Working Papers

Hot Economics, Cold Politics? Reexamining Economic Linkages and Political Tensions in Sino-Japanese Relations (with Sara Newland)

Scholars often claim that East Asia is characterized by “hot economics and cold politics.” While economic linkages between East Asian countries proliferate rapidly, mutual distrust and unresolved historical tensions seem to present a continual obstacle to the development of closer interregional political ties. This dynamic is particularly evident in the bilateral relationship between Japan and China. Though it has much to gain from trading with Japan, China continues to experience strong domestic anti-Japanese sentiment and periodic protests over issues such as history textbooks, territorial disputes, controversial Japanese statements about the Nanjing Massacre, and visits by politicians to the infamous Yasukuni Shrine. Despite the frequency with which the “hot economics, cold politics” thesis is invoked, however, there have been few attempts to test its accuracy or to specify the conditions under which it holds true. To what extent do firms react to these political debacles, and to what extent are the latter simply demonstrations of nationalist rhetoric? We tackle these questions by using a combination of event analysis and nonparametric matching techniques to examine the effects of a series of negative shocks in Sino-Japanese relations on specific types of companies listed on the Tokyo Stock Exchange. Our findings indicate that when shocks are unexpected and have potentially large-scale consequences, companies dependent on the Asian sales market are more negatively effected than otherwise similar companies. This suggests that a firm’s value is partially tied to Sino-Japanese bilateral relations and that political tensions are indeed important for the future of economic linkages in Asia. Our findings help to clarify the relationship between economic integration and political tensions between these two key countries, making a contribution to the understanding of Asian regionalism and the broader relationship between conflict and economic interdependence. Early versions of this paper were presented at the 2010 Annual Meeting of the American Political Science Association and the 2010 Annual Meeting of the Western Political Science Association. A portion of the research for this project was conducted with the support of the Japan Foundation.

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Between Aid and Arms: Japan’s Emerging Approach to Defense Capacity Building

Over the past decade, the Japanese government has quietly sought to enhance its security by promoting “defense capacity building,” helping other countries to improve their own security capabilities through a myriad of activities ranging from underwater medical training to provision of equipment. Why has Japan decided to pursue this as a national security strategy? What factors shape Japan’s defense capacity building program? How has Japan’s activities changed in the wake of the security reforms undertaken by the Abe administration? I argue that Japan’s defense capacity building activities have been influenced by concerns about external perceptions of Japanese activities and by the structure of domestic aid and defense institutions. Recent security reforms such as easing of arms export regulations have served to enable expansion of programs; however, institutional conflicts and limited experience mean that challenges remain in determining the future direction of these programs and ensuring their success. An examination of Japan’s defense capacity building program helps to shed light on how the country’s security posture is changing in response to domestic politics and shifting regional threats.

Security by Proxy: Defense Capacity Building as National Strategy

Under the banner of “defense capacity building,” major powers are increasingly providing assistance to less capable countries through activities ranging from underwater medical training to provision of fighter jets. However, there is little consensus about what this term means beyond the broad intention to improve the capacity of recipient states to more autonomously influence the security environment for the better. What exactly is defense capacity building? What explains the increasing frequency of its use as a security strategy? In this paper, I offer a new conceptualization of defense capacity building, building on three dimensions: activity scope, recipient character, and supply versus demand orientation. I then analyze the defense capacity building activities of the United States, Japan, and NATO countries, identifying differing trends in approaches. I argue that the increasing activity and discourse around defense capacity building reflects both a recognition of the growing complexity of the international security environment and the desire of declining powers to use partnerships to shore up their increasing vulnerabilities. Greater theoretical and empirical understanding of this concept will enable scholars to better characterize the range of national responses to the shifting international balance of power.