This op-ed by Kiyoteru Tsutsui originally appeared in Nikkei Asia.

In one of the few unscripted moments in the meticulously planned U.S.-Japan summit meeting last Friday, President Joe Biden referred to Prime Minister Yoshihide Suga as "vice president" before quickly correcting himself.

In a different era, this could have turned into a diplomatic incident, with right-leaning Japanese pundits calling it evidence of the U.S.'s patronizing approach to Japan. Fortunately for Biden, the current geopolitical environment is not conducive to such provocation, and no major media picked up on the slip.

[Subscribe to APARC's newsletters to receive updates on our scholars.]

Much has been made of Suga being the first foreign leader to meet Biden in person. According to the U.S. State Department Office of the Historian, this is only the second time ever that a Japanese prime minister became the first foreign leader to meet a new president in the White House.

The other time was in 1989, when Prime Minister Noboru Takeshita visited President George H.W. Bush. Back then, Japan was a major threat to U.S. economic hegemony. Today, China is that threat, and not just in the economic domain. China is the first bona fide competitor to the U.S. since the Soviet Union, and its threat extends to every nook and cranny of the globe.

To counter China's ascension, the U.S. needs its allies, and Japan is the most important partner for that purpose. This is the context in which Suga visited the White House despite all the COVID-related restrictions.

Not surprisingly, the statements were carefully crafted to send strong signals to China. Building on the two-plus-two dialogue in March, the joint statement touched on the importance of peace and stability in the Asia-Pacific, from the East and South China seas to even Hong Kong, Xinjiang and Taiwan.

Japan certainly wanted a reference to the Senkaku Islands, which Beijing claims and calls the Diaoyu, and the applicability there of Article V of the U.S.-Japan Treaty of Mutual Cooperation and Security. The Biden administration had made that commitment earlier, calming concerns among Japanese leaders that the new administration may be softer on China than the Trump administration.

Biden has, in fact, been quite tough on China and has given almost a perfect answer to what Japanese foreign policymakers wanted. In return, the U.S. wanted Japan to be squarely on Washington's side. The wording of the joint statement — negotiated until the last minute — saw Japan agree to include a reference to Taiwan for the first time in 52 years, but with Japan's preferred wording, encouraging "the peaceful resolution of the cross-Strait issues."

Predictably, China reacted quickly and strongly, accusing the two countries of interfering in its domestic affairs and warning Japan about siding with the U.S. We have yet to see what retaliatory actions China might take, but the reference to Taiwan signals the beginning of a new trilateral relationship between China, Japan and the U.S.

The summit covered other important issues, all with China in the background. One key issue is economic security. In particular, supply chain decoupling will become a battle cry for the U.S. and its allies as they seek to reduce dependence on materials from China. Semiconductors are especially critical, as they power all the major growth areas in the new economy. Taiwan's dominance in the semiconductor industry is the main reason why Taiwan is so important to both sides.

To remain in the driver's seat in the new economy, the joint statement announced a new U.S.-Japan Competitiveness and Resilience (CoRe) Partnership. The most concrete proposal was an initial commitment of $4.5 billion from the two governments toward fifth generation (5G) and 6G networks, reflecting concerns about China's dominance in the key digital infrastructure of the future.

Human rights is another thorny issue, with the joint statement specifying concerns over Xinjiang and Hong Kong. With some companies joining the boycott campaign on cotton from Xinjiang, and China countering by criticizing racial division in the U.S., the clash between China and the U.S. will intensify in this area as well. Japan has stepped out of its comfort zone and criticized China on human rights, following the American approach more explicitly than before. In this regard, it is notable that Suga also referred to rising violence against Asians in the U.S.

One area in which China might be more of a partner than a competitor is climate change, with all three countries committing to zero emissions by mid-21st century. Almost concurrently with the Biden-Suga meeting, American and Chinese climate envoys — John Kerry and Xie Zhenhua — met in China and issued a joint statement affirming their commitment to work together on global climate challenges.

All these initiatives and commitments are potentially meaningful and consequential developments that can reshape the Indo-Pacific, although more concrete ideas are needed before we can evaluate their impact. The biggest take-away ought to be the confirmation that the U.S.-Japan alliance is gearing up for a new era of competition with China.

Japan more than reaffirmed its commitment to the alliance with the U.S., risking its economic relations with China. The U.S. will be sure to ask for more concrete actions from Japan on the basis of the joint statement, and Japan can no longer evade questions about what it would do in a confrontation with China. Japan has to navigate a tough terrain of standing with the U.S. in the competition with China while preventing the escalation of tensions between Beijing and Washington, and at the same time protecting its own national interests.

A new phase of the trilateral relationship has just begun, and like it or not, other Asian nations might face the same decision that Japan faced, and sooner rather than later.

This op-ed by Kiyoteru Tsutsui originally appeared in Nikkei Asia.

As the summer of racial unrest forced America to confront its racist past and present yet again, a book by Heather McGhee, The Sum of Us: What Racism Costs Everyone and How We Can Prosper Together, which documents how racial division prevents Americans from uniting to lift everyone's lot, has attracted a good deal of attention.

From welfare to education to policing, Americans have generally supported policies that lifted the white middle class. But as the middle class has become more racially diverse, politics has become a divisive zero-sum game, with many whites seeing government spending as shifting money away from them toward minorities, even if whites also benefit.

This politics of racial division forecloses a social consensus that could boost the U.S. as a whole, leading to flagging social infrastructure, sputtering criminal justice system reform and challenges in offering broad economic support even to counter the pandemic.

This is not a problem unique to the United States. Social scientists have studied the relationship between racial division and low levels of public goods provision in multiple countries and established that ethno-racially heterogeneous societies tend to provide less in the way of public services.

Plagued by suspicions that some groups might benefit more than others, diverse societies tend to have greater difficulty in reaching consensus and working together on a strategy for economic and social development that would improve everyone's lives.

On this count, Japan is at the other end of the spectrum. More ethno-racially homogenous than most other advanced democracies, Japan has fared well when it comes to providing public goods such as efficient public transportation systems, low crime rates and universal health care.

Japan is often quick to reach a broad consensus about government spending on public services, since people generally feel that everyone benefits if they all support each other. Strong social cohesion, facilitated by the relative homogeneity of the population, enables this social consensus that supports spending on public goods.

The flip side of this coin is Japanese society's persistent resistance to diversity and disruption. Used to the comfort of living and working with similar people, Japan has been criticized for its reluctance to accept immigrants.

In response, the Japanese government has rather clumsily allowed immigrant workers in recent decades, first encouraging the migration of Japanese-Brazilians on the basis of shared ethnic roots that were supposed to make it easy for them to assimilate.

Learning that the reality of Japanese-Brazilians' life in Japan did not support this idea, Japan then adopted trainee programs to bring in foreign workers on a temporary basis. With the emphasis squarely on the temporary nature of their stay, those who came to Japan under this scheme could not contribute toward the country's long-term diversity.

Faced with a declining population, Japan needs immigrant labor, and its business leaders have consistently supported accepting more migrant workers. In addition to addressing the labor shortage, a more diverse workforce would likely stimulate innovation and facilitate adaptation to changing economic environments. Much social science research has demonstrated positive relationships between diversity and innovation.

Yet Japan's leaders are having a hard time pressing ahead. While it is easy for the public to come to a consensus for policies that boost all Japanese, it has proved difficult for them to support any policy that would undermine Japan's homogeneity.

Aside from ethnic diversity, Japan's consensus-oriented society is generally resistant to change. Valuing the protection of all members, companies have been slow to streamline and transform their operations to adapt to the changing economic environment, resulting in the prolonged economic decline since the 1990s.

While Brazil is home to the world's largest overseas Japanese population, many Japanese-Brazilians who moved to Japan discovered it was not easy for them to assimilate.

Urged on by American consultants, Japan imported America's neoliberal economic model to revitalize its economy through this period, and the lifetime employment and seniority-based salary system has given way to a rise in temp workers and various attempts to introduce a merit-based salary system. These efforts have not met with much success, leaving behind a questionable legacy, including the suppression of wages after the labor shortage of recent years.

In the U.S., racial division undermines the provision of public goods that would reduce economic inequality. But its acceptance of diversity contributes to innovation and economic revitalization that keeps the U.S. at the vanguard of a new economy.

In Japan, ethno-racial harmony facilitates public goods provision that prevents economic inequality from spiraling out of control. But aversion to diversity and dissent makes it difficult to accept much-needed immigrant labor and to adapt to changes in the economic environment.

In both countries, these characteristics are ingrained into their social fabric and resistant to change. However, the two largest economies with a democratic polity have much to learn from each other, and they should work together to find solutions for their problems.

Otherwise, China's nondemocratic model could become the dominant model for economic success, with its top-down forced consensus and suppression of diversity.

Democracies have long proven better at correcting their mistakes and adjusting to changes in their environment. As the two largest democratic economies in the world, the U.S. and Japan should be able to overcome the cost of racial division and the cost of homogeneity respectively even if it takes decades to achieve that.

[Subscribe to our newsletters to get updates on our experts' latest research.]

Published in APARC’s in-house series, the book is the second volume resulting from APARC’s Stanford Asia-Pacific Research Innovation project. It collects the research findings of participants at the project’s third conference that was held in South Korea in June 2019.

James Liang, a research professor of economics at Peking University and a leading scholar of demographics and social studies, opened the event by situating the discussion about population structure in the context of the U.S.-China technology race. China is quickly catching up with the United States in the quality of its talent pool and the number of its labor resources. It will continue to outpace and surpass the United States in talent and innovation power in the next 10-20 years, Liang says.

China, however, is on a demographic cliff, facing severe population aging and low fertility rates. Its population of young workers aged 25-44 year-olds is projected to decline much faster and sooner than its overall population, leveling out against the labor and innovation gains the United States makes through the inflow of international talent into U.S. universities and entrepreneurial ventures. To sustain its long-term growth in labor quality and innovation, China will need higher birth rates and additional talent gains through migration, argues Liang.

James Feyrer’s book chapter examines the macroeconomic relationship between workforce demographics and aggregate productivity in Asia. Feyrer confirms that the high-income Asian nations like Japan and Korea, and even some middle-income countries of the region, will no longer enjoy a “demographic dividend” boosting aggregate productivity. However, he finds that the negative consequences of shifting to an older population structure may be less severe than previously projected, and even weakening with time. Feyrer believes this may be a result of improved food security and better overall health experienced by old cohorts in childhood, reinforcing the long-reaching impacts of healthcare on societal well-being.

Joon-Shik Park focused on the specific challenges facing Korean society, where birth rates have dropped severely. These historic declines continue to contribute to rising social and political unevenness across Korean society today. Initially seen most visibly in rural areas and smaller villages, Park’s now sees this unevenness affecting the dynamics of medium-sized towns and more urban areas as well. Korea and other aging societies must find viable solutions to address these issues if they are to prevent demographic divides from hobbling development and innovation, Park says.

Closing the book launch event, APARC Research scholar Kenji Kushida offers perspectives from rapidly aging Japan. where the challenges of shrinking and aging populations, rural-to-urban population distribution, and labor shortages spur advances in technology and innovation. Kushida documents this trend across multiple sectors.

He shows that drone technology has increased the productivity of short-staffed surveying firms, while AI-assisted industrial machines allow a broader range of laborers to work in manufacturing. Even in traditionally human-dominated environments like nursing homes, staff increasingly use robots to help improve the physical and mental well-being of elderly patients. Rather than strictly retarding growth, Kushida makes the case that demographic challenges serve as a catalyst for the development and implementation of new technologies.

As the research collected in Demographics and Innovation in the Asia-Pacific demonstrates, the challenges facing aging Asian societies are complex, but there is reason to look to the future with optimism. As the editors of the volume state in their introduction to the book, “Few concepts are as critical for sustained improvement in living standards as innovation.” New technologies and solutions will be foundational to addressing the challenges of the new demographic frontiers many societies are now approaching.