KGRI Working Papers 2017

In the twenty-first century, China has placed increasing importance on both domestic and global nuclear power energy policy. It is clear that nuclear power is considered the most important energy resource in China, one that consists of significant diplomatic means. Nevertheless, the development of and changes in China's nuclear power energy strategy have been understudies. In correcting this academic oversight, this paper analyzes how the People's Daily--China's official news source--coverage of nuclear power energy policy has changed over time, based on discursive analysis. This paper focuses on comparing two nuclear power plants accidents: the Chernobyl disaster of 1986, and the 2011 Fukushima incident. By so doing, this paper reveals how the People's Daily covered the two incidents and antinuclear movements in the unique political context of China.

In the early 1960s, U.S.-Japanese nuclear relations were still unstable. For the United States, Japan was an important ally to support its nuclear test-ban diplomacy while Japanese national security greatly depended on the extended nuclear deterrence of the United States based on the U.S.-Japan Security Pact. In Japan, however, as its economy and technology improved, conflicting opinions on its nuclear policy emerged. Under these circumstances, Hayato Ikeda, assuming the office of the Prime Minister of Japan in 1960, had to handle the relationship with the Kennedy administration over nuclear issues very carefully. Drawing from new historical documents in the Japanese Diplomatic Archives, this paper shows how U.S.-Japanese nuclear relations were developed in the early 1960s and how Prime Minister Ikeda managed Japan's nuclear policy the unstable environment both within and outside Japan after the political turbulence toward the end of the 1950s. While most of the previous studies view Ikeda's nuclear policy as just following the footsteps of his predecessors, this paper argues that his nuclear policy was very important in framing Japan's post-war nuclear policy.

Existing literature on American grand strategy and America's relative decline has evolved around the question of the degree of America's global engagement. Unipolarity's unique impact on the international system and the significant policy relevance of this question has left this debate in a dichotomy between deep engagement and offshore balancing. However, the breadth of this grand topic has often made this intellectual debate conceptual, leaving behind numerous underlying assumptions that require reexamination. This paper therefore examines two large assumptions so as to identify factors that deserve more attention in order to enhance our understanding of American grand strategy. First, it analyzes the evolution of discussions on America's relative decline, which has cycled in intellectual debates since the 1970s. Next, I investigate the qualitative differences in conventional and unconventional security challenges. The analysis suggests that failed strategies with an incongruity in the means and ends produced discouraging results that exhausted national power. The future of America's unipolarity is a matter of America's own choice of an effective strategy. To that end, this paper underscores the importance of factors that shape America's global engagement, including the qualitative differences in threats as well as geographical differences.

This paper explores the determinants of house prices and bank credit. An empirical analysis of panel data of 22 developed countries during 1990-2015 reveals cross-border bank inflows and risk perception in global markets as the key drivers of house prices and bank credit. Moreover, it indicates that the effect of this risk perception on house prices is non-linear, depending on the leverage of local financial systems: it is stronger in economies with higher leveraged financial sectors. These results suggest that local financial cycles are exposed to spillover effects of U.S. monetary policy, and that local banking sectors play key roles in transmitting the effects to local house price cycles.

If the center of gravity of economic power shifts from the West to Asia, but the West maintains its leadership, the discrepancy between leadership and economic power will undermine the world. Cooperation between China and Japan offers a hint to solving this mismatch. This paper proposes how China and Japan can cooperate. It covers many dimensions, including leadership, globalization, international rules, the One Belt and One Road initiative, the AIIB, the internationalization of the yen and yuan, and Asian monetary integration.

This paper briefly reviews the current status of the Chinese economy. It argues that “new normal” cannot fully explain the dramatic slowdown of the Chinese economy and that the sharp fall of China’s export growth is mainly due to the reorientation of global value chains—the relocation of low-value-added tasks out of China. The persistent depreciation of the yuan and massive capital outflows since last summer challenge the stability of the Chinese economy and may trigger a financial crisis. Despite unstable political relations between China and Japan, the two economies have been closely integrated through bilateral trade and investment. The two countries will benefit more from further economic cooperation, especially when the world faces the headwind of antiglobalization.

In the aftermath of the Asian financial crisis, ministers of finance of major Asian countries launched the Asian Bond Markets Initiative (ABMI) to avoid the risk of currency crisis. But the ABMI does not facilitate currency clearing, especially multicurrency clearing. This chapter proposes a new multi-currency clearing system in Asia. That scheme will clear each currency on a simultaneous base, supported by the Asian central banks. The architecture for liquidity provision in multi currencies is the first step for Asian financial integration

By investigating various data at both customs and firm level, we present the new evidence of Japanese firms' invoice currency choice. Contrary to stylized facts, we demonstrate that Japanese firms tend to choose the U.S. dollar or importer's currency for trade invoicing in Japanese exports to advance countries, irrespective of difference in industry characteristics or product differentiation, while they choose the yen invoiced transactions in exports to Asian countries. More interestingly, Asia-based Japanese subsidiaries tend to use mainly the yen and U.S. dollar for trade invoicing in their trade with Japanese head offices and group companies. On the other hand, in Asia-based subsidiaries' trade with other countries excluding Japan, the yen is rarely used, even in intra-firm trade, and the U.S. dollar is dominantly used for trade invoicing. Even though Japanese subsidiaries increase their intra-firm trade with other Asia-based group companies, the use of the yen in Asia will not be growing. Instead, the use of the U.S. dollar will be increasing. These findings have significant policy implications for further use of the yen in the process of Asian economic integration.

Infrastructure development is essential to economic development in less developed countries (LDCs). In particular, ASEAN Member States (AMS) and developing East Asia have applied development strategies that aggressively utilize global value chains (GVCs), and logistics infrastructure and industry-supporting infrastructure services have been crucial. In addition to the long-standing official development assistance (ODA) and other official funds (OOF) provided by OECD-DAC countries and international organizations, deeper recent commitments to infrastructure development by China and other newly developed economies have further spurred such development in the region. However, we must note that the current bottleneck in infrastructure development is not necessarily the availability of investment funds but rather the challenge of identifying and implementing good projects accompanied by long-term commitments. Countries should prioritize quality infrastructure appropriate for their stage of economic development and implement high-quality projects. These principles must be applied to all projects, including those in which China and other stakeholders participate. In addition, the emergence of new players such as China will eventually necessitate new international rules regarding information disclosure, disciplines on government involvement, and the role of foreign aid. To support regional efforts in further utilizing GVCs for economic development, Japan and China should take the lead in establishing an efficient and dynamic policy environment for infrastructure development.

European integration has long been a reference, if not a model, for Asian integration. Recent developments cast doubt on the desirability and viability of the European version of integration, even of integration itself. As the world's economic centre of gravity shifts towards the east, Europe is seen by some as "just a museum." Unemployment stays high in some areas, the Greek debt crisis is not yet resolved, some European banks still have difficulties, the refugee crisis and terrorism continue to menace. The crises have changed Europe; unlike EMU (Economic and Monetary Union), EBU (European Banking Union) remains incomplete. Is there anything for Asia to learn from the construction of the EU? Can or should the European experience be replicated in Asia? If yes, what are the roles of China and Japan? A key to answering these questions is to understand what is and isn't special about Europe. This paper attempts to clarify these points to derive some meaningful implications for Asian integration and suggests a possible way forward in the form of integration at subnational instead of national levels.

This paper attempts to spark a policy discussion on the effects of China's renminbi internationalization and foreign policy. Defining China's market power as a form of structural power in geopolitics backed by China's consumption power, it unravels the ramifications of renminbi internationalization based on China's market power beyond the geoeconomic perspective. It argues that, such ramifications are an outcome of the strategic bind that has been gradually developed by China and its trading partners via economic transactions, owing to the market power that China possesses. Such binds are often asymmetric in bilateral relations, and increase China's bargaining leverage in foreign policy used for wielding power on the global stage. The paper therefore emphasizes that renminbi internationalization should not be simply considered as China's earnest efforts toward global currency diversification to assuage the side-effects of the dollar dominance, but rather be understood as a subset of China's global strategem, in which the renminbi is translated into a medium of power projection for Chinese foreign policy. The paper presents two case studies of renminbi internationalization - a) electronic payment services via China UnionPay, and b) oil transactions denominated in renminbi and the sale of China's renminbi-denominated oil futures that signal to the beginning of the end of the petrodollar dominance that has existed for decades since the 1970s.

The Association of Southeast Asian Nations (ASEAN) quest for regional integration entered into a new phase in 2016 as the long awaited ASEAN Economic Community (AEC) entered into force. The organisation's drive towards economic integration began in the early 1990s with the initiation of the ASEAN Free Trade Area (AFTA). Since AFTA, the member states have incrementally progressing in integrating the region culminating in the development of the AEC and ASEAN Connectivity projects. While ASEAN members have been the driving force behind integration, the project would not be possible without its regional partners, especially China and Japan. This paper seeks to examine the concepts behind regional integration, the role the two major Asian powers have played in supporting the AEC and ASEAN Connectivity, the common and differing interests of the actors involved, if the structure and depth of the two states relationship with ASEAN differ, and the range of mechanisms in place to facilitate cooperation. With the AEC entering into force in 2016 and the continuing negotiations of the Regional Comprehensive Economic Partnership (RCEP), analysing the role and how to bolster China-ASEAN and Japan-ASEAN relations becomes all the more necessary.