Japan has the world’s third largest economy. Internationally, Japan implements a multilateral diplomacy through dialogues and cooperation.

Japan is the world’s third-largest economy with a nominal Gross Domestic Product (GDP) of US$5.011 trillion as of 2021. The country has a highly developed and diversified economy, focused on manufacturing and service sectors.

The Japan Self Defence Forces (JSDF) are the unified military forces of Japan, established in 1954. To bolster Japan’s ability to deter aggression and to ensure the readiness of the SDF to fight, should a conflict arise, Prime Minister Fumio Kishida has pledged to raise the share of GDP allotted to national security to two percent, up from the traditional limit of one percent adopted over the past six decades. The 2023 budget for the JSDF was ¥6.82 trillion (US$51.4 billion) which was 1.19 percent of the nation’s GDP.

Kishida promised on 1 January 2024 to put Japan at the forefront of global affairs in what was predicted to be a “tense” 2024. In his New Year’s address, he said he would conduct summit diplomacy to “overcome challenges,” citing Russia’s war on Ukraine and the Israel-Hamas conflict.

On the economic front, Japan wishes to promote economic diplomacy as a strategic priority, centred around three aspects: (1) bolstering global economic systems through various economic agreements; (2) supporting the expansion of business by Japanese companies; and (3) advancing resource diplomacy along with tourism to Japan.

As of October 2019, there were 74,072 Japanese companies with branches overseas. Moreover, Japan’s Official Development Assistance (ODA) in 2020 was approximately ¥1,736 billion (around US$16.26 billion.), and 60.4 percent of ODA went to Asia, 11.4 percent to the Middle East and North Africa, 7.9 percent to Sub-Saharan Africa, and 3.8 percent went to Latin America and the Caribbean. According to the Organization for Economic Co-Operation and Development (OECD), Japan’s ODA ranked fourth behind the United States, Germany, and the United Kingdom.

Japan’s Relations with Major Powers

The United States and Japan have had a strong political, economic, and military relationship since the mid-20th Century. Japan is a significant US partner particularly in security and trade. The US-Japan mutual defence treaty grants the United States permission to base US troops – currently numbering some 50,000 – on Japanese territory in return for a US promise to protect Japan. Japan is the fourth largest US trading partner (with two-way trade valued at US$230 billion in 2022) and is the largest source of foreign direct investment in the United States (reaching a record US$721 billion in 2021.)

Meanwhile, since 1950, relations between China and Japan have been strained. Nonetheless, trade between the two countries has flourished with two-way trade in 2021 amounting to US$371 billion. However, “hot economics, cold politics” continue to underscore the bilateral relationship. Sensitive issues include the landing of Chinese missiles in Japan’s Exclusive Economic Zone, the protracted dispute over the Diaoyu Islands / Senkaku Islands, and the issue of Taiwan.

Japan and Russia have never signed an official peace treaty and are technically still at war. A territorial dispute over four islands seized by Russia at the end of World War Two has hamstrung bilateral ties ever since. As for the War with Ukraine, Japan has imposed sanctions on Russian oligarchs, frozen the assets of Russian banks, and revoked Russia’s most favoured nation trade status.

Japan and ASEAN (Association of South East Asian Nations) have built a cooperative partnership for peace, stability, development and prosperity over a period of 50 years. Trade between ASEAN and Japan reached US$226.0 billion in 2019, placing Japan as ASEAN’s fourth largest trading partner. Japan was ASEAN’s second largest external source of foreign direct investment in 2019, amounting to US$20.4 billion, constituting 12.7 percent of total foreign direct investment flows to ASEAN. Japan has been expanding its security ties with multiple Southeast Asian countries to offset China’s aggressive behaviour in the region.

The EU and Japan are strategic partners and share common values and interests. They have a strong trade relationship with Japan being the EU’s second-largest trading partner in Asia (with two-way trade in goods in 2022 amounting to US$156.1 billion). Together in 2021, Japan and the EU represented around one quarter of the world’s GDP, or US$24.22 trillion. They also cooperate on supporting human rights, democracy, and multilateralism. Since the start of Russia’s war of aggression, the EU and Japan have stood in solidarity with the people of Ukraine.

On 13 January 2023, Prime Minister Fumio Kishida gave a policy speech where he outlined three key issues for the future. First, the international community is “in grave danger.” Second, Japan seeks peace and prosperity within a free and open order worldwide. Third, Japan and the United States, as allies and close friends, “need to engage in further strengthening our bond.”

Dr Michael Vaughan is a former Commonwealth Public Servant from the Department of Trade and holds a Doctorate in Political Science from The University of Queensland. 

This article is published under a Creative Commons Licence and may be republished with attribution.