IEEJ：August 2019○ｃIEEJ 2019
Special Bulletin
A Japanese Perspective on the International Energy Landscape (441)

August 16, 2019Japan Faces Fluid International Situation and Growing Future Uncertainties
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, Japan
The international situation surrounding Japan has been destabilized further, with future
uncertainties growing. First, the future course of the global economy has become fluid due to the U.S.China trade war as noted in the previous special bulletin. Stock prices have been fluctuating wildly ondaily news reports regarding the U.S.-China trade war. Optimism and pessimism about the global
economy have come and gone on a daily basis in a manner to shake the world every day.
Both the United States and China are very important for Japan from the viewpoint of
economy and trade. If the two economies slow down in a manner to cause global economic
deceleration, Japan may be seriously affected. In this way, global economic trends are very importantfor Japan. In this bulletin, however, I would like to discuss the international political situation
surrounding Japan, relevant international relations and geopolitical risks in addition to global
economic issues.
First, the international situation surrounding the Middle East, the central energy supply
source for Japan and the entire world, has deepened its confusion. The Middle East situation has long
been plagued with destabilizing factors. Recently, however, the Middle East situation including theIran problem has become unprecedentedly destabilized, confused and uncertain. The deteriorating
Middle East situation’s impact on crude oil prices has been limited as market players have grownconcerned about global economic slowdown risks. If the Middle East situation is destabilized further
to pose real threats or risks to oil supply or transportation, however, market sentiment may turn around.
Tanker attacks and seizures, and the shootdown of drones in the vicinity of the Strait ofHormuz have led safe passage through the main oil transportation artery to attract global attention,
prompting the United States to call for forming a coalition to protect the oil transportation. Safe oiltransportation, though characterized as a global common, can be linked to the issue of howbeneficiaries from safe oil transportation should be held responsible for protecting the transportation.
The responsibility could be viewed as depending on how much oil a country imports from the Middle
East.
The United States has played a key role as the policeman of the world in stabilizing theMiddle East and securing safe oil transportation. The coalition proposal by such country could triggera major change in governance regarding the stabilization of the international energy market. At thesame time, how Japan as a country depending heavily on Middle Eastern oil should be involved in theissue will be questioned. Japan must consider its response to the issue within its legal and institutionalframework including the war-renouncing constitution. At the same time, however, a global viewpoint
covering the Japan-U.S. alliance and the future attitude and strategy of China as a major importer ofMiddle Eastern oil is required for Japan.
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In this respect, the key issue for Japan and the entire world would be how the United States
would move. U.S. foreign policy, including how Washington would deal with China, Russia and theMiddle East and what specific strategies it would implement, would be the biggest factor exerting
great influence on the international situation. From the viewpoint of a U.S. ally and the strategic
viewpoint of analyzing cold international politics, Japan must pursue its national interests. Japan isrequired to accurately analyze the long-term direction and key points of not only the Trumpadministration’s foreign policy but also long term perspectives on future U.S. foreign policy.
Asia as well as the United States and the Middle East is important for the internationalsituation surrounding Japan. The international situation in Asia has also been destabilized, withuncertainties and tensions growing. Holding the key to the Asian situation is China. The escalation ofthe U.S.-China trade war indicates that China has increased its presence and influence and developed
into a power that can challenge the United States. China has not only enhanced its presence in Asia
but also tried to increase its global presence beyond Asia through the Belt and Road Initiative. Itsaggressive diplomatic attitude and maritime expansion commensurate with its power have attracted
attention not only from regional countries but also from the entire world.
In a recent attention-attracting move, China has deepened strategic relations with Russia that
also confronts the United States, making great progress in their military cooperation. Progress in theChina-Russia relationship can exert various impacts on the whole of Northeast Asia. The Korean
Peninsula situation has also become fluid and complicated. The future of North Korea’s nuclear
development issue is still uncertain even after three U.S.-North Korea summit meetings. North Koreahas recently fired what seemed to be ballistic missiles in a manner to shake relevant countries. In suchcircumstances, relations between U.S. allies Japan and South Korea have grown tense due to thewartime labor and radar lock-on issues. Furthermore, Japan decided to revise its export control
arrangements for South Korea and drop it from the list of white countries subject to preferential
treatments regarding export control due to national security concerns, prompting South Korea to takea similar action against Japan. South Korean citizens have even boycotted Japanese products. JapanSouth Korea relations have thus become very severe and difficult.
In Hong Kong, students and other citizens have escalated their protests against a bill thatwould allow criminal suspects to be extradited to mainland China, shaking local politics and stability.
The protests are now unlikely to end soon. On August 12, demonstrations against the extradition billforced all flights to and from Hong Kong Airport to be cancelled. News reports say that Beijing,concerned about the escalation of the protests, has mobilized People’s Liberation Army troops inGuangdong Province near Hong Kong, leading the entire world to pay attention to China’s potentialintervention. In Taiwan where a presidential election is planned for next year, the Hong Kong problem
has attracted attention, leading a policy on China to become a key controversy in presidential election
campaigns.
In this way, very complicated and serious problems have emerged at various locations inAsia. The destabilization and growing uncertainties in Asia, though being characteristically different
from those in the Middle East, are as serious as them. As a matter of course, the destabilization andcomplication of the Asian situation greatly affect Japan. With China that holds the key to the Asiansituation, Japan has been improving relations after serious bilateral tensions, as symbolized by thephrase “from competition to cooperation.” As mentioned above, however, Japan must look to the2

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whole of Asia and the world and develop and implement an Asian strategy covering relations with theUnited States.
As international relations and geopolitical problems become more fluid and complicated,Japan is required to coolly discuss and consider what the best choices would be and what it should or
can do from an international viewpoint and devise and implement responses.

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