 Chapter 12
Political Leadership in Question――Toward Japan-South Korea Cooperation in
Addressing Risk
Atsushi Ijuin
Lead Economist, Japan Center for Economic Research[Key Points]
A Season of Politics in Northeast Asia
Key Data
Russia・State Duma elections brought forward toUSA・State primaries and caucuses in February throughSeptember・Conflict with the West over Ukraine

June
・Presidential election on November 8

North Korea
・Congress of the Worker's Party to take place for the first time in 36 years inearly May・Possibility that First Secretary Kim Jong-un will make his first overseas visit
South Korea
・20th legislative elections on April 13
・Maneuvering ahead of the next presidential election (2017) gets underway inearnestChina
・Maneuvering ahead of the next party congress(2017) gets underway in earnest
・Conflict with the USA over the South China Sea

Japan
・G7 Ise-Shima Summit to take place on May 26-27
・House of Councillors election to take place in thesummer (term of office ends on July 25)

and cyber attacks

Source: Compiled by the author

Japan Center for Economic Research

FY2015 “Asia Research” Report1. Addressing North Korean Risk

The seminars organized by the Japan Center for Economic Research (JCER) with thecooperation of Japanese and South Korean experts in 2015 – the 50th anniversary of thenormalization of diplomatic relations between Japan and South Korea – saw a lively exchange ofviews regarding risk assessments of North Korea and the risk reduction measures that Japan andSouth Korea should take. To facilitate free debate, seminar participants undertook discussions
based on the understanding that no information that could identify the speaker would be published,so this report refrains from attributing individual opinions, but most of the views expressed arecontained herein.

(1) The Debate over Changes and Risks in North Korea
In assessing the risks, the first issue to arise was the evaluation of recent moves by North Korea,
particularly changes since the birth of the Kim Jong-un regime. Contrary to most people’s initialexpectations, Kim Jong-un worked very quickly to consolidate his power from an early stage. In
December 2013, he executed Jang Sung-taek, his uncle and de facto second-in-command. In May
2015, South Korean media reported that Minister of the People’s Armed Forces Hyon Yong-chol,
who held considerable influence over the military, had been executed by firing squad for treason.
At the end of the year, information also circulated that Choe Ryong-hae, a secretary of the Workers’
Party of Korea who was regarded as being a member of Kim Jong-un’s innermost circle, “had beenbanished to a farm in the countryside to undergo revolutionary education,” so shock waves spreadeven further.
The question of whether or not the Kim Jong-un regime will become more stable is a major issue
for neighboring Japan and South Korea. Immediately after this series of incidents, the media
reported the view that it was “a reign of terror by First Secretary Kim Jong-un, aimed at
suppressing dissatisfaction among the military,” while at the seminar, some interpreted thesedevelopments to mean that “the Kim Jong-un regime was achieving some measure of success instrengthening its position.” Other opinions expressed included “he has adopted a different style ofgovernance from that of his father, General Secretary Kim Jong-il, and the screening of top officials
is going to continue;” “stability will grow in the short term, but the medium term is an unknown
quantity;” and “the amplitude of the swings in foreign policy has grown and the cycle of change
has accelerated.” An unexpected situation, such as the leader suffering from health problems, could
arise in North Korea at any time and in any form, so relevant countries need to share information

Japan Center for Economic Research“Asia Research” Reportand ensure that they are prepared for anything.
The majority of participants took a harsh view of the nuclear and missile issues, which directly
impact the security of Japan and South Korea. At a plenary meeting of the Central Committee ofthe Workers’ Party of Korea in March 2013, the Kim Jong-un regime approved the “new strategic
line on carrying out economic construction and building nuclear armed forces simultaneously.”
Nuclear and missile development is progressing in accordance with this basic policy and the
majority voiced the opinion that “there is no hope of North Korea disposing of its nuclear weaponsof its own accord,” for reasons of both foreign policy and domestic politics. One participant
commented, “North Korea’s possession of nuclear weapons is already a fait accompli, so thequestion is whether or not the conventional strategy centered on a quid pro quo for curbing
ownership of nuclear weapons or renouncing them entirely will be acceptable in future.” Some
expressed the view that even if the international community continues to press North Korea todispose of its nuclear arsenal completely, “for the time being, the emphasis should be placed on
thwarting the use of nuclear weapons and halting their development.” In the area of security issues,participants shared a recognition that it was becoming more important to be prepared against
cyber-attacks by North Korea.
Almost all members of the group agreed that the Kim Jong-un regime was devoting greater effort
than before to economic policy, to strengthen the regime and secure the support of the people. The
key pillars of the regime’s economic policy include officially sanctioning and using markets,
creating economic development zones, increasing the degree of discretion afforded to enterprises,
and agricultural reform based on reducing the size of production units. The planned economy basedaround rationing has reached an impasse, so North Korea is exploring new measures. Most of theSouth Korean members of the group expressed the view that, having hit rock bottom, the North
Korean economy was now improving, against the background of increased exports of the country’s
mineral resources and manpower, and improved food and electricity infrastructure.
On the other hand, many pointed out the contradictions and risks of the economic policy being
pursued by the Kim Jong-un regime. As well as the fact that it is trying to attract foreign capital toits economic development zones, while inviting isolation from the international community with its
nuclear development, these include the relationship between the market and social control, andNorth Korea’s growing dependence on China. Above all, in terms of the relationship between themarket and social control, the increasing spread of market economic elements could entail risks of
the regime, in the form of the influx of information from the outside world, the rise of newindividuals in positions of power, the spread of corruption, and growing inequality.
In fact, private money-lenders that North Koreans call donju (money masters) are springing up in

Chapter 12: Political Leadership in Questionvarious parts of the country, along with a new wealthy class. In analyzing the current situation,
seminar participants expressed such views as “there are undoubtedly government officials and thelike in the background behind these donju, so the public sector and the private economy are linked;”“instead of granting business rights in the form of ownership or real estate, those in power are
making money, and it is only the regime that has the ability to supply resources and products;” and“right now, the regime’s approach to policy management is based on its confidence that it cancontrol the market.”Opinions varied as to whether or not a situation in which property ownership and economic
activities by individuals are not fully guaranteed by law could be described as “the introduction of amarket economic system.” While some commented that “what the Kim Jong-un regime is aiming
for is development rather than opening up. It is pursuing change rather than reform,” others
predicted conflict between overseas Chinese capital and North Korean government-controlled
capital, saying, “inconsistencies will emerge if foreign investment in North Korea grows.” North
Korea will hold the Congress of the Workers’ Party for the first time in 36 years in early May 2016,
so close attention should be paid to this going forward.
Seminar participants also discussed North Korean society. The country’s prolonged economic
difficulties and the spread of markets are changing the values of North Koreans. Demographic
issues also seem to be having an impact. North Korea, too, is suffering from a declining birth rate,causing a drop in the school-age population, so its workforce is forecast to fall in future. Improving
productivity is essential if it aims to achieve economic growth. This is said to be the reason for
North Korea’s educational reforms, such as its announcement of the extension of compulsory
education from 11 to 12 years and its efforts to enhance education in science and technology, with
one member of the group commenting, “it is beginning to emphasize science, utility, andcompetition, as it is aware of globalization in the educational sector as well.” In their analysis,
participants took the view that educational change might encourage social change. How can North
Korea overcome the contradiction with conventional socialist values and the deification of the Kim
family? Some were of the opinion that, as with the question of markets, attention should focus on
the critical point of change.
Perceptions of North Korean risk also varied. If we focus on the North Korean regime, there is afundamental risk arising from the fact that it is a socialist revolutionary regime, so its very
existence poses a risk to the liberal democracies of Japan and South Korea. Some expressed theview that, if we turn our attention to the nature of the problem, the risks can be broadly classified
into risks associated with North Korea’s “aggressive demeanor toward the outside world,” such as
the nuclear and missile development problem and the abductions issue, and risks related to North

Japan Center for Economic Research“Asia Research” Report

Korea’s “instability and vulnerability,” such as problems relating to the economy and food, and theissue of maintaining the regime.
However, these are mainly risks felt or feared by neighboring countries and it is not the case thatthe risks associated with North Korea’s “aggressive demeanor toward the outside world” exist
entirely independently of the risks related to its “instability and vulnerability.” Some evensuggested that there was a greater need for discussions involving a frank exchange of views to
discover North Korea’s true opinions, saying, “North Korea’s actions demonstrate a dichotomy
between what it says and what it really thinks, and it is senseless for us to constantly try to battle
against what it says.” Accordingly, some members pointed out that “there is also a need to analyze
the risks as North Korea perceives them.” Other opinions expressed included “North Korea
probably feels that the alliance between the USA, South Korea, and Japan poses a risk to thesecurity of the regime, and may also perceive a risk of widespread social instability or corruption
being triggered by the expansion of markets and other non-socialist phenomena” and “we need toanalyze and comprehensively examine why North Korea has come to feel that way.”(2) Ideas and Policy Menus for Mitigating Risk
Animated discussions took place at the seminar concerning measures for mitigating North
Korean risk and Japanese-South Korean cooperation measures. The main proposals were as follows.
Almost all of them have been incorporated into the various chapters of this report.

(Short- to medium-term challenges)● Enhancing preparations for dealing with acts of provocation by North Korea● Enhancing preparations for dealing with a sudden change in North Korea● Enhancing intelligence-gathering capabilities and developing a shared understanding of the North
Korean situation● Cooperation aimed at resolving the nuclear and missile issues● Addressing the issue of the resumption of the Six-Party Talks● Urging China to take action on issues including cyber-threats● Japanese-South Korean security cooperation within the framework of Japan’s new security
legislation● Prompt conclusion of the Acquisition and Cross-Servicing Agreement (ACSA) between Japanand South Korea● Prompt conclusion of the General Security of Military Information Agreement (GSOMIA)
between Japan and South Korea

Chapter 12: Political Leadership in Question

● Promoting inter-Korean dialogue and exchange aimed at stabilizing the situation on the Korean
Peninsula● Resolving the issue of the abduction of Japanese nationals● Addressing humanitarian issues between Japan and North Korea, undertaking cultural andsporting exchange, and establishing a liaison office● Accelerating Japan-South Korea EPA (Economic Partnership Agreement) negotiations● Promoting negotiations on a China-Japan-South Korea FTA (Free Trade Agreement) that also
take North Korea into account● Cooperation on global issues, including the environment, anti-terrorism measures, and infectious
disease(Medium- to long-term challenges)● Developing a long-term vision for a cooperation framework that also takes into consideration apost-unification Korea● Cooperation aimed at regional development of North Korea and peace and development inNortheast Asia
● Mapping out a vision for the future of East Asia: prospects for a borderless political andeconomic community● Joint expansion (with the participation of China and Russia as well) into North Korean economic
development zones in parallel with progress on the nuclear issue● Supplying products and intermediate goods that will help to promote the spread of markets inNorth Korea● Improving Japanese-North Korean relations and establishing the Sea of Japan Rim Economic
Zone● Trilateral cooperation between Japan and North and South Korea: introduction of equipment andtechnologies for industrial modernization and joint development imports from North Korea● Multilateral cooperation: Northeast Asian security cooperation in a post-Six-Party Talks
environment● Multilateral cooperation: cooperation in the fields of logistics, energy, and the environment, etc.
● Multilateral cooperation: utilizing international financial frameworks such as the AsianDevelopment Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB), and exploring
the concept of a Northeast Asian Development Bank (NEADB)Discussion of measures to mitigate North Korean risk covered numerous topics and perspectives,

Japan Center for Economic Research“Asia Research” Reportincluding politics, economics, and society. All of these are necessary, but the fact is that none ofthese individual measures were entirely novel. To be completely frank, almost all of the assembled
experts had seen them at least once before. This was hardly surprising, given that 70 years havepassed since the Korean Peninsula was divided in two in the aftermath of World War II and 20
years have already passed since the nuclear crisis in North Korea became an issue of international
concern. Over this period, countless people have spent long hours in innumerable rounds of talks
about such issues as the peace and stability of the Korean Peninsula, inter-Korean reconciliationand exchange, and détente. It is not the kind of problem for which solutions will magically present
themselves.

(3) Military Options and the Cost of Inter-Korean Unification
In deliberations at the time of the first nuclear crisis in the mid-1990s, the US Clinton
administration came to the conclusion that the option of a military assault on North Korea could
result in the ruin of South Korea and cause numerous casualties, including among US troops, so it
steered a course toward the Agreed Framework with North Korea instead. Since then, successive
US administrations have been skeptical about a military solution to the situation, unless North
Korea were to escalate the crisis too far.
Since the 1990s, various estimates of the cost of inter-Korean unification have been made,primarily by South Korea; almost all of these suggest that progressive unification would be cheaperand place less of a burden on South Korea than a sudden unification.
The most recent study was an estimate of the cost of unification in a broad sense, which was put
together in November 2014 by the Financial Task Force on Unification, with the participation ofSouth Korea’s Ministry of Strategy and Finance and Ministry of Unification.1 Under this estimate
the cost of unification would be $500 billion. This was based on the Bank of Korea’s calculation of
the cost of raising North Korean per capita GDP (gross domestic product) from its current level of$1,251 to $10,000 – about half of the South Korean level – within 20 years.
The figure of $500 billion includes $140 billion for the cost of developing infrastructure such as
railways, roads, communications, and ports; and $35 billion for the cost of industrial development,
including the agriculture, forestry and fishery industry and the mining industry, as well as thedevelopment of special economic zones. $250-300 billion of this would be procured via policy
finance institutions such as the Industrial Bank of Korea and the Korean Export-Import Bank. The
paper also sets out a policy of funding infrastructure development and the like via development
1

South Korean Financial Services Commission, Unification of the Korean Peninsula and
Financial Policy Challenges (November 19, 2014)

Chapter 12: Political Leadership in Question

assistance ($17 billion) and private sector investment ($107.2-186.5 billion) from overseas, as well
as funds from North Korea’s own coffers ($100 billion).
In December 2015, South Korea’s National Assembly Budget Office published a report entitledUnification Costs Based on Different Inter-Korean Exchange Scenarios and Subsequent
Implications. The following provides an overview of this report’s findings.

Figure 1 Unification Costs Based on Different Inter-Korean Exchange Scenarios
Scenario

Start ofNorth Korean per

Year ofUnification costunification

capita GDP as acompletion of(Calculated at apercentage of theunification

rate of $1 =South Korean

process (point at

1,200 won)

figure in 2025

which North(immediately

Korean per

beforecapita GDP

unification)

reaches 66% of
the South Korean
figure)1. Maintenance4%

at current level

2076

4,822 trillion(For 50 years)

won

2026
2. Expansion of($4 trillion)
7%

humanitarian aid

2065

3,100 trillion(For 39 years)won($2.6 trillion)

3. Full economic
cooperation

11%

2060

2,316 trillion(For 34 years)

won($1.9 trillion)

Note: North Korean per capita GDP in 2016 is assumed to be 5% of the South Korean figure.
Unification cost refers to the total cost of unification in a broad sense, until the completion ofunification.
Source: South Korean National Assembly Budget Office (December 7, 2015)

The foregoing estimates assume that North and South Korea will begin peaceful unification in
2026 and show the cost of unification in each scenario over the decade up to that point, according
to the level of inter-Korean economic cooperation. The estimates reflect the cost of unification in a

Japan Center for Economic Research“Asia Research” Reportbroad sense, including private sector investment, in order to bring North Korea’s per capita GDP up
from 5% of the South Korean level (projection for 2016) to 66%; 66% is the level of interregional
income disparity within South Korea in 2012. The three scenarios were as follows: (1) maintenanceof inter-Korean exchange at the current level (limited exchanges and cooperation); (2) expansion ofhumanitarian aid, including food, medical, and agricultural development assistance; and (3) fulleconomic cooperation, including the promotion of economic investment. The results show that if
South Korea promoted economic cooperation with North Korea, income levels in North Korea
would rise quickly, which would more than halve the cost of unification compared withmaintaining inter-Korean exchange at its current level.

(4) Examples of Policy Coordination and Comprehensive Programs
The policy menus for reducing North Korean risk include items that are mutually contradictory.
This is because North Korean risk consists of risks associated with its “aggressive demeanor toward
the outside world” and risks related to its “instability and vulnerability,” so the measures forcombating these risks tend to be focused in contradictory directions. To put it in terms often usedby policymakers, it is a question of dialogue and pressure, or exchange and deterrence. The mostimportant issue is the question of coordination; that is to say, determining which items on thesemenus to choose and in which order to implement them.
In fact, there are prior examples of comprehensive programs that took such matters into account.
One such example is the joint statement issued on September 19, 2005 following the Six-Party
Talks between South Korea, North Korea, the USA, China, Japan, and Russia, which set out theconsensus reached on the Korean Peninsula issue by the main countries concerned. The jointstatement covered both security and economic matters, and affirmed that the goal of the talks was
the verifiable denuclearization of the Korean Peninsula in a peaceful manner. North Korea
committed to abandoning all nuclear weapons and existing nuclear programs and returning, at an
early date, to the Treaty on the Nonproliferation of Nuclear Weapons and to International Atomic
Energy Agency (IAEA) safeguards. The USA, which North Korea regards as its biggest security
threat, affirmed that it had no nuclear weapons on the Korean Peninsula and had no intention to
attack or invade North Korea with nuclear or conventional weapons.
It incorporated undertakings that the USA and North Korea, whose relationship hitherto had been
antagonistic, would take steps to normalize their relations subject to their respective bilateralpolicies, and that Japan and North Korea would take steps to normalize their relations inaccordance with the Pyongyang Declaration, on the basis of the settlement of unfortunate past andthe outstanding issues of concern. The Six Parties undertook to promote economic cooperation in

Chapter 12: Political Leadership in Question

the fields of energy, trade and investment. The USA, China, Russia, Japan, and South Korea statedtheir willingness to provide energy assistance to North Korea, with South Korea reaffirming a
specific proposal to provide 2 million kilowatts of electric power to North Korea.
The Six-Party Talks subsequently entered a period of stalemate over North Korea’s 2006 missile
launch and nuclear test, but in February 2007, the Six Parties adopted a joint communique entitled“Initial Actions for the Implementation of the Joint Statement.” This set out a plan to establish fiveworking groups and the procedure for resolving issues. The working groups were as follows: (1)Denuclearization of the Korean Peninsula; (2) Normalization of North Korea-US Relations; (3)Normalization of North Korea-Japan Relations; (4) Economy and Energy Cooperation; and (5)Northeast Asia Peace and Security Mechanism. The communique referred to the provision of
emergency energy assistance to North Korea and presented a vision for building a new security
mechanism to support Northeast Asian economic development, as a long-term task. North Korea
has long struggled with problems in the areas of security and energy, which are the very
cornerstone of economic development, so the agreement had many positive aspects from its
perspective. Accordingly, the agreement gave rise to hopes that the suspended talks process would
resume and that bringing the content of the agreement to fruition would be the first step toward
restoring trust.
However, as is common knowledge, there was no visible progress thereafter. Today, several
North Korean nuclear tests later, the Six-Party Talks are regarded as merely having given North
Korea the time and leeway to undertake nuclear development. Nevertheless, the reality is that thefactors behind the failure to reach an agreement included not only problems on the North Koreanside, but also the fact that Japan, the USA, China, South Korea and Russia fell out of step with eachother, due to differences in their priorities and motives. Having taken great pains to put together thismenu, the five countries failed to demonstrate sufficient determination and solidarity to applypressure to North Korea. They lacked adequate political power and ability to coordinate with eachother. Subtle differences in approach in such areas as security policy are only to be expected, evenamong allies and nations on friendly terms with each other, but there was even a noticeable
disconnect between the stances of the key countries of Japan, the USA and South Korea.
There are precedents for partnership between Japan, the USA and South Korea functioning
comparatively well, such as the Trilateral Coordination and Oversight Group (TCOG) meetings
instituted between them in the late 1990s. To address the North Korean missile issue, which was a
focal point for the USA at the time, President Clinton appointed former Secretary of Defense
William Perry – who also enjoyed considerable trust among Republicans – as North Korea policy
coordinator, effectively making him the US special envoy on North Korean issues. ThroughJapan Center for Economic Research“Asia Research” Reportfrequent working-level talks, the three countries coordinated their policies and put together
comprehensive programs such as the report that Perry submitted to the US president. One factor
contributing to the smooth functioning of this initiative was the relationship of trust that existed
between the leaders of the three countries concerned: President Clinton, South Korea’s President
Kim Dae-jung, and Prime Minister Keizo Obuchi of Japan. The fact that such an eminent personage
as former Secretary Perry was in charge of coordinating domestic affairs with foreign policy also
helped to facilitate matters. Political leadership is essential, precisely because of the difficulty inachieving a coordinated approach to Korean Peninsula issues.

2. A Season of Politics in Northeast Asia and the Role of Leaders(1) The Decision That Kim Jong-un Will Have to Make
2016 will be a season of politics in Northeast Asia, with a succession of major elections andmeetings scheduled to take place.
Firstly, in North Korea, one of the region’s biggest destabilizing influences, the Congress of theWorkers’ Party of Korea will be held for the first time in 36 years in early May. The Politburo of
the Workers’ Party of Korea officially announced the convening of the Seventh Party Congress on
October 30, 2015; the last time that the Party Congress – North Korea’s supreme decision-making
body – was convened was the Sixth Party Congress, which took place on October 10–14, 1980.
Naturally, as the Congress of the Workers’ Party of Korea was not held at all during the Kim
Jong-il era due to economic difficulties, among other reasons, this will be the first time that it has
taken place under the Kim Jong-un regime. The Politburo of the Workers’ Party of Korea
announced that it had decided to convene the Party Congress, “reflecting the demand of the party
and the developing revolution that witness epoch-making changes in accomplishing therevolutionary cause of Juche, the cause of building a thriving socialist nation.” As such, there is astrong possibility that Kim Jong-un will reveal new policies on domestic affairs and foreign
relations. It is expected that North Korea will turn this into a political event for asserting thelegitimacy of the succession of power and the administration, and showing audiences both at home
and abroad that the Kim Jong-un regime has become firmly established. A proposal forinter-Korean unification based on a federal model emerged from the previous Party Congress in
October 1980. In light of subsequent changes in world affairs, attention will focus on the approach
to inter-Korean relations that emerges. On the foreign policy front, there is the question of when
Kim Jong-un will make his first overseas visit as supreme leader. Also of interest is whether he will
choose China as the destination of his first visit and whether relations between China and North

Chapter 12: Political Leadership in Question

Korea improve to the extent of holding talks with General Secretary Xi Jinping and other top
officials, or whether Kim will explore other paths.
In the arena of domestic affairs, North Korea is placing the utmost importance on the economy,
taking steps to improve management that will extend the autonomy of those working on the front
lines of industry and agriculture, as well as opening up to other countries via special economic
zones, so the focus will be on how it develops these measures further. In his 2016 New Year
Address, First Secretary Kim Jong-un highlighted “the principle of giving priority to
self-development,” stating that North Korea should use its own efforts, technology, and resources tobuild a thriving nation. Attention will focus on whether North Korea’s economic policy will
become more inward-looking or more open in future. While North Korea’s planned economy has
been at a standstill, markets have spread throughout the country and changes in people’s lifestyles
and values have been occurring. Prioritizing the stability of the regime will lead to reluctance tointroduce or reform market mechanisms, but the supreme leader, Kim Jong-un has made a direct
promise to the North Korean people that he will improve their standard of living, saying “Our party
is firmly resolved to ensure that our people...enjoy all the wealth and prosperity socialism has tooffer and never again be obliged to tighten their belts.” As such, he will have to make bolddecisions in order to achieve results.
Regarding the crucial nuclear and missile issues, North Korea’s constitution already proclaims it
to be a “nuclear state,” so some North Korea watchers take the view that it is extremely unlikely toabandon its nuclear and missile development, now that it has spent such vast sums and has arealistic prospect of creating a missile capable of reaching the USA. However, we must recognizethat the international community will not permit North Korea to possess nuclear weapons, so an
improvement in its relations with the main countries concerned will be impossible if it continues
with nuclear development. Sincere actions to resolve the issue of abductions of Japanese nationals,
which Kim Jong-il admitted and apologized for, will also be essential to elicit the cooperation of
the international community.
Personnel changes among top officials will also be key in making progress with Kim Jong-un’sraft of policies. The previous Party Congress, in 1980, was the venue at which Kim Jong-il madehis first official appearance as President Kim Il-sung’s successor. Kim Jong-un has carried out
several reshuffles of key officials since inaugurating his regime. In his speech at an October 2015
event to mark the 70th anniversary of the founding of the Workers’ Party of Korea, he stressed that
the Party had set attaching importance to young people as its strategic line, so we are highly likely
to see a major generational change at the forthcoming Party Congress. While difficulties willprobably arise as a result of his being the third-generation leader, there is no need to fear aJapan Center for Economic Research“Asia Research” Reportcomplete change in policy or direction. Personnel is the supreme leader’s biggest weapon, so heshould have the courage to use personnel as a lever to put an end to incorrect policies and outdated
bad habits, and carry out bold reforms.

(2) 2016: Election Year
Outside North Korea, the rest of Northeast Asia faces a year packed with political events, as
well.
Across the 38th parallel from North Korea, South Korea’s 20th National Assembly elections willtake place on April 13. Having been inaugurated in February 2013, President Park Geun-hye andher cabinet have already passed the halfway point and entered the latter half of their five-year termof office. The results of the nationwide legislative elections will have a major impact on therunning of the administration in its latter stages, as well as on the selection of candidates for the
next presidential election in 2017 and the South Korean political situation thereafter. With North
Korea due to hold its Party Congress in early May, what kind of relationship will South Korea buildwith its northern neighbor once the election results emerge? The direction of inter-Korean relations
during President Park’s term of office is likely to determine this.
Something that will affect not merely the situation in Asia, but also world affairs as a whole is
the US presidential election on November 8. Key points of contention are likely to emerge
gradually over the course of the primaries and caucuses, which began in February. US media
interest in anti-terrorism measures and Middle Eastern issues appears to be high, but how will
matters concerning China and the rest of the USA’s Asia policy be positioned? US foreign policy
tends to change considerably when there is a change of administration. The Obama administration
has adopted a policy of “strategic patience,” which means waiting for change in North Korea, but
the stance adopted by the next administration will be a major influence on the Korean Peninsula
situation. Attention will also focus on whether North Korea – having gone ahead with its fourth
nuclear test – will carry out further acts of provocation or embark upon a bold dialogue offensive.
The US-China relationship is a major variable affecting the Asia-Pacific regional situation andconflict between the two countries has been deepening over the South China Sea situation andcyber-attacks. The Obama administration has left handling of the North Korea issue up to China, toa great degree, but the direction taken by US-China relations under the new administration will
influence the situation on the Korean Peninsula going forward. In China, jockeying for position is
expected to get underway in earnest, with a view to the appointment of senior party officials at the2017 Communist Party Congress. In Russia, the State Duma elections that were initially due to takeplace at the end of 2016 are now expected to be brought forward to September. President Putin’s

Chapter 12: Political Leadership in Question

term of office runs through to the spring of 2018 and the State Duma elections are positioned as apreliminary skirmish in the next presidential election. Inevitably, the repercussions of the domestic
affairs and power games of these three major powers – the USA, China, and Russia – seem likely toextend all the way to the Far East.
Japan, too, is facing a national election, with an election for the House of Councillors due to takeplace this summer. The administration of Shinzo Abe has positioned the resolution of the abductionof Japanese nationals as one of its most important tasks. Ahead of the House of Councillors election,
the G7 Leaders’ Meeting (the Ise-Shima Summit) will be held in Mie Prefecture on May 26-27. In
the field of politics, measures to counter the extremist organization Islamic State (IS) are expected
to be discussed, but Japan’s prime minister is likely to use his authority as the leader of the chair
country to focus on the question of how to deal with the Korean Peninsula and the South China Sea,
among other East Asian issues.

(3) Involvement of Top Leaders and New Umbrella Negotiations
While election years can have a negative side, with the emergence of a political vacuum, they
can also mean that complex webs of interests are more clearly defined, as they become subject tothe verdict of the people. We must also be conscious of this fact in regard to the Korean Peninsula
situation.
Quite often, in an election, there is a tendency for appeals to the electorate by political parties
and candidates regarding policy on countries such as North Korea to take one of two tacks:
dialogue or pressure. However, oversimplifying the issue is not very meaningful. This is because,
as described above, there are two sides to North Korean risk, so if the issue cannot be fully cleared
up by means of war, then any measures to deal with the situation need to tackle both aspects as well.
The most important issue is the question of balance and coordination; that is to say, determining
which items on these policy menus to choose and in which order to implement them.
Public support is essential to decisions on major issues, but leaving everything up to public
opinion renders politics or diplomacy meaningless. Appealing to nationalism and competing toestablish the most hard-line stance on foreign affairs in a bid for popularity is the height of folly.
While some have highlighted problems concerning its content and procedures, the fact that Japan’s
new security legislation was enacted before North Korea’s fourth nuclear test was perhaps a spot ofluck for Japanese authorities, in a sense. One cannot deny that if it had been enacted immediately
after the test, it could have been interpreted as a panicked response on the part of Japan, thereby
further ratcheting up tensions in Northeast Asia. That would have played into North Korea’s hands.
The requisite security frameworks must be put in place in times of peace.

Japan Center for Economic Research“Asia Research” ReportRather than leaving negotiations with countries such as North Korea up to the court of public
opinion, it is necessary to distance such issues from domestic affairs, to some extent, and to
endeavor to explore responses calmly, based on objective information and data. In fact, the USA
and South Korea have hitherto alternated between taking a conciliatory line and taking hard-line
measures vis-à-vis North Korea, but neither an exclusively cooperative stance, nor an approachbased entirely on pressure have been able to bring about radical change in North Korea. A former
diplomat summed up the lessons learned from dealing with North Korea over the last 30 years or so
as follows: “If you focus on economic cooperation first, they just ‘eat and run,’ enjoying thebenefits without giving anything in return; if you apply pressure alone, it just triggers a backlash.”
While North Korea should be reflecting on its failure to enrich its people through its adherence toa military-first diplomacy of brinkmanship, there is something that its neighbors should learn fromtheir experiences to date. Over the 20 years or so since the issue of North Korea’s nuclear
development first raised its head, the Korean Peninsula situation has involved repeated bouts oftension and dialogue. Every time that the crisis level has risen due to North Korea’s military
provocation or development of weapons of mass destruction, the countries concerned have sought
to restore calm by providing North Korea with economic support, but they have failed to reach afundamental solution to the problem. We must not forget that the power struggles and lack ofsolidarity among these countries not only allowed North Korea to take advantage of the situation to
postpone denuclearization initiatives and economic reform, but also gave it sufficient time toimprove its nuclear missile capabilities. In seeking institutional transformation with the goal ofdenuclearization and economic development, it is vital for the countries concerned to coordinate
their actions fully.
Coordination between countries requires resolve on the part of their leaders. Looking back overthe history of negotiations with North Korea, the greatest progress was made when the leaders ofeach country made a determined effort to undertake comprehensive negotiations with North
Korea’s supreme leader. There are limits to what can be achieved through working-level talks alone
when it comes to problems involving regions with a long history of conflict and an intricate web ofother countries’ interests, as is the case on the Korean Peninsula, so determination and politicalleadership on the part of national leaders are essential. North Korea is involved in complex
problems, including the abductions issue, as well as the nuclear and missile issues, so it would be
most effective to undertake summit-level negotiations as a big package that brings all of the leaders
together.
In fact, the reason why there has been no progress on security issues on the Korean Peninsula
hitherto is that the status quo was not necessarily all bad for the administrations of the countries

Chapter 12: Political Leadership in Question

concerned. It is not only China that would face the risk of an influx of refugees and consequent
impact on domestic affairs from North Korea, which is positioned as a buffer zone against the USA
and South Korea. Even in the other countries concerned, dynamics that were actually seeking themaintenance of the status quo also came into play.
However, the situation in North Korea has already gone beyond the bounds of what ispermissible. While we should avoid giving anything to North Korea in return for simply holding
talks, we should carefully examine and compare the risks of leaving things as they are and the risksof engagement. If we want to finally succeed in moving a mountain that has remained immovable
for a long time now, we must develop better-modulated policies and put together a stronger menu
than before, which both applies pressure and offers incentives to North Korea. We should be
prepared for a little friction. While ensuring that we have a risk management plan equipped for aworst-case scenario, we must build a negotiating framework that involves the top leaders of all
relevant countries so that we can zero in on a comprehensive solution. Of all the conceivablepeaceful methods, this is probably the most feasible approach.
While North Korea only occupies a small amount of land, it is rich in rare metals and othernatural resources, and it has a highly educated population. If we get the policy right, it has thepotential to achieve economic development within a short period. Geographically, it is positioned ina crucial location, so it could be the key to promoting Northeast Asian economic cooperation insuch areas as logistics and energy. If the leaders of North Korea and the other countries concerned
demonstrate adequate determination, they could build a win-win situation. Above all, neighboring
countries will need to look at this as a chance to turn risk into opportunity.

(4) The Roles of the USA and China and the Importance of Cooperation between Japan andSouth Korea
What will be vital in doing so will be the roles of the USA, which boasts the world’s strongest
military capacity, and China, which has considerable influence over its neighbor, North Korea.
Even after the presidential election, the vacuum in US policy on the Korean Peninsula could
continue for some time, as it will take a while for the new administration to formulate its Asia
policy. It is precisely at a time like this that the leaders of Japan and South Korea have a more
substantial role to play, given their location in East Asia. While there may be some differences innuance, many of the risks posed by North Korea to Japan and South Korea are the same, so the twocountries need to join forces and seek the cooperation of the USA and China.
Needless to say, China’s cooperation will be essential in increasing the effectiveness of sanctions
against North Korea, which has repeatedly carried out nuclear and missile tests. While China-North
Korea relations cooled as a result of the fourth nuclear test, various moves are underway behind theJapan Center for Economic Research“Asia Research” Reportscenes. There is information to suggest that talks are underway regarding China’s “One Belt, One
Road” (New Silk Road) initiative aimed at creating a new economic bloc, as well as infrastructure
support for North Korea. Depending on the approach, this could be a positive development forJapan and South Korea, but it has the potential to be a negative one in the absence of coordination
with the relevant countries.
If North Korea’s dependence on China becomes too strong as a result of the expansion of
economic cooperation, the kind of inter-Korean unification desired by South Korea will become adistant prospect. The strengthening of Chinese control over North Korea could have a serious
impact on Japan’s security, if the Sea of Japan became an inland sea for China. Lacking an outlet to
the Sea of Japan, China has embarked on joint development of the port city of Rason innortheastern North Korea; at the same time, in 2011, two of its naval vessels called at the port of
Wonsan, a key North Korean city on the Sea of Japan. The situation is transitioning from North
Korean risk and developing into Chinese risk. It will likely be necessary to look back over thehistory of conflict between Japan and China over the Korean Peninsula, which dates back centuries.
There are limits to what Japan and South Korea can achieve alone in dealing with China as it
pursues its own national interests. They will likely need to make the new US president aware of
how important the Korean Peninsula issue is amid a myriad of international issues, and to have the
USA step up its approaches to China on this issue. Preparations for this must begin right away.
While there is a possibility of bringing the USA and China together in addressing North Korea’s
fourth nuclear test, as it relates to nuclear nonproliferation, power struggles in East Asia are
involved in the question of precisely how to deal with the issue, so it could become a factor that
escalates antipathy between the USA and China. Stuck in the middle between them, Japan andSouth Korea will need to work carefully together to lead the USA and China in a positive direction.
On December 28, 2015, the governments of Japan and South Korea reached an agreement that
represented a “final and irrevocable resolution” to the issue of the Imperial Japanese Army’s
comfort women, which was the biggest outstanding issue between the two countries, but they have
only just begun to rebuild the badly damaged relationship between them. If the leaders of two
countries refuse to engage with each other, the bureaucracy below them will not take any action. As
with the shuttle diplomacy that used to take place decades ago, the leaders of both countries mustbuild a relationship in which they meet often and discuss outstanding issues of concern between
them.
It is odd that Japan and South Korea cannot undertake in-depth discussions of their responses to
North Korea and security issues unless the USA is involved as an intermediary. The foreign affairs
and defense authorities of both countries finally held security dialogue in the spring of 2015, after

Chapter 12: Political Leadership in Question

an interval of five years. As well as the resumed director-general-level talks, they should holdministerial-level 2+2 dialogue. Aides close to the leaders were involved in coordinating thearrangements that led to the November 2015 summit meeting taking place between Prime Minister
Shinzo Abe and President Park Geun-hye, marking the first time that the leaders of these twocountries had met for three and a half years, but the heads of the administrative bodies that support
the National Security Council (NSC) in both countries must also build relations that will facilitate
routine exchanges of frank opinions concerning security and strategic issues.
It is also important for the political leaders of both countries to adopt a more strategic perspectivein discussing such issues as South Korea’s participation in the Trans-Pacific Partnership (TPP), theJapan-South Korea Economic Partnership Agreement (EPA), and the China-Japan-South Korea
Free Trade Agreement (FTA), with a view to the North Korea issue and the future development of a
Northeast Asian economic zone.
All of these things are possible if the leaders of these countries demonstrate their resolve to makethem happen. The political leaders of Japan and South Korea must not lose sight of the big picture
and bring about a situation in which they again lock horns over low-priority issues. How can we
reduce the risks in this region, particularly those arising from the North Korea issue? Having
reached a turning point, the situation in Northeast Asia will not wait while the region’s politicalleaders procrastinate. We have just marked the passing of 70 years since the end of World War II
and 50 years since the normalization of diplomatic relations between Japan and South Korea.
Particularly at a time like this, the leaders of the Japanese and South Korean government
administrations have a duty to undertake in-depth discussions with a view to the next 50 years, andto make progress with initiatives aimed at achieving peace and development in Northeast Asia.

References
Atsushi Ijuin (2002) “Kimu Jon Iru ‘kaikaku’ no gyojitsu” [Truth and falsehood of Kim Jong-il’s‘reforms’] Nikkei――――(2013) “Chūchō keizai kankei no shintenkai” [New developments in China-North Korea
relations], in Lim Hua Sing ed. “Ajia kyōdotai―sono kōzō to kadai” [An Asian
community: Concept and challenges] Sososha――――(2014) “Kitachōsen no keizai kaikaku de arata na ugoki Toppu ga gōrei, ‘shijōka’Japan Center for Economic Research“Asia Research” Reportsusumu tokku” [New developments in North Korea’s economic reforms Under orders from thetop, the special zones introduce market mechanisms]
Japan Center for Economic Research Staff Report
http://www.jcer.or.jp/report/researcher/index.html――――(2014) “Seisai kaijo wo machiwabiru Kitachōsen kigyō Datsuchūgokuizon he, bōekitakakuka wo suishin” [North Korean companies eagerly await the lifting of sanctions Promoting
the diversification of trade to reduce reliance on China]
Japan Center for Economic Research Staff Report――――(2015) “Motomerareru hokutōajia senryaku no saikōchiku―Chiiki kyōryoku no kanōsei
to kadai” [The restructure required in Northeast Asian strategy―The potential forregional cooperation and the challenges faced therein] Japan Center for Economic
Research “Hokutōajia no keizai renkei―Sengo 70 nen, kawaru keizai chizu”[Economic partnership in Northeast Asia―The changing economic map, 70 years after
the war]――――(2015) “Kitachōsen jirenma kakae keizai kaikaku tesaguri――Zōsan mezashi,kōgyō/nōgyō de jishuken kakudai” [Facing a dilemma, North Korea gropes its way toeconomic reform――Expansion of autonomy in the industrial and agricultural sectors,
with the aim of boosting production] Japan Center for Economic Research Staff Report―――― (2015) “Gaishi yūchi, Genzan―Kumugansan no kankō kaihatsu ni shōjun―shikōsakugo
no kin’yū kaikaku Shinrai kaifuku ga saidai no kadai” [Wonsan seeks to attract
foreign capital―Sights set on tourism development at Mount Kumgang―Economic
reform by trial and error

Restoring trust is the biggest challenge] Japan Center for

Economic Research Staff Report
Atsushi Ijuin (2014) “A firsthand look at North Korea’s marketization” NIKKEI ASIAN REVIEW(Dec. 1-7, 2014)―――― (2015) “North Korea looks to cut Chinese apron strings” NIKKEI ASIAN REVIEW (Jan.
12-18, 2015)―――― (2015) “FLIRTING WITH CHANGE――Pyongyang comes as close as it dares toeconomic reform” NIKKEI ASIAN REVIEW (Nov. 30-Dec. 6, 2015)―――― (2015) “ROOMS AVAILABLE――Desperate for foreign investment, Pyongyang targets
tourism”

NIKKEI ASIAN REVIEW (Dec. 21-27, 2015)

Chapter 12: Political Leadership in Question