対外発表
2015年6月22日以降

Japan-Korea Joint Proposal

Japan-Korea Joint Proposal

Envisioning
Envisioning the Next Fifty Years of Japan-Korea Ties
the Next Fifty Years ofJapan-Korea Ties
IIPS-SFIA Joint Project

IIPS-SFIA Joint Research Project

The Institute for International Policy Studies (IIPS)The Seoul Forum for International Affairs (SFIA)

0Table of Contents

Introduction･･･････････････

1

Executive Summary･･･････････････

4

Section 1
Toward Enhanced Security Cooperation
between Japan and the ROK･･･････････････

8

Section 2
Economic Cooperation
between Japan and Korea･･･････････････

15

Section 3
Cooperation on Transnational Issues･･･････････････

25

Member List･･･････････････

37

1

Envisioning the Next Fifty Years of Japan-Korea Ties

Introduction
The Institute for International Policy Studies (IIPS) and The Seoul Forum forInternational Affairs (SFIA) have convened the annual Tokyo-Seoul Forum since2010 to discuss how Japan and the Republic of Korea can cooperate toward a stableand prosperous future for East Asia and the world. The Treaty on Basic Relations
between Japan and the Republic of Korea marks its 50th anniversary on June 22, 2015.
At this noteworthy time, joint research on the “Next Fifty Years of Japan-Korea Ties”
has been conducted by experts in both countries to identify potential issues of future
strategic cooperation between Japan and Korea in the next 50 years. It aims at
proposing concrete steps to make forward-looking bilateral relations between thetwo countries with a longer-term perspective.
After agreement on the Treaty on Basic Relations between Japan and the Republic ofKorea, both Japan and Korea have developed to become economic driving forces in
East Asia. For example, Japan’s nominal GDP amounted to US$4,901 billion in 2013,
ranking 3rd worldwide, while Korea ranked 14th at US$1,305 billion. In the past 50
years, Japan’s nominal GDP in 2013 has become 54 times that of 1965, and Korea’s is
421 times that of the same period. Trade in goods between Japan and Korea was
US$85 billion in 2014 (exports and imports, trade statistics of Japan), which
accounted for 385 times that of 1965. In addition, visitors between the two countries
were merely approximately 10,000 in 1965, while in 2014 they amounted to over 5
million people. And the two countries, as allies of the United States for half acentury, have contributed to guarding the peace in East Asia. Furthermore, thesuccess of the 2002 FIFA World Cup Korea/Japan also played a role in developmentof cultural interaction and economic cooperation. A close relationship between Japanand Korea is of utmost importance for the future of East Asia’s peace and prosperity.
Also, since 1998 when political leaders in both countries made a resolution to open
cultural doors to each other, people have begun enjoying each other’s popular
cultures. In Japan, there have been movements of the “Korean Wave” including thehits of Korean television dramas and K-POP music. In Korea, Japanese popular1

culture has constituted trendy items among the general populace. As an extension ofthese cultural exchanges between Japan and Korea, mutual understanding across theborder has been immensely upgraded.
However, current political relations between Japan and Korea are in a stalemate.
Historical issues are preventing improved relations between the two countries. Since
the Japan and Korea Summit Meeting in May 2012 (Prime Minister Yoshihiko Noda
and President Lee Myung-bak), the two countries have not been able to hold a
Summit Meeting, which is a quite extraordinary situation between neighboring
countries. President Park Geun-hye has prioritized solution of the comfort womenissue before holding a summit meeting while Prime Minister Abe maintains the
stance that a top-level meeting should be held from a broad point of view without
any preconditions. Some improvements in easing tension have been made in the last
several months. At the ministerial level, in addition to the regular Foreign Ministers’
meeting, two ministerial meetings by the Finance Ministers and Defense Ministers
were held in May 2015. We think it desirable that a summit meeting between the twocountries be resumed at the earliest convenience.
Historical and territorial controversies are stumbling blocks to further progress forstrategic cooperation between Japan and Korea. Historical issues have to be properly
addressed on both sides, but discussions on security, the economy, and others should
not be hampered by them. Also, the solution of the thorny historical issues should befounded on the principle of reciprocal cooperation between the two parties.
We should not forget the great efforts of the leaders and the achievements in the past
such as the conclusion of the Treaty in 1965, amicable relations between Prime
Minister Yasuhiro Nakasone and President Chun Doo-hwan in 1980s, and the Joint
Declaration of 1998 between Prime Minister Keizo Obuchi and President Kim Daejung, all of which greatly improved Japan-Korea relations. Building on theseachievements, we should make utmost efforts to make our relations better andstronger.
While visionary and sensible leadership roles are indispensable in improving
bilateral relations, it should be noted that a cautious, moderate, and prudent

2

approach of a public discussion about the other party is critically important. In
particular, the practice of blaming each other should be abstained from as soon as
possible. The spirit of mutual respect and trust should be regained.
This joint research project, premised on the legitimacy of the 1965 Treaty on Basic
Relations between Japan and the Republic of Korea, explores the possibility ofdeepening and widening strategic cooperation between Japan and Korea in the next
50 years. This joint research project focuses on three issues for cooperation between
the

two

countries:“Economic

Cooperation,”“Security

Cooperation,”and“Cooperation on Transnational Issues.” However, while achieving an understandingof the current status of each of these issues, the highest priority is placed on
formulating a proposal that will directly serve the purpose of cultivating JapanKorea ties. This proposal is expected to contribute to a new era of Japan-Korea
relations, stability in the East Asia region, and a stable global order for the next 50
years.
June 2015

Ken Sato

Jung Ku-hyun

President

President

Institute for International Policy Studies

The Seoul Forum for International Affairs

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Executive Summary
At the 50th anniversary of diplomatic normalization between Japan and the Republicof Korea (ROK), the Institute for International Policy Studies (IIPS) and the Seoul
Forum for International Affairs (SFIA) have conducted a joint research onenvisioning the next 50 years of Japan-ROK ties to identify potential issues ofstrategic cooperation between the two countries in the next 50 years. It aims at
proposing concrete steps to make forward-looking bilateral relations between thetwo countries with a longer-term perspective. In order to deepen and widen strategiccooperation between Japan and the ROK, this joint research has picked up threeareas of cooperation: security cooperation, economic cooperation, and transnational
cooperation.
The following are concrete proposals that have been suggested by experts in bothcountries.

(1) Security Cooperation between Japan and the ROK
1. Twisted perceptions and misunderstanding about each other are standing in theway to furthering security cooperation. To enhance mutual understanding,strategic dialogues at all levels should be actively promoted. Both governments
should increase the budget for a good-will public diplomacy toward each other.
Informing the public on the importance of Japan-ROK cooperation is important.
2. To share common security interests and strategic perspectives, open-mindeddialogues including track 2 and professional exchanges in various fields should
be promoted.
3. In order to deepen Japan-ROK security ties, it is urgent to institutionalize thebasis for bilateral security cooperation, including mutual defense assistances,
information sharing, crisis management mechanism, and other arrangements forenhanced cooperation. Also grassroots personnel exchanges among military
professionals should be promoted.

44. Japan and the ROK can cooperate further to promote the unification of the Korean
Peninsula. Japan should make it clear that it supports ROK’s initiatives toward
the unification of the Korean Peninsula. Also the two countries should sharecommon understanding on the basic conditions for unification.
5. For peace and stability in Northeast Asia, policy coordination and information
sharing on North Korean issues and China should be actively cultivated. JapanROK cooperation for responding to crises on the Korean Peninsula should beguaranteed.
6. Armed forces of Japan and the ROK can promote cooperation in international
activities, including UN PKO, global peace operations, humanitarian assistanceand disaster relief operations.

(2) Economic Cooperation between Japan and the ROK
1. Collaboration between the two countries in R&D and innovation is necessary. It is
recommended that the two countries start a new initiative called “Japan-Korea
Technology Platform 2025.” Platforms will be created in several key industries ortechnology areas, such as IoT (Internet of Things), bio, clean energy, robotics andeven FinTech (financial innovation along internet and mobile platforms).
2. The potential for business collaboration between the two countries in thirdcountry markets, especially in emerging markets, should be further explored. It is
recommended that the two countries collaborate in establishing industrial parks
in India and other emerging markets and also pursue joint projects in building
infrastructures in those markets.
3. It is noted that labor and capital market inflexibility is hindering new businessdevelopment in the two countries. The two countries should jointly explore ways
to stimulate new business start-ups, especially by young people.

54. Promotion of trade and investment between the two countries should be more
effectively handled under plurilateral settings such as a China-Japan-Korea FTA,
Regional Comprehensive Economic Partnership Agreement (RCEP), and TransPacific Partnership Agreement (TPP). The two countries should also cooperatewith each other in RCEP negotiations, in further securing market access forintermediate and consumer goods in India, China and ASEAN countries.
5. The two countries, actively participating in the Trade in Services Agreement(TISA) in the WTO framework, have an urgent need to engage in serious
discussions for deeper services market liberalization.

(3) Cooperation on Transnational Issues
1. In order to cope with humanitarian emergencies and natural disasters, Japan andthe ROK can coordinate policies and action plans for joint operations forhumanitarian assistance and disaster relief. Also the two countries can takepreventive measures together. In order to promote human security, Japan and the
ROK can jointly develop a system that enables effective implementation of ODA
and peacekeeping operations. Joint management of a PKO training center in Asia
should be considered.
2. Japan and the ROK can take initiatives in the formulation of new international
development objectives, namely sustainable development goals. The twocountries should also play a facilitating role in developing universal norms andconcepts of human security and humanitarian intervention.
3. As resource-poor countries relying on imported fossil energy resources, Japanand the ROK should cooperate for the promotion of energy efficiency and a lowcarbon society while developing renewable energy and technology. R&D
cooperation is critically important in this area.

64. The leadership role of Japan and the ROK in response to climate change issues atregional and global levels should be enlarged. The two countries can work
together to promote capacity building and technology transfer related to climatechange to developing countries.
5. Japan and the ROK can construct networks for exchanging information on
nuclear power development and nuclear accident response to enhance nuclear
safety. The two countries can prepare a common measure for nuclear safety with
China.
6. In order to cope with an aging society, Japan and the ROK should play a leadingrole in creating a new positive concept and norms for an aging society whichbring hope to the world and help policy-making.
7. In order to cope with labor shortage, a joint research project on the creative
options of cross-border mobility before accepting the more permanent
immigration can be conducted between Japan and the ROK. In addition, various
complementary measures should be studied jointly in order for people to be able
to work until 75 years of age, possibly, or at least until 70 years of age.

7Section 1
Toward Enhanced Security Cooperation between Japan and the ROK
Introduction
Japan and the Republic of Korea (ROK) have many reasons to advance security
cooperation in a changing world. From a regional viewpoint, the two countries face aformidable security threat from nuclear-developing and militarily-provocative North
Korea. As an ally to the United States and beneficiaries of the liberal international
order, maintaining a stable order in the Asia-Pacific is in the interests of Japan andthe ROK. In particular, those three countries are paying greater attention to emerging
challenges for the liberal maritime order in the western Pacific Ocean. From a global
viewpoint, Japan and the ROK are liberal democracies in Northeast Asia that havegreat potential to contribute to international peace and security together, if theycollaborate closely.
Together with the ROK, Japan will be able to contribute more as a “proactive
contributor to international peace.” On the other hand, the ROK will be able topromote multilateral cooperation such as a “Northeast Asia Peace and Cooperation
Initiative” if this Korean idea is supported squarely by Japan. The Korea-US allianceprovides Japan with the security of its western front while the Japan-US allianceprovides Korea and the United States with the logistical basis and backyard safety incase of North Korean contingencies. In this light, the two countries should deepen
and widen such understanding on the mutual reliance of the two alliances with theUnited States.
The United States has been expecting better relationships between its two leading
allies in Asia, as it will be the basis for peace and stability in Northeast Asia. Peoplesof the two countries sharing common values of democracy and a market economy
should be fully aware of the great value of closer security cooperation between Japanand the ROK. In this vein, the breakdown of Japan-Korea relations would weaken
alliances in Northeast Asia. Today, Japan and the ROK face new security challenges
such as the spread of the Islamic State in the Middle East, transnational terrorist
networks, and assertive Chinese claims in both the South China Sea and the East

8

China Sea. In fact, the two countries can be proud of their great contribution to peaceand stability in Northeast Asia and beyond in the last 50 years. Working together, thetwo democracies can contribute much more effectively to peace and stability acrossthe globe.

Going Beyond Misunderstandings and Misperceptions
Despite shared strategic interests of Japan and the ROK, a few outstanding
misperceptions and misunderstandings are standing in the way to furthering
security cooperation between the two. Most of all, it is sometimes difficult for thegeneral public to fully recognize the nuanced differences of the security interests
arising from different geostrategic locations. The ROK is situated closer to China andhas practical reasons to maintain its cooperative relationship with China, particularly
for realizing the unification of the Korean Peninsula. On the other hand, largely due
to its Constitutional constraints, Japan needs to consolidate its alliance with theUnited States to defend its sovereign territories.
Though security specialists are fully aware of strategic mutual dependence in the
Northeast Asian landscape, citizens of those countries are bound by negative
perceptions about the other party, which can hardly be verified on objective grounds.
From the perspective of Korea, Japan’s more proactive security policy under thecurrent administration is often seen in Korea as a dangerous move toward
remilitarization. However, it should be clearly understood that Japan’s defense
posture is being conducted in a democratic setting. Japan, despite its proactive
defense positions, would never go back to the pre-war regime. From the perspectiveof Japan, the ROK’s friendly diplomatic gesture to China could be seen as a moveaway from Japan. Some Japanese even claim that the ROK has tilted toward China.
However, it should be noted that the ROK, whose security is working on the groundof US alliance structure, would never go away from the US, which is Japan’s resoluteally. Though the ROK may develop a friendly diplomatic stance as well as amicableeconomic ties with China, this does not mean that the ROK would deviate from the
US security umbrella.
In order to go beyond twisted perceptions about each other, Japan should be9

cognizant of Korea’s geopolitical position as a divided nation that shares borders
with China as an immediate neighbor. Japan enjoys relatively safer geopoliticalground than the ROK in that it is an island country detached from the continent. As
the two Koreas are divided nations that wait for national unification in the future, theROK is interested in securing strategic support from China. Still, like Korea, Japan is
also trying to develop stable ties with China rather than simply balancing against
China. On the other hand, the ROK should clarify its strategic priority between
Korea-China cooperation and US-ROK alliance while not having to see them as a
zero-sum relationship. In this sense, strengthened security ties between the US andJapan does not go against the security interest of the ROK, especially in times of asudden change in North Korea.

The Necessity for Dialogues and Better Public Diplomacy
Japan and the ROK are in need of both mutual understanding and respect, which
will be an important basis for their security cooperation. Going beyond the distorted
images and perceptions of the other party can be a starting point of strategic
adjustment between Japan and the ROK. For that purpose, both countries had better
encourage the efforts of the other parties in a positive way. On the one hand, Japan
had better announce clearly that it supports the unification of the two Koreas under
the initiative of the liberal democratic ROK. Also, Japan can recognize theconstructive role of the ROK to promote trilateral cooperation among Japan, the ROK
and China to peacefully manage Northeast Asia. ROK’s endeavor to engage China is
not necessarily against the strategic interest of Japan. On the other hand, the ROK
should be encouraged to support Japan’s efforts to contribute more to global peace
and international security. Japan’s proactive contribution to peace such as in
Peacekeeping Operations (PKOs) does not necessarily go against the security
interests of the ROK. Furthermore, strong security engagement of the US in East Asiaand the Pacific benefits not only Japan but also the ROK. Both countries are in aposition to welcome and support American security commitment in the entire
region.
Distorted images and misperceptions would not naturally evaporate. To speed up
theprocessof

reducing

those

negative10

feelings

anddeepeningmutualunderstanding, strategic dialogues at all levels should be actively promoted. In
addition, reaching out to the public in each country may be vitally important for bothof them. Both governments should increase the budget for a good-will public
diplomacy toward each other while reducing the budget for a zero-sum public
diplomacy to avoid mutually assured damages.

Enhancing Security Cooperation
On the basis of right perceptions and understandings about each other, security
cooperation between Japan and the ROK can be developed in several dimensions:Sharing Common Security Interests and Strategic Objectives
Sharing of common security interests and describing common strategic objectives aredefinitely in need. For that purpose, the following measures should be promoted:-

Open-minded dialogues at various levels including track 2 are key for better
understanding on mutual reliance between US-Japan and US-Korea alliances,along with deeper respect for their roles and fairer appreciation of the other’sefforts for regional security.

-

Broader professional exchanges for practical cooperation may work better among
military officers, medical professionals, business people, and researchers in thefield of science and technologies as well as other experts in related areas.

-

The efforts by the two countries to reach out to domestic audiences are importantfor informing the public on the importance of Japan-ROK cooperation in various
areas.

Deepening Japan-ROK Security Ties
Deepening Japan-ROK security ties is a necessary step toward heightened security
cooperation. Concrete steps to be taken can include following measures:-

It is urgent to institutionalize the basis for bilateral security cooperation: mutual
defense assistance, information sharing, and other arrangements for enhanced
cooperation.

-

There are both necessity and possibility to further enhance crisis management

11

mechanisms between military and law enforcement organizations: existing(JASDF–ROKAF) and new hotlines, standing Japan-ROK military coordination
body, agreed-upon code of conduct.
-

Promoting grassroots mutual relations among military professionals will beeffective: personnel exchanges at various levels from political and military leaders
through working and operational levels to younger students at military andservices colleges.

-

Armed forces of our two countries could promote security cooperation in theareas of common interest, including: air defense, mine counter measures, antisubmarine warfare, cyber security, and outer space security.

Promoting the Unification of the Korean Peninsula
Japan and the ROK can cooperate further to promote the unification of the Korean
Peninsula. For this purpose, the following points should be taken into consideration:-

Japan should make it clear that it supports ROK’s initiatives toward theunification of the Korean Peninsula.

-

Japan and the ROK, along with cooperation with the US and China, should
coordinate their policy to avoid insecurity and instability at the time of theunification of the Korean Peninsula, while making the Korean Peninsula denuclearized.

-

The two countries should share common understanding on the basic conditions
for the unification, such as US security commitments to the region through USJapan and US-ROK alliances, China’s constructive role in the unification process,continuing dialogues among key players such as the Six-Party talks as well astalks between the South and the North, and the continuity of military postures ofJapan and the ROK forces together with close policy coordination between thetwo.

Enhancing Security Cooperation for Peace and Stability in Northeast Asia
Enhancing security cooperation for peace and stability in Northeast Asia is an area tobe actively cultivated. Practical measures to be taken include:-

Policy coordination and information sharing on North Korean issues.
12-

Policy coordination and information sharing along with possible Japan-ROK
cooperation in responding to crises on the Korean Peninsula such as North
Korea’s military and political provocations.

-Japan’s logistical supports for US forces in Japan in responding to contingencies
on the Korean Peninsula.

-

Policy coordination and political cooperation on policy toward China.

Joint Contribution to Global Peace Operations
Over the course of more than 20 years, Japan and the ROK, respectively, have been
considerably contributing to UN-led peace operations. Since its first PKO activity in
the UNTAG in Namibia in 1989, Japan has participated in diverse UN-led efforts
including UN Peacekeeping Operations (PKOs) and collective security measures,
post-conflict emergency humanitarian relief to recovery and reconstruction, andassistance through the UN Peacebuilding Commission. The country has also
dispatched Self Defense Force (SDF) units and other personnel to various regions on
international peace cooperation assignments including in Cambodia, the Golan
Heights, Timor-Leste, Nepal, and South Sudan. However, each time a new legislation
was needed on an ad-hoc basis. It took some time before the sending of SDF, because
the matter often gave rise to controversy. Currently, the Japanese Diet plans to pass
new legislation that establishes a general legal basis for sending SDF to multilateral
activities, which would in turn make easier sending SDF in the future.
Korea has also contributed 10,000 military and civilian personnel to UN PKOs since itjoined in UNOSOM II in Somalia in 1993 and has noticeably increased its
contribution since 2007. Korea’s recent UN-led PKO missions include theDongmyeong Unit in Lebanon, the Danbi Unit in Haiti, and the Hanbit Unit in South
Sudan. In addition, the country, as a member of the “coalition of the willing,” hasalso made substantial contribution to several MNF peace operations including theCheonghae Unit near the coast of Somalia, the Ashena Unit in Afghanistan, and the
Akh Unit in UAE. Such impressive and successful peace operations could have astrong synergistic effect if Japan and the ROK exploit opportunities to cooperate witheach other in various international peace operations such as UNPKOs, ad-hoc
coalitions similar to Operation Iraqi Freedom II, and counter piracy operations
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similar to one in the Gulf of Aden.
Armed forces of Japan and the ROK can further promote cooperation in international
activities such as UN peacekeeping operations (UN PKO) and humanitarianassistance/disaster relief (HA/DR) operations. For this purpose, the following
should be taken in to consideration:-

The two countries from time to time have participated in such operations together
as witnessed in the HA/DR activities in the Philippines after typhoon Haiyan in2013 and in the ongoing UN PKO in South Sudan.

-

Such operations can provide natural and harmless grounds for the two armed
forces to work together and to promote the two peoples’ understanding on theimportance and possibilities of Japan-Korea security cooperation.

-

Japan and Korea should coordinate their activities in such international peaceefforts while actively exchanging related information. This is particularly
important for HA/DR in the Asia-Pacific region which is a natural disaster-prone
area in the world.

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Section 2
Economic Cooperation between Japan and Korea
Cooperation in Private Business Sectors
Economic Prospects for Japan and Korea
Although there are some positive signs of economic recovery recently, the Japanese
economy has struggled with recession and deflation in the last two and half decades,
and the Korean economy is showing signs of stagnation in recent years. Japan’sannual GDP growth rate averaged around 4.4% during the 1980s, 1.6% in the 1990s,
and 0.8% in the last decade. Korea’s GDP growth rate averaged around 7.6% in the
1980s, 6.1% in the 1990s, and 3.6% in the first decade of the 21st century. In the next
10 years of 2016 to 2025, the Korean growth rate is expected to be around 2%. The
aged ratio of Korea (percentage of 65 years and older population out of the total
population) will progress from 13% in 2015 to 18% in 2025, and will reach 20% in
2028. The growth in the domestic market should be of qualitative nature, i.e. increaseof total factor productivity (TFP), and further growth should be sought in overseas
markets. Japan’s GDP growth in the next decade is not expected to be much better
than the last decade level of 0.8% despite Abenomics. The population aging will
progress from 24% in 2015 to 28-30% in 2025. The economic growth should comefrom the TFP and from overseas markets. But stagnation is not destiny. The twocountries have all the ingredients for economy growth: capital, disciplined andskilled manpower, technology, and accumulated experience in business and public
administration. It is possible to raise the economic growth of the two countries toover a 2% level with the right mix of government policy and business innovation.
This report will recommend several ways to reignite the economic engines and thetwo economies.
Fundamental Shift of the Global Economy circa 2015
Circa 2015 is somewhat similar to circa 1990: fundamental shifts are under progressin many areas—geopolitics, economics, technology and organization management.
But unlike in 1990, the technology shift seems to be the key driver in this complex
15

transition period. Technological changes are pervasive and could change the otherimportant orders, including economics and security. The technological changes are
led by the internet and mobile revolution, including the IoT (Internet of Things),
cloud computing and big data, but other critical tech changes are also underway:
robotics, auto-driving and drones, basic materials, 3d printing, energy, and biomedicine. For example, in the 1990s the shift from stand-alone PCs to inter-connected
PCs through the internet was made, and then to the hyper-connected individuals
through smart-phones after 2007. And now the expected connectivity of everything
through IoT is possible in the coming decade. The business ecosystem is also shifting
toward network-based competition. To be successful, companies should be able tocreate strong platforms by organizing the suppliers, innovators, distributors, andeven customers. There are already successful joint ventures and some joint projects
or consortiums between two countries, but there is ample room for more productive
collaboration.
Joint Efforts to Stimulate New Ventures
The entrepreneurial spirit in the two countries urgently needs to be reignited.
Japanese and Korean economies are dominated by big companies, some of which arealso very successful in global markets. And these big companies provide a relatively
high level of job security to employees and managers. It is only natural that talented
college graduates are eager to seek careers in these large firms. In contrast, a large
number of graduates from the leading US universities start a new business even
before they graduate from college. There is a stark difference between the US andJapan/Korea in terms of the entrepreneurship. In this respect, the labor market
flexibility is essential also for stimulating new start-ups in the two countries. Big
companies should take steps to make jobs less secure, and failed companies shouldbe let go so that talent and resources can be channeled to new business. Venture
capital and angel funds are only a part of the problem. Financial institutions in thetwo economies are very inefficient and rely on relatively low-risk loans to big
companies. Risk capital is not easily available to new start-ups in the two economies.
According to the OECD data of 2009, the available risk capital relative to the size of
GDP was 0.030% for Korea and 0.020% for Japan. These numbers are much lower
than the OECD average of 0.042% or 0.088% for the US. The problem is very simple:

16

established financial institutions such as commercial banks are not used to providing
risk capital. And government-supported venture capital firms often operate likebanks in many instances, asking for collateral or mortgage when lending. The twocountries should come up with a new and creative way to provide risk capital. “Outof-the-box” thinking is needed in this area. One possibility is the so-called FinTech, or
financial innovation along internet and mobile platforms. For example, crowd
funding is a good way to provide risk capital to potential start-ups outside theestablished financial institutions. Here both governments should lift many
regulations regarding accepting investments and making loans.
One possible way for the two countries to collaborate in stimulating the spirit ofentrepreneurship is to have a joint program that is targeted at colleges and college
graduates. Sister economic associations in the two countries, such as the FKI and
Keidanren, should work together to reignite the venture spirit in the two economies.
It would be somewhat ironical for those organizations representing big businesses tocome up with such programs, but it is their social responsibility. In order not to beleft behind in the current great technological transformation, more resources, both
capital and talent, should be channeled to new industries and ventures.
Collaboration in R&D and Innovation
East Asia is emerging as one of two leading technology hubs of the global economy
but the productivity of huge R&D expenditures is in doubt. In recent years, Japan
spent around 3.5% of her GDP on R&D and Korea about 4.2% of her GDP. In fact, thetwo countries are the most R&D-intensive economies in the world (belonging to the
top five in terms of the percentage of R&D/GDP) and also the heaviest R&D
spenders (in terms of the absolute PPP amount of Gross Expenditures on R&D,
together with the US, China, and Germany). Yet the commercialization of R&D
expenditures and findings (research and patents) is very disappointing: the twocountries are very poor in new biz startups and other indicators of businessdevelopment. Thus there is the term of the “Japan paradox” or “Korea paradox,”
meaning “for some reason, heavy R&D expenditures in Japan and Korea are nottranslated into business success or economic growth.” One possible reason for low
productivity of Japan and Korea in R&D is the closed nature of the national17

innovation system. According to an OECD study, the two counties have the mostclosed innovation system both domestically and internationally, meaning the lowest
level of collaboration among corporations, universities and publicly supported
research institutions in the country, and also the lowest level of participation offoreign multinationals as well as collaboration with foreign institutions. This iscontrasted to the heavy involvement of MNEs in many European countries,
especially the UK, and also in some other Asian countries, Taiwan, China, and India.
Thus one way to stimulate the two economies is to get more return/value from R&D
expenditures by creating a more “open and collaborative” research architecture.
It is recommended that two countries start a new initiative called “Japan-Korea
Technology Platform 2025.” Platforms will be created in several key industries ortechnology areas, such as IoT, bio, clean energy, robotics, and even FinTech. All three
actors, namely corporations, universities, and government agencies should
participate in these platforms. Initially five to ten joint technology platforms should
be initiated.
Business Collaboration in Emerging Economies
Economic interdependence between two economies has gone through some changes
in recent years. Traditionally, Japan provided parts and industrial raw materials to
Korea, and Korea assembled those to re-export to third countries. In recent years,
especially since the 2011 Great East Japan Earthquake, some Japanese parts makers
shifted their production to Korean locations. At the same time, the increased
technology capability of Korean companies reduced their dependence on Japaneseparts. As a result, Japanese exports to Korea decreased but Japanese direct
investments in Korea increased in recent years. For example, Japan’s exports to Korea
decreased by 10.4% in 2014 compared to the previous year. Korea’s business presence
in Japanese markets is very minimal. Hyundai Motors has pulled out of the market,
and recently Samsung Electronics is finding its sales of mobile phones decreasing in
the Japanese market. There are some exceptions like Line Corporation, a subsidiaryof Korea’s leading internet company Naver. Naver struggled several years before it
successfully developed and launched a mobile messenger service, called Line, inJapan in 2011. Since then it has been the leading such service in Japan and has also18

successfully penetrated into other Southeast Asian markets, such as Taiwan and
Thailand. For bilateral business collaboration, internet-related services, games, andentertainment are more promising than traditional manufacturing industries. On theother hand, many Japanese companies have been relatively more successful in
Korean markets. Most notable is Toray, which has increased its sales in Korea eversince the first entry in 1972 and also diversified its business portfolio to high-techareas such as carbon fiber and super plastics. Toray also developed its Indonesianbusiness through the Korean subsidiary in the area of advanced material. And
Japanese automakers such as Toyota and Nissan are improving their market positionin the Korean market.
More promising is the potential of business collaboration in third-country markets,
especially in emerging markets. There are already some successful cases. Mitsubishi
Corporation and Korea Gas have collaborated to build an LNG plant in Indonesia in
2011, and Hyundai Heavy Industries and Mitsubishi Heavy Industries jointly built athermoelectric power plant in Saudi Arabia. These companies have complementary
capabilities and can collaborate in a win-win fashion in the competitive global
market for infrastructure and resource development in the emerging markets (EM).
Japanese companies, especially the automobile companies, have a strong market
presence in Southeast Asia, especially in Thailand and Indonesia. On the other hand,
Korean companies are very active in Vietnam. Vertical and horizontal businesscollaboration is possible in many areas. The two governments can facilitate businesscollaboration through ODA in such areas as human skill development and IT
infrastructure investments. Korea has become a member of the OECD Development
Assistance Committee and has become very active. Another way to facilitate businesscollaboration in EMs will be a joint development of industrial parks. For example,
India’s new government is pushing very hard to develop manufacturing industries,
with the slogan of “Make in India.” Building industrial parks would be an effective
way to overcome the deficiencies of physical and administrative infrastructure ofIndia. The Japanese Government is already very active in assisting India to develop
its industries. If the two sides can collaborate in developing industrial parks in India,
that will be a great opportunity to increase business collaboration between the two
economies. And this model can be applied to other EMs, such as Myanmar or other
South Asia markets and also in some African countries. It is recommended that the19two countries collaborate in establishing industrial parks in India and otheremerging markets and also pursue joint projects in building infrastructures in thosemarkets.
Reforms to Reignite Growth Engines in the Two Economies
Both governments are keenly aware of the necessity to reform and restructure theeconomy. The Abe government’s third arrow is just that, and Park’s “creative
economy” is another effort to reform. The Japanese Cabinet’s measures include
investments in information technology, upgrading the competitiveness of Japanesecompanies, and improving the effectiveness of resource allocation through theconvergence of technology and globalization of the economy. In particular, theMiyakawa-Takizawa report of 2012 emphasizes the critical role of private sector
innovation and new ventures in economic revitalization. Park’s reform program
includes the increasing role of SMEs and start-ups, convergence of manufacturing
and IT industries, and channeling human resources and capital to new industries. It
should be emphasized that reforming the labor and capital markets is the key inrevitalizing the two economies. In order to take advantage of the fundamental shiftof the global economy mentioned above, both economies need flexible factor
markets, labor, and capital to channel resources to new industries and ventures. But
the two economies are notoriously inflexible in both factor markets. The labor market
is very inflexible in the two economies, and also the business sector is dominated bylarge business groups, making it difficult for capital and talent to move to the new
growth business. There is clearly a need to integrate the business ecosystems of two
countries. The two countries definitely need efforts to stimulate new business startups, especially by young people.

Cooperation in Economic PartnershipFree Trade Agreements for Japan and Korea
One characteristic of the trade pattern in East Asia can be described as a “triangulartrade structure,” in which China procures parts and components from neighboring
economies and then assembles them and exports final products to the global market.

20

(Table 1 and 2). As shown in Table 1, both Japan and Korea are two of the largest
beneficiaries of these regional production networks developed since the 1990s, whichhave been backed up by trade and investment liberalization.
Table 1. China’s imports of parts and components from East Asia (million USD)
1990
2000
2010
2013

Japan
$1,627.0$14,045.9$56,671.2$49,264.0

Korea$131.3$4,916.7$53,342.1$71,556.0

Taiwann.a.
$1,386.0$28,130.5$31,672.6

ASEAN$220.0$6,606.1$52,918.8$63,765.3

Source: RIETI-Trade Industry Database (2015)
Table 2. China’s exports of consumption goods to major markets (million USD)
1990
2000
2010
2013

USA
$11,756.8$58,860.6$145,016.6$154,299.7

EU$8,650.7$30,819.4$138,977.5$138,908.0

Japan$5,148.1$31,592.4$58,392.5$64,761.2

Korea$129.9$2,539.1$9,570.0$11,949.9

Source: RIETI-Trade Industry Database (2015)
The share of value added originated in Japan and Korea and exported to the US
through China is especially high in such industries as “computers and electronicequipment” (Japan 18.0%: Korea 29.7%), “chemical products” (Japan 11.6%: Korea
31.0%), and “metals and metal products” (Japan 11.9%: Korea 17.1%), meaning theseindustries are relatively dependent on China as a production base. However, thelabor cost in China has gradually been rising, and this trend is expected to continue
over the next decade. This is partly due to a decrease in the productive age
population in China, as well as a continuous increase in the minimum wage by the
Chinese government, which aims at doubling her real income level by 2020.
This casts doubt on the long-term sustainability of the China-centered triangulartrade structure in East Asia, and calls for gradual restructuring of the international
division of labor in this region in order to maintain the competitiveness of Japaneseand Korean enterprises. One natural direction to cope with this potential risk in
China is for Japan and Korea to diversify their production sites by investing in other
Asian countries, especially in ASEAN countries and India. For example, the value ofimports of parts and components from Japan and Korea to Indonesia, Vietnam, and21

Cambodia has been actually increasing since the 2000s. Notably, Vietnam andIndonesia’s imports of parts and components from Korea increased about 66.5 and12.4 times, respectively, during the period 2000-2013. This implies that Japanese andKorean enterprises have already begun to develop their production networks inthese emerging ASEAN countries. Therefore, Japan and Korea have to pursue
cooperation in region-wide FTA negotiations such as the Regional Comprehensive
Economic Partnership (RCEP), in order to develop more efficient and reliable
production networks in these countries.
Finally, Japan’s population is expected to fall from 127 million to 97 million by 2050,
and population in Korea is also expected to begin falling in 2030. Hence, the twocountries should also cooperate with each other in RCEP negotiation, in further
securing market access for final consumption goods in ASEAN countries, and in
India and China. In particular, the size of Japan and Korea’s exports to India is stillinsignificant when compared with their exports to China. This implies there is muchroom for the exporters to explore the potentiality of the Indian market as adestination of final consumption goods.
It should be noted that any effort to seriously deepen the bilateral economic
relationship between Japan and Korea has long been inhibited by chronic andincreasing trade deficit problems of Korea against Japan. In fact, the trade deficit
issues have been one of the major factors to suspend Japan-Korea FTA negotiation. In
this regard, it should be noted that the trade structure has shown important changes
in the trend. Since 2010, the trade deficit of Korea against Japan began to diminish, inparticular, despite significant yen depreciation. Thus, both countries should be able
to take advantage of plurilateral FTA negotiations currently in progress. Apart fromcontroversial political and diplomatic realities, the sheer size of trade balances alone
may still be a major obstacle to deepening any bilateral endeavor addressing
commodity trade. Therefore, promotion of trade and investment between the twocountries should be more effectively handled under plurilateral settings such as a
China-Japan-Korea FTA, Regional Comprehensive Economic Partnership Agreement(RCEP), and Trans-Pacific Partnership Agreement (TPP).
While utilizing plurilateral negotiations, the two countries can still deepen the22bilateral economic relationship, especially through FTA negotiation focusing on theservice sector. Unlike trade accounts, trade statistics show relatively stable service
sector trade balances between the two economies over the past decades. Moreover,both governments are very keen to enhance competitiveness of the service sector topromote economic growth. In addition, Japan and Korea are actively participating in
the Trade in Services Agreement (TISA) which aims to significantly liberalize trade inservices among like-minded countries in the WTO. Korea is also preparing major
improvement of the Korea-China FTA in the next round of services negotiation with
China, which will be a very important template for a China-Japan-Korea FTA. In thisregard, the Korea-US FTA for Korea and the TPP negotiation for Japan will be able toprovide a useful foundation to establish a bilateral services arrangement.
Considering all these situations, it seems urgent for the two countries to engage inserious discussions for services market liberalization.
Roles in the Multilateral Trading System
On the other hand, although FTAs have been the principal tool for strengthening
trade and economic partnership especially for the last decade, we should bear inmind various limitations of FTAs. This suggests that Japan and Korea can strengthen
their partnership in the WTO negotiations. For example, in the rules negotiations of
the Doha Round, the two countries share common views in issues such as fisherysubsidies and strengthening disciplines on anti-dumping measures. So Japan and
Korea should play a major role in revitalizing the WTO, for example in terms of its
rule-making functions, and also its surveillance function towards FTAs.
Although WTO members were able to reach certain agreements at the Bali
Ministerial Conference in December 2013, there is no doubt that it is extremely
difficult to reach consensus among WTO’s 160 members. In such a circumstance, aplurilateral agreement approach (an approach where the entrance to which is on adiscretionary basis) is gaining importance as an effective means of negotiations
within the WTO. Examples are negotiations such as TISA, and the Environmental
Goods Agreement (EGA). A plurilateral approach has been quite successful inInformation Technology Agreement (ITA), where about 80 WTO members commit
zero tariffs on approximately 200 IT related goods. The significance of this ITA type23

plurilateral agreement is that although negotiated by only a limited number of WTO
members, the agreement’s benefits are shared by all WTO members on a MostFavored-Nation (MFN) basis. This type of plurilateral trade agreement can evolve
into global trade rules. However, compared to the ITA, where the results of which
are applicable to all WTO members, a closed plurilateral agreement, only applicable
to its participants, may result in further fragmentation of trade rules. At the moment,
TISA is likely to fall in the latter category. In the TISA negotiations, the United States
is pushing for a system which does not fit into the architecture of the GATS (WTO’s
services agreement). Both Japan and Korea are members of major plurilateralagreements such as ITA, TISA, and EGA. In order to maintain trade rules which areapplicable globally and therefore contribute to sustainable global trade, Japan and
Korea should stand in a position that when WTO members negotiate a plurilateral
trade agreement, that agreement should pursue being applied on a MFN basis. In
other words, the two countries should stand against proposals which do notcontribute to formation of global trade rules and those which may further disconnect
global trade.

24Section 3
Cooperation on Transnational Issues
Japan and Korea have assumed noticeably greater roles not only in Asia but also therest of the world as their economic and diplomatic activities have grown globalized.
There is a large scope for bilateral cooperation in numerous fields, including
cybercrime control, democracy, energy and the environment, freedom of press,
infectious diseases, natural and man-made disasters, pollution, population, andrelated humanitarian emergencies, in addition to the areas of security and economy.
Closer collaboration with these regional and global challenges should be considereda responsibility of the two countries. Furthermore, as the two countries celebrate
their 50th anniversary of normalization of diplomatic ties, they should explore newareas of bilateral cooperation with a forward-looking vision for Northeast Asia andbeyond. In this regard, this section on mutual cooperation of global issues deals withthree topical transnational issues (humanitarian issues and global peace operation,energy and environmental issues, and aging society issues) where Japan and Korea
can closely cooperate to contribute to global stability and prosperity and to build
regional goodwill, which in turn plays a catalytic role in improving their bilateralrelations.

Humanitarian Issues and Global Peace Operations
A humanitarian crisis arises when armed conflict, natural disasters, epidemics,
famine, and other emergencies influence those who are too vulnerable to cope withnegative outcomes such as population displacements, loss of life, and extensive
damage to economies and societies. It is not easy to identify and categorize
humanitarian crises and emergencies because they are becoming more frequent,complex, and severe and each crisis has its unique challenges. Still, timely andefficient humanitarian responses, regardless of the type of crisis, are critical in saving
lives and minimizing human suffering.
Since the end of the Cold War, more violent conflicts have occurred within asovereign state rather than among states. Many groups in multiethnic societies
around the world have strengthened their communal and ethnic identities and25

sought group mobilization for political action, which has often led to violent
confrontation. The intractable and intensified ethnic conflicts or civil wars haveresulted in genocide, sexual violence against women, and massive refugee flows, as
witnessed in many cases including ethnic cleansing in Bosnia, genocide in Rwanda,
mass rape in Darfur, Sudan, and refugee crises in Libya and Syria. At the beginningof 2014, 51.2 million were forcibly displaced by armed conflicts.
As for acts of God, over 22 million people were forcibly displaced by natural
disasters such as the 2003 summer heat wave in Europe, the 2004 Asian tsunami, the2010 Haiti earthquake, the 2011 Great East Japan Earthquake, and the 2015 Nepal
earthquake. Over the past decades, thousands of major natural disasters haveaffected countries across the world, both rich and poor, they are happening more
frequently and are more deadly and their impacts are more catastrophic anddevastating in less developed countries.
Consequently, the timely prevention and effective response to humanitarian
emergencies in complex violent conflicts and in the midst of deadly natural disasters
are increasingly the crucial agenda in the United Nations and other international
security and development discourses.
Therefore, closer coordination and cooperation between Japan and Korea is highly
recommended because it would be instrumental in preventing and responding tohumanitarian crises caused by natural and human-induced disasters. The following
are among what the two countries could and should do.
Joint Operations for Humanitarian Assistance and Disaster Relief
For effective joint relief operations for victims of calamitous natural disasters, Japanand Korea need to closely coordinate their policy and action plans for all forms ofhumanitarian activities. Utilizing their military assets to deliver humanitarianassistance and relief should focus on reducing the suffering of vulnerable people
stricken by natural disasters. For instance, the two countries’ closer cooperation with
ASEAN for Humanitarian Assistance and Disaster Relief (HA/DR) activities anddivision of roles in quick response in the Philippines after Typhoon Haiyan in 201326

are worth noting.
The two countries should also recognize that preventive measures are essential tominimize impacts of natural catastrophes and work together to assist less developed
countries to develop people-centered disaster preparedness programs as much as
possible to alleviate troubles. In addition, with their technological and industrial
capabilities, their relief operations should be closely coordinated with development
projects in order to strengthen local capacities not only for well-timed and effective
disaster responses but also for sustainable reconstruction after disasters.
Japan and Korea have been significant financial contributors to the UN humanitarianfunding programs for victims of natural disasters and armed conflict. It should be
noted that global humanitarian funding requirements have more than tripled fromyear 2006 to 2014. For instance, the UN Central Emergency Response Fund (CERF)
and UN Peacebuilding Fund (PBF) have played a catalytic role in supporting
humanitarian responses for victims of natural disasters and armed conflict. Korea’s
financial contribution to CERF between 2006-2015 is ranked as the world’s 16th
(US$ 33.5 million) and Japan as the 17th (US$ 22.95 million), while Japan’scontribution to PBF during the same period is ranked as the 4th (US$ 42.5 million)
and Korea as the 15th (US$ 5.48 million). Such humanitarian donorship is valuable
and sensible since relief operations and efforts of preventing a relapse into violent
conflict need to be centralized around the UN for stability and coordination.
It should be also noted that private funding such as spontaneous individual donation
is becoming an effective solution to aid challenges driven from a discrepancy
between the increasing humanitarian crises and the fixed or even lessening donor
states’ aid budgets. However, private money tends to focus on “publicized” crises.
Given their global economic and diplomatic standing, Japan and Korea should thus
make joint efforts to facilitate to get funding to diverse crises that are not attentiongrabbing headlines.
Joint Efforts to Promote Human Security
Human security is an emerging norm, paradigm, and/or guiding principle for27

acknowledging global vulnerabilities and challenges that threaten the security of theindividual rather than state. Since the release of the 1994 UN Human Development
Report, the term and idea of human security that includes “freedom from want” and“freedom from fear” for all persons has become one of the important security
discourse in the international community. Japan has been championing to strengthen
human security particularly in the context of “freedom from want,” while Korea
began to seek its role in identifying the issues of human security/insecurity andactively participating in global efforts for the promotion of human security.
Since the notion of freedom from want and fear are inseparably connected inincreasingly complex humanitarian crises, it can be desirable for the two countries toendeavor to ensure effective implementation of their peacekeeping operations
through coordination with other activities, including ODA projects. Moreover, inorder to implement seamless assistance in security-related areas, including throughfurther strategic utilization of ODA and capacity building assistance, as well as
coordination with NGOs, Japan and Korea can jointly develop a system that enables
assistance to potential recipient organizations. In addition, Japan and Korea can work
together to establish educational programs in government, NGOs, and educational
institutions to train human resources jointly in areas such as peacebuilding andhumanitarian aid. Both countries should take into account the joint management of a
PKO training center in Asia.
Japan and Korea also should take initiatives in the formulation of new international
development objectives, namely the Sustainable Development Goals (SDGs). In thisvein, the two countries should engage in further efforts in mainstreaming the conceptof human security in the international community, building on our initiatives on thisagenda to date. Moreover, the two governments should share the lessons learned
and experiences from the many natural disasters that it has experienced, including
the Great Hanshin-Awaji Earthquake, and the Great East Japan Earthquake andtsunami. Given the expanding scale, impact, and frequency of disasters globally,
Japan and Korea will take the lead in international cooperation on disastermanagement and ensure that communities around the world have a high degree ofresilience to disasters.

28

In addition, Japan and Korea should play a facilitating role in developing universally
norms and concepts of human security and humanitarian intervention that canreconcile the principle of non-interventionism with the notion of “Responsibility toProtect” (protection of civilians), or “R2P.” Current armed conflicts, terrorism, andother violence have been strongly related to the non-Western frustration, anger, andresistance against the Western dominance. How to bridge these conflicting forcesthat have caused serious violent clashes and severe humanitarian crises is a big, if not
unfeasible, task, but Japan and Korea should cooperate to seek ways of compromise
and resolution. Furthermore, it is desirable for the two countries to identify new
agendas where the two countries, preferably with China, work together to make a“Northeast Asian voice,” as well as to contribute to global peace and humanitarian
activities.
The processes of these joint endeavors related to humanitarian crisis and global
peace operations are expected to be a stepping stone for the two countries to increase
open-minded dialogues, overcome historical animosity, define shared strategicinterest and common goods, and move toward a future-oriented cooperation.

Potential Bilateral Cooperation in Energy and Climate Change
Response Strategies
Japan and Korea are both resource-poor countries and continue to rely heavily on
imported fossil energy resources. Increasing uncertainty in energy and climatechange issues has underscored the need for practical cooperation between Japan and
Korea. Both countries pursue national goals of low-carbon green growth,development of environment-friendly energy, and greenhouse gas reduction
although they have different industrial structure and policies. Both are expected tohave potential interest in exploring balanced pathways of a future energyenvironment-economy nexus.
As for an economic point of view, measures in which the two countries can cooperate
are as follows: i) cooperation for the promotion of energy efficiency and a low-carbon
society; ii) development of renewable energy and technology R&D cooperation; andiii) enlargement of leadership response to climate change issues in the region (i.e.,

29

capacity building and technology transfer).
In particular, the two countries can share know-how of domestic policies andinstitutions to reduce greenhouse gas emissions, promote energy efficiency andrenewable energy-related cooperation projects, and conduct joint academic researchon the social impacts and adaptation measures of climate change. It will be mutually
beneficial for both countries to promote cooperation based on the experiences andknow-how accumulated in Japan and Korea.
Coping with Climate Change
Cooperation on effective methods for reduction and adaptation based on bothcountries’ respective experiences can be both possible and helpful. Direction andagenda for cooperation between Japan and Korea in responding to climate change
will be cooperative measures on the abatement of greenhouse gas emissions,cooperative technology development on renewable energy and increasing energy
efficiency, and joint scientific investigation on the impact of climate change. Morespecifically, it will be a good opportunity to create a new Asian carbon market bymeans of linking the Korean carbon emission trading scheme (KETS) and Japan’s
voluntary emissions trading scheme (JVETS).
In addition, although the policies and strategies of the two countries on climatechange issues are different, Japan and Korea have to play an important role toresponse to climate change as OECD members. Both countries can support
developing countries to abate greenhouse gases and to adapt to climate change using
technology transfer, financial support, and capacity building through education.
Cooperation between Japan and Korea on promotional activities in developing
countries is also possible, especially in production and distribution of environmental
education and sending out capable educators.
Development of Renewable Energy and Cooperation for Technology R&D
To reach each country’s long-term GHG reduction target, Japan and Korea may
undertake a major research, development, demonstration, and diffusion effort to30

develop low-carbon technologies, some of which are not yet technically mature or
fully commercialized or affordable. Those are advanced energy storage, integrated
portfolio design for balancing power systems with high penetrations of variable
renewable energy, zero emissions vehicles, advanced nuclear power technology thatsustains public confidence and support, and so on.
Specifically, possible cooperation areas are solar power energy research, constructionof solar and wind power plants, biomass energy, expansion of renewable energy, andenergy transition technology R&D. In particular, offshore wind power plant
construction can achieve substantial results through cooperation. It will be also agood opportunity to consider the expansion of the renewable energy supply and tosecure power supply by means of building a submarine electricity power cableconnecting Japanese and Korean electricity grids, which form a part of a vision for a
super-grid to integrate power generation and distribution in Northeast Asia.
Cooperation on Nuclear Safety
Japan and Korea are also leaders in nuclear power. Since Japan has already had toaddress cleanup from the 2011 Fukushima nuclear accident, it could also offer to help
Korea, and even China, to think through nuclear industry safety and response issues.
Especially, the know-how to overcome a nuclear power plant disaster in Japan can beshared with Korea and can help Korea to prevent future accidents. Japan and Korea
can prepare a common measure for nuclear safety with China, because any nuclear
accident would cause enormous damage to East-Asian countries.
Japan, Korea, and China jointly adopted the Nuclear Power Safety Cooperation
Agreement to boost cooperation on nuclear power safety at a trilateral summit heldin 2011. There now remains a need for the three countries to proceed beyond taking asymbolic act of a joint agreement, and to institutionalize their cooperative efforts at
the government level to achieve greater nuclear safety. It is desirable for Japan and
Korea to be directly involved in developing networks for the exchange of
information on nuclear power development and nuclear accident response toeffectively manage any potential nuclear power plant accidents.

31

Climate Change Adaptation and Disaster Risk Reduction
Effective adaptation to climate change needs close cooperation between Japan and
Korea. Both countries can implement innovative solutions to adapt to climate change.
For this, Japan and Korea may make climate change adaptation platforms that
include information on policy action, scientific research output, guidance, decision
support tools, experiences from practices, and implemented adaptation measures.
Both countries can also make climate services and disaster risk reduction platforms.
Since adaptation measures cover long-term and gradual impacts of climate change aswell as disasters linked to extreme weather events intensified by climate change, acloser collaboration between climate adaptation and disaster risk reduction platforms
can boost the use of available knowledge and contribute to reduce vulnerability inJapan and Korea. Especially, those platforms will act as the groundwork fordeveloping measures to support developing countries that are vulnerable to climatechange.
In conclusion, cooperation between Japan and Korea will be needed from an
economic approach rather than a political point of view. The cooperation should beaccompanied by an effective institutional design. Cooperation also has a reinforcing
relation with other regional economic cooperation initiatives such as APEC,ASEAN+3 as well as Tripartite Environment Ministers Meeting (TEMM), Northwest
Pacific Action Plan (NOWPAP), and North-East Asian Subregional Programme forEnvironmental Cooperation (NEASPEC). A decision made by Japan and Korea in the
post-Kyoto negotiation will have a long-term impact on future climate change issues.
The two countries should play a vital role in the international negotiation progressand jointly undertake a major research, development, demonstration, and diffusion
effort to develop low-carbon technologies that are not yet technically mature orcompetitive and are indispensable for the success of greenhouse gas reductions.

Aging Society
The Most Fundamental Global Issue
As the UN and the Organization for Economic Cooperation and Development

32

(OECD) have reported, two population problems, such as restraining population
growth in developing countries and rapidly aging societies in developed countries,
are some of the most fundamental global issues today. Japan and Korea are already
faced with this rapidly aged society problem as two top runners. Japan is already the
top runner with the rate of population aged 65 and above. Korea is projected to be
the top runner in population aging rapidity. Most developed countries are projected
to follow Japan and Korea in the near future. If developing countries, not only
developed countries, also address the consequences of population growth according
to the UN program, all countries will face this aging society issue in the near future.
Japan is already a super-aged society and has the oldest population as a nation in theworld. The rate of population aging, defined as the proportion of 65 and older people
in the total population, reached 25.1% in 2013. The rate of population aging in 2050 isprojected to rise by 36.4% according to the UN.
Korea’s rate of population aging is 12.7% in 2014. But Korea will become an aged
society, defined as the aged ratio reaching 14%, in 2017 and a super-aged society in
2026 estimated by STATISTICS Korea. The rate of Korea’s population aging is
projected to rise to 38.2% in 2050 according to the UN. This rapid aging of the
population, from 12.7% to 20.8% in 12 years, is the fastest ever ratio in humanhistory. This is due to the fact that Korea’s baby boomers who were born between
1955 and 1963 will become 65 years and older by 2027. And Korean society is notready and cannot be ready for the unprecedented pace of population aging.
Reasons for Rapid Aging
Two factors explain the rapid aging of both Japan and Korea: i) low fertility rate, andii) lengthening life expectancy.
First, low fertility rate has been problematic both in Japan and Korea. Japan’s total
fertility rate (TFR) declined to 1.26 in 2006 and is slightly recovered to 1.43 in 2013.
But it is still far from the TFR 2.07 replacement level. The main physical factors of the
TFR decline in Japan are fewer marriages, late marriage, and late or no pregnancy inmarried couples. There are many mental and environmental factors behind them,33

such as economic instability, compatibility with employment and/or self-realization,and mental anxiety.
Korea’s fertility rate declined to the level of 1.08 in 2005 and has remained around the1.25 level ever since despite efforts to increase it. The main policy instruments usedin Korea to increase the fertility rate included financial assistance to child care up to
the age of five and work-life balance at jobs including one-year paid child-care leave.
But the policy has not resulted in any tangible effect on the fertility rate yet.
Second, longer life expectancy is highly related to the rapidly aging societies. Japan’slife expectancy at birth is 84 years in 2015 and it is the longest in the world. Life
expectancy in Korea stands at 82 years now, one of the highest in the world. In
Korea, for example, life expectancy has increased by one year every two years in thepast 20 years. But the cost of long life in terms of pension and health care has put
increasing financial pressure on the social welfare budgets in the two countries.
In principle, longevity is not a bad thing. However, extending the physiologicalsurvival period is quite different from enjoying life as a human being. The quality oflife is most important. The global suicide rate is the highest among elderly people. A
lonely death of elderly people has become a new social problem. It is important for
the elderly to live with a mental sense of fulfillment knowing they are required insociety and they are useful to society.
Economic Impact of Aging
Aging affects the economy in many ways, but we can emphasize the two effects: i)shortage of labor force, and ii) adverse effect on consumption.
First, labor shortage is a serious economic consequence of aging both for Japan and
Korea. Japan began to experience the decrease of the working age population starting
around 1995. Korea’s working age population will start to decrease from 2017. This
has a strong downward pressure on economic growth potential. It is estimated thatthe correlation between the increased rate of working age population and real
economic growth rate is .7072. Both countries have three immediate options: more34

labor participation by women, delaying the retirement age, and inviting foreign-bornworkers.
Empirical correlation of the female labor force participation rate and TFR is widely
known in international comparisons. For both countries, the labor force participation
promotion by women is likely to be a key factor for improving the labor force andincreasing TFR.
In Japan, the retirement age was already extended to 65 years of age steadily since2013 with the system gradually decreasing salary from 55 years of age. In Korea, theage of 60 will become the minimum mandatory retirement age in 2016. It is rather
difficult to maintain the seniority-based wage system in these situations. While being
careful not to adversely affect family planning, there is a need to continue toenhancing the liquidity of the labor force.
European countries have a substantial number of foreigners, including both legal andillegal immigrants, amounting to about 15% to 20% of their populations. And it iswell known that the US continues to have labor inflow from the southern border. It isestimated that the US has over 20 million Mexico-born people within the border.
Japan and Korea are unique that both of them have very small number of foreignborn residents, 1.5% in Japan and about 3.0% in Korea. The discussion to have more
immigrants as a labor force has barely started in Korea. Both Japan and Korea should
consider other alternatives first, such as inviting more temporary foreign workers
and to make it easier for foreign students to remain and work in the country after
they graduate.
Second, suppressed consumption is a negative economic outcome of the aging
society. The uncertainty of life makes it very difficult for the retired people to planahead financially. Many retired people try to maintain the size of their wealth andminimize consumption. In Korea, many salaried people and employees retire fromtheir stable jobs well before the age of 55 or even 50. This means that the negative
effect of aging on consumption and thus the economic growth shows up among alarger segment of the population. This seems to be one of the main reasons why theaged society tends to move close to long-term stagnation and even deflation.

35

In Japan, there are two keys to shift the wealth from the elderly to the younger
generations to activate national consumption. One is reforming a part of theinheritance tax law in 2015. It is expected to shift wealth during their lifetimes. The
younger need and use more money than the elderly. And the other is the IIPS
recommendation to work until 75 years old, or at least until 70. The elderly today areyoung enough to work. They could be taxpayers but now they are pensioners.
Working leads the elderly to active and healthy lives that conduct more positive
consumption.
Tasks for Coping with the Rapidly Aging Society: Creating a New Positive Concept
for the Aging Society
Aging society tends to be discussed as a negative issue. But negative thinking brings
no solution and no happiness. Without a doubt, an aging society comes to all
countries at some point in time. As the two top runners, the most aged society andthe fastest aging society, respectively, Japan and Korea should create a new positive
concept for an aging society using oriental intelligence and share those messages
with the whole world. An aging society means both a long life expectancy and asociety full of wisdom. Positive concepts will be the origin and source of making
policy and concrete action plans.
Tasks for Coping with the Rapidly Aging Society: Joint Research Project on Crossborder Labor Mobility
Accepting a large number of young foreign-born workers is perhaps the mosteffective and easiest way to deal with the aging problem in the short term. But its
impact on social cohesion and fabric is too significant and it can’t be the solution in
the long term. Referring to foreign cases, Japan and Korea should endeavor to
generate many creative options before accepting more permanent immigration.

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Member List
Japanese Members
President
SATO Ken

President, IIPS

Coordinator
TOYODA Yutaka

Senior Research Fellow, IIPS

Researchers
Section 1
HOSOYA Yuichi

Senior Fellow, IIPS / Professor, Keio University

YAMAGUCHI Noboru

Professor, International University of Japan/ former Lieutenant General, JGSDF

Section 2
KUNO Arata

Associate Professor, Kyorin University

TAKAYASU Yuichi

Professor, Daito Bunka University

YASUDA Akira

Research Fellow, IIPS

Section 3
IDE Tomoaki

Senior Research Fellow, IIPSNISHINO Junya

Associate Professor, Keio University

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Korean Members
President
JUNG Ku-Hyun

President, SFIA

Coordinator
PARK Cheol Hee

Director, Institute for Japanese Studies,
Seoul National University

Researchers
Section 1
KIM Sung-han

Professor, Korea University

PARK Cheol Hee

Director, Institute for Japanese Studies,
Seoul National University

Section 2
AHN Dukgeun

Professor, Seoul National University

JUNG Ku-Hyun

President, SFIA / Visiting Professor, KAISTLEE Woo Kwang

Advisor, Korea-Japan Cooperation Foundation
for Industry and Technology

Section 3
CHO Yongsung

Professor, Korea University

LEE Hoesung
LEE Shin-wha

Vice-Chair, Intergovernmental Panel on Climate Change
Professor, Korea

38