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Japan's Future Role in the International Arena 

In a rapidly changing world with prosperity moving east, a deep Japanese involvement in the international arena is not only desirable, but a necessity, the country's former Prime Minister Yoshihiko Noda said during an interview. 

Sir John Major, Former Prime Minister of the United Kingdom, conducted the interview with Yoshihiko Noda during a Credit Suisse Salon held in Tokyo. (See box below for additional details about the Credit Suisse Salon). Noda now sits in the opposition in the House of Representatives, as a member of the Democratic Party of Japan (DPJ). He served as the country's Prime Minster between 2011 and 2012.

What should Japan's future role be in the Asia Pacific region?

Yoshihiko Noda: We had the era of the Atlantic region in the aftermath of World War II. The 21st century will, however, be the era of the Asia Pacific region. I am certain of that. This region includes the US, and Japan has to be very deeply involved in it, in order to benefit from the prosperity created by the region.

A Pacific Charter – in line with the Atlantic Charter (defining the Allies' post-war goals) – should be established. But who should be its maker? Japan should of course play a role here, but the biggest partner given its rule of law, routine and democratic tradition is the US. Both nations should lead, to become the rule makers of the Asia Pacific region. China may be participating at a later stage, that would be ok.

You mentioned that the 21st century will be the era of the Asia Pacific region. How should its members go about to facilitate intra-regional trade?

The best way according to me is through the Trans-Pacific Partnership (TPP) free trade agreement (currently being negotiated between Japan, the US and 10 other countries in the Pacific region). Japan needs to tap demand outside its borders, because of its demographic situation. The TPP is a starting point, which will expand our opportunities in the region. We've put in effort to accelerate the negotiations, but they haven't reached the final stages yet. I hope they can be concluded in the near future.

Japan's FTA (free-trade agreement coverage) ratio – the proportion of its trade with its FTA partners – is currently about 20 percent. To increase this figure going forward is a very important national policy. The opportunities springing up from the TPP should help.

Are there any potential risks facing the Asia Pacific region's booming trade?

Trouble may arise in the China Seas, composed of the South China Sea and the East China Sea. China is becoming aggressive in the South China Sea. This is now being understood in the US and Europe.

Rule making in the oceans would benefit from the involvement of the US, as it would make it easier to involve China in the picture. The (signing of the) TPP would be an excellent opportunity to avoid conflict in the Pacific area.

Japan is a maritime nation composed, surrounded by oceans. How is it affected by the escalating tension in the China Seas?

There are deep seas just outside Japan, where you can find precious and rare metals, as well as other mineral resources. It's critical for Japan to control its 6,800 islands and that might lead to conflict with other countries. We have to protect and control our islands as well as the oceans surrounding us.

My government, for instance, decided to nationalize the previously privately owned Senkaku Islands in 2012 to secure their property rights, in order to control them in a stable and long-term manner. At the time, China remained silent and did not send out any signals to us. This is why we moved forward.

What are there region's economic risks?

Widening income disparities around the world is the biggest single risk, as they may lead to conflicts. The Gini coefficient is a good indicator of inequality, with a coefficient exceeding 0.4 indicating there is a risk of social unrest. In 2012, both the US and China, respectively ruled by the Democrats and the Communists, reported record high coefficients – both above 0.4.

How does this widening American and Chinese inequality have an impact on Japan?

The US may become more isolationist and not prioritize Asian issues. Such a development would be negative (for the region, including Japan).

As for China, it currently focuses on tackling domestic corruption and fraud issues to diffuse the attention of the people from this rising inequality. But China may also try to draw the attention of their population to external issues, by taking drastic action in the China Seas. It may become aggressive.

A Japanese security policy has to be based on reality. We have to remain calm, not be too drastic and take cautious steps.

The current Japanese Prime Minister, Shinzo Abe, has been traveling extensively around the world. Is it simply to move Japan to the global world or does he have more specific objectives doing so?

The current (parliamentary) environment allows Abe to travel extensively overseas. It was not the case when I held that position. I'm a bit envious of him. Abe sees himself as a bit as a spokesperson for Japan. It is good that he has the opportunity to talk to various countries.

From a distance, it looks as if the relationship between China and Japan is improving, despite the Senkaku Islands dispute. How do you view it and how is this relationship developing?

After the nationalization of the Senkaku Islands, the Chinese prime minister would not even shake hands with me. Today, we're back to a situation where the Japanese and Chinese Prime Ministers at least can talk to each other. That is a progress.

We are the world's second and third-largest economic power. We can overcome issues and there are areas where we can cooperate. Both countries will have to come up with a lot of wisdom to do so.

Japan and China should not conduct disputes and be stuck on issues, but be grown-ups and deal with them.

How much does Japan worry about the situation in North Korea? What type of action do you advocate to deal with it and how far do you think China can control what Kim Jong-un does?

It is questionable whether China has influence (on Kim Jong-un) compared to the past (under his father). There is potential that North Korea can become uncontrollable.

The US, China, Russia, South Korea and Japan used to discuss the nuclear issue with North Korea. China used to be the most influential country, but it seems that China has lost some of that influence.

What is your view on relationship between Japan and Russia? What role should Russia play in the region?

With regard to Ukraine, I don't think we should be too complacent toward Russia and we should cooperate with the international community. We should focus more on the US-Japan alliance treaty.

The leader of the Russian Parliament recently met with Prime Minister Abe. He may have wanted to send a message to Putin about the Northern Territory issues (also known as the Kuril Islands). Japan is currently taking an appeasing stance toward Russia.

Japan should cooperate with the international community, but has some issues that go beyond that scope. This is a source of concern.

The US-Japanese relationship seems to be going in one direction, because the US is a good market for Japan. Would it be possible to have an American military presence on Japanese territory to in a way deter North Korea and China?

We already have the US-Japan alliance, with US military bases in Okinawa and other places. The presence of US military is essential for Japan's security but also for the entire Asia Pacific region. The US military presence is a public asset and its value will increase, not decrease. We have to maintain and treasure it.

Do you believe Japan should have the capabilities to wage a war?

Japan adopted a pacifist approach after the war. I would advocate that Japan remains a country that cannot stage a war. That would give comfort for potential investors to invest in Japan.

I of course do not hope that there will be a war or that Japan would be involved in a war. But if you think ahead, you have to be prepared.

Prime Minister Abe recently said that Japan should not be inward looking. Is inward-lookingness an issue in Japan? What is the feeling of the general public?

Japan is not inward looking; nor should it be going forward. When the 2011 earthquake and tsunami hit Japan, 160 countries and more than 40 international institutions supported us financially.

Japan has been peaceful for more than 70 years and contributed to the world through official development assistance (ODA). We've also sent out people, students overseas. This is why we were supported, not because we are or have been inward looking.

Which are the main challenges facing Japan in the medium to long term?

Our demographic situation with an ageing population and a low birth rate is one. We're experiencing this situation ahead of the rest of the world. Climate change is another. We should be sharing (our experiences about) these issues with others and try to contribute.

If you were the country's Prime Minister today, which domestic issues would have your top priority?

Japan strength used to be its very large middle class. A middle class that was optimistic it would be able to raise its living standards through hard work. Today, many people fall out of this middle class into the lower class. This is where the government needs to take action.

I have a completely different stance to that of the current Prime Minister Abe. He has adopted a trickle down stance: that if you take action at the top (of the income pyramid) it will eventually trickle down and make a difference to the bottom (of the income pyramid). This policy works in a high-growth era, but in a low-growth era people at the very bottom need to be supported by social policies. They need a safety net.

We have many other domestic issues, but I would like to highlight the high number of Japanese companies, which have been flourishing for more than a century. More than 5,000 companies, out of which 3,000 are Japanese, were founded more than 200 years ago. The oldest Japanese company was founded 1,500 years ago! They have all survived wars, depressions and financial crashes.

With such examples in mind, I believe that Japanese companies have the ability to overcome the issues Japan currently faces.