Japan's economic clout wanes in Southeast Asia
China does 3 times more ASEAN trade, but Japan leads in accumulated investment
JAKARTA -- Japan is losing its presence in Southeast Asia, the engine of global growth.
China already tops Japan in trade with the Association of Southeast Asian Nations and South Korea is catching up fast. This trend has accelerated due in part to Tokyo's decision to close the border to keep the coronavirus pandemic at bay.
Japan competed with the U.S. for the top spot as ASEAN's biggest trading partner for five years through 2008 before China boosted its trade value, according to the ASEAN Secretariat. After outstripping Japan in 2009, China nearly trebled its lead in 2021. In 2003, Japan's ASEAN trade was three times bigger than South Korea's, but the gap narrowed to 1.3 times in 2021.
Japan's annual direct investment in ASEAN totaled $14.85 billion in 2012, the third-largest after intraregional investment and the U.S., but the amount fell to sixth place at $8.52 billion in 2020.
Japan's diminishing presence can also be seen in the flow of people. Japan accounted for 10% of people who visited ASEAN countries from other Asian regions in 2020, down from 16% in 2012. Visits by high-ranking government officials and corporate executives fell due to Japan's strict COVID-19 quarantine measures that some ridiculed as a "closed-door policy."
Only 2.6% of policy experts and opinion leaders in ASEAN nations cited Japan as "the most influential economic power" compared with 77% for China, in a 2022 survey by the ISEAS Yusof Ishak Institute, a Singapore think tank. In the 2019 survey, Japan was cited as such by 6.2%.
But Japan's strength lies in its past economic contribution to the region, said experts.
While the share of Japan's direct investment in ASEAN has been shrinking, the country stands out in terms of accumulated investment.
Japan helped Southeast Asian economies grow with financial aid after World War II. Between 1999 and 2019, Japan allocated 15% of its net disbursement of official development assistance to ASEAN. China often requires recipient countries to procure materials and equipment from the country, but Japan in general did not attach such conditions.
Despite the influence generated from its contribution to the region's development, however, Japan cannot afford to remain complacent, experts said.
"Japan tends to think its deep bond with ASEAN, nurtured over the past half-century or more, makes it special," said Yuri Sato, a research fellow emeritus at the Institute of Developing Economies at the Japan External Trade Organization. "But local society keeps changing, and Japan should renew its perception of Southeast Asia, too."
Japan's rivals are moving fast to expand their presence in the region. Vaccine diplomacy is a case in point. While Japan failed to develop COVID-19 vaccines, Beijing sent more than 500 million doses of Chinese vaccines to ASEAN, helping ease public anxiety at the height of the delta variant wave.
It has also become difficult for Japan to compete with China in production volume now that the Chinese economy is three times bigger than Japan's.
Trust is one thing Japan can still sell in the region, said one pundit. In ISEAS's 2022 survey, 54% of respondents cited Japan as a country that "does the right thing" to help promote peace, security and prosperity around the world, while only 27% picked China. People are apparently put off by Beijing's strong-arm tactics in the South China Sea and elsewhere.
"People in their 40s and 50s have grown with Japanese brands and animations, and generally have a good impression of Japan," said Sato. "Japan should take advantage of their trust while it lasts."
Sato named education and youth exchange as two areas that can help Japan increase its influence.
Japan has long formulated its Asian diplomacy based on its alliance with the U.S. While Southeast Asia increases its geopolitical importance amid the Ukrainian crisis, Japan urgently needs to rebuild its relations with ASEAN, as its diminishing presence there could erode its diplomatic power, said one expert.
Additional reporting by Ismi Damayanti in Jakarta.