Geithner a balm for Japan's Clinton trauma

Posted in Japan | 26-Nov-08 | Author: Kosuke Takahashi| Source: Asia Times

Treasury Secretary-designate Timothy Geithner, during a new conference by President-elect Barack Obama, announcing members of Obama's economic team, Monday, Nov. 24, 2008, in Chicago.

TOKYO - United States president-elect Barack Obama's appointment of Timothy Geithner as his Treasury secretary has come as a relief to many Japanese officials and corporate types, who remain hurt by their experiences of the last Democrat-led US government and the Bill Clinton administrations.

Although Obama's cabinet appointments include several officials from the Clinton era, Geithner, 47, is widely known to be well versed in things Japanese and is remembered for his sympathetic views of the country.

Although Japanese government leaders and diplomats never speak about this officially, many hoped a Republican administration would remain in office under John McCain because they feel that the Republicans treat Japan with greater respect than the Democrats. Tokyo endured strained ties with the Democrats over trade rows early in the 1990s through to the Asia financial crisis late in the decade.

Geithner, the current New York Federal Reserve Bank president and referred to by Obama on Monday as "the chief economic spokesman" for his administration, has been a central player in the George W Bush government's response to the increasingly global financial crisis.

He joined the US Treasury in 1988, when George W's father was in the White House, and went on to serve as assistant attache at the US Embassy in Tokyo in time to witness the bursting of Japan's asset-inflated bubble economy at the start of the 1990s. He was then assigned as a special assistant to Lawrence Summers, at the time under secretary of the Treasury for international affairs and who is now to head Obama's National Economic Council.

Geithner's family background is heavily colored by Asian interests, his father, Peter F Geithner, having held various positions related to Asia at the Ford Foundation in New York, including director of Asia programs.

Geithner junior graduated from Dartmouth College with a bachelor's degree in government and Asian studies in 1983 and from the Johns Hopkins School of Advanced International Studies with a masters in International Economics and East Asian Studies in 1985. He speaks Japanese and Putonghua, also known as Mandarin.

Japanese financial officials happy to see Geithner as the new Treasury secretary will also be satisfied on the grounds that previously hotly tipped Summers did not get the post. Geithner's former boss is unpopular, being viewed as a key official involved in spiking Japan's proposal during the 1997 Asian economic crisis for an Asian Monetary Fund, an idea put forward by Japan's then-vice minister of finance for international affairs, Eisuke Sakakibara.

Summers, a deputy secretary of the Treasury from 1995 until 1999, when he succeeded Robert Rubin as Treasury secretary through to the end of the Clinton tenure of the White House, teamed up with China to forestall this unusual Japanese initiative, with an eye on US national interests and a concern with maintaining American hegemony in the region. In such a situation, Geithner, who has extensive knowledge of Japan, emerged in the eyes of Japanese financial officials as a rare reliable and sympathetic negotiator.

The term "Japan passing" became popular at about this time, reflecting concern that world’s second-biggest economy was being passed by in a fast-changing world, and that Japan could no longer even be taken seriously. Japan passing was symbolized by Clinton's nine-day visit to China in 1998, a trip East during which he did not visit Tokyo.

Tensions between the two countries were present from early in the first Clinton administration, when the US was focused almost exclusively on economic problems and understated the country's security relationship with Japan, its most important Asian ally. In 1993, when Clinton took office, the US was running a US$59 billion trade deficit with Japan, deepening to $65.6 billion in 1994.

This deficit, driven by Japanese exports of automobiles, semiconductors and other consumer products, led to a period of intense "Japan-bashing". The US pursued what was termed a results-oriented negotiating strategy and trade policy with Tokyo, forcing Japan to accept numerical quotas for American exports. Results-oriented policy places emphasis on the measuring and monitoring process as much as on wording of agreements, often followed up with threats and at times retaliatory actions if agreed trade outcomes are not met.

By 1996, the deteriorating trend of the US trade deficit with Japan had briefly reversed to a negative $47.5 billion.

The 1990s are still referred to in Japan as "the lost decade", marked as it was by years of economic distress following the bursting of the country's economic bubble in the early 1990s and bumbling political and business leadership, and also by the sharp rise of China.

"Japan-US relations were in a real mess during the first term of the Clinton administration," Akihiro Tanaka, a professor of international relations at the University of Tokyo, told Asia Times Online. "As for Japan-passing around 1998, Japan was to be held responsible. It was natural Japan was neglected because the then Ryutaro Hashimoto administration was pursuing fiscal austerity" while suffering a sluggish economy - "stunning the US".

The return of Clinton-era officials to the White House did not unduly perturb Tanaka. "They are the Democratic Party's best and the brightest," Tanaka said. "We shouldn't worry about that."

The absence of major economic friction between the US and Japan should also mean no return to "Japan-bashing", said Toru Umemoto, chief currency analyst in Tokyo at Barclays Capital. In the US house of horrors, China now stood economically and militarily in the place formerly occupied by Japan.

The US trade deficit with Japan last year was $82.7 billion, compared with a $195 billion deficit with China.

"With China's trade surplus ballooning and its military building up its arsenals, for example, by building an aircraft carrier, the rapidly rising China would be a threat for the US," Umemoto said. "This would shake the dollar's status as the world's key currency. The US should be tough on China, not on Japan."

Other prominent Japan experts in Obama's team look likely to include Frank Jannuzi, who serves as the senior East Asia specialist for the majority staff of the US Senate Foreign Relations Committee. Jannuzi, a former visiting professor at Keio University in Tokyo, is expected to join the Obama administration's policymaking on East Asia. As a Korea policy adviser for the Obama administration, he met the North Korean negotiator Ri Gun this month.

Kosuke Takahashi is a Tokyo-based journalist. He can be contacted at [email protected]