NO. 32 &emdash; August 22, 1997


Feature Article


The American defense establishment was hopeful that a 1988 project to jointly develop and produce Japan's next-generation fighter support aircraft, the FS-X, would open the door to more reciprocal flows of military and military-related technologies between the United States and Japan. However, the political frictions, exorbitant costs and technical problems associated with this precedent-setting program soured many Japanese defense officials and industry players on future military codevelopment and coproduction projects with the United States. As recently as two years ago, the outlook for bilateral defense technology collaboration was not very bright.

The hopes of U.S. proponents of industrial and technological cooperation were buoyed somewhat last September when the bilateral Systems and Technology Forum &emdash; a group established in the early 1980s to facilitate government-to-government cooperation in the development of defense technologies &emdash; agreed to establish a special defense industry panel to explore ways to enhance transpacific cooperation. Defense experts attribute the formation of this panel in part to the harsh realities of shrinking defense budgets. Both industries stand to reap benefits by pooling money, research and technological expertise.

In addition, the pending expansion of the bilateral defense operational guidelines will place greater emphasis on systems interoperability; that provides another motivation for collaborative activities. Analysts also propose that while Japan has made enormous strides in developing indigenous military technologies, contractors there finally are willing to acknowledge that a certain amount of cooperation with the United States remains indispensable to maintaining a viable defense industrial base.

Having learned many lessons from the FS-X controversy, the American defense establishment is interested in undertaking more projects with Japan that entail greater sharing of costs and risks. U.S. defense officials stress, however, that both sides first must discuss their mutual requirements to determine the extent to which their security interests overlap.

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Weekly Review

Debt Burdens Heavy In Japan Despite Low Interest Rates by Douglas Ostrom

For the time being, short-term interest rates on both sides of the Pacific are likely to remain stable. That at least is the consensus among central bank watchers in the United States and Japan as of mid-August. Late summer economic developments in Japan have increased the probability that the Bank of Japan, that nation's central bank, will move later rather than sooner to ratchet up interest rates, despite widespread awareness that keeping the cost of borrowed money at low levels carries some economic risks.


Jockeying In Japan Intensifies For Possible Leadership Reshuffle by Barbara Wanner

Anticipating Prime Minister Ryutaro Hashimoto's easy reelection by the end of September to a second two-year term as Liberal Democratic Party president, members of the ruling party instead have focused increased energy and attention on trying to shake up the current LDP executive lineup as well as reorganize the premier's 11-month-old second cabinet. Intraparty rivalry has become so fierce, in fact, that some experts speculate that the upcoming LDP leadership race &emdash; which must be held before the September 30 expiration of Mr. Hashimoto's term and may occur as early as September 10 &emdash; conceivably could alter Japan's political landscape.


India, Pakistan Celebrate 50 Years Of Independence by Jon Choy

On August 15, 1947 the world was focused on India, the first British colony to leave the empire and claim independence. That event was marred, however, by the nearly simultaneous, violent partitioning of Muslim-dominated eastern and western areas of the former South Asian colony into the new country of Pakistan. As indicated by Foreign Minister Yukihiko Ikeda's recent trip to the two nations and growing Japanese business activity there, the region is garnering more of Japan's attention for both positive and negative reasons.


USTR To Defend Massachusetts' Burma Law
--- by Eric Altbach

In the face of World Trade Organization actions brought by the European Union and Japan, U.S. Trade Representative Charlene Barshefsky has pledged that Washington will defend a controversial Massachusetts law that restricts companies doing business in Myanmar (Burma) from entering into Massachusetts state contracts. The EU and Japan have requested WTO consultations with the United States, charging that the law violates the Uruguay Round's government procurement agreement, which Massachusetts along with 36 other states voluntarily pledged to uphold. The case is a difficult one for the Clinton administration.

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