Senior Vice President for Economics and Simon Chair in Political Economy
Center for Strategic & International Studies (CSIS)

On being a “gaijin” in Japan in the 80s, being cursed in 90s, the rise of China, relationship with Korea, with Myanmar, Trump to Biden, catastrophic mistake to withdraw from TPP, democracy, Japan’s “stock” and opportunity to step up.

Matthew Goodman: It’s cool to be a Japan Expert Again

Let’s take a trip around Asia Pacific with Japan as the starting point.  Our guide will be Matthew Goodman, a policy specialist in the region with a wealth of experience and insights formed through his long career both in the public and private sector, and hence a keen observer of this critical part of the world.

Matthew arrived in Japan for the first time in March 1983 with no job or connections, other than Keiko Atsumi, who had worked with his father at the World Bank.  She introduced him to JCIE (The Japan Center for International Exchange, founded by my late-uncle Tadashi Yamamoto) and the English version of Nikkei Shimbun (a major Japanese newspaper), where he got some part-time work.

He came to Japan for three reasons. 

One, Matthew’s father worked with Japan at the World Bank in the 1950s and 1960s, and he often brought back from business trips, gifts and photo images of Japan. 

Two, after college, Matthew worked for awhile on Capital Hill as an intern, and there was a colleague studying Japanese because he was going abroad to Japan to teach English, and Matthew thought that was kind of cool. 

Three, he read “SHOGUN”, a stylized novel (authored by James Clavell in 1975, later

a TV mini-series) about the first Englishman to serve the shogun in feudal Japan.

These three reasons caught Matthew’s imagination, and since he didn’t know what he wanted to do with his life yet, he decided to travel to Japan. 

He remembers loving it from the beginning.  Riding into Tokyo from Narita Airport on the commuting train, the cheapest form of transportation, he was crammed in with other passengers but was awed by the various colors and senses that he experience during his ride into Tokyo.

The very first place he stayed was a small place, just to hang your hat.  Half of the people staying there were “gaijin” (non-Japanese) travelers, and the other half were Japanese day laborers.  Matthew shared a room with 5 of these guys, and they all smoked.  They left quite an impression on the young Matthew Goodman, but at 1500 yen (about $6.5 at that time) a night he didn’t mind, and felt he had a great start.

He did move up in terms of his living quarters however, when he started to receive steady income working for JCIE, Nikkei Shimbun English Version, and as an instructor for GMAT cramming courses for Japanese preparing for entrance exams to MBA business schools in the US. 

Keeping this busy did seem to keep Matthew out of the heavy drinking tradition of many Japanese salaryman in those days, most of the time.

The 1980s, was an age of “Japan As Number One”.  Japan was wealthy and comfortable, and for a gaijin it was easy to get around, with plenty of English signs.  Back in those days, he could be the only gaijin in the area, even for a metropolitan area like Tokyo, which felt a little bit strange, but never uncomfortable.  Matthew was impressed how well the Japanese society worked.  Everything seems to be efficient, and it was always easy to find a good meal.

After he had left Japan, reflecting back on the “Lost Decade” of the1990s, Matthew felt that there were some over confidence in Japan in the late 80s, as well as some policy mistakes.

The 1990s saw some fundamental structural problems in Japan, like demographics.  The problems regarding aging society were starting to loom. 

Matthew believes that the narrative for those years were a bit exaggerated, since Japan was not completely stagnant.  But Japan went from being a very exciting place and people being envious of Matthew’s ability speak Japanese to almost being a curse in 1990s. 

It was not cool to be a Japan expert.  So, people like Matthew had to reinvent themselves as “Asia experts.”

But now, Matthew says, “Japan is back.  Now it’s cool to be a Japan expert again.”

So, what changed?  Matthew observes that Japan stabilized, and regained some lost confidence.  There was better policy, especially vis-à-vis the world that caught attention, which was combined with Japan’s soft power like, sushi and anime.  This convergence made Japan interesting again.

Much more recently in his network of professionals in think tanks and academia, there is a lot of concern about China, and Japan being a really important ally is “incredibly important for Americans” says Matthew.

“Made in Japan” in was the success model in the Showa Era (1926 ~1989) when Japan satisfied the mass consumption needs of mostly developed countries of the world by mass production, while Heisei Era (1989~2019) the model was modified to “Oh I am so sorry, I will make it in your country – Made by Japan.”  However, this era started as “Japan Bashing” but ended up being “Japan Passing.”

For the new Reiwa Era starting from 2019, I hope the new model will be “Made with Japan,” co-creating prosperity and sustainability with the world, hence the naming of this podcast.

Matthew agreed that this makes lots of sense.  The reason Japan was hot in the 1980s was because of trade frictions and displacement in the US, which was all exaggerated in hindsight.  During the decades of “Made by Japan,” Japan invested heavily in the US, and while also slowing down, which posed less threat to the US and led to changed perceptions.

Matthew believes that the recent hopes and expectations for Japan leading to “Made with Japan” are characterized by two things,

The first point is that former prime minister Shinzo Abe did do something really important by stepping out into Asia and the world.  Japan contributed to establishing new set of rules and norms, particularly in the area economic affairs. 

Japan managed to keep TPP (Trans Pacific Partnership) even after the US left.

Other initiatives like “Quality Infrastructure,”

“Data Free Flow with Trust” across borders with security and privacy.

Japan also proposed “Free and Open Indo Pacific Strategy,” which the Trump Administration picked up those exact words for their Asia strategy, and the Biden Administration have endorsed same concept.

This is the basis for Japan being an important partner for the US.

The other important point is the rise of China.  Matthew admits that this rise is certainly spectacular and have brought good things for many in the world.  800 mm Chinese rose from poverty to middle class, which is obviously a good thing.  But China is also a challenge for the US, Japan, and others, Matthew warns.  On the other hand, Japan’s marketed oriented democracy have rules and norms that the US is comfortable with. 

I posed a question to Matthew regarding democracy.  Japan’s position in Asia has been a democratic stronghold.  But, democracy is under difficult times, as seen in the US in recent years.  Japan is stable, yet the opposition party is in a weak position, which raises some questions regarding validity of democracy here.  And, then there is China, saying that they have the better model.

“Time will tell,” says Matthew.  He still believes that we have the better model, referring to the famous Winston Churchill quote, “Democracy is the worst form of government, except for all the others.”

Matthew admits that democracy is messy, and it doesn’t work very well sometime.  A representative democracy of elected official working on behalf of ordinary people have two problems.

First, it did not deliver to the people, especially regarding transitional pains from the ever-changing global economy.

Second, with the internet and social media, the flow of news and information directly to the people is having effects on the representative indirect form of democracy. In the past, there were only 3 major TV stations and everybody basically got the same information and news.  That is not the case anymore.  People are more empowered and have access to information and news like never before, some of which are unreliable.  It is difficult to get the people on the same page regarding the facts.

This new political conditions for the new age raise a question regarding the impact of the millennials in the United States.  This young generation, with much more ethnic diversity, is going to be the largest population bracket in the US, and therefore will be a large political and economic force going forward.  Also, what kind of effects will it have on “American Values.”

   Matthew believes that “diversity is a great source of strength of the US, and it does not undermine values in the US.  There might be some changes on the margins, but the current important discussions about gender, race, and equality will strengthen the US.

Millennials are at the forefront of challenging the traditional structure, but in the long term, Matthew is very optimistic that this will be good for the US.

There will of course be structural problems in US democracy, since most millennials are in urban areas, while American political structures favor the rural areas, which tend to be more white, more male dominated, and less educated. 

Matthew thinks that it is important to get through the current challenges in democracy, if the US is to continue to be a strong beacon for rest of the world. “We must keep our doors open,” says Matthew, because “diversity is our strength.” 

If one were to count back several generations, all Americans are from somewhere else, and immigrants finding success is source of strength of America.  If the US shuts down their borders and discourages immigration, Matthew worries that they will run short of new jolt of energy and ambition that immigrants bring to invigorate American society.

The Chinese authoritarian model may have performed better in addressing Covid-19, after some early big mistakes and lack of transparency.  It is true that China organized better to get economy back going again.  But China has to deal with their long-term trajectory, with their huge demographic problems.

Matthew notes that in 1950 around the start of the People’s Republic of China, there were 500 million Chinese.  Currently, that is around1.4 billion.  But this number will peak in the next 5 years, just like how Japan’s population peaked 2010.  It is forecasted that in 2100, China’s population will be back to 500 million, 150 years after its start.  “This is a catastrophic decline,” says Matthew.

Japan was already a rich country when the aging society started. This is not the case for China.  There are environmental as well as financial challenges, and China has not been able to move out of the middle income trap.  It will have issues trying to be a high value-added economy while having tight government control, and it is getting tighter and tighter these days. 

 But China cannot loosen up because that will raise questions regarding the legitimacy of the Communist Party.  Therefore, in his view, the foregoing conclusion that China is going to continue their rapid projectory raises some questions.  He is not predicting failure.  If China does fail, that will be much more of a problem for the US and Japan.  But perhaps in 20 or 30 years we will look back on China today, like Japan in the 1980s, “Wow, that was an anomaly.”

Matthew agrees with my observation that Japan was able to go through three decades of slow growth, because of the “stock” that the society had accumulated in the previous decades.  This stock was financial as well as a psychological buffer.

China does not have the same kind of accumulated stock, and the social divide between the “haves” and the “have nots”, “urban” and “rural” is severe. 

Matthew thinks that it is over-simplified regarding the notion that whenever China has problems internally within their borders, they tend to make advances externally beyond their borders.  However, he does feel that there are two sources of legitimacy for the Chinese Communist Party, and that is the economy and nationalism.

If there is economic slowdown in China, having them push out nationalism is bad news for Japan and the world.  So, growth is crucial for China.

There is some debate in Matthew’s circle about whether China’s aggressive posture towards Hong Kong and Taiwan is about their desire to reestablish their glory and reclaim ancient historical dominance, or fear that if they don’t keep their economic wheel going that they are going to miss their moment.

Matthew admits that he sounds a bit too pessimistic, since China has surprised the world so many times over the last 30 years, and one should not underestimate their prospects.  There is lots of talent and ability there, and if they can tap into that, they will continue to be formidable.  However, he does think it is wrong to say that China is on this inevitable upward trajectory to become a dominant player in the world or even in the Asia Pacific region.

 Even though the US changed from the Trump Administration to the Biden Administration, Matthew thinks that there is a lot of continuity regarding China.  Despite a lot of controversial policy decisions, the Trump Administration did shine lot of light on competitive aspects regarding relationship China that was understated or underexplored, in areas like competition over technology. 

The Chinese invested heavily on their technological capability including through policies where US felt that it was not reasonable or fair.  All of these concerns were going on before, especially in the later Obama years, but according to Matthew, the Trump people certainly took it to a new level.

This new level of awareness and concern is still exist, especially in technological competition.  Biden Administration has more concerns on human rights issues in China, but probably less on trade deficits. 

Matthew is not expecting massive tariffs against China.  Biden Administration will likely take a more targeted response, not shutting everything down or decoupling the economies, but rather acting more selectively to disengage in some areas or brush China back on some other areas.

Matthew feels that Biden will be focused on investing in American strengths.  The new president’s priorities are to repair economic disruption from Covid and also to invest in infrastructure, research and development, education and the caring economy in order to be strong at home.  Matthew believes that “Trump talked about making great again, but didn’t do a whole lot in investing in that strength.”

Trump’s decision on his third day in office in 2017 to withdraw from TPP was catastrophic mistake, says Matthew.  “I think history will show that it was one of his biggest mistakes in policy.”

TPP was an agreement that the US had led, negotiated and pushed for, since it was very much in its interest economically but also strategically, regarding their positioning in Asia and dealing with China.

“Thank God, Japan stepped in to save the agreement,” says Matthew.  In the US, this move by Japan was seen to be very strategic and bold, to lead the remaining 11 countries over the finish line. “It was very highly valued and praised.”

The motions by the UK to consider joining TPP seems a bit odd geographically, but Matthew believes that after Brexit, they are looking for friends in the world.  His guess that it makes sense for a country like the UK and it certainly is possible over the next year or two.

However, Matthew thinks that China’s motions to join TPP seems a bit more far-fetched.  TPP’s standards are very high and there are lots of rules about the role of the state in the economy, what state-owned enterprises can do in the market, and China is not ready to constrain their state-owned enterprises.

In addition, Matthew cannot see Japan, Australia, Singapore or the remaining members of TPP lowering their standard to let China in.  So, Matthew’s bet is that China’s motions regarding TPP is 10 % real about rising to high standards and 90% strategic play to show engagement in the region.

However, China is taking on a leadership role in RCEP (Regional Comprehensive Economic Partnership).  Compared to TPP, RCEP is a broader but shallower trade agreement of 13 nations, not the not the US, and not India who recently pulled out.

  Even though many people in the US are not taking RCEP seriously, Matthew thinks they should, since it is a deal, and this deal doesn’t involve the US.  It could be built upon to build Asian regional integration.

Basically from 1989 when US helped found APEC (Asia Pacific Economic Cooperation, it has always positioned itself basically as a Pacific power.  Even though US is not considered to be geographically in Asia, because US is a Pacific power, Matthew believes that US should be engaged in TPP and other agreements in the region. 

  Regarding his worries about stability of the Asia Pacific region, Matthew again mentions China. They are challenging Japan territorially, and exerting economic coercion upon others.  Matthew believes that this has caused a lot of concerns among people in the region.

But on the other hand, Matthew stresses the fact that everybody needs the Chinese market to trade and investment.  Therefore, nobody wants to or can cut themselves from China.  The question he poses is how to live with China that doesn’t exactly play by the rules that we want to play by. 

He notes that there have been shifts in the manufacturing value chain as China is getting more expensive, and operations have been shifting to Vietnam or Bangladesh.  And, Covid-19 is exacerbating this underlying big trend.

Regarding the new US administration position on South Korea, Matthew felt that this relationship was important for the US.  South Korea is a big economy, one of biggest in Asia.  It is a sophisticated economy with state of the art in technology and therefore an important middle power.

South Korea is an ally of the US, and an important country work with for economic reasons and the North Korea challenge, and also to deal with China.  However, Matthew sees some big problems.  It is still very much in the shadow of China, worried about antagonizing them.  The other problem is the relationship with Japan.

The historical aspect is difficult, but whatever the reason, the fact that the two of US’s best allies are not getting along very well is a big problem.  “We need Japan and South Korea to be working better together,” pleaded Matthew.

  North Korea is also a big worry.  They are non-transparent, and even though they are somewhat predictable, they are hard to get handle on, and they have nuclear weapons.      This it’s a big issue for the United States and Japan to deal with because “We can’t allow a nuclear arm race in the region and we can’t have North Korea threatening Japan and lobbing missiles into Japanese waters,” says Matthew.  

For Japan the abductee issue still needs to be resolved, and lots need to be done.  A high priority in Washington DC, according to Matthew.

  Although it is not an area of expertise for Matthew, we touch upon a bit about Iran.  To the casual observer it seems the United States has been making a stronger stance about possible threat of Iran having nuclear capability, whereas North Korea already has it.  At least in form, Iran is supposed to be a democratic state, while in North Korea there is one guy that can just push the button.

Matthew thinks that Iran having nuclear weapons in the region that is so unstable and has so many American interests, including their most important ally, Israel, being directly threatened are the reasons for US engagement towards Iran.

Japan is also an ally that is threatened.  That is why Matthew believes the North Korean situation is high priority for the US, and he thinks that the Biden Administration is serious about both issues.  The number two at the State Department is Wendy Sherman, who was the chief negotiator the Iran deal, but before that worked on North Korea for many years, so she should be very involved in addressing both of these challenges.

Another area we explored was Myanmar, a country with so much potential.  Matthew agreed that it was a wonderful country with huge potential, and he pointed out that before World War II, it was one of the most powerful economies in Asia, Japan included.  They have huge mineral resources and great capabilities, yet “it has been so badly governed.”

Matthew felt that there was a moment of hope for a few years, but Aung San Suu Kyi was not quite the kind of leader that could really push through all of the reforms.

He hopes she gets released and the country gets back on track to a democratic rule, because Myanmar is such a wonderful country very rich in all senses and people are very gentle and friendly.

Matthew points out that position on Myanmar may be potential issue between US and Japan relations, because Japan feels special connection with Myanmar from early years of World War II when Japan helped to liberate Myanmar from British rule. 

Japanese have made investments into Myanmar’s development through JICA (Japan International Cooperation Agency, Ministry of Foreign Affairs and other organs of the Japanese government that was really on the ground trying to make a difference in Myanmar.

Matthew notes that Japan was even engaging in political brokering between political groups within Myanmar, which is an unusual thing for Japan.  “Japan has made big investments into the country, and now it appears it has gone wrong.”

From US perspective, they are ready to impose sanctions and be very tough on the military in Myanmar, and Japan is, according to Matthew “is understandably a little bit more conflicted.”

But he feels that it has been encouraging that Foreign Minister Toshimitsu Motegi has made very strong statements, and Defense Minister Nobuo Kishi signed a joint statement on Myanmar which Matthew thinks it was the first time that Japan defense minister has ever made a statement like this in post war history

Joint Statement of Chiefs of Defense Condemning Military-Sponsored Violence in Myanmar > U.S. DEPARTMENT OF DEFENSE > Release

But when it comes down to joint sanctions on Myanmar, Matthew thinks that it will be a very difficult decision for Japan.

On a more positive side, regarding the “Made with Japan” theme, Matthew believes Japan has really played an important yet understated role in South East Asia for many years.  Japan has been investing lot of money in the region, providing a lot of development assistance and capacity building across South East Asia.  Matthew thinks that Japan has a bigger economic footprint in South East Asia than China.  China is growing faster, but Japan has a stock of investment in the literal sense, but also in a political sense in the region.

Japan ranks very high in opinion polls across South East Asia as a trusted partner and which is a real asset for Japan.  Matthew thinks that frankly this benefits the United States this as well because they are “not quite as popular anywhere, certainly in that part of the world as we used to be or could be.”  Therefore, Japan is a really important partner in a critical part of the world, because collectively that is a big region with a lot of economic potential.

Therefore, from an American point of view, they are looking for Japan as a partner in South East Asia, East Asia, and working with Korea and Australia on joint security challenges and dealing with a rising China.

Matthew thinks that in a broader sense, there are expectations to Japan to act as a leader in economic rule making and norms across the Asia Pacific and the world, and he thinks it is a huge opportunity for Japan to step up.  This is in the interest of Japan, but also definitely in the interest of US and the world.

  I believe that Japan is never going to be the US or China.  We will never be a superpower with nuclear weapons.  Yet, we are still the 3rd largest economy in the world.

Matthew echoed my comment, saying that Japan may not be a superpower, but it doesn’t need to be.  Even if drops from number 3 to number 5, that is still a large economy with tremendous capabilities.  Japanese commerce and technology are state of the art, and it delivers the goods to the world. 

Japan is very important in Asia Pacific, with China trying to assert itself as leader of the region.  “Japan is too big for China to ignore and step over,” says Matthew. “In  a positive sense, Japan is a bulwark of stability and democracy in a critical point of world.”