Japan's New Foreign Economic Policy: A Shift Toward a Strategic and Activist Model?*

Abstract

This article analyzes key departures in Japanese foreign economic policy: the development of an extensive network of free trade agreements thereby abandoning the exclusive focus on the multilateral system as the vehicle for trade liberalization, and the revamping of the official development assistance (ODA) program by slashing its budget, emphasizing national interests in aid giving, and phasing out yen loans to China. We argue that the remarkable degree of policy activism in both trade and ODA represents the Japanese government's attempt to respond strategically to common challenges: domestically the economic recession, internationally the pressure for policy convergence and competition with China. However, in both issue areas the ability of the government to embark on swift policy changes has been compromised by domestic politics: opposition from vested interests and politicization of policy‐making, bureaucratic sectionalism, and weak executive leadership. We conclude with some policy recommendations to improve the coherence of foreign economic policy formulation in Japan.