Executive Summary: As tensions continue to rise in the Asia-Pacific region, Japan has approved a new National Security Strategy that includes the National Defense Program Guidelines and the Mid-Term Defense Program. This move will increase Japan's defense budget to NATO's standard of 2% of GDP by 2027. The increase in defense spending is a response to the growing tensions and challenges in the region, particularly at the Taiwan Strait, and is meant to ensure Japan's security and stability. Japan remains committed to peaceful resolution of conflicts and to maintaining good relations with its neighbors. Meanwhile, we have developed a scenario planning technique to consider the possibility of an unthinkable geopolitical clash in the region. According to our simulation, the South China Sea and the Strait of Malacca may be the next flashpoints after the Taiwan Strait. The scenario involves an alliance between Indonesia, the Philippines, and China, while the US, Taiwan, Japan, South Korea, and Australia form an opposing alliance. Thailand and India remain neutral. The war lasts for five years, from 2031 to 2036. The impact on industries such as insurance and aviation, as well as energy prices and casualties, would be significant. It is in our best interest to consider possible policies to prevent such a conflict.
Japan's cabinet has approved a new National Security Strategy, which includes the National Defense Program Guidelines and the Mid-Term Defense Program. This move, with delicate political calculus, will pave the way for Japan to increase its defense budget to NATO's standard of 2% of GDP by 2027. Despite the increase in defense spending, Japan is not seeking an aggressive stance like it did during the early Shōwa period. The increase in defense budget and more "active" Japanese security policy is a result of the rising geopolitical tensions in the Asia-Pacific region, particularly at the Taiwan Strait.
In an effort to quell Taiwan's independence movement, mainland China has implemented several deterrent measures such as more frequent "flyovers" of Taiwan's air defense zone. The visit of US House Speaker Nancy Pelosi to Taiwan in August 2022, despite a "soft" warning from US President Joe Biden, and the White House's insistence on Pelosi's right to visit and warning to Beijing not to overreact, has been viewed by China as an escalation. As a result, China conducted military exercises around Taiwan from August 4-15, which some scholars have described as a virtual blockade. During the live-fire drills, the People's Liberation Army fired missiles into Japan's exclusive economic zone, leading to a protest by Japanese Defense Minister Nobuo Kishi.
Japanese Awakening
During the 2022 Asia 21 Young Leaders Summit in Tokyo, former Japanese Defense Minister and current Minister of Digital Affairs Taro Kono spoke candidly about the rising tensions in the Asia-Pacific region. Kono stated that Japanese security policy discussions have shifted quickly over the past year, and there is now a debate in parliament over whether or not Japan should intervene in the event of a war between China and Taiwan. Kono also pointed out that China, as an authoritarian regime similar to Russia, don't hesitate to take any responsible in sending their own people to die, and the loss of a single Japanese Self-Defense Forces officer in any security operation would be a controversial issue. Kono suggested the use of a fleet of drones as a more effective countermeasure, as sending fighters to wage war is becoming increasingly risky and aircraft carriers may be less useful. He also mentioned the assertive stance of North Korea in the Korean Peninsula.
Kono is a member of the faction led by former Prime Minister Taro Asō within Japan's ruling Liberal Democratic Party (LDP). There are several factions inside LDP specifically the major cliques such as the Seiwa Sesaku Kenkyūkai and the Keisei Kenkyūkai. The Seiwa clique is the strongest faction among others, according to research in 2012, they had 25 MPs and 19 senators with dedicated budget at 242 million Yen, and it’s very close to the strongest conservative force in Japan, the Nippon Kaigi. This conservative force, according to this report, is known that "of the 40 representative committee members, 16 are associated with religious organizations, such as the head priest at Yasukuni Shrine (as of July 1, 2016)."
Kono had been asked to drop out from an internal election of LDP’s leader during 2020, hence it was a three-corner fighting between Yoshihide Suga, Fumio Kishida, and Shigeru Ishiba. And it was Suga to be elected as LDP’s head and also the PM. While in 2021, Kishida had won Kono in the second-round runoff. Kono, therefore, is a strong future candidate after Kishida, had Kishida decided to resign on whatsoever reason. In the panel discussion, Kevin Rudd had teased, as of his style, Kono when he will succeed Kishida. We heard anything but words from Kono reflects how serious both the outsider scholarly circle and inside Japanese political corridor look at his future potentiality.
Kono's comments reflect the shift in thinking within the LDP and among Japanese policymakers towards a more proactive stance in addressing security challenges in the region. This shift is also reflected in the government's decision to increase defense spending and adopt a more active security policy.
Source: MacroTrends
While Japan's increased defense budget and more active security policy do not indicate a desire for aggression, they do reflect the growing tensions and challenges in the Asia-Pacific region. With China's assertive actions towards Taiwan and the Korean Peninsula, and the unpredictable behavior of North Korea, Japan is taking steps to protect its own interests and ensure its own security. It is important for all nations in the region to work towards peaceful resolution of conflicts and to maintain stability in the region.
What ASEAN Should Do, a Scenario
Amidst a more rising tension, we have developed a scenario planning technique about an unthinkable geopolitical clash in Asia-Pacific. We’ve developed a story-line, quite an intrigue and in realistic details, i.e. we’ve mentioned details in hypersonic missile, the Tactical High Power Operational Responder (THOR), the US Fort Detrick, drone warfare and Continuity of government (COG) for example.
We’ve used one technique in develop scenarios, called “news headline” by ask AI to simulate the possible global news headlines according to the storyline we’ve submitted for the “osmosis” or “breathing in” to process input of information. According to the simulation, it’s very interesting that South China Sea and the strait of Malacca is the next possible flashpoint after straits of Taiwan. In the scenario, China needs to secure its sea-lanes and logistic via the strait of Malacca, and thus to occupy Singapore. In the meantime, the formation of the ally of China between Indonesia and the Philippines will take place since the two countries have more economic interdependence with China and because their adjacent border in South China Sea that will comprehend them to take side. While the opposing allies between the US, Taiwan, Japan, South Korea and Australia will take place. North Korea will keep quiet during the first phase of the war as the opportunistic stance. Thailand and India will choose to be neutral and seeking to promote a peace talk. India with its unique Kauṭilya’s realistic stance, albeit a limited leaning toward global rules-based liberal order, while Thailand with its unique geolocation on is no adjacent border with China and sees no benefit to join war with any side will team up together as a neutral force. The war will be exercised for five years starting in 2031 until it will be settled in 2036.
Please take in mind that this scenario is no anything to promote war neither violence, its objective is to exercise stress test in either public or private sector. The most impact industry will be at insurance and aviation industry. The energy price will skyrocketing hence impact directly to the inflation, not to mention huge casualties. Therefore, it’s in our best interest to think about possible policy to restraint this war in the future.
In the investment perspective, it will need to think about better portfolio management and to shift the asset into more safe class asset. Please consult more details from a stress-test report from the Cambridge Centre for Risk Studies.
Conclusion
While Japan's increased defense budget and more active security policy may cause some concern among its neighbors, it is important to remember that these measures are not meant to be aggressive or confrontational. They are a response to the growing tensions and challenges in the region, and are meant to ensure the security and stability of Japan and the wider region.
Japan has always maintained good relations with its neighbors and is committed to peaceful resolution of conflicts. It is a key player in regional and global efforts to promote peace and stability, and its increased defense budget and more active security policy should be seen as a continuation of this commitment.
It is important for all nations in the region to work together to address security challenges and maintain stability. Japan's increased defense budget and more active security policy are necessary steps towards this goal, and it is important that all nations in the region cooperate to ensure regional stability and prosperity. This will require open and honest communication, mutual respect, and a willingness to find common ground and work towards mutually beneficial solutions. Japan is committed to playing a constructive role in regional security and is ready to work with its neighbors to achieve this goal.