Japan and the liberal economic order: Hegemony and system support

This thesis attempts to explain Japanese foreign economic policies using the concept of 'system supporter', as developed by David Lake and Inoguchi Takahashi. The concept of 'system supporter' modifies Charles Kindleberger's thesis of hegemonic-stability which argues that a liberal international economic order can only be sustained when a hegemon exists to provide leadership. The present crisis of the liberal trading regime and the growing threat of protectionism, it is argued, can be explained by industrial dislocation and relative economic decline of the United States. This created conditions that strained the ability of the United States to continue to perform the leadership function as it did after the Second World War. The emergence of Japan as an economic superpower and the fact that it was the principal beneficiary of the postwar trading regime combined with the present threat to that regime has, we argue, led to a greater awareness on the part of Japanese leaders on the need to play a more active and supportive role in the international system. Using this new found sense of responsibility, we try to assess the major new foreign economic policy initiatives of the Japanese government.;We focus on the period from 1979 to the present and examine the nature of the U.S.-Japan automobile dispute, the U.S.-Japan trade imbalance and the various initiatives undertaken by the Japanese government to liberalize its economy and restructure the industrial structure with a view to both contain the threat to the liberal trading regime and to promote imports. In each case, we find some support for our working hypothesis although the lack of a clearcut domestic consensus made the task of overcoming the opposition from specific groups particularly difficult. We also look at one potential threat to the future stability of the system and attempt to understand what Japan could do to defuse this potentially destabilizing factor.