KGRI Working Papers

Working papers at the Keio University Global Research Institute (KGRI) are made available on the KGRI website by its researchers and participants in its research projects before their research results are officially announced in academic journals or books, etc., for use and discussion by researchers both inside and out of KGRI. Various versions of papers are made available before and during the peer review process.
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Japan's Defense Buildup, With a Focus on the 1976 NDPO

No.12 Wang Rui

Date:2017.12.04

Japan is always referred to as an "economic great power" and a "military and/or political pygmy." However, Japan began to change the traditional Yoshida Doctrine in the latter 1970s, and after acquiring some major defense equipment in the 1980s it enlarged the range of SDF activity after the Cold War. Realism argues that the material variables -- balance of power (threat) or alliance politics (the fear of abandonment) -- were the most important factors for those changes. Constructivism emphasizes the impact of ideational variables -- antimilitarism or pacifism -- and the hybrid model tries to combine those two kinds of variables. My argument is that in the second half of the Cold War, the weakening of negative pacifism and the balance of threats decided Japan's defense buildup, and after the Cold War the fear of entrapment and the emergence of positive pacifism became more important. In this article, I will trace the process of the 1976 National Defense Program Outline (NDPO) and try to find the reasons for its establishment. The 1976 NDPO was the first military doctrine in post-war Japan. It became the basis for Japan's security for more than 30 years and will be a critical case for my research.

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Reselecting Nuclear Policy: Kennedy, Ikeda, and U.S.-Japanese Nuclear Relations, 1961-63

No.11 Masaki Sakamoto

Date:2017.10.25

In the early 1960s, U.S.-Japanese nuclear relations were still unstable. For the United States, Japan was an important ally to support its nuclear test-ban diplomacy while Japanese national security greatly depended on the extended nuclear deterrence of the United States based on the U.S.-Japan Security Pact. In Japan, however, as its economy and technology improved, conflicting opinions on its nuclear policy emerged. Under these circumstances, Hayato Ikeda, assuming the office of the Prime Minister of Japan in 1960, had to handle the relationship with the Kennedy administration over nuclear issues very carefully. Drawing from new historical documents in the Japanese Diplomatic Archives, this paper shows how U.S.-Japanese nuclear relations were developed in the early 1960s and how Prime Minister Ikeda managed Japan's nuclear policy the unstable environment both within and outside Japan after the political turbulence toward the end of the 1950s. While most of the previous studies view Ikeda's nuclear policy as just following the footsteps of his predecessors, this paper argues that his nuclear policy was very important in framing Japan's post-war nuclear policy.

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Destiny or Choice?: Why America's Relative Decline is still a Myth (as for now)

No.10 Takuya Matsuda

Date:2017.10.10

Existing literature on American grand strategy and America's relative decline has evolved around the question of the degree of America's global engagement. Unipolarity's unique impact on the international system and the significant policy relevance of this question has left this debate in a dichotomy between deep engagement and offshore balancing. However, the breadth of this grand topic has often made this intellectual debate conceptual, leaving behind numerous underlying assumptions that require reexamination. This paper therefore examines two large assumptions so as to identify factors that deserve more attention in order to enhance our understanding of American grand strategy. First, it analyzes the evolution of discussions on America's relative decline, which has cycled in intellectual debates since the 1970s. Next, I investigate the qualitative differences in conventional and unconventional security challenges. The analysis suggests that failed strategies with an incongruity in the means and ends produced discouraging results that exhausted national power. The future of America's unipolarity is a matter of America's own choice of an effective strategy. To that end, this paper underscores the importance of factors that shape America's global engagement, including the qualitative differences in threats as well as geographical differences.

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House price and credit cycles: effects of global liquidity and risk perception

No.9 Satoshi Tobe

Date:2017.10.5

This paper explores the determinants of house prices and bank credit. An empirical analysis of panel data of 22 developed countries during 1990-2015 reveals cross-border bank inflows and risk perception in global markets as the key drivers of house prices and bank credit. Moreover, it indicates that the effect of this risk perception on house prices is non-linear, depending on the leverage of local financial systems: it is stronger in economies with higher leveraged financial sectors. These results suggest that local financial cycles are exposed to spillover effects of U.S. monetary policy, and that local banking sectors play key roles in transmitting the effects to local house price cycles.

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The China-Japan Cooperation and the Asian Century

No.8 Masaya Sakuragawa

Date:2017.9.29

If the gravity of the economic power shifts from West to Asia, but West keeps taking leadership, the discrepancy between leadership and economic power will undermine the world. The cooperation between China and Japan gives a hint to solve this mismatch. This paper propose how China and Japan cooperates. It covers a lot of dimensions, including leadership, Globalization, International rules, One Road and One Belt, the AIIB problem, Yen and Yuan internationalization, and the Asian monetary integration.

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Chinese Economy and the Sino-Japanese Economic Relations

No.7 Yuquing Xing

Date:2017.7.18

This paper briefly reviews the current status of Chinese economy. It argues that "new normal" cannot fully explain the dramatic slowdown of the Chinese economy and the sharp fall of China's exports growth is mainly due to the reorientation of global value chains--relocation of low value added tasks out of China. Persistent depreciation of the yuan and massive capital outflows since last summer challenges the stability of the Chinese economy and may trigger financial crisis. Despite of unstable political relations between China and Japan, the two economies have been closely integrated through bilateral trade and investment. The two countries will benefit more from further economic cooperation, especially when the world faces the headwind of anti-globalization.

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Prospects for a Multicurrency Clearing System in Asia

No.6 Junichi Shukuwa and Masaya Sakuragawa

Date:2017.7.18

In the aftermath of the Asian financial crisis, ministers of finance of major Asian countries launched the Asian Bond Markets Initiative (ABMI) to avoid the risk of currency crisis. But the ABMI does not facilitate currency clearing, especially multicurrency clearing. This chapter proposes a new multi-currency clearing system in Asia. That scheme will clear each currency on a simultaneous base, supported by the Asian central banks. The architecture for liquidity provision in multi currencies is the first step for Asian financial integration

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Internationalization of the Yen in Asia: Has Regional Economic Integration Promoted Yen Invoiced Trade?

No.5 Kiyotaka Sato

Date:2017.7.18

By investigating various data at both customs and firm level, we present the new evidence of Japanese firms' invoice currency choice. Contrary to stylized facts, we demonstrate that Japanese firms tend to choose the U.S. dollar or importer's currency for trade invoicing in Japanese exports to advance countries, irrespective of difference in industry characteristics or product differentiation, while they choose the yen invoiced transactions in exports to Asian countries. More interestingly, Asia-based Japanese subsidiaries tend to use mainly the yen and U.S. dollar for trade invoicing in their trade with Japanese head offices and group companies. On the other hand, in Asia-based subsidiaries' trade with other countries excluding Japan, the yen is rarely used, even in intra-firm trade, and the U.S. dollar is dominantly used for trade invoicing. Even though Japanese subsidiaries increase their intra-firm trade with other Asia-based group companies, the use of the yen in Asia will not be growing. Instead, the use of the U.S. dollar will be increasing. These findings have significant policy implications for further use of the yen in the process of Asian economic integration.

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Infrastructure and Development in Asia:The Quality of Infrastructure and Project Implementation

No.4 Fukunari Kimura

Date:2017.7.18

Infrastructure development is essential to economic development in less developed countries (LDCs). In particular, ASEAN Member States (AMS) and developing East Asia have applied development strategies that aggressively utilize global value chains (GVCs), and logistics infrastructure and industry-supporting infrastructure services have been crucial. In addition to the long-lasting effort of the official development assistance (ODA) and other official funds (OOF) provided by OECD-DAC countries and international organizations, the recent deeper commitments of China and other newly developed economies to infrastructure development further activate infrastructure development in the region.We however have to notice that the current bottleneck in infrastructure development is not necessarily the availability of investing money but how to identify and implement good projects accompanied with long-term commitments. Countries should think much of infrastructure of quality appropriate for its economic development and implement projects of good quality. These principles must be applied for all projects including what China and other stakeholders participate in. In addition, the emergence of new players such as China will eventually call for new international rules on the information disclosure, discipline on government's involvement, and the positioning of foreign aid. Supporting regional effort in further utilizing GVCs for economic development, Japan and China should lead the establishment of efficient and dynamic policy environment for infrastructure development.

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Regional Integration --- Is Europe Special?

No.3 Sahoko Kaji

Date:2017.7.18

European integration has long been a reference, if not a model, for Asian integration. Recent developments cast doubt on the desirability and viability of the European version of integration, even of integration itself. As the world's economic centre of gravity shifts towards the east, Europe is seen by some as "just a museum". Unemployment stays high in some areas, the Greek debt crisis is not yet resolved, some European banks still have difficulties, the refugee crisis and terrorism continue to menace. The crises have changed Europe, unlike EMU (Economic and Monetary Union), EBU (European Banking Union) remains incomplete. Is there anything for Asia to learn from the construction of the EU? Can or should the European experience be replicated in Asia? If yes, what are the roles of China and Japan? A key to answering these questions is to understand what is and isn't special about Europe. This paper attempts to clarify these points to derive some meaningful implications to Asian integration, and suggests a possible way forward in the form of integration at sub-national instead of national levels.

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A Cautionary Tale of Market Power and Foreign Policy: Beyond the Geoeconomics of Renminbi Internationalization

No.2 June Park

Date:2017.7.18

This paper attempts to spark a policy discussion on the effects of China's renminbi internationalization and foreign policy. Defining China's market power as a form of structural power in geopolitics backed by China's consumption power, it unravels the ramifications of renminbi internationalization based on China's market power beyond the geoeconomic perspective. It argues that, such ramifications are an outcome of the strategic bind that has been gradually developed by China and its trading partners via economic transactions, owing to the market power that China possesses. Such binds are often asymmetric in bilateral relations, and increase China's bargaining leverage in foreign policy used for wielding power on the global stage. The paper therefore emphasizes that renminbi internationalization should not be simply considered as China's earnest efforts toward global currency diversification to assuage the side-effects of the dollar dominance, but rather be understood as a subset of China's global strategem, in which the renminbi is translated into a medium of power projection for Chinese foreign policy. The paper presents two case studies of renminbi internationalization - a) electronic payment services via China UnionPay, and b) oil transactions denominated in renminbi and the sale of China's renminbi-denominated oil futures that signal to the beginning of the end of the petrodollar dominance that has existed for decades since the 1970s.

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Advancing The ASEAN Economic Community: The Role of China and Japan in Supporting ASEAN's Regional Integration

No.1 Blake H. Berger

Date:2017.7.18

The Association of Southeast Asian Nations (ASEAN) quest for regional integration entered into a new phase in 2016 as the long awaited ASEAN Economic Community (AEC) entered into force. The organisation's drive towards economic integration began in the early 1990s with the initiation of the ASEAN Free Trade Area (AFTA). Since AFTA, the member states have incrementally progressing in integrating the region culminating in the development of the AEC and ASEAN Connectivity projects. While ASEAN members have been the driving force behind integration, the project would not be possible without its regional partners, especially China and Japan. This paper seeks to examine the concepts behind regional integration, the role the two major Asian powers have played in supporting the AEC and ASEAN Connectivity, the common and differing interests of the actors involved, if the structure and depth of the two states relationship with ASEAN differ, and the range of mechanisms in place to facilitate cooperation. With the AEC entering into force in 2016 and the continuing negotiations of the Regional Comprehensive Economic Partnership (RCEP), analysing the role and how to bolster China-ASEAN and Japan-ASEAN relations becomes all the more necessary.

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