Japan’s trade policy is currently undergoing a major shift. It is now focusing on bilateral and regional approaches, in the face of its traditional policy of multilateralism. Japan must make this shift for it to continue to be globally competitive and remain a leader in the world economy.
While the trend toward regional trading arrangements appears relatively new in Asia, and specifically Japan, intellectually it has been discussed for over three decades. Professor Kiyoshi Kojima, at a conference at The East-West Center in the 1960’s, spoke of creating free trade agreements (FTA’s) to promote trade and investment in the AsiaPacific region. Kojima and like-minded colleagues began working together on this subject and this led to the formation of the Pacific Trade and Development Conference (PAFTAD). PAFTAD and other early efforts were the precursor to APEC, the AsiaPacific Economic Cooperation.
Japan’s shift to regional integration and the success of this shift inevitably requires two important adjustments. First, Japan must implement structural adjustments to its domestic economy, which can be forced by entering FTA’s. Secondly, the bilateral agreements entered into by Japan must work with, not replace, the current multilateral agreements already in place.
This paper focuses first on the forces and trends towards regional integration. Second, it highlights as an example, the recently concluded Japan-Singapore Economic Partnership Agreement (JSEPA). Next it suggests some future directions for ASEAN integration. Finally, the paper concludes with analysis of Japan’s FTA policies, in particular, the implications of the FTA’s for Japanese domestic structural adjustment.