Putin’s visit to Japan: breaking personal boycott, “cautious friendship”

Russian President Vladimir Putin’s two-day visit to Japan is over. The world media was flooded with reports on that visit due to the islands disputed since WWII and Japan’s territorial claims to Russia therein. The two countries’ high-level dialogue had two major issues: peace treaty and four islands known as Southern Kuril Islands – Iturup, Kunashir, Shikotan and a group of Habomai Islands.

In an interview with Nippon TV (Nippon Television Network Corporation) and Yomiuri Shimbun newspaper prior to the visit, Vladimir Putin presented the normalization program with Japan. Generally, the president spoke about the need for “creating an atmosphere of trust and friendship between the two nations and peoples.” As a measure of “building confidence and friendship,” “large-scale economic activities will be launched to cover the Kuril Islands too. It may be achieved by solving purely humanitarian issues, for instance, unhindered visa-free travel by former residents of the Southern Kuril Islands to where they used to live: visiting cemeteries, native places and so on,” the president said. Actually, Russia sees wider opportunities of economic cooperation than just “joint” economic activity on the four islands.

The “confidence and friendship” depends on some political issues too. “We need to understand the degree of Japan’s freedom and what steps it is ready to take. We should look into this, as these are not minor issues. Our foundation for signing a peace agreement will depend on them,” Vladimir Putin said.

Well, since 2000, Japan’s economy has experienced recession four times. Since 2013, due to Prime Minister Shinzo Abe’s program, an insignificant growth of 1.4% was registered. Then it was the highest indicator in G7. A year later, Japan saw no growth. In 2015, the growth was just 0.5%. After nuclear reactors were suspended in Japan due to the earthquake and tsunami of 2011, Japan’s industrial sector and its households became more than even dependent on import of fossil fuels. This is a significant pressure on economy. However, Abe’s government seeks to reanimate the nuclear power generation in the country on a “safe basis” and in 2015, two nuclear power plants were reactivated in Japan.

Japan’s debt burden is rather heavy - 230% of GDP and there is upwards trend of this indicator. The country suffers a high budget deficit, - 5.4% of GDP. The country has high reserves, about $1.2 trillion, though this figure does not look impressive amid $5.18 trillion foreign debt.

Japan is suffering from deflation too and trying to fight it with Abe’s “recipe” i.e. devaluation of the national currency. Since 2011, the Japanese Yen has depreciated against U.S. dollar from 79 to 117 Yens per 1 US dollar.

Yet, the national currency devaluation has not triggered any significant growth of the Japanese export. Therefore, the foreign trade balance of Japan is not sustainable. In the meantime, Japan’s industrial capital drain continues amid high cost of labor force and jobs-for-life system. At the same time the unemployment level is low, though for Japan is still high - nearly 6%.

Demographic decline, low birthrate and ageing population is a long-term problem for economy of Japan.

As Prime Minister Abe is concerned over economic growth problems, Russia’s leadership is trying to take advantage of the situation suggesting new economic opportunities to Japan, including in the energy sector. Japan needs economic growth through increasing exports of either goods or capital. Note that Japan’s investments in Russia in 2015 increased by 51%, though total volume of foreign investments in Russia decreased by more than 70%. Russia does need loans, technologies and investments, especially Russia’s Far East. The country is keen to supply its energy commodities to the Japanese market. From Gazprom’s viewpoint, the most efficient energy project would be the gas pipeline from Sakhalin to Hokkaido. Yet, in the case of Sakhalin, it is important that the most valuable part of this island with energy resources belonged to Japan before 1945 and Japanese do not forget about that circumstance.

At the beginning of the visit, Japanese at once made a reservation saying that Russia should not expect a large-scale cooperation. On December 15 2016, Economy Minister of Japan said Tokyo is not going to sign with Russia any economic agreements that would run contrary to the G7 policy of sanctions on Moscow “after annexation of the Ukrainian Crimea peninsula and the Russian policy on Ukraine.” Note that Japan’s sanctions on Russia are insignificant, but Tokyo may expand them in the context of the general policy of the West. In fact, this means that Japan seeks to consult with its suzerain U.S. over specific economic projects of cooperation with Russia.

The situation in the political field is not good either. On the eve of Putin’s visit, an influential Japanese newspaper Asahi reported that the Japanese government may deploy military bases on two islands of the Kuril Islands if they are transferred to Tokyo, since Japan’s sovereignty over the islands would put them under the treaty of security guarantees between U.S. and Japan.

After WWII, U.S. has been actually holding protectorate over Japan, and the country’s sovereignty is limited. This dependence has been holding Japan from penetrating into Asia. In addition, Japan’s rapidly developing neighbors, Korea and China, has been using the negative historical facts to deter Japan economically. Now, China feels itself more confident in the territorial dispute with Japan. Of course, Japan is cautiously follows the ongoing Russian-Chinese rapprochement and military and technical cooperation. Japan seeks an equidistant (not close!) stance of Russia on it. Prior to visiting Japan, Vladimir Putin tried to use that “Chinese lever” to influence Japan. In particular, in the abovementioned interview with Nippon and Yomiuri, Putin has repeatedly highlighted the special relations of Russia and China in the region and global politics. “China is our largest trading partner. As I said, country-wise, Russia trades the most with China,” the Russian president said. Actually, the Japanese were offered to move towards balance. However, it turned out that for Japan, the U.S. guarantees are more important in its territorial dispute with China over Senkaku Islands that are neighboring Taiwan. President-elect Donald Trump’s tougher policy towards “Greater China” may strengthen Japan’s positions in the region in future, they in Tokyo say.

Finally, Putin’s visit reaffirmed the known fact. As long as U.S. holds a protectorate over Japan, no peace treaty is possible between Russia and Japan. This “neither war nor peace situation with territorial claims” increases Washington’s protectorate over Tokyo, which pays 75% of its budget to maintain the U.S. military bases in its territory. This is an unprecedented situation. Actually, U.S. will have no special claims under Trump either.

Eventually, what are the results of Putin’s visit to Japan? No final document was published. No decision on the gas pipeline was adopted. At a certain stage, the economic cooperation will improve slightly. Largest companies are going to involve into deals on both sides: NOVATEK, Rosneft, Gazprom, Mitsui, Marubeni and Tokyo Electric Power.

Putin and Abe agreed to launch certain “joint economic activity” on the Southern Kurils with citizens of Japan to get visa facilitation to visit the four islands. However, for Russia, the “economic activity” on Kurils, with Japanese “settlement” to emerge on the four islands amid limited economic relations and no peace treaty do not cost the strategic status of the four islands.

Perhaps the most important results of Vladimir Putin’s visit to Japan is that the country is a G7 member. Therefore, the relations with it for President Putin personally mean a breakthrough of the West’s boycott against him personally. This became evident yet at the G20 Summit in Brisbane in November 2014. While media was covering Putin’s visit to Japan quite calmly with no expectations of any breakthroughs in the relations of the two countries, the patriotic national segments of the society perceived the Putin-Abe talks quite suspiciously. Therefore, the “friendship” prospects will be questioned constantly as long as there are such sentiments in Japan and Russia.

EADaily Analysis