By Adam P. Liff, Ryan Hass
Throughout 2021, U.S. government officials and scholars expressed deepening concerns that China may use its growing military power to force unification with Taiwan. Against this backdrop, Japan-Taiwan relations and Japan’s role in cross-Strait peace and stability — as a close neighbor whose westernmost territory is less than 70 miles from Taiwan, fellow democracy, and U.S. treaty ally hosting roughly 50,000 U.S. military personnel — attracted unprecedented media and policy attention.
In a written conversation with Brookings Senior Fellow and Koo Chair in Taiwan Studies Ryan Hass, Adam P. Liff, an associate professor of East Asian international relations at Indiana University’s Hamilton Lugar School and nonresident senior fellow in Brookings’ Foreign Policy program, reflects on the past year of Japan-Taiwan relations and looks ahead to the rest of 2022.
You have several major research projects on Japan-Taiwan relations underway, and also published several pieces last year examining recent developments. How should Americans understand Japan’s approach to Taiwan? Has Tokyo’s approach changed significantly since the April 2021 U.S.-Japan summit declaration “underscore[d] the importance of peace and stability across the Taiwan Strait and encourage[d] the peaceful resolution of cross-Strait issues?” What are a few notable developments from the past year?
ADAM P. LIFF:
2021 was an important year for Japan-Taiwan relations. I can’t recall their officially “non-governmental” relationship receiving this much attention overseas before — especially in Washington. At the same time, Tokyo’s decades-old public position concerning how it would respond to a possible cross-Strait conflict remains far more nuanced, and intentionally ambiguous, than a lot of the excitable headlines claimed last year.
The first development I’d highlight relates to the remarkable “mainstreaming” in Japan of concerns about peace and stability in the Taiwan Strait, especially after the April summit between President Joe Biden and then-Prime Minister Yoshihide Suga. It wasn’t that Japanese concerns were fundamentally new, especially among Japanese security experts and prominent “Taiwan-friendly” politicians. In fact, since 1972 Japan’s official position calls for “peaceful resolution” of cross-Strait issues through dialogue. And in 2005 — during an earlier period of severe cross-Strait frictions — the U.S. and Japanese governments jointly labeled “peaceful resolution” a “common strategic objective.” That said, worsening frictions across the Taiwan Strait throughout 2021 did focus Japanese media, politicians, and policymakers on the risks and potential impact on Japan of a possible conflict — perhaps to an unprecedented degree.
Beyond security issues, 2021 also saw Japan’s government again express support for democratic Taiwan as “an extremely crucial partner and an important friend, with which [Japan] shares fundamental values,” and its application for membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and observer status at the World Health Assembly. Japan’s government also continued its formal membership in the U.S. and Taiwan-led Global Cooperation and Training Framework (GCTF). None of these represented a new Japanese position or policy, per se, but especially given Beijing’s active efforts to weaken Taiwan’s international connections, this support was still meaningful.
The last development from 2021 I’d highlight is the continued deepening of politician-centered initiatives. (Since Japan-Taiwan diplomatic relations ended in 1972, legislative exchanges have been the primary venue for political exchange and cooperation.) For example, last February, Japan’s most powerful political party, the Liberal Democratic Party (LDP), launched its first-ever Taiwan-focused “Project Team.” Over the summer, it delivered policy recommendations to Japan’s prime minister and helped facilitate inter-legislator dialogues, including a virtual meeting pairing LDP politicians with counterparts from Taiwan’s ruling Democratic Progressive Party (DPP) to discuss security issues. Japanese politicians’ quiet coordination with U.S. counterparts also ultimately led to the allies donating a combined eight million COVID-19 vaccines to Taiwan.
So, it was a big year. But context is also key: the incremental deepening of Japan-Taiwan is a longer-term trend that significantly predates 2021. And it’s critical to differentiate between that more general trend and the specific matter of how Japan might respond in a possible cross-Strait conflict.
I recall from our conversations last year that you were a bit frustrated with some commentary asserting that Japan’s posture toward a possible cross-Strait conflict fundamentally or radically shifted in 2021. What is the source of your concerns, and why is this a problem?
ADAM P. LIFF:
As I wrote in a critical analysis last August, the selective and disproportionate focus by international media and commentators on a few choice statements by politicians last year seeded widespread claims — mostly outside Japan — that Japan’s government had somehow taken the unprecedented (and uncharacteristic) step of publicly pre-committing to “defend Taiwan” if China attacks, or to unconditionally backing the U.S. military if Washington decided to intervene in a cross-Strait conflict. If you’ll forgive my candor, those assertions are just not accurate.
Perhaps the most high-profile and consequential example was a global headline-making July 5 remark from Japan’s then-deputy prime minister, Taro Aso. I can’t go into a full post-mortem but suffice it to say that much reporting and commentary left out critical context and/or misrepresented what Aso actually said: For starters, Aso’s remark was made at an LDP political party fundraiser in a Tokyo hotel, not in Japan’s parliament, as some claimed. This suggests that the famously outspoken Aso appeared to be speaking as an LDP politician, not a government representative. Second, what Aso actually said appears to have been widely misunderstood or exaggerated, at least sometimes due to poor or incomplete translations. What he appeared to present as a conditional possibility (“could”) — namely, if an attack on Taiwan occurred and Japan’s political leaders judged that it posed an “existential threat” to Japan — was widely misrepresented as an unconditional commitment (“would”). Unfortunately, this comment was widely cited as alleged evidence that Japan’s government had somehow radically departed from its decades-old posture and publicly committed to defending Taiwan alongside the U.S. It did not. To be sure, the content and rarity of such a remark certainly made it newsworthy and notable. But that fact, too, counseled additional caution.
Also problematic: unambiguously authoritative evidence of the government’s nuanced official position did not receive nearly as much attention as a few attention-grabbing remarks like Aso’s. Yet throughout 2021, top Cabinet officials, including the prime minister and chief Cabinet secretary, repeatedly reaffirmed the basic ambiguity at the heart of Japan’s decades-old posture: Japan wishes to see a peaceful resolution through direct dialogue between Beijing and Taipei, and does not pre-commit to any particular course of action if war breaks out.
To sum up: in 2021, did Japan’s government publicly pledge to “defend Taiwan,” or to back the United States if China attacks Taiwan? No. Did it say it won’t back the United States if China attacks Taiwan and the U.S. decides to intervene? Also no. Rather, Japan’s government repeatedly signaled that whether and how Japan would respond, and under what legal authorities it might consider deploying its Self-Defense Forces, will depend on political leaders’ judgment about the particulars of the contingency.
Japan’s reluctance to publicly go beyond this ambiguous posture should not be interpreted as apathy, or ambivalence. Nor should it be surprising — after all, even the U.S.’ famously forward-leaning posture is “strategically ambiguous,” and certainly not unconditional.
But it’s important to get the nuances of Japan’s official position right. This is not some academic distinction. Going forward, accurately assessing where Japan’s government stands on these issues is critically important for policymakers to make sound judgments. The stakes are extremely high. Careful parsing of what was actually said, who said it, and in what capacity, is essential.
Can you share with us a few issues you will be tracking in Japan-Taiwan relations in 2022?
ADAM P. LIFF:
How actively will Japan support Taiwan’s September 2021 application to join CPTPP, and will there be concrete progress? Though Tokyo has been publicly supportive, Taiwan’s longstanding ban on imports of food from five Japanese prefectures near the 2011 Fukushima nuclear disaster site remains a major thorn in otherwise generally positive relations. If the ban persists, Taiwan’s path to CPTPP membership may be even rockier than it otherwise would (due to Beijing’s opposition).
To what extent will the U.S. and Japan deepen cooperation with third parties in support of Taiwan? For example, might another U.S. democratic ally or India follow Japan (2019) and Australia (2021) and formally join GCTF or otherwise deepen its cooperation to support Taiwan’s international engagement? Or as Australia-Japan security ties deepen and Australia’s leaders become increasingly vocal expressing concerns about Taiwan, is deeper trilateral coordination in the cards?
Will Japan agree to more explicit statements of support for Taiwan in a U.S.-Japan bilateral statement? Though in recent years Japan’s government officially identifies Taiwan as an “an extremely crucial partner and an important friend,” in a U.S.-Japan alliance joint statement it has resisted explicitly referring to “Taiwan” (as opposed to relatively anodyne statements about “peace and stability in the Taiwan Strait”) or criticizing Beijing’s attempted intimidation of Taipei. The January 2022 2+2 statement’s reiteration of last year’s language suggests this may not change anytime soon.
What, if any, public evidence is there of deepening Japan-Taiwan(-U.S.) security cooperation, or U.S.-Japan alliance planning for a Taiwan contingency? Throughout 2021, Japanese security experts and “Taiwan-friendly” politicians expressed concerns about the lack of Japan-Taiwan security cooperation and/or U.S.-Japan contingency planning specifically for a cross-Strait contingency. Though a few media reports suggest some forward movement on the latter, it is tough to draw clear conclusions from the public record. Meanwhile, some voices on both sides continue to bemoan the continued obstacles to Japan-Taiwan security cooperation.
Finally, will efforts by Tokyo and Beijing to commemorate the 50th anniversary of their diplomatic normalization negatively affect prospects for Japan-Taiwan cooperation this year? Despite significant frictions in the East China Sea and elsewhere, China remains a hugely important country for Japan, and Prime Minister Fumio Kishida has called for a “stable relationship.” How will Tokyo and Beijing mark the anniversary? Will there be any breakthroughs?india japan china covid-19
EUR/GBP price prediction: is the bears’ pain over?
Ever since Brexit happened, the British pound gained against the common currency, the euro. Despite many analysts calling for the pound’s decline, it…
Ever since Brexit happened, the British pound gained against the common currency, the euro. Despite many analysts calling for the pound’s decline, it gained ground in a relentless bearish trend.
The downtrend was so strong that even in 2022, some analysts believe that the EUR/GBP exchange rate will still hover around 0.84 in March 2023 – about 10 months from now.
Currently, EUR/GBP trades at 0.85, bouncing from its lows and looking constructive from fundamental and technical perspectives. So, where will the exchange rate go next?
Here is a price prediction considering both the technical and fundamental aspects.
The two central banks’ policies are set to diverge
Let’s start with the fundamental perspective. A currency pair moves based on the monetary policy differences between the two central banks.
In this case, the Bank of England was one of the first major central banks in the world that decided to increase the interest rate in the aftermath of the COVID-19 induced recession. Moreover, it did so not once but multiple times.
At the same time, the European Central Bank did nothing. It couldn’t do so, as a war started in Eastern Europe (Russia invaded Ukraine) in February.
In order to shelter European economies from the war’s economic impact, the European Central Bank preferred a wait-and-see stance. However, inflation is running way higher than the central bank’s target, and one of the causes is just the war.
As such, the central bank recently announced that it plans to end negative rates by September. Considering that the deposit facility rate is at negative 50bp, it means that a couple of rate hikes are on the table during the summer.
Yet, the Bank of England is now in a wait-and-see mode. Therefore, the fundamentals favor a move higher in the EUR/GBP exchange rate over the summer.
An inverse head and shoulders shows EUR/GBP struggling to overcome resistance
From a technical perspective, the market may have bottomed with the move to 0.82. It was quickly retraced, suggesting the presence of an inverse head and shoulders pattern.
A close above 0.86 should put the 0.90 area in focus. That is where the pattern’s measured move points to, and the move also implies that the lower highs series would be broken, thus ending the bearish bias.
All in all, EUR/GBP looks bullish here. Both technical and fundamental aspects favor more strength in the months ahead.
The post EUR/GBP price prediction: is the bears’ pain over? appeared first on Invezz.recession covid-19 monetary policy pound euro european europe russia ukraine
The UK’S Rich Are Getting Richer
The UK’S Rich Are Getting Richer
The UK’s richest people were announced in The Sunday Times’ annual roundup this week, including the…
The UK’s richest people were announced in The Sunday Times’ annual roundup this week, including the founder of Dyson vacuum cleaners, as well as JK Rowling and Elisabeth Murdoch. As Statista's Anna Fleck notes, the list comes at a time when the majority of Brits are feeling the burden of the cost of living crisis.
You will find more infographics at Statista
At the top of the list came billionaire brothers Sri and Gopi Hinduja, who own the Mumbai-based conglomerate Hinduja Group. They were reported to own £28.47 billion together. Other key names to make it onto the list, albeit further down, included Chancellor of the Exchequer Rishi Sunak and his wife Akshata Murty, ranking at 222nd place out of 250 with a joint £730m of wealth. Sunak is reportedly the richest serving MP in history.
Chelsea manager Roman Abramovich dropped 20 places on the newspaper’s list this year, after his wealth was believed to have been cut from £12 billion down to £6 billion. He was one of the Russian figures to have been hit with sanctions in light of the Russian war in Ukraine. Alisher Usmanov also saw a fall, from sixth to eleventh place, with an estimated wealth of £10bn this year.
In terms of demographics, only seven of the people on the list were women, while 116 of the richest were men, and a further 78 were listed under the grouping “man with family.”
Income from property was the most common primary source of wealth, with 43 percent of people on the list benefiting from it.
Additionally, as Statista's Fleck details below, the UK’s top ten richest people are wealthier than the group has ever been, with their cumulative wealth having grown from £47.77 billion in 2009 to £182 billion in 2022 - an increase of 281 percent.
You will find more infographics at Statista
As this chart shows, following the 2008 crash, the UK’s billionaires have seen a steady, and fairly steep, incline in their wealth.
The upward trend continued despite the pandemic, which saw the UK’s economy shrink by 20.4 percent in the second quarter of 2020, as most industries suffered, and 30.5 million people in Europe were expected to be pushed into poverty. This is a stark contrast to the UK’s 250 ultra wealthy, who saw their collective wealth surge to a record high of £653 billion in 2022.
George Dibbs, the head of the Center for Economic Justice at the Institute for Public Policy Research, explains how we are seeing a widening wealth gap, as the rich are getting richer:
“As we enter a once-in-a-generation cost of living crisis, the Sunday Times rich list shows us again that vast wealth often begets more wealth. That has proved particularly true during the pandemic, when the wealthiest accumulated more wealth than poorer people, who saved nothing,” he tells The Guardian.
“Now there are more billionaires in the UK than ever before and the collective wealth of the richest has grown again.”
According to the article, Dibbs is now calling on Sunak to bring in taxes in order to “redistribute the wealth gains of the richest to pay for higher social security benefits for those who most need them.”
Weekly investment update – Weaker economic outlook weighs on markets
Global equities have continued their sell-off over the last week. What is new is that markets are now reacting to risks of weaker economic data weighing…
Global equities have continued their sell-off over the last week. What is new is that markets are now reacting to risks of weaker economic data weighing on earnings. Real bond yields, whose rise triggered the recent drop in equity markets, have fallen as investors price a higher probability of a recession.
Yields of US Treasury bonds have slipped since reaching around 3.12% in early May (see Exhibit 1). The rally has been driven by fears of a global recession due to poor economic data, strong inflation numbers, aggressive talk from central bankers and concerns over the consequences of Covid in China.
Recent data that contributed to the bond market’s unease about the prospects for the US economy includes:
- The Richmond Federal Reserve Manufacturing survey, which fell to its lowest since 2020 at -9.
- The monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York fell to -11.6, with the shipment measure falling at its fastest pace since the start of the pandemic two years ago.
- The Federal Reserve Bank of Philadelphia’s May business index dropped 15 points to 2.6, with the six-month outlook falling to its lowest since December 2008 (though the underlying details were better than the headline number).
- Existing and new home sales dropped for a third month, to its lowest since 2020, held back by lean inventory, rising prices and higher mortgage rates.
Taken together, the various regional Federal Reserve surveys suggest that the ISM Report for Business may come in at around 53, above 50 so still clearly in expansion territory for the US economy, but down noticeably from the upper 50s/lows 60s readings to which markets have become accustomed.
US equities still weak
US equities have remained weak as the down move continues for its seventh week.
It has been apparent that, in contrast to the start of the year when rising real bond yields were undermining equity markets, it is now fears of falling earnings due to a weaker economy that are weighing on stocks.
The last week has seen, in accordance with the risk-off regime, more buying-the-dip and selling-the-rally. There has also been a rotation out of growth and cyclicals into value and defensives (healthcare, real estate, utilities and staples).
European markets under the cosh
Bearish sentiment is prevalent in Europe, too, with investors cutting exposures to European equities.
There was another outflow in the week to 18 May, taking the total to 14 weeks of outflows in a row. Cyclicals, in particular, saw strong outflows, led by the materials, financials and energy sectors.
Our multi-asset team are inclined to reduce exposure to equity markets given the deterioration in the outlook.
European economy resists
Economic activity indicators have fallen so far in May, but remain above 50. Activity edged up in the manufacturing sector despite the fallout from the Ukraine war and supply chain disruptions that have intensified with China’s coronavirus lockdowns.
Although factories continue to report widespread supply constraints and diminished demand for goods amid elevated price pressures, the eurozone economy is being boosted by pent-up demand for services as pandemic-related restrictions are wound down.
While purchasing manager indices are still pointing to growth, it may be that these surveys understate the shock to activity, while sentiment surveys likely overstate the shock. Markets are increasingly tilting towards anticipation of a contraction in the coming quarters.
Higher food prices
Restrictions on the export of Ukrainian cereals continue and risks increasing food insecurity as the UN World Food Programme has highlighted.
As much of Russian and Ukrainian wheat goes to poorer nations, hunger could be a critical risk, driving up political instability.
The risk of further rises in food prices will be a key driver of inflation, particularly in emerging markets, the worst-case scenario being that the situation worsens significantly.
Moreover, lower fertiliser supply will have a greater impact on the next few months’ harvests, while the pass-through of costlier logistics and input prices is likely to drive food prices even higher.
Minutes of the meeting of the US Federal Open Markets Committee on 3-4 May will be published later on Wednesday.
However, market conditions have soured appreciably since the Fed’s first 50bp rate rise, so some of the language in the minutes pertaining to financial risks and market conditions will be outdated.
Instead, the three major focus points for market participants will likely be:
- Policymakers’ views on the conditions which could lead to a shift down, back to a pace of raising rates by 25bp at each FOMC meeting;
- Any hints as to how far and for how long policymakers intend to push policy rates into restrictive territory;
- Guidance shaping expectations for the next Summary of Economic Projections — aka the dot plot — due to be released at the June meeting.
Forthcoming economic data
US personal income and spending data for April should give investors an insight into the US consumer’s behaviour: Are they tightening the purse strings? The report may also show the Fed’s preferred inflation gauge (core PCE deflator) starting to decelerate.
Perhaps equally important, the report should shed light on how consumers are responding to the current high inflation environment, indicating how wages are performing relative to inflation and how aggressively consumers are tapping into the USD 2.5 trillion of accumulated savings from the pandemic period.
Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. The views expressed in this podcast do not in any way constitute investment advice.
The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.
Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.
Writen by Andrew Craig. The post Weekly investment update – Weaker economic outlook weighs on markets appeared first on Investors' Corner - The official blog of BNP Paribas Asset Management, the sustainable investor for a changing world.recession pandemic coronavirus treasury bonds bonds emerging markets equities stocks fomc fed federal reserve us treasury home sales mortgage rates real estate recession european europe ukraine china
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