George W. Bush got the cold shoulder in his farewell tour of Europe last month. The US president will face no such lack of interest in Japan this week.
Asia’s biggest economy is keen to grab some of the spotlight that’s shining so brightly on China. Japan is sparing no expense and its media no amount of airtime as leaders of the Group of Eight (G-8) industrialized nations make their way to Toyako in the the northern island of Hokkaido for the three-day summit starting on Monday.
Instead of going to Hokkaido, I decided to spend this week in the western city of Fukuoka, where Japan last hosted the G-8 in 2000. One reason is the inverse relationship between the number of journalists and the amount of news. G-8 summits, let’s face it, have become little more than expensive photo opportunities.
Another reason: Fukuoka is experiencing all of the economic and political forces the G-8 should be discussing, but predictably won’t. The media breathlessly cover what the leaders of Canada, France, Germany, Italy, Japan, Russia, the UK and the US will discuss: the global credit crisis, oil and food costs, and climate change. It’s far more intriguing to explore what the G-8 should be grappling with, but will probably sweep under the tatami mat. Here are five issues.
Fukuoka is one of Japan’s main industrial centres and geographically it’s closer to Korea and China than Tokyo. Historically, its major industries include automobiles, semiconductors, steel, shipping and fishing — all of which have been challenged as rarely before by global competition.
The yen’s 15% increase versus the dollar in the past 12 months is crimping growth, and that’s partly Japan’s fault. Japan hasn’t used the last six years of stable growth to raise its competitiveness. That helps explain why the Nikkei 225 Stock Average on 4 July recorded its worst losing streak — 12 straight days of declines — since 1954, the year Elvis Presleymade his first record.
The dollar is playing a major role in the doubling of crude-oil prices over the last year. G-8 leaders should press the US to clarify whether it still favours a strong dollar and how it plans to stabilize its currency. “The easiest way to engineer a weaker oil price is a stronger dollar, but Henry Paulson isn’t helping on that front,” Simon Grose-Hodge, a strategist at LGT Group in Singapore, says of the US treasury secretary’s handiwork.
China and India
There has never been a more obvious time to add chairs to the G-8’s table. The group should immediately add China, India and Brazil and create a process for even more to join this most exclusive of clubs.
What good is being a G-8 member when you have no sway over the governments and trends driving world growth? It’s heartening that Japanese Prime Minister Yasuo Fukuda is pushing G-8 members to halve global greenhouse gas emissions by 2050. Yet that goal is four decades away. In the short run, nothing can be achieved without developing nation leaders. And if Bush is still dragging his heels, why can’t China and India?
Asian officials are aghast at how badly the US is handling its credit crisis. The Bush team’s plan is encouraging Americans to worry less and shop more. The US Federal Reserve is letting inflation take care of itself. Wall Street thinks markets know best and politicians should stay away—except when it’s time for a bailout.
All the while, contagion from the US has flowed Asia’s way, affecting credit markets from Fukuoka to Jakarta. Leaders should demand that the US tighten market regulations and do more for households than investment banks. Members should express concern about the US adopting the Japan-like strategy of relying on easy credit to support growth.
History may show that European Central Bank president Jean-Claude Trichet focused too much on the risks of rising prices. It also may show that the Fed and central banks across Asia were irresponsible in the latter half of the 2000s.
The G-8 should be speaking frankly about whether a global recession is more dangerous than double-digit inflation. There has never been a better time for a combined political response to rising energy and food costs.
The search for alternatives to oil continues to lead many towards food. The side effects of that policy are being seen in poor communities from Nigeria to Cambodia. G-8 leaders should consider that biofuels can be made from many non-food sources such as bacteria and algae, and Fukuoka has lots of algae. Why is corn often the focus? It gets votes for politicians lacking in vision. It’s time for the US, Europe and Japan to scrap subsidies. We’re getting to the point where, as Elvis might say, “It’s Now or Never.” It’s highly doubtful it will happen at the G-8’s hollow talkfest — or much else for that matter.