Order Code IB97004
CRS Issue Brief for Congress
Received through the CRS Web
Japan-U.S. Relations:
Issues for Congress
Updated June 7, 2004
Richard P. Cronin, Coordinator, William Cooper,
Mark Manyin, and Larry A. Niksch
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Role of Congress in U.S.-Japan Relations
U.S.-Japan Cooperation and Interdependence
U.S.-Japan Relations Under the George W. Bush Administration
Cooperation Against Terrorism: Response to the Attacks in New York and
Washington
Support for U.S. Policy Towards Iraq
U.S.-Japan-China Relations
Converging Korean Peninsula Priorities?
Claims of Former World War II POWs and Civilian Internees
Kyoto Protocol
Security Issues
Issue of U.S. Bases on Okinawa
Burden Sharing Issues
Revised Defense Cooperation Guidelines
Cooperation on Missile Defense
Economic Issues
Japanese Political Developments
Current Situation
Koizumi’s Popularity
Background — The Political System’s Inertia
LEGISLATION

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Japan-U.S. Relations: Issues for Congress
SUMMARY
The United States has long worked
has been outspoken in favor of the U.S. posi-
closely with Japan to build a strong, multifac-
tion on Iraq and sent some 600 non-combat
eted relationship based on shared democratic
military and reconstruction support, despite
values and mutual interest in Asian and global
considerable public and political opposition.
stability and development. Alliance coopera-
tion has deepened significantly since Septem-
Japan’s position toward North Korea
ber 11, 2001, despite disappointment at Ja-
generally has been hardening in recent
pan’s failure thus far to overcome economic
months, primarily due to Pyongyang’s nuclear
stagnation that has lasted more than a decade,
and ballistic missile programs and to North
including recent criticism of Japan for actively
Korea’s admission that it kidnapped Japanese
intervening to maintain a yen-dollar ration that
citizens in the 1970s and 1980s. Tokyo
helps maintain a large Japanese trade surplus.
appears to be more willing than previously to
(Data released in April 2004 suggest that
support coercive diplomatic measures against
growth is finally resuming in Japan.)
North Korea, including economic sanctions.
U.S.-Japan relations concern Members
Due to its own concerns about North
and Committees with responsibilities or inter-
Korea and a rising China, Tokyo has started to
ests in trade and international finance and
bolster its self-defense capabilities even as it
economics, U.S. foreign policy, ballistic
increases cooperation with the United States
missile defense (BMD), and regional security.
under revised defense cooperation guidelines
The latter include North Korea’s nuclear and
agreed to in September 1997. Japan is partici-
missile proliferation and China’s potential
pating in joint research and development of a
emergence as the dominant regional military
U.S. missile defense capability, but has not
power. Congress has been particularly inter-
made an acquisition decision.
ested in issues concerning U.S. military bases
in Japan, which have played a key role in
The traditionally large U.S. trade deficit
supporting the military campaign in Afghani-
with Japan has been a perennial source of
stan and the military buildup near Iraq.
friction. The deficit reached a record $81.3
billion in 2000, but fell to $69 billion in 2001
In October 2001 the Koizumi
and $70 billion in 2002 because of the
government gained parliamentary passage of
moribund Japanese economy and the current
legislation permitting the despatch of Japanese
U.S. economic slowdown.
ships and transport aircraft to the Indian
Ocean to provide rear-area, non-combat logis-
In general, the Bush Administration has
tical support to U.S. forces engaged in the
paid somewhat less attention to the trade
anti-terrorist campaign in Afghanistan despite
deficit than did the Clinton Administration,
strong opposition from both within and out-
while calling on Tokyo to deal more vigor-
side of the ruling coalition. A small Japanese
ously with its huge problem of bad bank loans,
flotilla which has remained on station since
which are a drag on Japan’s economy, and to
late 2001 has supplied the majority of the fuel
follow through on structural reforms.
needs of U.S. and British warships. Japan also

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MOST RECENT DEVELOPMENTS
On May 22, 2004, Prime Minister Koizumi visited Pyongyang, North Korea, and
secured the release of five children of four Japanese citizens who had been abducted by
North Korean agents in the 1970s and 1980s. In return, Koizumi pledged some 250,000 tons
of rice and $10 million in medical supplies and other humanitarian aid, and promised not to
impose economic and financial sanctions so long as North Korea adhered to past
commitments regarding its nuclear and ballistic missile programs. The Kim Jong-il regime
had allowed five of the former abductees to “visit” Japan in October 2002, where they
remain. The trip generated significant controversy, with some advocates of the abductees
cause arguing that Koizumi had given too much in return for too little. Bush Administration
officials generally applauded the mission. (See section on Japanese Political Developments
for more details.)
On June 4, a senior official from Japan’s foreign ministry reportedly met with Assistant
Secretary of Defense for International Security Affairs, Peter Rodman, to discuss the case of
the American deserter, Charles Jenkins. The Japanese government has asked U.S. officials
to set aside the charges against Jenkins so that he and the children can leave North Korea,
but thus far U.S. officials have maintained that he is subject to prosecution for desertion.1
On June 3, 2004, the lower house of the Japanese Diet (parliament) passed legislation
that would give the government the right to bloc visits to Japanese ports by ships deemed to
be a security risk. The Koizumi government supports enactment of the legislation despite
having given a conditional pledge to North Korea not to impose sanctions, on grounds that
leverage remains necessary to insure that Pyongyang shows satisfactory progress on the
abductees issue and regarding its nuclear and missile programs.
Both the ruling Liberal Democratic Party (LDP) and the main opposition party, the
Democratic Party of Japan (DPJ), are reeling over revelations that a number of senior
political leaders, including Prime Minister Koizumi and his Chief Cabinet Secretary, and
leaders of the DPJ, had failed at various times to pay into the national pension plan. (See
Japanese Political Developments, below).
BACKGROUND AND ANALYSIS
Role of Congress in U.S.-Japan Relations
Congress cannot itself determine the U.S. approach toward Japan, but its powers and
actions in the areas of trade, technology, defense, and other policy form a backdrop against
which both the Administration and the Japanese government must formulate their policies.
As of 2003 several high profile policy issues were of particular interest to Congress,
including dealing with the confrontation over North Korea’s nuclear and missile programs,
1 “Japanese, U.S. Officials Discuss Deserter Issue.” Jiji Press, June 4, 2004.
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anti-terrorism cooperation, Japan’s support for U.S. policy concerning Afghanistan and Iraq,
and cooperation on missile defense. Congress also has been active recently in pushing the
Administration to employ anti-dumping trade penalties against steel imports from Japan, and
in supporting efforts by survivors of Japan’s World War II slave labor camps to gain relief
through the U.S. courts by opposing a long-standing U.S. policy that gives primacy to the
terms of the 1951 U.S.-Japan Peace Treaty.
U.S.-Japan Cooperation and Interdependence

(This section was written by Richard Cronin and Mark Manyin)
The United States and Japan have long sought to promote economic cooperation, an
open global trading system, and regional stability and security. In economic terms, the two
countries have become increasingly interdependent: the United States is by far Japan’s most
important foreign market, while Japan is one of the largest U.S. markets and sources of
foreign investment in the United States (including portfolio, direct, and other investment).
The U.S.-Japan alliance and the American nuclear umbrella give Japan maneuvering room
in dealing with its militarily more powerful neighbors. The alliance and access to bases in
Japan also facilitates the forward deployment of U.S. military forces in the Asia-Pacific,
thereby undergirding U.S. national security strategy.
U.S.-Japan Relations Under the George W. Bush Administration. Japanese
leaders and press commentators generally welcomed the election of George W. Bush and
indications that the new administration would emphasize alliance relations and also be less
inclined to pressure Japan on economic and trade issues. Following the terrorist attacks of
September 11, Japan’s positive and timely response under Prime Minister Koizumi’s
leadership has fostered closer security cooperation and coordination.
Historically, U.S.-Japan relations have been strained periodically by differences over
trade and economic issues, and, less often, over foreign policy stances. Strains arising from
trade issues peaked about 1995, after several years of conflict over the Clinton
Administration’s efforts — with mixed results — to negotiate trade agreements with
numerical targets. Some friction has again emerged over efforts by the Bank of Japan to
maintain a “weak” yen against the dollar to boost Japanese exports, and the Bush
Administration’s actions to restrict certain types of steel imports from Japan and other
countries.
Cooperation Against Terrorism: Response to the Attacks in New York and
Washington. The Koizumi government strongly condemned the terrorist attacks of
September 11, 2001, and initiated a series of unprecedented measures to protect American
facilities in Japan and provide non-lethal logistical support to U.S. military operations against
Al Qaeda and the Taliban in Afghanistan. The latter mainly took the form at-sea
replenishment of fuel oil and water to U.S., British, French, and other allied warships
operating in the Indian, and logistical airlift. A small flotilla of transport ships, oilers, and
destroyers has provided most of the fuel used by U.S. nine other allied naval forces in the
Indian Ocean since the first deployment in November 2001. Japanese non-combat logistical
support to U.S. and allied warships was extended through the Iraq war and continued as of
early 2004.
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Japan’s ability to “show the flag” in its first such deployments since the end of World
War II was made possible by the adoption by the Japanese Diet (parliament) at the end of
October 2001 of three related bills anti-terrorism bills. One law, the Anti-Terrorism Special
Measures Law, gave unprecedented post-World War II authority to the Japanese Self-
Defense Forces (SDF) to provide “rear area” support to U.S. forces operating in the Indian
Ocean. Permitted support includes intelligence sharing, medical care, and the provision of
fuel and water and nonlethal military supplies. The restriction of the authority to nonlethal
supplies was a domestic political compromise aimed at reconciling Japan’s “no-war”
constitution with the government’s desire to meet the Bush Administration’s expectations
of material support.
Japan also has been the leading country donor to Afghan relief and reconstruction after
the United States. Japan played a major role along with the United States, Saudi Arabia, and
the Asian Development Bank in accelerating reconstruction of the critical highway linking
Kabul with Kandahar, in the heartland of the Pushtun ethnic group. The Pushtuns, which had
provided the vast majority of the forces of the Taliban, remain the ethnic group most
dissatisfied with the slow pace of economic reconstruction. At the Berlin Conference for
Reconstruction Assistance to Afghanistan, the first such multilateral meeting of donors since
a conference held in Tokyo in early 2002, Japan pledged some $400 million in aid to
Afghanistan for the current year. After the United States, Japan has been the largest country
donor to Afghan relief and reconstruction.2
Support for U.S. Policy Towards Iraq. While strongly preferring a clear United
Nations role in resolving the U.S./British confrontation with Iraq, Japan nonetheless gave
almost unqualified support to the Bush Administration’s position. During an open debate in
the U.N. Security Council on February 18, Japan was one of only two out of 27 participating
countries, the other being Australia, to support the U.S. contention that even if the U.N.
inspections were strengthened and expanded, they were unlikely to lead to the elimination
of Iraq’s weapons of mass destruction unless Iraq fundamentally changed its current passive
cooperation. Koizumi and Foreign Minister Yoriko Kawaguchi called the leaders of several
undecided Security Council Members to try to persuade them to support the U.S. position.
Japan has committed to providing some $5 billion in assistance to Iraq over the next
four years, with $1.5 billion in grant aid to be provided in 2004. In addition, the Koizumi
government plans to send up to 1,000 military and civilian personnel to Iraq as peacekeepers
and to support reconstruction. Legislation permitting the despatch of troops to Iraq gained
final passage in the Upper House of the Diet on July 26, 2003, and was signed into law. The
legislation passed by a vote of 136-102, but not before a dramatic shoving match erupted in
a committee chamber the night before, when opponents of the legislation clashed with ruling
party members following a decision by the committee chairman to cut off debate. As of early
April 2004 Japan had deployed some 550 military personnel — mainly ground troops — to
carry out humanitarian aid and reconstruction activities in Iraq, about half of a total
commitment of up to 1,000 troops.
2 Glenn Kessler, “Afghans Ask for Economic Aid to Prevent Domination by Drug Trade.”
Washington Post, April 1, 2004.
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The Iraq war has had a mixed impact on the attitude of the Japanese public towards the
United States and the U.S.-Japan Alliance. An opinion poll on Japan’s foreign and security
relations released by Mainichi Shimbun, a major national daily, on January 5, 2004, revealed
only a moderate increase in negative feeling about the United States since the U.S.-led attack
on Iraq despite the wide unpopularity of the war and subsequent occupation among the
Japanese public. Some 20% of the respondents said that they “like” the United States, while
another 53% claimed to “somewhat like” America. Only 5% said that they “disliked” the
United States. Overall, those liking or somewhat liking the United States rose by a total of
9%, including a 7% increase in “like” response, since a poll taken in December 2002.
However, when asked specifically whether their like or dislike had changed since the March
2003 attack on Iraq, 3% said they liked the U.S. more, 28% said they liked it less, and 67%
said they didn’t know. Indicative of the low opinion of how the Japanese government has
managed U.S.-Japan security relations, some 27% of the respondents saw Japan’s role as one
of “cooperation,” 9% “independence,” 11% as “ingratiating,”and 32% as “blindly follows.”3
U.S.-Japan-China Relations. Tokyo often has watched with unease the course of
U.S.-China relations, but its own relations with Beijing have been anything but smooth, and
at present Japan seems to view China’s rising power with deepening concern. Japanese
officials grow uncomfortable when U.S.-China relations are too close, and also when they
deteriorate. Japan’s own relations with China have been increasingly strained in recent years
as a result of conflicting claims to disputed islands and related Chinese intrusions into what
Japan considers its 200 mile economic zone and Japan’s concerns about China’s rising power
and influence. For its part, China has objected to the granting of a visa for a visit to Japan by
former Taiwanese president Lee Teng Hui, has complained about the treatment of Japan’s
past aggression in Japanese textbooks, and bitterly objected to several visits by Prime
Minister Koizumi to the Yasukuni War Shrine, in Tokyo, which enshrines the names of
Japan’s war dead, including a handful of convicted war criminals. Japan values China’s role
in promoting multilateral talks aimed at eliminating North Korea’s nuclear program, but
Tokyo also worries about the expansion of China’s regional influence.
Converging Korean Peninsula Priorities? Japan’s role is critical in the current
crisis over North Korea’s nuclear weapons programs for a number of reasons. Most
importantly, Japan has told North Korea it will provide a large-scale economic aid package
to compensate for the Japanese occupation of the Korean Peninsula from 1910-1945.
Reportedly, Japanese officials are discussing a package on the order of $5-$10 billion, an
enormous sum for the cash-starved North Korean economy. Normalization of Japan-North
Korean relations was one of Pyongyang’s demands during the trilateral U.S.-North Korea-
China talks held in April 2003. Currently, Japan is a significant source of North Korea’s
foreign exchange, by virtue of the Japanese market being a major destination for the North
Korean government’s suspected drug-running operations, and of remittances from Korean
permanent residents in Japan.
On September 17, 2002, Japanese Prime Minister Junichiro Koizumi and North Korean
leader Kim Jong-il held a one-day summit in Pyongyang that momentarily restarted
normalization talks between the two countries, which have not established official relations
since North Korea was founded in 1948. Kim pledged conditionally to unilaterally extend
3 Mainichi, Jan. 5, 2004: 10-11.
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his country’s moratorium on missile testing beyond 2003 and issued a vague promise to
comply with international agreements related to nuclear issues, but the talks ended on a sour
note after Kim acknowledged that North Korean agents had kidnapped at least 13 Japanese
citizens during the 1970s and 1980s, and that only five remained alive. News of the
unexplained deaths of the eight abductees, who were relatively young when they disappeared,
and Kim’s refusal to provide information on other suspected abductees outraged public
opinion in Japan, and brought about a hardening of Tokyo’s policy towards Pyongyang.
In October, 2003, the five surviving abductees traveled to Japan for a visit, but their
family members were not allowed to leave North Korea. The Japanese government has not
allowed the five visitors to return to the DPRK and has demanded that the family members
be allowed to travel to Japan. Prime Minister Koizumi has said normalization talks will not
continue unless Pyongyang begins dismantling its uranium program and is more cooperative
on the abduction issue. In mid-November, Japan voted with the United States to suspend
shipments of heavy fuel oil to North Korea. The oil was being provided under a 1994 U.S.-
North Korean agreement in which Pyongyang agreed to halt its nuclear weapons program.
Koizumi’s trip to Pyongyang was a significant departure from Tokyo’s recent stance
toward North Korea and initially had the potential to put Japan at odds with the Bush
Administration’s hard-line policy. For years, Japanese policymakers sought to move slowly
and deliberately on normalizing relations with North Korea, due to North Korea’s launching
of a long-range Taepodong Missile over Japan in August 1998, Pyongyang’s development
and deployment of medium-range Nodong missiles capable of reaching Japan, new
revelations about the abductions of Japanese citizens by North Korean agents in the 1970s
and 1980s, and incursions by North Korean espionage and drug-running ships into Japanese
waters. This cautious approach often created tension between Tokyo and the Clinton
Administration, which, along with South Korea’s Kim Dae Jung, had been attempting to
engage with North Korea. Japanese officials and commentators from across the political
spectrum generally welcomed the Bush Administration’s policy of using public accusations
and warnings to pressure North Korea to allow international inspections of its nuclear
facilities and agree to verifiable curbs to its missile program, including missile exports. (For
more on U.S. policy toward North Korea, see CRS Issue Brief IB98045, Korea: U.S.-Korean
Relations, by Larry Niksch.)
Japan has supported most of the concrete steps the U.S. has taken since the revelations
about North Korea’s uranium nuclear program were made public in October 2002. The
Japanese government has toughened enforcement of its controls on the export of potential
dual-use items to North Korea and has announced a new interpretation of domestic foreign
exchange laws that would enable Tokyo to more easily cut off bilateral trade and shut off the
flow of remittances from ethnic Koreans to their relatives in North Korea. Specifically,
Japan has moved away from its traditional position that sanctions against North Korea would
require United Nations Security Council approval and is now taking the position that Japan
could impose in cooperation with the United States, even in the absence of specific U.N.
approval. Remittances to North Korea are thought to have declined significantly since the
early 1990s, they still are estimated to total several millions of dollars a year.
On May 22 and 23, President Bush and Prime Minister Junichiro Koizumi held a
summit meeting at the President’s ranch near Crawford, Texas. The invitation to meet the
President at Crawford was widely viewed as a gesture of appreciation for Japan’s strong
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support of U.S. policy on Iraq. At a joint press conference on May 23, President Bush and
Prime Minister Koizumi both declared that they shared a unity of view regarding the need
for North Korea to promptly, completely, and verifiably dismantle its nuclear program.
Koizumi declared that Japan would take “tougher measures” if North Korea escalated the
situation, and also that Tokyo, in any event, would “crack down more vigorously on illegal
activities” involving North Korea or ethnic Korean supporters in Japan. The President also
expressed strong backing for Japan’s insistence on a full accounting of the fate of Japanese
citizens kidnapped by North Korea.
As of April 1, 2004, Japan reportedly had received no reply from North Korea regarding
a bilateral meeting on normalizing relations and dealing with issues such as the return of the
family members of Japanese citizens during the 1970s and 1980s. In bilateral talks during
February 11-14, 2004, and in sidelines discussions during the February 25-28 round of the
so-called “six-party talks” (U.S., China, Japan, South Korea, Russia, and North Korea),
North Korean officials had implied readiness for further talks but had declined to discuss a
timeframe. A Japanese official reportedly speculated to the press that North Korea judged
that the United States was too preoccupied with the war in Iraq and the coming presidential
elections to take “tough measures” and that the Kim Jong-il regime was playing for time.
The unstable political situation in South Korea caused by the impeachment of President Roh
Moo-hyun was also cited as a likely reason for North Korea’s disinterest in pursuing talks
with Japan.4
Claims of Former World War II POWs and Civilian Internees. Congress has
also indicated intense interest in another issue in which the U.S. and Japanese governments
have been in essential agreement. A number of surviving World War II POWs and civilian
internees who were forced to work for Japanese companies during the war have filed suits
in Japan and California seeking compensation of $20,000 for each POW or internee. Former
POWs and civilian internees had been paid about $1.00-2.50 for each day out of internment
from seized Japanese assets by a congressionally established War Claims Commission
(WCC) in 1948. Numerous suits have been filed in California against Japanese firms with
wartime or pre-war roots, including Mitsui & Co., Nippon Steel, and Mitsubishi Company
on grounds that these companies subjected POWs and internees to forced labor, torture, and
other mistreatment. Thus far, the Japanese courts and the U.S. Court of Claims have
dismissed the suits on grounds that Japan’s obligations to pay compensation were eliminated
by Article 14 of the 1951 Multilateral Peace Treaty with Japan. The State Department and
Department of Justice support the position of the Japanese government, but a number of
Members of Congress have sided with the plaintiffs.
Two conflicting court decisions in California in early 2003 have further clouded the
prospects for the victims’ claims. A January 2003 decision by a California appeals court
ruled that the claim against a Japanese company by a Korean-American who was a former
POW could go forward. A week afterwards, a federal appeals court in San Francisco made
the opposite determination in a case involving the consolidated claims of several thousand
former POWs forced to work in camps run by major Japanese conglomerates. The latter
decision upheld the long-standing contention of the State Department that only the Federal
4 “Japan-North Korea Talks May Slip to After Six-Party Talks As North Makes No Reply to Japan’s
Proposal.” Mainichi Shimbun (national Japanese daily), April 1, 2004: 5.
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Government had the right to “to make and resolve war,” including the resolution of war
claims. The core issue is whether the Peace Treaty with Japan relieved only the Japanese
government from future claims or whether it covered private companies as well. On April
30, 2003, the California Supreme Court agreed to review the two cases and the pertinent state
law, which allows victims of World War II forced labor to sue Japanese multinational
companies that operate in California.
A number of bills and amendments introduced in the 107th Congress sought to block the
executive branch from upholding the supremacy of the Peace Treaty in civil suits. On July
18 and September 10, 2001, the House and Senate respectively adopted similar amendments
to H.R. 2500, the Commerce, Justice, State, and the Judiciary appropriations bill for FY2001,
that would prohibit use of funds for filing a motion in any court opposing a civil action
against any Japanese individual or corporation for compensation or reparations in which the
plaintiff alleges that as an American prisoner of war during WWII, he or she was used as a
slave or forced labor. In a move that generated controversy, the provisions were dropped by
conferees. The conference report to H.R. 2500 was agreed to in the House on November 14,
2001, and the Senate on November 15; and signed into law by the President on November
28 (P.L. 107-77). The conference report explains that the provision was dropped because the
adamant opposition of the President would have jeopardized the bill, but some Senators
expressed reservations, charging that the provision had been the victim of a questionable
“parliamentary tactic.”
A number of bills and amendments have been introduced in the 108th Congress to
achieve the same purposes. Several of these have passed in at least one house during the 1st
session, but none has been enacted. (For further background, see CRS Report RL30606, U.S.
Prisoners of War and Civilian American Citizens Captured and Interned by Japan in World
War II: The Issue of Compensation by Japan, by Gary K. Reynolds.)
Kyoto Protocol. Japan is the fourth leading producer of so-called greenhouse gases
after the United States, the Russian Federation, and China. Under the Kyoto Protocol, which
Tokyo ratified on June 4, 2002, Japan is obligated to reduce its emissions 6% below its 1990
levels by 2010. Japanese industry shares many of the concerns of U.S. industry about the
cost and feasibility of achieving these reductions by the target date of 2012, but the Japanese
government, which places a high value on its support of the protocol, expressed extreme
dismay over the Bush Administration’s decision to back away from the protocol.
Security Issues

(This section was written by Larry Niksch)
Japan and the United States are military allies under a Security Treaty concluded in
1960. Under the treaty, the United States pledges to assist Japan if it is attacked. Japan
grants the U.S. military base rights on its territory in return for U.S. support to its security.
In recent years Japan has edged closer to a more independent self-defense posture. A year-
long study by a foreign policy advisory body reported its findings to Prime Minister Koizumi
on November 28, 2002. The report is said to stress the need for a more comprehensive effort
to deal with an emerging military and regional influence threat from China, for crafting a
policy towards the United States which is compatible with and complements U.S. policy but
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also emphasizes Japan’s own foreign and security perspectives and requirements —
including Japan’s policy towards North Korea.
Issue of U.S. Bases on Okinawa. Since September 1995, the U.S. military
presence on Okinawa has been plagued by controversy over crimes committed by U.S.
military personnel, especially U.S. Marines, and by plans to re-shape the structure of military
bases on the island. There have been widespread calls on Okinawa for a re-negotiation of
the Japan-U.S. Status of Forces Agreement (SOFA) and a reduction in U.S. troop strength.
The U.S. and Japanese governments have opposed revising the SOFA; but in 2001, the
United States agreed to turn over American military personnel suspected of specific grievous
crimes to Japanese authorities prior to formal indictments being issued by Japanese courts.
In negotiations in 2003, the U.S. military has sought a greater U.S. presence when these U.S.
military personnel are questioned by Japanese officials prior to indictment. Japan reportedly
has offered to allow U.S. military police officers to be present during interrogations but
wants an expansion of the types of crimes under which U.S. servicemen would be turned
over to Japanese authorities prior to indictment.
A U.S.-Japanese Special Action Committee on Okinawa (SACO) reached an agreement
in 1996 under which the U.S. military will relinquish some bases and land on Okinawa (21%
of the total bases’ land) over seven years, but U.S. troop numbers will remain the same —
about 29,000. Implementation of the agreement has been stalled by the issue of relocation
of the U.S. Marine air station at Futenma. A new site, Nago, in northern Okinawa, was
announced by the Japanese government in November 1999. However, the Okinawa governor
proposes a 15-year time limit on U.S. use of the new facility. The Bush Administration and
the Pentagon oppose such a time limit. In November 2003, the Okinawa governor presented
Secretary of Defense Rumsfeld with a petition calling for realignment of U.S. facilities on
Okinawa, relocation of training by U.S. Marines to sites other than Okinawa, and an overall
reduction of U.S. forces stationed on Okinawa. Japan’s opposition Democratic Party, which
made major gains in December 2003 parliamentary elections, came out in favor of a total
U.S. military withdrawal from Okinawa.
Burden Sharing Issues. The United States has pressed Japan to increase its share
of the costs of American troops and bases. Under a host nation support (HNS) agreement,
Japan has provided about $2.5 billion annually in direct financial support of U.S. forces in
Japan, about 77% of the total estimated cost of stationing U.S. troops.
Revised Defense Cooperation Guidelines. U.S. and Japanese defense officials
agreed on a new set of defense cooperation guidelines on September 24, 1997, replacing
guidelines in force since 1978. The guidelines grant the U.S. military greater use of Japanese
installations in time of crisis. They also refer to a possible, limited Japanese military role in
“situations in areas surrounding Japan” including minesweeping, search and rescue, and
surveillance. The Japanese Diet passed initial implementing legislation in late May 1998.
The crises often mentioned are Korea and the Taiwan Strait. Japan has barred its Self-
Defense Forces (SDF) from operating outside of Japanese territory in accordance with
Article 9 of the 1947 constitution. Article 9 outlaws war as a “sovereign right” of Japan and
prohibits “the right of belligerency.” It provides that “land, sea, and air forces, as well as
other war potential will never be maintained.” Japanese public opinion has strongly
supported the limitations placed on the SDF. However, Japan has allowed the SDF since
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1991 to participate in a number of United Nations peacekeeping missions. Japan’s current
Prime Minister, Junichiro Koizumi, has advocated that Japan be able to participate in
collective self-defense and broader peacekeeping roles, but he said he would not seek a
revision of Article 9.
The Bush Administration says it will seek agreements with Japan which would upgrade
Japan’s role in implementing the 1997 defense guidelines, including crises in “areas
surrounding Japan.” Escalation of the nuclear crisis with North Korea influenced the passage
by the Japanese Diet in May 2003 of three wartime preparedness bills, which specify the
powers of the government to mobilize military forces and adopt other emergency measures.
The North Korean situation also sparked a debate in Japan over acquiring offensive
weaponry that could be used to attack North Korea. Japan dispatched naval vessels to the
Indian Ocean in 2002 to support U.S. operations in Afghanistan. In December 2003, Japan
announced that it would sent about 1,000 SDF personnel to Iraq in early 2004 for non-
combat, civic action-type missions
Cooperation on Missile Defense. A six year Japan-U.S. program of cooperative
research and development of anti-ballistic missiles began in 1999. Proponents of missile
defense justify it based on North Korea’s missile program, but China opposes the program.
U.S. military officials reportedly have recommended that Japan adopt a missile defense
system that combines the ground-based U.S. Patriot Advanced Capability-3 (PAC-3) system
and the ship-based U.S. Standard Missile-3 system. Prime Minister Koizumi announced in
December 2003 that Japan would acquire these two U.S. systems. The Defense Agency
reportedly hopes to begin deploying the missile defense system around major Japanese cities
by 2007. The total cost to Japan is estimated at close to $10 billion. (See CRS Report
RL31337, Japan-U.S. Cooperation on Ballistic Missile Defense: Issues and Prospects, by
Richard P. Cronin.)
Economic Issues

(This section was written by William Cooper)
Despite Japan’s long economic slump, trade and other economic ties with Japan remain
highly important to U.S. national interests and, therefore, to the U.S. Congress. By the most
conventional method of measurement, the United States and Japan are the world’s two
largest economies, accounting for around 40% of world gross domestic product (GDP), and
their mutual relationship not only has an impact on each other but on the world as a whole.
(China’s economy is now larger than Japan’s by another method of measurement, purchasing
power parity.) Furthermore, their economies are intertwined by merchandise trade, trade in
services, and foreign investments.
Although Japan remains important economically to the United States, its importance
has slid as measured by various indicators. Japan is the United States’s third largest
merchandise export market (behind Canada and Mexico) and the fourth largest source for
U.S. merchandise imports (behind Canada, Mexico, and China) as of the end of 2003. At
one time Japan was the largest source of foreign direct investment in the United States but,
as of the end of 2002, it is the fourth largest source (behind the United Kingdom, France, and
the Netherlands). It is the fifth largest target for U.S. foreign direct investment abroad as of
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the end of 2002. The United States remains Japan’s largest export market and second largest
source of imports as of the end of 2003.
Because of the significance of the U.S. and Japanese economies, domestic economic
conditions strongly affect their bilateral relationship. Except for some brief periods, Japan
has incurred stagnant or negative economic growth since 1991. In 2000, real GDP increased
1.5%, declined 0.5% in 2001, and increased only 0.3% in 2002. In 2003, Japan’s GDP
increased 2.5% and increased 1.4% (or at an annualized rate of 5.6%) during the first quarter
2004, suggesting that Japan may be experiencing sustained recovery. Some observers have
argued, however, that much of Japan’s growth is the result of sharp increases in Japanese
exports to Asia, in particular to China, and that Japan’s recovery could prove ephemeral if
China’s economy slows down or goes into recession.
Economists and policymakers in Japan and in the United States have attributed Japan’s
difficulties to a number of factors, including the collapse of the investment “bubble” in the
early 1990s and ineffective fiscal and monetary policies and structural economic problems.
The United States has pressed Japan to implement reforms, such as revising government
regulations in its telecommunications sector and eliminating non-performing loans held by
Japanese banks, in order to create the conditions for steady economic growth.
On March 31, 2004, Japan closed its fiscal year 2003 with growing confidence that the
economy was on an upward path. The Tokyo stock exchange registered the first annual rise
in stock averages in four years, with the Nikkei average fully 50% higher than FY2002.
More troubling to Japan’s economic managers, however, was the continued strengthening
of the yen to about ¥104 to the U.S. dollar despite massive currency market transactions by
the Bank of Japan during the first quarter of calendar 2004. Reportedly the Bank of Japan
sold some $140 billion in yen in currency markets in the first quarter of calendar 2004 before
recently adopting a more relaxed attitude toward the yen’s rise against the dollar.5
If Japanese economic problems are occupying the center of U.S.-Japanese economic
ties, some long-standing trade disputes continue to irritate the relationship. The U.S.
bilateral trade deficit with Japan reached $81.3 billion in 2000, breaking the previous record
of $73.9 billion set in 1999. (See Table 1.) However, in 2001, the U.S. trade deficit
declined 15%, primarily because of the slowdown in the U.S. economy, but increased
moderately to $70.1 billion in 2002. The trade deficit decreased slightly to $66.0 billion in
2003.
Table 1. U.S. Trade with Japan, 1996-2003
($ billions)
Year
Exports
Imports
Balances
1996
67.5
115.2
- 47.7
1997
65.7
121.4
- 55.7
1998
57.9
122.0
- 64.1
1999
57.5
131.4
- 73.9
5 Todd Zaun, “Optimism in Japan Lifts Yen to 4-Year High As Recovery Spreads, Market
Intervention Expected to Decline.” New York Times, April 1, 2004.
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Year
Exports
Imports
Balances
2000
65.3
146.6
- 81.3
2001
57.6
126.6
-69.0
2002
51.4
121.5
-70.1
2003
52.1
118.0
-66.0
Source: U.S. Department of Commerce, Bureau of the Census. FT900. Exports are
total exports valued on a f.a.s .basis. Imports are general imports valued on a customs
basis.
Another lingering bilateral trade dispute pertains to the Japanese ban on imports of U.S.
beef. Japan imposed the ban on December 24, 2003, in response to the discovery of a case
of “mad cow” disease on a Washington State ranch. In April 2004, the two countries agreed
to form an experts working group to develop arrangements that would lead to resumption of
the imports. Japan claims that U.S. beef inspection procedures are inadequate and that all
beef must be inspected before it is shipped. U.S. officials countered that 100% inspections
are inefficient, unnecessary, and not scientific. The binational working group is aiming to
produce an agreement that will allow U.S. beef exports to Japan to resume by summer 2004.6
Until it imposed the ban, Japan was by far the largest market for U.S. beef and veal exports,
far ahead of second place South Korea.7
Japan, together with other major trading partners, has challenged U.S. trade laws and
actions in the WTO. For example, Japan and others challenged the U.S. 1916 Antidumping
law and the so-called “Byrd Law” (that allows revenues from countervailing duty and
antidumping orders to be distributed to those who had been injured). In both cases, the WTO
ruled in Japan’s favor. Legislation to repeal the 1916 law is pending but has not been acted
on by the Congress. There is strong resistence in the Congress against repealing the “Byrd
Law.”
Japan and the United States are major supporters of the Doha Development Agenda, the
latest round of negotiations in the WTO. Yet, the two have taken divergent positions in some
critical areas of the agenda. For example, the United States, Australia, and other major
agricultural exporting countries have pressed for the reduction or removal of barriers to
agricultural imports and subsidies of agricultural production, a position strongly opposed by
Japan and the EU. At the same time, Japan and others have argued that national antidumping
laws and actions that member countries have taken should be examined during the DDA,
with the possibility of changing them, a position that the United States has opposed.
Despite some outstanding issues, tensions in the U.S.-Japan bilateral economic
relationship have been much lower than was the case in the 1970s, 1980s, and early 1990s.
A number of factors may be contributing to this trend:
6 International Trade Reporter. May 27, 2004. p. 891-892.
7 U.S. Department of Agriculture. Economic Research Service. FATUS Export Aggregations.
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! Japan’s economic problems in the 1990s and in the first few years of this
decade have changed the general U.S. perception of Japan as an economic
“threat” to one of a country with problems.
! The rise of China as an economic power has caused attention of U.S.
policymakers to shift from Japan to China as source of concern.
! The increased use by both Japan and the United States of the WTO as a
forum for resolving trade disputes has de-politicized disputes and helped to
reduce friction.
Japanese Political Developments

(This section was written by Mark Manyin)
Current Situation. The Japanese political world currently is focused on July 11
elections for one-third of the seats in the Upper House of the Diet (Japan’s parliament),
which the ruling Liberal Democratic Party (LDP) controls through a coalition with another
party. Prime Minister Koizumi and the LDP, which has dominated Japanese politics for
nearly a half-century, have received a boost in popularity from Koizumi’s daylong trip to
North Korea in May 2004. However, the LDP’s electoral fortunes could be threatened by
an ongoing pension payment scandal, in which Koizumi and seven members of his cabinet
have admitted failing to make payments into the national pension system. The scandal led
Koizumi’s most important ally in the LDP, Yasuo Fukuda, to resign from his position as
Chief Cabinet Secretary. The main opposition party, the Democratic Party of Japan (DPJ),
arguably has been damaged even more heavily by the scandal, as the disclosure of non-
payments in May forced its leader, Naoto Kan, to step down. Then, one of the DPJ’s most
prominent politicians, Ichiro Ozawa, backed away from an agreement to take over from Kan
after he, too, was found to have missed payments. Ultimately, a relatively unknown figure,
Katsuya Okada, took over as DPJ leader. The focus on pension payments has been driven
by LDP-sponsored legislation to increase mandatory contributions to the national pension
system by 35%, while cutting benefits by about 15%. Unless radical changes are made, the
rapid ageing of the Japanese population will create a huge gap between pension obligations
and payments in the next decade.
Koizumi’s Popularity. Since his unconventional rise to power as an avowed political
and economic reformer in 2001, Prime Minister Koizumi has tried to reshape the LDP by
leveraging his high public approval ratings, which generally hover in the 40-50% range, the
highest of any prime minister in decades. The key to Koizumi’s relative popularity is his
appeal to independent voters, who have emerged as a major force in the Japanese electorate
and tend to back reformist politicians. As Prime Minister, Koizumi has begun seizing the
machinery of government away from the factions that have long dominated the LDP.
Lacking a strong base within the LDP, Koizumi’s popularity is one of the few weapons he
wields against the “old guard” that are strongholds of the “old economy” interests most
threatened by Koizumi’s agenda. Another factor that has helped keep Koizumi in power is
the absence of any politicians in the LDP or in Japan’s opposition parties who have the
political strength to replace Koizumi in the near future. This was a primary reason the LDP
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overwhelmingly re-elected Koizumi to a new, three-year term as party president in
September 2003. The president of the LDP traditionally serves as Prime Minister.
Despite his reformist image, Koizumi’s record on economic reforms generally is judged
to be mixed at best. Many analysts attribute this to a combination of a lack of focus and
detailed planning by the Prime Minister’s Office, and to opposition from vested interests.
In April 2004, Koizumi attempted to redouble the impetus behind his reforms by appointing
a deregulation task force with himself at the head. Koizumi has been far more assertive on
security issues, spearheading legislation designed to pressure North Korea to cooperate with
the international community, calling for a revision of Japan’s constitution (including its war-
renouncing Article 9), and carrying out controversial military deployments into the Indian
Ocean to support Operation Enduring Freedom in Afghanistan and into Iraq to support the
U.S.-led occupation.
In general, Japan’s political peculiarities constrain U.S. influence over Japanese policy.
Most importantly, the relative weakness of the Japanese prime minister and cabinet often
make it difficult to for Japanese leaders to reach and then deliver on controversial agreements
with foreign countries. At present, these structural debilities are compounded by the LDP’s
need to consult frequently with its coalition partners. U.S. options are further limited by
Koizumi’s enthusiastic participation in the war against terrorism and the war in Iraq, and by
the widely-held perception that Koizumi represents the best hope for pushing through
economic reforms the U.S. seeks. These beliefs have led the Bush Administration generally
to avoid criticizing Koizumi publicly, for fear of diminishing his political effectiveness.
Background — The Political System’s Inertia. Despite over a decade of
economic stagnation Japan’s political system and economic policies have remained
fundamentally unchanged. What accounts for this striking inertia? Three features of Japan’s
political system give vested interests an inordinate amount of power in Japan: the extreme
compartmentalization of policy-making; the factional divisions of the Liberal Democratic
Party; and the weakness of the opposition parties. Many of Koizumi’s most far-reaching
reform proposals actually are attempts to alter the first and second of these characteristics.

The Compartmentalization of Policy-Making. To a striking degree, Japan’s
policymaking process tends to be heavily compartmentalized. Policy debates typically are
confined to sector-specific, self-contained policy arenas that are defined by the jurisdictional
boundaries of a specific ministry. Each policy community stretches vertically between
bureaucrats, LDP policy experts, interest groups, and academic experts. Unlike in most
industrialized societies, each policy arena in Japan is so self-contained that cross-sectoral,
horizontal coalitions among interest groups rarely form. One reason for this is that
bureaucrats are paramount in most of Japan’s policy compartments. Only in matters
involving highly politicized industries such as agriculture and security policy have politicians
and interest groups become significant players in the policymaking process. Even in these
areas, responsibility for carving out the details of policy still rests with the bureaucrats, in
part because Japanese politicians often only have a handful of staffers to assist them.
Furthermore, the LDP’s policymaking organ, the Policy Affairs Research Council
(PARC), itself is segmented into specialist caucuses (often called “tribes” or zoku), so that
competing interests — such as protectionist farmers and export industries — rarely face off
inside the LDP. For this reason, the LDP often finds it difficult to make trade-offs among
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its various constituencies. The result is often paralysis or incremental changes at the margins
of policy. Koizumi has been changing this somewhat by centralizing more power in the
Prime Minister’s office, at the expense of the PARC and the bureaucracies.
The Factional Nature of the Liberal Democratic Party. The LDP has been the
dominant political force in Japan since its formation in 1955. It is not a political party in the
traditional sense because it has long been riven by clique-like factions that jealously compete
for influence with one another. For instance, cabinet posts, including the office of prime
minister, typically have been filled not on the basis of merit or policy principles but rather
with a view towards achieving a proper balance among faction leaders, who act behind-the-
scenes as kingpins. Because the LDP president (who de facto becomes Japan’s prime
minister) is not the true leader of the party, he often lacks the power to resolve divisive intra-
party disputes or even to set the party’s agenda. Koizumi has altered this situation
somewhat. One of his most significant political reforms has been the partially neutralization
of party factions. He has accomplished this in part by refusing to give the most numerically
powerful factions key Cabinet posts.
Over time, one result of the LDP’s opaque, top-down decision-making structure has
been its inability to adapt quickly to changes in Japanese society. The LDP has coddled
many of Japan’s declining sectors, such as the agriculture and construction industries, which
have provided the money and manpower for the party’s political activities. Corruption has
thrived in this machine-politics system; over the past thirty years many of the LDP’s top
leaders have been implicated in various kickback scandals. Compounding the problem is
that Japan’s electoral districting system overweights rural voters compared with more
reformist-minded urbanites; each rural vote is worth an estimated two urban votes.
Over the past decade, a bloc of independent voters has arisen opposing the LDP’s
“business as usual” political system. Urban, younger, and increasingly female, this pool of
independents has shown itself willing to support politicians, such as Koizumi, who appear
sincerely committed to reform (although when pressed, many of these same voters oppose
specific structural — and potentially painful — economic reforms). Thus, the LDP is under
severe, perhaps unmanageable, stress: to succeed in future elections, it must become more
appealing to the new generation of reform-minded voters. Yet, if it adopts political and
economic reforms, it risks antagonizing its traditional power base.
The Opposition Democratic Party of Japan (DPJ). Until the November 2003
Lower House election, Koizumi’s popularity had weakened the DPJ, which describes itself
as “centrist” and currently is led by Katsuyo Okada. The LDP lost seats in the November
election, while the DPJ raised its seat count from 137 to 177. The DPJ benefitted from
publishing a detailed policy manifesto for the election — a rarity in Japan — and from its
September 2003 absorption of another political grouping, a move that helped unify
opposition to the LDP for the first time in years. However, with the loss of Kan and Ozawa
as party leaders, the DPJ generally is not expected to fare well in the July 2004 Upper House
election. Okada has signaled that the DPJ will campaign on a platform of opposition to
Japan’s deployment to Iraq and to the LDP’s pension reform plan. The DPJ was formed in
April 1998 as a merger among four smaller parties. A fifth grouping, Ichiro Ozawa’s
conservative Liberal Party, joined the DPJ in September 2003. However, the amalgamated
nature of the DPJ has led to considerable internal contradictions, primarily between the
party’s hawkish/conservative and passivist/liberal wings. As a result, on most issues the DPJ
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has not formulated coherent alternative policies to the LDP, which perhaps explains why the
DPJ’s approval ratings have rarely surpassed 20%.
LEGISLATION
H.R. 595 (Mica)
To provide compensation for certain World War II veterans who survived the Bataan
Death March and were held as prisoners of war by the Japanese. Introduced February 5,
2003; referred to House Committee on Arms Services. Executive branch comment requested
from the Department of Defense, February 28, 2003.
H.R. 1864 (Rohrabacher)
To preserve certain actions in Federal court brought by former prisoners of war seeking
compensation from Japanese entities for mistreatment or failure to pay wages in connection
with slave or forced labor. Introduced April 9, 2003; referred to House Committees on the
Judiciary, International Relations, and Government Reform. Referred to Subcommittee on
Immigration, Border Security, and Claims, May 5, 2003.
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