☆☆◎●EDITORIALSStates drew wrong lessons from Japan’s policy responses to the collapse of the asset-inflation economic bubble and its painful
experience in dealing with the deflationary
downturn and applied these lessons to its
own economic policy.
In the United States, the dotcom bubble inthe stock market peaked in 2000 and thenburst. The U.S. administration responded tothis with a raft of fiscal and monetary measures to keep the economy on a growth track,
lowering interest rates to extremely low levels.
Convinced that a persistent decline in consumer prices prolonged Japan’s economic
malaise, the Fed kept interest rates unusually low for an extended period of time in abid to avoid deflation at home. The Fed’s policy helped to inflate the housing bubble.
Rising house prices fueled consumer spending, a major driver of economic growth in
the country. The U.S. economy appeared to
be back on a path of continued vigorous expansion. But that was an illusion.
What is happening now shows the mistakeof trying to correct a “distortion” in the economy with another “distortion.” The UnitedStates at that time relied heavily on the economic stewardship of Alan Greenspan, thenthe charismatic chairman of the Federal Reserve Board, in another sign of dangerous
economic frenzy.
For Japan, the U.S. downturn is by nomeans a fire on the other side of the ocean.
The U.S. bubble translated into strong growthin exports to the United States from all over
the world, providing a big lift to global economic growth in recent years. Japan, as oneof the beneficiaries, should be aware thatrepercussions from the economic troubles in
the United States would spread worldwide.
How is it possible to fix economic distortions to engineer a soft-landing of the world
economy without triggering a financial crisis? That is the tough challenge confronting
monetary authorities all over the world.
After the U.S. mistake in the Iraq war andthe financial upheavals that started in the
United States, the world should prepare itself for more shock waves from the only superpower.
—The Asahi Shimbun, Jan. 24

Global warming
Rich countries have a duty to help poorer nations.
here is a certainty about global
warming: Sea levels will rise andthere will be more frequent droughts
and floods. Measures must be taken to minimize damage to people,
the economy and nature. While thismay be possible for industrializedcountries, poor developing countries surely
do not have the means to implement suchdrastic steps.
This is the new reality of climate change.
In a report published by the United Nations
Development Program (UNDP), Nobel Peace
Prize laureate Desmond Tutu of South Africa
referred to poor countries’ inability to copewith global warming and said, “We are drifting into a world of ‘adaptation apartheid.’”“Adaptation” means having a strategy forsurvival when global warming causes climatechange. While it is important to make an effort to reduce emissions of greenhouse gases, we must also tackle the problem ofadaptation. According to U.N. estimates, global warming could deprive 2.6 billion people
who live on less than $2 a day of the chanceto escape from poverty. Measures to help developing countries adapt to climate changemust be implemented without delay.
The damage that developing countries may
face is beyond imagination. Droughts would
deliver a major blow to agriculture. According to one estimate, agricultural productivity in sub-Saharan Africa would drop by 26
percent in 2060. With changes in rainfall patterns, in 2080, an additional 1.8 billion people
are expected to face water stress.
It is mostly industrialized nations that havebeen emitting greenhouse gases. Even thoughmany developing nations are not responsible for causing global warming, they are theones that will suffer the most. Industrializedcountries, including Japan, have committed
large amounts of development assistance inan attempt at solving the North-South problem but if global warming advances, theachievements will come to naught.
Necessary measures for developing countries to adapt to climate change are varied,Tdepending on location. Dikes are neededalong shorelines and rivers to prevent storm
surges and floods. In areas prone to droughts,
irrigation systems must be built. Efforts arealso needed to spread new agricultural methods to secure food. Measures to prevent infectious diseases and extinction of wild
animals and plants are also indispensable.
The 13th Conference of the Parties to theUnited Nations Framework Convention on
Climate Change that took place in Bali, Indonesia, in December agreed on a method
to manage an “adaptation fund” to help suchinitiatives. Industrialized countries that invest in projects to reduce greenhouse gas
emissions of developing countries receive
emissions credits in exchange for their investments. Under the agreement, they will
use this system to donate the equivalent of 2
percent of their credits to the fund.
According to estimates, in 2030, $100 million to $5 billion will be added annually tothe fund.
However, the UNDP estimates that in order to alleviate damage in developing countries, a minimum of $86 billion a year will
be needed by 2015. The fund alone is far too
inadequate to cover such expenses.
Drastic measures are needed. Funds mustbe found to finance adaptation projects frominvestment funds that are circulating aroundthe world with economic globalization.
In his recent policy speech to the Diet,
Prime Minister Yasuo Fukuda stressed theneed to create an international “funding
mechanism” for adaptation. As host of theGroup of Eight summit to be held in Lake
Toyako, Hokkaido, in July, he should demonstrate leadership and promptly come up withconcrete measures to deal with this problem.
First, Japan needs to re-examine its aid
strategy. In addition to boosting official development assistance, which has been declining, the government should set up a
special account for adaptation assistance witha bold target amount. Japan must show its
determination with action.
—The Asahi Shimbun, Jan. 24

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23

New U.S. president to be left with mess in Iraq

Japan should brace itself for shock waves.

D

Friday, January 25, 2008

POINT OF VIEW/ Robert Dujarric

U.S. market downturn
ark clouds are hovering over the U.S.
economy, which has been a leading
engine of global economic growthfor years. On Tuesday, the U.S. Federal Reserve Board slashed a key interest rate by three-quarters of apercentage point in an emergency
meeting held in response to a global stock
market sell-off.
The Fed’s action, however, failed to contain the stock market disturbance. The $145billion (about 16-trillion-yen) economic
stimulus package announced last week by
U.S. President George W. Bush mainly features tax cut for individuals and businesses.
The package has been dismissed as insufficient by market players, who are already clamoring for additional measures.
The tumult in the U.S. economy that started with foreclosures on subprime mortgages
last summer triggered the collapse of the housing bubble and left major banking institutions
seriously undercapitalized.
Leading U.S. banks have sought cash infusions from the government-operated investment funds of some oil-producing countries
and other nations. Until recently, such funds
were eyed suspiciously in the Western financial community because of the “opaqueness” of their operations.
But this is apparently no time for the troubled financial institutions to be choosy about
their rescuers.
If the decline of house prices in the UnitedStates stops now, the economic downturn will
be short. If the housing market suffers a further steep slide, however, the current turmoil
could develop into a full-fledged financial crisis, causing a serious impact on the world
economy.
There is a strong possibility of that happening. The centerpiece of Bush’s tax relief
plan is a one-time tax rebate for individuals.
Its effects will be limited.
Averting a full-scale crisis may require
some drastic measures by the U.S. government, like injecting taxpayer money into thebanking system, in addition to further rate
cuts. That would be a replay of Japan’s bitter
struggle with economic and banking woes in
the 1990s.
In retrospect, it seems that the United

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Special to The Asahi Shimbun

Iraq has left the front page of the
U.S. election campaign. The fear ofrecession partly accounts for this,but more broadly Americans believethat conditions in Iraq are improving. It is, however, important forJapanese to be aware that America’s position in the region that wasonce Mesopotamia continues toworsen, with important implications
for Japanese interests.
On the surface, there are improvements in Iraq. American fatalities are down and suicidebombings are less common. Sunni
Arabs are fighting al-Qaida with
U.S. help. The Shiite government
may be gaining ground against theMahdi Army of Muqtada al-Sadr.
Unfortunately, even if thesetrends continue (which is far forcertain), they do not spell victory
for the United States. The new Iraq
that is emerging will be as hostileand more dangerous than the dictatorship of Saddam Hussein. Returning exiles from Iran are the coreof the current administration in
Baghdad. Not all of them are proIranian, but it is inevitable thatmany harbor sympathy toward
Tehran while others are in the payof Iranian intelligence.
Their foreign policy objectives,
let alone their political and religious
values, are irreconcilable with
American interests. In fact, if a few
years ago we had been told that the

U.S. president would praise a government backed by the Supreme
Council for the Islamic Revolution
in Iraq, journalists would havelaughed in disbelief.
On the Sunni side, American allies against al-Qaida are guerrillas
who led the Baath/Sunni insurgency. They know that “jihadist”
victory would deprive the Sunni
elites of their power and probablyof their lives as well. But, these Sunni Arabs, who were the beneficiaries of Baathist rule, are neither
supportive of American interests
nor of U.S. ideals.
Moreover, the possible pacification of the Shiite areas by Iraqi government forces and of the Sunnizones by the foes of Osama bin
Laden is not a prelude peace. There
are rivers of blood running between
the Shiite and the Baathists.
The Shiite activists remember
their suffering at the hands of Saddam’s death squads. The Sunni
blame the new Shiite rulers for depriving them of their status andopening the door to Persian hegemony. Until 2003, many Iraqi Arabs
harbored few sectarian prejudices,at least by the standards of Middle
Eastern societies. But the massacresand ethnic (or rather denominational) cleansing of recent years
have inflamed religious hatred.
Therefore, the success of themainstream Shiite and Sunni may
be the semi finals, to be followedby the grand finale, a struggle tothe death between the Shiitearmy and Sunnifighters. The
Sunni will obtainweapons and
money
from
Saudi Arabia andother petromonarchies andthe Shiite may
call on Iran forRobert Dujarricassistance.
Osama
bin
Laden’s men, criminal gangs, andother minor players may (re)enter
the playing field. In the improbable
event that the two main groups settle their differences, after years offighting, hatred of America will beglue that will bind them together.
Finally, Kurds set up a de facto
state thanks to the breakdown of
Iraq. They will not accept the return to Arab domination, nor will
Iraqi Arabs acknowledge the lossof a territory that has been theirs
since Iraq’s creation. Anybody who
thinks that a compromise will beeasy should study how India andArab nations reacted to the birth ofPakistan and Israel respectively. Besides the start of a Kurdish-Arabwar, there is a strong probability
that Turkey will join the fight.
Therefore, regardless of the place
Iraq occupies in the competition for
the White House, it will be the mostpressing foreign challenge the new
American president will face. Only

unforeseen catastrophes, such as
hostilities with China or Iran, or an
implosion of Pakistan merged withboth the Afghan conflict and another Indo-Pakistani war, could
overtake Iraq as the number one
problem.
This situation has consequencesfor Japan. First, even if the new
American president follows the bestpolicy possible, namely a quick
withdrawal of all U.S. forces from
Iraq, conditions in the country andthe entire region will remain bad.
Japanese policymakers and businesses should, therefore, be readyfor other oil crises. The silver liningof this development is that it will
provide opportunities for Japanesecompanies with expertise in energy conservation and alternative energy.
It will also make it easier to convince the Japanese public of thewisdom of the country’s nuclear
program. Second, Japanese officials
should not expect Americans to pay
much attention to Japanese affairs.
The new American president willbe the “janitor-in-chief” with thethankless task of cleaning up themess left by the previous administration in Iraq and Afghanistan. Heor she will confront more pressing
issues than the Japan-U.S. relationship.
The author is director of the Institute of Contemporary Japanese Studies at Temple University Japan.

POINT OF VIEW/ Thitinan PongsudhirakWith PPP poll win, Thailand tug-of-war goes on
The voters’ verdict in the Dec. 23,
2007, elections will set Thailand’s
course of events for 2008. Ousted
Prime Minister Thaksin Shinawatra’s
People Power Party (PPP) triumphed
at the polls, bringing Thailand back towhere it was two years ago. The full
events comprised three main phases.
The first phase began with sporadic,
limited anti-Thaksin protests in
Bangkok in September 2005 and intensified throughout 2006 to the climactic military coup Sept. 19, 2006.
This brought Thailand to the brink
and was marked by street demonstrations, the Lower House’s dissolution,a nullified snap election and ultimately Thaksin’s overthrow and self-imposed exile.
The second phase belonged toThaksin’s opponents, but they made amess of it. They managed to see to itthat his Thai Rak Thai party was dissolved and 111 of its leading members
banned from politics, but they wereunable to put Thaksin away for goodpolitically on the corruption and other charges that led to the putsch.
By rejecting everything Thaksin
stood for, the coup-makers failed towin over his downtrodden grass-roots
supporters and poor urban dwellers.
Having abolished the popular 1997
Constitution, they came up with a newcharter, but its promulgation has only handed power back to Thaksin’s
PPP proxy and his nominees.

The third phase will belong toThaksin. At issue is how he intends toplay his winning hand, and how his
opponents will forestall his efforts andcling to the Thailand that they built
and presided over for several decades.
Unless the two sides are willing toconverge, Thailand faces prolonged
and protracted instability and volatility in the 21st century.
To be sure, the generals who overthrew Thaksin and the powers whobacked them are snookered. On one
hand, international opinion and domestic expectations require democratic
rule. It is an entrenching norm of the
new era. They can seize power byforce, but the men in uniform are inevitably forced to come up with a Constitution and elections—which Thaksin
and his cohorts will win indefinitely,
owing to their proven agenda that captured the popular imagination and addressed long-neglected needs andgrievances of the electorate.
On the other hand, the generals are
ill-equipped to manage Thailand in theera of globalization, with rising expectations at home and growing pressures from abroad. Indeed, the generals
have proved unfit in their handling of
post-coup Thailand. Policy directions
have been murky, leadership incompetent, overall administration inept.
The generals made themselves obsoleteby botching their latest putsch.
Thailand has changed dramaticallyover the last generation, while the Thai
military has not. This means anothercoup is less appealing even to the generals, let alone the Thai public and theinternational community.
The poll results will force the handsof Thaksin’s opponents. Thaksin has
been vindicated by the PPP’s crushing
victory. He has sent his wife, Khunying Potjaman, back to Bangkok to negotiate a deal whereby the PPP forms
the core of the incoming coalition government, with Thaksin’s triumphantreturn to be arranged shortly thereafter. But Thaksin’s past record of vindictiveness does not engender trust
among his opponents. They fear retribution and the resumption ofThaksin’s pandering rule and its attendant abuses of power and graft. This
temporary stalemate between the winners and the Establishment forces thathave lost partly explains the slow
progress on coalition formation.
The best near-term outcome would
be some measure of modesty and magnanimity and concrete concessions
from Thaksin. He would have to own
up to the charges of corruption andabuses of power leveled against him.
Short of dramatic court hearings andoutright incarceration, some kind ofhefty fines, a self-imposed ban frompolitics and restrictions on his physical movements may be required in exchange for his homecoming.
His opponents would have to yield

to concessions and accept Thaksin’s
winning hand at the polls. It would allow reconciliation for Thailand andpolitical settlement for the coalition
administration.
The worst outcome would be mutual mistrust and conflicting petty egos
on both sides. It would reset the crisis
that manifested from September 2005
with recurrent Bangkok-based demonstrations propelled by the urban middle class, parliamentary opposition andthe military, the same forces that voted against the PPP last month and ousted Thaksin more than a year earlier.
Despite the PPP victory, Thaksin will
be stymied by his opponents’ resistance. His coalition government will beovershadowed by the judicial and constitutional overhang. Pending caseswith the Election Commission and theConstitution Court could culminate
with the PPP’s dissolution this year.
As he is living abroad, Thaksin’s maneuvers will be limited. The crisis is
still ongoing. While the ball has been
thrown back at his opponents, the initiative still remains with Thaksin. He
would be characteristicallyshrewd—but not smart—if he overplays his winning hand.
The Bangkok Post

The author is director of the Instituteof Security and International Studies,
Faculty of Political Science, at Chulalongkorn University in Bangkok.

Sino-British relations remain stronger than ever
Britons are getting a good dose ofof Chinese culture at the moment.
An exhibition of the terra cotta warriors from Xi’an is currently showing at the British Museum in London.
And next month, CHINA NOW,
the largest festival of Chinese culture in Britain, will be launched, running until the Beijing Olympics inAugust.
These events are supposed to give
Britons a wholistic picture of China—its past and the very best of its
vibrant and dynamic present.
On Jan. 14, Prime Minister Gordon
Brown held a tea party with about
20 Chinese students, sports people

and representatives from Chinesecompanies at 10 Downing Street office a warm-up for his trip to China
which starts today.
He set the tone for his visit by saying China-British relations are “better than ever.”Since the handover of Hong Kongin 1997, the relationship between China and Britain has been free ofthorny problems.
The common challenge the twocountries now face is to maintaintheir sustainable development.
The summit meeting of the twonations’ leaders is instrumental in
keeping bilateral relations on theright track.
The two countries agree on many
international issues because theirleaders have frequent deliberations.
China is at a critical stage of its
industrialization. Britain, the first
country to become industrialized,
can be a very good reference for China. The development of China andBritain’s economies can benefit eachother. Manufacturing dominates China’s economy and exports, andBritain is famous for its service industry.
China’s priorities in the years
ahead are service, education, finance,
research and development, and en-

vironmental protection. Britain’s experience in all these sectors leaves
more space for cooperation between
them.
As an important financial centerof the world, London boasts uniqueadvantages in capital management
and financial regulations. Opening
its arms to Chinese investors, Britain
has turned out to be an important
destination for the country’s “outgoing” strategy.
Brown’s three-day visit to China
is expected to raise the bilateral comprehensive strategic partnership toa higher level.
—China Daily editorial, Jan. 18

VOX POPULI, VOX DEI

Poor bear the brunt of waning global economy
The season’s first snow fell on Tokyoon Wednesday. I happened to be walking around the Nihonbashi district,
where many securities companies arelocated. Stock prices had recovered
somewhat, but there were few people
on the streets gazing at electronic display panels of stock price listings at
brokerage houses.
On the curbside, a bento box lunch
vender had his blue parasol unfurled.
All his bento were uniformly priced
at 390 yen, and I took comfort in thiskind of “stable low price.”
Amid the global plummeting of stock
prices, the Nikkei average has dipped
30 percent from its peak last summer.
Justice Minister Kunio Hatoyama,

whose asset holdings are well known,
was quoted as noting lightheartedly,“I’ve been told I may have lost 4 billion
yen.” His older brother Yukio, secretary-general of Minshuto (Democratic
Party of Japan), is also said to havelost the same amount.
For ordinary consumers, the thoughtof losing even a little bit of the valueof their stock holdings comes as a greatblow.
The gross mishandling of the subprime mortgage fiasco by the U.S. government caused the current downturnin the global economy. Even the announcement of Washington’s economic
stimulus package and a massive key
interest rate cut has had little effecton the stock market.
The United States deploys its invincible armed forces at will and takes
little interest in the planet’s environment. Mindless of its trade deficits, it
continues to guzzle oil and indulges
in spending sprees on borrowed money.
Most of the blame lies with the current administration. But I also feelthat social structure of American society has come into question. It makes
me wonder if the world under U.S.
control will last much longer.
Here in Japan, the poor who haveno chance of playing the stock market
are in serious trouble. Increases in theprices of heating oil and foodstuffs arehitting these people especially hard
this winter. The wealthy justice minister’s light jest and the aloof tone ofPrime Minister Yasuo Fukuda’s remarks have left me with a sinking feeling, making me doubt their politicalgrace for protecting the people.
Temperatures in Tokyo registered
the season’s lowest on Wednesday. In
an underground passageway in the securities firms district, a homeless man
lay curled up, his head resting on a paper bag.
When the global economy is deteriorating, we also need to be awarethat there are people who suffer froma wrecked life and value just 10 yen.
—The Asahi Shimbun, Jan. 24