significant number of the politicians who have paid visits to North Korea are drawn from constituencies either with sizeable communities of Korean residents (the prefectures surrounding Tokyo, Kyoto, Osaka, and Kobe) and or located on the Sea of Japan coast, and which are hopeful for improved business links with North Korea and the conclusion of an official and permanent fishing rights agreement for Japanese ships operating near North Korea waters (see Map 1). The suspicion is also that Kanemaru, later brought down by the Sagawa Kyūbin bribery scandal and known to be involved in recycling massive illegal donations to his Takeshita faction, was encouraged to visit Pyongyang due to the prospect of North Korean financial gifts and pressure from Japanese corporations seeking to improve their business interests in the North.59 Moreover, Kanemaru’s inclusion of the extravagant promises of compensation in the Three-Party Joint Declaration can be explained in part by knowledge of a possible financial bonanza for the Takeshita faction following normalisation. For even if the Japanese government succeeded in settling the North Korean seikyūken problem in the form of ‘economic cooperation’ and at its preferred figure of US$5 billion, it still would have been obliged to inject massive quantities of ODA into the North, and the Takeshita faction under Kanemaru as the chief actor responsible for oiling the wheels for this financial flow could have expected kickbacks from both a grateful North Korean government and Japanese corporations receiving the aid contracts.60 Consequently, viewed in this way, the promises of compensation in the Three-Party Joint Declaration appear not as a calculated Japanese ploy to trade North off against South, but more as the product of Kanemaru’s freewheeling diplomacy and greed for financial contributions. The MOFA and the Japanese government were relatively more concerned with the implications of Japan-North Korea normalisation talks for the balance-of-power on the Korean Peninsula, but demonstrated by their conduct of normalisation talks that they certainly had no intention of using the process to undercut Seoul’s diplomatic position. Although the MOFA was later to disown the Three-Party Joint Declaration, it did agree originally to the Kanemaru mission as a means of opening a window of dialogue to North Korea and, along with the politicians, recognised the need to press ahead with normalisation talks in order to attempt to resolve a range of bilateral issues. But rather than viewing improved Japan-North Korea ties as an opportunity to counteract South Korean diplomatic gains, the MOFA was if anything less enthusiastic than the politicians about the normalisation process because it feared the negative impact upon relations with South Korea. The consistent position of the MOFA in the Cold War and post-Cold war periods has been that Japan’s primary political, economic, and security interests on the Korean Peninsula lie with South Korea, and thus it approached Japan-North Korea normalisation talks with the utmost caution and the aim that they should not be allowed

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to jeopardise relations with Seoul. As a result, during the talks, the MOFA persevered with its policy-line that it would only negotiate based on the precedent of the Basic Treaty, fearful that providing preferential treatment on compensation would harm relations with the South and necessitate a revision of the Basic Treaty. The MOFA also complied with President Roh’s requests that Japan should improve relations with North Korea in consultation with the South and in conjunction with progress in North-South dialogue. The agreement in part was a response to US and South Korean diplomatic pressure, but the MOFA itself also appears to have seen diplomatic advantage in complying with South Korean requests and laying out a policy of renkei, or linkage between improvements in Japan-North Korea and North-South relations. For while the MOFA continued to maintain that South Korean requests and the renkei policy imposed no formal restrictions upon Japan’s diplomatic freedom, it was by observing the principle of the linkage able to show diplomatic solidarity with South Korea, and adjust the pace of Japan-North Korea normalisation in accordance with changes in the international environment and security situation on the Korean Peninsula. The renkei policy then enabled the MOFA to wrest control of the normalisation process back from the politicians which it saw as undisciplined in making concessions to North Korea based more on emotional sentiments and personal financial incentives than measured appraisal of Japan’s strategic interests and the practical problems of negotiations with both North and South Korea. The eventual outcome was that, during the normalisation negotiations, the MOFA exhibited strong support for the diplomatic position of the South, to the extent that it was prepared to allow the normalisation talks to fail on the issue of nuclear inspections. The above examination, then, confirms that Japanese approaches to North Korea were not part of some Machiavellian strategy to sabotage South Korean diplomatic gains in the post-Cold War period. In many ways Japan was simply reacting to the diplomatic changes brought about by the North and South, and apart from the basic desire for stability policy-makers lacked agreed policy objectives towards North Korea. Those LDP and SDPJ politicians which took initiatives to improve ties with North Korea were not motivated by the desire to balance one Korea against the other, but by what they saw as the not necessarily incompatible objectives of improving the general climate of JapanNorth Korea bilateral and international relations in the region, whilst at the same time receiving some personal or constituency financial gain as reward for this good turn. The MOFA, for its part, also did not want to create further divisions between North and South as this would only prolong tensions on the Korean Peninsula and the subsequent risks to Japan’s security, but wanted to see improved Japan-North Korea ties in order to benefit the security of both countries and the region at large.61 Nevertheless, it would only seriously promote normalisation efforts as long as they did not imperil South Korea’s international position. The end result of the MOFA stance was that Japan-North Korea diplomatic contacts had again stagnated by early 1992, whereas Japan-South Korea relations were to become increasingly stronger with the onset of the nuclear crisis. Japan and the North Korean military security threat The North Korean military threat to Japan has comprised both explosive and implosive

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aspects in the early and mid-1990s. Japanese defence policy-makers have long identified North Korea’s military capabilities as a potentially explosive cause of instability in Northeast Asia, and the perceived threat from North Korea was heightened by its withdrawal from the NPT in 1993. During the nuclear crisis all the main political parties were united in condemnation of North Korea’s exploitation of its ‘nuclear card’, even if they differed over the degree of sympathy that they expressed for its diplomatic and economic plight, and how hard-line an approach should be taken in resolving the issue. The LDP prime minister at the time of North Korea’s announcement of its withdrawal from the NPT, Miyazawa Kiichi, described North Korea’s action as a ‘great threat’ to Japan’s security, and Hosokawa Morihiro and Hata Tsutomu, coalition prime ministers between July 1993 and June 1994, also described North Korea’s nuclear programme as a security threat.62 The SDPJ, whilst attempting to maintain its traditionally friendly ties with North Korea, has been willing both in opposition, and since 1993 after having joined coalition governments, to criticise the North for its recalcitrance on the issue of nuclear inspections. Official Japanese concern about North Korea also has been illustrated by the JDA’s defence white papers, which since 1994 and for the first time have chosen to place North Korea ahead of Russia or China as the principal source of military instability in Northeast Asia.63 Agreement on the existence of a potential threat from North Korea does not necessarily mean, though, that Japanese policy-makers have reached a consensus amongst themselves or with their counterparts in the US over the exact type of threat posed, and the extent to which the threat is a nuclear one. In the run-up to the nuclear crisis speculation mounted that a functioning North Korean nuclear bomb and a South Korean move in response to acquire its own nuclear deterrent might force Japan to abandon its non-nuclear principles and also to obtain nuclear weapons.64 This speculation was strongly denied by the Japanese government at the time, and it is clear that Japanese policy-making opinion tends to be as divided as that in the US over the existence of a North Korean bomb, and thus over the degree of necessity, if any, for Japan to reconsider its nuclear option. Some prominent policy-makers such as Ozawa Ichirō readily accepted the US estimates and asserted that North Korea was close to the possession of a bomb.65 Ozawa, however, should not be taken as fully representative of policy-making opinion, in that he probably saw some advantage in using the North Korean threat as a means to promote his own agenda for Japan’s assumption of a more active role in global security. In fact, most policy-makers have been more cautious in their predictions about North Korea’s bomb. In April 1994, the then JDA Permanent Vice Minister, Hatakeyama Shigeru, stated that the estimate of US Secretary of Defence William Perry that North Korea had already acquired two bombs could not yet be confirmed.66 Hata Tsutomu as Foreign Minister repeated Hatakeyama’s cautious line in November 1993, and as Prime Minister in June 1994, he declared that he felt that North Korea did not have a bomb, although he agreed that it was probably diverting material for the manufacture of one.67 Policy-makers in Japan, then, during the nuclear crisis did share the certainty of US policy-makers that North Korea had been attempting to produce or give the impression that it was producing a bomb, but not the certainty that it had actually succeeded in producing one. The emergence of a nuclear threat over the long term if the North Korean

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nuclear programme continued unchecked was clearly a concern, but over the short term Japanese policy-makers did not see its programme as an immediate or functioning military threat, or as grounds for Japan to acquire its own nuclear deterrent. Japanese policy-makers also doubted US evaluations of North Korea’s missiles as viable delivery systems for a nuclear weapon. The Japanese defence community does take the missile threat very seriously, and as the JDA’s 1995 white paper notes: In the event of North Korea succeeding in the development and deployment of the Nodong-1 missile, more than half of Japan will be within its range. Furthermore, North Korea is believed to be attempting to develop a missile with a range greater than the Nodong-1. This missile, if completed by North Korea, could serve as a delivery system for weapons of mass destruction.68 The JDA is referring here to the Taepodong-1, and the greatest fear of Japanese defence planners would be North Korea’s acquisition of a credible nuclear strike force by combining its Taepodong-1 missile with a nuclear warhead. These anxieties were later increased following the North’s believed test of a Taepodong-1 in August 1998. For even though it was later ascertained by the US that the launch was for ‘peaceful’ purposes, the test did demonstrate the ability of the missile to strike easily the whole of Japan. However, it appears that Japanese strategists do not view North Korea’s existing missiles as of yet sufficient power and sophistication to constitute a genuine nuclear strike force threat. The JDA pointed out in May 1994 that North Korea could probably not combine its missiles with a nuclear warhead, as any North Korean bomb in the early stages of its development would be too heavy a payload for the existing missile system.69 But where Japanese policy-makers and strategists do seem to be in agreement with US threat evaluations is with regard to the possibility of North Korea attacking Japan with high-explosive or chemically-armed missiles. The actual military effectiveness of chemical warheads is limited by their lack of accuracy and reliance upon favourable environmental conditions. It is estimated that to create a chemical attack with the destructive power of a Hiroshima-sized nuclear bomb, seventy-five chemical-tipped weapons would have to be detonated over the target area, something believed to be beyond the technical capabilities of Scud-based missile systems like the Taepodong-1.70 Consequently, at present North Korea’s missiles are incapable of functioning as a strategic deterrent or as a tool of long-term military pressure upon Japan. But as the JDA’s 1995 defence review pointed out, the most effective option open to North Korea might be to exploit them as terrorist weapons, similar to Iraq’s use of Scud missiles against Saudi Arabia and Israel during the Gulf War in 1991.71 Iraq chose to use, or was only capable of using, high-explosive warheads, but these attacks combined with the perceived threat of chemical attack were enough to provide it with a weapon of terror. The physical and psychological vulnerability of Japan to chemical attacks has been shown by the sarin gas attack incidents perpetrated by the Aum Shinrikyō in March 1995, and the threat of the launch of chemical and conventional warheads would be likely to produce far greater panic amongst the populations of Japanese cities. North Korea’s test launch of a Taepodong-1 in August 1998 heightened the apprehensions of the Japanese public concerning the North’s missiles, not least of all because it reinforced the

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impression of Japan’s relative defencelessness in the face of this threat. Hence, Japan’s strongest perception of the North Korean military threat is that of a chemical missile attack and the subsequent domestic chaos that it would produce. Indeed, it is arguable that during the nuclear crisis one of the most significant North Korean threats to Japan was internal disorder. The fear amongst certain policy-makers was that Japanese cooperation in the imposition of UN sanctions upon North Korea in mid-1994 would lead to a backlash from the estimated 56,000 Chōsensōren members in Japan. This backlash could come in the form of the use of its financial influence over Japanese political parties, its links to organised crime, promotion of civil disorder, or even possibly terrorism. In spring 1994, as the likelihood of war on the Korean Peninsula increased, the Hata administration established a ‘Korean emergency study group’. Chaired by the Chief Cabinet Secretary, Ishihara Nobuo, the group was charged with the responsibility of investigating the steps that Japan could take domestically in order to cooperate with economic sanctions against North Korea, evacuate Japanese citizens from South Korea, deal with refugee flows from the Korean Peninsula, and protect installations from terrorist or guerilla attack.72 The institution of the study group was particularly urgent because Japan was thought to lack both effective plans and a legal framework to cope with such contingencies and also to remove obstacles to the deployment of the SDF to defend Japan from any external attack generated by a military crisis on the Korean Peninsula or elsewhere in the region. The JDA since 1978 had conducted research into the possible creation of a yūji hōsei, or legislation for emergency situations, which during a conflict would provide the government with enhanced control over the requisitioning of civilian land, buildings, power networks, and transport systems, and so remove anticipated restrictions upon the mobility and operability of the SDF.73 However, the progress of the yūji hōsei research was hampered by jurisdictional disputes between the related ministries, and had lost momentum by the early 1990s with the end of the Cold War and the decline of visible threats to Japanese security. The research findings of the Korean emergency study group were leaked to the media in 1994 and demonstrated that the Japanese government took the threat of internal disruption seriously and was aware of the limits of its crisis management system. The group predicted that in the event of sanctions the Chōsensōren might mount large protests at Japanese government buildings, the US embassy, and US military installations. In addition, there was the possibility of violence directed at the police by certain sections of the Chōsensōren, plus conflict between the North Korean community and rightwing extremist Japanese organisations.74 The Japanese authorities were also fearful of North Korea’s links with terrorist groups in Japan, and the report pointed out that for North Korea to intensify its activities in this area: Would be comparatively easy given the state of public order and limited experience of terrorist threats that Japanese society has experienced up until now. These activities are likely to result in serious human and physical damage, and could destabilise society.75 By mid-1994, as the likelihood of the imposition of sanctions increased, the predictions of the report looked as if they could be realised. Relations between the Japanese

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authorities and the Chōsensōren grew especially tense. Japanese police raided two companies believed to be used by the Chōsensōren as fronts for the export to North Korea of equipment for its missile programmes.76 Chōsensōren members also clashed in street protests with the police as they entered the organisation’s headquarters in Kyoto and Osaka in May and June 1994, ostensibly to investigate violations of land utilisation laws. The second incident was reported by the Chōsensōren press in Japan as involving 1,300 riot police.77 Whilst this number is probably exaggerated, the Japanese government’s commitment of large numbers of police does demonstrate that it was putting considerable pressure on the Japanese North Korean community in 1994, and that it was aware of the domestic security risks of the nuclear crisis. The report also raised the prospect of North Korean terrorist and guerilla action against US bases in Japan, either by the despatch of special operatives to Japan, or through the agency of Korean residents. One target thought to be especially vulnerable to a North Korean terrorist or guerrilla attack were the twenty-five nuclear power stations concentrated along the Sea of Japan coastline. The Japanese National Police Agency (NPA) concluded that it was unequipped to guard the isolated Sea of Japan coastline against infiltration by North Korean special forces; a fact later confirmed by the September 1996 submarine incident in South Korea. For if the submarine could escape detection by South Korean forces on constant standby for any sign of North Korean aggression, and if North Korean soldiers, at least initially, could evade thousands of South Korean troops mobilised to search for them after they had landed, then Japan’s ability to cope with such a guerilla threat in wartime, especially as it lacks a system of crisis management comparable to South Korea’s, is questionable. Linked to the explosive and internal security aspects of the North Korean security problem, the Japanese security authorities have also been conscious of its implosive aspects. Japanese anxieties about the possible implosion of the North Korean regime existed prior to the nuclear crisis, but intensified after 1994 as the true extent of North Korean food shortages became known.78 At the time of the nuclear crisis, the Japanese government’s study group was concerned that a military conflict on the Korean Peninsula could lead to an exodus of North and South Korean refugees to Japan, and that Japan lacked the necessary legal and physical infrastructure to cope effectively. Following the nuclear crisis, concerns have shifted to a refugee influx resulting from the economic collapse of North Korea. In August 1997, the then Chief Cabinet Secretary, Kajiyama Seiroku, gave voice to these concerns when he argued that armed ‘refugees’ might with support from Korean resident groups generate internal strife in Japan.79 The plausibility of Kajiyama’s remarks is questionable, but they do demonstrate the extent to which certain Japanese policy-makers perceive North Korea as presenting to Japan a series of interconnected explosive and implosive low-intensity military security threats.80 Japan and the North Korean political security threat These military security threats have been greatly magnified for Japanese policy-makers, though, by the knowledge that the North Korean crisis threatened to derail the US security system in Northeast Asia, and thereby upset the fundamental basis of not just South Korea’s but also Japan’s security. North Korea’s success in weakening confidence

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in the US-South Korea alliance had clear implications for Japan’s own security, as any indication of a reduced US commitment to Korean Peninsula security also brought into question the US commitment to the security of Northeast Asia as a whole and the defence of Japan.81 Concerns about a gradual unravelling of the US security system in Northeast Asia and the US-Japan alliance had already been set in train due to domestic pressure within the US for retrenchment in strategic commitments in Asia, and renewed US-Japan trade friction in the early 1990s. The fear of some Japanese policy-makers was that following the advent of the Clinton administration the US would neglect or even withdraw totally from its security commitments in Asia, and evidence of this trend seemed to be provided initially by the US’s poorly articulated response to the threat of North Korean nuclear proliferation.82 These anxieties about the future of the US-Japan alliance were intensified further by Japan’s inability during the height of the nuclear crisis to demonstrate the extent of the military and logistical support it could provide to the US in the event of a conflict on the Korean Peninsula. Under Article 6 of the US-Japan security treaty, Japan after consultation with the US is obligated to provide to it bases to be used for the maintenance of the security of the Far East, which according to the Japanese government’s own 1960 interpretation includes South Korea. Thus, in 1994 the natural expectation of the US was that in a new Korean conflict, as in the Korean War, it would be able to reinforce its military presence in South Korea with the despatch of air, naval, and marine units from its bases in Honshu, Kyushu, and Okinawa. The Japanese government was clearly uncomfortable with the prospect of even this indirect involvement in a conflict on the Korean Peninsula, but as the nuclear crisis escalated it also began to receive US requests for more active and direct support for the US military position in South Korea. The US is reported as having requested in 1994 that Japan provide various forms of rear-end logistical support such as intelligence gathering, facilities for the repair of US warships in Japan, and the use by the US military of Japanese civilian harbours and airports. In addition, the US military appealed for SDF participation in a naval blockade of North Korea in the event of the imposition of sanctions, and hoped for the despatch of SDF minesweepers to Korean waters.83 The Japanese government response to US demands for support for military action on the Korean Peninsula, though, proved indecisive. This was because, in a similar fashion to the yūji hōsei measures outlined above, the government had conducted insufficient research into contingency plans and operating procedures for Japan to support US forces in anything other than a military attack upon Japan itself. Again, in the past the government had taken some steps towards crisis management and enhancing the operability of the security treaty with the conclusion of the 1978 Guidelines for Japan-US Defence Cooperation. The Guidelines were intended to give definite shape for the first time to the ways in which Japan and the US could cooperate militarily within the framework of the Constitution and the security treaty during conflict situations, including combined tactical planning, information exchanges, and logistical support. Three types of scenarios for cooperation were envisaged by the 1978 Guidelines: cooperation to deter aggression; cooperation in the event of aggression against Japan; and cooperation to support US forces in the event of emergency situations in the Far East which affect the security of Japan.84 Research into the first two scenarios enhanced US-Japan military

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planning and led to a rise in the number of combined military exercises. The third scenario came under study in 1982 but produced few concrete results. Hence, by the time of the nuclear crisis in 1994, the Japanese government found that it lacked specific plans in order to support its US ally in the event of a Far East or Korean Peninsula emergency, and was forced hurriedly to entrust to the Chief Cabinet Secretary’s study group the task of investigating also the extent to which Japan could comply with US demands for military assistance. The study group posited that the government could allow the US to use its bases in Japan under Article 6 of the security treaty, but was less certain as to whether it could offer logistical support or participate in blockade and minesweeping operations, due to restrictions in the existing SDF Law and the fear that these types of activities would transgress the government’s interpretation of the Constitution as prohibiting the exercise of the right of collective self-defence. For instance, the study group suggested that Japan could carry out minesweeping operations in its own territorial waters, even if designed primarily to support US naval forces, because at the same time they would make a clear contribution to the defence of Japan’s own shipping and territory, and thus could be interpreted as an act of individual rather than collective self-defence. The despatch of minesweepers to Korean or international waters, though, was considered to be more problematic. The government lacked a precedent for the despatch of SDF minesweepers to an area of conflict in international waters, as the 1991 Persian Gulf operations had been conducted during peacetime. Moreover, the concern of the study group was that, even though the government might be able to argue that the despatch of minesweepers to Korean and international waters was also in order to protect Japanese shipping, Japanese forces in the war-zone might become caught up in the fighting itself or be seen as intervening to assist the US. In turn, this could lead to the accusation that Japan had both directly and in conjunction with the US become involved in the conflict, and so exercised the right of collective self-defence.85 The final conclusion of the study group was that the problem of collective self-defence had created a number of ‘grey zones’ in which Japan could not be entirely sure as to whether the provision to the US during a conflict of the types of military support listed above would be in breach of constitutional interpretations. The Japanese government’s indecision was then further compounded by its coalition make-up at the time of the nuclear crisis. Although influential figures in the coalition such as Ozawa were relatively ‘hawkish’ on the North Korean issue and advocated unequivocal support for the US, other vital elements such as the SDPJ were opposed to economic sanctions and a military solution to the crisis. Given the study group’s conclusions and the divisions in the coalition, the Japanese government reluctantly communicated to the US in mid-1994 that it would be unable to provide logistical support and participate in blockade and minesweeping operations in the event of a Korean conflict, but that it would endeavour to cooperate with US forces and any UN sanctions resolution as far as possible within the ‘bounds of the Constitution’.86 Japanese policy-makers were painfully aware that their US counterparts would view Japan’s response to requests for assistance as inadequate, and that, in the same way as during the Gulf War, US opinion would begin to question the value of an alliance under which Japan enjoyed the benefits of US protection, but in return was seemingly unprepared to contribute even rear-end logistical support to its

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ally’s military forces engaged in a conflict close to Japan and with implications for Japan’s own security.87 Tanaka Hitoshi, the then Section Chief of the MOFA’s Foreign Policy Bureau, summed up Japanese policy-makers’ anxieties at the time of the nuclear crisis about the health of the US-Japan alliance when he argued in July 1994 that: If there is chaos on the Korean Peninsula, its impact will definitely extend to Japan. In the event of an emergency situation on the Korean Peninsula, Japan for its security is largely reliant upon the US, but if it is said that Japan has not maintained sufficient cooperative relations with the US, then will the US consider Japan to be a country worth protecting?88 In the end, the growing crisis in the US-Japan alliance was averted by the Carter mission to North Korea and the receding prospect of any immediate military emergency on the Korean Peninsula. But this was not before the nuclear crisis had exposed the essential lack of US-Japan political solidarity and preparation to operationalise the alliance in the post-Cold War period in order to deal with contingencies in Korea or elsewhere in the region. Hence, it can be seen that in many ways the principal threat posed by North Korea to Japanese security in this period was a political one, in that, in a similar fashion to the case of the US-South Korea alliance, the effect of the North Korean nuclear crisis was to undermine US and Japanese confidence in the security alliance and call its future into question. As has been discussed above, Japanese security policy-makers have been concerned about North Korean military security threats including the nuclear and ballistic missile programmes, but over the short term have not necessarily viewed these as critical threats to Japan because of their technical shortcomings and because of the existing security guarantees from the US. However, the fear of Japanese policy-makers has been that over the long term the political traumas which North Korea has engendered in the US-Japan alliance could lead to its eventual breakdown, and indeed the collapse of the entire US security system in Northeast Asia, and that it is in this situation, with an absence of US security guarantees, that Japan would be truly vulnerable to threats either from North Korea or from other states in the region.89 The fears about the malfunctioning and even possible termination of the US-Japan alliance first initiated by the North Korean nuclear crisis were then to be heightened shortly after by the issue of US bases in Okinawa, and, as will be seen in Chapter 5, efforts to restore confidence in the US-Japan alliance have absorbed the greatest part of Japanese foreign policy-making energies ever since. Japanese diplomatic and military alliance response during the nuclear crisis Japan’s limited ability to respond militarily to the range of security problems presented to it by North Korea meant that its main contribution to the containment of the nuclear crisis was diplomatic in nature. The preferred option for Japan was clearly a diplomatic settlement as this offered the best hope of avoiding a military—political crisis for the USJapan alliance and of demonstrating unanimity with its ally. Consequently, Japan was in agreement with and an active participant in the US policy of trying to involve China in a resolution of the nuclear issue. From the earliest stages of

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the nuclear crisis, Japan had conceived of China (rightly or wrongly) as being able to play a settokuyaku or persuader role in persuading North Korea to accede to IAEA inspections, and as the nuclear crisis developed most of Japan’s political initiatives were directed at trying to bring China into line with US and South Korean policy on North Korean nuclear proliferation. Prime Minister Hosokawa described China in 1993 as the most ‘influential body’ in the dispute with North Korea, and stated in 1994 that ‘the role which China can fulfil is very great. We are expecting it to continue to pressure North Korea’.90 Periodic Sino-Japanese talks signalled Japan’s faith in China’s ability to defuse the crisis. The foreign ministers of Japan and China held frequent talks on the issue, and one of the main points for discussion during Hosokawa’s visit to China in March 1994 was the Chinese government’s attitude towards sanctions.91 In the North Korean nuclear crisis, therefore, Japan seemed to be looking to finally fulfil its long hoped for watashiyaku (bridging) role by acting as an intermediary between the US and China. Japan also made efforts to coordinate its policy closely with South Korea and within the framework of the US security system. Japan and South Korea held talks on the North Korean problem in November 1993, March, April, June, and July 1994, and the frequency of prime ministerial level talks between the two countries increased in response to the crisis. Japan also participated in trilateral talks on nuclear policy with South Korea and the US in June and November 1994. Therefore, in addition to Japan’s close adherence to South Korean diplomatic interests in normalisation talks with North Korea in the early 1990s, the nuclear crisis became a further occasion for the strengthening of the coordination of Japan-South Korea strategy in conjunction with the US, and this pattern of triangular diplomatic cooperation was to form Japan’s main active contribution to the containment of the nuclear crisis.

The conceptualisation of North Korea as a problem of economic power and security The preceding sections have sketched a scenario of the Korean Peninsula as dominated both historically and in the post-Cold War period by cycles of conflict between the two Koreas and the major regional powers, and an approach to guaranteeing the respective security interests of each state based upon a strategy of containment and by employing balance-of-power alliance diplomacy and military power. The events leading up to the nuclear crisis demonstrate that North Korea utilised diplomatic and military pressure in order to try to escape from its increasingly isolated and vulnerable security position after the Cold War; that the US and South Korea attempted initially to suppress the North Korean challenge by the threatened mobilisation of their own military power; and that Japan, even though unable to make a direct military contribution, provided active backing for South Korean and US diplomatic manoeuvring to hold North Korea in check. Hence, it is clear that policy-makers in Northeast Asia in the immediate post-Cold War period have remained attached to traditional military and balance-of-power conceptions of Korean Peninsula security, and indeed the strength of this attachment is shown by the fact that North Korea, South Korea, and the US were even willing in mid-1994 to risk plunging into a second devastating Korean War.

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However, at the same time it is also clear that the events of the nuclear crisis have indicated opportunities for policy-makers to break with the past cycles of conflict and military approaches to security, and to begin to conceptualise new approaches to Korean Peninsula security. Military force and alliance diplomacy continue to form the backdrop for security relations between the regional powers, as mutual suspicions die hard, and the Korean Peninsula remains heavily militarised with always the potential for a military clash. But in many ways the North Korean nuclear crisis was a revelatory experience in which the policy-makers of the US, South Korea, and Japan, having looked into and drawn back from the abyss of military conflict, were forced to contemplate afresh supplementary and alternative approaches to achieving stability on the Korean Peninsula. In fact, it can be said that the shock of the nuclear crisis initiated a learning process whereby US, South Korean, and Japanese policy-makers have come to comprehend that what has underlain and driven North Korea’s post-Cold War nuclear and conventional military threats has been economic insecurity, that traditional containment approaches are inadequate to cope with the contemporary nature of the North Korean security problem, and thus that there is a need to develop alternative and particularly economic-based forms of security policy in order to resolve it. North Korean economic insecurity manifested as military aggression The interpretation offered up until this point of North Korea’s diplomatic and military strategy has shown that it has been designed to restore some semblance of the balance-ofpower on the Korean Peninsula and to reduce the North’s own security vulnerability. But as the events of the nuclear crisis and beyond have unfolded, it is also possible to discern that North Korea’s military behaviour and railing against the US security system in the region has been generated largely by economic insecurity, and that the regime’s ultimate objective in seeking to restore the military and diplomatic balance on the Korean Peninsula has been to restore economic balance as well, and to ensure its economic survival. This conclusion can be reached because it is apparent that the end of the Cold War, coupled with South Korea’s nordpolitik and detachment of the USSR and China from active engagement in the Korean Peninsula balance-of-power and close alliance relationships with the North, spelled not just military and diplomatic insecurity for North Korea but also an economic catastrophe for its already structurally defective economy. As mentioned previously and detailed later in Chapter 4, the improvement of the USSR’s and China’s diplomatic and economic relations with South Korea entailed also the downgrading of their economic relations with North Korea, marked by the move of both countries to a hard currency basis for trade with the North in 1990 and 1992 respectively. The loss of North Korea’s preferential access to its largest markets in the USSR and China, to be followed later by the collapse of markets in the former socialist bloc in Eastern Europe, sent the North Korean economy essentially into a tailspin, with pronounced energy shortages and GNP estimated to be declining at a rate of at least minus 5 per cent annually from the start of the 1990s. The economic difficulties of North Korea were enhanced by the failure of agriculture resulting from a combination of natural and manmade disasters, to the extent that by mid-1995 onwards North Korea had reached

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a state of near famine, and predictions were raised further of an imminent regime implosion. Thus, it is evident that the crucial national objective of the North Korean regime since the early 1990s has been simple economic survival, and above all it is this which has driven the regime’s desperate military efforts to try and break out of its international isolation and to gain new diplomatic and economic contacts.92 North Korea’s first attempt to initiate new economic contacts came with its approach to Japan to begin normalisation talks, in the obvious hope that this would secure up to US$ 10 billion in vital economic aid for the North’s ailing economy and the attraction of Japanese investment to its newly established Rajin-Sonbong Free Economic and Trade Zone (FETZ). It was the nuclear crisis, though, which made more overt the connection between North Korea’s strategies for military and economic survival. As the crisis developed it became clear that the principal aim of North Korea’s determined use of its nuclear card was to forge the conditions for exclusive dialogue with the US in order to angle for not just military concessions, such as the cessation of the Team Spirit exercises and negative nuclear security guarantees, but also economic concessions in the form of the supply of up to US$5 billion in LWR technology and energy supplies, and most crucially the US’s acceptance under the Agreed Framework of the need to move towards the normalisation of diplomatic and economic relations. The obvious merit of this for North Korea is that it offers an end to the US trade embargo, access to new markets, and a means to stave off economic collapse. Hence, during and since the nuclear crisis the essential pattern of North Korean strategy has been to moderate its security threats in return for the promise of direct talks with the US and the tantalising prospect lying beyond these talks of major economic concessions from the US and its allies. It has already been noted how North Korea hinted in negotiations with the US in July 1993 that the nuclear crisis could be brought to an end with the economic concession of the supply of LWRs, and thereafter the most substantial progress in resolving the nuclear and other North Korean security issues, or at the very least in calming the North’s security behaviour, has indeed come when the US and its allies have been able to offer concrete economic concessions to the Pyongyang regime. The Agreed Framework itself was the final outcome of the recognition by US negotiators that North Korea’s bottom-line demand in the nuclear crisis was the provision of both diplomatic and economic concessions, and ever since North Korea has only remained in dialogue with the US in the fora of direct and four-way talks due to the promise that the US will reciprocate with offers to provide food aid and to loosen eventually the economic embargo. Moreover, North Korea has even hinted that it is prepared to bargain its missile programme as its last remaining military card in return for economic concessions from the US. In bilateral talks in September 1998 the North was reported to have told US negotiators that it would consider the cessation of missile exports, although not of the missile development programme itself, if the US would provide US$500 million annually.93 Conversely, North Korea has reacted badly to the failure by the US and its allies to offer or fulfil promises of economic concessions, or threats by these powers to increase in any way the already desperate economic isolation of the regime. As noted earlier, the reaction of the regime to the slow progress of the KEDO project has been to periodically

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threaten to withdraw from the Agreed Framework and to turn up the heat on the Korean Peninsula security situation by resuming its nuclear and other military brinkmanship. Hence, North Korea’s timing of its missile test in August 1998 can in part be explained as an attempt to pressure the US to deliver on its obligation to provide fuel oil under the Agreed Framework, and consequently further moderation in the North’s behaviour was secured by the US’s agreement in bilateral talks the following month to investigate a resumption of supplies of oil and food aid. North Korea also reacted badly to the threat of economic sanctions, which during the nuclear crisis it declared to be an act of war, and which only served to make its military behaviour and rhetoric even more defiant. A picture then emerges of North Korean military threats as a manifestation of its deep economic insecurity, and that the underlying strategy of the Pyongyang regime in the post-Cold War period has been to seek some form of engagement with the US as the key to its economic survival. Quite clearly, the intention of the North Korean regime is to seek engagement on its own terms: anxious to conduct dialogue with US to the exclusion of the South, and wary that KEDO constitutes a Trojan Horse which could smuggle in pernicious foreign influences and erode the authoritarian basis of the regime. Nevertheless, the North Korean government also seems to believe that it can constrain these foreign political and economic forces by throwing up a physical cordon around the KEDO LWR site, and at the same time adeptly finesse negotiations with the US through a mixture of guile and procrastination so as to escape entrapment in any US or South Korean ploy to suppress the North’s diplomatic freedom or even to topple the Pyongyang regime. Consequently, North Korea will continue to believe that it can triumph in the contest of shadow-boxing and engagement with the US, but the essential point for its adversaries is that North Korea’s strategy has revealed that economic insecurity and economic power form the key to a long-term resolution of the North Korean security problem. The limitations of military power In conjunction with the growing realisation that the North Korean security problem has been generated largely by economic insecurity, the policy-makers of the US and South Korea have begun to question the traditional containment policy approach to ensuring stability on the Korean Peninsula security, the limitations of the policy tools of the balance-of-power and military force, and subsequently to re-evaluate the role of economic power in contributing to a resolution of the problem. The balance-of-power has been disabled as an effective international framework to stabilise security relations on the Korean Peninsula due to the fundamental power shift brought about by the end of the Cold War and South Korea’s nordpolitik. As argued previously, the four-plus-two equation of the Cold War has been upset by the demise of the USSR, Russia’s marginalisation in Northeast Asian affairs, and China’s reluctance to provide anything other than passive support for North Korea’s security position. Instead, the balance-of-power has been replaced by a fundamental imbalance, as South Korea maintains good relations with Russia and China, and, with the direct support of the US alliance and indirect support of Japan, exercises crushing strategic superiority over North Korea. Moreover, it is clear that despite the fondness of the involved states, including

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North Korea, for the old status quo, there is no prospect of its restoration. Although the two-plus-two formula of four-way peace talks does offer a crucial forum for peace negotiations and is of vital important as a CBM, North Korea clearly views the talks as a poor substitute for the previous balance-of-power, is mistrustful of China as its supposed partner in the negotiations, and suspects that the talks are merely a ruse to push it into direct dialogue with South Korea, but from a position of relative diplomatic, military, and economic disadvantage. Proposals for a new four-plus-two framework of peace talks incorporating Russia and Japan might hold out the prospect of greater stability on the Korean Peninsula. But at present this proposal looks unrealisable, and it is apparent that North Korea will not readily acquiesce in any diplomatic initiative which it views as an attempt by the regional powers to return it to the type of suffocating international confinement that South Korea’s nordpolitik created for it at the end of the Cold War. The path of North Korean foreign policy laid down by Kim Il Sung during Carter’s visit and before his death in 1994 was the normalisation of relations with the US, and the rigidities of the North Korean regime mean that it is likely to pursue this objective to the very end. Thus, the only balance-of-power that the North can accept is one characterised by selective engagement and closer ties with the US, all arguing that the traditional conceptions and formulae of the balance-of-power designed to contain North Korea are no longer workable under the changed power configurations of the post-Cold War world. Military power has also shown itself to have had limited value in attempts to force the North Korean genie back into the bottle of containment security policy. The first consideration with regard to the limits of military power is that, despite the sophistication of the US’s and South Korea’s firepower, they were unable to use it as an effective tool in support of foreign policy goals because North Korea was simply too well physically defended, so ruling out Gulf War-style air-strikes against the North’s nuclear facilities. Related to this, the second consideration was that the use of military power was likely to goad North Korea or China into full-scale retaliation and to spark another Korean conventional and possibly nuclear war with all the accompanying massive human and financial costs described earlier. Hence, US and South Korean commanders were aware that the high degree of military interdependence on the Korean Peninsula ruled out the use of US and South Korean military power for anything other than the deterrence of a North Korean offensive across the DMZ. The third consideration, though, is that even the superior military strength of the US and South Korea may not prove sufficient to deter and contain North Korea. The rationality of North Korea’s policy-makers should not be doubted and they most likely realise the inevitability of defeat in a drawn-out conflict with the US and South Korea. But while North Korea has skilfully played the game of nuclear and conventional military bluff in such a way as to veer away at the last moment from the actual initiation of a conflict, and is aware that war is the very antithesis of its diplomatic strategy to seek engagement with the US, the possibility cannot be discounted that if North Korea were to be pushed even further into diplomatic and economic isolation by the military power of the US and South Korea, with no prospect of dialogue with the US, it could launch a desperate military offensive against the South. The costs arising from such an attack demonstrate that in this instance the application of military pressure on North Korea would be counterproductive and lead to an explosion rather than containment of the

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North Korean security problem. The final consideration regarding the limitations of military power is that it was and continues to be ill-suited to dealing with the implosion aspects of the North Korean security problem. As discussed above, the concern of US, South Korean, and Japanese policy-makers has been that the internal collapse of North Korea could release large refugee flows or other forms of low-intensity conflict. Chapter 1 has already demonstrated the limited relevance of conventional military power in dealing with these types of problems, and US and South Korean military power is as equally mismatched in its lack of ability to address security crises generated by economic collapse. US and South Korean ‘soft-landing’ policy Confronted by the limitations of military power and the awareness that the North Korean security problem is one increasingly driven by economic insecurity, the policy-makers of the US and South Korea have had to grope for the alternative policy tool of economic power as a means to achieve stability on the Korean Peninsula. As detailed earlier, the US and South Korea had already fixed upon the importance of economic power with the plan to impose negative economic sanctions upon North Korea through the agency of the UN between 1993 and 1994. However, despite the fact that this use of the economic ‘stick’ was undoubtedly feared by North Korea and might have bitten hard into its already troubled economy, the application of economic pressure in the same way as military pressure was likely to have had limitations in its effectiveness and to have been counterproductive. Negative sanctions were limited in their efficacy firstly because China was unwilling to support them, and secondly because, as will be seen in Chapter 4, the resilience of the North Korean economy would have dampened their impact. Moreover, even if the US and its allies were able to overcome political barriers and impose a tight enough sanctions regime on North Korea to punish it for its threatening military behaviour, incremental hikes in economic pressure would simply have aggravated the root economic causes of the North Korean security problem, and thus have induced the type of explosive and implosive security crises that sanctions were designed to contain in the first instance. The US and South Korea have been unwilling to abandon entirely the option of negative sanctions as in the last resort they constitute one means to at least threaten retaliation against North Korea for its military behaviour. But the events of the nuclear crisis and after have taught US and South Korean policy-makers that their strategy of offering positive sanctions and economic ‘carrots’ is likely to be far more effective and less costly as a means to manage North Korean security threats. The clear lesson of USNorth Korea negotiations leading up to the nuclear crisis and the conclusion of the crisis itself with the signing of the Agreed Framework was that, while the North was a tough and infuriating negotiating partner, it was prepared to bargain away its nuclear card in return for economic concessions from the US and its allies. Therefore, it has been US, South Korean, and Japanese offers of KEDO energy assistance, the prospect of an end to the US embargo, and food aid which have been the most effective policy tools in moderating North Korea’s security threats, not the application of military pressure. In turn, the provision of positive economic sanctions has proved to be the least costly policy

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for South Korea and Japan, but also particularly for the US. The US$5 billion for the KEDO project between 1994 and 2003, with the US contributing annually just US$26 million in fuel oil, looks to be a cheap option to preserve stability on the Korean Peninsula when compared with the US$2.5 billion spent each year on maintaining US troops in South Korea, close to US$1 billion spent on Team Spirit exercises in 1993, and the estimated 500,000 US and South Korean military casualties and US$60 billion to US$1 trillion in military expenditure (let alone the high number of civilian casualties and catastrophic damage to the South Korean economy) that could be incurred in the event of another Korean war.94 The realisation of US and South Korean policy-makers that positive sanctions are the most efficacious tool in moderating North Korean military threats has strengthened since the nuclear crisis as the true state of the North’s economic decline has become known and the implosive aspects of the security problem have begun to take precedence over its explosive aspects. Fear of the collapse of North Korea and its attendant security risks has begun to convince US and South Korean policy-makers that rather than just attempts to treat the symptoms of the North Korean security problem and prevent the immediate collapse of the North with a range of short-term economic concessions, the optimum policy over the long term is to tackle the North’s economic insecurity, and thus the root cause of its military aggression, by responding to its demands for selective diplomatic and economic engagement. In the same way as their North Korean counterparts, the obvious hope of the US and South Korean policy-makers is to manipulate the game of engagement to their own advantage, but in contrast to the Pyongyang regime, the final objective of Washington and Seoul is to use KEDO and other forms of economic contacts as a bridgehead in order to begin to establish the necessary degree of economic interdependence with the North which they believe has a chance of forestalling its military threats in the future.95 The aims of the KEDO project and rudimentary engagement strategy, or what has been christened as the ‘soft-landing’ policy, were summed up by Warren Christopher, the then US Secretary of State, when he stated in the Senate Committee on Foreign Relations in 1995: Our goal in crafting the [Agreed] Framework was thus three-fold: to stop the North’s existing nuclear programme; to devise a larger strategy that would address the threat posed by the North’s missile programme and conventional build-up; and to reduce tensions in the region by bringing North Korea out of its international isolation into the broader community of nations…The Agreed Framework not only stops North Korea’s nuclear programme in its tracks. It provided the basis for reducing tensions in the region by opening the way for the establishment of more normal political and economic relationships between the United States and North Korea, and prospectively between North and South Korea.96 Hence, the US Department of State has envisaged KEDO as the initial stage to open North Korea up and to incorporate it both politically and economically into the region and the larger international community. In essence, the Agreed Framework represents the first internationally recognised and mutually binding political and economic agreement

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between the US and North Korea; provides a regular venue for North-South contacts; ties the North via the receipt of technological and economic assistance in the KEDO project to the US, South Korea, and Japan; and due to the participation in KEDO of the EU links the North indirectly to international organisations and states in other regions. As Michael J.Mazaar argues, KEDO and the ‘soft landing’ mark North Korea’s gradual enmeshment in a web of contacts which could bring access to foreign investment and aid, and propagate the types of interdependent relations which will act as the most effective deterrent to the North’s reversion to the use of military threats in order to gain economic concessions.97 However, whilst the ‘soft-landing’ policy has a strong rationale, there are obvious South Korean and US policy-making difficulties which hamper its execution. For its part, South Korea has long been aware of the importance of economic power and cooperation as both a means to reduce North-South tensions in the short term, and to promote reunification efforts over a longer time span. For instance, President Roh in his July 1988 address proposed deeper trade links between North and South, and the collapse of East Germany in 1989 focused the minds of South Korean policy-makers on the need to extend economic links to the North in order to reduce in advance the potential costs of Korean reunification.98 The South Korean government legalised trade with the North in February 1989, and the necessity of economic contacts with the North was acknowledged by the 1991 Agreement on Reconciliation, Non-aggression and Exchange and Cooperation, which intended to establish a Joint North-South Economic and Exchanges Cooperation Commission charged with the responsibility of promoting the ‘integrated and balanced development of the national [Korean] economy and the welfare of the entire people’, and to ‘engage [North and South] in economic exchanges and cooperation, including the joint development of resources, the trade of goods as domestic commerce, and joint ventures.’ Even as the nuclear crisis developed, the South continued with its efforts to gain an economic foothold in the North, believing that this would bring about economic interdependence and alleviate North-South tensions. In August 1994 President Kim Young Sam announced the Unification Formula for the Korean National Community which proposed the creation of a single North-South economic community, and in November 1994 legalised the resumption of trade between its industrial chaebol conglomerates and the North. Seoul was also keen to gain a central role in the KEDO project by acting as the chief supplier of the reactor technology and finance, and, concerned about the possible implosion of the Pyongyang regime, has provided food aid since mid-1995. Furthermore, the South Korean government think-tank Korea Development Institute argued in a mid-1996 report that the only way to achieve a peaceful settlement of the North Korean security problem was to ease Seoul’s restrictions on South Korean chaebol trade with the North, to open air, land, and sea links to the North, and to integrate North and South into a Korean economic community by 2020. The Institute also suggested that in order to establish a joint framework for industrial projects, Seoul should aid Pyongyang’s entry into the World Bank, the IMF (International Monetary Fund), and ADB.99 But despite South Korean recognition of the key role of economic power in Korean Peninsula security, domestic political considerations have generated inconsistencies in the South’s policy towards the North and restricted the degree of North-South economic

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engagement possible. The tendency of the Kim Young Sam administration in its later stages, fearful that it was being excluded from US-North Korea diplomacy and of looking weak on policy towards the North, was to try to use economic power as a means to coerce Pyongyang into direct North-South dialogue. In 1994 President Kim talked openly of his hopes for the imminent economic collapse of the North and hinted at his opposition to the Agreed Framework.100 His government announced in August 1996 that it was prepared to offer massive economic aid to North Korea only if it responded to the four-way peace talks proposal, and, as will be seen in Chapter 5, the South Korean diplomatic opposition has meant that it has exercised a virtual veto on any proposed improvement of JapanNorth Korean relations and economic contacts. Added to this, Kim’s administration utilised the September 1996 submarine incident as a means to threaten to end cooperation in the KEDO project, and so further squeeze North Korea economically; and consistently begrudged food aid to the North, concerned that the Pyongyang regime had overstated the extent of food shortages, was channelling food aid to the military, and was trying to use the food issue to divide South Korea from the US and Japan.101 Although Kim Young Sam’s government was undoubtedly correct that the North was prepared to use the food aid issue to improve ties with the US and Japan and avoid contacts with South Korea, it was also aware that the use of economic power in this way was counterproductive, given that the North was known to be largely unresponsive to economic pressure, likely to increase its military activity in the face of the sanctions threat, and that even if North Korea were to collapse, it is the South which would have to pay for the heightened costs of reunification brought about by its own policy of undermining the North’s economy.102 Some South Korean policy-makers may argue that the North’s political and economic system is incapable of serious engagement and reform, and that it is best to topple the regime immediately rather than to continue to prop it up. But it appears that any South Korean attempt to use economic power to crush North Korea following the nuclear crisis is motivated less by calm consideration of the political and economic realities, and more by a reluctance to be seen to submit to North Korean pressure, and problems of face, national pride, and domestic politics.103 US engagement of North Korea has been impeded by similar domestic policy-making considerations. The principal sponsor of the ‘soft-landing’ policy has been the Department of State, but it has encountered opposition from the CIA, and elements of the US military and US Congress. The Pentagon and its military commanders in South Korea clearly support dialogue with North Korea as a means to avoid a costly war on the Korean Peninsula, but those with a more ‘hawkish’ attitude have viewed the Agreed Framework as a form of appeasement of North Korean military aggression, and, as discussed in this chapter and again in Chapter 5, are concerned about the political effect of North Korea’s strategy on the US-South Korea and US-Japan alliances, and its damaging effect on the legitimacy of the US military presence in the South, and indeed the Pentagon’s entire global force structure. Sections of the Republican party in Congress have opposed the ‘soft-landing’ policy on the grounds that KEDO offers too many concessions with no effective guarantees of North Korean reciprocation, and that the policy lacks concrete goals beyond a vague commitment to engagement with North Korea.104 Hence, as noted earlier, since the conclusion of the Agreed Framework, Clinton administration officials have fought a running, although not always successful, battle

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with Congress to prevent it from severing US funding for KEDO. In 1996, in a fit of parsimony Congress cut in half the required US$26 million budget for the provision of crude oil, and since 1998 has made it increasingly difficult for the US government to deliver oil supplies on time to the North. For the US and South Korea these policy-making obstacles have been multiplied since late 1997 by the East Asian currency crisis and South Korea’s own economic difficulties which have raised doubts about its ability to meet its financing commitments under the KEDO project. The Japanese government’s decision, explained later in this chapter, to delay signing the final agreement on KEDO financing in September 1998 in protest at the North’s missile test the previous month has also added to the concerns of US and South Korean policy-makers. Moreover, as already noted, the Pyongyang regime will not willingly acquiesce in any engagement policy with the US which its sees as moving from a selective to a comprehensive basis and threatens to swamp the North, will continue to twist and turn to avoid envelopment in the engagement strategy and restrictions upon its diplomatic freedom, and may be aiming simply to extract enough concessions to allow it to ‘muddle through’ the current economic crisis, and so fend off the risks of deeper economic interdependence with the US and South Korea, or even absorption by the South.105 But in spite of all these difficulties, it is apparent that the US and South Korea have zeroed in on economic power as the key to dealing with the North Korean nuclear problem and will not be distracted easily from the engagement strategy. The Kim Dae Jung administration, newly inaugurated in January 1998, has demonstrated its commitment to engagement by using the four-way peace talks as a means to persuade North Korea to resume direct inter-Korean dialogue in April 1998 on the issues of food aid, agricultural assistance, and the reunion of divided families, and has moved ahead rapidly with the liberalisation of economic relations with the North. In May 1998, the new government as part of its ‘sunshine’ policy of engagement removed restrictions on South Korean investment in the North, and during his visit to the US in June of the same year President Kim even went so far as to request the loosening of the US trade embargo on the North. The determination of Kim’s administration to adhere to the engagement policy was also shown by its relatively calm reaction to a new North Korean submarine incident in June 1998. In a near repeat of the September 1996 incident, a North Korean midget submarine was caught infiltrating South Korean waters after becoming entangled in a fishing net, and the crew of five are believed to have committed suicide rather than be captured. The South Korean government naturally regarded the incursion by the submarine as another military provocation and relations again cooled between North and South. But this time, both North and South avoided an unsightly slanging match over the incident, the South Korean government quickly returned the bodies of the crew, and Kim Dae Jung responded that the South would not abandon its general policy of engagement with the North. In addition, in August 1998 Kim Dae Jung proposed North-South Cabinet-level dialogue and an ‘age of North-South exchange’, and the South Korean government also reacted far more calmly than the Japanese government to the Taepodong-1 test later in the same month: viewing it as provocative behaviour and grounds for strengthening US-South Korea-Japan diplomatic cooperation, but determined that it should not undo the engagement strategy or KEDO project. Similarly, the Clinton administration has persevered with the ‘soft-landing’ policy even

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when it was deemed to be in serious trouble. Hence, during the 1996 submarine incident, the extent of the US Department of State’s engagement with North Korea was shown by the fact that it effectively stepped across the alliance dividing line and acted as an intermediary between North and South to keep the KEDO project on track. Similarly, when another crisis in the Agreed Framework loomed in mid-1998, due to the US’s failure to supply crude oil and the North Korean response of suspending the canning of reprocessed fuel, both sides had the necessary will and mutual interest to return to negotiations in September. The result of the negotiations was that, in return for the US’s promises of food aid and fuel oil, the North then agreed to participate the following month in new missile and four-way peace process talks, and, most importantly, to resume the canning of spent fuel and maintain the freeze on its nuclear programme. Moreover, North Korea also chose to mediate the Hwang Jang Yop defection in 1997 via the good offices of the US, and having received up to US$75 million in food aid in 1998 North Korea is now one of the US’s largest aid recipients in Asia—all of which suggests that it has moved from being the US’s implacable adversary to being a negotiating partner, and at times of crisis is prepared to nestle for a degree of protection under the superpower’s diplomatic and economic umbrella. Finally, the North has continued to work closely with the US since the Agreed Framework in order to recover the remains of US servicemen missing in action (MIA) from the Korean War. None of this means that the North Korean security problem is fully resolved, as the US embargo still remains in place, the US and North Korea are yet to actually exchange liaison offices, the North persists in avoiding direct North-South talks, and the four-way peace process continues to shudder forward at the slowest of paces. In addition, despite US-North Korea talks on missiles since April 1996, to the US’s irritation the North has blatantly refused to curb its exports of missile technology to the Middle East, and then threw down a further challenge to the US and its allies on this issue by going ahead with the testing of its Taepodong-1 missile in September 1998. But nevertheless the basic thrust of US and South Korean policy since the advent of the KEDO project has been the use of economic power and engagement as the primary means to address the North Korean security issue, and thus attention now turns to the role of Japan in the ‘softlanding’ policy as the third member of the KEDO consortium and neighbouring economic superpower. Japanese conceptions of North Korea as a problem of economic security policy Although alliance connections with the US and the prioritisation of relations with South Korea have meant that Japan’s primary contribution to Korean Peninsula security during the Cold War was indirect support for North Korea’s containment, it is also clear that Japanese policy-makers have long recognised the economic nature of the North Korean security problem and the value of selective engagement as an approach to its resolution. Sections of the LDP and SDPJ have been aware of North Korea’s economic predicament since the 1970s and the need for Japan to engage the North in order to assist its economic restructuring. Indeed, Japan became one of the principal targets of Pyongyang’s informal economic liberalisation programme in 1970s which sought to import technology from

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and expand trade links with Japan and Western Europe.106 The plan ultimately failed due to debts owed to Japanese corporations, as discussed in Chapter 4. But Japanese attention was drawn back to North Korea’s economic difficulties and the role that they played in driving North Korea’s diplomatic and military policy during the 1990–92 normalisation talks. The Three-Party Joint Declaration held out to North Korea the prospect of positive economic sanctions and enhanced engagement with Japan in the form of new communication links, expanded trade and investment, and the provision of compensation. The MOFA made it clear at the ensuing government-level normalisation talks that Japan would not provide compensation, but it knew that its offers of ‘economic cooperation’ were a powerful bargaining tool to try to induce North Korea to accept nuclear inspections. Furthermore, even during the height of the nuclear crisis and faced by a range of military threats, Japanese policy-makers did not lose sight of the economic aspects of the North Korean security problem. As already noted, the second stage of the US sanctions plan in 1994 called for Japan in line with UN mandates to halt all remittances by North Koreans resident in Japan to their homeland, and Japanese policy-makers were aware that this would have a ruinous effect upon the North Korean economy. The Japanese ruling parties did reach a fragile consensus to impose sanctions if requested by the UN, but viewed the negative sanctions option as the least attractive because of the internal security problems it would pose for the government and because they were likely only to exacerbate the North’s military threats. Hence, it was with some relief that Japanese policy-makers greeted the Carter mission and avoidance of sanctions, and then the negotiation of the Agreed Framework and the shift to the approach of offering positive sanctions to North Korea. The Japanese government has assumed a significant role in the management of the KEDO project and expressed full support for the principle of engagement with North Korea and the ‘softlanding’ policy. For instance, in November 1994 Kōno Yōhei, Foreign Minister under the LDP-SDPJ-Sakigake coalition, noted that the Agreed Framework and KEDO were important steps, ‘to bring North Korea into international society. The deepening of North Korea’s interdependence with international society will serve our security interests better than the North’s current isolation’.107 Even the end of the coalition government and the replacement of Murayama as premier by the LDP’s Hashimoto Ryūtarō, known to be less sympathetic towards North Korea, did not alter the basic Japanese position of support for the ‘soft landing’. Foreign Minister Ikeda Yukihiko confirmed in February 1996 that, ‘the task not just for Japan but also for other countries with an interest is to create for North Korea a more open system and to bring it into international society by means of a “soft landing.’”108 The Japanese government’s use of the discourse of the ‘soft landing’ has been backed with the provision of 500,000 tons of food aid to North Korea in June and October 1995, and US$6 million of food aid via UN agencies in June 1996. A full-scale Japanese contribution to a North Korean ‘soft landing’, though, can only come with the normalisation of relations and the resulting flows of Japanese ‘economic cooperation’ and private sector investment. Since the conclusion of the Agreed Framework sections of the LDP and its coalition partners the SDPJ and Sakigake have worked to try to restart normalisation talks. Watanabe Michio, LDP faction boss and former Foreign Minister, led a cross-party LDP-SDPJ-Sakigake mission to North Korea

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in March 1995 for talks with the KWP, which produced another party-to-party declaration urging the governments of Japan and North Korea to resume normalisation talks. But this mission was not followed up by substantial initiatives from either government, and in the meantime bilateral relations were further impeded by mounting media and public pressure for the North to make concessions on the visits of Nihonjinzuma to Japan, and to provide information on the racchi jiken issue following the surfacing of new allegations and circumstantial evidence in February 1997 concerned with its involvement in the believed 1977 abduction of a Japanese schoolgirl. However, signs of improved government relations did come with the start of informal dialogue between MOFA and North Korean diplomats in Beijing in early 1996. These talks were followed by formal government talks on the Nihonjinzuma problem, beginning in August 1997, which resulted in Pyongyang’s agreement to allow groups of Nihonjinzuma to Japan in November 1997 and January 1998. Moreover, although North Korea continued to deny any connection to the racchi jiken, it did show flexibility for the first time in agreeing to at least investigate the possibility that there could be some missing (yukue fumei) Japanese citizens in North Korea. The Japanese government reciprocated by agreeing to the resumption of normalisation talks to be arranged at a later date, and by the announcement in October 1997 by Obuchi Keizō, the newly appointed Foreign Minister, of $27 million in food aid via international agencies. In turn, a new LDP, SDP, and Sakigake mission was despatched to North Korea between 11 and 14 November 1997, which failed to produce a new inter-party declaration but did confirm the desire of the governing parties and the KWP for a quick resumption of government-level normalisation talks, to continue the visits of Nihonjinzuma, and that North Korea should cooperate with investigations into missing Japanese citizens. But again neither government acted on the inter-party initiatives, and bilateral relations experienced another setback with North Korea’s report to the Japanese Red Cross on 5 June 1998 that it could find no trace of any Japanese citizens missing in the North. In addition, clearly dissatisfied that Japan was not more forthcoming with food aid, Pyongyang took the decision to cancel the third round of Nihonjinzuma visits to Japan. The appointment of Obuchi as Prime Minister in July 1998 offered the possibility of some new Japanese initiatives to improve bilateral relations, as shown by his tentative suggestion the following month that North Korean victims of the atomic bombings could be brought to Japan for treatment. But bilateral relations then shifted from bad to worse due to North Korea’s test firing of its Taepodong-1 missile later in the same month. North Korea continued preparations for the test in spite of Japanese efforts to convey its objections beforehand via contacts between MOFA and North Korean officials in Beijing, and then conducted the actual missile launch itself without the warnings expected under international aviation agreements, and thus posing a potential risk to any Japanese civil aviation in the path of the missile as it landed in the Pacific Ocean. North Korea’s motives for carrying out the missile launch were probably threefold: firstly, to gain a domestic propaganda victory with the supposed scientific success of the launch of a satellite in the run-up to Kim Jong Il’s appointment as effective head of state the following month; secondly, to put pressure on the US to make concessions in the upcoming bilateral talks; and, thirdly, to demonstrate the capabilities of North Korea’s missiles to buyers in the Middle East. But even though the missile test was probably not

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intended as a direct provocation against Japan, and the US later gave North Korea the benefit of the doubt by declaring that the test had been a failed satellite launch, Japanese policy-makers had little choice but to treat it as such, and to be seen to respond to public worries by imposing limited sanctions on the North. Immediately following the test, the Japanese government stated that it would suspend for the time being all attempts to restart food aid or normalisation talks with North Korea, that it would delay signing of the final agreement on financing the KEDO LWRs, and that it would cancel charter flights between North Korea and Nagoya in Japan. Both houses of the Japanese Diet adopted resolutions condemning the test, and some LDP members were even reported as demanding that the government should investigate ways to halt remittances to the North from North Koreans resident in Japan, in the same way as during the nuclear crisis in 1994.109 Consequently, as of September 1998, and despite the recognition on the part of Japanese politicians of the importance of seeking to engage North Korea, Japanese policy has moved out of step with that of the US and South Korea, and in reaction to the missile test temporarily reverted back to one of semi-containment. The outcome is that JapanNorth Korea normalisation talks remain stalled, and Japan’s economic role in the resolution of the North Korean security problems as yet restricted. The reasons why the issues of the racchi jiken, Nihonjinzuma, and missiles have become such prominent obstacles in Japan-North Korea relations, along with other crucial reasons for the deadlock in normalisation talks and bilateral relations more generally, are explored in detail in Chapter 5. Nevertheless, the problems of the normalisation process and Japan’s current ‘hard-line’ stance towards North Korea, do not deny the fact that Japanese policymakers, in the same way as their counterparts in the US and South Korea, increasingly conceptualise the North Korean security issue as one which can best be dealt with by the application of economic power and engagement, and that they recognise that Japan possesses considerable reserves of economic power to contribute to the ‘soft landing’. For despite the Japanese government’s show of imposing sanctions upon North Korea in September 1998, the basic awareness of its policy-makers is that economic pressure applied to North Korea is only likely to accentuate North Korea’s explosive and implosive security risks over the long term. Furthermore, whilst expressing understanding of Japanese annoyance at the missile test, US and South Korean policy-makers have stressed to their counterparts in Japan the importance of adhering to the underlying policy of engagement. Hence, even whilst holding off on normalisation talks, the Japanese government has already begun by late-September 1998 to move back into line with US and South Korean policy and to resume support for the engagement policy by preparing to sign the KEDO finance agreement, and its basic stance of support for the ‘soft landing’ over the long term has not changed.

Conclusion The main purpose of this chapter has been to demonstrate the beginnings of a fundamental shift in the nature of Korean Peninsula security in the post-Cold War period. The North Korean security problem has traditionally been perceived as one handled by a

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policy of containment, and reinforced by the manipulation of the balance-of-power and exertion of military power. An initial look at North Korea’s nuclear and conventional military threats in the post-Cold War period would seem to suggest a continuation of this scenario. However, the policy-makers of the US, South Korea, and Japan have gradually come to understand the limitations of traditional containment strategy, that North Korea’s military behaviour is a manifestation of its economic security, and that the mobilisation of economic power offers the best chance to resolve the problem. As Bruce Cumings notes, even though North Korea might not be a ‘nice place’ and might be unpleasant to deal with, policy-makers have come to the conclusion that it can at least be bargained with in return for economic concessions, and have switched to a strategy of engagement to draw the North into a set of interdependent relations which will moderate its security behaviour.110 The result is that, in the same way as other security problems elucidated in Chapter 1, even the heavily militarised Korean Peninsula, which is so often tiredly referred to as the last ‘Cold War’, now has to be reconceptualised as very much a postCold War security problem and one where economic power can play a crucial role. In line with the theory of economic security policy in Chapter 2, it can be seen that the initial approach of the US and its allies was to place North Korea in the second subdivision of the category of security policy concerned with protecting states in the event of a conflict by imposing economic costs on a state which is seen to be threatening. Hence, their first reaction was to consider economic pressure and sanctions to coerce North Korea into altering its security behaviour. But as the engagement and ‘softlanding’ policies have evolved, the North Korean security problem has now increasingly come to be placed and dealt with in the first category of economic security policy concerned with the prevention of the occurrence of those conflicts between states which are generated by economic hardship. Again, though, clearly none of the involved powers are advocating the abandonment of their military security guarantees, and there is the constant risk that the delicate experiment of engagement may blow up in the face of policy-makers and cause North and South to stumble into a military conflict. But now at least the regional powers have been obliged to consider the equal utilisation of economic alongside military power, and it is clear that out of this scenario of a comprehensive approach to security on the Korean Peninsula comes a potential new security role for Japan based on the use of economic power. Hence, having demonstrated the existence of the first condition for economic security policy as given in the theory of civilian power in Chapter 2—namely, the conceptualisation of a particular problem as addressable by the use of economic power— the next chapter will analyse the second condition and the extent of Japanese economic power capacity in relation to North Korea.

Notes 1 2 3 4

Olsen (1993, p. 90). Koh (1984, p. 1). Okazaki (1986, p. 12). Cumings (1990).

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Yahuda (1996, p. 28); Dingman (1988–89); Foot (1988–89). For an examination of juche ideology, see Chapter 4 and Suzuki (1994, pp. 36–4). Gills (1996, pp. 124, 155). For a detailed description of this second incident, see Oberdorfer (1997, pp. 74–83). Hao and Qubing (1992, p. 1142). Ha (1983, pp. 127–30). Polomka (1986, p. 41). Welfield (1988, p. 92). Cumings and Halliday (1998, p. 203). Asagumo Shimbunsha, Boei Handobukku 1998 (1998, pp. 306–7). Full accounts of the Basic Treaty’s negotiation are contained in Sugiyama (1965); Takasaki (1996). The Three Arrows Study incident, or Mitsuya Kenkyū, was exposed by the SDPJ member Okada Haruo on 10 February 1965, when he charged that the SDF under its 1963 General Defence Plan of Operation had been planning to establish an authoritarian type of government in Japan in the event of a crisis on the Korean Peninsula. Okada also claimed that the Mitsuya Kenkyū contained the following items: Japan would be an integral part of the United States strategy in the Far East and serve as the base for US operations; the SDF would train jointly with US, Taiwanese, and South Korean troops; in another Korean crisis precipitated by a North Korea and Chinese invasion of South Korea, the SDF would fulfil defensive assignments, including the blockade of the eastern coast of China, as well as acting as a reserve force in Japan, Korea, and Manchuria; and that during a period of emergency, the whole of Japan would be mobilised with necessary agencies to control and regulate services previously managed by civilian bodies. Prime Minister Satō at first denied the existence of the General Defence Plan of Operation, but later acknowledged its existence and defended it on the grounds that it was merely a theoretical study by the SDF and not a national defence plan (Bōeinenkan, 1966, pp. 128–30; Asahinenkan, 1966). Hao and Qubing (1992, p. 1138); Hu (1995, p. 53). Kawakami (1994, pp. 36–74); Nihon Shakaitō Seisaku Shingikaihen (1990, pp. 41, 489–90, 503–6, 1225, 1235–7, 1251). Okonogi (1991, pp. 105–7). Ko (1977, p. 35). Kim (1983, p. 305). For details of the racchi liken, see Okonogi (1997a, p. 503). Gills (1996, p. 105). For detailed accounts of the events leading up to the nuclear crisis see Mazaar (1995, pp. 55–180); Sigal (1998). Eberstadt (1996, pp. 540–1). Shigemura (1994). Drifte (1996b). Manning (1997, pp. 606–7). Joo (1996, pp. 32–9). Harada (1997, pp. 62–5). Michishita (1995,p. 243). D.S.Kim (1994, pp. 38–9). Hu (1995, pp. 58, 63–4). Garrett and Glasser (1995, pp. 538–9). International Institute for Strategic Studies, The Military Balance 1997–98, pp. 183–4.

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36 One of the favourite pastimes of North Korea watchers has been to try to measure the military balance on the Korean Peninsula and the literature is extensive. For two inquiring analyses of this problem, see Okamoto (1994, pp. 165–99); O’Hanlon (1998). 37 Okonogi (1991,pp. 58–9). 38 Collins (1994, pp. 12–14). 39 Oberdorfer (1997, p. 315); Rosegrant and Watkins (1995, p. 39). 40 Ertman (1993, pp. 614–15). 41 Ertman (1993, p. 620). 42 Mack (1991b, p. 88). 43 Cotton (1993). 44 Mazaar (1995, p. 116). 45 Park (1994, p. 88). 46 Korea and World Affairs: A Quarterly Review, vol. 17, no. 2, 1993, p. 364. 47 Office of International Security Affairs (1995, p. 23). 48 Sigal (1998, p. 68). 49 Spector (1995). 50 Ishii (1991, pp. 34–7). 51 Interview with MOFA official and member of Japanese normalisation negotiating team, Tokyo, 14 October 1996. 52 Interview with former JSP House of Representatives Diet member, Tokyo, 1996 February 22. 53 Okonogi (1991, pp. 127–8). 54 Park (1992, p. 334). 55 For an analysis of the normalisation talks, see Bridges (1993, p. 153). A pro-North Korean but detailed account of the talks is contained in Omu (1997). 56 Park (1992, p. 330). For similar South Korean views of Japan’s ‘two Koreas’ policy, see Ahn (1993, p. 263); and Chang (1992, p. 521). 57 Suzuki (1994, pp. 51–6). 58 H.N.Kim (1994, pp. 690–2). 59 Following Kanemaru’s arrest in 1993 for his involvement in the Sagawa Kyūbin scandal there was speculation that the unmarked gold ingots found in his office safe had been passed to him from North Korea (The Economist Intelligence Unit, Country Report: South Korea and North Korea, no. 3, 1993, p. 44). There was also speculation that Kanemaru’s interests in the construction industry favoured improved ties with North Korea in order to gain access to cheap building gravels of which North Korea has an abundance due to the mismanagement of its agricultural policy and soil erosion. 60 Interview with Mainichi Shimbun journalist, Tokyo, 6 February 1997. 61 For the MOFA view as given by a former chief negotiator with North Korea and ambassador to KEDO, see Endō (1996, p. 41). 62 Japan Times, 2 April 1993, p. 1; Asahi Shimbun Yūkan, 20 November 1993, p. 1. 63 Bōeichōhen, Bōei Hakusho 1995 (1994, pp. 49–58). 64 For examples and criticisms of such speculation, see Hughes (1996a, pp. 81–2). 65 Asahi Shimbun, 7 February 1994, p. 2. 66 Asahi Shimbun, 5 April 1994, p. 2. 67 Asahi Shimbun, 9 February 1994, p. 2; Nihon Keizai Shimbun, 19 June 1994, p. 2. 68 Bōeichōhen, Bōei Hakusho 1995 (1994, p. 61) [Author’s translation]. 69 Asahi Shimbun, 5 April 1994, p. 2. 70 Mack (1991a, p. 47).

Military and economic conceptions of the north korean security problem 71 72 73 74 75

76 77 78

79

80

81 82 83 84 85

105

Japan Times Weekly International Edition, 24–30 July 1995, p. 3. Funabashi (1997, pp. 317–18). Bōeichōhen, Bōei Hakusho 1997, pp. 380–8. Asō (1994, p. 205). Asō (1994, p. 210) [Author’s translation]. The Japanese defence establishment has viewed the large urban-based Korean minority as an internal security threat since the 1960s. South Korea’s KICA demonstrated its ability to operate inside Japan when it abducted the South Korean opposition candidate Kim Dae Jung from Tokyo in 1973. North Korea gave sanctuary in 1972 to members of the Japanese Red Army (Nihon Sekigun), who hijacked and forced a Japan Airlines jet to land in North Korea. Members of this group have remained in the North and continue to publish a newsletter entitled Nihon o Kangaeru (Think Japan), although it seems that the North Korean regime has not allowed the group the freedom to continue its guerrilla activities as it had originally hoped. North Korea is also alleged to have provided training and financing for another group of the Nihon Sekigun in the Lebanon during the 1970s, and was suspected of being involved in Red Army operations to disrupt the Seoul Olympics in 1988. North Korea’s links with terrorist activities in Japan since the 1970s are chronicled in Bermudez (1990, pp. 146–54). Desmond (1994). People’s Korea, 7–14 May 1994, p. 1, 18 June 1994, p. 1; Chosen Jihō Henshūbuhen (1994). Following Kim Il Sung’s death in 1994 and until Kim Jong Il’s appointment as KWP General Secretary in 1998 there was a fairly vigorous debate in Japan regarding the possibility of the internal collapse of the North Korean regime. One confident prediction of the regime’s terminal decline is provided in Hasegawa and Satō (1996). For an opposing view which sees the authoritarian structure of the regime as enabling it to overcome food shortages and domestic power shifts, see Shigemura (1996). Kajiyama’s remarks were reported as follows: ‘For example, [in the case of a Korean crisis] a mass flow of refugees will come [to Japan]. A number of those posing as refugees will also come. If we suppose that they bring weapons, what will we do? They have domestic organisations, both South and North. When this leads to internal strife, Japan’s SDF will have no capability to fight back.’ Asahi Shimbun, 10 August 1996, p. 5 [Author’s translation]. Kajiyama’s prediction of a refugee crisis is questionable because it assumes that refugees from the Korean Peninsula would seek first of all to flee to Japan and that they would have the means to do so. Certainly in the event of a major war on the Korean Peninsula refugee flows would occur, and some refugees might be tempted to seek safety with relatives in Japan. However, the problems of crossing the Sea of Japan in anything other than a large ocean-going vessel are very great, and therefore it is more likely that refugees would head by land for sanctuary with relatives in South Korea or ethnic Korean areas in southern China. The absence of refugee flows from North Korea to Japan during the Korean War confirms the impression that Japan is not necessarily the prime destination for refugees in the event of a crisis. For a critical analysis of Kajiyama’s viewpoint, see Tsuru (1996, pp. 90–1). Okazaki (1994). Brown (1994, pp. 445–6). George Mulgan (1997, p. 148). Asagumo Shimbunsha, Bōei Handobukku 1997 (1997, pp. 310–15). Hasegawa (1994).

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86 Asahi Shimbun, 22 March 1994, p. 2. 87 Interview with former MOFA official involved in planning for a Korean Peninsula emergency in 1994, Tokyo, 11 December 1996. 88 H.Tanaka (1994, p. 64) [Author’s translation]. 89 In this connection it is interesting to note how the Japanese attitude towards North Korea’s possible development of nuclear weapons has been different from its attitude towards China’s acquisition of a bomb in the 1960s. As John Welfield points out, China’s test of its first nuclear device in 1964 aroused little concern in Japan at the time due to Japanese faith in the US’s power and unequivocal security guarantees (Welfield, 1970, pp. 2–35). 90 Asahi Shimbun, 20 November, 1993, p. 1; Asahi Shimbun Yūkan, 25 February 1994, p. 1 [Author’s translations]. 91 Asahi Shimbun, 21 March 1994, p. 1. 92 Roy (1996–97, p. 22). 93 Asahi Shimbun, 5 September 1998, p. 2. 94 Sigal (1998, p. 9). 95 Cotton (1995, p. 343). 96 Prepared Statement of Secretary of State Warren Christopher (1995, pp. 10–14). 97 Mazaar (1995, p. 239). 98 Korea and World Affairs: A Quarterly Review, vol. 12, no. 3, 1988, pp. 629–30. 99 Japan Times, 15 June 1996, p. 11. 100 Oberdorfer (1997, p. 354). 101 Japan Times, 16 August 1996, p. 4. 102 Interview with leading Japanese academic, Tokyo, 11 June 1996. 103 Gurtov (1996, p. 30). 104 Manning (1997, p. 600). 105 Noland (1997). 106 Komaki, Yamamoto and Wada (1996, p. 128). 107 Dai1rui Dai14gō Dai131 Kokkai Shūgiin Gaimuiinkai Giroku, 28 November 1994, no. 3, p. 26 [Author’s translation], 108 Dai1rui Dai4gō Dai136 Kokkai Shūgiin Gaimuiinkai Giroku, 11 February 1996, no. 3, p. 7 [Author’s translation]. 109 Asahi Shimbun, 8 September 1998, p. 7. 110 Cumings (1998, p. 236).

4 Japanese economic power and North Korea In order to examine the extent of Japanese economic power in relation to North Korea, the procedure will be to follow Chapter 2 and to investigate in turn each of the components of economic power: production, finance, trade, communications, energy, and aid. A brief description of each of these components in the North Korean economy and their levels of vulnerability is given—as judged by the factors of resilience, adjustment, substitution, and availability. This analysis is then dovetailed with one of the links between the North Korean and Japanese components of power to reveal the areas where Japanese direct and indirect economic power can be brought to bear to assist in a resolution of the North Korean security problem. However, before moving on to explore the individual components of economic power, it is first necessary to note that the analysis is made difficult by a lack of reliable statistics. North Korea ceased publication of regular statistics in 1965, thus forcing researchers to glean information on economic indicators from the speeches of politicians, and in particular Kim Il Sung’s New Year address.1 Moreover, as North Korea’s economic situation has worsened since the 1970s, economic statistics have become increasingly sporadic and have to be supplemented with South Korean and Japanese ‘mirror’ statistics, most notably from the Bank of Korea and Japan External Trade Organisation (JETRO).

The North Korean production system History and characteristics The strategies of economic development pursued by the North Korean regime, and the subsequent nature of the production structure of the North Korean economy and its vulnerabilities, are the outcome of the mixed legacies of colonialism, socialism, and juche ideology. Japan’s annexation of Korea in 1910 laid the foundations for the North Korean production system and economic growth, but also instigated a pattern of variegated development which has continued to influence the North’s economic strategy in the postcolonial period and beyond. Although Japan governed Korea as one administrative unit, it imposed a practical economic division on the colony due its emphasis on the development of agriculture in the southern half of the Peninsula, whilst concentrating development efforts in the northern half on the exploitation of its rich natural resources (including coal, ferrous and non-ferrous metals, and non-metallic resources); the build-up of heavy industry; and hydro-electric power. Moreover, integration into the Japanese

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colonial economic system meant that while northern Korea’s heavy industry reached a relatively advanced level, it was unable to develop light industries such as textiles or machine tools that might threaten competition with Japanese manufactures. The economy of northern Korea was dependent upon Japanese markets to give it viability, with raw materials, semi-finished manufactures and war goods imported from Korea for finishing in Japanese plants. Imbalances in the development of the north and south were also matched by imbalances in the northern economy itself. The interior of the north of Korea remained underdeveloped compared with its coastal regions which were connected by sea to the Japanese imperial economic network, and the construction by the Japanese of railway lines mainly running north-south hindered the integration of the east and west coasts. The Japanese colonial period has been described as leading to the ‘malfor-mation’ of the North Korean economy, and these problems of development were further compounded by the break-up of the Japanese empire after the end of World War II, which was to deprive the newly independent states of both North and South Korea of Japanese management expertise and their traditional Japanese markets.2 Thus, in the post-war period, and despite its close relations with the USSR and China, North Korea needs to be viewed within the same context as other ex-colonies and developing nations in Asia and Africa, in that its economic strategy has been to strive to overcome the effects of colonial rule and achieve growth independently of the major regional powers, but also that it has been obliged to do so with a largely resource-based economy and faced with shortages of capital and technology. In turn, these shared economic problems and characteristics have led North Korea to stress economic links with developing nations in the Third World and the Nonaligned Movement, and the need for South-South cooperation.3 But having noted the influence of the developing world on North Korea’s production structure, the impact of socialism is also undeniable. The DPRK was founded under Soviet tutelage in 1948 and placed firmly within the socialist economic sphere. This ensured the continued severance of economic links with Japan and economic displacement from South Korea, as both states had been incorporated into the US’s opposing economic sphere in East Asia. The physical, economic, and ideological division of the Peninsula impacted heavily upon North Korea’s development strategy. NorthSouth rivalry and Pyongyang’s desire to demonstrate its military and economic prowess to Seoul has resulted in its devoting ever greater proportions of total government expenditure to its military (reaching over 20 per cent by the 1990s) and to massive civil construction projects, both of which have had the effect of directing resources away from productive investment and placing greater strain on the economy.4 For example, the North is reported to have spent US$4.5 billion to build facilities for the 1989 Thirteenth World Festival of Youth and Students, and US$128 million on a 105-storey hotel in Pyongyang which has stood empty as a monumental ‘white elephant’ since the completion of its exterior in 1989.5 As a socialist state, North Korea followed the expected path of development based on a centrally planned economy and close links with the USSR, China, and the rest of the communist bloc. But in contrast to the examples of more developed socialist states such as the USSR, East Germany, and Czechoslovakia, North Korea’s background as an ex-

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colony means that its economic strategy has to be termed more as the ‘socialism of a developing nation’.6 The closest comparison to North Korea’s style of socialism was perhaps Ceausescu’s Romania, which had sought through the application of technology and labour in heavy industry to raise income per capita, diversify the production base, and produce independently key industrial products. Furthermore, in a similar fashion to Romania, the political and economic system of North Korea encouraged an ideology and rhetoric of economic development which eschewed dependence on outside powers. As North Korea’s Nodong Shinmun stated in 1963: Economic independence is the basis of political independence. Economic dependence on foreign forces entails political dependence on those forces. Economic subordination leads to political subordination.7 For North Korea this ideology of independent development has crystallised in the form of juche. First enunciated by Kim Il Sung in the 1950s, juche had risen to become the main ideological prop of the regime by the 1960s, with its emphasis upon independence, selfreliance, and self-defence. Juche gained strength during the Sino-Soviet split due to North Korean fears about the reliability of both the USSR and China as political and economic partners, and has given a particular stamp to the North Korean production system because it has strengthened the drive for independent economic development often at the cost of practical economic management. In reality, the North has not always been able to practice juche beyond the rhetorical level, and has relied economically on the USSR and China. But juche’s influence in providing resilience as well as rigidity to the North Korean production system should not be underestimated. Economic plans Following the imperative to achieve economic development independently and along socialist lines, the North Korean regime embarked on the creation of a command economy in the post-colonial period. The nationalisation of industry and collectivisation of agriculture were both officially declared to be completed in 1958.8 North Korea also undertook a series of economic plans, marked by an emphasis upon rapid economic growth and high state investment in producer and capital goods, compared with a relatively low priority for consumer goods. Kim Il Sung stated publicly in 1969 that annual growth rates of 6 to 7 per cent were sustainable under the socialist system, and it is estimated that from 1949 to 1969 between 44 and 67 per cent of total state investment was in industry, and out of that amount between 64 and 93 per cent was in heavy industry.9 Investment in industry has remained high, with 63.4 per cent of total government expenditure in this sector in 1984, and 67.4 per cent in 1994.10 By contrast, investment in agriculture between 1949 and 1969 was only 9 to 20 per cent of government expenditure.11 North Korean figures for the results of the economic plans are provided in Table 4.1, and most commentators agree that through to the completion of the Seven-Year Plan the North did manage to establish a production system which allowed it to recover to some extent from the colonial and Korean War periods. The structural transformation of the

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North Korean economy was shown by the fact that by 1965 industry and agriculture accounted for 64.2 and 18.3 per cent of national income respectively—a virtual reversal of their immediate post-independence positions.12 The North had also built up considerable heavy industries in the areas of coal mining, electrical power, iron and steel, non-ferrous metals, chemicals, and synthetic fibres.13 Rapid industrialisation enabled North Korea to manufacture most industrial products domestically, to export products such as ships to other countries in the communist bloc, and also to carry out ambitious civil engineering projects, such as the Nampo Lock Gates which connect Suchon and Pyongyang. The North Korean regime also showed considerable ingenuity in overcoming the problems of industrialisation that it encountered in this period; for instance, developing chemical fibres to make

Table 4.1 Official North Korean figures for industrial output during economic plans Economic Target for Actual average Target factor Actual factor plan average annual annual increase of increase of increase increase in in industrial over standard over standard industrial output output (%) year year (%) Post-War .. 41.7 2.6 2.8 Recovery Three-Year Plan (1954– 56) Five-Year .. 36.6 2.6 3.5 Plan (1957– 60) Seven-Year 18.0 12.8 3.2 3.3 Plan (1961– 70) Six-Year Plan 14.0 16.3 2.2 2.5 (1971–76) Second 12.1 12.2 2.2 2.2 Seven-Year Plan (1978– 84) Third Seven10.0 N/A 1.9 N/A Year Plan (1987–93) Sources: Compiled from Chung (1974, pp. 163–7); Komaki (1986, p. 99); Tamaki (1995, p. 52). up for shortages in the domestic supply of raw materials for textiles. The breakneck pace of industrialisation also wrought changes in North Korean society. In 1953 only 17.7 per

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cent of the population was concentrated in urban areas, but by 1965 this figure had risen to 47.5 per cent and North Korea was well on the way to becoming an urban society.14 Income was reported to have reached US$2,200 by 1982 (although other non-North Korean sources generally put it at around US$1,000), and the North also had established an eleven-year system of free education, and a national system of free medical care.15 Hence, the economic development achievements of the North Korean regime in this period should not be belittled, and especially when viewed against the background of the difficulties imposed by colonialism and the devastation of the Korean War. At the same time, though, it is clear that by the time of its completion the Seven-Year Plan encountered and even enhanced a number of structural problems which have continued to plague the North Korean economy until the contemporary period. The fact of the plan’s extension by three years to 1970, and its designation of this year as a buffer year before the announcement of a new Six-Year Plan in 1971, raises doubts about the true extent of its success. In addition, although the actual factor increase for industrial output exceeded the target figure, the actual average annual increase of 12.8 per cent was well below the target figure of 18 per cent—suggestive of a slow-down in economic growth. Agricultural production is also believed to have begun to fall with no results announced at the end of the plan for meeting target factor increases. Finally, this is the period when North Korea stopped the consistent reporting of interim figures for plans, probably to mask embarrassing shortfalls in meeting targets.16 The reasons for the failings of the Seven-Year Plan seem to have been threefold. Firstly, high levels of growth in the North Korean economy until the 1960s resulted from the rapid development of under-utilised resources through the application of labour, raw materials, and basic technology. However, once this initial period of slack in the economy had been taken up, high levels of growth proved hard to sustain due to the small size of the overall economy and available labour supply in a country of only 22 million people. The only way for the North to overcome these problems is believed to be inputs of higher levels of capital and technology. But even though the regime has arguably recognised and tried to correct these problems in successive economic plans, it has been hampered, in the same way as other developing nations, by a chronic lack of the foreign currency necessary to purchase foreign capital and technology. Secondly, changes in the international political environment, most notably the intensification of the Vietnam War and the Sino-Soviet split, led North Korea to divert valuable resources needed for economic growth to its military budget. Thirdly, there were increasing signs during the Seven-Year Plan of the North’s mismanagement of the economy, manifested in overly dogmatic juche ideology, the eschewing of economic cooperation with non-socialist nations, and the promotion of heavy industry and growth rates as symbols of national progress at the expense of a balanced economy. An attempt to deal with the structural problems uncovered by the Seven-Year Plan became the theme of the Six-Year Plan of 1971–76.17 The plan focused on consolidation, the correction of structural imbalances, the promotion of agriculture, and the use of technology to overcome bottlenecks in the production system. The North also took its first steps towards economic liberalisation and breaking out of its isolation by importing large amounts of advanced technology from the non-communist world. The course of this trade is examined in more detail in the section on trade, but at this point it is important to

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note that North Korea under the Six-Year Plan nearly doubled the value of its foreign trade from US$696 million in 1970 to US$1,261 million in 1973, that the majority of this increase was accounted for by technology imports from Western Europe and Japan, and that for the first time the North’s trade with capitalist countries came to rival that with the socialist bloc. The results of the Six-Year Plan were varied. According to official announcements the plan was completed one year and four months ahead of schedule. But in part this was a result of a seventy-day production ‘speed battle’ towards the end of the plan which contributed to the long-term exhaustion of labour and the existing supply of plant. Another long-term economic problem was created for the North due to its failure to repay debts incurred from running a major deficit in Western imports of technology. North Korea lacked hard currency due to a decline in prices for its principal export commodities following the oil shocks, and by 1975 had defaulted on its loan repayments, which subsequently cut off supplies of vital Western credit and technology required for economic expansion.18 The debt problem, as will be explained later, has continued to be a major drag on North Korean economic development in the contemporary period. The response of the regime to the seeming shortcomings of the Six-Year Plan was to designate 1977 as a buffer year, and to prepare a Second Seven-Year Plan for 1978–84. North Korean interim figures stated that the plan’s targets had as usual been overfulfilled, but outside commentators note that most figures for the plan were disjointed and that Kim Il Sung omitted any announcement of its success in his January 1985 New Year address. Komaki Teruo has also argued that the average annual increase in industrial output was lower than official figures suggest, and that again the agricultural sector seems to have under-performed (Table 4.2).19 The problems of the Second Seven-Year Plan explain the designation of 1985 and 1986 as years of adjustment, and it was not until October 1986 that North Korea unveiled a Third Seven Year Economic Plan for 1987–93. This plan returned to attempts to solve the structural problems of the economy, with a stress upon the introduction of new technology, an improvement in production capacity, and meeting the needs of consumers for food, clothing, shelter, and higher living standards (Table 4.3). Increasingly erratic official economic statistics make the success of the plan difficult to judge, but the stunning announcement of the KWP Committee on 8 December 1993 that it had been ‘impossible to fulfil the Third Seven-Year Plan as scheduled,’ and Kim Il Sung’s

Table 4.2 Targets and results for the Second Seven-Year Plan (1978–84) Item Target Attainment (%) Estimate of actual (1977=100) attainment* Average annual increase in 12.1 12.2 10.3 industrial output (%) Factor increase in industrial 2.2 2.2 N/A output over standard year 56–60 178 50 Electricity (billion kilowatts) Coal (million tons) 70–80 150 70 185 6.1 Steel (million tons) 7.4–

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8.0 Non-ferrous metal ores (million 1 tons) 5 Machinery (million tons) Chemical fertilisers (million 5 tons) Cement (million tons) 12–13 Textiles (million metres) 80

113

N/A

N/A

230 156

N/A 4.7

178 145

12 80

Sources: Compiled from Komaki (1986, pp. 108–9); Economist Intelligence Unit, Quarterly Review: China and North Korea, no. 2, 1985, p. 31.

Note *Estimates by Komaki. avoidance of reference to specific achievements of the plan in his 1994 New Year address, all indicate its overall failure.20 Indeed, North Korea’s admission of economic difficulties under the Third Seven-Year Plan really seems to have been a forewarning of the fact that its production system was now bumping up against the limits of growth possible under central planning, and of a lurch towards general economic crisis and possibly even collapse from the early 1990s onwards. The failure of the Third Seven-Year Plan can be accounted for by the same problems of shortages of capital and technology and an over-concentration on producer versus consumer goods which had been identified as far back as the 1970s and the first Seven-Year Plan. However, the Pyongyang regime was unable to rectify these problems, partly due to juche ideology, which maintained an emphasis on heavy industry, and partly due to its continued isolation from Western sources of capital and technology as a result of the mounting debt problem—estimated to be around US$6 billion by 1989. Economic isolation from the capitalist world was then made even more significant by the collapse of the communist bloc and its main markets towards the end of the Third Seven-Year Plan. The move by both the USSR and China to a hard currency basis for trade with North Korea in 1990 and 1991 has already been mentioned in Chapter 3, and these new terms of trade were especially severe for the North because of its reliance on both for oil supplies. Moreover, for the North the collapse of communism and isolation from the West has meant also a deterioration in its security environment, to which it has responded by maintaining crippling high levels of defence spending at around 20 per cent of GNP. The consequence of this has been that the North Korean military-industrial complex has further distorted

Table 4.3 Targets for the Third Seven-Year Plan (1987–93) and estimates of attainment by North Korean and South Korean sources Item Target North Korean North Korean South Korean figure figures for figures for estimates of attainment attainment attainment reached by the end reached by the end figures by 1994 of 1988 of 1990

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Average annual increase in industrial output (%) Factor increase in industrial output over standard year Electricity (billion kilowatts) Coal (million tons) Steel (million tons) Non-ferrous metal ores (million tons) Factor increase in machinery Chemical fertilisers (million tons) Cement (million tons) Textiles (million metres) Factor increase in agricultural output Tideland reclamation (thousand hectares) Grain (million tons) Rice (million tons) Marine products (million tons)

114

10

N/A

N/A

N/A

1.9

N/A

N/A

N/A

100

54

56.4

24.7

120

83

87

29.2

10

6.9

7.12

5.98

17

N/A

N/A

4.9

2.5

N/A

N/A

N/A

7.2

N/A

5.82

3.51

22

13

13.9

12.0

150

85

88

68

1.4

N/A

N/A

N/A

300

N/A

N/A

N/A

15

N/A

9.1–10

N/A

7

N/A

N/A

N/A

11

N/A

4

N/A

Sources: Compiled from Komaki (1988, p. 62); Economist Intelligence Unit, Economist Intelligence Unit, Country Report: South Korea and North Korea, 1st Quarter 1994, p. 38; Tamaki (1995, pp. 58, 62). economic planning, with the military reported to have acquired its own farms in the fertile Ryongyon region, to have priority for power and raw material supplies, and to possess an economic bureau to deal with external arms sales.21

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The economic crisis engendered by the failure of the Third Seven-Year Plan began to become clear as foreigners visiting Pyongyang reported severe energy shortages and a general slowdown in economic activity in the early 1990s.22 South Korean sources given in Table 4.4 also estimate that from 1990 the North Korean economy was contracting annually at the rate of around minus 5 per cent. The critical state of North Korea’s production system has been made most apparent by the failure of agriculture. Initial signs of weakness came with flood damage to harvests in the North in 1989 and appeals for food aid to Thailand and Indonesia in 1991.23 Heavy flooding in 1995 and 1996 impacted even harder on the North’s agricultural sector, wiping out between a third and a half of its 8 million ton grain harvest, according to North Korean statistics.24

Table 4.4 Annual growth rates in North Korea by sector according to South Korean sources (%) 1990 1991 1992 1993 1994 1995 GNP –3.7 –5.2 –7.6 –4.5 –1.7 –4.5 Agriculture, forestry and fishing –10.2 2.8 –2.7 –7.6 2.7 –10.5 –8.5 –6.8 –6.1 –7.2 –5.5 –2.3 Mining Manufacturing –1.5 –13.4 –17.8 –1.9 –3.8 –5.3 Light industry N/A N/A –7.3 5.0 –0.1 –4.0 N/A N/A –21.0 –4.2 –5.2 –5.9 Heavy industry –2.2 –4.5 –5.7 –8.7 4.2 0.1 Electricity, gas and water Construction 5.9 –3.4 –2.1 –9.7 –26.9 –3.2 Services 0.3 2.5 0.8 1.2 2.2 1.5 Source: Economist Intelligence Unit, Country Report: South Korea and North Korea, 3rd Quarter 1995, p. 49; Kannihonkai Keizai Kenkyūjo (1996, pp. 252–3). The controversy about the extent of food shortages in the North and whether its military has hoarded food stocks has already been discussed in Chapter 3. But the North’s constant requests for food aid since 1995, along with the regular reports of the UN World Food Programme (WFP), NGO groups, and the investigations of a special US food assessment team in October 1997, have confirmed the decline of North Korean agriculture and famine conditions for many of the North’s citizens. The problems of agriculture can in part be attributed to poor luck with natural disasters, but they are also the result of errors in central planning and manmade disasters. Hence, despite UN Food and Agriculture Organisation (FAO) estimates that North Korean grain production could not exceed 10 million tons, since the 1970s the North has pushed the physical limits of agriculture by rigid adherence to collectivisation, and the ever-greater application of chemical fertilisers and terracing.25 The end result of this has been over-cultivation, deforestation, and soil erosion, all of which exacerbated the flood damage of 1995–96. Vulnerability of the North Korean production system The above examination of the parlous state of the North Korean production system in the

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contemporary period reinforces the explanation given in Chapter 3 of North Korea’s security behaviour during the nuclear crisis as driven by economic desperation, and also reveals the levels and areas of vulnerability which might be susceptible to direct and indirect economic power. North Korea’s juche ideology and efforts to avoid apparent interdependence with other states mean that it may have lower levels of vulnerability than other states more integrated into the regional and international economy. Thus, the North Korean production system has demonstrated remarkable resilience, with its ability to withstand the termination of economic links with Japan after World War II, economic isolation from South Korea during the Cold War, the pressures of the Sino-Soviet split in the 1960s, the debt problems and deterioration of economic contacts with the West in the mid-1970s, and even the loss of its privileged access to the socialist economic sphere in the early 1990s. North Korean resilience has meant that, like the other small, surviving socialist state of Cuba, it has overcome a series of economic shocks and continues to defy the expectations of those who have predicted its demise after the Cold War. The exercise of adjustment for North Korea appears to have been harder due to its seeming lack of stockpiled resources for anything other than military use. Furthermore, substitution has not always been possible, and the North was forced to compromise its juche ideology by its reliance on the USSR and China for many key economic resources. The North, though, has also exercised a measure of substitution by producing certain types of machine tools independently; the development of chemical fibres to make up for scare natural raw materials; and the completion of major construction projects despite the cessation of outside assistance after the end of the Cold War. North Korea was first obliged to exercise availability and seek closer economic ties with the communist bloc because of the closure to it of markets in the West. But following the collapse of communism and the imposition of harsher terms of trade with its neighbours, the North has sought new availability by forging links with other ‘rouge’ states such as Cuba, Syria, Libya, and Iran. But despite North Korean efforts to insulate its economy from outside pressures, the problems it has faced in the 1990s have made it clear not only to outside commentators but also to the Pyongyang regime itself that the limits of vulnerability have now been reached. The consequence is that the regime has been compelled to consider policies to reconstruct the production system, and which entail the opening of the economy to the outside world, the attraction of foreign investment, and interdependent economic relations—all of which could allow Japanese economic power to function for security ends. TRADP, Rajin-Sonbong FETZ, North-South economic contacts Following its first unsuccessful attempt to correct structural deficiencies in the production system by the import of Western technology under the Six-Year Plan in the 1970s, North Korea’s second set of limited economic reform measures came with the announcement on 8 September 1984 of a Law on Joint Ventures designed to attract foreign investment. The law met with some immediate success, such as the agreement between a French company and the North Korean government to construct a 105-storey hotel in Pyongyang. But on

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the whole the law failed to attract large volumes of foreign investment, and as of 1991 over 75 per cent of all projects contracted under the law were small-scale enterprises run by North Korean residents in Japan.26 The significance of the Law on Joint Ventures was that it marked early North Korean recognition of the need for foreign investment and economic restructuring, but the third and most important set of reforms had to wait until the end of the Cold War and the regime’s interest in the creation of free economic zones (FEZ) and economic contacts with South Korea. The fluidity in Northeast Asian political and security relations, described in Chapter 3, also produced economic fluidity and hopes for deeper interdependence between the production systems of the Russian Far East, China, South Korea, North Korea, and Japan. On a greater regional scale, economic interdependency has been manifested in the emergence of APEC and EAEC, and on a subregional scale by growth-triangle concepts such as the Sea of Japan Rim grouping (Japan, China, the Korean Peninsula, and Russian Far East); the Yellow Sea Economic Cooperation Zone (China, the Korean Peninsula, and Japan); and the Bohai Economic Zone (Northeast China and the Korean Peninsula). The Tumen River Area Development Programme (TRADP), though, is the concept which has attracted North Korea’s interest and which offers the greatest likelihood of its gradual integration into the subregional economy.27 The basic economic rationale of the TRADP is to utilise the Tumen River delta’s unique geographical position as the point of convergence for the land borders of the Russian Far East, Northeast China, and North Korea, and to create a FEZ which promotes economic linkages and growth not only amongst these economies but also more widely between the Sea of Japan and the Northeast Asian hinterland including Mongolia. The project in theory promises to generate a market of 300 million people with a total GNP of US$3 trillion (incorporating the Russian Far East, Northeast China, Mongolia, North and South Korea, and Japan), and to exploit effectively the economic complementarities of the region.28 For example, economic synergy might be expected to result from combining abundant Russian energy resources, Chinese labour, and Mongolian and North Korean raw material endowments with Japanese and South Korean management skills and capital (Table 4.5).29 The TRADP concept originated at the First Northeast Asia Economic Forum held in Changchun, Jilin Province, China, and attended by representatives from China, Japan, the USSR, the US, Mongolia, and North and South Korea, at which the Chinese delegation proposed the creation of a ‘Tumen River Golden Triangle’ of development. The idea was subsequently taken up by the United Nations Development Programme (UNDP) which produced at its October 1991 Northeast Asia Regional Co-ordination Meeting an ambitious master plan for TRADP. This consisted of US$30 billion in investment over a twenty-year period; the creation of a UN ‘international city’ to link together FEZs at Rajin (North Korea), Hunchun (China), and Posyet (Russia) to form a 1,000 square kilometre Tumen River Economic Zone (TREZ) small development triangle; and, to support the TREZ, a larger 10,000 square kilometre Northeast Asia Regional Development Area (NEARDA) triangle centred on Chongjin (North Korea), Yanji (China), and Vladivostok/Nakhodka (Russia). A Programme Management Committee (PMC) to study the feasibility and guide the preparation of the project was also established at this time by Chinese, Mongolian, and North and South Korean delegates,

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with Russia later joining as a full member and Japan and the ADB as observers in February 1992. In the meantime, the USSR established the Nakhodka FEZ in July 1990, North Korea the Rajin

Table 4.5 The mutually complementary economic resources of Northeast Asian states and regions involved in TRADP States/regions Positive factor endowments Negative factor endowments Japan Capital savings; advanced Shortages of labour, energy, and technology; vanguard industrial industrial resources; products; management insufficiencies in agricultural experience products Russian Far Forest, non-ferrous metal ore, Shortages of capital, management East aquatic oil, gas, coal resources; experience, labour, agricultural heavy and chemical industries and light industrial products (steel and fertilisers) Northeast Agricultural products (maize, Shortages of capital, advanced China soya beans, meat, fruit); textile technology, management industrial products; oil, coal and experience and mineral resources; building material resources; weak infrastructure surplus labour North Korea Mineral resources; metal ores; Shortages of capital, technology, simple processed products; management experience, energy, heavy industrial commodities; light industrial and agricultural disciplined labour commodities; poor communications South Korea Surplus capital; advanced Shortages of labour, energy and technology; vanguard industrial industrial resources; products insufficiencies in agricultural products Mongolia Animal husbandry; mineral ores Shortages of capital, technology, light industrial commodities, agricultural products; poor communications with rest of Northeast Asia Source: Adapted from Hwang (1993, p. 299). FETZ in December 1991 (later extended to become the Rajin-Sonbong FETZ in September 1993), and China the Hunchun Border Economic Cooperation Zone in October 1992 (Map 2). A series of six PMC meetings was held between February 1992 and December 1995. At PMC III in May 1993 the riparian states agreed to lease land for the TREZ to be administered by a jointly owned Tumen River Development Corporation, but by PMC IV in July 1994 this plan along with the UNDP master plan had been abandoned due to legal difficulties involved with leasing sovereign territory and problems in raising the

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necessary finance. PMC V focused instead on harmonising the separate FEZs, with the establishment of a Coordinating Committee to promote cooperation on investment, trade, and infrastructure between the participating countries, and the signing of a Memorandum of Understanding on Environmental Principles. In April 1996 a Tumen River Secretariat was established in Beijing to manage the project. The TRADP has, therefore, reached the enactment stage, but clearly is not without problems. There are concerns about its environmental impact on the pristine Tumen valley in the Khasan area of Russia; and the economic priorities of states lie elsewhere, as Russia concentrates on the development of existing infrastructure in Vladivostok, and China on its southern provinces and the Three Gorges dam.30 But the relative disinterest of some participatory members in the TRADP and its economic shortcomings have been compounded above all by political problems—centre-local and inter-state. Some of the strongest proponents of FEZs and the TRADP have been local governments in China and the Russian Far East which stand to gain the most economically from regional integration, but their economic cooperation efforts have been frustrated by central governments fearful of the effect that open regionalisation could have on centre-local relations. For instance, the Duma in Moscow, anxious about the Russian Far East’s economic gravitation towards other states in Northeast Asia and the implications for political separatism, rescinded the tax privileges of the Nakhodka FEZ in 1993. Interstate rivalries also obstruct economic integration, shown by Russia’s unease that Chinese interest in the TRADP is motivated by the desire to capture the markets and resources of its Far East provinces, and the fact that Russia, China, and North Korea still guard their sovereignty to the degree that they were prepared to scrap the idea of the TREZ.31 Hence, it appears that the key to unlocking the latent economic complementarities of the TRADP and Northeast Asia is the removal by the governments concerned of the political barriers to economic interaction and private sector investment. Nevertheless, in spite of these problems for the TRADP, North Korea has been, perhaps along with Mongolia, the most enthusiastic supporter of the project. A mark of the North’s enthusiasm was that it stayed involved in negotiations for the project even at the height of the nuclear crisis, and it has been a full partner in the PMC.32 In turn, the experience of the TRADP and knowledge of the success of China’s SEZs have spurred on North Korea’s own FETZ projects.33 The Rajin-Sonbong FETZ, including the free port of Chongjin, covers 746 square kilometres, and to support its creation a new joint ventures law was introduced in October 1992. This law allowed 100 per cent foreign ownership of enterprises within the FETZ; and set taxes at 25 per cent outside the FETZ, and 14 per cent inside the zone, with no custom duties, and a three-year tax holiday on profits from new investments, rising to 50 per cent after this period. North Korea also introduced in November 1993 laws on land leasing, foreign bank investments, and foreigners entering and leaving the FETZ.34 The Rajin-Sonbong FETZ has had some initial success in attracting foreign investment and technology. In late 1994, the president of the Osaka-based Kyōsei Steel visited North Korea to investigate a possible pipe-welding joint venture in the FETZ, and reported afterwards to Japan’s Ministry for International Trade and Industry (MITI).35 In 1995, following a relaxation of US regulations on investment in North Korea, the US company Stanton Oil was reported to have taken over the Unggi oil refinery in the Rajin-Sonbong

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area which had been used formerly to process oil imports from the USSR and then Russia. The ING-North East Asia Bank was formed in the FETZ in January 1995 as a joint venture between the Dutch bank Internationale Nederlanden Greop and the North’s Korean Foreign Insurance Company, with a modest capital of US$15 million. In January 1996, North Korea attracted its first major multinational company to the FETZ after signing a deal with Shell for a fifty-year lease on a 1.7 hectare site in Sonbong to build facilities for the stockpiling of 100,000 tons of oil.36 North Korean economic officials have also participated in seminars in the US, Russia, Hong Kong, and Japan in order to explain the investment opportunities of the FETZ, and sponsored jointly with the UNDP investment forums exclusively for the FETZ in Beijing in September 1995 and in Rajin-Sonbong itself in September 1996. The latter attracted around 550 delegates from twenty-six different countries, and according to North Korean official claims secured eight projects worth a total of US$285 million. These projects included the Emperor Group of Hong Kong’s promise to construct a US$180 million five-star hotel and casino; a US$50 million hospital in Pyongyang to be financed by North Koreans resident in Japan; and a US$5 million motorcycle plant run by China’s Yantai Motorcycle Company.37 However, the September 1996 investment forum was adjudged to be a failure by many of those who attended. North Korea was acknowledged to have made some progress in adapting to international business practices, but it was still seen to lack the sufficient infrastructure and depth of economic reforms to attract large amounts of investments. The speculation was that the motivation for investments from Hong Kong may have been based less on a strict evaluation of the commercial benefits of the FETZ and more on mainland Chinese influence which wished to see investment in order to prevent the collapse of its neighbour and make a quiet contribution to the ‘soft-landing’ policy.38 Moreover, political factors again played a role in restricting investments by private sectors companies, as South Korean TNC chaebols were forced to boycott the forum due to a dispute between the governments of North and South over the numbers allowed to attend, and, for reasons explained later in this section and Chapter 5, the representatives of major Japanese corporations took part in the forum but refrained from making investments.39 Hence, by late 1997 a number of investments agreed at the forum had failed to materialise in contract form and total investment carried out still stood at only US$32 million.40 The Rajin-Sonbong FETZ is still a long way from being a success, but it does demonstrate that North Korea is serious about making adjustments and limited reforms to its production system based on external economic exchange, and this policy is also made clear by its experimenting with the improvement of economic contacts with South Korea. Cold War confrontation restricted economic contacts in the past, with only occasional instances of cooperation such as the provision of rice aid by the North to the South following flooding in 1984. But Chapter 3 has already shown that as the Cold War drew to a close Seoul began to seek to engage Pyongyang economically, and the North’s regime responded by seeking to increase bilateral trade and investment. Chung Yu Jung, the founder of Hyundai, was the first to take advantage of North-South political rapprochement by visiting his ancestral homeland in January 1989, and this was followed by the visit of Daewoo’s chairman to the North in January 1992 in order to initiate joint

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ventures in light manufacturing. The other chaebols, Samsung and Lucky Goldstar, soon followed Hyundai’s and Daewoo’s lead with the result that inter-Korean trade rose from virtually zero in 1988 to a total of US$287 million in 1995, making the South the North’s third largest trading partner.41 The balance has been heavily in the North’s favour, as it exports raw materials, steel and metal products, in return for imports of machinery and chemicals. Furthermore, despite the nuclear and other security crises, the chaebols have continued to press the South Korean government to allow access to the North, and under the Kim Dae Jung administration’s ‘sunshine’ policy are reported to be planning new investment projects, including Hyundai’s development of Mount Kumgang as a tourist destination, a Samsung telecommunications centre in the Rajin-Sonbong FETZ, a Lucky Goldstar colour television plant, and a Daewoo appliance assembly plant in the Nampo trading estate. These investments are small in scale, but point to economic complementarities and the growth of interdependence between North and South, and show how private sector economic actors can spearhead South Korean efforts to stabilise bilateral economic and political relations.42 However, the main problems for North-South economic cooperation and flows of TNC investment, as with the case of the TRADP and FETZ, remain political: demonstrated by the South’s refusal to let its chaebols attend the September 1996 investment forum and the stoppage of economic contacts following the submarine incident later in the same month. To summarise, North Korea has persevered with joint ventures laws, FEZs, and NorthSouth cooperation as means to liberalise and resuscitate its troubled production system. The reforms should not yet be taken as evidence of fundamental change in economic policy because they are still limited and defensive in nature, with the Rajin-Sonbong FETZ designed as an even stricter version of a Chinese SEZ and to filter out from the external investment and technology that the North requires those other foreign economic and political forces which threaten the regime’s totalitarian control. But nevertheless North Korea’s conspicuous need for investment and technology indicates an area where Japanese economic power could be set to work for security ends. Japanese FDI and the North Korean production system Japanese technology and investment were crucial factors in the economic development of the Korean Peninsula during the colonial period, and, as Bruce Cumings notes, even though it may pain Korean nationalists to hear it, they were again important for South Korea’s economic take-off in the 1960s.43 Moreover, North Korea’s developing nation characteristics should mean that it is amenable to the same type of economic development and integration that has been sponsored by Japan across the whole of Asia in the post-War era. The likelihood is, then, that Japanese investment and FDI will again in the contemporary period and in the future prove indispensable for the reform of the North Korean economy and development of the Korean Peninsula. However, this time it is also clear that Japan has to take a secondary position to South Korea, and the hope is that it will use its economic power to realise more balanced growth. As already described, Japan has been one of the main targets of the North’s strategy to acquire Western technology and investment ever since the Six-Year Plan in the 1970s. Japan-North Korea trade increased substantially in this period, but North Korea’s

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subsequent default on loan payments for the import of Japanese technology put a halt to Japanese private sector plans for business in the North and has continued to deter Japanese enterprises from dealing with the North into the contemporary period. Japan was again identified as a candidate for the attraction of external investment after North Korea announced the Law on Joint Ventures in 1984. A few projects were initiated, with reports in September 1986 that a joint venture had been established by North Koreans resident in Japan to develop a gold mine at Unsan backed by the Mitsui general trading company (sōgōshōsha); that the Chairman of Nankai Railways had visited the North to discuss investment prospects in June 1987; and that an Osaka-based company had established a cement factory in the North in December 1990.44 The debt problem, though, ensured that only minimal Japanese investment reached North Korea in this period. Instead, the majority of projects were under the guidance of North Koreans resident in Japan and Chōsensōren loyalists, leading to a process of the Chōchōka, or ‘Koreanisation’, of Japan-North Korea trade since the 1970s. The Law on Joint Ventures of 1984 contained a specific provision for investments by the North Korean community in Japan, known as Chōchōgappei jigyō. Small ventures did emerge such as a coffee shop and a department store set up in November 1984 and February 1985 for foreign visitors to Pyongyang. In February 1986, Kim Il Sung called for larger investments by the North Korean community in Japan, leading to the establishment by the Chōsensōren of the Korea International Joint Venture Trading Company and Korea Joint Venture Bank in 1989 in order to finance joint ventures. The Law on Joint Ventures created in total around 110 Chōsensōren-affiliated enterprises which have made a positive contribution to the restructuring of the North Korean economy.45 To some extent their impact has been moderated by their small scale and the temptation of the Pyongyang regime to use them as a device simply to wring money out of its loyal compatriots in Japan. Moreover, in areas where the North Korean production system could be competitive, such as steel, there are as yet no joint ventures. But many of the enterprises seem to have served as a means to introduce good management skills into the North and do produce highly competitive products, such as the men’s suits which are exported profitably to Japan and accounted for the sharp rise in textile trade between the two countries from 1990 to 1994. Enterprises run by North Koreans resident in Japan, then, seem to be one means for private sector investment from Japan to restructure the North Korean economy and alleviate causes of economic and political instability. But arguably it is North Korea’s third reform programme and attempt to attract FDI from Japanese TNCs after the Cold War, which, although as yet unsuccessful, offers Japan the direct and indirect power to influence decisively the North’s security behaviour. As already noted, and for reasons analysed more fully in Chapter 5, Japanese TNCs have avoided making investments in the Rajin-Sonbong FETZ, and this virtual investment strike could be seen to benefit the Japanese state’s security interests by working as a negative sanction to denude North Korea’s economic and military power, and its potential security threat to Japan. Furthermore, it is clear that through the Consultative Group and Coordinating Committee for Multilateral Export Controls (COCOM) and other new legal regulations introduced in 1996, UN mandates in the event of sanctions, and simply by refusing to back actively Japanese TNC investments in the North with measures such as export credits, the Japanese government is capable of restricting the flow of Japanese private sector FDI to

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North Korea. However, Chapter 3 has already made clear that negative sanctions and economic pressure are counterproductive and serve only to exacerbate the North Korean security problem, and thus it is more likely that positive sanctions and efforts to channel FDI to assist in the creation of interdependent production relations between Japan, North Korea, and the rest of Northeast Asia will serve best the security interests of all concerned. The Japanese state, in the same way as other developed states, lacks the ability to push its TNCs into undertaking FDI projects unless they perceive obvious commercial benefits, which limits also the extent that it can offer positive FDI sanctions and mobilise direct power. Consequently, the main option open to the Japanese government is to utilise the FDI of TNCs for its security interests, but to let it work in the form of indirect power. Examination of the TRADP and chaebol investment in North Korea has demonstrated that states can promote indirect power relationships because they are able to clear away political barriers to economic cooperation, and so hold the key to unlocking economic complementarities and activating flows of private sector FDI. Moreover, this key to the exercise of indirect power is potentially within Japan’s grasp in the case of North Korea. The Japanese state has already worked in partnership with TNCs to assist in the economic development of other regions such as Southeast Asia and Southern China, and the TRADP and Rajin-Sonbong FETZ provide openings for Japanese sōgōshōsha to open up the North Korean economy and to act as the ‘informal organisers’ of the entire Northeast Asia region.46 For it is clear that even minimal inputs of Japanese management skills, technology, and FDI would be able to bind the region together and kick-start upward economic growth from its current low levels.47 Japanese interest in the development of the region is also not purely altruistic, given that many of the local governments on the relatively underdeveloped Sea of Japan coastline are as enthusiastic as their counterparts in China and Russia about the benefits of FEZs for improving their own economic situation and are prepared to commit their own resources to achieve regional integration.48 The necessary elements for Japanese indirect power to flow and to act in Japan’s security interests are, then, nearly all in place. As Nobukuni Makoto, an official of Niigata’s Economic Research Institute for Northeast Asia (ERINA) states with regard to regional integration: It will also create an opportunity to advance the causes of global development and international security, mitigating interregional income differentials and eliminating poverty as a major cause of regional conflicts. The enhanced security achieved in these ways will be substantial, but as yet remains unappreciated. For example, no serious discussions have been heard about how TREDA [Tumen River Economic Development Area] might assist Japan in achieving a desirable resolution of the DPRK’s nuclearisation policies.49 Japanese FDI can never hope to compete with investment from South Korea in the reconstruction of the North Korean production system, but if Japan is to function as a secondary engine to drive North Korean and Northeast Asian growth, the final element needed to complete the jigsaw puzzle of regional economic integration is the willingness of the Japanese state to promote private sector cooperation either by active steps to improve the inter-state political and diplomatic climate, or to at least step back and

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remove those political barriers which encumber the freer flow of private sector and local government-led economic activity. For reasons examined in Chapter 5, these political obstacles have not yet been dismantled in the case of Japan-North Korea economic relations. But still this does not detract from the recognition that Japan possesses latent indirect economic power in the component of production which could be used for the security purposes of a global civilian power.

North Korean finance Structure and vulnerability The emphasis of juche ideology upon self-reliance in economic affairs has to some extent dictated also North Korean financial policy. The levers of finance have remained firmly under the control of the North Korean state: the Central Bank aiding the implementation of government economic plans, and regulating the accounts of other banks such as the Foreign Trade Bank which handles international trade settlements.50 North Korea lacks membership of international financial institutions such as the WB or IMF, and the small size of its foreign trade meant that it was not incorporated into the USSR’s rouble bloc during the Cold War, and has remained outside any US dollar or Japanese yen dominated bloc after the Cold War. Therefore, at first sight North Korea appears to be one of the most financially isolated states in the world with low levels of dependency and vulnerability. But it is also clear that despite the North’s juche ideology it has become increasingly dependent on outside sources of finance which expose it to the operation of direct and indirect power for the security purposes of Japan and other states. The origin of North Korea’s financial dependency is the debt problem described earlier. Reliable figures for North Korea’s foreign debt are hard to find, but by 1989 North Korea was estimated to have owed in excess of US$6 billion to a mix of Western and communist bloc private banks and states (Table 4.6). The North did enter into a series of negotiations with its Western creditors between 1984 and 1988 which produced agreements to reschedule its debts. But North Korea’s chronic lack of hard currency again pushed it into default, with the result that a group of sixty Western banks is reported to be conducting court procedures in the US and Europe against North Korea to recover US$1.37 billion in debts. Recent estimates by South Korean sources even suggest that North Korea’s accumulated foreign debt may have climbed to US$ 11.5 billion, including US$4.3 billion owed to Russia, US$2.2 billion to China, US$2.3 to Western banks, and US$900 million to Japanese institutions.51 Direct financial links between North Korea and Japan were initiated with correspondent banking contracts between Mitsui Bank, Sumitomo Bank, and the Foreign Trade Bank of North Korea in 1963 and 1964. Similar agreements were later concluded between North Korea and the following Japanese financial institutions: Asahi Bank, Ashikaga Bank, Daiichikangyō Bank, Fuji Bank, Long Term Credit Bank of Japan, Mitsubishi Shintaku Bank, Sumitomo Bank, Sanwa Bank, Sakura Bank, and Tōkai Bank. The Ashikaga Bank has links with a number of other North Korean banks, including the

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Credit Bank of Korea and the Korea Chanwan Credit Bank. The debt problems also became a major irritation for Japan-North Korea bilateral economic and political relations. The MITI stopped export credits to North Korea in 1974 due to its slow pace of debt repayments, and half of the debt owed to Japan is believed to be held by Shinwa Bussan, a subsidiary of Mitsui. North Korea again conducted negotiations from the mid-1970s to the

Table 4.6 North Korea’s external debt by creditor at the end of 1989 (US$ million) Amount Date incurred Western bloc 240 1973 Morgan Grenfell (lead manager) 643 1973–74 ANZ Bank (lead manager) Japan 530 1972–75 France 227 1970–74 Former West Germany 350 1973–77 Sweden 146 1970–74 Austria 102 1971–75 Others 504 Sub-total 2,742 Communist bloc USSR 3,133 1971–89 China 903 1971–89 Sub-total 4,036 Total 6,778 Source: Economist Intelligence Unit, Country Profile: China and North Korea 1992–93, p. 89. mid-1980s on rescheduling its Japanese debts, mediated via individuals such as the LDP member Utsunomiya Tokuma, and the private Japan-Korea Trade Association and JapanNorth Korea Consultative Committee on Debt Repayments. An agreement was reached in April 1983, but following Japan’s imposition on North Korea of limited economic sanctions for the Rangoon bombing, the North retaliated by stopping all debt repayments, and has been in default ever since. In October 1986, the MITI paid Japanese companies ¥300 billion in compensation for losses incurred in trading with the North.52 The JapanNorth Korea Trade Association held new discussions with the North on the debt problem in 1990 and 1994, and agreement was at least reached that North Korea owed ¥50.22 billion in debt and ¥26.2 billion in accumulated interest.53 In 1991, the debt problem also became one of the issues at Japan-North Korea normalisation talks, but the suspension of the talks means that the debt problem remains unresolved. In terms of vulnerability, North Korea can be seen to have exercised considerable resilience in its obstinate refusal to meet its debt repayments. But the persistence of the problem and loss of access to Western and Japanese finance does impose heavy costs for the economy. If the total accumulated debt of North Korea is accepted to be US$11

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billion, this is then equivalent to over half of the North’s GNP and represents a massive burden for economic development. The outcome of this financial squeeze has been that North Korea has been obliged to exercise availability and to seek finance from alternative sources. The main alternative source of finance is the North Korean community in Japan and the cash remittances (sōkin) which became the centrepiece of US proposals to impose UN sanctions on the North during the nuclear crisis in 1994. The remittances are carried to the North from Japan in two ways. The first is the physical transfer of cash by human flows between Japan and North Korea, generally on ferry ships from ports on the Sea of Japan coast such as Niigata, and which some commentators believe may total up to ¥60 billion annually.54 The Korean emergency study group report of 1994 revealed that this figure was accepted by the MOF, but persons connected in the past with the Chōsensōren claim this figure is exaggerated.55 The second flow of remittances is by bank transfer. Individual transfers that can be traced and require the notification, although not the approval, of the Ministry of Finance (MOF) include transfers from relatives totalling over ¥5 million, investments and profits from joint ventures which exceed ¥30 million and ¥10 million respectively, and payments for trade imports. The cash transfers pass through the Japanese banking institutions listed above, and via the Chūgoku Bank in London and the Nanyōshōgyō Bank in Hong Kong, and then are passed on to the North Korea Foreign Trade Bank. The main route for transfers is the Ashikaga Bank in Tokyo, which either receives them directly from the sender in Japan before passing them to North Korea Foreign Trade Bank, or indirectly from the sender via one of the foreign exchange banks and then passes them on.56 Either way, the Ashikaga Bank is the convergence point for currency transactions with the North. Finally, the North Korean regime has been accused of extorting money from the families of relatives in North Korea, and by fraud, as in a case reported in 1993 in which to satisfy the request of Kim Il Sung ¥82 billion was taken from the Chōsensōren-associated Chūgin Osaka Shinyō Kumiai without authorisation from depositors.57 How much money is transferred by remittances or extortion from the North can never be known exactly, but it is undoubtedly a vital financial crutch for the regime. The other alternative that North Korea is believed to have been exploiting in its search for finance is the illicit economy of forgery. In June 1994, the President of the North Korean Chongwan Trading Company and the holder of a diplomatic passport was arrested in Macau for passing counterfeit US$100 bills, and in March 1996 a member of the Japanese Red Army who had sought refuge in North Korea since 1972 was arrested in Cambodia for trafficking in counterfeit dollar bills.58 Whether or not these bills really originated in North Korea, whether it has the technology to produce them, and whether those caught were acting with government approval, cannot be known, but what these reports do show is the desperation for funds of some figures connected closely to the regime and the vulnerability of the North Korean economy produced by its lack of access to foreign finance. Japanese financial power and North Korea The most obvious source of Japanese direct economic power is for the state to use the

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threat of the negative sanction of cutting off remittances to North Korea in order to influence its security behaviour. The second stage of the US sanctions plan called for the cessation of all remittances to the North, and in 1994 the Japanese government’s study group began to investigate possible means to stop the human and bank-carried transfers.59 The group’s report concluded that the government could stop physical transfers of cash to North Korea, as it possessed the legal powers to deny access to re-entrants from North Korea to Japan.60 Moreover, the Japanese government already had some experience of placing restrictions on air and sea transport to and from North Korea because of its imposition of travel sanctions on the North for the Rangoon attack between 11 November 1983 and 1 January 1985, and the South Korean airliner bombing between 26 January 1987 and 24 September 1988. The report of 1994 also investigated the effect of stopping cash remittances via banks to North Korea, but concluded that this would be a far more difficult operation even under sanctions conditions. This was because it would be hard to separate legitimate flows of finance from those going to North Korea, remittances could be rerouted via third countries, and, as its officials later admitted in 1997 in the Diet Standing Committee on Foreign Affairs, the MOF could not track multiple small-value transfers.61 However, it does appear that the MOF briefly tested the feasibility of stopping remittances in May 1994, when all dollar-based remittances from the Ashikaga Bank ceased abruptly.62 Any connection with the sanctions policy was denied by the MOF and Ashikaga Bank at the time, but it did look very much as if the Japanese state did possess the ability to stop remittances over the short term. However, the government’s exercise of financial muscle in this way was likely to encounter not only Chōsensōren opposition, but also opposition from the Japanese financial institutions. For instance, Morikawa Toshio, the Chairman of the Federation of the Bankers’ Association of Japan, commented in a speech in June 1994 at the height of the nuclear crisis that he was fearful the stoppage of remittances to North Korea would damage the Japanese banking industry as a whole.63 The evidence thus suggests that Japan does indeed dispose of the latent direct power which could be used to punish North Korea in a conflict situation, but this is not necessarily the preferred approach of Japanese policy-makers, nor is it necessarily the most effective means of Japan using its economic power for its security interests in this case. As outlined in Chapter 3, Japanese policy-makers were anxious not only about the internal security effects of stopping remittances to North Korea from loyalists in Japan, but also that cutting North Korea’s financial lifeline would serve simply to aggravate the root causes of North Korea’s nuclear brinkmanship and possibly provoke new explosive and implosive security problems. Hence, faced with the limited utility of negative financial sanctions for security purposes in anything other than a deliberate attempt to provoke total economic and political meltdown in the North with its attendant security risks, again the most advantageous use of Japanese direct power is to offer positive financial sanctions. Clearly, Japanese private financial institutions will not support the offering of positive sanctions and new loans unless North Korea shows good faith in putting its financial house in order. But this is an area where again the Japanese state has the potential to assist the flow of private sector economic interaction by taking the lead in sponsoring negotiations and an economic consortium to make a start on tackling the debt problem.

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Certainly, US$900 million is not an insubstantial sum of money and North Korea should not be allowed to renege on its promises for repayment. But the amount is small relative to the size of Japanese banking industry and government finances (even given the recent financial troubles of both), and the effort involved in rescheduling the debts is considerably cheaper than the security costs which continue to be generated by North Korea’s lack of access to foreign finance and resultant economic and political instability. Furthermore, since mid-1997 North Korea has invited WB and IMF officials to Pyongyang to explain the workings of international financial institutions, and Japan could assist in this area by offering training and expertise to the North so that it could better handle its debt problems. In turn, the Japanese state’s extension of these positive sanctions also offers long-term indirect power benefits as the return of a degree of financial trust in North Korea speeds the growth of inward FDI and economic interdependence.

North Korean trade Structure and characteristics North Korean trade, as with finance policy, is an expression of juche ideology in that it is designed to avoid over-dependence on other states. But the Pyongyang regime also acknowledges pragmatically that trade is essential to acquire the foreign currency and technology needed for economic development. Overall trade strategy has concentrated on the transformation of the North from being purely an exporter of raw materials to making it an exporter of manufactured products. In the past, North Korea was able to look to markets in the socialist bloc and in the developing world, but also has viewed the West as an important source of technology imports and a market to earn hard currency.64 Trade is controlled by the Ministry of Foreign Trade, the Ministry of External Economic Affairs, the Foreign Trade Bank, and a number of trading organisations regulated by the state. However, since the beginning of the 1990s, and especially during the recent famine, a degree of uncontrolled cross-border trade has taken place with Russia and China in foodstuffs and commodities such as second-hand cars.65 The total value of North Korean trade is small by world standards, but has risen in fits and starts from US$105.3 million in 1955, to US$771 million in 1970, to US$2 billion in 1975, and then to a reported US$5.2 billion by 1986 (Table 4.7). In terms of the direction of trade, the majority of North Korea trade was with the socialist world until the mid1980s, although there was some diversification of trade with Western countries under the Six-Year Plan in the 1970s (Table 4.8). Among the socialist nations the USSR was dominant, accounting for 80.6 per cent of total North Korean trade in 1955; 50.5 per cent in 1970, and 44.5 per cent in 1985, with the balance of trade firmly in the Soviet Union’s favour. Trade between the USSR and North Korea was promoted by trade credits and most-favoured-nation status for the latter, and a series of long-term trade agreements. China has traditionally been the North’s second most important trading partner, accounting for 9 per cent of total trade in 1955, 15 per cent in 1970, and 16.2 per cent in 1985. The North usually avoided running a deficit with China and trade was also

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governed by a series of bilateral protocols. The composition of North Korea-USSR trade changed over time, as the North began by the 1970s to supplement its exports of raw materials to the Soviet Union with manufactured products such as rolled steel, magnesite powder, and clothing. The main imports from the USSR were agricultural and industrial machinery, transport machinery, petroleum products, coal, base metals, and food, including wheat and flour. North Korean trade with China had a similar composition to that with the USSR, but with a larger proportion of imports made up from energy resources. Prior to 1955 North Korea did not trade with the non-communist world, but following the introduction of the Six-Year Plan and the aim to import advanced technology the proportion of trade with the capitalist world rose sharply to

Table 4.7 North Korea’s main trading partners for selected years between 1986– 96 (US$ millions) 1986 1988 1990 1991 1992 1993 1994 1995 1996 USSR/Russia Exports 642 887 1,047 171 65 40 40 16 N/A Imports 1,187 1,922 1,668 194 227 188 100 68 N/A Total 1,829 2,809 2,715 365 292 228 140 84 65 Balance –545 – –621 –23 –162 –148 –60 –52 N/A 1,035 China Exports 276 234 125 86 156 297 199 64 62 Imports 233 346 358 525 541 602 425 486 547 Total 509 580 483 611 697 899 624 550 609 Balance 43 –112 –234 –439 –385 –305 –226 –422 –485 Japan Exports 173 325 300 284 259 252 323 340 291 Imports 184 239 176 224 223 220 171 255 227 Total 357 564 476 508 482 472 494 595 518 Balance –11 86 124 60 36 32 152 85 64 South Korea Exports .. .. 12 106 163 178 176 223 166 Imports .. .. 1 6 11 8 18 64 77 Total .. .. 13 112 174 186 194 287 243 Balance .. .. 11 100 152 170 158 159 89 Total world trade 3,600 5,240 4,730 2,830 2,830 2,830 2,300 2,360 2,136 Total trade balance –620 – –790 –600 –450 –430 –270 –420 N/A with rest of the world 1,180 Sources: Compiled from Kannihonkai Keizai Kenkyūjo (1996, pp. 254–5); JETRO, Sekai to Nihon no Bōeki 1997, 1997, p. 252; Economist Intelligence Unit, Country Report: South Korea and North Korea, 4th Quarter, 1997, p. 51. 31.4 per cent by 1975 (Table 4.8). The fall-off in trade after 1975 is explained by the

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failure of the Six-Year Plan and the emergence of the debt problem. North Korea’s trade with the West since the 1970s has been composed mainly of exports of semi-processed raw materials, such as zinc, pig iron and metallic ores, and imports of machinery, textiles, fabrics, and foodstuffs. During the Cold War period, North Korea’s largest trading partner from the noncommunist world, and third largest trading partner overall, was Japan. Japan-North Korea trade remained in abeyance during the immediate post-colonial period. But in October 1955 three Japanese companies–—Tōhōshōkai, Tōkōbussan and Wakō Kōeki— commenced indirect trade with the North via Hong Kong and Dalian, and in June 1956 the Japan-Korea Trade Association was established to promote trade between the two countries. The Nagasaki Flag Incident led to the closure of Chinese ports to Japanese trade in 1958 and hence the cessation also of Japan-North Korea trade until June 1959.66 In April 1961, the Japanese government permitted direct trade with North Korea, and

Table 4.8 Proportion of North Korean trade by region and country 1955–85 (percentage of total North Korean trade) Socialist USSRChina Capitalist Japan Developing countries countries countries 1955 100.0 80.6 9.0 N/A N/A 1960 96.0 35.7 N/A 3.7 N/A 1965 88.9 40.4 N/A N/A N/A 1970 78.1 50.5 15.0 19.4 7.4 1975 59.5 24.5 24.4 31.4 12.8 1980 55.4 26.6 19.8 27.9 16.6 1985 70.2 44.5 16.2 20.1 14.5

N/A N/A N/A 2.5 9.1 16.7 9.7

Sources: Compiled from Chung (1974, pp. 1 10–1 1); Komaki (1988, p. 53). in November 1962 the first regular cargo shipments commenced between Japan and North Korea. July 1964 saw the signing of two trade agreements: the Agreement Between the Japan-North Korea Trade Association and the DPRK International Trade Promotion on Contacts Between Japanese and DPRK Trading Companies, and the General Conditions Covering Transactions Between Japanese and DPRK Trading Companies. These agreements were later revised in August 1965, June 1968, and September 1985. In May 1970, the first North Korean trade exhibition was held in Tokyo, and the result of these improved conditions for trade was that by 1970 bilateral trade had risen to around US$60 million annually (Table 4.9), accounting for 7.4 per cent of the North’s total trade.67 North Korea’s Six-Year Plan further stimulated bilateral trade and in particular Japanese technology exports. In March 1972, the Korea-Japan Export-Import Trading Company was set up in Tokyo, and in June of the same year the Kyōwa Bussan Trading Company was established, capitalised at ¥100 million and backed by twenty large Japanese companies, including Nippon Steel and Tōshiba. Kyōwa Bussan then became involved in joint efforts with a Danish company to set up a 3 million ton capacity cement factory in the North worth US$160 million.

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However, the debt problem of the mid-1970s also hit Japan-North Korea trade, which had reached a high of US$361 million by 1974, but then dropped off rapidly to US$168 million by 1976. North Korea from this period until the early 1980s moved into heavy deficit with Japan because of increased imports of machinery, transport equipment, synthetic fibres, plastics, textiles, and electrical machinery. In return, the North exported to Japan sulfates, wood pulp, processed zinc, magnesium, fish, and other foodstuffs. Since then, and into the post-Cold War period, the trend in the value of Japan-North Korea trade has been upwards and settled at around US$500–600 million annually, but marked by positive and negative fluctuations which reflect the ups and downs in bilateral political relations. Japan may even have become North Korea’s number one trade partner by 1995 (Table 4.7), although China seems to have reclaimed the top spot after 1996. Moreover, North Korea has been in the envious position of running a trade surplus with Japan, mainly due to the

Table 4.9 North Korea-Japan Trade 1961–96 (US$ millions) Exports to Japan Imports from Japan Total value of trade Balance of trade 1961 3.976 4.938 8.914 –0.962 1962 4.553 4.781 9.334 –0.228 1963 9.430 5.347 14.777 4.083 1964 20.231 11.284 31.515 8.947 1965 14.723 16.505 31.228 –1.782 1966 22.692 5.016 27.708 17.676 1967 29.606 6.370 35.976 23.236 1968 34.032 20.748 54.780 13.284 1969 32.186 24.159 56.345 8.027 1970 34.414 23.344 57.758 11.070 1971 30.059 28.907 58.966 1.152 1972 38.311 93.443 131.754 –55.132 1973 72.318 100.160 172.478 –27.842 1974 108.824 251.914 360.738 –143.090 1975 64.839 180.630 245.469 –115.791 1976 71.627 96.056 167.683 –24.429 1977 66.618 125.097 191.715 –58.479 1978 106.862 183.347 290.209 –76.485 1979 152.027 283.848 435.875 –131.821 1980 180.046 374.305 554.351 –194.259 1981 139.476 290.995 430.471 –151.519 1982 152.026 313.162 465.188 –161.136 1983 126.149 327.077 453.226 –200.928 1984 145.218 254.719 399.937 –109.501 1985 179.293 247.069 426.362 –67.776 1986 173.229 183.971 357.220 –10.742 1987 241.744 213.739 455.483 28.005 1988 324.649 238.883 563.532 85.766

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1989 1990 1991 1992 1993 1994 1995 1996

298.678 300.282 283.574 258.560 252.351 322.684 339.680 290.796

197.001 175.900 223.993 223.025 219.654 170.780 254.957 226.519

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495.679 476.182 507.567 481.585 472.005 493.464 594.637 517.315

101.677 124.382 59.581 35.535 32.697 151.904 84.723 64.277

Source: Tsūshōsangyōshōhen, Tsūshō Hakusho, 1964–97. expansion of North Korean exports of textiles, and high-cost agricultural products such as matsutake mushrooms (Table 4.10).68 North Korean trade vulnerability As pointed out previously, from the late 1980s onwards North Korea’s trade environment deteriorated rapidly. The move to a hard currency exchange basis for trade with the USSR in 1990 and China in 1992, and then the collapse of the Soviet Union and other communist states in Eastern Europe, all conspired

Table 4.10 Composition of Japan-North Korean trade for selected years between 1984–96 (percentage) 1986 1988 1990 1992 1994 1996 Exports to Japan Marine products 20.5 21.0 17.1 23.4 15.6 19.9 10.2 5.6 13.9 9.2 22.0 3.7 Vegetable and fruit products Raw materials 11.5 7.4 9.0 5.9 3.1 3.4 Fuels 0.4 6.9 8.4 6.8 5.9 6.6 Textile manufactures N/A 2.1 9.0 25.7 28.6 42.7 Metal products 36.8 32.1 38.0 22.4 10.6 7.9 Other products N/A 2.2 2.8 1.7 1.5 N/A Imports from Japan Textiles 7.3 7.7 15.9 27.8 39.1 33.4 Non-metallic ores 2.6 2.4 2.3 1.5 1.2 0.6 11.1 9.7 14.2 11.3 11.1 N/A Light industry products Chemical products 10.0 9.0 10.1 7.8 4.3 3.3 Metallic products 13.7 9.4 9.3 5.5 5.4 4.1 20.2 22.2 23.1 18.4 13.4 28.2 General machinery Electrical machinery 13.3 12.5 10.1 12.0 10.0 8.3 Transport machinery 12.5 8.1 5.7 7.8 8.7 11.4 2.1 1.8 1.3 1.8 0.8 1.5 Precision machinery Other products 7.0 17.3 8.2 6.1 5.8 N/A Source: Tsūshōsangyōshōhen, Tsūshō Hakusho, 1985–96.

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to deprive the North of subsidised export markets and cheap imports of strategic commodities such as oil. The calamitous effect on trade is recorded in Table 4.7, with North Korea-USSR/Russia trade plummeting from US$2.7 billion in 1990, to US$365 million in 1991, and then to US$65 million by 1996. North Korea has certainly exercised considerable resilience in the face of these economic shocks and has sought to exercise availability in order to find new trade partners. In the same way as the component of finance, the regime in desperation seems to have experimented with the illicit economy of smuggling and narcotics. Reports in December 1985 revealed an operation in which North Korean embassy officials in Pakistan had been smuggling in from Singapore video cassette recorders and cassettes. North Korean diplomats in Nepal were also accused of smuggling wrist watches, gold, videotapes, and narcotics. In 1991, there were reports from South Korean sources that the North was exporting drugs from the Kaema plateau, believed to include 1,000 kilogrammes a year of opium, heroin, and marijuana. In March of the same year, a North Korean diplomat was arrested for carrying 1 kilogramme of heroin from Czechoslovakia to Sweden; in May 1994 two North Koreans were arrested in Vladivostok in possession of 8.5 kilogrammes of heroin; and in April 1994, a North Korean defector claimed that the North sold opium for hard currency.69 In 1996, reports emerged that the North Korean embassy in Romania had been turned into a casino, and that a healthy trade in North Korean antique national treasures run by diplomats had emerged. Moreover, in April 1997 Japanese police discovered 70 kilogrammes of illegal stimulants on a North Korean freighter at Hososhima port, estimated to have a street value of US$ 100 million.70 The truth of all these reports and the extent of official government involvement in the smuggling is unknown, and certainly government and media sources in South Korea and elsewhere have used them as a weapon in their propaganda war against the North. But what the reports do seem to demonstrate is that the North’s lack of access to trade with other states only serves to push it into the international economy of crime and to further ‘gangsterise’ its activities. The second form of availability and alternative trade which North Korea has engaged in and with definite state approval is the sale of military hardware to other ‘pariah’ regimes. North Korea has been an exporter of arms since before the collapse of the socialist bloc, and was reported in 1986 to have sold 100,000 automatic rifles to Cuba, and in 1988 a large cache of arms including rocket launchers to Uganda. The need for hard currency in the post-Cold War period has encouraged North Korea’s export of missile and possibly nuclear technology to countries in the Middle East, so making a substantial contribution to its balance of payments but which is not represented in the trade statistics. The Scud missiles that North Korea sold to Iran in 1987 netted it up to US$300 million, an Iranian delegation visited North Korea in April 1993 seeking to buy 150 Nodong-1 missiles in exchange for oil supplies, and there were rumours that Iranian observers were present at the test firing of the Taepodong-1 missile in August 1998. In 1993 unsubstantiated reports stated that in a complex deal, and in contravention of UN sanctions, the North was planning to sell Iran missiles in exchange for Iran’s purchasing of US$ 120 million of oil from Iraq.71 There are also suspicions that North Korea, in conjunction with China, sold technology to Pakistan for its Ghauri missile—one of the weapons which along with Pakistan’s and India’s nuclear tests has been responsible for destabilising the military situation in South Asia since early 1998. In total, North Korea is

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calculated to have earned between US$200 million and US$1 billion in arms sales between 1992 and 1996.72 The US has attempted to negotiate curbs on North Korean missile exports since 1996, but in June 1998 North Korea’s state-controlled media asserted that the trade in these commodities was legitimate, as due to the US embargo they were the only means available of gaining hard currency.73 Furthermore, as noted in Chapter 3, during the September 1998 US-North Korea negotiations, the North made it clear to the US that it would contemplate stopping missile exports if the US would provide an alternative source of US$500 million annually in hard currency. North Korea’s obvious ploy (and probably an unwise one given the hard-line attitude of the US Congress towards it and the proliferation of weapons of mass destruction) is to place the blame for its economic predicament on the US and to persuade it to lift the embargo. But North Korea’s pleadings do contain a grain of truth, in that its position as a proliferator of missile technology, with all the implications for the security of the Middle East and South Asia, is a result of its lack of access to external markets after the Cold War and the stretching of the limits of availability. Japanese trade power and North Korea The limits of availability are all suggestive of a high degree of vulnerability in trade, and that it is only new trade links with the nations of Asia and the West which can provide the injection of technology and hard currency that the North Korean economy needs to survive. This again opens up possibilities for the utilisation of direct and indirect economic power to influence North Korea’s security behaviour. The main task for this has to fall to South Korea which possesses the necessary expertise and motivation to draw North Korea away from illicit patterns of trade and towards the wider opportunities offered by the regional trading framework. But Japan too disposes of the power in trade to contribute to a resolution of the North Korean security problem. As already seen, in world terms the volume of trade between Japan and North Korea is exceedingly small, accounting for only 0.1 per cent of Japan’s total trade, and ranking the North bottom in terms of importance amongst Japan’s trade partners in Asia. But conversely, and despite the continuing debt problem, trade with Japan is still very important for North Korea. Since the end of the Cold War, Japan has assumed the position of the North’s second largest trade partner and its main supplier of technology. This high degree of North Korean trade dependence upon Japan clearly gives the latter a degree of direct power to impose negative economic sanctions and force North Korea to moderate its security behaviour. Thus at the height of the nuclear crisis, and alongside consideration of the cessation of remittances, the Japanese government also studied the possibility of interrupting trade to coerce North Korea into accepting nuclear inspections. The government study group’s report concluded that, although there were difficulties involved such as the need to gain Chinese cooperation to block the rerouting of trade via third countries, a stoppage of Japan-North Korea trade was feasible and would have a deleterious impact on the North Korean economy.74 In the end the Japanese state was not called upon to impose sanctions, but undoubtedly it does have the practical capability to cut or squeeze trade links with the North. The small size of bilateral trade means that it is

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easy for Japan to bear the economic as well as political costs of punishing the North without inflicting significant damage upon its own economy. The Japanese state’s legal capacity to restrict trade is based on COCOM and other trade guidelines.75 For instance, in June 1987 the MITI stopped a shipment to North Korea of 156 long-based Japanesemade trucks due to warnings from US intelligence that they were destined for use by the North as launch vehicles for missiles. In May 1987, a Chōsensōren-affiliated company in Osaka was prevented from exporting ¥10 million of circuits and oscillators to North Korea as these were judged to be items banned under COCOM regulations, and in April 1988 the MITI in cooperation with US authorities stopped the export to North Korea via Singapore of 500 computers manufactured in Japan.76 During the nuclear crisis itself in 1994, Japanese police raided a Chōsensōren company and seized under revised COCOM rules and the Foreign Exchange and Foreign Trade Control Law (FEFTCL) spectrum analysers suspected of being used for the production of Nodong missiles. The same company was again raided in December 1994 and fined for selling used cars to the North in contravention of the FEFTCL.77 These last two incidents were deliberate public demonstrations of the Japanese state’s power to disrupt trade with North Korea in the event of a conflict. Moreover, even if the MITI cannot choke off trade flows entirely, it can impose a de facto embargo through the intimidation of companies and by making involvement in Japan-North Korea trade a highly unattractive commercial prospect. But yet again it is arguable that it is the Japanese state’s application of positive economic sanctions to North Korea which has the greatest utility for security policy. Negative sanctions and restrictions upon North Korea’s access to external markets have only served to undermine its economic stability and obliged it to seek new markets and to test and proliferate missile technology—the very antithesis of a resolution to the explosive aspects of the North Korean security threat. Hence, a Japanese policy of positive economic sanctions and trade promotion towards North Korea, similar to the policy towards China since the 1970s, may hold out better security prospects over the long term, and contribute to a situation whereby in the future Japan can stop North Korean missile tests such as that of the Taepodong-1 in 1998 by alleviating the North’s economic need to gain hard currency from missile exports and to demonstrate the capabilities of its weapons to potential buyers in the Middle East. The most important role for the Japanese state is to dismantle the economic and political barriers, and in turn foster the growth of those private sector interactions which can enhance North Korea’s economic integration into the Northeast Asia region. The North Korean community in Japan is necessarily in the vanguard of these efforts due to its long history of forging external trade links with the North. But the expansion of private trade across the Sea of Japan between North Korea and Japanese ports such as Niigata since the end of the Cold War argues that there are also Japanese-based enterprises willing to follow the example of North Korean residents and to exploit economic complementarities.78 The task of the Japanese state, then, is to activate these latent private economic forces through measures such as support for an improved communications infrastructure in Northeast Asia, but most importantly through the creation of the political environment which eliminates the need for constant government disruption and discouragement of subregional trade links. If Japanese government initiatives in these areas are reciprocated by North Korean efforts to deal with its debt

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problems and further open its economy, then Marcus Noland has argued that Japan could cement its position as North Korea’s number two ‘natural partner’ after South Korea, and account for around a steady 30 per cent share of its total trade (Table 4.11). Given these economic projections, and the history of Japan and North Korea in the colonial period as complementary—if at the time also forced—trading partners, the conditions could be generated which would convert the bilateral trading relation from one of dependency to true interdependence, and which brings all the accompanying benefits for security. In turn, improvements in Japan-North Korea trade relations

Table 4.11 Actual and ‘natural’ North Korean trade shares Actual trade share 1995 ‘Natural’ trade share China 23 South Korea 35 Japan 21 Japan 30 South Korea 10 China 13 Russia 4 US 7 Rest of the world 12 Rest of the world 15 Source: Noland (1996, p. 30). could also open the way for North Korea’s integration into the wider regional community through such bodies as APEC.

North Korean communications North Korean isolation and vulnerability The isolation of North Korea from the outside world has been a product of both physical and ideological barriers to communication. The mountainous terrain of the northern half of the Peninsula has imposed natural geographic barriers to communications and economic development. Manmade influences have served to compound this isolation: the Japanese colonial policy of the development of coastal transport systems produced the internal separation of industrial from agricultural areas; and in the Cold War period North Korea’s relative separation from external communications was marked by the priority given to the development of links with its communist neighbours, China and the USSR, and the neglect of links with the non-communist world. In the post-Cold War era, this pattern of communications links and North Korea’s isolation has also generated for its economy a degree of costs and vulnerability which cannot be compensated for by the exercise of resilience. It is clear, therefore, that the North’s economic restructuring relies on the improvement of rail, road, port, and air facilities, as well as the introduction of modern telecommunications. Following independence, the North Korean regime reconstructed and modernised the rail system, adding new trunk routes between the interior and coastal areas. The rail network accounts for around 70 per cent of passenger and 90 per cent of freight traffic (estimated to be able to handle 169 million tons a year), and in 1994 the North possessed

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5,112 kilometres of track, of which 75 per cent is electrified.79 There are five external rail links to China and Russia, with one passenger train a week to Moscow, and four trains a week to Beijing. But despite North Korea’s heavy investment in the rail network, its problems were revealed in 1988 when the USSR complained that the USSR-North Korea rail links were unable to cope with normal volumes of trade between the two countries, managing to carry only 82 per cent of the necessary USSR exports to the North and 52 per cent of imports from the North to the USSR.80 In addition, it is clear that for the Rajin-Sonbong FETZ to succeed the rail network in the northeastern region of North Korea needs to be upgraded, with the TRADP planning to expand track in the area from 50 to 110 kilometres.81 The road system in North Korea plays a minor role in freight transport, with an annual capacity of only 42 million tons. In 1994, North Korea had between 23,219 kilometres of roads, but of this a large proportion is unmettled, and the North has slightly less than 400 kilometres of multi-lane highways.82 The TRADP proposes that in order to push the project forward it is necessary to extend, widen and mettle existing roads between North Korea, Russia, and China, and that a 190 kilometre expressway should be constructed between Tumen, Chongjin, and Unsan.83 North Korea’s port facilities also need modernising if the TRADP is to succeed. The principal ports in the FETZ are Chongjin (1.8 kilometres of wharves, annual handling capacity 3 million tons), and Rajin (1.5 kilometres of wharves, annual handling capacity 800,000 tons). A container port was established at Chongjin in July 1995, and North Korea plans to raise the annual capacities of Chongjin and Rajin to 20 million and 100 million tons respectively by 2010.84 North Korea’s main international civilian airport is Sunan in Pyongyang. The existing fleet of North Korean civilian aircraft was purchased from the Soviet Union. In 1986 there were reportedly two flights a week to China and the USSR. Scheduled and charter flights leave from Pyongyang to Beijing, Moscow, Khabarovsk, Vladivostok, Berlin, Sofia, Macau, Niigata, and Nagoya. Flights to Moscow were suspended in November 1992 due to a lack of passengers, but restarted again in July 1993.85 The small number of international flights may be increased if Sonbong airport is converted to international use for the TRADP, and to gain extra hard currency North Korea also informed the International Air Transport Association (IATA) on 2 August 1996 that it would open its skies to overflights by foreign airlines.86 North Korea’s telecommunication links to the outside world were particularly poor prior to the end of the Cold War. In 1985, there were only 30,000 telephone lines in the entire country, and the only direct international lines were to Moscow and Beijing, with an international direct dialling service established via Hong Kong in 1989. A satellite communications centre was installed with French assistance in Pyongyang in 1986, and the North uses Intelsat’s Indian Ocean satellite. The North Korean media is tightly controlled to exclude outside influences. In 1990 there were 250,000 television and 3.75 million radio sets in service in the North, but the dials are fixed to receive only designated frequencies and to prevent the reception of foreign broadcasts. North Korea also broadcasts short-wave radio transmissions overseas in several languages.87 Since the end of the Cold War, the North Korean government has attempted to exercise availability and to improve telecommunication links, although without undermining its own control

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of the flow of information in and out of the country. Thus, following the Agreed Framework, North Korea allowed the AT&T corporation to install a telephone line from North Korea to the US.88 A number of new developments in telecommunications have been planned for the FETZ, including a satellite station and a communications centre in Rajin. Japanese power in communications and North Korea Japan’s transport and telecommunications links with North Korea are limited, but the Japanese state could certainly exercise a degree of direct power and impose negative economic sanctions to influence the North’s security behaviour. The Japanese government’s direct power was shown in 1988 when it imposed limited sanctions for the South Korean airline bombing and refused permission for the crews of North Korean ships to land in Japan, so interrupting human and remittance flows.89 Following the Taepodong-1 test in August 1998, the Japanese government again demonstrated some of its direct power in communications by cancelling charter flights from North Korea to Nagoya. But the evidence suggests that, given the limited nature of Japan-North Korea communications links and North Korea’s probable response to their severance by simply withdrawing further into international isolation with destabilising effects on its economy, Japan is more likely to derive direct power from building up communications with the North and by offering positive sanctions in this area. Hence, Japanese central government promotion of greater investment in ports such as Niigata (8 kilometres of wharves, and an annual capacity of 1.7 billion tons) on the Sea of Japan coast and their opening to North Korean traffic could function to haul along the TRADP and North Korea’s transport infrastructure plans. Similarly, if actively developed, air communications links between Japan and North Korea could bring indirect power benefits. Air travel between the two countries has usually been via Moscow or Beijing, but in 1990 the Japanese Ministry of Transport (MOT) authorised the first direct charter flight from Japan to North Korea for the Kanemaru mission, and the Three-Party Joint Declaration expressed the desire that the North and Japan should establish direct flights. The first direct commercial flight from Japan to North Korea took place in May 1991 carrying one hundred members of the Chōsensōren, and since August 1991 there have been direct air-freight flights for imports of matsutake mushrooms. The nuclear crisis made the expansion of air flights difficult as the MOT was reluctant to negotiate new air routes until political relations between Japan and North Korea stabilised. But in December 1994, North Korea offered to open its airspace to all carriers on the Tokyo-Pyongyang-Beijing route.90 The establishment of air routes between Japan and North Korea promotes bilateral commerce and economic interdependence, as well as the intriguing possibilities of tourism. The North Korean regime has been particularly keen to encourage tourism by North Koreans in Japan because of the hard currency it brings into the economy. For instance, in 1993 the Chōsensōren-affiliated Jungwae Travel Company offered 50 flights a year from Nagoya for 7,000 to 8,000 passengers at a cost of around ¥200–300,000.91 The principal visitors to North Korea have indeed been Chōsenōsoren loyalists, and the unduly high costs of the tours and limited scope of freedom to travel restrict tourist volumes. But the

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participation of larger numbers of Japanese citizens on these and other tours could have an important effect in exposing North Koreans to contact with Japanese people and customs—all of which could contribute to increased cultural friction but also maybe the beginnings of the infllitration of Japanese ‘soft’ cultural power into North Korean society as in other Japanese tourist destinations in Asia. Japanese efforts to boost telecommunications links could also have ‘soft’ power effects. North Korea sought the establishment of satellite communications with Japan in the Three-Party Joint Declaration of September 1990, and these were initiated the following month by the Japanese Ministry of Posts and Telecommunications (MOPT) in cooperation with the Japanese corporation KDD (Kokusai Denshin Denwa). Japan also agreed to share its telecommunications satellites with the North, and in November 1990 KDD was reported to be planning to send a team to North Korea to start fax and data transmissions.92 The installation of these telecommunication links and the information that flows through them is seen by some commentators as the most effective means to end North Korea’s isolation and to bring it into the regional community.93 The possibilities of information exchange and Japanese ‘soft’ power through modern communications were demonstrated by North Korea’s broadcast of a ninety-minute television film following the start of Japan-North Korean normalisation negotiations, and then reports in July 1991 that the number of those in the North seeking to learn Japanese had risen sharply.94 The North’s regime obviously has control over these mediums of communication and will not give this up easily. But if satellite television or the Internet supported by Japanese technology were to make a breakthrough in North Korea, this could lead to the dissemination of Japanese culture in the same way as in South Korea, where Japanese comic books (mango) and pop music have proved to be attractive cultural images.95 Again Japanese ‘soft’ power is unlikely to be able to compete with that of South Korea or the US, but its spread could make a contribution to breaking down much of the vehement anti-Japanese sentiment in the North and to moderating its security challenge to Japan.

North Korea and energy Structure and vulnerability North Korea has traditionally placed great emphasis upon the development of electric power for its industrialisation effort, with ambitious targets for the expansion of power generation laid down by successive economic plans, and up to 85 per cent of total electricity consumption accounted for by industrial production.96 In order to achieve these targets, the regime’s basic strategy has been to exploit the North’s own rich energy resources to the full, whilst at the same time avoiding dependency on foreign energy imports. Consequently, in the 1990s around 80 per cent of North Korea’s primary energy supply consists of domestically produced coal for use in its thermal power stations at Pukchang (1,600 megawatts), Pyongyang (500 megawatts), Chongjin (150 megawatts), Sunchon (200 megawatts), Chongchongan (200 megawatts), and East Pyongyang (50 megawatts).97 Hydroelectric power, at around 10 per cent of total primary supply, has

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been the other main contributor to energy self-sufficiency (Table 4.12). North Korea is believed to have offshore reserves of oil, but due to technological shortcomings these resources are undeveloped and the North remains totally reliant on foreign oil imports. Hence, in the past to reduce energy dependency the North constructed only one oil-fired power station at Ungii (200 megawatts) and has restricted as far as possible petrol consumption and the use of automobiles other than transport and military trucks. North Korea’s level of foreign energy dependency is then remarkably low, at less than 10 per cent of total supply. However, in recent years chinks in the armour of North Korean energy self-sufficiency have begun to emerge. Firstly, North Korea’s coal production has nearly halved since 1989 due to a lack of the technology needed to exploit new coal reserves lying under the seabed in the Anju mining district (Table 4.12). Secondly, the reliability of hydroelectric power supplies seems to have been affected since 1994 by flooding and droughts. Thirdly, North Korea’s avoidance of reliance upon and then eventual loss of access to foreign oil supplies has impacted hard on its economy. The growth of the North Korean petrochemical industry has been stunted because of its restricted access to oil supplies, which in turn has created production bottlenecks for industrial materials, manmade fibres, and fertilisers. Moreover, following the end of the Cold War oil imports from Russia declined sharply and hurt the North’s transport sector (Table 4.13). Fourthly, although juche ideology makes the North Korean regime reluctant to acknowledge it, a good deal of its energy infrastructure was built up with Soviet assistance, but which was then withdrawn after 1990. Finally, there exists a range of structural energy inefficiencies in North Korean power generation, including the lack of spare parts for old and unproductive generating plant; the fragmentation of

Table 4.12 North Korean primary energy supplies (thousand tons of petroleum equivalent) and coal production 1988–94 (thousand tons) 1988 1989 1990 1991 1992 1993 1994 30,439 30,866 26,503 25,052 23,960 23,121 22,113 Coal % of total 81.0 82.0 79.0 80.0 81.0 84.0 82.0 937 947 957 967 981 994 1,008 Charcoal % of total 3.0 3.0 3.0 3.1 3.3 4.0 4.0 3,143 3,351 3,485 3,358 3,172 2,971 3,039 Hydroelectric % of total 8.3 9.0 11.0 11.0 11.0 11.0 11.2 3,020 2,485 2,520 1,880 1,520 1,360 910 Crude oil % of total 8.0 7.0 8.0 6.0 5.1 5.0 3.4 144 118 111 111 111 101 101 Petroleum products % of total 0.4 0.3 0.3 0.4 0.4 0.4 0.4 37,683 37,767 33,576 31,368 29,744 27,547 27,171 Total 40,700 43,300 33,150 31,100 29,200 27,100 25,400 Coal production Source: Kannihonkai Keizai Kenkyūjo (1996, pp. 254–5).

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Table 4.13 North Korean oil imports from China and USSR/Russia 1988–95 (million tons) 1988 1989 1990 1991 1992 1993 1994 1995 USSR/Russia 0.6 0.5 0.4 0.04 0.2 0.2 N/A N/A China 1.2 1.1 1.1 1.1 1.1 1.1 0.8 1.0 Source: Kannihonkai Keizai Kenkyūjo (1996, pp. 254–5). responsibility for coordinating the North Korean energy industry; poor technology to manage power distribution; power loss on overly long generation lines from hydroelectric plants to industrial areas; and massive domestic energy wastage due to the non-use of insulation technologies.98 The combined result of these problems has been to expose the energy vulnerability of North Korea in the post-Cold War period. The North has been unable to fulfil the 100 billion kilowatt target for electricity production in the Third Seven-Year Plan, and, according to South Korean estimates, production by 1995 may have been as low as 25 billion kilowatts.99 The energy shortages witnessed by foreigners in North Korea since the early 1990s have been mentioned already, and in June 1997 one North Korean official was reported as stating that as much as 84 per cent of the North’s thermal generation capacity was idle due to either lack of fuel or antiquated equipment.100 To counteract these energy weaknesses, the regime has exercised resilience through austerity programmes which redirect energy to industrial usage and cut back on oil consumption. The North’s apparent lack of energy stockpiles, apart perhaps from those earmarked for the military, means that it is unable to exercise adjustment or substitution. But the North has sought to exercise availability by trading missile technology for Iranian oil. KEDO and North Korean vulnerability These conservation measures have, though, clearly been insufficient to resolve the North’s dire energy situation, and it has been forced to seek a new source of availability through the KEDO project which offers both crude oil supplies for power generation and a nuclear energy capacity of up to 2,000 megawatts. The supply of LWRs to North Korea is probably not the lowest-cost means to meet North Korea’s energy shortages, but the nature of the nuclear crisis dictated that the KEDO partners replace one potential source of nuclear energy with another less suited to weapons production. Furthermore, it is clear that the North had long sought after its own nuclear generating capacity, having obtained its Yongbyon nuclear reactor as far back as 1965 with Soviet assistance, and this was the only option it was likely to accept in negotiations. Thus, from the North Korean viewpoint the KEDO project has secured its principal objectives of free energy supplies, with the very likely hope, as noted in Chapter 3, that the KEDO project can be contained as a Trojan horse and make for only selective engagement with the US and South Korea. All the evidence suggests, though, that North Korea’s acceptance of KEDO has delivered into the hands of the latter two states a good deal of direct and indirect power to be used for security ends. The US, termed by KEDO

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officials as the ‘symbolic leader’ of the project, and because of its role as the main supplier of crude oil, is now able to offer positive sanctions which in many ways have allowed it to replace the USSR as North Korea’s principal source of energy concessions. Indeed, the extent of the turn around in US-North Korea ties and the North’s willingness to risk entering into direct and indirect power relationships with the US is shown by the fact that in 1978 Kim I1 Sung had remarked that the North would never rely on oil imports because it would allow the US, which dominated the world oil regime, ‘a stranglehold on our jugular’, but that by 1994 it was agreeing to accept up to 500,000 tons of crude oil annually from the US.101 South Korea has also derived direct and indirect power with regard to North Korea due to its ‘central role’ in KEDO as the provider of nuclear technology. Despite the Pyongyang regime’s original objection to accepting South Korean LWRs and the attempt to limit Seoul’s presence in the North by confining the reactor site to a self-contained compound, technical considerations mean that the North’s planners and scientists cannot avoid interaction with their counterparts from the South and being drawn into a dependency relationship. Hence as the ex-KEDO director Stephen Bosworth notes, ‘KEDO is a way of bringing about greater contact on a constructive basis between North and South Korea’.102 The project also has strengthened the economic foothold and indirect production power of South Korean chaebols by its allocation to them of contracts for the supply of reactor hardware. KEDO and Japan Japan’s role in KEDO is described as one of making a ‘significant contribution’, and the project provides a framework for Japan to offer positive concessions to North Korea and extend direct economic power for security ends. Successive Japanese governments have strongly supported the KEDO concept since its inception, and since 1994 Japan has given US$31.7 million for LWR site preparation and the running costs of the KEDO office in New York.103 In addition, Japan has provided technical support by the despatch to KEDO of scientists from MITI-related agencies, and, as a stop-gap measure to cover US budget difficulties, agreed also to pay for US$19 million of crude oil supplies to North Korea in February 1996.104 However, Japan’s main contribution to KEDO is financing for the actual construction of the LWRs. The negotiations to divide up the estimated US$5 billion cost of the LWRs have been extremely protracted: the South Korean side since the conclusion of the Agreed Framework seeking a Japanese contribution of up to one quarter of the total, but the Japanese MOFA consistently avoiding a percentage figure and arguing successfully by July 1998 in favour of a fixed amount of US$1 billion in zerointerest long-term financing.105 Japan’s role in the financing of KEDO has been further complicated since September 1998, when in protest at the Taepodong-1 missile test it decided to delay signing the agreement on financing the LWRs. The Japanese government’s threat to cut off financing and its use of a negative sanction against North Korea, though, is likely to prove short-lived, as US and South Korean pressure to support KEDO and the logic of the project as the lowest-cost means to end the North’s nuclear programme have already begun to work on Japanese policy-makers’ minds by lateSeptember, and the government has moved to prepare to sign the agreement.

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US$1 billion certainly represents a ‘significant’ Japanese role in KEDO and contribution to the resolution of the North Korean security problem, but there are still calls for Japan to mobilise further its economic power in support of the project. South Korea’s financial difficulties since the emergence of the Asian currency crisis in late 1997 have led it to request that Japan increase its financial assistance to KEDO, and the US, faced with continuing congressional opposition to the project, has regularly asked for Japan to shoulder some of the burden for crude oil supplies.106 The MOFA for its part agrees with the need to cooperate with the South to help it meet its KEDO commitments during the currency crisis, but is unlikely to accede to requests for an increased contribution due to the Japanese government’s own financial worries, and because ultimately the LWRs will become a Korean asset which should be paid for in the main by Koreans. The MOFA feels less able to turn down directly US appeals for assistance, but also sees crude oil supplies as essentially a US responsibility and one it should be able to meet independently with its growing budget surplus. Moreover, in the same way as in the US, the MOFA eventually has to justify the KEDO budget to the Diet, which, although with the exception of a few conservative elements is generally supportive of the project in principle is also disgruntled by the North Korean Taepodong-1 test and wants to see the minimum possible Japanese contribution to the project.107 Japan’s role in KEDO remains a secondary one behind South Korea and the US, and the use of its financial power in this area is curtailed. But it is clear that there are also opportunities for Japan to contribute to KEDO other than by the direct provision of finance, such as its diplomatic efforts to persuade the EU to participate in KEDO in return for Japanese support for the EU’s own security project in the reconstruction of Bosnia since 1996. Added to this, the Japanese government or Japanese NGOs could also help to solve North Korea’s energy problems by providing it with technical advice on efficient generation and consumption in non-nuclear areas of its energy sector. The USbased Nautilus Research Institute’s establishment of wind power generation facilities in the North since late 1997 is one precedent that Japanese NGOs with backing from the government could perhaps follow.

North Korea and aid Aid and North Korean vulnerability During the Cold War, and in spite of juche ideology, North Korea was a large beneficiary of military and economic aid from the USSR and China. Both of the latter provided economic aid for industrial and energy sector projects, and the USSR claimed in 1980 that it had given the North a total of US$2 billion in aid since 1948.108 The flow of aid, however, was not always smooth, and the North showed resilience in surviving periodic reductions in aid from both sides during the Sino-Soviet split. North Korea has even been a provider of aid. In 1983 and prior to the Rangoon bombing, it was reported that the North had provided assistance to Burma for hydroelectric power projects, synthetic fibres, and mining. The North also supported agricultural development in Tanzania, and provided US$30 million in loans to Nicaragua to be used to buy North Korean steel.109 In

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addition, Pyongyang gave rice aid to Seoul following floods in September 1984. Nevertheless, the near total stoppage of aid from the USSR in the late 1980s pushed North Korea to the limits of resilience and forced it to seek availability and new sources of development aid from international institutions such as the UNDP. Between 1980 and 1986, the UNDP provided aid for the upgrading of Nampo port facilities, railway electrification, and the North’s first integrated circuits plant. By 1991, the UNDP was also reported to have provided US$38 million for fifty small agricultural and industrial projects, and was reported to be planning to dispense a further US$26 million for technology, energy, and pollution control schemes.110 The failure of its agricultural production since the end of the Cold War has also forced the North to the limits of resilience for humanitarian and food aid. The totalitarianism of the North Korean regime is obviously such that at times it has been prepared to tolerate the starvation of large sections of its rural population rather than accept dependency on foreign food supplies, while at others it has cynically exploited fears of its own internal collapse and the humanitarian issue of famine as means to extract food aid and other economic concessions from neighbouring countries. But whatever the motives of the regime, there can be no doubt that the food situation has been serious enough for it to shelve its juche ideology and to seek availability in humanitarian aid from the WFP, China, the US, and South Korea, which in turn provides these countries with a measure of direct economic power over the North. The obvious temptation for the US and South Korea has been to withhold food aid as a negative sanction in order to induce North Korean cooperation on security matters, and this has been made easier to do because of doubts about the North’s diversion of humanitarian aid to its military. However, the US has generally favoured the provision of food aid as a positive sanction to strengthen the process of engagement with the North and the ‘soft landing’, and since the advent of Kim Dae Jung’s administration South Korea has followed this policy line with more consistency. Japanese aid power and North Korea The exposure of North Korea’s vulnerability in the component of aid should also produce opportunities for Japan to mobilise direct economic power for security ends, given the fact that, as has been seen in Chapter 1, Japan has a long tradition of using ODA and other forms of aid for security ends. In terms of food aid, the Japanese government provided 300,000 tons of rice aid directly to North Korea twice in June and October 1995, and then US$6 million and US$27 million in food aid in June 1996 and October 1997 respectively via international agencies. These are clearly positive sanctions designed to stabilise North Korea and to remove the sources of economic insecurity that threaten the implosion of Japan’s neighbour. But even though the Japanese government recognises the serious food shortages in the North and the utility of aid for security ends, it has made clear that these are purely one-off disbursements of humanitarian aid, and, for the reasons discussed in Chapters 3 and 5, has seemingly preferred to use the withholding of food aid as an unspoken negative sanction to induce North Korean cooperation on the nuclear and missile security issues and the problems of the Nihonjinzuma and racchi jiken.

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Development aid, though, is the area where the Japanese state could bring to bear its greatest direct economic power for a resolution of North Korea’s economic insecurities. Chapter 3 has already described how the normalisation of Japan-North Korea relations could release the flow of up to US$5 billion in Japanese ODA to the North. In the same way as Japan’s provision of ‘economic cooperation’ under the Basic Treaty of 1965 triggered industrial take-off in South Korea, this Japanese aid to North Korea could also promote the economic growth of the North and form Japan’s main contribution to the ‘soft-landing’ policy.111 But as Chapter 5 will show, the nature of the Japanese policymaking process has meant that the normalisation process has remained deadlocked and that rather than being able to use economic cooperation as a component of direct economic power to offer positive sanctions, instead the Japanese state has been forced to keep it out of North Korea’s reach as a form of negative economic sanction, but which ultimately only serves to compound the North’s economic vulnerabilities and the extreme nature of its security behaviour. Furthermore, the Japanese state has been unable to offer North Korea positive aid sanctions via international institutions. For example, the Japanese government is known to exercise considerable influence in the ADB—typically providing the bank’s president and up to 50 per cent of its funding—but MOF officials have shown considerable reluctance to promote the ADB’s role in the TRADP, and effectively blocked North Korea’s attempt to become a bank member in May 1997, apparently due to concerns about the racchi jiken.112 The outcome is, then, that Japan has employed economic aid primarily as a negative sanction to exert pressure on North Korea, but has not yet fully mobilised the type of direct power through positive aid sanctions which it has used with such effect in its security relations with other states in Asia and beyond. The constant argument of this book has been that economic pressure applied to North Korea has often been a counterproductive policy because it simply accentuates the root causes of explosive and implosive security threats, and because it has become clear after the nuclear crisis that what the North is seeking above all is economic engagement with the US and other regional powers. Thus, it would seem that Japan could make a greater contribution to Korean Peninsula security by the provision of ODA on a large scale and by building through the extension of aid those economic links which can help to integrate North Korea into the region. But until there is some further progress in Japan-North Korea normalisation talks the likelihood is that Japanese economic power for security purposes as expressed through the component of aid will continue to lie dormant and Japan will remain hamstrung as an ODA great power in this case.

Conclusion This chapter has examined the North Korean economy since the end of the Cold War and found that, despite a remarkable record of independent development and resilience, it has now become vulnerable across a range of economic components. North Korea’s industrial and agricultural production systems are crumbling and in need of fundamental reform, and its financial situation is precarious, with foreign trade shrinking. Energy

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shortages have also hit the North’s economy hard, and all these problems have been compounded by poor communications and a decline in foreign aid since the collapse of the Soviet bloc. Hence, North Korea is in need of assistance and engagement in order to reconstruct its economy and alleviate the causes of economic instability which threaten to upset regional security. The main impetus for economic reform has to come from the North itself and economic contacts with South Korea and its chaebols, but there is also a role for the Japanese state and TNCs to assist in this process. The above analysis has shown that the tentacles of Japanese direct and indirect power extend potentially to embrace North Korea across all the components of economic power and in specific projects such as the TRADP and KEDO, and thus that Japan, in keeping with the theory of global civilian power expounded in Chapter 2, possesses the requisite capacity to follow a security policy based on economic power towards North Korea. However, the analysis has also shown that for Japanese economic power and its security benefits to function in this way, it is necessary for the Japanese state to take the initiative to clear away political barriers to private sector and TNC economic activities. But the impression is that as yet the Japanese government has not taken such steps and that much of Japan’s economic power capacity for security purposes remains latent and under-utilised in the case of North Korea. The explanation for this lies in the immobilism in Japanese policymaking will and is examined in the next chapter.

Notes 1 Komaki (1986, pp. 82–3); Chung (1974, pp. xiv, 169–77). 2 Chung (1974, p. 58). 3 Komaki (1986, pp. 83–4). 4 Watanabe (1995, p. 17). 5 Economist Intelligence Unit, Country Report: China and North Korea, no. 3, 1989, p. 29. 6 Komaki (1986, p. 85). 7 Nodong Shinmun, 11 April 1963, cited in Kim (1965, p. 255). 8 Vreeland et al. (1976, p. 226); Lee (1963). 9 Chung (1974, pp. 74–5). 10 Economist Intelligence Unit, Country Report: China and North Korea, no. 2, 1984, p. 32, Country Report: South Korea and North Korea, 2nd Quarter 1994, p. 45. 11 Chung (1974, p. 42). 12 Vreeland et al. (1976, p. 224); Chung (1974, pp. 78–9, 146–7). 13 Sawda (1993, p. 128). 14 Chung (1974, pp. 146–7). 15 Economist Intelligence Unit, Quarterly Report: China and North Korea, 1984, no. 1, p. 28; Hwang (1993, pp. 123–7). 16 Komaki (1986, pp. 92–3). 17 Jeong (1992, p. 27); Koo (1992, pp. 139–42). 18 Hwang (1993, pp. 44–5). 19 Komaki (1992, pp. 52, 55). 20 Economist Intelligence Unit, Country Report: South Korea and North Korea, 1st Quarter, 1994, p. 37. 21 Economist Intelligence Unit, Country Report: South Korea and North Korea, 2nd Quarter,

Japanese economic power and north korea 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61

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1995, p. 43. Martin (1993, p. 17); Y.Tanaka (1994, p. 3). Economist Intelligence Unit, Country Report: South Korea and North Korea, 2nd Quarter, 1994, p. 41. Miyatsuka (1997, pp. 88–9). Murooka (1995, p. 90); Tanaka (1996). Miyatsuka (1992, p. 105). Marton, McGee, Paterson (1995, pp. 11–15). Far Eastern Economic Review, ‘Hinterland of hope: regional powers have ambitious plans for the Tumen delta’, vol. 155, no. 21, 16 January 1992, pp. 16–17. Taylor (1996, p. 171). Interview with ERINA researcher, Tokyo, 19November 1996; Cotton (1996, p. 1099). Rozman (1998, pp. 10, 14). Far Eastern Economic Review, ‘Zone of dreams: Pyongyang goes overboard for Tumen project’, vol. 153, no. 21, May 1992, p. 30. Namkoong (1995, p. 468). Shiode (1995, pp. 287–90). Japan Times, 19 October 1994, p. 12. Economist Intelligence Unit, Country Report: South Korea and North Korea, 2nd Quarter 1995, pp. 46–9, 1st Quarter 1996, p. 45. Japan Times, 16 September 1996, p. 3; Economist Intelligence Unit, Country Report: South Korea and North Korea, 4th Quarter, 1996, p. 52. Interview with Asahi Shimbun journalist and participant at the September 1996 investment forum, Tokyo, 15 November 1996. Hasegawa (1996). Komaki (1997, p. 368). Kohari (1995, pp. 138, 143, 148–50). Yeon (1993, p. 713). Cumings (1984, p. 8). Miyatsuka (1992, p. 111). For a full list of these enterprises, see Miyatsuka (1992, pp. 128–9). Shimakura (1995, p. 299). Interview with ERINA researcher, Tokyo, 19 November 1996. Taga (1991, pp. 40–1). Nobukuni (1996, p. 205). Vreeland et al. (1976, pp. 236–7). K.Tanaka (1997, pp. 130–1). Tamaki (1991, pp. 119–23). Japan Times, 28 August 1990, p. 10, 5 April 1991, p. 10. Time International, ‘The Japanese connection’, 11 October 1993, p. 36. Asō (1993, p. 202); Chan (1995, p. 118). Miyatsuka (1992, p. 123). Chan (1995, pp. 126–7). Economist Intelligence Unit, Country Report: China and North Korea, 3rd Quarter 1994, p. 53; Moreau and Watson (1996). Interview with former MOFA official, Tokyo, 11 December 1996. Asō (1993, p. 200). Asō (1993, p. 202), Dai1rui Dai4gō Dai140kai Kokkai Shūgiin Gaimuiinkai Kaigiroku,

Japan’s economic power and security 62 63 64 65 66

67 68 69 70 71

72 73 74 75 76 77

78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93

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Dai18gō, 4 June 1997, p. 3. Asahi Shimbun, 20 May 1994, p. 2. Japan Times, 1 June 1994, p. 12. Hwang (1993, pp. 201–2). The Economist Intelligence Unit, Country Report: South Korea and North Korea, 4th Quarter, 1996, p. 47. The Nagasaki Flag Incident occurred on 2 May 1958 when Japanese youths in a department store in Nagasaki desecrated a People’s Republic of China flag. Using this as a pretext, China cut off trade with Japan, although in fact the real cause for the Chinese move was Prime Minister Kishi Nobusuke’s visit to Taiwan the previous year. Aoki (1990). Asahi Shimbun, 28 September 1997, p. 9. Economist Intelligence Unit, Country Report: China and North Korea, no. 1, 1986, p. 46; no. 2, 1991, p. 34; no. 3, 1994, p. 53; Japan Times, 28 March 1996, p. 4. International Herald Tribune, 19–20 April 1997, p. 1. Economist Intelligence Unit, Country Report: China and North Korea, no. 2, 1986, p. 36; no. 1, 1988, p. 34; no. 3, 1989, p. 33; no. 2, 1991, p. 34; Economist Intelligence Unit, Country Report: South Korea and North Korea, 3rd Quarter 1993, p. 42, 3rd Quarter 1993, p. 42; Japan Times, 28 March 1996, p. 4. International Institute for Strategic Studies, The Military Balance 1997–98, p. 264; Takesada (1998, pp. 143–5). Asahi Shimbun, 18 June 1998, p. 8. Asō (1993, pp. 198–9). Tsūshōsangyōshō Bōekikyoku Yūshutsuka (1994). Economist Intelligence Unit, Country Report: China and North Korea, no. 3, 1987, pp. 33– 4; Japan Times, 29 April 1988, p. 13. Japan Times, 15 January 1994, p. 17. Details were also released in 1996 which suggested that North Korea may have obtained vital components for its nuclear programme from Japan (Tamaki, 1996, pp. 282–97). Shimakura (1995, p. 271). Vreeland et al (1996, p. 16). Economist Intelligence Unit, Country Report: China and North Korea, no. 4, 1988, p. 43. Imai (1995, p. 185). Vreeland et al. (1976, p. 307); Sawda (1993, p. 146). Imai (1995, p. 185). Kannihonkai Keizai Kenkyūjo (1996, p. 20). Economist Intelligence Unit, Country Report: China and North Korea, no. 2, 1986, p. 40; 2nd Quarter 1993, p. 40. Japan Times, 4 August 1996, p. 4. Vreeland et al. (1976, pp. 147–8). Far Eastern Economic Review, ‘Don’t all jump at once: politics still stalls US investment in North Korea’, vol. 158, no. 31, 3 August 1995, p. 35. Japan Times, 10 February 1988, p. 3. Japan Times, 26 September 1990, p. 3, 29 September 1990, p. 1; 18 May 1991, p. 2; 16 August 1991, p. 7; 25 January 1992, p. 1; 25 December 1994, p. 1. Economist Intelligence Unit, Country Report: China and North Korea, no. 2, 1993, p. 40. Japan Times, 10 October 1990, p. 10; 30 November 1990, p. 14. Interview with member of Radio Press Inc. and North Korean broadcasts monitoring

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service, Tokyo, 18 June 1996. Japan Times, 10 February 1991, p. 2; 6 July 1991, p. 3. Drifte (1996a, pp. 157–8). Vreeland et al. (1976, p. 278). Hayes (1997a, p. 51). Hayes (1997b, pp. 142–9); Tamaki (1992, p. 155). Kannihonkai Keizai Kenkyūjo (1996, p. 162). Economist Intelligence Unit, Country Report: South Korea and North Korea, 3rd Quarter, 1997, p. 51. Kim Il Sung cited in Cumings (1998, p. 221). Diamond (1997, p. 6). Gaimushōhen, Gaikō Seisho 1998, p. 23. Interview with MITI official, Tokyo, 22 October 1996. Asahi Shimbun, 30 July 1998, p. 3. Asahi Shimbun, 29 April 1998, p. 2. Interview with senior MOFA official, Tokyo, 6 November 1997. Economist Intelligence Unit, Country Report: China and North Korea, no. 2, 1988, p. 42. Economist Intelligence Unit, Country Report: China and North Korea, no. 1, 1984, p. 31. Economist Intelligence Unit, Country Report: China and North Korea, no. 3, 1991, p. 36. Cumings (1997, pp. 321–32). Ming (1995–6, p. 519); Japan Times, 12 May 1997, p. 2.

5 The Japanese policy-making process and economic versus military security policy This chapter examines the reasons for the apparent gap between those Japanese policymaking conceptions of North Korea as a security problem which can be addressed by economic power, as presented in Chapter 3, and the evidence from Chapter 4 which suggests that, even though Japan has the economic capacity to contribute to a resolution of the North Korean problem, much of this power is at present inoperative and Japan in this case does not fully conform to the criterion of a global civilian power. As the theory of economic power and security outlined in Chapter 2 indicates, policy-making will is the essential factor which allows the instrumentalisation of economic capacity in pursuit of economic-based conceptions of security. Hence, the following analysis looks at the nature of the policy-making actors and process in Japan, and examines in detail the internal and external restrictions that have been placed upon Japan’s mobilisation of economic power for security ends and its assumption of the role of a global civilian power. In turn, the analysis looks at the extent to which these policy-making restrictions have actually encouraged Japan to devote greater policy-making energies to military conceptions of security.

Policy-making in Japan Early models of Japanese policy-making stressed the elitist and closely collaborative nature of the principal policy actors, identified as the central bureaucracy, the LDP, and big business leaders. The original ‘Japan Inc.’ thesis viewed economic policy-making as dominated by an interlocking directorate comprised of these three actors, and derivatives of this model have remained influential to the present day, either in distorted media versions which see elite groups as tending towards conspiracy rather than simple collaboration, or academic versions which emphasise the coherence of elite policymaking ‘triads’ and ‘iron triangles’.1 Although rather neo-mercantilist in tone, this model of a tightly-knit elite with control over government and private sector economic activity does argue that Japan could activate economic power to fulfil the role of a global civilian power. However, more recent research has countered the image of a monolithic Japanese policy-making structure, and indicates instead that policy-making elites are in competition amongst themselves, and subject also to pressures from other internal and external policy-making actors. Hence, models have been proposed which place the bureaucracy at the apex of the elite policy-making structure and ascendant over the politicians and big business, whereas other models have demonstrated the divergence of

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big business and bureaucratic interests, the growing liberalisation of the Japanese economy since the 1970s, and the independence of Japanese corporations from the administrative and regulatory controls of the bureaucracy.2 Furthermore, other research has drawn attention to the newly found policy expertise of the LDP and other political parties, resulting from the formation of the LDP’s Policy Affairs Research Council (PARC) and other intra-party committees, and the existence of ‘policy tribes’ (zoku) with specialist interests in matters such as construction, fisheries, education, and defence.3 Debate about the value of each of these models has been prone to become side-tracked in futile attempts to prove the absolute supremacy of one policy elite over another, when it is clear that the real significance of the models is to demonstrate that the policy-making structure in Japan is still largely elite-led but also increasingly pluralistic, with various groups exercising different degrees of influence according to the particular issue addressed.4 The impression of pluralism in Japan is also reinforced by the knowledge that the media, public opinion, and NGO pressure groups have always played a key role in shaping government policy on issues such as the environment, minority rights, nuclear policy, and the US-Japan security treaty. Finally, added to these internal pluralistic pressures, and as the US government’s role in reinforcing domestic calls for financial reform since mid-1998 have shown, the policy-making elite in Japan has never been insulated from foreign pressure or gaiatsu. The pluralistic range of actors in Japan also means that quite naturally, and as in the same way as other liberal democracies, the process of interaction between these actors and producing a policy outcome is likely to be susceptible to conflict and gridlock. As J.A.A.Stockwin and Kent Calder have observed, the Japanese policy-making process has exhibited characteristics of lurching towards immobilism and crisis, which can only be overcome by compensating those policy-making groups resistant to the policy outcome or by the action of external pressure to break down internal policy barriers.5 Consequently, with regard to Japan’s utilisation of economic power for security ends in the case of North Korea, it has to be assumed that any policy dynamism will be contingent upon the adjustment between the interests of pluralistic internal policy-making actors examined below, as well as their interaction with the policy input from external actors.

Political parties The Japanese political parties have long engaged in foreign and security policy-making, as shown by the efforts of both the LDP and opposition parties through unofficial and personal diplomatic efforts to improve relations with China prior to normalisation in the 1970s.6 In much the same way, it has already been seen how the LDP and SDPJ were involved in active, party-to-party diplomacy with North Korea in the run-up to commencement of government-level normalisation talks in 1990. Thus, the analysis of Japanese policy-making with regard to North Korea begins with the politicians, not necessarily because they are the most dominant element in the policy process, but because they have shown themselves capable in the past of taking the initiative to improve bilateral relations.

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Liberal Democratic Party The policy of the governing LDP towards North Korea in the past has reflected the broad spectrum of conservative opinion contained within the party and its various factions. An anticommunist and anti-North Korea attitude certainly exists amongst a limited number of ‘hawkish’ LDP and the members of the defence policy tribe (kokubōzoku), and the mainstream of LDP opinion after the nuclear crisis remains concerned about the implosive and explosive security aspects of the North Korean security problem, and in particular Japan’s lack of a crisis management system to cope with refugee flows and the ballistic missile threat as further revealed by the Taepodong-1 test in August 1998. But Chapter 3 has also shown that a significant proportion of LDP Diet members have been in favour of cautious engagement with North Korea since the early 1970s, and consequently official LDP policy following the nuclear crisis has been supportive of the logic of the ‘soft landing’. The LDP appraisal of the North Korean military threat, with the exception of the missile tests, has been restrained, and the general belief is that Japan can contribute to the economic stabilisation of the North. For instance, a December 1996 PARC report on Japan’s foreign policy in the Asia-Pacific stated that if North-South dialogue progresses, then this could lead to: The normalisation of Japan-North Korea relations which will be crucial for the reconstruction of the North Korean economy. As a result of the expected largescale transfer of Japanese capital and technology to North Korea following normalisation, it will be possible to some extent for the North to improve its infrastructure, to renew its industrial base, to utilise its good-quality labour force, and to develop labour-intensive export industries.7 As the report makes clear, Japanese support for the soft landing is largely dependent on the normalisation of relations, and LDP members have shown renewed and sporadic enthusiasm for normalisation since the nuclear crisis, taking part in joint LDP—SDPJ— Sakigake missions to the North in March 1995 and November 1997. The motivations for LDP members to seek to engage North Korea are still very much the same as at the time of the Kanemaru mission in September 1990. The basic diplomatic motivation is that improved Japan-North Korea relations will clear up the unfortunate legacy of colonialism, and have a positive effect in alleviating the political and diplomatic isolation of the North which has been responsible for its aggressive behaviour. In turn, the hope is that this will have beneficial effects for North-South rapprochement and the general security environment of Northeast Asia. In the same way as the Kanemaru mission and the Fujisanmaru problem, LDP members are also very much concerned with the humanitarian issues of the prevention of mass starvation in the North, securing North Korean assent for the continued visits of Nihonjinzuma to Japan, and North Korean cooperation in a resolution of the racchi jiken issue. Hence, the three-party delegation in November 1997 raised these issues in talks with the KWP as well as inspecting agricultural conditions in the North, and in March 1998 the LDP sent a mission to the North to inspect flood damage. In addition, narrower constituency and financial interests

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continue to form essential elements for LDP interest in engagement with the North. Diet members from constituencies on the Sea of Japan coast still hope for improved economic exchange with North Korea and the conclusion of a long-term fishing agreement following the expiry in 1992 of the 1977 provisional agreement. The lure of financial paybacks from a settlement of the ‘economic cooperation’ and compensation issues left over from the 1990–92 normalisation talks is also still strong.8 Thus, despite Kanemaru’s downfall in the Sagawa Kyūbin scandal in 1992 and then his death in 1996, in tandem with the death of Watanabe Michio in 1995, which resulted in the loss of two influential LDP faction bosses willing to push for improved Japan-North Korea relations, a number of other prominent LDP politicians have emerged in support of engagement with North Korea since the conclusion of the nuclear crisis. Again many of these have been drawn from Kanemaru’s own faction, which has passed from the leadership of Tanaka Kakuei to Takeshita Noboru and to Obuchi Keizō, and which has taken the chief role in guiding improvements in Japan-North Korea relations ever since the period of the Tanaka administration and the foundation of the Dietmen’s League for the Promotion of Japan-North Korea friendship in 1971 under Tanaka faction member Kuno Chūji. Therefore, the second most senior LDP member to accompany the threeparty delegation in November 1997 was Nonaka Hiromu, Obuchi faction member and then LDP Deputy Secretary General; while the delegation was led by Mori Yoshirō, a member of the Mitsuzuka faction and then Chairman of the General Council of the LDP, but known to be closely associated with Obuchi, a fellow Waseda University graduate. Obuchi himself as Foreign Minister was initially an open advocate of improved relations with North Korea, stating in the Diet in November 1997 and March 1998 that Japan ‘should move as quickly as possible’ for the restart of normalisation negotiations, and should ‘work energetically to engage in the North Korean problem and open the way for North Korea to enter international society’.9 It was also no coincidence that his appointment to the MOFA in September 1997 was followed the next month by the announcement of new food aid for North Korea and the invitation for the three-party delegation to visit North Korea. But even though the Obuchi faction regards the improvement of relations with North Korea and possible access to the last great source of untapped ODA funds as its exclusive domain, it appears that other prominent LDP members and faction members have intruded increasingly into this area of party-to-party diplomacy and are rumoured to have begun to compete for a piece of the potential financial bonanza. Yamasaki Taku, a member of the Nakasone faction (formerly the Watanabe Michio faction), and a former Director General of the JDA, Minister of Construction, and Chairman of PARC, although expressing concern over the continuing security problems of inter-Korean confrontation, indicated support for the provision of rice aid to North Korea in 1995 and an early move to the resumption of normalisation talks. Yamasaki has denied press reports that he constitutes part of the ‘North Korea lobby’ in the LDP, arguing that his experience of North Korean affairs is ‘zero’, but it is also the case that he visited the North in June 1994 in an apparent attempt to defuse the nuclear crisis, and is regarded by the Chōsensōren at least as a ‘friend of North Korea’.10 Katō Kōichi, a leading member of the Miyazawa Kiichi faction, former Director General of the JDA, Chief Cabinet Secretary, Chairman of PARC, and until July 1998 LDP Secretary General, has also been closely involved in

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efforts to improve relations with North Korea. As Chairman of PARC in 1995, he acted on his own initiative in negotiating the provision of rice aid from Japan to North Korea, and the North’s regime is believed to have passed over its normal channels of communication with the Japanese government—the SDPJ and Chōsensōren—in favour of direct talks with Katō, who it seems to have regarded at the time as a figure similar to Kanemaru with the necessary personal authority to push forward independently bilateral relations.11 Moreover, the unsubstantiated speculation is that, apart from obvious humanitarian considerations, Katō’s interest in food aid for the North was provoked by the desire to wrest control of contacts with North Korea and the potential flow of North Korean political funds away from the Obuchi faction and redirect it to his own Miyazawa faction.12 There is then a pool of influential LDP politicians which is relatively keen to see the improvement of Japan-North Korea relations and Japan’s extension of economic power for security ends in this case. However, at the same time, the actual experience of negotiating directly with North Korea has acted to deter many of these same politicians from expending further political energy on the problem. North Korea by exploiting its nuclear card and other aggressive behaviour, has used up much of its reserves of good will in the LDP, and this has been compounded since the end of the nuclear crisis by its perceived lack of cooperation on the issues of Nihonjnzuma and racchi jiken.13 Certain LDP figures, such as Nakayama Masaaki, leader of the LDP flood damage inspection team to North Korea in March 1998, have argued that the humanitarian issues of Nihonjinzuma, racchi jiken, and food aid should be dealt with separately from each other and from the political issue of normalisation.14 But as will be seen in later sections on the MOFA and mass media, LDP politicians have been under pressure from these quarters to link progress on humanitarian and political issues with each other, and have shown extreme dissatisfaction with the North’s report in June 1998 that it could find no trace of any Japanese citizens that may have disappeared in the North (even though the Japanese MOFA had used the term yukue fumei instead of racchi jiken as a form of compromise to avoid accusing the North of illegal abductions to which it obviously would not admit), and with its decision to cancel the third round of visits of Nihonjinzuma to Japan. The result was to prompt even Mori Yoshirō, the leader of the November 1997 three-party mission and a senior LDP figure in favour of improved relations with North Korea, to conclude in exasperation that, ‘North Korea obviously is not serious about normalisation with Japan, 1 really cannot tell what their true intention is.’15 Pyongyang’s actions also alienated the normally mild-mannered Obuchi, one of the North’s potentially strongest allies in the LDP, who as Foreign Minister commented disappointedly at the time that, ‘Rather than any impression of progress in bilateral relations, I have to say that this seems to me to be a regression’.16 As noted in Chapter 3, following Obuchi’s appointment as Prime Minister in July 1998 there were some fresh hopes of progress in bilateral relations, especially with the new premier’s proposal at the start of the following month for North Korean atomic bomb victims to receive treatment in Japan, and his assembling of a team of cabinet and party officials seen to be in favour of improved ties with North Korea, including Nonaka as Chief Cabinet Secretary and Mori as LDP Secretary General. These hopes, though, were soon put paid to by the Taepodong-1 missile test, which forced the government to

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suspend any initiatives for normalisation talks and to impose limited sanctions on North Korea. Thus, even with Obuchi’s succession to the premiership, he and his cabinet colleagues as of September 1998 have lost patience with North Korea and have shown comparatively little interest in using their expanded authority to improve bilateral relations while the racchi jiken, Nihonjinzuma, and missile problems continue. The domestic political incentives for engaging North Korea have also been reduced for LDP politicians in recent years. Most of those Diet members with an interest in North Korea are either from Sea of Japan coastline constituencies or areas with large Korean resident populations, and the awareness is that the national constituency to support improved Japan-North relations is currently too narrow to carry opinion within the LDP towards active engagement. Moreover, public opinion has remained highly distrustful of North Korea, judging it to be the main military threat to Japan in the post-Cold War period due to the nuclear crisis and Taepodong-1 test, and is certainly in no mood to make concessions to the North’s regime which continues to be portrayed in much of the Japanese media as single-handedly obstructing progress on food aid, racchi jiken, Nihonjinzuma, and of sponsoring narcotics smuggling to Japan.17 The financial benefits of dealing with North Korea also appear to be on the decline, as the bursting of the ‘bubble economy’ in Japan is believed to have reduced the ability of the Chōsensōren to channel funds to the LDP, and the Obuchi faction, jealous of its designated place as first in line for any financial hand-outs to be achieved from normalisation, seems to have worked to reassert his control over the process with Obuchi’s appointment as Foreign Minister and his taking the decision to provide food aid in late 1997, and then his appointment as Prime Minister in 1998. Indeed, even if other sections of the LDP are able to gain access to these political funds it is unlikely that the benefits of these outweigh the very real political risks of being seen to be associated with efforts to improve Japan-North Korea relations. As has been seen in Chapter 3, Kanemaru’s role in the normalisation process invited heavy media and public criticism, and really marked the first in a series of political miscalculations which led to his downfall in the Sagawa Kyūbin scandal in August 1992.18 The removal of Kanemaru from political influence proved the catalyst for the breakdown of LDP one-party rule and the 1955 political system described in Chapter 1, and demonstrated to his LDP colleagues the high political risks of involvement with North Korean affairs. The lessons of Kanemaru’s downfall were also almost visited upon Katō for his part in the rice aid negotiations of 1995. The rumours of financial benefits for Katō were sufficient to ensure that the image of financial intrigue stuck to him also, and severe embarrassment was then caused to the Japanese government by the claims of one North Korean official that the rice aid formed part of Japan’s colonial compensation, forcing the then Chief Cabinet Secretary, Nozaka Kōken, to issue a public denial.19 The consequence of Katō’s being hit by the same North Korea ‘jinx’ as Kanemaru seems to have been to persuade him to back away from further involvement with North Korea since 1995. The political risks and problems of ‘doing business’ with the North are well illustrated by Nonaka Hiromu’s comments made before his appointment as Chief Cabinet Secretary: The Three-Party Joint Declaration included provisions on post-war compensation, and it was said that Kanemaru sold his country out. When

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Watanabe Michio went to North Korea and helped to provide food aid, and when Katō Kōichi as PARC Chairman arranged food aid, they were accused of treachery. All politicians who get caught up in this [task of improving JapanNorth Korea relations] have to run a heavy political risk. This is really an unfortunate situation. Therefore, it is only older politicians like me who having nothing to lose by getting hurt politically that can persevere with the task.20 But despite Nonaka’s proclaimed political bravery, he himself was also later to be burnt politically by his involvement with North Korea. For as Chief Cabinet Secretary in September 1998 at the time of the Taepodong-1 test, but also as a senior LDP figure known to have close connections with the Pyongyang regime and to have visited North Korea a total of six times in an eight-year period, he was subject to media criticism for his pro-North Korea stance in the past, and then as the government’s spokesman he was forced to undergo the political humiliation of having to condemn publicly the North for its military provocation and to eat his own words about the need for rapprochement with it. In this situation, where active pursuit of engagement with North Korea promises neither votes nor money, most LDP politicians have been persuaded to shelve the issue of normalisation for the time being and are relatively content for Japan to support the ‘soft landing’ by the occasional provision of food aid to North Korea and by energy assistance via KEDO; although these measures were made less palatable for LDP members by North Korea’s 1998 missile test. The passivity of the ‘North Korea lobby’ in the LDP is perhaps best shown by the fact that since late 1995 the Dietmen’s League for the Promotion of Japan-North Korea Friendship has been ‘temporarily’ disbanded, whereas a new Dietmen’s league has appeared to pressure for a resolution to the racchi jiken.21 Instead, the attention of the majority of LDP members has shifted to other issues connected with Korean Peninsula security. For even though the general awareness of the LDP since the end of the nuclear crisis is that both the capability and intention of North Korea to pose a serious military threat to the security of Japan is on the decline, there are no LDP members who are prepared to ignore the irritant of North Korean missiles, and, most crucially, the political damage that the North’s military activity has inflicted upon the US alliance system in Northeast Asia. As already discussed in Chapter 3, the main impact of the nuclear crisis was that it revealed North Korea’s ability to undermine the solidarity of the US-South Korea alliance, and in a similar way exposed the lack of political and military preparedness of the US-Japan alliance in the post-Cold War period to deal with security contingencies either on the Korean Peninsula or elsewhere in the Asia-Pacific region. Faced with the fear that the North Korean political security threat could cause the collapse of both alliances and thus the very perceived foundation of Japan’s security policy, the overriding priority of LDP politicians has been to demonstrate support for the US’s security system in the region by strengthening Japan-South Korea diplomatic relations and by placing the US-Japan alliance back on a stable political and military footing. Even those LDP members who have long campaigned for improved relations with North Korea acknowledge that Japan’s chief priority must be to preserve good relations with South Korea as the US’s alliance partner and as a state of key strategic importance for Japan’s

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own security.22 Hence, most LDP members are reluctant to engage Pyongyang unless they are confident that it will not upset the South’s security position versus the North and have gained a measure of assent from the Seoul government. Meanwhile, in order to buttress the alliance, and as detailed later in this chapter, LDP politicians have invested a great deal of time through deliberations in PARC’s Security Research Council (SRC) and the activation of their human networks with the US defence establishment to carry out preplanning for the revision of the 1978 Guidelines for Japan-US Defence Cooperation.23 The overall impression is, then, of LDP policy towards North Korea as having entered a process of drift. The basic recognition of LDP politicians is that the ‘soft landing’ and engagement are the optimum policy options to resolve the North Korean security problem, but they are restrained from more active efforts in this area by the problems of the racchi jiken, Nihonjinzuma, and missile tests, and by anxieties about implication in financial scandals. Added to this, LDP members are not prepared to take the risks of engaging North Korea if this conflicts with South Korea’s security interests, and they have poured most of their foreign and security policy-making energies into revitalising the US-Japan alliance. Finally, the political confusion caused by the LDP’s defeat in the House of Councillors election in July 1998 and problems of domestic financial reform have meant that the issue of improved relations with North Korea has been pushed even further down the policy-making agenda. Given this situation, the prospects of any policymaking impetus from the governing LDP for greater mobilisation of Japan’s economic power for security ends in the case of North Korea are uncertain. SDPJ and Sakigake The SDPJ and Sakigake have been the other political parties with a long track record of efforts to improve Japan-North Korea relations. SDPJ officials such as Fukada Hajime and Doi Takako have maintained close links with the KWP leadership and the North Korean community in Japan, and in the past the SDPJ often acted as the information pipeline between North Korea and the LDP and the Japanese government. The SDPJ was in a stronger position to promote Japan-North Korea ties from 1993 onwards due to its participation in anti-LDP and then LDP coalition governments. Thus, whilst the SDPJ condemned North Korea’s brinkmanship during the nuclear crisis, it was also resistant to the imposition of UN economic sanctions, preferring instead a negotiated settlement, and the SDPJ’s refusal to acquiesce in the sanctions option was one of the reasons for disunity in the Hata administration over North Korea policy and its ultimate fall in June 1994. SDPJ influence on the policy-making process towards North Korea reached its height with Murayama’s assumption of the premiership of the LDP—SDPJ—Sakigake government in the same month. The Murayama administration was able in October of the same year to pledge support for the Agreed Framework and KEDO, and helped to initiate the three-party mission to North Korea in March 1995. Murayama’s resignation as prime minister in January 1996 marked the beginnings of reduced SDPJ influence over the policy-making process. But the SDPJ as a member of the Hashimoto coalition government until October 1996 was able to keep North Korea on the policy agenda, and then, continuing to work with the LDP outside the cabinet on financial and security issues until June 1998, took part also in the three-party mission to North Korea in November

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1997. In addition, in April 1998 the Chōsensōren put forward unsuccessful proposals for ex-Prime Minister Murayama to visit North Korea in order to further bilateral ties. The basic policy of the SDPJ after the nuclear crisis has been to downplay the military security threat from North Korea and to favour vigorous Japanese engagement of the North. For instance, an SDPJ security research council report of 12 April 1996 noted that, ‘If the activities and strengths of North Korea are evaluated objectively, it can be considered that there is no immediate danger of a military crisis on the Korean Peninsula.’24 The SDPJ leadership also suspects that the LDP and Japanese government have used the North Korean military threat as a means to justify the April 1996 US-Japan Joint Declaration on Security and other efforts to strengthen the US-Japan alliance discussed later in this chapter. Hence, Itō Shigeru, Secretary General of the SDPJ and chairman of its Policy Affairs Research Council, noted that: The Joint Declaration indicates North Korea and the Korean Peninsula as the biggest concerns [for East Asian security]. However, we [members of the SDPJ Policy Affairs Research Council] think that we have to prepare a ‘soft landing’ for the DPRK in international society and promote friendly relations...Japan has a big role to play in the diplomatic strategy to stabilise North Korea.25 The SDPJ’s support for the ‘soft-landing’ policy has taken the form of calls for increased Japanese government food aid to the North and the rapid restart of normalisation talks. SDPJ Diet members such as Itō Shigeru and Den Hideo, both members of the three-party mission to North Korea in November 1997, are more inclined than their LDP counterparts to separate humanitarian issues from each other and from political issues, believe it is unacceptable that the Japanese government should withhold food aid to North Korean famine victims until there is a solution to the racchi jiken or missile problem, and argue that only by restarting the normalisation talks as a forum for discussion can any real progress be made in finding a solution to both the racchi jiken and bilateral security problems.26 Apart from these humanitarian and diplomatic considerations, the SDPJ is motivated to engage North Korea for the same financial and constituency incentives as the LDP. The SDPJ leadership has been an enthusiastic sponsor of enhanced economic interdependency between Japan and North Korea through the Sea of Japan economic zone concept, and SDPJ figures such as Murayama have strong connections with fishing interests.27 Moreover, the SDPJ, as at the time of the pachinko scandal prior to the Kanemaru mission, is also thought in the past to have taken financial donations from the Chōsensōren.28 However, despite the SDPJ’s unqualified support for the ‘soft landing’, it has had only a limited ability to take initiatives to promote Japan-North Korea relations. In a similar fashion to LDP politicians, SDPJ members are wary of the stigma of financial scandal associated with North Korea and any backlash from public feeling that may come from involvement in North Korean affairs. But the main restraint on SDPJ engagement of North Korea is the simple decline in recent years of its political strength. The defections of key party members such as Kubo Wataru to the DPJ, and the loss of seats in successive elections for the House of Representatives in October 1996 and House of Councillors in

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July 1998 have marginalised the SDPJ in terms of political importance. The North Korean government for one is certainly conscious of the SDPJ’s political weakness, and ever since the Kanemaru mission has discarded the SDPJ as the main link to the Japanese political establishment and preferred instead to forge direct links with LDP faction leaders. The SDPJ’s decision to end all policy cooperation with the LDP prior to the July 1998 elections only served to confirm that its influence on the policy-making process towards North Korea had been largely broken. The Sakigake has fared even worse than the SDPJ in terms of its decline in Diet representation and political influence to push forward Japan-North Korea relations. Takemura Masayoshi, the leader of the Sakigake, during his time as an LDP Diet member led the advance team for the Kanemaru mission in 1990, and Sakigake members have generally been in favour of rapid Japan-North Korea normalisation, having taken part in both three-party missions to North Korea since 1995. But the Sakigake’s reduction to the status of a micro-party due to defections to the DPJ and failure to gain seats in the elections of 1996 and 1998, leaving it with a combined total of only two seats in both houses, and the cessation of policy cooperation with the LDP since July 1998, have all written off the party as a major policy actor with regard to North Korea. Consequently, it can be seen that neither the SDPJ nor the Sakigake are able to exercise the necessary political influence to cajole the LDP into greater support for the ‘soft-landing’ policy and to arrest its drift towards concentration on the military and alliance aspects of the North Korean security problem. Democratic Party of Japan The main beneficiary of the SDPJ’s and Sakigake’s decline in political influence has been the DPJ and it may be able to substitute for both of them as a policy-making actor capable of generating momentum for engagement with North Korea. Founded by Diet members from the SDPJ, Sakigake, and the now defunct NFP, the DPJ since early 1998 has become the main opposition party and experienced considerable success in the elections of the same year. Official DPJ policy, as outlined in a September 1997 internal report, notes both the explosive and implosive aspects of the North Korean security policy and advocates Japanese government support for the ‘soft landing’ and the early normalisation of bilateral relations.29 The sympathetic stance of the DPJ towards normalisation with North Korea is indicated by the fact that both the party leader, Kan Naoto, and his deputy, Hatoyama Yukio, visited the North as representatives of the Sakigake in March 1995. Furthermore, the Chōsensōren certainly regards Kan as another potential ‘friend’ of North Korea, and ex-SDPJ member Kubo Wataru and ex-LDP/NFP member Ishii Hajime have close links with the KWP.30 However, the ability or willingness of the DPJ to influence policy towards North Korea remains doubtful. The September 1997 policy document echoes LDP policy in that it too stresses that progress in normalisation talks is dependent upon a resolution to the problems of racchi jiken, drugs smuggling to Japan, and missiles, and that the provision of food aid to the North should only be undertaken in close consultation with South Korea. Moreover, in reaction to the Taepodong-1 missile test in 1998, Kan proposed that Japan should improve its defences against North Korea and other regional threats by the

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acquisition of its own surveillance satellite. DPJ caution on North Korea is reinforced by the fact that a number of its members are drawn from the former NFP and tend towards a harder line on food aid and racchi jiken, and that it is preoccupied at present not with foreign policy, but with challenging the LDP on the domestic issue of financial reform. Japan Communist Party The JCP remains in implacable opposition to the LDP outside the government, but the recent resurgence of support for the party following the 1996 and 1998 elections, in which it came close to doubling the number of its House of Representatives and House of Councillors seats, means that it has at least strengthened its voice on issues of foreign and security policy. To some degree the JCP is obliged to support North Korea against what it sees as the extension of US imperialism in the Asia-Pacific region and the Korean Peninsula through the mechanism of the US-Japan and US-ROK security alliances.31 In 1994 the JCP argued that the nuclear crisis was in part manufactured by the US as pretext to further entangle Japan in the US alliance system, and since then has continued to heap criticism upon the US and Japanese governments for undertaking a review of the Guidelines for Defence Cooperation based upon the scenario of a Korean contingency.32 But at the same time as attacking the US-Japan security system, the JCP has been reluctant to argue for the alternative policy of engagement with North Korea. This can probably be ascribed to the fact that relations between the JCP and North Korea have been poor since 1954, when the latter ordered its loyalists in Japan to defect from the JCP to form what was to become by 1955 the Chōsensōren.33 Relations seem to have been further damaged by the JCP’s breaking off relations with the Soviet Union and Chinese Communist parties, North Korea’s chief international sponsors, in 1964 and 1966 respectively. In this situation of the JCP being unable to condemn North Korea because it might imply support for US military policy, but also being unable to defend the North for reasons of political ideology, it seems to have chosen to remain largely silent on North Korean affairs, and other related issues such as KEDO and food aid. The normalisation of relations between the JCP and Chinese Communist Party in July 1998 may lead to a corresponding improvement in ties with the KWP, but at present the JCP is unlikely to expend much political capital on advancing Japanese government engagement of North Korea. NFP and Liberal Party In the period between its formation in December 1994 and its eventual disintegration in late 1997, and reflecting the diverse background of its membership, the NFP as the main opposition party displayed a variety of views on the North Korean security problem. ‘Dovish’ members such as Ishii Hajime who later defected to the DPJ argued that North Korea presented virtually no threat to Japanese security and that the government should increase its assistance for the ‘soft-landing’ policy.34 However, the bulk of NFP members, whilst generally supportive of KEDO and the concept of the ‘soft landing’ as a means of stabilising North Korea, were more cautious in the extent to which they were willing to actively seek engagement with the North. Like their counterparts in the LDP,

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by early 1997 many NFP members were beginning to view food aid to North Korea as virtually conditional upon a resolution to the racchi jiken. For example, Matsuzawa Shigefumi, an NFP member who later defected to the DPJ, stated in the House of Representatives Standing Committee on Foreign Affairs in April 1997 that: The suspicions about racchi jiken are a matter of human rights which affect the very lives of Japanese citizens...I realise that the North Korean people are desperate for food, but I think that we should link the food aid problem with that of the racchi jiken and the human rights of Japanese citizens, and make it clear to North Korea that as long as it does not provide information on the racchi jiken, then regrettably we cannot respond to requests for food aid...I do not like to use the expression ‘strategic aid’, but this is one form of diplomatic leverage and a means to resolve the racchi jiken.35 NFP members were also concerned, like the LDP, about the military threat posed to Japan by North Korean missiles, as well as the political damage that the North Korean nuclear crisis had inflicted upon the smooth functioning of the US-Japan alliance. Representative of this group of NFP members was Aichi Kazuo, who later rejoined the LDP from the NFP in 1997, but had been Director General of the JDA between December 1993 and April 1994 under the Hosokawa administration, and had thus experienced first-hand the problems of Japan’s making clear to the US the extent of logistical support it could provide in a Korean contingency. In November 1995 he presented to the NFP Security Policy Dietmen’s League a private policy paper which stated that, despite the progress of KEDO, North Korea was still at present the main source of instability in the region due to its missile programme and implosive security problems, and that recent crises had revealed the lack of mutual confidence in and operability of the US-Japan alliance. Aichi proposed that, in order to upgrade the alliance to deal with the post-Cold War security environment, the Japanese government should investigate the provision of various base facilities in Japan to the US and conclude an ACSA.36 In Aichi’s view, therefore, the security problems posed by North Korea had been above all a test of the political solidarity and durability of the US-Japan alliance, and it is this aspect of Korean Peninsula security and the strengthening of the alliance to which Japanese policy-making energies should be devoted.37 For example, during a discussion on security with LDP and SDPJ members in July 1996, Aichi was involved in the following exchange: MODERATOR: In the event of an armed conflict occurring between North and South Korea on the Korean Peninsula, under the terms of the US-Japan security treaty and before the dispatch of US forces from bases in Japan, there should be consultations between Japan and the US. In this situation do you think that Japan can say ‘no’ to the dispatch of US troops? AICHI: Japan has to answer ‘yes’. The US-Japan security treaty functions for stability in the Far East because of the belief that US forces can move freely in times of crisis, and this gives them a deterrent value for stability in the surrounding region. MODERATOR: If Japan says ‘yes’, this will mean that Japan has entered into a state of

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belligerency with North Korea. AICHI: Even if that is so, what must receive priority is the US-Japan alliance. The arena of international relations is not always a peaceful one, and it is necessary to comprehend this reality by facing it head on.38 Concentration on the North Korean political security threat and implications for the USJapan alliance as opposed to efforts to engage the North were also a feature of the policy of the Ozawa group in the NFP. The general acceptance was that the KEDO project was one policy avenue which needed to be explored in order to open up and stabilise the North. But at the same time, there was some dissatisfaction with the Agreed Framework as a seeming reward for North Korea’s aggressive behaviour, and a fait accompli which Japan as the US’s alliance partner had little choice but to go along with.39 There was also considerable scepticism among this group about the genuine willingness of the North to reform its economy and cooperate on the racchi jiken issue. The Ozawa group’s relative resistance to the engagement of North Korea was reinforced by the emphasis that it placed upon North Korea as a military threat and was a measure of Japan’s commitment to international security and the US-Japan alliance. Ozawa himself indicated that the North Korean nuclear threat might have been sufficient to justify the despatch of the SDF overseas, when he stated in an interview with a South Korean newspaper in 1993 that: If it looks as if North Korea will cause problems, Japan, the US, and South Korea can band together and deal with the problem within the framework of the UN. Of course, Japan would not dispatch troops independently, but as a member of the UN and with the approval of South Korea.40 For Ozawa, then, a crisis on the Korean Peninsula provoked by North Korea was one instance whereby Japan could have fulfilled its responsibilities to the international community as a ‘normal’ country by the despatch of troops to UN operations in a conflict situation. Moreover, his followers in the NFP appear to have viewed North Korea’s nuclear and missile threats as powerful illustrations of the need for Japan to increase its support for the US alliance system by pushing ahead with the review of the Guidelines for Japan-US Defence Cooperation and Japan’s participation in Theatre Missile Defence (TMD), discussed later in this chapter.41 The Liberal Party, which consists predominantly of followers of the Ozawa personality cult from the NFP, does not yet appear to have produced a clear policy on North Korea. But given the make-up of the party and the stated opposition of some of its members, such as House of Councillors representative Tamura Hideaki, to food aid to North Korea while the racchi jiken remain unresolved, coupled with the party’s strong support for the redefinition of the US-Japan alliance, there is unlikely to be any more policy impetus from the Liberal Party than from the NFP for Japan’s engagement of North Korea.42 In fact, the conclusion from the above analysis of the attitudes of the main political parties towards North Korea has to be that, for a variety of reasons, there is no individual politician or major group in any political party willing to expend the necessary political energy to mobilise Japan’s economic power for security purposes in this instance. Instead policy-making priorities have been directed to the maintenance of the US-Japan alliance

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and to the avoidance of damaging relations with South Korea.

Central bureaucracy Ministry of Foreign Affairs The role of the MOFA in shaping Japanese policy towards North Korea is crucial as it supervises the Japanese government’s bilateral dealings with North Korea in the areas of diplomatic relations, economic cooperation, and security policy. Furthermore, the MOFA is responsible for coordinating Japanese policy towards North Korea within the broader framework of US-Japan and Japan-South Korea relations. As already outlined in Chapter 3, the basic policy of the MOFA has been a recognition of the need to normalise relations with North Korea and fairly sustained support for the US State Department’s ‘softlanding’ policy via participation in KEDO and the provision of food aid on a humanitarian basis. But despite the MOFA’s belief in the value of economic power as a means to resolve the North Korean security problem, it has also for a number of reasons exercised extreme caution in dealing with the North and applied a slow brake to the pace of bilateral engagement. The first of these reasons is the awareness of the MOFA, in a similar fashion to the politicians, that involvement with the problem of North Korea carries high political risk and can damage the status of individuals and organisations. The MOFA has been described in the past as having developed a North Korea ‘allergy’ due to its experience of what it sees as the North’s underhand and undiplomatic negotiating tactics, and MOFA officials were subject to media criticism for not acting to prevent Kanemaru’s inclusion of compensation concessions in the Three-Party Declaration in 1990.43 Consequently, since the conclusion of the nuclear crisis, MOFA officials have remained disdainful of the North’s obvious attempts to divide Japan from South Korea and the US, and sceptical about the chances for the rehabilitation of the North Korean economy and the opportunities for the achievement of Japan-North Korea normalisation as long as the North persists with its policy of prioritising relations with the US in the seeming hope that Japan will then inevitably follow the US diplomatic lead.44 For some, the feasibility of the ‘soft landing’ is doubtful unless North Korea is prepared to embark upon serious reform, and the preferred description of the policy is one of a ‘controlled crash’ designed simply to prop up the regime long enough to avoid the precipitation of conflict on the Peninsula.45 Moreover, even though many LDP politicians at the time regarded the August 1997 agreement to restart normalisation talks some time in the future as a major breakthrough in Japan-North Korea ties, the MOFA’s cautious assessment was that it represented more a process of restoring bilateral relations from a ‘state of minus to zero’.46 The MOFA’s gloomy view of relations with North Korea was then reinforced by the missile test in 1998 which forced it to impose limited sanctions on the North and pushed bilateral ties firmly back into the negative. The impression is, then, that the MOFA would often prefer to foot-drag and avoid having to deal with the thorny issue of North Korea altogether. However, MOFA officials also accept that, in spite of the practical problems of negotiating with North Korea, it is a

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task which has to be undertaken for the general benefit of Japanese and regional security. Faced with this reality, the determined policy of the MOFA has been to ensure that it at least gains full control of the conduct and pace of the negotiating process and that there will no repeat of the embarrassment of the Three-Party Declaration in 1990. The official policy line of the MOFA is that it welcomes party-to-party diplomacy as a means of maintaining dialogue and exchange with North Korea, but it is clearly also distrustful of the propensity of the politicians, and in particular the SDPJ, which it sees as duped to some extent by its supposed ‘friends’ in the KWP, to make concessions on compensation and economic aid.47 Therefore, the MOFA has worked to constrict these channels of ‘dual’ and ‘individual’ party diplomacy through efforts such as persuading the three-party mission to North Korea in November 1997 not to issue a joint statement with the KWP which might have threatened to undermine the Japanese government’s negotiating position. MOFA officials also seem to have worked hard on their political master Obuchi Keizō from the time of his appointment as Foreign Minister in 1997 until his promotion to Prime Minister in 1998 in order to talk him out of his enthusiasm for normalisation with North Korea, and the contrast between his initial energetic pronouncements on normalisation at the time of his appointment to the Foreign Ministry and his later passivity towards North Korea have been striking. In addition, the former Director General of the Asian Affairs Bureau, Katō Ryōzō, initiated a second strategy of making inter-party contacts largely redundant as a diplomatic channel by patiently building up the MOFA’s own direct links with the North Korean government. Informal contacts between Japanese and North Korean diplomats began in Beijing in 1996, and eventually produced agreement for the government-level negotiations of August 1997. Having battled to gain control of the negotiating process with North Korea, the MOFA has made it clear that the extension of significant Japanese economic power to assist the North is still restricted by progress in normalisation talks. For instance, in the House of Representatives Standing Committee on Foreign Affairs in June 1997, Kondō Shōichi, a DPJ member, attacked the reluctance of the MOFA to offer economic aid to the North by stating that, ‘I believe we need to find a peaceful solution to the North Korean problem...That Japan with its great economic power should contribute more actively to finding a resolution’, to which then Foreign Minister Ikeda responded with the MOFA’s official position: The Diet member suggests that as Japan has economic power and as North Korea is requesting assistance, then we should pour economic resources into resolving this problem...But the general policy of Japan has been that the extension of economic power is premised upon normalised relations. For countries with which we have no diplomatic relations only small-scale humanitarian and emergency aid is possible via international agencies.48 Furthermore, the MOFA has made it clear that it will not pursue normalisation with North Korea at any price—political, diplomatic, or economic—and that it expects reciprocation (or perhaps total capitulation viewed from the North Korean perspective) on a number of bilateral issues. The MOFA conducted normalisation talks between 1990 and 1992 without preconditions, but clearly pressed the nuclear issue to the point where

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North Korea felt it either had to submit to Japanese demands or break off the talks. Since then the MOFA has maintained the stance of no preconditions for talks, but has clearly selected and linked together issues which it wants to see progress on before the resumption of negotiations. As the August 1997 talks showed, the MOFA has insisted that the North give concessions on the racchi jiken and Nihonjinzuma before it is prepared to budge on the provision of food aid and normalisation talks, and called a halt to all efforts to consider restarting normalisation talks in September 1998 to protest against the North’s Taepodong-1 test. To some extent, the MOFA regards problems such as Nihonjinzuma and racchi jiken as unwelcome because they have been thrust upon it by media and LDP pressure and serve only to further complicate the bilateral negotiating agenda. In particular, the MOFA does not really regard the Nihonjinzuma as within the sphere of its responsibilities due to their abandonment of Japanese citizenship. But at the same time they are also issues which the MOFA can shelter behind when necessary to slow down the progress of normalisation talks, and once charged with the problem the MOFA has been determined that it should persuade North Korea to show flexibility; for as one official noted, ‘Japanese public opinion of North Korea is very low and wonders why we should make so many concessions for the North to assist us on these problems... We are certainly not going to beg North Korea for normalisation’.49 MOFA officials also argue that even if normalisation is eventually achieved, the ability of the Japanese government to assist North Korea economically will still be limited. They make clear that Japanese aid will only be effective if the North is prepared to rectify its structural economic problems; that Japan certainly has no bottomless pit of cash to provide to the North; and that the only way for a guaranteed ‘soft landing’ is for the growth of economic cooperation between North and South Korea. As one official remarked, ‘There is only one country on this earth that can save North Korea economically, and that is South Korea.’50 Finally, overriding all these concerns restricting MOFA engagement of the North are the military and alliance-politics aspects of the North Korean security problem, and the desire not to alienate South Korea. As outlined in Chapter 3, for the MOFA the importance of the security and economic relationship with Seoul far outweighs that with Pyongyang, and in official statements the MOFA has made it clear that it will maintain the renkei policy first implemented at the time of the 1990–2 normalisation talks, and will do nothing to harm bilateral relations with South Korea.51 Although the MOFA continues to argue that this policy places no formal restrictions upon Japan’s diplomatic freedom, the linkage in practice between improvements in Japan-North Korea and North-South relations has been further strengthened since 1996 with Japan’s support for the four-way peace talks. MOFA officials stress that the upgrading of ties with North Korea should be carried out in a way that promotes general stability on the Korean Peninsula, which is dependent upon progress of North-South dialogue and the four-way talks as the forum for that dialogue. The outcome of the renkei policy is that the MOFA is unlikely to embark upon any decisive initiatives to normalise relations with North Korea or to provide significant economic aid unless it can gain the implicit approval of South Korea, and synchronise its efforts with some perceptible improvement in North-South relations. Thus, the timing of the August 1997 talks between Japan and North Korea can be explained by the parallel commencement in the same month of the preliminary four-way

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talks, and until there is further progress in North-South relations the MOFA will continue to apply a prudent brake on Japan-North Korea normalisation efforts, and Japanese diplomacy towards the North will follow the ‘stop-go’ rhythm of the four-way talks. Alliance considerations with the US also continue to dictate Japanese policy towards North Korea. The reliance of the MOFA upon US leadership in the ‘soft-landing’ policy means that it is only prepared to engage North Korea at broadly the same pace as the State Department which has not yet moved to normalise relations or fully lift the economic embargo. Even more importantly, and as already outlined in Chapter 3 and then later detailed in this chapter, the political cracks in the alliance revealed at the time of the North Korean nuclear crisis, and later compounded by the Okinawa base issue, have convinced MOFA officials that their current security policy priority with regard to the Korean Peninsula and the Asia-Pacific region as a whole is to restructure the USJapan military alliance, and it is this rather than the ‘soft landing’ which has occupied their policy-making energies. JDA and SDF The JDA and the SDF have traditionally been junior partners to the MOFA in security planning, but as the bodies responsible for the administration and execution of Japan’s defence policy their input into the policy-making process is important, and the role of the JDA has been increased since late 1995 due to its participation alongside the MOFA in SACO and other forums for US-Japan security dialogue.52 Both the JDA and the SDF regard the ‘soft landing’ as the optimum policy for dealing with North Korean explosive and implosive security threats, which they acknowledge are generated largely by economic instability.53 But whilst the MOFA searches for a means to implement the engagement policy, the JDA and the SDF are faced in the meantime with the task of devising a defence against threats such as ballistic missiles and refugee flows, and are aware that their response to these problems has been complicated by the deficiencies in the operability of the US-Japan alliance exposed during the nuclear crisis. Hence, the principal consciousness of the JDA and the SDF with regard to the North Korean security threat is that it has indicated the need for Japan to improve its own individual defence capabilities and to reinforce the political and military alliance with the US. The result of this has been that both organisations have fully supported the review of the Guidelines for Japan-US Defence Cooperation, ACSA, new yūji hōsei research, and continued investigation of, if not yet actual participation in, TMD. The imperative of the JDA and the SDF to strengthen the US-Japan alliance in the post-Cold War period, as first revealed by the nuclear crisis, also seems to have spilled over into the temptation to use North Korea and a Korean Peninsula contingency as the primary means to justify all changes in Japan’s defence policy even if they are designed to counter other threats as well over the long term. SDF officers admit in private that the sources of North Korean military threat towards Japan have been declining since the nuclear crisis, whereas potential Chinese sources of threat are on the increase.54 However, in 1998 the JDA defence white paper continued to give the greatest attention to North Korea over Russia and China in terms of all potential threat phenomena, and to appeal implicitly for Japanese participation in TMD based mainly on the threat from

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North Korean missiles.55 To some extent the JDA’s concentration on the North Korean threat seems to have been proved correct by the Taepodong-1 test in September of the same year, which again pointed up the inability of Japan to fend off North Korean missile terror attacks. But the fixation of the JDA on the North Korean missile threat appears to be a less than balanced appraisal of the security problems which Japan faces, given that the awareness of most independent commentators and SDF and JDA officials themselves is that China’s missiles are of far greater sophistication than North Korea’s, and that China has demonstrated its willingness to use them by conducting tests off the coast of Taiwan in 1995 and 1996. The consequences of the JDA’s outlook on North Korea for Japanese military security policy are discussed later in this chapter, but at this point it is sufficient to note that, even though the JDA and the SDF are not opposed to the ‘soft landing’, these institutions along with the MOFA and the LDP are also not above using the North Korean security problem as an opportunity to strengthen the US-Japan alliance. Ministry of International Trade and Industry The MITI is not concerned directly with the day-to-day planning of security policy, but its formal and informal regulatory power over Japanese trade and investment relations with North Korea means that it has a crucial role in promoting or hampering Japanese economic engagement of the North. The MITI’s provision of export credits to Japanese trading companies in the 1970s was certainly important in supporting the expansion of bilateral trade in this period, and the expectation of the North Korean community in Japan is that the MITI could help to revive trading relations by restarting export credits and providing information to Japanese investors interested in the North.56 The MITI has begun to play a limited role in the Japanese economic engagement of North Korea through its joint management with the MOFA of Japan’s participation in the KEDO project. Nevertheless, the MITI views its task as the profitable and safe expansion of Japanese trade, and is only likely to sponsor private business contacts with North Korea if they can satisfy these criteria. Past experience of North Korea’s failure to meet its debt obligations, and doubts about the extent of economic reform in the North, mean that at present the MITI sees only maximum risk and minimal commercial gain for Japanese corporations operating in the North.57 In addition, the MITI’s caution to prevent the export of dual-use military technology to North Korea means that it views the entire process of Japan-North Korea trade as a potential security risk for Japan. Hence, although it wants KEDO and the ‘soft landing’ to succeed, and will continue to monitor business prospects via JETRO, the MITI will wait until there is an MOFA-led political solution to the debt problem and further signs of economic reform before committing itself to advancing economic engagement with the North.

Business interests As Chapters 2 and 4 have demonstrated, private sector TNCs and economic exchange are the key to the mobilisation of Japanese economic power for security purposes, and

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historically the Japanese business community has performed a crucial role in preparing the ground for the Japanese government’s political and economic engagement of closed or hostile neighbouring states. The most notable example of this was the efforts of Japanese business leaders in the 1960s and 1970s, often with the silent backing of the government through the policy of seikei bunri (separation of politics and economics), to pioneer improvements in Sino-Japanese relations and even to overcome setbacks such as China’s arbitrary cancellation of the joint-venture Baoshan Iron and Steel complex in 1981.58 Private sector diplomacy was also important for the improvement of diplomatic relations between Japan and South Korea in the 1960s. Kimura Masato has demonstrated how between 1960 and 1965 representatives from the subsidiaries of major Japanese corporations located in the Kansai region of Japan paid regular visits to the South, and pressured the Japanese government to move towards the normalisation of bilateral relations.59 These past examples of the Japanese business community’s involvement with China and South Korea demonstrate that it is has a potentially important role in promoting Japan-North Korea engagement. Indeed, in the period between the 1950s and 1970s, it seemed very much as if Japan-North Korea relations would follow the seikei bunri pattern of Sino-Japanese relations, and that Japanese corporations would lead the way in opening up the North economically by establishing trading links first via Hong Kong, and then directly. However, Chapter 4 has also shown how this process came to a halt by the late 1970s due to the debt problem, and that since then the Japanese business community has shown little interest in working to integrate North Korea’s economy into the Northeast Asia region. The end result has been that Japan-North Korea trade has become further ‘Koreanised’ and Japanese private investment in the Rajin-Sonbong FETZ remains minimal. The reasons for the Japanese business community’s reluctance to engage North Korea economically are straightforward. Certainly it is not the case that the Japanese business community denies the potential benefits for security in Northeast Asia of opening up North Korea economically, and nor is it unaware of the investment opportunities in North Korea. For example, the Keidanren (Japan Federation of Economic Organisations), held a symposium in August 1993 concerning investment opportunities in TRADP, and continues to accept trade delegations from North Korea.60 Kadota Hiroshi, the then Director of Asian Affairs at the Keidanren, visited North Korea in November 1995. In Tokyo in July 1996, Masaya Miyoshi, the then Secretary General of the Keidanren, met with Kim Jong-U, the then vice-chairman of North Korea’s External Economic Affairs Commission and the official responsible for the promotion of the Rajin-Sonbong FETZ.61 Japanese companies also have experience of investing in the contiguous Hunchun SEZ in neighbouring China, and visited the Rajin-Sonbong investment forum of September 1996 to monitor the progress of economic reforms. But as described in Chapter 4, investments were only forthcoming from Chōsensōren-affiliated enterprises, and the reluctance of native Japanese corporations to make concrete investments is accounted for by the various problems of conducting business in the North. These problems include the existence of a bureaucracy which is more rigid than in other socialist countries; the unreliability of energy supplies; the difficulty of obtaining suitable raw materials and parts; and the fact that, even though the labour supply may be well disciplined, it is not

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significantly cheaper than in other neighbouring countries. In addition, the debt problems of North Korea have given it the image of an unreliable economic partner, and most businessmen feel that North Korea has yet to understand even the most basic of international business practices.62 Nevertheless, all of the above drawbacks could perhaps be forgiven if it was the case that businessmen saw greater long-term commercial incentives in North Korea. In contrast to Japanese business dealings with China from the 1950s until the 1970s, when the lure of a potential market of hundreds of millions of consumers was great enough to encourage Japanese firms to run the risks of trading with the closed socialist state, North Korea’s small market of 20 million has fewer attractions. Japanese businessmen have also been convinced from an early stage that China’s economic reforms would spread from the SEZs to penetrate the whole country, whereas North Korea has not yet specified its plans to open its market beyond the boundaries of Rajin-Sonbong. Even the concepts of TRADP and the Sea of Japan zone which offer larger regional markets arouse scepticism amongst Japanese businessmen. As one Keidanren official remarked: The people of the three areas [in the TRADP scheme] of China, Russia, and North Korea are basically some of the poorest in Northeast Asia. I really do not want to put down the people of the Sea of Japan side of Japan, but in fact they are also rather poor relative to the rest of Japan. Therefore, looking at the TRADP and the Sea of Japan economic zone, its economic attractions are at present limited. After all, when poor people get together to do business, it does not really amount to much of a market.63 The economic disincentives for Japanese private business to deal with North Korea are reinforced by the political problems. Investors from Japan question the internal stability of the North Korean regime, and the wisdom of investing in a state which has become embroiled in a series of security crises. The biggest political problem, though, is the lack of normalised relations between Japan and North Korea, which means there is no formal mechanism to resolve the debt problem and no immediate prospect for an injection of Japanese ODA. Furthermore, unlike the experience of economic relations with China prior to normalisation in 1972, a seikei bunri approach is not possible as the MITI is unwilling to provide implicit support for Japanese enterprises to trade with North Korea by the provision of export credits, but is prepared to impose economic sanctions on North Korea for security reasons. The outlook for Japan-North Korea business relations at present is then bleak. As one representative of Mitsui Bussan noted, ‘We cannot establish a local office [in North Korea] or make business trips with any ease. It is impossible to ignore political tensions and to make any deals.’ An employee of the Japan-Korea Export Import Trading Company also complained: Private sector economic exchange [between Japan and North Korea] has been going on for thirty years, but it is unstable and we have never had any back-up from the government. Recently there have been the problems of drought and floods, and everybody involved gets even more nervous.64

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The implications of the stagnation in Japan-North Korea business relations for security policy are clear as it strangles at birth any attempt to create a partnership between the Japanese state and private sector actors which can mobilise Japan’s economic power to stabilise the North. The only way to break the vicious circle of a lack of Japanese business interest in North Korea, reinforced by the lack of Japanese government policymaking will to support bilateral economic links, is for the Japanese and North Korean states to take the political initiative to resolve the debt problem and establish the political environment which allows private sector exchange to flow with benefits for security. But as previous sections have shown there is little impetus for this policy from the politicians and bureaucracy, and until there is, the business community will continue to watch from the sidelines and abdicate its role in the policy-making process.

Academic community, mass media, and Chōsensōren The influence of academic opinion upon the policy-making process towards North Korea is hard to evaluate. To some extent, it certainly has a role in shaping the conceptions of those politicians and bureaucrats who consult with individual academics, and public opinion is also partly dependent on academic analysis for information concerning North Korea, which is a society viewed in Japan as relatively mysterious and frightening. Much of the academic debate in recent years has been distracted with the issue as to whether North Korea is likely to collapse, but there has also been discussion over what practical steps Japan should take to deal with the North Korean security problem. ‘Liberal’ scholarship has argued for Japan’s provision of humanitarian and economic aid to prevent the collapse of North Korea and for a general policy of engagement.65 Korea specialists such as Izumi Hajime and Okonogi Masao have also asserted that Japan should support the ‘soft landing’ through the provision of aid and participation in KEDO.66 In contrast, ‘realist’ Japanese scholarship has questioned whether it is worth aiding the North’s totalitarian regime which may be incapable of economic reform.67 The most radical views of the approach that Japan should take towards North Korea have come from certain members of the Gendai Koria (Modern Korea) Institute. Researchers have launched caustic attacks on those politicians involved in North Korean negotiations such as Katō Kōichi, oppose all food aid until a resolution is found to the racchi jiken, and argue that Japan’s objective should be to pile economic pressure upon North Korea to ensure its collapse.68 The basic intention of the institute is apparently to sabotage any moves towards Japan-North Korea normalisation, and although its views are extreme and born from a fairly undisguised hatred of the North’s regime, they have been propagated with relative success in the mass media. Hence, the institute, in conjunction with the press and families of suspected victims of North Korean abductions, has in part been responsible for revitalising the racchi jiken as a bilateral issue since early 1997. The mass media itself has been divided over the correct Japanese policy towards North Korea. Liberal media organisations or keiretsu, such as the Asahi Shimbun and its associated broadcasting stations and publishing houses, have been sympathetic to the ‘soft-landing’ policy and have pressured the government to take active steps on humanitarian aid and arranging Nihonjinzuma visits to Japan.69 More conservative media

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groups, such as that of the Yomiuri Shimbun and the Sankei Shimbun, though, have been prepared to dredge up issues such as drug smuggling to damage the North’s reputation further, have made North Korean concessions on the racchi jiken a precondition for aid, have given their support to the strengthening of Japan’s domestic crisis management system and the US-Japan alliance in response to the North Korean implosive and explosive threats, and have argued forcefully for Japan’s participation in TMD following the Taepodong-1 test.70 Hence, North Korea is short of allies amongst private policy actors in Japan, and even the Chōsensōren, whilst still intensely loyal to the North’s regime, in recent years has experienced a decline in its ability to pressure for improved Japan-North Korea ties. The Chōsensōren exerts some influence via its links with the LDP and SDPJ, but due to declining membership and income is unable to channel funds to politicians in the same way as in the past. The result has been that the North Korean government and KWP have tended to bypass the Chōsensōren to deal directly with the LDP and MOFA.

US and South Korean external pressure The fourth main influence upon the policy-making process in Japan has been external pressure from South Korea and the US. As already noted in Chapter 3 and the section in this chapter on the LDP and MOFA, the principal concern of Japanese policy-makers in pursuing engagement with North Korea has been that it should not damage relations with South Korea. Thus, as the South’s policy towards the North has veered from one of engagement under President Roh, to an inconsistent mix of engagement and containment under President Kim Young Sam, and then back to engagement under Kim Dae Jung, so has the MOFA, following in the wake of the South Korean government, been forced to slam on and off the brakes of Japanese normalisation efforts with the North and to keep a watchful eye on the progress of the four-way talks. The US has governed to a large extent both the pace and orientation of its Japanese alliance partner’s security policy towards North Korea. Chapter 3 has described how the security policy-making community in the US itself has been split over the correct approach to North Korea both prior to and after the nuclear crisis. The State Department has been concerned about the corrosive political effects of North Korean military pressure on the bilateral alliances with South Korea and Japan, and recognised the need to restore both alliances, but its principal response to the North Korean security problem has been to persevere with its role as the leader of the ‘soft landing’ and to persuade Japan to adhere to the engagement policy despite problems like the Taepodong-1 test launch. The US military establishment, in its position as the frontline actor responsible for countering North Korean aggression, is certainly more sceptical than the State Department about the prospects for the ultimate success of the ‘soft landing’, but has also given its cautious approval to the policy as one means to avoid a costly conflict on the Korean Peninsula. But while the Pentagon is prepared to tolerate KEDO and economic engagement with North Korea, it has remained preoccupied with the North Korean military threat and focused upon it as a demonstration of the legitimacy of its attempts to maintain and strengthen its alliance systems and force structure in the Asia-Pacific.

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The importance which the Pentagon attaches to the North Korean security problem as a legitimising factor is partly related to genuine perceived military necessity, although not entirely connected to the problem of the Korean Peninsula itself. As Chapter 3 has explained, the North Korean nuclear crisis exposed the lack of political and military operability of the US-Japan alliance to deal with a contingency on the Korean Peninsula. However, even more importantly, the nuclear crisis also indicated the alliance’s inability to deal with other future and potentially more worrisome security threats and crises in the Asia-Pacific region. A number of observers have viewed the most prominent of these threats to be the growing capability and intent of China to project its military power in the region, and that the Pentagon shares this consciousness was shown by its decision in March 1996 to despatch the aircraft carrier Independence, home-ported in Japan, to the Straits of Taiwan in order to signify its will to intervene in any military crisis between China and Taiwan. The basic thrust of US and Pentagon policy towards China, as towards North Korea, is engagement. Nevertheless, the obvious imperative for the Pentagon following the nuclear crisis and in the post-Cold War period is to strengthen the US-Japan alliance and its force structure in the Asia-Pacific region to hedge against military threats from both North Korea and China. At the same time, though, it also appears to be the case that the Pentagon has chosen to publicly legitimate changes in the US-Japan alliance based solely on the threat from North Korea, and to eschew the explicit designation of China as a military threat for fear of a diplomatic backlash from this more powerful potential adversary. The result has been that the Nye report placed North Korea at the top of the list of sources of instability in the region and thus by implication reasons for the preservation of the US-Japan alliance, and justified also the need for the maintenance of the controversial presence of marine bases in Okinawa due to the need to respond to a Korean Peninsula contingency, whilst avoiding all mention of their possible role in intervening in any other crisis in the region which could involve China.71 Moreover, as will be seen in a following section, the revision of the Guidelines for Japan-US Defence Cooperation has been carried out by both the Japanese and US governments in such as way as to draw attention to North Korea as the primary legitimisation for redefining the alliance, but to camouflage the fact that the threat from China has also been an important factor in these moves. Added to the importance of North Korea as an all-encompassing legitimacy for the enhancement of US military capabilities in the Asia-Pacific region in order to deal with North Korean and Chinese military threats, there are also indications that the North Korean security problem has assumed a position of importance in Pentagon planning at times often less related to calculated military necessity and more to the simple desire to protect existing budgets and force numbers. The most notable example of this is the Pentagon’s September 1993 Bottom Up Review, which specified that in the post-Cold War period US strategy should be to maintain sufficient military forces in order to fight simultaneously two major regional wars, that the yardstick by which to measure these force levels were conflict scenarios involving Iraq and North Korea, and that the US should retain close to 100,000 troops in Northeast Asia, including current levels of naval and land forces in mainland Japan and marine units in Okinawa.72 Thus, by 1993 the Pentagon had in effect pegged its overall budgetary and force levels in the Asia-Pacific and globally to the level of threat from North Korea, and the suspicion of some commentators has been that this has

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meant that the Pentagon has a vested interest in talking up the threat from North Korea in order to maintain its budgets and evade searching questions about the need to scale down and re-deploy its forces in Northeast Asia in the post-Cold War period.73 The Pentagon reiterated the two major regional wars strategy in its May 1997 Quadrennial Defense Review, but subsequently drew criticism even from Pentagon insiders: the National Defence Panel in its December 1997 report criticising the two regional wars construct as not a true strategy, but more a ‘force protection mechanism—a means of justifying the current force structure—especially for those searching for the certainties of the Cold War era’.74 It is clear, therefore, that even if the Pentagon has no need of war with North Korea, it does still have need of the continued existence of the North Korean threat for a complex mix of military motives and budgetary strategies, and that its main policy response to the North Korean security problem has been to seek to strengthen the USJapan alliance. In turn, the Pentagon’s attitude has had a significant impact upon Japanese policy towards the North. For with the progress of Japan-North Korea engagement limited by various internal political and diplomatic difficulties, the attention of Japanese policy-makers has shifted instead to repairing the damage done by the North Korean nuclear crisis to the US-Japan alliance as the fundamental basis of Japan’s security, and thus they have prioritised cooperation and policy-making initiatives with the Pentagon in this area.

Policy immobilism and Japanese engagement of North Korea The conclusion reached after aggregating the influences of the various policy actors analysed above is that at present Japan lacks sufficient policy-making will to mobilise in full its economic power as a means to assist in the resolution of the North Korean security problem. The striking feature of all domestic Japanese policy-making actors is that there is general concurrence with the principle of the ‘soft landing’ as the optimum policy approach towards North Korea. However, the politicians are unwilling to take the political risks involved in pushing forward with normalisation, and place priority on maintaining good security relations with South Korea and the US. Likewise, the bureaucrats value above all good relations with the South and the US, and see no compunction at present to expend policy-making energies on promoting economic relations with North Korea. Finally, the business community, despite its latent economic power potential, remains unconvinced of the business opportunities in North Korea, and has preferred to take a back seat to the politicians in dealing with North Korea. Added to this, the external influences of South Korea and the US have combined to create some frameworks for Japan to engage North Korea such as KEDO, but at the same time have placed diplomatic and security limitations on the extent of engagement possible. Hence, in the case of the Japanese economic engagement of North Korea, various influences have conspired to create the type of policy immobilism identified by J.A.A.Stockwin, and policy-makers, rather than seeking to take advantage of the shared conceptions of Japan being able to contribute to Korean Peninsula security based on economic power, have instead shown policy dynamism only with regard to Japan’s military contribution to security via the redefinition of the US-Japan alliance.

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Japan’s military policy towards North Korea since 1994 The aftershocks of the North Korean nuclear crisis have triggered from 1995 onwards what has been termed by academics and the media in Japan as a ‘redefinition’ (saiteigi) of the US-Japan alliance. Japanese government security planners prefer use of the word ‘reconfirmation’ (saikakunin) to describe the changes in the US-Japan alliance, and stress that they see initiatives in this area as merely a process of filling in the gaps in the operability of the alliance exposed after the Cold War and not as a radical departure from Japan’s traditional defence posture.75 But even though the actual lettering of the USJapan security treaty has not changed, it is clear that there have been moves to expand and strengthen significantly US-Japan military cooperation within the framework of the treaty and the Japanese Constitution, and which represent more than just a simple reaffirmation of existing security arrangements than the term reconfirmation would warrant. The diplomatic initiatives undertaken by the Japanese government in conjunction with US security planners to redefine and reinforce the alliance have occupied the greatest part of Japanese foreign policy-making energies. For instance, Prime Minister Hashimoto shortly after his appointment sought a summit meeting with President Clinton in Santa Monica in February 1996 to gain approval for the reduction of US bases in Okinawa, and then staked much of his credibility on securing the return of Futenma and pushing through the review of the Guidelines for Japan-US Defence Cooperation. The following section examines the Guidelines review as well as other initiatives by Japanese policy-makers, including the formulation and adoption of the new NDPO (Bōei Taikō) in 1995; the implementation of ACSA in 1996; new research into a yūji hōsei, and research into TMD. It aims to demonstrate that many of these changes were originally put in train by the experience of the political and military failings of Japan’s own independent and the US-Japan alliance’s military capabilities to respond to the nuclear crisis, but that even though the threat from North Korea has been acknowledged to be on the decline since the Agreed Framework in comparison to other potential security problems in the region, North Korea has still remained the prime legitimisation for the upgrading of Japan’s military security role in the post-Cold War period. National Defence Programme Outline The original NDPO was adopted by the Japanese government in October 1976, and was the first attempt by security planners in Japan to set out the principles of Japan’s defence policy alongside the military force structure necessary to achieve them. Although formulated in the period of détente and containing many innovative concepts, the 1976 NDPO was still essentially a product of the Cold War in terms of the strategy and force structures it laid down for Japan’s defence.76 Thus, following the end of the Cold War, Japanese policy-makers began to seek to reformulate the NDPO to make it more relevant to the range of new security challenges faced by Japan. The process of reformulation began with Prime Minister Hosokawa’s institution of the Advisory Group on Defence in

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February 1994 to consider a new blueprint for Japan’s defence in the twenty-first century. The Higuchi report as the final outcome of these deliberations has already been mentioned in Chapter 1. The report examined the post-Cold War security environment and characterised it as one in which the end of East-West confrontation had been replaced by diverse and non-specific security problems, such as regional conflict, the proliferation of weapons of mass destruction, and economic poverty. In the Asia-Pacific region, the report identified the chief security concerns as the signs of the build-up of military capabilities in a number of countries; confrontation on the Korean Peninsula; China’s expansion of its military power and tensions between China and Taiwan; fears of the destabilisation of Cambodia; and the possibility that great power relations in the region could deteriorate.77 In order for Japan to be prepared to handle this opaque and hazardous security environment, the draft version of the report advocated: firstly, that Japan should promote multilateral approaches to security and its role in not just UN PKOs but also Peace-Keeping Forces (PKFs), a step which would have meant going beyond the existing provisions of the PKO Law and involved the possible exercise of military force; secondly, that it should strengthen the US-Japan security relationship as the platform for stability in the region by mutual cooperation to improve operability and logistics support; and, thirdly, that Japan should maintain a reliable and efficient independent defence capability. But while the Advisory Panel did stress the indispensability of the US-Japan alliance for Japanese security, it still managed to raise US concerns about Japan’s seeming prioritisation of multilateralism over the bilateral alliance in the post-Cold War period, and led the US to exert pressure on the Advisory Panel via the MOFA and the JDA to reverse the positions of these policies in order of importance in the final report.78 Nevertheless, the Higuchi report was clearly a progressive attempt to reorientate Japan’s defence posture to meet the demands of the post-Cold War period, and did propose fundamental changes in the structure of the SDF’s forces in order to allow them to support UN operations. The new NDPO when unveiled by the JDA and SDF in November 1995 can be seen to have taken on board and incorporated much of the innovative thinking of the Higuchi report. The NDPO reaffirmed the traditional principles of Japan’s defence policy in the post-War period—exclusive self-defence, the three non-nuclear principles, and civilian control. But at the same time it also introduced a new stress on the need for the US-Japan alliance to serve as the basis for the growth of multilateral security dialogue, the importance of Japan taking a greater role in UN PKOs, and for the SDF to counter lowintensity threats such as terrorism. However, the new NDPO also reflects the conservatism of the defence establishment in Japan and only partial acceptance of the type of thinking about post-Cold War security contained in the Higuchi report. The inertia and resistance to change is well illustrated by the force levels laid out by the NDPO (Table 5.1). In spite of the recognition of the need to create a more flexible SDF to deal with low-intensity conflict and some projected cutbacks, the new NDPO retains large amounts of interceptor aircraft, anti-submarine warships, and main battle tanks—a force structure very similar to that of the Cold War period and originally designed to support the US security system in the region.79 Indeed, the NDPO gives the impression of being designed more than anything as a means to justify the strengthening of US-Japan alliance following the traumas of the North Korean

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nuclear crisis the year before. The release of the NDPO was timed to coincide with the planned but later postponed visit of President Clinton to Japan for the Osaka APEC summit in November 1995 and the issuing of a new US-Japan joint declaration on security intended to boost mutual political confidence in the alliance. The emphasis of the NDPO is still very much on bilateralism, and, as noted above, the promotion of Japan’s role in multilateral security dialogue and operations is made dependent upon the simultaneous strengthening of the US-Japan alliance. The new NDPO is

Table 5.1 Comparison between the organisation and primary equipment scales of 1976 and 1995 NDPOs 1995 NDPO 1976 NDPO SDF personnel 160,000 180,000 regular personnel 145,000 ready reserve personnel 15,000 GSDF major units regionally deployed units 8 divisions 12 divisions 2 combined brigades 6 brigades mobile operation units 1 armoured division 1 armoured division 1 airborne brigade 1 airborne brigade 1 helicopter brigade 1 helicopter brigade 8 anti-aircraft ground-to-air missile 8 anti-aircraft artillery groups artillery groups units main equipment battle tanks approximately 900 approximately 1,200 artillery approximately 900 approximately 1,000 MSDFmajor units destroyer units (for 4 flotillas 4 flotillas mobile operations) destroyer units (regional 7 divisions 10 divisions district units) submarine units 6 divisions 6 divisions minesweeping units 1 flotilla 2 flotillas land-based patrol aircraft 13 squadrons 16 squadrons units main equipment approximately 50 approximately 60 destroyers submarines 16 16 approximately 220 combat aircraft approximately 170 ASDF major units aircraft control and 8 groups 28 groups warning units 20 squadrons 1 squadron 1 squadron (airborne earlywarning squadron)

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interceptor units support fighter units air reconnaissance units air transport units ground-to-air missile units main equipment combat aircraft fighters (included in combat aircraft)

177

9 squadrons 3 squadrons 1 squadron 3 squadrons 6 groups

10 squadrons 3 squadrons 1 squadron 3 squadrons 6 groups

approximately 400 approximately 300

approximately 430 approximately 350

Sources: Defense Agency, Bōei Hakusho, 1995, 1996. shot through with references to the importance of the US-Japan security system, mentioning it thirteen times in contrast to three for the 1976 version. Added to this, the new NDPO overturns the defence strategy of the 1976 NDPO which stated that in the event of direct aggression Japan would seek to resist for as long as possible by reliance on its own military capabilities, and only seek help from the US to rebuff such aggression if the enemy proved too strong. Instead, the new NDPO states that Japan will seek from the outset to repel direct aggression with US assistance. The NDPO’s efforts to enhance security cooperation with the US are also shown by its introduction of a new clause stating that, ‘should a situation arise in areas surrounding Japan (shūhen), which will have an important influence on national peace and security’, then Japan will take appropriate steps to deal with this in line with constitutional and other military restrictions and through support for UN activities, and ‘the smooth and effective implementation of the Japan-US security arrangements’.80 This clause was included despite resistance from the Cabinet Legal Affairs Bureau which feared that it touched upon issues of collective self-defence. But the obvious intention of the NDPO by focusing here on the term shūhen, as first introduced in the 1960 definition of the scope of the Far East, was to assert the need for Japan to actively support US military forces to function for the security of not just Japan itself but also of the entire region in a way that it was unable to do at the time of the nuclear crisis. Moreover, it is clear that as well as being a reaction to the North Korean security problem and the deficiencies in the alliance that it revealed, the NDPO has based its legitimacy upon the threat from North Korea to the exclusion of other potential threats. In line with Japan’s policy of exclusive self-defence, the new NDPO refrains from explicitly designating any particular country as a potential threat to Japan’s security, and instead refers to regional trends and phenomena that may constitute sources of instability. But the oblique language of exclusive self-defence and the NDPO fails to disguise that the Korean Peninsula—shorthand for North Korean aggression—is one of the main premises for strengthening the US-Japan alliance. The 1995 NDPO in the same way as the Higuchi Report, carried out a survey of the international security situation surrounding Japan and noted the following: In the area surrounding Japan, the end of the Cold War and the collapse of the

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Soviet Union have brought about a reduction of the military force level and changes in the military posture in Far East Russia. At the same time, there still remain large-scale military capabilities, including nuclear arsenals and many countries in the region are expanding or modernising their military capabilities mainly against the background of their economic development. There remain uncertainty and unpredictability such as continued tensions on the Korean Peninsula, and a stable security environment has not been fully established. Under these circumstances, the possibility of a situation in the region which could seriously affect the security of Japan, cannot be excluded. At the same time, various activities are being pursued to deepen cooperative relations among nations and to achieve regional stability, such as the promotion of regional dialogues and the search for a regional security framework. The close cooperative relationship between Japan and the United States, based on the US-Japan Security Arrangements, will help to create a stable security environment, provide the foundation for the engagement of the United States and the US military presence which are necessary for peace and stability in this region, and thus will continue to play a key role for the security of Japan, as well as the stability of the international community.81 In this way, the NDPO acknowledges the end of East-West conflict, the concomitant reduced likelihood of conflict in the Far East generated by Russia’s military, and then goes on to state a number of uncertain problems of security in the region. But what is of note is that, whereas the Higuchi report considered the problem of the Korean Peninsula alongside China, Russia, and Cambodia, the new NDPO makes mention of and so elevates to a position of prime importance only one specific area of geographical concern—the Korean Peninsula. The NDPO then goes on after raising the issue of the Korean Peninsula as the sole specific example of security concern, to link the continuance of problems such as this with the future of Japanese and regional security, and to state that the US-Japan alliance is essential to guarantee both. The focus on the Korean Peninsula as the only named source of threat to draw attention to the need for the maintenance of the US-Japan security alliance is made even more striking when it is considered that the NDPO chose to neglect the obvious concerns of the perceived expansion of China’s qualitative and quantitative military power and its impact on East Asian security as raised in the Higuchi Report and by other groups of observers and policy-makers in Japan and abroad. The NDPO was produced before the escalation in tensions between China and Taiwan in early 1996, but the decision to omit China as one possible example of a source of instability in the region looks to be another example of using North Korea as the sole legitimacy for changes in the alliance. The then Director General of the Bureau of Defence Policy, Akiyama Masahiro, when interviewed in 1996 about the formulation of the NDPO, gave the following view of a possible Chinese threat: We do not see any threat [from China] at this time. Of course this is really a question of how far ahead we can foresee events. Frankly speaking, we do not foresee any problems in the next five years, but it is rather difficult to say what might happen in thirty. The new NDPO has a time frame of ten to fifteen years,

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and it contains no references to China as a threat.82 Discussions with Defence Agency and SDF personnel and the general climate of security relations in East Asia suggest, however, that Akiyama’s answer may be somewhat disingenuous. The real reason for the NDPO’s avoidance of any mention of concerns about China is not that they do not exist, but that for Japan as for the US it is politically and diplomatically impossible to express these concerns without inviting a strong reaction from China.83 Hence, as it stands, while the NDPO is undoubtedly concerned with creating the basis of a new Japanese defence posture to hedge against security anxieties linked to China and other security problems, the Korean Peninsula and by implication North Korea have been singled out for designation as the only specific geographical area of concern upon which to ground the US-Japan alliance in the post-Cold War period. Acquisition and Cross-Servicing Agreement The next step in strengthening the US-Japan alliance in response to the military deficiencies revealed by the North Korean nuclear crisis was the conclusion of ACS A on 15 April 1996. The US’s original request for ACSA had come in May 1988 as part of the on-going Guidelines research, when it sought to gain Japan’s agreement to provide logistical support to US forces during a military crisis in the form of food, fuel, communications, transport, and ammunition.84 The Japanese side turned down the US request at the time due to concerns that the provision of such logistical support would contravene constitutional prohibitions on the exercise of the right of collective selfdefence. However, US requests for logistical support during the nuclear crisis in 1994, followed by the Okinawa base protests in 1995 and the need for a substantial gesture to restore confidence in the alliance, gave new impetus for the conclusion of ACSA. PARC’s SRC recommended the introduction of ACSA in March 1996, and the agreement was prepared and signed by the Japanese and US governments just prior to President Clinton’s visit to Japan in the same month.85 ACSA excluded US demands for the provision of ammunition for live-firing drills as possibly touching upon the exercise of the right of collective self-defence, but did determine that Japan could supply food, transport, communications, spare parts, and repairs to US forces, provided that this was limited to peacetime joint US-Japan exercises, UN-led PKO, and international relief activities. The terms of ACSA were more limited than the US may have desired, but the agreement was viewed as important by both sides because it tightened the interoperability of US forces and the SDF. Moreover, US and Japanese policy-makers since the adoption of ACSA have begun to expand incrementally the range of its application. In conjunction with the revised Guidelines bill discussed in the next section, since April 1998 the Japanese government has also submitted a bill to revise ACSA in order incorporate within it support for US forces not only in peacetime, UN, and humanitarian activities, but also in conflict situations in ‘areas surrounding Japan’. Hence, ACSA, like the NDPO, has become another device to strengthen regional security cooperation in line with the term shūhen. US-Japan Joint Declaration and review of the 1978 Guidelines for Japan-US

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Defence Cooperation The next and most important step taken by the Japanese government to reinforce the US alliance precipitated by and using the legitimisation of the North Korean security problem has been the review of the 1978 Guidelines for Japan-US Defence Cooperation. Chapter 3 has already shown how Japan’s inability to respond to US demands for rear area and logistical support during the North Korean nuclear crisis was largely a result of insufficient joint research under the 1978 Guidelines into Japanese cooperation with the US in the event of contingencies in the Far East, and that the subsequent outcome of the lack of preparation for such crises was to induce both military paralysis and political trauma in the US-Japan alliance. Following the nuclear crisis, the US continued to pressure Japan to stipulate the types of support that it could provide in a regional contingency, and the US military command in Japan was reported to have submitted to the Japanese government in December 1995 a detailed list of 1,059 items for desired cooperation, including minesweeping operations, logistics, and the use of SDF and civilian ports and airports by US forces.86 The US placed further pressure on Japan to specify rear area support by making it clear in the February 1996 Clinton-Hashimoto summit that the return of bases in Okinawa was dependent on Japan being able to demonstrate that it could provide alternative bases for US forces in the event of a military crisis in the region, and put in place a proper cooperative framework to eliminate the gaps on the Japanese side in the operability of the alliance. Responding to US pressure, and seeking to shore up the alliance in the run-up to the scheduled visit of President Clinton to Japan in April, and to find simultaneously a way to soothe mounting domestic political discontent since late 1995 over the Okinawa base issue, Prime Minister Hashimoto shortly after his return from the US in February ordered a review of the 1978 Guidelines. The politically sensitive nature of the Guidelines review and the fear that it would provoke domestic and international charges of Japanese remilitarisation, meant that the task of preparing the review was first conducted at party level and entrusted to PARC’s SRC which produced a report on 19 March 1996 entitled Nichibei Anpo Taisei no Konnichiteki Igi (The Current Importance of the Japan-US Security Arrangements).87 The report, in the same way as the NDPO and ACSA, used the term shūhen to refer to the regional security situation around Japan, and pointed out potential sources of instability related to North Korea, China, the Russian Far East, and ASEAN. The second of these sources of instability, China, was given particular pertinence at the time of the report’s writing by the simultaneous occurrence of the Taiwan Straits crisis. The report argued that in the face of such security uncertainties, US-Japan security cooperation remained the basis for regional stability and should be strengthened through investigation of Japan’s exercise of the right of collective self-defence, the conclusion of ACSA, joint development of anti-ballistic missile technology, and a review of the 1978 Guidelines. The SRC also prepared a paper entitled Kyokutō Yūji e no Taiō (Response to a Far East Emergency) which recommended that in the event of a regional contingency Japan should provide logistical support to the US military and allow it to use SDF and civilian ports and airports as supplementary bases. The SRC then circulated the report to the MOFA, the JDA, and the MOT, and later concluded from research presented to it by these government ministries on 11 April that it would be possible within the bounds of the constitution for US forces to use Japanese SDF and civilian facilities during a military

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crisis.88 SRC and ministerial deliberations helped to pave the way for the issue of the US-Japan Joint Declaration on Security on 17 April. The Joint Declaration postponed from November 1995 was revised for Clinton’s visit to Japan, and stressed the importance of the bilateral alliance not just for the security of Japan, but also for the first time of the entire Asia-Pacific region. The Joint Declaration incorporated many of the features of the SRC policy papers, and the statement that research would be carried out: To promote bilateral policy coordination, including studies on bilateral cooperation in dealing with situations that may emerge in the areas surrounding Japan (shūhen), and which will have an important influence on the peace and security of Japan.89 The Japanese and US governments then established the SCC (Security Consultative Committee) to review the Guidelines. The SCC held its first meeting in Hawaii in May 1996, produced a mid-term progress report in September of the same year, and released the completed Guidelines review in September 1997. In April 1998, the Japanese government prepared a Guidelines bill (shūhen jitai hōan), along with revisions to the SDF Law and ACSA, in order to create the legal framework to mobilise the SDF and provide support for the US in security situations in areas surrounding Japan. At the time of writing in September 1998, the attempt to pass this bill in the Diet, and to find the necessary coalition partners among the Kōmeitō and Liberal Party, is likely to become one of the main issues for the new Obuchi cabinet, although the introduction of the bill is likely to face delays due to pressure for the government to handle issues of financial restructuring first. The fields for cooperation in areas surrounding Japan are shown in Table 5.2, and include activities to deal with refugee flows, non-combat operations, the enforcement of economic sanctions, the use of SDF and civilian base facilities, rear area support, and minesweeping—all items which the US had requested but Japan had been unable to provide during the nuclear crisis in 1994. The revision of the Guidelines has met with a mixed reception domestically and internationally. The US government has obviously welcomed the Guidelines review as a means to clear up the ‘grey zones’ evident in 1994 and to strengthen significantly the operability and power projection capabilities of the US-Japan alliance in the region. But as predicted by the Japanese government before it began the review, the new Guidelines have also encountered considerable

Table 5.2 Functions and fields and examples of items of cooperation in areas surrounding Japan Functions and fields Examples of items of cooperation Cooperation in Relief activities and •Transportation of personnel and activities measures to deal with supplies to the affected area initiated by refugees •Medical services, communications, either and transportation in the affected

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area •Relief and transfer operations for refugees, and provision of emergency materials to refugees Search and rescue •Search and rescue operations in Japanese territory and at sea around Japan and information sharing related to such operations Non-combatant evacuation •Information sharing, and operations communication with and assembly and transportation of non-ombatants •Use of SDF facilities and civilian airports by US aircraft and vessels for the transportation of noncombatants •Customs, immigration, and quarantine of non-combatants upon entry into Japan •Assistance to non-combatants in such matters as temporary accommodation, transportation, and medical services in Japan Activities for ensuring the •Inspection of ships based on UN effectiveness of economic Security Council resolutions for ensuring the effectiveness of sanctions for the economic sanctions and activities maintenance of related to such inspections international peace and •Information sharing stability Japan’s support Use of facilities •Use of SDF facilities and civilian for US forces airports and ports for supplies and activities other purposes by US aircraft and vessels •Reservation of spaces for loading/unloading of personnel and materials by the US and of storage areas at SDF facilities, and civilian airports and ports •Extension of operating hours for SDF facilities and civilian airports and ports for use by US aircraft and vessels •Use of SDF airfields by US aircraft •Provision of training and exercise areas

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Rear area support

Functions and fields

Supply

183

•Construction of offices, accommodation, etc., inside US facilities and areas •Provision of materials (except weapons and ammunition) and POL (petroleum, oil, and lubricants) to US aircraft and vessels at SDF facilities and civilian airports and ports •Provision of materials (except weapons and ammunition) and POL to US facilities and areas

Examples of items of cooperation Transportation •Land, sea, and air transportation inside Japan of personnel, materials, and POL •Sea transportation to US vessels on the high seas of personnel, materials, and POL •Use of vehicles and cranes for transportation of personnel, vehicles, and POL Japan’s support Rear Maintenance •Repair and maintenance of US for US forces area aircraft, vessels and vehicles activities support •Provision of repair parts •Temporary provision of tools and materials for maintenance Medical services •Medical treatment of casualties inside Japan •Transportation of casualties inside Japan •Provision of medical supply Security •Security of US facilities and areas •Sea surveillance around US facilities and areas •Security of transportation routes inside Japan •Information and intelligence sharing Communications•Provision of frequencies (including satellite communications) and equipment for communications among relevant US and Japanese agencies Others •Support for port entry/exit by US

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US-Japan operational cooperation

Surveillance Minesweeping

Sea and airspace management

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vessels •Loading/unloading of materials at SDF facilities and civilian airports and ports •Sewage disposal, water supply, and electricity inside US facilities and areas •Temporary increase of workers at US facilities and areas •Intelligence sharing •Minesweeping operations in Japanese territory and on the high seas around Japan, and information and intelligence sharing on mines •Maritime traffic coordination in and around Japan in response to increased sea traffic •Air traffic control and airspace management in and around Japan

Sources: Bōe ichōhen, Bōei Hakusho 1998, p. 240; Japan Times, 25 September 1997, p. 4. domestic political criticism due to fears that they represent a US-Japan ‘war manual’ and a further incremental expansion of Japan’s military security role. Opposition parties, sections of the liberal mass media and public opinion, and pacifist groups fear that the Guidelines could lead to Japan’s ‘automatic’ involvement in any regional conflict. This is because under the proposed Guidelines’ legal framework the government in the event of a security crisis would draw up a ‘basic plan’ to mobilise the SDF which requires only Cabinet and not Diet approval, and opposition groups doubt that the Japanese government would to be able to resist US pressure for cooperation in a crisis situation even if it did not impinge upon Japan’s security interests. The government position is that Cabinet approval is sufficient due to the need to react swiftly to any sudden security crisis and because the SDF’s role will not involve the exercise of armed force. Opponents of the Guidelines also fear the ‘basification’ (kichika) or ‘Okinawaisation’ (Okinawaka) of the entire Japanese mainland during a regional crisis. This is due to the fact that the Guidelines commit Japan to furnish US forces with SDF and civilian bases potentially anywhere in the country, and because, even though the government admits it cannot compel local civilian authorities to cooperate, it has incorporated into the proposed legal framework for the Guidelines a clause which seeks their full support for the US military. Evidence for the preparation by the US and Japan of supplementary bases came in August 1997 when it was reported that the US military had already surveyed and provided a list of over ten Japanese civilian port and airport facilities which it would seek to use in a regional crisis, and in September of the same year with the visit of the carrier Independence to Otaru on the Sea of Japan side of Hokkaido—the first ever visit by a US

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warship to a wholly civilian port in Japan and a seeming test-run of the suitability of such facilities for military use.90 An additional anxiety is that, despite government reassurances, the Guidelines contravene the ban on the exercise of the right of collective self-defence. For instance, in line with the ‘basic plan’, the Japanese government proposes that SDF ships will be able to provide logistical re-supply to the US military during a conflict situation by unloading their cargoes to US ships at a specific point on the perimeter of the combat zone in international waters and outside the range of the US’s enemy forces, and in this way avoid direct involvement or attack by the US’s enemy, and subsequently also the charge of supporting the US in an act of collective self-defence. But the ability of the SDF to designate the dividing line between non-combat and combat zones is doubtful given the fluidity of modern warfare and the extended range of weapons such as missiles, and critics contend that the likelihood is that Japan could become sucked into the conflict and combat alongside the US. However, domestic and international opinion has shown greatest dissatisfaction with the vague geographical delimitation of the Guidelines and the Japanese government’s refusal to rule in or out which sources of instability and potential adversaries they are designed to deal with, and thus its seemingly deliberate but clumsy attempts to disguise the types of conflicts that Japan could become involved with under the Guidelines and in support of the US. Government policy-makers maintain that the Guidelines have not been designed to counter the threat from any specific country, and that the term shūhen used in the Guidelines as well as the NDPO is situational rather than geographical.91 Policymakers have not revised Prime Minister Kishi’s 1960 definition of the Far East as outlined in Chapter 3, which first introduced the concept of shūhen to delimit the scope of the US-Japan security treaty, and which was strongly geographical in nature due to its inclusion of the area north of the Philippines, South Korea, and Japan; and do agree that the new Guidelines contain a geographical element in the sense that the scope of their operation is likely to be relatively close to Japan. But the preference of the government is to stress Kishi’s additional statements at the time that definitions of shūhen are not necessarily geographically rigid or restrictive of the security treaty’s range of action, and to posit that it is not possible to draw a firm geographical line to demarcate Japan’s security interests. This gradual shift in emphasis from geographical to situational definitions of shūhen and the scope of the alliance carries two apparent advantages for the Japanese government. Firstly, it allows the government to expand when required and based on the concept of situational need the range of action of the US-Japan alliance beyond the traditional geographical limits of the Far East and security treaty as defined in 1960, and to encompass the entire Asia-Pacific region as envisaged in the US-Japan Joint Declaration. Secondly, policy-makers seem to feel the concept of situational need introduces a valuable element of strategic ambiguity into the coverage of the US-Japan security treaty, with the particular advantage of leaving vague the position of Taiwan and China as objects of the Guidelines. In line with the 1960 definition of the Far East, Taiwan comes within the coverage of the US-Japan security treaty, and the events of 1996 demonstrated that China-Taiwan tensions are still a major concern for the US-Japan alliance. However, as explained previously, the policy of the US and Japan appears to be to hedge against a possible military contingency involving China by strengthening the bilateral alliance, but also to avoid the designation of China as a threat for fear of

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antagonising it and endangering the general policy of engagement. The concept of situational need seems to be ideally designed for this policy as it enables the US and Japan to de-emphasise the clear-cut geographical specification of Taiwan as part of shūhen and a concern of the US-Japan security treaty and Guidelines, but at the same time retains for the alliance the option to operate in the Taiwan Straits if there is judged to be sufficient necessity. Emphasis on situational instead of geographical limits for the Guidelines, though, has failed to convince the government’s critics who contend that this is simply obfuscating language used to conceal the fact that the Guidelines are intended to counter threats from China as well as North Korea. This perception is partly based on the historical knowledge that two of the principal functions of the US-Japan security treaty since its inception have been to cope with military contingencies involving the Korean Peninsula and Taiwan, as well as contemporary experience of the North Korean nuclear and Taiwan Straits crises which formed the background to the conduct of the Guidelines review. Moreover, the government’s own officials have on occasion proved incapable of maintaining the linguistic contortions of the situational definition of shūhen and have given the strategic game away. For instance, in August 1997 Kajiyama Seiroku, when Chief Cabinet Secretary, asserted that the scope of the Guidelines did include the Taiwan Straits, and thus implied that they were designed to counter contingencies involving China; and in May 1998 Takano Toshiyuki, the Director General of the MOFA’s North American Affairs Bureau, stated in the House of Representatives Committee on Foreign Affairs, that shūhen did not exceed the scope of the Far East as defined in 1960, and so drew attention back to the original geographical nature of the concept and the possible inclusion of Taiwan within the coverage of the Guidelines.92 Takano’s remarks led to his eventual removal from his post in July of the same year. As a result of government blunders, the SDPJ has been given grounds to suspect that the Guidelines are a device to ensure Japanese support for the US in the event of security contingency in both Korea and the Taiwan Straits, and, fearful of Japan’s being dragged into a war between China and the US over Taiwan, has called for the Guidelines’ definition of shūhen to specifically exclude Taiwan. Likewise, the DPJ has called for a clear geographical definition of shūhen to limit the scope of Japan’s involvement in potential security crises, while the NFP before its break-up took the alternative tack and argued that the Taiwan Straits should be specifically included in the Guidelines to make clear Japan’s security commitment to the region. Meanwhile, China itself perceives very clearly that the Guidelines are directed against it, openly denouncing them as a means to allow US and Japanese intervention in the Taiwan Straits and in internal Chinese politics. All the above evidence points, therefore, to the fact that Japanese policy-makers have designed the Guidelines to deal with contingencies involving China and North Korea. But despite this and the government’s insistence upon the situational rather than geographical nature of shūhen, it seems that policy-makers still cannot escape from threat-based perceptions of the security treaty, nor can they resist the temptation to indicate North Korea as the sole area of geographical concern for the US-Japan security treaty in order to make intelligible to the Japanese public the need to strengthen the bilateral alliance. The SRC report, which formed much of the basis for the drafting on the Japanese side of the US-Japan Joint Declaration, drew attention in its evaluation of the regional security

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environment to the problems of North Korea, China, Russia, and ASEAN. But the Joint Declaration itself drops these references; shows astonishing myopia in neglecting all mention of the Taiwan Straits crisis only one month beforehand, despite its having been of sufficient concern to the US to despatch an aircraft carrier to the scene; and buries all mention of China to the back of the document and to the limp assertion that both the US and Japan hope for its constructive and cooperative role in the region. Instead, the Joint Declaration, in the same way as the NDPO, evaluates the security situation around Japan by indicating a range of potentially destabilising phenomena but fixing upon the Korean Peninsula as the sole specific geographical concern: Since the end of the Cold War, the possibility of global armed conflict has receded. The last few years have seen expanded political and security dialogue among countries of the region. Respect for democratic principles is growing. Prosperity is more widespread than in any other time in history, and we are witnessing the emergence of an Asia-Pacific community. The Asia-Pacific region has become the most dynamic area of the globe. At the same time, instability and uncertainty persist in the region. Tensions continue on the Korean Peninsula. There are still heavy concentrations of military force, including nuclear arsenals. Unresolved territorial disputes, potential regional conflicts and the proliferation of weapons of mass destruction and their means of delivery all constitute sources of instability.93 Furthermore, in a move to reassure China that it is not the object of the Guidelines, Katō Kōichi was reported to have told Chinese leaders on a visit to Beijing in July 1997 that, ‘The Guidelines review has the Korean Peninsula in mind, it does not have China in mind at all.’94 Thus, the Japanese government clearly seems to be arguing the case for the legitimisation of the Guidelines both ways—keeping up the inconsistent pretence that they are not designed to counter any specific threat, whilst simultaneously intimating that China is not a threat, but that North Korea is. Yūji hōsei As noted in Chapter 3, the North Korean security problem indicated for Japanese policymakers the inadequacy of research into legislation to deal with emergency situations and to remove restrictions upon the mobility of the SDF inside Japan during a conflict. The Korean emergency study group concluded in 1994 that there was a need for a yūji hōsei, and as part of his drive to demonstrate Japan’s active stance on defence, Prime Minister Hashimoto ordered the resumption of research into legislation in early 1996. In April, the JDA presented research to the SRC which outlined the ability of the SDF under existing laws to evacuate Japanese citizens from abroad, to guard coastal installations from terrorist attack, and to manage refugee flows. The coordination of the research was then undertaken by the security division of the Cabinet Research Office. Research into the evacuation of Japanese nationals was concluded relatively quickly, this being an area of MOFA jurisdiction and experience. But research into other areas of crisis management has not proceeded so smoothly. In part this is due to jurisdictional clashes between the

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JDA and the NPA, neither of which it appears is willing to take the extra responsibility of guarding the Japanese coastline.95 The other reason for the slow pace of research is that the government clearly does not want to invite any more controversy over changes in defence policy, occupied as it is at present with fending off criticism of the Guidelines.96 Thus, the yūji hōsei research is set to continue for the meantime, but still represents one more step in the strengthening of Japan’s military security policy sparked by the North Korean security problem. Theatre Missile Defence During and since the nuclear crisis, North Korea’s possible utilisation of its ballistic missiles as terror weapons to attack either civilian targets or US military installations in Japan has remained a major anxiety for Japanese and US security planners. In response to the emergence of the North Korean missile threat, the US instigated discussions with Japan in October 1993 on the adaptation of SDI technology to create an anti-missile defence system, termed TMD.97 The US put forward specific technology-sharing proposals in June 1994 and since then has sought Japanese participation in Navy Theatre Wide (NTW), the least developed aspect of the TMD project. But while TMD has been given impetus by the North Korean missile threat, it is also apparent that the project is designed to counter the growing missile threat from China as well. China’s possession of both nuclear and conventional armed missiles is an obvious threat to Japan as shown by their use to intimidate Taiwan in 1996, and Chinese military leaders fear that NTW as a naval-borne missile defence is the first stage in Japan’s acquisition of the capability to intervene in a Taiwan Straits crisis, that the whole TMD project is designed to undermine China’s strategic defences, and that it will eventually upset the military balance in the Asia-Pacific.98 How far Japan proceeds with the TMD project is uncertain given fears about Chinese objections, but also scepticism about the feasibility of the project, its cost and US motives for seeking Japanese cooperation. The Japanese defence establishment seems to doubt whether TMD is practical given the repeated failures of anti-missile tests in the US, and questions whether even if deployed the system would be able to provide sufficient guarantees of protection to a large enough area of Japan.99 The colossal cost of TMD for the Japanese taxpayer is another disincentive for cooperation: calculated at anything up to ¥2 trillion and far greater than the entire Japanese annual expenditure on frontline military equipment.100 Finally, the apprehension is that the prime reason for US interest in TMD is as a means to extract financial burden sharing and leading-edge technologies from Japan, and that this could lead to another bout of technology-sharing friction as in the case of the joint US-Japan development of the FSX fighter plane.101 But mutual suspicions aside, US and Japanese policy-makers reaffirmed their commitment to the research for project in the Joint Declaration, and the JDA and the MOFA continue to view TMD as an important demonstration of the political solidarity of the alliance regardless of its true military benefits. North Korea’s launch of its Taepodong-1 missile also spurred on the enthusiasm of the defence policy tribe in the LDP for participation in TMD and to acquire an independent satellite surveillance capability to increase forewarning of tests. Hence, LDP members have proposed that

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Japan could avoid its own May 1969 prohibition on the use of space for military purposes by disguising what would essentially be a military spy satellite as a ‘multi-purpose’ satellite which could be used to detect not just missile launches but also natural disasters.102 Once again, though, this strengthening of the alliance has been publicly predicated on the North Korean rather than Chinese threat. For example, as noted earlier, the 1998 JDA defence white paper continues to give prominent attention to North Korea’s development of ballistic missiles and to indicate this to be a strong argument for TMD research, but at the same time chooses not to emphasise China’s improved ballistic missile capabilities and its role in the development of Pakistan’s missile programme, all of which would seem to be an equally powerful argument in favour of TMD research.

Conclusion The above discussion has demonstrated how policy immobilism has restricted the will of Japanese policy-makers to pursue engagement with North Korea and to utilise economic power in the service of security policy. Hence, with regard to the North Korean security problem, Japan as yet lacks the policy-making will to allow it to fulfil the role of a global civilian power. Instead, it is apparent that Japanese policy-making energies have been devoted to enhancing Japan’s military role in security in the post-Cold War period via the redefinition of the US-Japan alliance, which has bolstered the ability of the US to project its military power across the entire Asia-Pacific region. This relative dynamism in Japanese military security policy has been prompted by the political and military deficiencies first revealed in the alliance by the North Korean security problem. But it is also the case that, even as the North Korean threat has declined following the Agreed Framework and the need for engagement with it been recognised, North Korea has continued to serve as the chief legitimisation for changes in the alliance and as the means to obscure the politically and diplomatically awkward fact that the redefinition of the alliance is partly designed also to hedge against the potential military threat from China.

Notes 1 2

3 4 5 6 7

For examples of these type of ‘Japan Inc.’ views in academic works, see Nester (1990); Huber (1994). Arguments which assert the supremacy of the bureaucracy are contained in Pempel (1979); Johnson (1982). The relative independence of big business is argued for in Samuels (1987); Calder (1993). On the role of the politicians see Satō and Matsuzaki (1984); Inoguchi and Iwai (1987, pp. 1–40); Schoppa (1991); Ramseyer and McCall Rosenbluth (1993); Nakano (1997). On pluralism, see Muramatsu and Krauss (1987). Stockwin (1988); Calder (1988a, b). Zhao (1995, pp. 19–40). Seimu Chōsakai (1996, p. 22) [Author’s translation]; Japan Times, 29 November 1996, p. 1.

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10 11 12 13 14 15 16 17

18 19 20 21 22 23 24 25 26 27

28 29 30 31 32 33 34 35 36 37 38 39 40

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Interview at Cabinet Research Office, Tokyo, 11 November 1996. Dai1rui Dai4gō Dai141kai Kokkai Shūgiin Gaimuiinkai Kaigiroku, Dai5gō 28 November 1997, p. 14; Dai1rui Dai4gō Dai142kai Kokkai Shūgiin Gaimuiinkai Kaigiroku, Dai3gō 11 March 1998 [Author’s translation]. Yamasaki (1996a, p. 116); interview at Chōsensōren headquarters, Tokyo, 21 November 1996. Interview at National Institute of Defence Studies, Tokyo, 1 November 1996. Interviews with Asahi Shimbun and Mainichi Shimbun journalists, Tokyo, 15 November 1996 and 6 February 1997. Interview with LDP House of Representatives Diet member, Tokyo, 4 December 1996. Chōsen Jihō, 23 April 1998, p. 1. Asahi Shimbun, 9 June 1998, p. 2 [Author’s translation]. Asahi Shimbun, 10 June 1998, p. 2 [Author’s translation], According to one newspaper poll, 29 per cent of the Japanese public feel a military threat from North Korea, compared with 19 per cent from the US, 18 per cent from China, 7 per cent from Russia, and 2 per cent from South Korea (Asahi Shimbun, 22 September 1997, p. 2). Johnson (1995a). For one critical attack in a major national journal on Katō’s role in the rice aid negotiations, see Satō and Nishioka (1995). Nonaka (1998, p. 73) [Author’s translation]. Interview with LDP House of Representatives Diet member’s staff, Tokyo, 30 October 1996; K. Tanaka (1997, p. 131). Interview with LDP House of Councillors Diet member, Tokyo, 16 December 1996; interview with LDP House of Representatives Diet member, Tokyo, 6 February 1997. Tōseimu Chōsakai Anzen Hoshō Chōsakai (1996). Shakaitō Anzen Hoshō Chōsakai (1996, pp. 20, 22) [Author’s translation], Itō (1996, pp. 8–9) [Author’s translation]. Interview with SDPJ House of Representatives Diet member, Tokyo, 20 November 1996; Gekkan Shakaitō (1998). The stated hope of the SDPJ has been to turn the Sea of Japan into a heiwa to yūjō no umi, or ‘sea of peace and friendship’, and senior party figures such as Murayama Tomiicihi and Itō Shigeru have attended ERINA seminars (Itō, 1993). For criticism of the SDPJ’s financial dealings with North Korea, see Satō (1989, p. 54). DPJ Homepage, http://www.dpj.or.jp/search/search.html. Interview at Chōsensōren headquarters, Tokyo, 21 November 1996. For an example of JCP criticism of the US security system as an extension of imperialism in Korea and Japan, see Miura (1995). Akahata, 8 April 1994, p. 2. Ryang (1997, pp. 82, 89–91). Interview with NFP House of Representatives Diet member, Tokyo, 12 November 1996. Dai1rui Dai4gō Dai141kai Kokkai Shūgiin Gaimuiinkai Kaigiroku, Dai10gō 18 April 1997, p. 8 [Author’s translation]. Aichi (1995, p. 6, 10–11). Interview with NFP House of Representatives Diet member, Tokyo, 25 November 1996. Yamasaki (1996b) [Author’s translation]. Interview with NFP House of Representatives Diet member, Tokyo, 1 November 1996. Asahi Shimbun, 23 September 1993, p. 7 [Author’s translation].

Japan’s economic power and security 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73

74 75 76 77 78 79

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Interview with NFP House of Councillors Diet member, Tokyo, 7 November 1996. Asahi Shimbun, 3 October 1997, p. 7. Ishii (1991,p. 59). Interview with ex-senior MOFA official and ambassador to KEDO, Tokyo, 4 September 1998. Interview with senior MOFA official, Tokyo, 27 November 1996. Asahi Shimbun, 21 August 1997, p. 1. Interview with senior MOFA official, Tokyo, 14 October 1996. Dai1rui Dai4gō Dai140kai Kokkai Shūgiin Gaimuiinkai Kaigiroku, Dai18gō 4 June 1997, pp. 11–12 [Author’s translation], Interview with senior MOFA official and negotiator with North Korea, Tokyo, 8 January 1998. Interview with senior MOFA official, Tokyo, 3 December 1996. Interview with senior MOFA official, Tokyo, 6 November 1997. Funabashi (1997, pp. 111–16). Interview with JDA official, Tokyo, 14 November 1996. Interview with member of SDF Defence Planning staff, Tokyo, 22 November 1996. Bōeichōhen, Bōei Hakusho 1998, p. 50. Interview at Chōsensōren headquarters, Tokyo, 21 November 1996. Interview with MITI official, Tokyo, 22 October 1996. Johnson (1995b, p. 250); Ogata (1989). Kimura (1989). ‘Tōmonkō seminā kaisai’, Keidanren Shūhō, 27 September 1993, pp. 2–3. Korea Times, 3 July 1996, p. 5. Interview with Asahi Shimbun journalist, Tokyo, 15 November 1996. Interview with Keidanren official, Tokyo, 15 October 1996 [Author’s translation]. Asahi Shimbun, 28 September 1997 [Author’s translation]. For examples of ‘liberal’ academic views, see Yoshida (1996, pp. 202–3); Wada (1998, pp. 303–8). Izumi (1996, p. 11); Okonogi (1997b, pp. 48–53). Kamiya (1994, pp. 254–97). Interviews with Gendai Koria researchers, Tokyo, 25 June 1996 and 30 October 1996. Takesada (1996, p. 211). Kitagawa (1996, pp. 172–6); interview with Asahi Shimbun journalist, Tokyo, 21 November 1996. Office of International Security Affairs (1995, p. 18). Aspin (1993, pp. 5–6, 14). For views which see the Pentagon as reliant on the North Korean threat to sustain its budgets and force strategies, see Suh (1996); Tsuru (1996, p. 85); Sigal (1998, pp. 232–3); Bracken (1998, p. 412). Cohen (1997, p. 23). Interview with Defence Agency official, Tokyo, 14 November 1996; Umemoto et al. (1996, pp. 25–30). For the background to the formulation of the 1976 NDPO, see Ōtake (1983, pp. 127–32); Chapman et al. (1983, pp. 65–71); A.Tanaka (1997, pp. 244–64); Sebata (1998, pp. 57–73). Advisory Group on Defence Issues (1994, pp. 4–6). Funabashi (1997, pp. 264–6). Interview with member of SDF Defence Planning staff, Tokyo, 22 November 1996.

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80 Defense Agency, Defense of Japan 1996, Tokyo, Japan Times, 1996, p. 279. 81 Defense Agency, Defense of Japan 1996, Tokyo, Japan Times, 1996, p. 277 [Author’s italics]. 82 ‘Japan’s defense: security for the Twenty-First Century’, Look Japan, vol. 42, no. 483, June 1996, p. 5. 83 Interview with member of SDF Defence Planning staff, Tokyo, 22 November 1996; Heiwa Anzen Hoshō Kenkyūjohen, Ajia no Anzen Hoshō, 1996–97, Tokyo, Asagumo Shimbunsha, 1996, p. 11. 84 Maeda (1996, p. 76); Bōeichōhen, Bōei Hakusho 1996, p. 220. 85 Tōseimu Chōsakai Anzen Hoshō Chōsakai (1996, p. 96). 86 Mainichi Shimbun, 16 May 1997, p. 1. 87 Interview with LDP House of Representatives Diet member and former chairman of SRC, Tokyo, 6 February 1997. 88 Tamura (1997, pp. 203–25). 89 Defense Agency, Defense of Japan 1996, pp. 266–7. 90 Asahi Shimbun, 30 August 1997, p. 2. 91 Interviews with MOFA officials, Tokyo, 3 and 6 December 1996. 92 Japan Times, 19 August 1997, p. 1; Asahi Shimbun, 28 May 1998, p. 2. 93 Defense Agency, Defense of Japan 1996, p. 266 [Author’s italics]. 94 Asahi Shimbun, 3 September 1997, p. 4. 95 Interview with former MOFA official, Tokyo, 11 December 1996. 96 Asahi Shimbun, 15 April 1998, p. 2. 97 Yamashita, Takai and Iwata (1994, pp. 201–22). 98 Asahi Shimbun, 8 July 1998, p. 8. 99 Interview with member of SDF Defence Planning staff, Tokyo, 22 November 1996. 100 Asahi Shimbun, 3 July 1998, p. 4. 101 For the background to TMD and early Japanese resistance to it, see Green (1995, pp. 136– 42). 102 Asahi Shimbun, 8 September 1998, p. 2.

Conclusion The introduction to this book laid out three inter-linked questions concerned with the function of economic power in post-Cold War global security policy, the future security role of Japan, and the insights that IR theory can offer to assist policy-makers in the construction of economic power-based approaches to security in this period. This concluding chapter recapitulates the main arguments of the book in order to draw out the answers to these three main questions.

Arguments Examination of the security debate in the US and globally has revealed that following the end of the Cold War there are increasing doubts about the utility of military power as the primary means of ensuring stability and the prevention of conflict. Faced with the rise of a range of low-intensity conflicts and non-military, economic-generated security problems, policy-makers have considered afresh economic power-based and comprehensive approaches to security. Analysis of the Japanese policy-making debate in the 1990s demonstrates that there is also a strong tradition of alternative and comprehensive conceptions of security, and a fundamental acceptance of the utility of economic power for security policy. But despite this and Japan’s undoubted possession of great economic power, those policy-making conceptions and political forces which stress in various forms an expanded military security role for Japan are clearly in the ascendant. Given this apparent paradox between enhanced opportunities for Japan to contribute to security in the post-Cold War era based on economic power, but with the predominant policy impetus towards military security, investigation proceeded as to whether IR and IPE theory could indicate ways for Japan to re-articulate conceptions of security policy based on economic power and in this way perform a key role in achieving global stability. The starting point for this investigation was the concept of global civilian power, which views states as attempting to rely primarily on economic rather than military power for security purposes. By fusing this ‘prototype’ concept with differing traditions of Japanese and Western IR scholarship a more complete model of global civilian power was then produced which could be used to test the theoretical and empirical possibilities of Japanese economic power for security policy. In particular, the model proposed that the three main characteristics of a global civilian power are the ability of a state’s policy makers to conceptualise a security problem as resolvable by economic power; that the state either itself or in cooperation with private sector actors possesses the requisite economic power capacity to follow an economic power-based security option; and, most essentially, that policy-makers have the necessary will to instrumentalise the policy. The case study of the North Korean security problem applied the model of global

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civilian power to Japan by examining the changing policy-making conceptions of Korean Peninsula security since the end of the Cold War. The historical pattern of security relations surrounding the Korean Peninsula has been one of great power geostrategic conflict, and attempts to ensure stability and contain North Korea in the Cold War period by the manipulation of military and alliance balance-of-power politics. In many ways this balance-of-power scenario appears unchanged in the post-Cold War period as North and South Korea continue efforts to outmanoeuvre each other and the regional powers jockey for influence on the Korean Peninsula to secure their perceived national interests. Moreover, the Korean Peninsula still holds the potential for military conflict, as the North Korean nuclear crisis of 1994 showed. But at the same time, it has also become clear to policy-makers in surrounding states that the explosive and implosive aspects of North Korean security have been increasingly generated by the North’s economic insecurity and that military power is of limited utility in addressing the root causes of these problems or restraining new military crises. Hence, the US and South Korea in the form of KEDO and the ‘soft landing’ have now edged towards a policy of economic engagement with North Korea and the use of economic power and comprehensive security measures. The Japanese approach towards the North Korean security problem has followed that of the US and South Korea. Japan has been subject to North Korean military explosive and implosive security threats, magnified more than anything by North Korea’s success in exposing during the nuclear crisis the essential lack of political and military operability of the US-Japan alliance to deal with security crises on the Korean Peninsula and elsewhere in the region. However, Japanese policy-makers have also recognised that following the nuclear crisis, and even allowing for the Taepodong-1 missile test in 1998, the military threat from North Korea is declining and the optimum policy approach to ensuring stability on the Korean Peninsula is the economic engagement of the North. Hence, Japan fulfils the first criteria of global civilian power as its policy-makers are able to conceive of the North Korean security problem as resolvable by economic power. In addition, examination of Japan-North Korea economic relations in the post-Cold War period argues that there are many areas where the economies of both states could intermesh, and Japanese economic power as manifested in both state and private sector activity could work to stabilise North Korea’s economic situation and its military behaviour. But having noted Japan’s economic power capacity and fulfilment of the second condition of global civilian power it is also appears that at present Japan’s politicians, bureaucrats, and business interests lack the third condition of the policy-will to instrumentalise a security policy based on economic power. Due to domestic political change, anxieties about political scandal, problems of the racchi jiken and Nihonjinzuma, lack of commercial interest, and external pressure from South Korea, the pace of Japan’s engagement of the North is slow and prone to policy immobilism. At the time of writing in late September 1998, Japan-North Korea talks, the key to Japan’s economic engagement of the North, remain suspended. Kōmura Masahiko the newly appointed Foreign Minister in Obuchi’s cabinet, summed up the reactive nature of Japanese policy towards North Korea the previous month, when he stated that: ‘Although I want to avoid saying that we will take no initiatives whatsoever [to restart normalisation talks], the ball is very firmly in North Korea’s court and we will wait for it to move’.1 In some ways,

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North Korea has made its move with the Taepodong-1 test, which demonstrated its relative lack of interest in normalisation with Japan over the short term, and greater focus on internal regime stability and pushing along negotiations with the US as the key to its diplomatic strategy. The effect has been to produce near total stalemate in Japan-North Korea ties and Japanese policy towards North Korea presently remains stuck in neutral. In contrast to the immobilism of Japanese policy towards North Korea, policy-makers in Japan have poured their energies into the rehabilitation of the US-Japan alliance following the Cold War and the shock of the North Korean nuclear crisis. Through measures such as the revision of the Guidelines, Japan has upgraded the alliance to serve as a platform for the US to project its military power across the entire Asia-Pacific region and beyond. Furthermore, despite the declining threat from North Korea relative to the rise of other potentially more dangerous security threats such as China, policy-makers in the Japan and the US have sold changes in the alliance to the Japanese public based solely on the threat from North Korea.

IR theory and security policy This book has constructed and tested the model of global civilian power with mixed conclusions and implications for the three questions raised above concerning post-Cold War security policy. To take the question of IR theory and security policy first, it is arguable that the application of concepts of global civilian power and economic power to security policy, whilst clearly far from providing exhaustive solutions or guides to deal with every security problem, does indicate ways to think around issues and open up new policy approaches. As the Japanese IR specialist Sakamoto Yoshikazu notes, the Cold War was a product of the mode of thought at the time, and it was the belief in the inevitability of conflict which determined the patterns of security behaviour and the predilection of policy-makers for balance-of-power strategies.2 In turn, the understanding that conflict scenarios and security policies are not invariable or total realities, but products of human thought and action, indicates that by being prepared to search for alternative approaches to security problems alternative solutions can also be uncovered. This understanding is particularly valuable in the case of the Korean Peninsula, where conflict and the balance-of-power have often been seen as unshakeable realities, and where this outlook on security policy has persisted into the post-Cold War period, and even to the point of almost dragging policy-makers into an unnecessary war in 1994 by obscuring from them the new reality that the North Korean security problem is now largely driven by economic insecurity and requires comprehensive solutions. Through the utilisation of IR and IPE theory, this book has hopefully met the demand for and sketched out the opportunities of an alternative approach to security based on economic power which is applicable to the Korean Peninsula and beyond. The model suggests the theoretical possibility that even in the case of North Korea, usually viewed as the very apogee of military security scenarios, states such as Japan armed with economic rather than military power can make a significant contribution to regional and global security. Simultaneously, though, the model also points to very considerable restrictions upon the exercise of economic power for security purposes, accounted for by

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the diffusion of economic power between state and private sector actors, and the lack of the necessary will amongst policy-makers to give cohesion to the economic security policy option. Global civilian power is, then, a hard status to attain, but the expectation is that the model can at least serve as a touchstone for policy-makers to think flexibly about their own conceptions of security problems and attachment to what have been regarded as orthodox military approaches to security.

Economic power and security The policy immobilism identified in Japan and the obstacles in the US and South Korea to the execution of the ‘soft landing’ highlight the difficulties of instrumentalising economic security policy. Moreover, it is clear that all of the involved regional powers will maintain a guarded military posture as insurance against any explosive or implosive military crises precipitated by North Korea. But even whilst this background of policymaking problems and military contingency planning has to be acknowledged, the inescapable reality of US, South Korean, and Japanese policy towards North Korea is that it has gradually shifted in varying degrees from uncompromising military containment to cautious economic engagement. The US and South Korea are continuing to play a game of power politics, but have now placed economic power, and not just economic pressure but also economic interdependence, alongside military power in the arsenal of strategic tools available to them. The outcome is a form of comprehensive security policy which, although it indicates a long-haul approach and like military power has no guarantee of ultimate success, does offer some prospect of avoiding the costs of the collapse of North Korea and currently appears to be effective. North Korea will persist with occasional threats of military brinkmanship to secure economic concessions, but the most perceptible trait in its security behaviour since the Agreed Framework in 1994 has been to moderate its security threats and to seek tentative engagement with the outside world. The Korean Peninsula security endgame has not yet been reached, and North Korea may display greater resilience than many observers give it credit for and continue to upset the regional security picture. But the use of economic power to deal with its economic insecurities should form the key factor in avoiding future nuclear and other Korean Peninsula security crises. In turn, the lessons of the North Korean security problem should be applicable to other post-Cold War security issues. During the writing of this book a number of security issues have arisen which demand economic and comprehensive solutions. The near collapse of Albania into political anarchy due to an economic crisis between 1996 and 1997 aroused anxieties about new instability in the Balkans, and fears of political and security instability in Southeast Asia have been heightened by chain-reaction currency crises since late 1997. Likewise, economic chaos in the Russian Republic in the autumn of 1998 threatens to feed through into political and military instability internally and for neighbouring states. Thus, security policy-makers are steadily becoming aware that the utilisation of economic power is essential in order to pre-empt possible explosive and implosive security risks in both Southeast Asia and Russia. As stated previously, economic power does not offer solutions to every aspect of every security problem, but it

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at least presents one avenue for policy-makers to explore in an attempt to resolve such hazardous security problems.

Japan and global security The key importance of economic power for security indicates that there is an opening or niche role for Japan in global security policy which is uniquely suited to its traditions of comprehensive security and its economic power portfolio. Furthermore, the model of global civilian power outlined in this book suggests strongly that Japan could fulfil this role to assist in the resolution of such specific security problems as North Korea. Nevertheless, the main conclusion reached so far is that due to internal policy-making problems Japan as yet has not adequately met the criterion of a pro-active global civilian power and much of its economic power in this case lies under-utilised for security purposes. Indeed, it can be said that the North Korean security problem is actually more likely to serve as the occasion for Japan’s emergence as a global military power, rather than a civilian power, due to the changes that it has wrought in the US-Japan alliance. For even though North Korea’s political threat to the alliance has not yet led directly to a build-up in Japan’s own independent military capabilities, it has served to legitimise the expansion of the range of action of the US-Japan security treaty across the entire AsiaPacific and promoted the debate concerned with Japan’s military contribution to security. Some may applaud this as a sign of Japan finally inching towards fuller burden-sharing in regional and global security. But the flip-side cost of this has been to ignore the possibilities for Japan to assist in the resolution of the North Korean security problem, which seems to cry out for a vigorous Japanese diplomatic and economic contribution, and to tip the overall balance of Japanese security policy away from comprehensive security to concentration on military security policy. Thus, the answer to the question concerning the future of Japan’s contribution to global security seems to be that at present it will embark upon further incremental expansions of its military role, whilst passing up one important opportunity offered by the post-Cold War security agenda to use economic power for security ends. But this is not to say that Japan’s role in economic security policy will remain constrained indefinitely or that the concept of global civilian power is invalid. Japan could still assume the status of a global civilian power if the policy-making obstacles to the instrumentalisation of economic security policy are overcome. Progress in NorthSouth relations and the four-way peace talks would remove one major international restriction on Tokyo’s diplomacy towards Pyongyang. If the US were to normalise relations with North Korea, this could break the pattern of immobilism in Japan’s diplomacy and speed the process of Japan-North Korea normalisation and produce significant economic engagement. Furthermore, despite the racchi jiken, Nihonjinzuma, and missile problems, the basic diplomatic and economic incentives for Japanese policymakers to improve relations with North Korea still exist. For the time being policymakers are disillusioned with diplomatic approaches towards North Korea, but three of the top political figures in the current Japanese government—Obuchi, Nonaka, and Mori—remain aware of the benefits of the elusive prize of normalisation with the North,

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and once the domestic political frenzy over the missile tests has died down new initiatives may be forthcoming from Japan. Therefore, the possibility cannot be ruled out that by the time of the publication of this monograph the prospects for Japan-North Korea normalisation talks may have improved and that Japan will begin to tread the path to the fuller economic engagement of North Korea and the assumption of the role of a global civilian power.

Notes 1 Asahi Shimbun, 2 August 1998, p. 2 [Author’s translation]. 2 Sakamoto (1987, pp. 107–10).

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Index academic community, Japan 169–4 Acheson, Dean 49 Acquisition and Cross-Servicing Agreement (ACSA) 166, 179; and military policy 20 adjustment in economic power 35 Agreed Framework on nuclear crisis 58, 59–7, 69–7, 90; and soft-landing policy 103–8, 176, 187 Aichi Kazuo 161–4 aid, in economic power 42–8 aid, North Korea 142–7; and Japanese power 155–7; vulnerability 154–5 air force (Japan), changes in 176 airports, North Korea 137 Akiyama Masahiro 178 Allende, Salvador 43 Angell, Norman 5 arms sales, North Korea 133 army (Japan), changes in 176 ASEAN-PMC 17 ASEAN Regional Forum 12, 17 Asia Pacific Economic Cooperation (APEC) 8, 39, 136 Asian Development Bank (ADB) 20, 42, 144 Aum Shinrikyō 82 availability in economic power 35 axe-killing incident 51 balance of power: military and economic 11–12; shifts in 68–70, 208, 210 ballistic missiles: export of 144; manufacture of 74; security issues and aid 156; tests of 63, 74, 90, 167, 169; threat of 74, 89–91, 163, 166 Bosnia 2, 3, 4, 5, 6, 9 Bosworth, Stephen 142 Boutros Ghali, Boutros 2 Bush, George 1, 8, 71 business interests, Japan 167–5

Japan’s economic power and security Buzan, Barry 30 Calder, Kent 151 Carter, Jimmy 53, 59, 99 cash flows to North Korea 59, 100, 125–7 central bureaucracy, Japan 162–80; Japanese Defence Agency (JDA) 179– 80; Ministry of Foreign Affairs (MOFA) 175–9; Ministry of International Trade and Industry (MITI) 180; Self Defence Force (SDF) 179–80 charcoal supplies, North Korea 139 Chechnya 3, 4 China: and Japanese military policy 14–15; and Korean Peninsula 68–70; and Korean War 54; and North Korean nuclear crisis 96; policy towards North Korea 69–70, 71–2; security policy on North Korea 52; trade with North Korea 139–41, 147 Chōsensōren 55; cash flows to North Korea 137–8; decline in support 183–4; investment in North Korea 132–3; and EDP 165; pachinko money scandal 81, 86; and policy-making in Japan 183–4; and SDPJ 169–70; threat to Japan 91–3; tourism by 149; and trade with Japan 145 Christopher, Warren 8–8, 94 Chung Yu Jung 120 civilian power: future of 25–7; global 31– 2; qualities of 33; security 32–3 Clinton, William 2, 8, 9, 17, 39–3, 58, 71, 96, 176, 179 coal supplies, North Korea 139–1 Cold War: end of 12–14; Japanese economic security policy 21–4; Japanese security and Korean Peninsula 56–61; Japanese security policy after 12–21; and Korean War 53–6; military security after 1–8, 61–8; security agenda after 3–8

218

Index

219

communications, North Korea 136–50; and Japanese power 149–50; satellite 150; vulnerability 147–8 communications in economic power 40–5 Communist Party of Japan 14, 159 Comprehensive National Security Policy (Japan) 19–5 Consultative Group and Coordinating Committee for Multilateral Export Controls (COCOM) 122, 134 Cotton, James 69 credit 37–1 Cumings, Bruce 49, 102 Dayton Peace Accord 1, 3 debt, North Korea 123–6 defection, North Korean official 61, 64, 98 Democratic Party of Japan (DPJ) 158–2; and Japanese military policy 17–18 Den Hideo 158 Deng Xiaoping 63 Dietmen’s League for the Promotion of Japan-North Korea Friendship 55, 156 Doi Takako 16, 74, 76, 157 drug smuggling 133, 155, 159 economic aid in economic power 42–8 economic growth rates, North Korea 115 economic plans, North Korea 108–25 economic power: balance of 11–12; components of 38–48; direct 36, 42–3, 44, 45–6, 47; indirect 35–6, 43, 44; and security 8–12; and security policy 36– 7; vulnerability 37–8 economic security policy: capacity 36–48; concepts 33–5; Japanese, in Cold War 21–4; policy-making will 48; and welfare 34 economic security policy, Japan 18–4; future of 25–7; post-Cold war 24–5 electricity supplies, North Korea 139–1, 139 energy, North Korea 139–4; and KEDO 152–4; vulnerability 150–2

Japan’s economic power and security energy in economic power 41–6 Etō Shinkichi 23 European Bank for Reconstruction and Development (EBRD) 38, 42 European Union 3 6, 97, 160 Exchange of Technology Agreements (US-Japan) 10 Exchange Rate Mechanism (ERM) 38 finance in economic power 37–2 finances, North Korea 123–8; debt 134–6; and Japanese power 137–8; structure and vulnerability 134–7 foreign direct investment: and economic power 39–40; Japanese in North Korea 131–4 Foreign Exchange and Foreign Trade Control Law (FEFTCL) 134–6 forgery 126 four-way talks on nuclear crisis 72–73 free economic trade zones (FETZ, North Korea) 119–31; and Japanese business interests 181; and port facilities 148 Fujisanmaru 18 incident 56, 74–2, 75, 78, 152 Fukada Hajime 75, 157 Fukuda Takeo 19 Funabashi Yōichi 30, 33, 35 General Agreement on Tariffs and Trade (GATT) 39 Gilpin, Robert 36 Gorbachev, Mikhail 62 Guam Doctrine (1969) 7 Guidelines for Japan-US Defence Cooperation 84–85, 179–189 Gulf War 10–12; and military power 1–2 Hashimoto Ryūtarō 99, 179, 187 Hata Tsutomu 15, 81–9, 81, 83 Hatakeyama Shigeru 81 Hatoyama Yukio 159 Helms-Burton Act (USA, 1996) 9 Hosokawa Morihiro 15, 81, 88, 174 Hwang Jan Yop 61, 64, 98 hydroelectric supplies, North Korea 139 Ikeda Hayato 19 IkedaYukihiko 220 industrial output, North Korea 109 information flows and economic power 32 Inoki Masamichi 21

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221

International Atomic Energy Agency (IAEA) 42; and North Korea 63, 64, 65, 83 International Monetary Fund (IMF) 123, 128 investment in North Korea 121–3; Rajin-SonbongFETZ 129–31; TRADP 127– 9. see also foreign direct investment Iraq 2, 5, 7 Ishihara Nobuo 83 Ishihara Shintaro 14 Ishii Hajime 75, 160 Itō Shigeru 158 Izumi Hajime 170 Japan: business interests 180–3; central bureaucracy 175–80; diplomatic policy on North Korea 60, 80–97; FDI in North Korea 131–4, 137–8; and Korean war 56–7; military policy on North Korea 58, 80–97, 187–203; military security threat of North Korea 88–93; normalization talks with North Korea 83–5; and nuclear crisis see nuclear crisis, Korean Peninsula; policy-making 161–2; political parties 162–75; political security threat of North Korea 93–6; political system 17– 20; politicians’ visits to North Korea 81–3; regional security 14–21; security and South Korea 58; strategic view of Korean Peninsula 52–3; trade with North Korea 131–5, 140–3, 145–7; and United States see US-Japanese alliance Japan Defence Agency (JDA) 166–80; changes in organization and equipment 190; and military policy 14, 19; and North Korean military threat 89–90, 90 Japan-North Korea Trade Association 125, 129 Japan-South Korea relations 51–55 Japan Socialist Party 10 Japanese military policy on North Korea 173–189; Acquisition and Cross-Servicing Agreement (ACSA) 193; after Cold War 12–14; NDPOs 188–93; theatre missile defence 202–3; and USA, Joint Declaration 194–203; Yūji hōsei 201

Japan’s economic power and security Japanese power over North Korea: in aid 155–7; in communications 149–50; in finances 137–8; in trade 145–7 Japanese security policy: after Cold War 12–21; future of 25–7; and Korean Peninsula during Cold War 56–61 Jin Park 77 Joint Declaration for Defence Cooperation, US-Japan 179–189; functions and fields 196–7; Guidelines for 94 Joint Declaration on denuclearization 57, 59 Joint Nuclear Control Committee (JNCC) 56 juche (self-reliance) ideology 50, 109, 143; and finances 134; and production system 117, 119, 123, 126 Kadota Hiroshi 168 Kaifu Toshiki 11, 67, 76 Kajiyama Seiroku 84, 186 Kamo Takehiko 33 Kan Naoto 158 Kanemaru Shin 14, 74–4, 78, 152, 155, 163 Katō Kōichi 22, 153, 155, 170, 187 Katō Ryōzō 163 Kenya 17 Keohane, Robert 33 Kim Dae Jung 55, 97, 121, 144, 171 Kim II Sung 49, 50, 55, 56, 59, 62, 74, 75–4, 92, 109, 121, 142 Kim Jong II 62 Kim Jong-U 168 Kim Young Sam 57,69, 95, 171 Kishi Nobusuke 52, 185 Kissinger, Henry 50 Knorr, Klaus 33, 39 Komaki Teruo 112 Kōmura Masahiko 194 Kondō Shōichi 164 Kōno Yōhei 99 Korean Peninsula: historical overview of 51–3; Japan’s strategic view 52–3; and Korean War 55; military balance 71; as military security problem 51–61; nuclear crisis on 61–8;

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shifts in balance of power 68–70 Korean Peninsula Energy Development Organization (KEDO) 59–6, 90; and Japan 153–4; MOFA on 175; and soft-landing policy 104, 105–7; and vulnerability of North Korea 152–3 Korean War 48–6 Kōsaka Masataka 20, 30 Kubo Wataru 75, 158 Kuno Chūji 55 latent economic power 32 Li Un-Hye 76 Liberal Democratic Party (LDP, Japan) 15, 151–9; and Agreed Framework 109; and Japanese military policy 12, 13–14, 16; and Japanese security in Cold War 59; and North Korean military threat 88, 163; policy-making 162; and racchi jiken 173 Liberal Party, Japan 14, 160–5 Masaya Miyoshi 168 mass media, Japan 169–4 Matsuzawa Shigefumi 161 Maull, Hans 29–2 Mazaar, Michael 95 Miki Takeo 53 military balance, Korean Peninsula 65 military hardware: changes in 190; trade in 144 military power and security: after Cold War 1–8, 61–8; after Gulf War 1–2; balance of 11–12; effectiveness of 5–7; intervention, human costs of 5–6; Japanese 12–14; limitations of 3–8 Ministry of Foreign Affairs (MOFA, Japan) 162–9; and military policy 14, 19; normalization talks with North Korea 87–8 Ministry of International Trade and Industry (MITI, Japan) 167; and North Korea economic development 130, 135–6 Missile Technology Control Regime (MTCR) 67 Miyazawa Kiichi 81 Mori Yoshirō 153, 154, 197

Japan’s economic power and security Morikawa Toshio 127 Mozambique 17 Murayama Tomiichi 22, 74, 157 Nakanishi Hiroshi 23 Nakasone Yasuhiro 11, 153 National Defence Programme Outlines (NDPOs, Japan) 174–93; changes in 190; and military policy 20 navy (Japan), changes in 176 Nester, William 20 New Frontier Party (NFP, Japan) 15, 160– 5; and Japanese military policy 16, 17, 200 Nihonjinzuma: academics on 184; and aid 156; in Cold War 59; LDP on 164, 165, 166, 169; and MOFA 177; visiting Japan 84, 110–11 Nixon, Richard 7, 50, 53 Nobukuni Makoto 123–4 Nodong-1 missile 61, 67 Noland, Marcus 136 Non-Proliferation Treaty (NPT): and North Korea 56, 63–4; South Korea in 56 Nonaka Hiromu 153, 154, 155, 197 normalization talks (Japan-North Korea) 75–5 North American Free Trade Agreement (NAFTA) 8 North Atlantic Treaty Organisation (NATO) 2, 3 North Korea: aid 154–7; cash flows to 137–8; Chinese policy towards 69–70; communications 147–50; debt 134–6; drug exporting 143; as economic and security problem to Japan 97–111; economic contacts with South Korea 131; economic growth rates 125; economic insecurity 98–100; economic plans 119–25; energy 150–4; finance 134–8; free economic trade zones 129– 31; industrial output 120; Japanese diplomatic policy on 60, 80–97;

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and Japanese FDI 131–4, 137–8; Japanese military policy on 58, 80–97, 187–203; and KEDO 152–4; and Korean War 54; military aggression 98–100; military expenditure and forces 71; military power, limitations 100–2; military security threat to Japan 88–93; and MOFA 175–9; normalization of policy on 80–8; normalization talks with Japan 83–5; political security threat to Japan 93–6; positive economic sanctions on 103; primary energy supplies 151; production system see production system; and Rajin-Sonbong FETZ 129– 30; Second Seven Year Plan 123; soft landing policy 102–8; strategy during nuclear crisis 72–7; Third Seven Year Plan 124; trade see trade, North Korea; TRADP 127–9; visits by Japanese politicians 81–3; vulnerability of see vulnerability; withdrawal from NPT 88 Northeast Asia Regional Development Area (NEARDA) 117 Nozaka Kōken 155 nuclear crisis, Korean Peninsula 55–8; Japanese response 96–7; LDP on 165, 168; North Korean strategy 99; South Korean policy 70–2; US and South Korean response 77–80 nuclear programme (North Korea) 51, 56– 2, 67–6; and energy supply 153 Nye, Joseph S. Jr 33, 71 Obuchi Keizō 100, 153–7, 164, 194, 197 Official Development Assistance (Japan) 20, 22, 79, 144–7 Ōhira Masayoshi 20 oil imports, North Korea 140 oil supplies, North Korea 139 Okinawa 13–14, 17–18; and US-Japan alliance 55, 193, 198 Okonogi Masao 65, 170 Omnibus Trade Acts (USA, 1988) 8 Organization for Economic Cooperation and Development (OECD) 36 Organization of Petroleum Exporting Countries (OPEC) 42

Japan’s economic power and security Ōta Masahide 13, 18 Ozawa Ichirō 11, 14–16, 22, 23, 76, 81 86, 162–5 pachinko money scandal 74, 79, 158 Park Chung Hee 51, 55 peace keeping operations 1, 3, 4, 5; and Japan 13–14, 16, 19 Perry, William 81 petroleum supplies, North Korea 139 policy-making in Japan 150–2; business interests 180–3; central bureaucracy 175–80; immobilism of 187; political parties 162–75; US and South Korean pressure 184–6 political parties, Japan 150–75; Communist Party 172; Democratic Party of Japan (DPJ) 171–2; Liberal Democratic Party (LDP) 163–9; Liberal Party 173–5; New Frontier Party (NFP) 173–5; Sakigake 169–71; Social Democratic Party (SDPJ) 169–71 Polomka, Peter 51 ports, North Korea 137 production in economic power 36–37 production system, North Korea 107–34; characteristics 117–19; economic plans 119–25; industrial output 120; and Japanese FDI 132–3; and North-South economic contacts 126–31; vulnerability of 125–6 Qian Qichen 51 racchi jiken 56, 77, 100; academics on 183–4; and aid 156; in Cold War 61; and Democratic Party of Japan 172; LDP on 164, 165, 166, 168, 169; and Liberal Party 173; and MOFA 177; and New Frontier Party 173, 174–5; SDPJ on 170 rail system, North Korea 136 Rajin-Sonbong FETZ 119–31, 122;

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Index Japanese interest in 181 Rangoon terrorist attack (1983) 56 Reagan, Ronald 1, 8 Recruit bribery scandal 74 Reich, Robert 8 relational economic power 33 renkei policy 80; and MOFA 178 resilience in economic power 35 revealed economic power 33 RIMPAC exercises 17 Riscassi, Robert 70 road system, North Korea 137 Roh Tae Woo 57, 67, 74, 76–5, 80, 95, 171 Russia: and Korean Peninsula 68–70; security policy on North Korea 52; trade with North Korea 147 Sagawa Kyūbin corruption scandal 14, 79, 153, 155 Sakamoto Yoshikazu 195 Sakigake 157–71; and Agreed Framework 110; and Japanese military policy 17 satellite communications 139 Satō Eisaku 53 Scud missiles 67, 82 Sea Lanes of Communication (SLOC) 11 security: and civilian power 32–3; regional, Japan 12–21 security policy: balance of military and economic power 11–12; Japanese, after Cold War 12–21; and Korean Peninsula during Cold War 56–61; military-oriented 9 seikei bunri policy 168 seikyūken 76, 79; and Japan-Korea Basic Treaty 57 Self Defence Force (SDF, Japan) 166–80; and Japanese military policy 12–13, 21; peace keeping operations 13–14, 18 self-sufficiency in economic power 35 Shevernadze, Andrei 69 shūhen 177, 180, 186; and Cold War 57 Sino-Japanese War (1894) 47 smuggling 133, 155

227

Japan’s economic power and security

228

Social Democratic Party of Japan (SDPJ) 157–71; and Agreed Framework 109; and Fujisanmaru incident 81–2; and Japanese military policy 12–13, 16–17, 17, 21; and Japanese security in Cold War 59; and North Korean military threat 88, 89; in political system 17–18 soft economic power 32 soft landing policy, North Korea 92–8; and aid 155; and Democratic Party of Japan 171; JDA on 179; MITI on 180; MOFA on 175, 178; SDF on 179; SDPJ on 170–1; USA on 185 sōgōshōsha 121–3 Somalia 2, 4 South Korea: defence treaty with USA 55; economic contacts with North Korea 65–6, 131; military expenditure and forces 71; and North Korean submarine incursion 67; policy during nuclear crisis 70–2; and policy-making in Japan 184–6; and Rajin-Sonbong FETZ 129– 30; response to nuclear crisis, Korean Peninsula 77–80; trade with North Korea 147 South Korean airliner bombing 74, 76, 126 Soviet Union: and Korean Peninsula 68– 70; and Korean War 54; policy on Korean Peninsula 71–2; security policy on North Korea 52 Special Action Committee on Facilities and Areas in Okinawa (SACO) 17 Special Economic Zones 37 state, role of 29–3 Stockwin, J.A.A. 151, 173 Strange, Susan 33–6, 33, 41 Strategic Defence Initiative (SDI) 1 structural economic power 32–6 Structural Impediments Initiative (USA, 1989) 8 submarine incursions, North Korean 61, 83, 97 substitution in economic power 35 Suzuki Zenkō 11, 20 Taepodong-1 missile 67, 82

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Takemura Masayoshi 22, 75, 159 Takeshita Noboru 74, 153 Tamura Hideaki 162 Tanabe Makoto 74 Tanaka Akihiko 23 Tanaka Hitoshi 87 Tanaka Kakuei 55, 153 Team Spirit military exercises 57–5, 61, 90 telecommunications, North Korea 137 theatre missile defence 162, 188–3 Three-Party Joint Declaration on Japan-North Korea Relations 75–4, 78–7; and LDP 167; and MOFA 176 tourism 138–50 trade, North Korea 128–47; with Japan 131–5, 142–3, 147; and Japanese power 145–7; main partners 140, 147; main trading partners 140, 147; in military hardware 144; regional patterns 141; structure and characteristics 139– 42; value of 139; vulnerability 142–4 trade and economic power 38–4 transnational corporations 36–37; in North Korea 132–3 Tumen River Area Development Plan (TRADP, North Korea) 117–9, 123, 167; and communications 148; economic resources 128 United Nations 1, 3; and TRADP 127–8 United Nations Development Programme (UNDP) 117, 143 United Nations Peace Cooperation bill (Japan, 1990) 11–12 United States: defence treaty with South Korea 55; economic power, use of 10– 11; and Korean War 53–4; and nuclear crisis, North Korea 65; peace keeping operations 2–4; and policy-making in Japan 184–6; relations with North Korea 75–6; response to nuclear crisis, Korean Peninsula 77–80; and soft landing policy 102–8; and South Korea 77; trade policy towards Japan 9; trade with North Korea 147

Japan’s economic power and security Uno Sōsuke 74 US-Japan Joint Declaration on Security 179–189 US-Japanese alliance 12–18; Exchange of Technology Agreements 12; JDA on 179, 194–201; Guidelines for Japan-US Defence Cooperation 93–94, 194– 203; US-Japan Joint Declaration on Security 194–203; and North Korean nuclear crisis 93, 95–6; and Okinawa 15–16, 19–20; redefinition of 187; SDFon 179 USS Pueblo incident 50 Utsunomiya Tokuma 125 Van Creveld, Martin 3 vulnerability of North Korea: aid 154–5; communications 147–8; economic power 38; energy 150–2; finances 134– 7; and KEDO 152–3; production system 125–6; trade 145–6 Watanabe Michio 99, 153–5 weapons of mass destruction 6, 67, 82 World Bank 43, 124, 127 World Trade Organisation (WTO) 39 Yamaguchi Jirō 12 Yamamoto Shinobu 23 Yamasaki Taku 22, 153 yatō gaikō (opposition diplomacy) 54 Yoshida Shigeru 19 Yūji hōsei: and Japanese military policy on North Korea 201; JDA on 179; and North Korean threat 91, 94; research into 188; SDF on 179 Zaire 17

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