Since the end of WWII Japan has been reliant on the US military for protection, the security provided by the United States also allowed japan to engage in trade relations, for the United States this opened a market with low labor cost which could mass produce products at a lower price. Over the coming decades the US became Japan’s largest trade partner. While Japan relied heavily on the US for exports of finished products in the earlier stage of its growth this is no longer the case with China having overtaken the US as Japan’s largest trade partner in 2008 and the overall trend seems to be towards a decline in importance of the US as an economic partner. Japan’s inability to exert hard power in ways that the US and China has in the past due to provisions in its constitution which prevent Japan from having an active military, has led Japan to focus on its economy and develop soft power through cooperation and influence. As the Japanese economy has grown Foreign Direct Investment (FDI) has seen large growth especially in the US even as it levels of trade have shifted since the 1990’s. With a shift from an economy heavily dependent on exports to the United States to a more diverse economy with multiple trading partners Japan still aims to maintain its ties with the US and promote its ways of doing business. In recent years after the 2008 financial crisis Japanese FDI in the US has seen a growth compared to the ones seen after the 1971 oil crisis when the Japanese yen appreciated in value which made investment conditions more favorable. Japan’s push for greater investment in the United States has led to the creation of jobs and an increase of innovation by US companies that must now compete with Japanese technology. While Japan might not have a military like the United States to bring forth change in international politics and government policy, its use of its economic soft power through FDI in the US demonstrates that its presence in the international community is larger than it may appear.
Although Japan remains a challenger to the US in the high-technology and high value added sector of the economy Japan places less importance on exports to the US than it has in the past. This decline in trade is due to the growing global economy and the trade policies imposed by the US, in order to circumvent these challenges, Japan has relied on FDI towards the US to maintain its economic relationship. Since 2009 Japanese FDI has seen a steady increase in the US helping create thousands of new jobs and leading to innovation in the United States. More recently the push for job creation and economic growth by the Trump Administration through his “America first” approach has assisted in the boost in FDI from Japan. Through the use of soft power in terms of economic strategy, Japan has managed to recreate itself into a one of the largest economies in the world, today Japan is the largest provider of foreign direct investment in the United States, FDI allows japan to maintain greater presence in the US by creating jobs and funding large R&D projects which leads to greater economic and cultural integration of Japanese culture in the united states, the rise of japan can be attributed to its success with soft power through the use FDI. While the 2008 financial crisis slowed down global investment especially FDI from japan, stronger economic conditions and better investment opportunities has led to a renewed interest by Japan in recent years. With economic and cultural trends becoming more open through globalization japan has established a strong footing in American society which continues to benefit both states creating a win-win situation where Japanese influence and power in the international system increases in legitimacy and the US benefits of economic activity created by japanese Investments.
After WWII Japan who was once one of the most powerful militaries in the world was left with little to nothing, the marshall plan which helped Japan rebuild its economy following the war can be attributed to Japan's rise in the second half of the 20th century. Although Japan could no longer hold an active military according to article 9 in the Japanese constitution it now shifted its attention towards economic growth. For japan who was once determined to become the dominant superpower would have to find a new way to excerpt its power, as japan began to reconstruct with help of the US it became clear it could regain some of the power it once had through economic development. In Japanese international politics the use of soft power can be seen through its use of investment in other countries in forms of FDI which allows it to expand its economic activity and influence internationally and help propagate its culture beyond its border. The use of soft power through economic policy and strategy has been used by japan in many cases, as japan grew out of its post war industrial manufacturing period into an exporter of finished goods in the tech and automotive sector it began a deeper integration of soft power into its international relations strategy. This impart can be connected to Joseph Nye’s article on soft power in which he stated “The factors of technology, education, and economic growth are becoming more significant in international power” Nye argues that that traditionally countries with large emphasis on military power and conquest were successful in excreting power , although with changing international systems, countries most willing to cooperate and influence others have risen in power since WWII. Japan's inability to hold a significant military force due to provisions in article 9 has led to a greater focus on economic power and strength, this result has best exemplified Nye’s theory of soft power since it must rely on its economic strategy and cooperation to exert power over other countries. While Japan has created a distinctive alliance with the United state in such that it receives protection in return for economic activity which has helped with the instability in the region, it is un-implied that Japan and the US must conduct trade with no formal free trade agreements signed (FTA). While there has always been a power imbalance and Japan-US relation has been asymmetrical, Japan who had to rebuild after WWII grew in to one of the largest world economies by the end of the 21st century but the the power imbalance is still seen today with the United States dictating the rules since japan doesn't have a military power, Japan has risen to power in the international community through its us of soft power, being an important ally to many countries and a valuable trade partner to many others it has shown how the conventional “hard” power is not needed to influence others. Through its brands, products present internationally and culture integrated into western culture, japan's approach to soft power in international relations has proven successful in regaining its influence on the world stage.
Since the early 1970s Japan has played an increasing role in international relations through increase levels of foreign direct investment(FDI), Japan's FDI increase was brought on by the following set of events. In 1972 Japan began easing policy on FDI due to the surpluses of balance of payments which allowed easing of restrictions on FDI, it also lowered interest rates by the Japan Export-Import bank on foreign investment funds. The easing of policy alongside the rapid increase of wage rates in japan created favorable conditions for FDI, after the collapse of the Bretton Woods system in 1971 Asian currencies especially the yen began sharply appreciating against the US dollar, which led to greater FDI in newly industrializing economies (NIE) and subsequently into the United States. Japan sought to outsource manufacturing by opening subsidiaries in other countries, as this practice became more widely used it became favorable to conduct business in the United States. By the start of the 1980’s Japan saw even greater outflows of FDI, this FDI began taking form of foreign investment in the secondary and tertiary sector compared to the primary sector in previous decades, from 1985-1989 the appreciation of the yen allowed for Japanese corporations to increase FDI since it cut costs of investing overseas especially in the US by half. Change in local and international policy brought forth a wave of japanese FDI which now saw much more favorable investing opportunities overseas. By the start of the 1990s japan had heavily invested in FDI in the US the reason for this was due to trade barriers imposed on international corporations in order to increase focus on local production, trade barriers such as such barriers such as VER’s imposed by the US on japan in the 1980-1990’s reduce the inflows of foreign components and products in to the US. For Japan however this meant that it would have to set up subsidiaries in the United States in order to maintain its presence in the United States and remain competitive. While Japanese’s corporations have set up subsidiaries in the US many have not been profitable like their Japanese counterparts, this is because costs of labor are much higher in the United States, although at the time japanese companies expected to become more profitable as their operations expanded. As Japanese FDI in the United States continues to grow some more notable American corporations and real-estate have been purchased by rapidly expanding Japanese conglomerates, some of these acquisitions such as the Rockefeller Center and Columbia pictures top the list of large acquisitions. Throughout the end of the 20th century, Japan's FDI grew at faster pace, with now a increase focused on investment in the United States.
In the 21st century Japan-United States trade relations have continued to become more complex, with Japan maintaining a large trade surplus the US have taken a harder stance on balancing trade, increasing tariffs and other policy to even the playing field this has led japan to use different methods in order to avoid these tariffs and remain competitive in the US. Japanese FDI in the United States has grown at an even larger pace since the end of the 1990’s with FDI reaching US$469 billion by the end of 2017, this number which has grown 3 fold since the early 2000’s indicating Japan's aim to work around tariffs and policies which have affected trade over the years. Through FDI japan has helped create employment growth and economic development in the US predominantly in the manufacturing and auto industry, alongside japan has also greatly contributed to R&D through FDI. Japan's use of soft power through FDI has help it maintain strong economic ties with the US and push for more open policy in the US which would benefit international trade and economic development in the US, while the current Trump administration has taken a harder stance on international trade, it has advocated an “America First” policy which japan can greatly benefit from due to its focus on FDI in the US.
Japan's use of soft power through FDI in the US has helped support manufacturing and the automotive industry which has been moving its production from the US to developing countries where labour costs are lower, it has also forced American corporations to place greater focus on innovation in order to stay competitive with japanese firms. With japanese FDI in the United states on the rise since the 2008 recession in both relative and absolute terms, this has allowed for an increase in job creation and economic development to take place Japanese FDI which is heavily represented in the Auto & manufacturing industry, has also played an important role in policy change which benefits US and non-US multinationals that operate in the United States, these policy changes allow for better investment conditions which make the United States a more desirable environment to conduct business in,“This Includes policy initiatives directed at improving the skills of US workers, changing immigration and visa regulations, upgrading US infrastructure, and restructuring US corporate taxation.”. In the 1980’s when japanese firms began setting up operations in the United States they often operated at a loss or minimal profit, this led to the assumption that japanese firms would focus on low value added activities in the US creating low skill manufacturing jobs, although in 2012 japanese firms have contributed more than $93 billion dollars to the US economy, Japanese firms operating in the US are investing in R&D activities which help create high paying, high skill jobs. While the initial objective of Japanese FDI in the US was to circumvent tariffs on imports from japan in the later part of the 20th century, today FDI has helped Japan establish a strong presence in the United States which strengthens its ties. Japan-United States economic relation which stems from japan's dependence on US security and its access to the US economy and for the US, its need to maintain a presence in east asia has made them critical allies, Japan-US foreign economic agendas has been centered around their bilateral economic relations. With Japan heavily influencing US trade policy through its use of FDI in the US has led to more favorable trade conditions and help it balance its power with the US who holds large military operations in Japan and provides the majority of its security in the region. Since the Trump administration has taken office in the United States there has been a much greater push for increase investment form the US’s trade partners, Trump who has been vocal of his “America first” plan has also aimed to push for smaller trade deficits with countries such as china and japan, while this has put strain on their relationship there has been a large increase in Japanese FDI in the US since 2017 with FDI increasing 70% in months following him taking office. While FDI in the US has continued to grow, the trend of larger investments have begun taking place with the total number of projects decreasing, these projects will most likely increase high skill and high paying jobs in the United States. Japanese firms such as Toyota, Mazda and Denzo have helped create more than 860,000 jobs in the past decades with more than 20,000 jobs created in 2017. The significant increase in Japanese FDI in the United states is primarily due to Japan's push for a larger presence outside asia which increases its influence and power overall, through FDI Japan has exerted its soft power on the United States ultimately creating economic growth and employment in the US along with policy change that greatly benefits international trade.
In the past two decades Japanese FDI in the US which has predominantly been targeted towards the automobile and manufacturing industry, has also been used for R&D activities, these R&D activities by japanese corporations help create high skill and high paying jobs and help created greater value to firms with in the United States, this in turn allows japan to maintain a greater presence in the US and play a larger role in the US economy. By the end of the 1990’s to the beginning of the 21st century japanese R&D through MNC in the US had risen more than 10% per year. Japanese R&D investment in the United States has seen such a rapid rise due to the US’s large economy, especially its growing technology sector which has seen the greatest potential for growth in past decades, by 1998 53% of Japanese R&D went to the United States making it the largest recipient of Japanese R&D investment. In 2018 Japanese R&D has continued to grow with an even greater emphasis on technology and the automotive industry, these R&D projects greatly benefit the American automotive industry by creating more efficiency and competition in the industry which has led to greater innovation. In return for R&D investment in the United States, Japan is able to maintain a stronger influence over the US economy and policy. This influence is important since Japan does not have any formal bilateral free trade agreements with the United States. Although the trump administration might see Japan's push for greater trade and investment as an opportunity to form a bilateral trade agreement, this could lead the signing of FTA which prime minister Shinzo Abe and the Trump administration would both see beneficial.
When observing Japanese-US relations especially in terms of economic policy and integration it is apparent that there has been a shift in the dynamic of their relation, with Japan once depended on the United States as its largest trading partner and main recipient of Japanese exports. Today Japan's total trade has declined in the US, however a much greater level of integration is present with Japanese firms heavily invested in the US through FDI and the rising number of american capital flowing into the japanese economy where investment conditions have become much more favorable due to japan’s trade liberalization, this signifies an increasing level of integration between the Japan and the US. Integration between Japan-US economy has heavily evolved over the past years, with Japanese FDI steadily increasing , Shinzo Abe’s push to reform japan's economy and until recently the signing of the Trans Pacific Partnership which the US backed out off in 2017. These shifts benefit both economies and help strengthen their relations. As this relation policy is changing, the US who previously mainly focused on increasing investment and trade with japan is focusing on investment in Japan, “the United States aims to expand access to Japan's markets, increase two-way investment, stimulate domestic demand-led economic growth, promote economic restructuring, improve the climate for U.S. investors, and raise the standard of living in both countries” this shift in trade relation which for the better part of the past century saw japan benefiting from trade with the US and the US getting access to east asia through military operations in japan now looks to increase its economic presence in in the region especially with japan who under Shinzo Abe has sought to push for greater trade liberalization. Increase in liberalisation in Japan would remove trade restrictions and ease policies that border on protectionism, while this could affect industries such as agriculture in japan which has remained fairly untouched for the past decades by creating competition it would also introduce greater inflows of US FDI. Greater inflows of US FDI in Japan would lead to an increase in economic activity in japan and greater level of bilateral economic relations and an increase in Japanese-US integration.
While the case for Japanese FDI in the US shows increase in integration between both countries, it is also important to note the changes occuring in the Japanese economy, with the US shifting its focus from Japan to china's rising threat in recent years Japan has found new major trading partners in asia, especially with china who is now japan's largest trade partner since 2006*. Although even if china has become Japan's largest trading partner it does not have the same ties as Japan has with the US which can be seen with japan signing the TPP which would have been a deterrent to china's rising power in asia. Japan-US trade relations, although diminishing still hold a important presence in international trade, their total trade in 2017 was 283 billion dollars of which japan had a trade surplus of 55 billion dollars. This trade deficit for the US is impart reason for the Trump administration's push for greater trade and cooperation with japan, since balancing trade has been a central goal of the administration.
Another aspect of japan-us integration relies on their cooperation in the asian region dealing with rising issues especially potential threats such a china's growing power and the threat of North Korea.While Japan relies on the US military for security, its FDI in the US has allowed it to become a closer ally with the US and exert greater influence which has played an important role in international relation, with japan siding with the US in conflict in the region economic integration with the United States benefits both states greatly. To conclude while overall trade between Japan and the United States has decreased in relative terms over the past decades, increase in FDI in the US, the Trump administrations pressure on japan to balance trade deficit with the US and Shinzo Abe’s push for greater trade liberalization has led greater economic integration.
Looking forward, Japan which has played an important role in the US economy and politics in the decades following the cold war has seen the emergence of its large financial institutions heavily investing in the US equities and business, large banks such as Soft bank has become a prominent investor in the field of US technologies and start ups with the funding of such companies as Uber, Wework and Boston Dynamics. These innovative investment heavily reflects on Japan's Abenomics and trade policy. Abenomics which was initiated in 2013, is prime minister Shinzo Abe’s economic vision for japan, which consists of monetary expansion, fiscal stimulus and structural reforms, the goal of abenomics was to end japan's cycle of deflation which has affected its economy since the early 1990’s. Under Abenomics, monetary objectives were to increase inflation targets 2% which would of been the highest year to year rate since 1991, following a 2% increase in GDP budget would be used to create fiscal stimuli and finally structural reform which would stimulate GDP and increase economic growth in japan. Together these objectives or the three arrows would stimulate growth in the japanese economy, other than government economic reform abenomics also focuses on strategic economic reform that will benefit japan, such as greater investment in sectors that will better japanese society, these objectives relate to the large increase in japanese investment in innovative organizations that are changing the way people live. Through the use of FDI in the US Japan has a greater reach in innovative investment potential, allowing it to invest in organizations that are redefining society, this allows Japan to gain a greater influence in international politics and in the US by placing a greater focus on innovation. Soft Bank which operates the Vision fund has become a large investor in the US technology sector, creating new employment and economic opportunity, in 2016 it pledged 50 billion dollars of investment in the US and to help create 50,000 new jobs. While Softbank is one of the most prominent in past years, the trend of japanese FDI in the has been growing and with the Trump administration and their “America first” policy this will remain japanese MNC best method to increasing their trade with US corporations.
When looking at Joseph Nye’s Soft power, the current situation between Japan and the United States can best be described as follows; The power imbalance that Japan has faced with the United States is primarily due to japan's dependence on security from the US which stems from Japan's military restrictions since WWII (article 9) and the growing instability of east asia during the cold war, today japan's dependance on the US stems from its historic reliance. As japan grew from a country decimated by war to the 2nd largest economy by 1991, it could now use its economic power and capabilities to influence international politics, its use of soft power as joseph nye proposed could balance the uneven playing field. Today it has managed to apply “Soft Power” through foreign direct investment in the US, this has allowed Japan to exert greater power and influence in the international system, this is achieved by the its role in economic growth, job creation, the investment in innovative technologies and trade policy changes in the US. Japan's increase balance of power with the United States has stemmed from cooperation and increase economic activity with the US As Japanese-US relations continue to progress japan will continue gaining influence and power in international politics, giving it more power in its relations with the US
As Japan enters a new era of international politics, it must use its previous experiences to greater strengthen its economic and political relations moving forward, while Japan has seen major growth since the end of WWII followed by a slow decline in its economy which has placed it a recession since the 1990’s, Japan has managed to maintain strong ties with the US through trade and security agreements, while it doesn't formaly have an FTA with the US Japan which has often been imposed tariffs on has managed to grow its economic presence in the US through FDI. The use of FDI in the US has also allowed japan to increase its influence and power in the US through job creation, economic growth and policy change, this use of soft power has proved that japan who lacks the military influence has managed to gain power through cooperation and influence. Today Japan is the 3rd largest economy and has returned to growth levels prior to the 1990’s due trade liberalisations and policy change brought on by Abenomics and a push by US to increase trade and reduce current deficits this has increase its influence and power and created a more level playing field with the US. To conclude Japan while weak in military power maintains important influence in international politics and its US relations through its use of soft power and FDI.