The Donald Might Still Save The Land of the Rising Sun.

Stuck at Frankfurt airport for a few hours with free wifi, I was going to type a few lines on Trump’s recent comments on making America’s defence partners pay for their own defence. This somehow ended up becoming my first Medium post.

Trump might still save Japan. Save Japan from the seemingly long term economic and demographic decline in a roundabout way

He could be the one to let The Land of The Rising Sun shine again.

The Donald’s comment at an Iowa campaign event will send chills to America’s south east Asia allies. From The Telegram:

“If we’re attacked, Japan doesn’t have to do anything. They can sit home and watch Sony television, OK?”
Mr Trump added that the United States protects Japan, South Korea, Germany, Saudi Arabia and other nations, and “they don’t pay anything near what it costs”.
“They have to pay. Because this isn’t 40 years ago,” he added. “It’s got to be a two-way street.”

This seemingly innocuous comment which seems perfectly reasonable comes at a big cost. For example, why should a country pay for the defence of another sovereign country? Why the heck should the US continue to maintain bases and pay the cost of 50,000 soldiers who aren’t exactly popular in their host communities? Exactly!

I won’t delve into why Japan signed Treaty of Mutual Cooperation and Security on January 19, 1960. And why the Japanese have an Article 9.

So, in the scenario in which The Don does win his election (this isn’t exactly impossible in my opinion again) and he thinks this is another art of deal making, he tries to force Japan to pay, people get upset. Abe gets upset. The Don walks away from the deal like a good deal maker.

(At this point my good folks, I would recommend you stock up on whatever defence ETF you know. I’m dead serious here – not saying there will be a war, but that’s the initiation a stupid arms race)

Japan has enough, ahem, difficult neighbours around it. Folks are slightly jittery as seen in the Japanese Self Defence Forces, JSDF being progressively strengthened in recent times.

With the US out of the equation, Japan moves more to the right. With the JSDF upgraded to a more conventional first world military, ability to forward project military capabilities becomes a priority. This would lead to re-route of a lot of capital to building military capacity to seemingly protect Japan’s interests vs. DPRK, China and Russia. At this point things get interesting.

Will the US stay and watch Japan build capacity? Given the rather sometimes not very pleasant history between an increasingly assertive China and Japan, what will the Chinese response be? How far will the Russo-Japanese aggression go? Will not be exploring this today. So many non linear projections on what could and will happen.

Building capacity for war helps set off another industrial line of which the government becomes the biggest customer. There is suddenly something by the government to do with all that money.

Recruitment of folks (or maybe even conscription) for military duties and the subsequent propaganda that follows ensures a reignited nationalistic feelings. Given the demographics, women will have to become a much active participant in the economy. This will stimulate a rather stagnant demographic as the government will be forced to incentivise a population growth. We will be seeing a bigger government here…

One thing I wonder is if this issue will be enough to break the Japanese apparent hostility to migration given the need for more workers especially at the lower end of the markets? Or will quicker automation/robotic advancement be made to help fill in blanks?

My expectation is Trump will be a stimulant for the Japanese economy. Not necessarily sure if this will be a good or a bad thing for the neighbours. But it will be interesting to see.

But then I could be fantastically wrong. The Japanese long term decline might just continue or not. Or Trump might just be a more reasonable president than I think he will be.

I’m starting to ramble. So, I will leave it here.