The 21st Century Public Policy Institute
October

2023
Asking the Principal Research Director

Research Project on Rebuilding Japan-Korea Relations

Outlook for Future of Japan-Korea relations
Yukiko Fukagawa

Professor, Faculty of Political Science and Economics, Waseda University
Principal Research Director, The 21st Century Public Policy Institute

As Japan and Korea progress toward healthy relations, theJapan Business Federation (Keidanren) has teamed up with
the Federation of Korean Industries (FKI), a Korean economic
organization, to form the Japan-Korea Future Partnership
Fund and proceed with joint projects. With this, the 21stCentury Public Policy Institute (21PPI) has newly launched
the Research Project on Rebuilding Japan-Korea Relations
this fiscal year. Here we ask Principal Research Director
Yukiko Fukagawa, Professor at the Faculty of Political Scienceand Economics at Waseda University, about Korea’s domestic
challenges and the outlook for the future of Japan-Korea
relations.
Japan and Korea have progressed toward healthy relations.
Much can be attributed to a change of government to theYoon Suk-yeol administration. How do you view this change
and the future direction of the administration?
The Yoon administration has dramatically shifted the foundationof foreign policy, steering sharply away from the pro-North
Korea and China rapprochement path of the previous
administration toward a restoration of globalism and the JapanUS-Korea framework. This result marks a move toward theimprovement of current Japan-Korea relations. However, thiscannot be described as a Korean national consensus, so thepolitical situation will continue to warrant attention. Korea
currently has a split parliament with opposition parties
comprising a majority and next April will bring a generalelection of national lawmakers that influences its fate. As JapanKorea relations depend heavily on presidential leadership, thoserelations could be shaken again if the ruling parties lose, giving
way to a lame duck administration. However, there isconsiderable ideological fragmentation, so a landslide victory for
either the ruling or opposition parties appears inconceivable atthis stage. That said, the election is still a half-year away and
Korean politics are said to be capable of changing all at oncewith SNS, so the situation could remain unpredictable.
Korea’s youth led a candle demonstration that gave rise to theMoon Jae-in administration, but disillusionment with theadministration has partly been channeled into support for the

Yoon administration. Korea requires men to serve in the militaryand undergo severe training, but this stems from the existence ofNorth Korea as an “enemy” to its security. At the same time,
however, the previous administration was pro-North Korea. Thatadministration also emphasized a “victim-centered approach”(VCA) and promoted policies appealing to vulnerable
constituencies, obtaining the support of women as a result.
However, women do not have military service, enabling them tocontinue with their studies while the men of the same generation
are serving in the military. This leads to an inevitable disparity
when finding employment that requires qualifications such as
taking civil servant or lawyer exams. Men in their 20s felt acontradiction between these two realities and their backlash led
to support for the rise of the current administration. This
generation has come to feel trapped and hopeless under highunemployment and soaring real estate prices said to stem fromthe policy errors of the previous administration. As a result, thecurrent administration is under pressure to bring future hope tothis generation in particular. At the same time, this young
generation has perceived Korea to be a developed nation sincebirth and does not have a complex about Japan, so there issignificant hope within the administration that Japan-Korea
relations can drastically improve if it can reach out to thisgeneration.
So the current administration appears to have highexpectations for this young generation. Likewise, “promoting
exchange programs for young talent” and “enhancing JapanKorea economic cooperation” have become two pillars of thejoint project between Keidanren and FKI that you areleading. It sounds like these dovetail with the movements ofthe current administration. Next, I would like to ask about
Japan-Korea economic cooperation, the second pillar.
Mutual understanding would presumably be essential for
promoting this, but first, I think Japan and Korea sharevarious challenges – economic, social and otherwise – and I
would like you to tell us about some of these.
Globally, Japan and Korea have many points in common. First,
they are nations with limited resources and energy. Both need tobuy resources from other countries, but can lose when they1

compete with major powers such as China because they do nothave as much demand. However, if Japan and Korea cooperate,they can make up for this handicap and share development risk
as well. In fact, Korea has relatively poor energy efficiency,
small reserves and limited expertise in procurement, making
energy a source of inflation. As Korea Electric Power Company(KEPCO) and Korea Gas Technology Corporation (KOGASTech) have kept utility rates low to date, a legacy of Korea’s
period as a developing country, they have now been forced toraise those rates due to large-scale debts. I think energy
cooperation is a very important matter.
Next, there is the issue of food security. Both countries haveglobally low rates of food self-sufficiency. Korea is similar to
Japan in that it has protected the agricultural industry, but thatindustry has seen considerable damage. This contrasts withJapan, which has moved early to revitalize agriculture by
combining crop cultivation with processing and distribution/
selling, and switched to domestic production with more young
people actually becoming farmers. Also, domestic demand islarge, enabling the industry to make it even amid JPY
depreciation. As Korea has been unable to adapt to this extent,
food prices quickly rise when the KRW depreciates. However,the picture is similar overall, so I think food is a major sharedchallenge.
In addition, both nations face the internal macroeconomic
constraint of declining birthrates and population aging. In 2022,
the total fertility rate (TFR) came to just 0.59 in Seoul and was
only 0.79 as a national average. In Japan, even at 1.26, people
are already describing the situation as a crisis of “anotherdimension.” Although there is a difference in perception,
potential growth is already declining in both nations. The
momentum of domestic demand is weak in Japan, while Korea,
too, is unable to rely on the external economic environment thathas allowed its rapid export-led growth in the past. One idea
would be to accelerate innovation, but here too there areconstraints related to young human resources. There are several
others as well, but I think it is these areas of homogeneity
between the Japanese and Korean economies that stand out first.
Next, could you tell us not about homogeneity, but rather
about areas of heterogeneity between Japan and Korea?
“Similar, but different” is an expression that applies here.
Japanese and Korean people look exactly the same, but think
differently and have different social values. Economically as
well, there is much heterogeneity.
First, both nations have massive debts, but in Japan it is mainlyin the form of government debt; in Korea, it is household debt.
This household debt is a major issue for the Korean economy. Asinterest rate spreads with the US widen, the impact on emerging
countries becomes larger, and if current account deficits continue
and a slump in the real economy leads to employment
adjustment, it could become entangled in the process. Korea’s
household debt is almost entirely in real estate and since much is
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21PPI NEWS LETTER OCT. 2023

in the form of floating rate loans, rate hikes present a severe
condition. Real estate prices have soared, especially in the Seoul
economic zone, and if they should crash, the impact would likely
be large.
Also, Korea’s currency differs in that it is not a reserve currency.
This explains Korea’s treatment as an emerging economy on thefinancial side. For example, all of the G7 economies are able tosettle their trade and investments in their own currencies. Korea
still has some capital constraints and the government’s
continuation of monetary controls over a prolonged period has
left a large negative legacy, with financial institutions late toboost their international competitiveness. As a result, it has notbeen easy for the KRW to become a reserve currency.
Next is in the area of balance of payments. While Japan itself
continues to show a deficit in its trade account, Korea has a trade
surplus that drives its entire current account, but still relatively
little in the way of foreign assets accumulated overseas. One
might say this structure makes it impossible to “live on apension” that relies on the capital account, as in Japan.
Also, I just spoke of population constraints, but contrary toJapan, Korea is now set to enter the peak of its population aging.
Korea’s baby-boomers were born between 1955 and 1963 andwhile this generation has a pension system that enables it to
scrape by, older generations lack adequate pension and medical
coverage, so this baby-boomer generation is handling the long
lives of their parents’ generation while becoming part of theelderly generation themselves. Moreover, the drop in the birthrate is sharp, so the population is aging rapidly. This raises a
related issue. While I just mentioned that much of the household
debt is linked to real estate, another hidden household debt is thedebt of the self-employed. Although the self-employed do nothave a retirement age, many of the elderly self-employed face a
difficult reality, on top of their debts, of not being able to survive
on their pensions. As a result, Korea faces a severe phase of
having to decide how extensively to take responsibility for thewelfare of its people.
Now that you have told us about the homogeneity andheterogeneity between Japan and Korea, could you tell us
what direction you think should be taken in rebuilding
Japan-Korea economic cooperation? Could you kindly offersome examples from respective areas?
From growth to sustainability
I would venture to say that this is a “new dimension” for JapanKorea cooperation, and one aspect of that involves a switch from“growth to sustainability.” Korea still has dreams of growth. As
a result of the rapid growth to date, public finances have been
supported by growth in tax revenues and the shift from low cost,
low welfare to medium cost, medium welfare has been acomfortable one. Hence, even policy makers themselves havethis idea that they should be able to make a comeback to rapid
growth at some point. However, the reality is that Korea’s
potential growth rate has already fallen below 2% and a return tosuch growth will not be simple. Growth through the exports of

the manufacturing sector raises questions around the supply
chain environment and human rights considerations, andcatching up with China and others has become difficult.
A symbol of the growth mindset is semiconductors, and thiscomes up as the first target of economic cooperation with Japan.
While Korea is at the cutting edge globally in the mass
production of memory semiconductors, it has a nationalistic
stance that “there is a problem of dependence on imports fromJapan for chip-making machinery and raw materials, so it isdesirable to replace this through, for example, Japanese
corporate investment in Korea or technology transfers to SMEs,”
and under these conditions, cooperation between private-sector
companies is unlikely to proceed smoothly. Korean firms have
only limited experience in certain semiconductor businesses
such as power semiconductors and some areas of logic and Japanis likewise targeting a semiconductor renaissance through thepromotion of industry clusters, so it is important to achieve aframework for cooperation that private-sector companies on bothsides can appreciate.
In the area of green transformation (GX), decent efforts areunderway in both Japan and Korea, but the scale of ESG
investment ranks behind that of China. Korea’s GX has
proceeded mainly around the notion of reducing environment
impact through digitalization, while Japan has engaged a bit
more broadly, including in the area of environmentally friendly
materials. I believe the two sides could tap their respective
strengths and work together, starting with R&D, for example.
One item on the problem-solving agenda is coping withpopulation aging. For example, contrary to Japan, Korea has
started its digital transformation (DX) early and made progresswith management under national identification numbers. As thisis linked to medical care, Korea has large volumes of goodq u ality da t a . M e a nwhi l e, J apan has m oved ahea d inaccumulating knowhow on elderly medical care, albeit on apaper basis. If the two sides can establish rules around data, thenexchange and share data and have their experts conduct joint
research, since social structures are similar, there would appear
to be many possibilities related to, for example, administrative
cost reduction and basic research for new drug development.
Moreover, population aging is not limited to Japan and Korea;
developing countries in Asia also have aging populations, so if
the issue can be addressed under a Japan-Korea model, themarket for application could spread to elsewhere in Asia.
Revitalization of urban areas is another area. Korea’s smart cities
have largely revolved around an expectation for a rise in prices
through real estate development. However, the population will
shrink without a rapid increase in immigration, so there isalready a need to think about sustainability. The regeneration ofagriculture and maintenance of medical systems are also
common challenges. For example, Japan’s food exports havereached the JPY1trn threshold and the nation is aiming to boost
this to JPY5trn, but there are also some areas where Korean foodexports can serve as reference. Riding the momentum of its

cultural exports, Korea’s marketing has also become
sophisticated, and the latecomer Japanese companies are sort offollowing in those footsteps. Agriculture and food products are
extremely diverse industries, and Japan and Korea have amutually strong attachment to diverse diets. And since they are
geographically close, even delicate food items can be covered
through cold value chains. As food companies are also locatedoutside of urban areas in order to procure raw materials, I thinkthey can also be good for the revitalization and activation ofthese regions.
Meanwhile, the content industry and tourism already havemarkets in motion, so do not require any kind of major
government initiative; instead, a spread to related industries may
be the focal point.
From zero-sum competition to reform competition
On the second point, the mindset needs to shift from “zero-sum
competition to reform competition.” The Korean media still
carry lots of news about beating or losing to Japan and thepeople are affected by this. A competitive mindset is not a badthing, but rather than a competition that drags the two sides
down, I think it is important to change negative into positiveenergy. I think one way to do this is through the acceleration of
innovation. Korean ventures are active, but face major
constraints in the domestic market and an ecosystem has failed
to take shape, apparently making it difficult to find an exit
domestically in some cases. Meanwhile, Japan buys various
products from Korean ventures. University hospital reservation
systems are one example. With the incorporation of these Korean
reservation systems, there are cases where hospital wait times
have vanished, for example.
I think another area with great potential is social policy. In
Korea, welfare has the reputation of being “unproductive
government expenditure,” but this is unsustainable. Companies
have had little involvement in addressing gender issues, birthrate
reversal, diversity, inclusion, population aging and work stylereform, so progress remains limited. However, there aresubstantial social needs, so instead citizen’s groups and NGOsassume the responsibility for various activities. I think it would
be highly meaningful for the two countries to share theirknowledge and nurture social enterprises.
There is also disaster response due to global warming. Japan
always faces a massive potential risk of earthquakes, but Korea
has almost none. Since Korea only has major earthquakes aroundonce every 200 years, Japan should have relations with Korea
that enable it to establish a back-up base in Korea as long as theright environment is in place, and actually make Korea a base ina worst-case scenario. The speed and focus of its response whensomething happens are Korean strengths. Both nations are
expected to see an increase in abnormal weather such as
torrential rains as well as disasters such as floods and droughts,
so cooperation around backup stockpiles of necessary supplies isalso conceivable.

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From a base layer society clash to global cooperation
The third and final point is “from base society clash to global
cooperation”; that is, a direction of moving forward through amultilateral framework. In Korea, there is still a catch-up
mentality focused on the nation’s ranking compared with Japan,
but in a multilateral framework, it is possible to soften such a
way of thinking. The quarantine system is one such example. If
Korea entered the Trans-Pacific Partnership (TPP), it would needto show evidence if it ever wanted to ban an import because it
thought it was dangerous. Even in the case of the current issue
around Fukushima, for example, the submission of scientific
data and expert opinions could be used to create a framework forpreventing simplistic bans. Korea has numerous internationalcaliber experts, so I think it would also be good for these experts
to have exchanges through multiple frameworks. Also, there aremany professional posts at international institutions that Japan,
unfortunately, is unable to fill, so one way to build trust would
be through an arrangement where these are backed by a JapanKorea group with benefits for Japan as well.
Next is about relations with the US. The US is basically putting
America first, including through the Inflation Reduction Act, andChina has always put its nation first. For example, lithium, a raw
material for Korean batteries, is produced largely in China andthis will have to be reconsidered when origin rules become
stricter. Japanese companies are likely attractive as a partner toshare this risk and since there is information that only Korea has
through its alliance with the US, there should at least be somemerits from information exchange.
Governments and related organization provide support for fragile
states and conflict-torn states. Here as well, if competition andcooperation work, I think Japan-Korea groups could show theirpresence to the world. Korea did well during the Fall of Kabul in
Afghanistan and also helped Japan at the time of political change
in Sudan. Korea faces a constant threat from North Korea, so
there is a high level of crisis management awareness. In terms ofofficial development assistance (ODA) as well, the humanresources that Japan can allocate on its own are limited,presenting another opportunity to work together. Since many
countries need help, there is no need to compete in this area.
There is also a role of providing public goods through basic
research cooperation. For example, there is said to be a limited
time until avian influenza passes on to humans. I think it is therole of developed nations like Japan and Korea to prepare
vaccines and build a structure for distribution to Asia for such acontingency. Some lead time is needed, so acting after the fact is
too late. I think it is one of those cases where steps need to betaken in preparation for the future.
Positive stories have an aspect of competition, making it isdifficult for people with a “which side is on top” mentality toaccept, but avoiding the negative is an approach relatively
conducive to agreement based on the mutual interests of bothnations. Japan and Korea can look to the future with a preemptive defense against the negative and free themselves frombilateral constraints under a global framework, so I think it isbest to proceed from these three angles.
Finally, returning to the Japan-Korea bilateral relationship, thebiggest concern for Korea is how the situation in the North will
evolve. At the same time, for Japan, this means a potential
revival of questions around how to think about economic
cooperation and aid to Korea and how to deal with North Korea.
This cannot be altered and requires a broad judgment on whether
to approach changes in the North Korean situation with trust
between Japan and Korea remaining in a state of collapse, or topromote market integration and advance relations of trust with
Korea to an extent in the process. This is not a remote matter
only involving distant governments, but rather a major
geopolitical change in East Asia that has suddenly brought a bigchange to private enterprise as well, so I believe a big-picture
perspective is absolutely necessary in economic cooperation
with Korea.
(Yuko Chiba, Senior Fellow)

Capitalism and democracy

A dialogue and symposium held with Professor
Markus Gabriel
On 8 May, the 21PPI welcomed University of Bonn Professor
Markus Gabriel, who also serves as Academic Director of The
New Institute (TNI) in Hamburg, Germany to the Keidanren
Kaikan in Otemachi, Tokyo, where a dialogue with Japan
Business Federation Chairman Masakazu Tokura and a
symposium co-sponsored with the Japan Institute for Social andEconomic Affairs (Keizai Koho Center, KKC) were held.
During the dialogue, with 21PPI Principal Research Director
Takahiro Nakajima (Director of the East Asian Academy for
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21PPI NEWS LETTER OCT. 2023

New Liberal Arts, The University of Tokyo) serving as
coordinator, Chairman Tokura and Professor Gabriel exchanged
opinions on topics including an analysis of the current state of
the world, the ideal interface between capitalism and science andtechnology, and the ideal state of society in the future.
In the symposium that followed, there were keynote speeches byProfessor Gabriel and University of Tokyo President Teruo Fujii
and a panel discussion on the theme of “Toward a SustainableFrom left to right, Prof. Gabriel, Chairman Tokura

From left to right: President Fujii, Professor Gabriel, Principal Research
Director Nakajima

Capitalism.” More than 100 participants, including executives
and employees of Japan Business Federation member companies
and organizations and TNI members visiting Japan withProfessor Gabriel, attended the event and engaged in a lively
Q&A session around the opinions of the professors. In his
keynote speech, Professor Gabriel outlined his thoughts on“ethical capitalism,” ie, that ethical contributions to society
present the biggest business opportunities, then expanded thediscussion to the ethical behavior methodology that companies
should take and argued that this direction is closely linked to therealization of corporate behavior based on a “social point ofview” as sought by the Japan Business Federation. President
Fujii introduced various examples of the University of Tokyo’s
initiatives, including the Ocean Monitoring Network Initiative(OMNI) that he is personally involved with, based on theconcept of building a better future through dialogue with people

from various backgrounds.
At the panel discussion, with Principal Research Director
Nakajima serving as MC, a variety of discussions took place onsuch topics as strategies for companies and universities to offer
new value to society and the possibility that liberal arts,
including fine arts, will become important at that time.
21PPI has earnestly conducted research on the impact of changes
in the international situation, technological innovation, thespread of infectious diseases and other such developments on
capitalism and democracy. Going forward, the institute isplanning to promote joint research with the members of TNI led
by Professor Gabriel. The knowledge obtained through the latest
dialogue and symposium will be utilized as part of that.
(Natsuki Sakai, Fellow)

US

A conference on “New Energy Realities” is held
On 23 May, 21PPI’s US research project (Principal Research
Director: Fumiaki Kubo, President, National Defense
Academy) invited Paul Sanders, representative of the US
Energy Innovation Reform Project, for a conference on New
Energy Realities. Following his speech, a panel discussion on
the theme of “Energy Issues Around the Russia-Ukraine
Conflict and Implications for International Order” was heldwith Principal Research Director Fumiaki Kubo serving as
moderator and Research Fellow Junko Sugino (Associate
Professor, Musashino University; Visiting Fellow, The Instituteof Energy Economics) participating as a panelist. Below is asummary of the speech by Mr. Sanders and the panel
discussions by the three panelists.
Speech of Paul Sanders
Energy transformation is a major theme, but there are issues in
the areas of geopolitics, politics, economics and resources thatmake it challenging, so progress has been slower than expected
and also costly, making the transformation difficult to achieve.
In particular, the deterioration of US-China relations andRussia’s invasion of Ukraine impede with the transformation.
5

Annual CO2 emissions in China are increasing at double thepace in the US and many Americans are asking why theircountry has to suffer despite such an increase in China. Also,
there is a dilemma of needing to invest more into fossil fuelenergy to secure an energy supply, but also needing to invest into
clean energy in order to accelerate the energy transition.
In terms of the outlook, while decarbonization is a goal for theAmerican economy and the importance of energy transformation
remains unchanged, measures and legislation focused on
boosting competitiveness could see a further push. Even if suchdevelopments are strongly focused on China, close trade partners
and allies can get entangled in practice, making it necessary forgovernments consult closely in order to minimize any damage.
Panel discussion(Ayako Sugino, Research Fellow)
At the time of the shale revolution some 10 years ago, there wasa view that the era of energy deficiency had ended with a shift toan era of energy sufficiency, but due to the rush to decarbonize, ashortage of battery and rare mineral materials has emerged andinvestment into fossil fuels has become inadequate. An era ofenergy shortages now appears set to begin. This ultimately left
me wondering what the shale revolution was. Meanwhile, theMineral Security Partnership was launched last year and will
now start operating. This is said to target a resilient supply chain
from mine development to smelting, processing and recycling,
but the focus is on what kind of leadership the US is planning todemonstrate.
(Fumiaki Kubo, Principal Research Director)
The international order is in danger with an inadequate stance on
the part of China, Russia’s invasion of Ukraine and America’s
weakening will to protect that order. The focus going forward
will be the Biden administration’s and Republican Party’s views
on Russia and China or how the US will once again assume therole of supporting the international community. The term “flatworld” was coined at the start of this century, an era ofglobalization took hold, and it was said that the age of freeflowing capital, information and people had arrived, but now
things are moving in quite the opposite direction. Energy is anextreme example. Some countries are even using it as a weapon,
so there are other countries that have to confront this head-on
and Japan is also getting caught in the mix. One might say theera of globalization is over, but in some areas it still continues.
Each nation must decide where its government will intervene
and impose restrictions to an extent and what areas it will leaveto free market mechanisms. Things can no longer be resolved
simply based on a single principle. In terms of the Ukraine issue,
the will of the Western G7 nations, Central and Eastern European
nations excluding Hungary and Baltic nations to support Ukraine
has proven stronger than expected and this remains unwavering.
If this lasts, there is a view that Russia could increasingly be at a
disadvantage going forward.
(Hiroyasu Hatayama, Senior Fellow)

China

Symposium on “China’s Strategy to Build a Strong
Nation”
On 3 July, 21PPI’s China research project (Principal Research
Director: Shin Kawashima, Professor, University of Tokyo,
Graduate School of Arts and Sciences) held a symposium on“China’s Strategy to Build a Strong Nation” with around 200
participants from member companies in attendance. Amid a
global situation shaken by US-China conflict and the Ukraine
invasion, China’s strategy as a global power was interpreted
and the purpose and background analyzed. Below is an
overview.
An essay on Xi Jinping’s leadership based on management
knowledge and “internal documents” (Takashi Suzuki,
Professor, Daito Bunka University, Institute for Oriental
Studies)President Xi Jinping is currently the most powerful person in
China. He was able to become a strong leader throughconnections from his clan (organized by children of former highranking Communist Party officials) and provincial leadership
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21PPI NEWS LETTER OCT. 2023

At the back right,Principal Research Director Kawashima,
From right to left in the front, Research Fellow Hirono, Research Fellow
Ding, Research Fellow Suzuki

days, his successful anti-corruption campaign that purged
political opponents and his appeal to sub-leaders. At democratic
life meetings held for two days each year, sub-leaders areassembled for criticism of their work and themselves. Throughthis and other means, Xi institutionalizes opportunities toconvince others to obey him through psychological pressure andtime-consuming persuasion.

developing nations are not interested in China’s ideology andinstead foster a view of China based on their own interests.

China’s industrial advancement and global value chain
reorganization (Ding Ke, Senior Research Fellow, Institute ofDeveloping Economies, Japan External Trade Organization)
In the 2010s, China promoted industrial advancement involvinga shift from labor-intensive assembly industries to more
technology- and capital-intensive intermediate goods industries
and is establishing a new global chain with Vietnam andThailand importing intermediate goods from China andassembling final goods. At the same time, foreign firms remain
highly dependent on China. For example, Apple has more than
95% of its suppliers’ production bases in China and it isestimated that it would take eight years to shift a mere 10% of its
production capacity from China to other nations. US
semiconductor regulations are becoming stricter, but China is
expanding its investment into non-advanced semiconductors andpromoting initiatives for next-generation semiconductor
technology.

The future of the situation in Taiwan (Principal Research
Director Kawashima)
In terms of issues around the “Taiwan conflict,” there is atendency to focus on developments in the US and China, but it isalso important to understand the situation inside Taiwan. In a
survey of domestic views in Taiwan around the question of
independence or unification, 80% of the respondents favoredeither the status quo or slight independence. Almost no one
sought unification and there was a deep-rooted view that China
will not conduct a military invasion. The policy of Taiwaneseunification under China involves the threat of military force,gray zone tactics (eg, fake news cyber attacks) and economic
sanctions. At the general election scheduled for 2024, Lai Chingte of the Democratic Progressive Party is currently favored. The
issues are varied, including not only Taiwan’s distance from
China, but also the economy, social life and population decline.

China’s programs and actions related to global governance(Miwa Hirono, Professor, College of Global Liberal Arts,
Ritsumeikan University)
As the international order enters a period of change, how China
thinks of global governance is a major issue. I analyze this issue
through two programs: the Belt and Road Initiative and the
Global Development Initiative (GDI) proposed by President Xi
Jinping at the United Nations General Assembly in September
2021. While the Belt and Road Initiative puts an emphasis on
hard infrastructure that creates win-win bilateral relations, the
GDI is multilateral with an emphasis on soft infrastructure suchas capacity building, education, the environment and SDGs. The
two programs are in a relationship of coexistence. However,Panel discussion
Next, a panel discussion among the three speakers was held with
Principal Research Director Kawashima serving as themoderator. In an overview of the speeches, Principal Research
Director Kawashima emphasized that 1) the general view ofChina differs somewhat from reality and that 2) it is important tocarefully look at the whole picture assuming a diverse range ofactors. There was in-depth discussion with the speakers on suchmatters as “the destabilizing factor of a decline in Xi Jinping’s
influence,” “the social issues of unemployment and disparity andeconomic growth,” “the future of the Belt and Road Initiative”
and the “domestic assessment of the Belt and Road Initiative”(Yuko Chiba, Senior Fellow).

International situation

Seminar held on the “Current Status and Outlook for
the G7 and the Indo-Pacific”
On 5 July, 21PPI held a seminar at the Keidanren Kaikan in
Otemachi, Tokyo. Ryo Sahashi, Associate Professor of the
University of Tokyo’s Institute for Advanced Studies on Asia,
who serves as a visiting research fellow at 21PPI, delivered aspeech on the “Current Status and Outlook for the G7 and theIndo-Pacific.”
During the speech, Professor Sahashi noted that a conciliatory
atmosphere had spread in relations between the US andChina, but speculated that conflict would continue over the
medium to long term. Under such conditions, he pointed out
the necessary actions for Japanese companies. Below are thekey points of this speech.

Visiting Research Fellow Ryo Sahashi

7Near-term path of reconciliation
The G7 joint statement sent a message of reconciliation, using
constructive language unseen in recent years such as “we call on
China to engage with us” and “China also seeks ourengagement.” China reciprocated along this path by, forexample, accepting US Secretary of State Blinken’s visit toChina. This came from a superficial coincidence of intentions
with, for example, the Biden administration not wanting a nearterm crisis and China concerned about the current economy.
The West stays its groundAt the same time, the G7 joint statement also incorporated a
response to China’s economic coercion and sought to boost
supply chain resilience, and after the G7, the EU newly
announced an economic and security strategy, suggesting theWest has not altered its stance.
What both sides really want is the economic benefits beyond
dialogue. Unless there is something to gain in the long run,
structural problems will result and US-China conflict willcontinue.

A conflict structure that creates mutual distrust
A key word surrounding the current world is distrust. Mutual
distrust between superpowers complicates matters. As a result,even where there would ordinarily be reasonable solutions,
nations are beset by a structure of conflict not only militarily, butalso economically and have fallen into a dilemma of notunderstanding the true nature of one another.
There were numerous questions from the participants following
the speech, reflecting the high level of interest in the theme. For
example, one participant asked what kind of strategy Japanesecompanies should take given that China remains an attractive
market. On this, Professor Sahashi remarked that, first of all,there is a need to understanding the situation in the US. There
are US companies that can hold their own even amid USChinese conflict because they understand the information that
their country holds, saying it is important for Japanesecompanies to know the US like their US counterparts do.
On how the balance of power among the US, China and related
nations evolves, he answered that it depends on the extent towhich China can expand its partnership diplomacy.
(Kota Aono, Senior Fellow)

International order

Symposium held on the “Future of International
Order”On 7 August, 21PPI’s International Order Research Project(Principal Research Director: Masayuki Tadokoro, Specially
Appointed Professor, International University of Japan;
Honorary Professor, Keio University) held a symposium on
the “Future of International Order” at the Keidanren Kaikan
in Otemachi, Tokyo. The institute has long conducted researchon the direction of international order from multiple
perspectives such as the political economy and science andtechnology. Reporting on that research, the institute gave abroad presentation at the symposium on potential futurescenarios around science and technology, China and America,
looking out to the period from 2050 onward. Below is an
overview.
Research project overview – Why make a projection about
the future (that will miss the mark)? (Principal Research
Director Tadokoro)
This project is a kind of thought experiment that takes a slightly
broader perspective and asks us to think about several visions forthe future. It also seeks to challenge the bias toward the present
when thinking about the future. Thinking about future
possibilities even without knowing what is in store also has
value when engaging in business activity.

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21PPI NEWS LETTER OCT. 2023

Speech 1: The “Future of Science and Technology and theInternational Order” (Kazuto Suzuki, Professor, Graduate
School of Public Policy, The University of Tokyo)
Science and technology has a destructive nature and changes
greatly into the future, so it is important to think about its impact
on society. Technological innovation in such areas as artificial
intelligence, communications, transport and space development
brings great benefits, but can also widen disparities and deepen
political turmoil. In an optimistic scenario, countries control
innovative technology through a shared code of conduct,
resulting in the emergence of a society where many people
receive the benefits and the formation of an order in theinternational community based on peaceful coexistence and rules– it is possible to imagine such a scenario. In reality, however,
we must think about a scenario where differences in science andtechnology lead to large disparities between nations and there isa decline into an unstable state where rules fail to take hold andthe potential for military conflict and industrial dominancepersists.
Speech 2: The “Future of China and the International
Order” (Shino Watanabe, Professor, Faculty of Global
Studies, Sophia University)
When thinking about the future of the international order, China
is an extremely important actor in light of its ambitions. It has
set goals, made plans and persistently continued to execute on
them. However, unexpected things routinely occur day to day.
For this reason, it is more difficult to project the future in thecase of China than it is with other nations. It is essential to lookat China’s security and economy as well as its internal affairs
and foreign relations with this in mind. Global South (developing
country) initiatives are an area of strength for China, so thedirection here could become a key to the future. In a futureworld revolving around China, one can imagine 1) US-China
polarization; 2) Chinese hegemony; or 3) fragmentation into a“rivalry of warlords.” It is important to think about what will
happen to Japan and how companies will respond in the eventthat such developments materialize.
Speech 3: The “Future of America and the International

Reports published

Order (Satoru Mori, Professor, Faculty of Law, Keio
University)
The future of 1) US-China relations, 2) global issues and 3) third
countries are factors acting on the future direction of theinternational order. In addition, I would like to emphasize that“black swans,” or unexpected, events occur and that the flow of
the world changes greatly around such events. The US and China
are in a state of extremely multifaceted competition around
military arms, industrial technology, international rules andinfluence on third countries. Also, the cooperation, policy
making and action of major powers that should ordinarily be
addressing global issues represented by the climate crisis
continue to lack momentum. With US leadership in a relative
decline, there is a question around how Japan can develop 1) a
re-expansion of the international economic activity space and 2)
diplomacy contributing to the spread of rules-based international
order.
Following the speeches, a panel discussion involving the three
speakers was held with Principal Research Director Tadokoro
serving as the moderator. A multifaceted debate took place on
the future of the Global South and issues of internal governanceas seen from each perspective, with an effort to involve
participants in the discussion through, for example, a show ofhands on four possible future scenarios centered around the US
and China (US supremacy, Chinese supremacy, mutual
antagonization, mutual destruction), bringing the event to a
successful close.
(Yasuhiro Iwasaki, Senior Fellow)

The full reports can be found here:

http://www.21ppi.org/theme/report/index.html

Report of “Review Committee on Startup-Friendly Scoring”
The Review Committee on Startup-Friendly Scoring (Akie
Iriyama, Executive Research Fellow and Professor, Graduate
School of Business and Finance, Waseda Business School)
compiled a report on its FY22 research results.

The report discusses the background, thinking, implementation
methods and results of start-up friendly scoring, an effort to givevisibility to the start-up friendliness of major companies.

Writers (random order)
Tomoko Namba (Vice Chair, Keidanren/Chair, Committee on Startups, Keidanren)
Makoto Takahashi (Chair, Committee on Startups, Keidanren)
Mitsuru Izumo (Vice Chair, Board of Councillors, Keidanren/Chair, Committee on Startups, Keidanren)
Akie Iriyama (Executive Research Fellow, The 21st Century Public Policy Institute/Professor, Waseda Business School (Graduate
School of Business and Finance), Waseda University)
Kazuhiko Chuman (Deputy Head, Business Exploration and Development Division, KDDI Corporation)
Toshio Taki (Executive Officer, CoPA (Chief of Public Affairs), Money Forward, Inc.)
Nobutaka Yasui (Manager (Capacity Unleash, Public Policy), Mercari, Inc.)
Susumu Nishimura (Deloitte Tohmatsu Venture Support Co., Ltd.)
Koichi Hayashida (Deloitte Tohmatsu Venture Support Co., Ltd.)(Titles as of March 2023)
Megumi Komata (Deloitte Tohmatsu Venture Support Co., Ltd.)

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OCT. 2023

Report on “EU and the New Capitalism/Democracy”
The European Research Project (Principal Research Director:
Takao Suami, Professor, Faculty of Law, Waseda Law School)
compiled its FY21 and FY22 research results in a report titled“EU and the New Capitalism/Democracy.” In the report, the nine

experts involved in the project debate the outlook for a newcapitalism and new democracy in the EU and its implications forJapan.

Writers (random order)
Takao Suami (Professor, Waseda Law School, Waseda University)
Ryosuke Amiya-Nakada (Professor, College of Liberal Arts, Tsuda University)
Sayuri Ito (Director, Economic Research Department, NLI Research Institute)
Mikiko Ohta (Associate Professor, College of Economics, Nihon University)
Tomoya Kuroda (Associate Professor, School of Law, Senshu University)
Shunsuke Sato (Associate Professor, Faculty of Law, Kokugakuin University)
Hitoshi Suzuki (Visiting Senior Research Fellow, Institute of Geoeconomics (IOG), The International House of Japan, Inc.)
Yumiko Nakanishi (Professor, Graduate School of Law, Hitotsubashi Unversity)
Yorizumi Watanabe (Dean, School of Global Communication, Kansai University of International Studies/Professor Emeritus,(Titles as of March 2023)
Keio University)

Report on “The Compass of the Xi Jinping Administration
The “China Situation Research Project” (Principal Research
Director: Shin Kawashima, Professor, The University of Tokyo,
Graduate School of Arts and Sciences) compiled its FY21
research results in a report.
The report analyzes from social, economic, constitutional stateand foreign policy perspectives how the Communist Party of
China dealt with the issues of the post-COVID and with-COVID
era. Ten leading China researchers commented on theirrespective areas of expertise, with Professor Kawashimasummarizing their studies and discussing the implications for theJapanese economic community.

Writers (random order)
Shin Kawashima (Professor, Graduate School of Arts and Sciences, The University of Tokyo)
Kazuko Kojima (Professor, Keio University)
Kai Kajitani (Professor, Graduate School of Economics, Kobe University)
Ding Ke (Senior Research Fellow, Institute of Developing Economies, Japan External Trade Organization (IDE-JETRO))
Jin Ishizuka (Associate Professor, Faculty of Life and Environmental Sciences, University of Yamanashi)
Wakako Ito (Director of Research, The Japan Forum on International Relations, Inc. (JFIR))
Shinji Yamaguchi (Senior Research Fellow, The National Institute for Defense Studies)
Chisako T. Masuo (Associate Professor, Faculty of Social and Cultural Studies, Kyushu University)
Jun Kumakura (Associate Professor, Faculty of Law, Hosei University)(Titles as of July 2022)
Toru Kurata (Professor, Rikkyo University)

The 21st Century Public Policy InstituteThe 21st Century Public Policy Institute, Keidanren (Japan Business Federation)
1-3-2, Otemachi, Chiyoda-ku, Tokyo 100 - 8188 Japan
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