During the 1980s, America thought Japan was a threat more than the USSR – vastly inflating Japan’s power. However, today, the mentality is quite the opposite. Instead, the global community, including the United States, seems to underestimate Japan’s abilities. Though, there are legitimate reasons to why there is such pessimism. They include: the recovery Japan needs to have due to the Hiroshima meltdown on April 11, 2011. Japan is also the fastest aging country with the birth rate only higher than three other countries -- causing economic burdens from pensions and lack of resources(particularly energy)and the public’s declining faith in political leaders – low public approval and annual Prime Minister changes.
Hence, the question remains is, why is Japan still important? Surely, Japan is the secondcontributor to international agencies and has an anemic stock market. Japan also has parallel ideas with US, which is further strengthened by the historical alliance US and Japan have built over the years since the American Occupation. By maintaining US military presence in Japan, it serves as a strategic positioning for the US in the South East region. Therefore, while US attempts to build solid Sino-US relations, US is well aware it can’t simply leave its “little brother” (Japan) behind.
However, in the midst of China's rise, there are also considerations Japan must respond to. They include: bandwagon:join the rising power, stay neutral – nearly impossible, internal balancing – gain more weapons, or external balancing: join other countries and create an alliance. Japan has taken the last method -- external balancing – by signing agreements with India in 2008 and Australia in 2007. Japan is still in the process of transformation from a conservative political style and such change takes time. Thus, Japan’s resilience is questioned constantly through such uncertainty.
There are four challenges Japan must overcome in order to fully rise again. The first one is production challenge. Japan’s nuclear meltdowns take time to recover and there are many damaged areas in the country that still needs to be fixed. According to IMF, Japan lost 2.3% in production rate in 2011 due to the tsunami disaster. Energy companies and nuclear plants that were looking forward to expanding their businesses before the disaster have now halted those projects in order to recover what was lost. There is also a supply change in technological products in Japan. Nowadays, Japan creates the small smart chip that operates a system while China creates the whole entire machine. Such process changes the way Japan has to deal with production strategy.
Secondly, there is an energy challenge. In 2012, Japan has increasingly relied on liquefied natural gas (LNG). Since the nuclear meltdowns, Japan has been struggling to maintain enough energy within its country. LNGs degrade really easily – thus, Japan can only hold three weeks worth of it at a time. Japan has been importing a lot of petroleum to compensate for the lost of the nuclear power plants.
Thirdly, there is a fiscal challenge Japan faces. Japan is over 200% GDP in debt and $2 billion has been used in rebuilding the areas affected by the tsunami disaster. Japan simply can't nationally fund its debts.
Lastly, there are embedded challenges Japan fundamentally has to face. Due to globalization, the rises of other countries are eroding Japan’s past privileges. Asia is also a much more competitive state than before – competition for attention (Sino-US relations) and current complex country relations. For instance, Japan has been attempting to join the TPP (Trans-Pacific Partnership), but current members of the TPP have expressed that they do not have faith that Japan can reach the economic demand the partnership requires each member to have. The TPP serves as a South East economic coalition that strives to bring small countries together through trade. Nonetheless, Japan's main strength is its ability to be internally organized and unified as a nation. Most of Japan’s challenges are external and thus, with the help of innovation, it is possible for Japan to potentially get back on its feet again.