U.S. policymakers seem to have given up on Japan. Who can take a country seriously when its June 25 elections featured almost no debate on how to revitalize a stagnant economy? When the electorate returned to power one of the most unpopular coalition governments and Prime Ministers in post-war Japanese history? When the bureaucracy stubbornly refuses to reduce the access fees that NTT charges for internet service, even though information technology is the only hope for Japan to achieve higher productivity to compensate for a rapidly aging society? The common wisdom in Washington is that Japan is incapable of “leadership.” All eyes turn instead to the problem of managing Asia’s new rising power— China.

But the common wisdom is misguided. Just as the United States overplayed the Japan threat in the late 1980s (remember the book The Coming War with Japan), the current rumors of Japan’s demise are, as Mark Twain would say, greatly exaggerated. “How can Japan demonstrate leadership if its economy remains stagnant for the years ahead?” people will ask. But people are asking the wrong question. The United States tends to define Japanese “leadership” as Tokyo doing what Washington wants without Washington having to tell Tokyo to do so. The prospects for that sort of “leadership” may not be very good. However, the prospects for Japan becoming a more significant player in the international system are very high. To understand why requires a view not from Washington, but from Tokyo.

First, whether or not Japan’s GDP reaches its potential growth rate of 1 to 2 percent in the decade ahead, Tokyo sits on considerable assets in the international arena. Japan is the second largest contributor to the United Nations, the International Monetary Fund, the World Bank, the Asian Development Bank— and just about every other multilateral institution that sustains the world order. In the 1980s Japan achieved this status by recycling massive current account surpluses out of a sense of “giri” or “obligation” to repay international society (and keep Washington off its back). Today, however, the debate in Tokyo is about how to maintain Japan’s diplomatic “weight” in the world at a time of declining relative economic power. The domestic pressure will almost certainly increase for the Japanese government to get more influences for its money. Phrases like “no taxation without representation” and prioritizing “national interest” are now far more common in the halls of the Diet and the government than the phrases “international contribution” and “obligation” thatcharacterized spending on international affairs in the late 1980s and early 90s. Tokyo is not about to stop spending on international institutions, but it is already far more active in trying to shape their agenda. Japan’s proposal for an Asian Monetary Fund in 1997 and subsequent lobbying to change the “free market fundamentalism” of the IMF and World Bank are already having an impact on those institutions. In the UN, Ambassador Richard Holbrooke has made common cause with Japanese Ambassador Yukio Sato on Japan’s reform agenda for the Security Council because politicians in Tokyo are threatening to cut back on Japan’s UN dues without better representation. Money talks and Tokyo is finding its voice.

Second, Japan’s economic weight in Asia continues to be enormous. Despite the “rise” of China, two-thirds of Asian GDP is Japanese, and Japan’s economy is seven times the size of China’s. Tokyo claims to have committed over $80 billion to help the region recover from the Asian economic crisis since 1997. This huge commitment was broadly supported at home because it gave meaning to Japan’s “Asian” identity, but more so because without it shaky Japanese companies would have been dragged down by their debt exposure in the region. The Japanese economic model may not hold the attraction it once did, but Tokyo’s rhetoric against hedge funds, IMF conditionality, and other aspects of “market fundamentalism” wins points in other Asian capitals.

Third, Japan is increasingly moving as an independent strategic player in the region. Polls show that support for the U.S.-Japan alliance is higher in both countries than it has been since 1986, but within that broad support there is a growing consensus among Japanese that their nation must have more ownership of the alliance and do more on its own to influence the security environment. The intellectual ferment over security policy in Japan is stunning to long- time observers of this pacifist nation. Over 60 percent of the public now supports changing the Peace Constitution (90 percent of Diet members under 50 want revision). Over 50 percent of Japanese now view China in a negative light. Thirty percent think there could be a war in Northeast Asia in the near future. Eighty percent support once- controversial contingency legislation to respond to security crises. In a word, Japan’s security policy debate is steadily becoming more “normal” and more “realist” (in both the theoretical definition and the real world meaning). This shift is occurring because of generational change; fatigue over apologizing for history; insecurity caused by the stagnation of the economy; and the clear and present danger thrust in the Japanese consciousness by events like the 1996 Taiwan Straits crisis and the August 1998 launch of North Korea’s Taepodong missile.

As a result, Japan is far less passive about its security environment. Tokyo has a proactive agenda to shore up political and even security cooperation with Russia, South Korea and ASEAN as a balance to Chinese influence and in order to constrain Pyongyang. Japan is also scrutinizing the U.S. defense commitment more carefully. Washington’s tepid response to the North Korean missile launch in August 1998, for example, sparked unanimous support in the Diet for development of an indigenous Japanese spy satellite system as well as an unusual Diet debate about Japan’s constitutional right to pre-emptively strike North Korean missile sites. After the launch, Tokyo also began balking at paying the $1 billion it had committed to the Korean Peninsula Energy Development Organization (KEDO) for construction of two light water reactors in North Korea as part of a 1994 deal to end the North’s nuclear weapons development program. U.S. diplomacy toward the North had largely ignored Japan up to that point since the primary locus was the Four Party Talks, which included only the two Koreas, the United States and China, but not Japan. But after Tokyo’s volatile response to the North Korean missile launch, Washington had no choice but to consult more with Tokyo to keep the Japanese on board. This was a large part of the motivation behind the establishment of the U.S.-ROK-Japan Trilateral Coordination and Oversight Group (TCOG) in 1999 — a long overdue measure initiated for the administration by former Secretary of Defense William Perry.

Finally, as frustrating as Japanese political leadership is to the Japanese people and the U.S. Government, one should not be blinded to change by the Kremlin-like staying power of the LDP faction leaders. Yoshiro Mori is not winning any points in the international or domestic press for his repeated gaffes and poor understanding of policy issues. The real power behind the throne, Hiromu Nonaka, represents the last of a traditional style of LDP political leadership that emphasizes consensus, incrementalism, protection of non-competitive sectors like agriculture, and deference to Japan’s neighbors because of past history. After Nonaka, however, there is a space of several faceless ranks in the Diet (the exceptions being perhaps Koichi Kato and Makiko Tanaka for those who follow politics in Japan)— and then a rich crop of younger, more assertive and internationalist politicians united by their desire to thrust Japan into a more active and respected role in the world. For the next five years or so, there is an unfortunate probability that Japan’s new attitude towards the world will not be captured in the personality of a dynamic new leader, but that is not a permanent or debilitating condition. As the respected historian Carol Gluck has observed, Japanese political institutions are stubbornly resistant to change, even as society and culture undergo massive transformations. She points to the staying power of the Tokugawa Shogunate after the arrival of Commodore Perry’s “Black Ships” in 1853. After about two decades of clinging on, of course, the Tokugawa Shogunate collapsed completely and modern Japan was born.

Does all of this mean that Japan is capable of “leadership”? Perhaps not by our traditional definition. But the lessons of the past few years clearly demonstrate the consequences of assuming that Japan is losing its significance in international affairs. The fact is Japan remains our most important strategic partner in Asia. Indeed, Japan may be the only power other than Russia and the United States that has some level of influence and presence in every corner of the globe. And few U.S. policy goals can be achieved without active support from Tokyo.

The task of the next U.S. administration should be obvious, though not necessarily easy. Japan seeks a close alliance with the United States but also a more independent identity. Japan’s political leadership gives no face or coherent strategy to what is nonetheless a cohesive, persistent, and increasingly assertive worldview. Japan’s decisionmaking process is becoming far more pluralistic and unpredictable because of political realignment and the declining power of both the bureaucracy and the LDP. Small issues related to the maintenance of U.S. bases or reducing barriers like the NTT access fees will therefore consume more time from senior U.S. policymakers, crowding out the larger strategic issues that we should really be coordinating. Utilizing the potential of the U.S.-Japan partnership and avoiding the distractions of divergence will require a long-term strategic view in the United States.

Several steps will help.

First, the United States should raise the bar of expectations for Japan. It is not just a matter of “no taxation without representation.” Tokyo must share not only financial responsibilities, but also risk, if it wants a larger voice. Japanese UN peacekeeping should be expanded and encouraged, for example, beyond its current constrained formula. The popular support for such a role is there in Japan, and the politicians must be pressed to build on it.

Second, the United States and Japan must end surprises. Too often Tokyo and Washington have announced initiatives or policies over the past few years without the other side being fully read in. At the level of the NSC, U.S. and Japanese officials should lay out their six-month agenda for international organizations, China policy, arms control and the like. The two sides should agree on strategies to support mutual objectives and to minimize damage where there is divergence. Bold public bilateral initiatives are not necessary, but quiet coordination is critical. Tokyo should be reminded of how often its uncoordinated policy initiatives have failed for lack of U.S. support. Bad ideas should be stopped. But the U.S. policymakers must find areas of diplomacy where Japan is given the lead and backed by strong U.S. support. Japan’s initiatives for UN reform could be one example, or Japan’s initiatives in the Asian Development Bank. It is no longer sufficient to think of diplomatic coordination with Japan as the process of stopping Japanese initiatives and securing Japanese funding of U.S. initiatives.

Third, the United States should demonstrate its unambiguous support for a larger Japanese political role in Asia. Beijing’s strategy is clearly zero-sum — to minimize Japanese political influence in the region and strengthen bipolarity between China and the United States. The net effect will be decreased U.S. leverage and growing frustration in Tokyo, as well as a more pronounced Sino- Japanese rivalry. U.S. rhetoric about a Sino-U.S. “strategic partnership” does not help. Instead, China should understand the appropriateness of a larger Japanese role. This is also true of those in the United States who have traditionally feared a Japanese “yen bloc” in Asia or a remilitarized Japan. After all, Constitutional revision, if it occurs in the next five to ten years, will be a democratic and transparent process in Japan and should not be feared. Expanded Japanese peacekeeping will occur through the United Nations, and is not unilateral “remilitarization.” Internationalization of the yen and greater integration of Asian economies will only happen if Japan’s own financial markets are deregulated and transparent. Autarky in Asia is impossible for Tokyo. In other words, these potential changes in Japan are consistent with a more open and accessible Japanese system. The alternative— an introverted, unempowered, and resentful Japan— is hardly in U.S. or even Chinese interests.

Japan is a good ally. It is not quite as strategically reliable as Great Britain, but it has rarely undermined U.S. foreign or security policy the way other middle powers like France or even Canada have. The United States should not squander its unipolar moment by letting hubris and disinterest push Japan in the wrong direction. Veteran diplomats know that working with Japan is labor-intensive, but U.S. strategic interests leave no other choice.