1 00:00:03,720 --> 00:00:07,119 Speaker 1: Hello, Stephanomics. Here the podcast that brings you the global economy, 2 00:00:07,280 --> 00:00:11,479 Speaker 1: and this week we're joining world leaders in Japan, virtually 3 00:00:11,520 --> 00:00:14,000 Speaker 1: at least as they head to the G seven Heads 4 00:00:14,000 --> 00:00:17,840 Speaker 1: of Government summit in Hiroshima. It wasn't so long ago 5 00:00:18,239 --> 00:00:21,400 Speaker 1: that people spoke wistfully about getting rid of the G 6 00:00:21,520 --> 00:00:26,279 Speaker 1: seven altogether. Having just the US, Canada, Japan and a 7 00:00:26,280 --> 00:00:29,840 Speaker 1: bunch of European countries sitting around the table just didn't 8 00:00:29,840 --> 00:00:33,960 Speaker 1: feel like a representative sample of the global economy. But 9 00:00:34,159 --> 00:00:38,280 Speaker 1: today a lot of extra countries get invited. Plus everything 10 00:00:38,320 --> 00:00:40,600 Speaker 1: going on in the world has left the G seven 11 00:00:41,000 --> 00:00:45,920 Speaker 1: needing a safe space. The change in geopolitics and economics 12 00:00:46,520 --> 00:00:50,199 Speaker 1: is particularly evident in Asia, and perhaps nowhere is it 13 00:00:50,280 --> 00:00:54,959 Speaker 1: more challenging to policymakers than in Japan. I'm getting into 14 00:00:55,040 --> 00:00:58,240 Speaker 1: all of that in a few minutes with distinguished thinkers 15 00:00:58,240 --> 00:01:03,400 Speaker 1: and authors Richard McGregor and Rory metcalf. But first, here's 16 00:01:03,400 --> 00:01:17,959 Speaker 1: our economy and Government reporter Yoshiaki Nohara in Hiroshima, Mokdo. 17 00:01:22,360 --> 00:01:27,360 Speaker 2: It's August sixth, twenty twenty two. The clock hits eight 18 00:01:27,520 --> 00:01:32,640 Speaker 2: fifteen in the morning, precisely seventy seven years ago. This 19 00:01:32,800 --> 00:01:38,559 Speaker 2: time the Wall's first nuclear bomb exploded. Here in Hiroshima, Japan, 20 00:01:39,680 --> 00:01:44,039 Speaker 2: I'm standing among hundreds of people observing a moment of 21 00:01:44,080 --> 00:01:50,080 Speaker 2: silence for the victims. Japanese Prime Minister Formio Shida steps 22 00:01:50,120 --> 00:01:52,160 Speaker 2: forward and dedicates a wreath. 23 00:01:55,920 --> 00:02:00,320 Speaker 3: We must not repeat the calamity on that day seventy 24 00:02:00,480 --> 00:02:04,760 Speaker 3: seven years ago. This is our nation's responsibility as the 25 00:02:04,840 --> 00:02:08,800 Speaker 3: only even hit by an atomic bomb, and it's my 26 00:02:08,960 --> 00:02:13,520 Speaker 3: preach as Prime Minister hum Hiroshima. 27 00:02:13,720 --> 00:02:17,960 Speaker 2: This coming weekend, Hiroshima will be hosting a G seven summit, 28 00:02:18,120 --> 00:02:22,920 Speaker 2: and Chida will reigrate his pledge for peace. But in 29 00:02:22,960 --> 00:02:27,840 Speaker 2: the background stakes are higher than ever. Russia is escalating 30 00:02:27,960 --> 00:02:33,040 Speaker 2: nuclear threats in Ukraine, North Korea keeps firing missiles, and 31 00:02:33,160 --> 00:02:37,239 Speaker 2: China is putting greater pressure on Taiwan. They are all 32 00:02:37,480 --> 00:02:38,799 Speaker 2: Japan's neighbors. 33 00:02:40,280 --> 00:02:44,799 Speaker 4: Japanese Prime Minister Kishida FuMO ordered the Defense finance ministers 34 00:02:44,840 --> 00:02:48,720 Speaker 4: on December fifth to secure forty three trillion yen for 35 00:02:48,840 --> 00:02:51,000 Speaker 4: defense spending from fest of All twenty twenty three. 36 00:02:51,160 --> 00:02:56,400 Speaker 2: Ironically, peace is often preserved through the supply of heavy weapons. 37 00:02:56,960 --> 00:03:02,440 Speaker 2: Kishida's ordered a historic increase in defense spending. Japan's military 38 00:03:02,480 --> 00:03:06,040 Speaker 2: budget is now said to be two percent of its 39 00:03:06,120 --> 00:03:10,280 Speaker 2: economic output. That would rank third largest in the world, 40 00:03:10,760 --> 00:03:13,160 Speaker 2: only after the US and China. 41 00:03:13,600 --> 00:03:16,959 Speaker 4: Japan had said multiple times this year that it will 42 00:03:17,080 --> 00:03:19,240 Speaker 4: drastically strengthen defense capable. 43 00:03:19,520 --> 00:03:25,720 Speaker 2: NOWA is counting on private companies to make sophisticated weapons 44 00:03:25,840 --> 00:03:30,000 Speaker 2: to arm Japan's self defense poces, and the key weapons 45 00:03:30,080 --> 00:03:41,080 Speaker 2: factory is located in, of all places, Hiroshima. The Japan 46 00:03:41,200 --> 00:03:45,640 Speaker 2: Still Works Hiroshima plant sprawls over a flat plain on 47 00:03:45,840 --> 00:03:50,000 Speaker 2: eastern edge of the city. The company let me enter 48 00:03:50,120 --> 00:03:54,840 Speaker 2: the factory and watch them making artilleries and canons, but 49 00:03:54,920 --> 00:03:59,360 Speaker 2: they wouldn't let me use any sound or take any photos. 50 00:03:59,560 --> 00:04:03,960 Speaker 2: It's a secret operation here and even locals are dimly 51 00:04:04,000 --> 00:04:08,240 Speaker 2: aware of what happens inside. So I would just describe 52 00:04:08,360 --> 00:04:17,200 Speaker 2: what I saw. Jebre factory specializes in making activities. I 53 00:04:17,240 --> 00:04:21,000 Speaker 2: saw bunch of cannons and guns. They would be loaded 54 00:04:21,040 --> 00:04:25,359 Speaker 2: on warships and tanks. I looked into the barrel of 55 00:04:25,440 --> 00:04:30,359 Speaker 2: a cannon. I saw spiral groups inside that will allow 56 00:04:30,520 --> 00:04:34,160 Speaker 2: shells to spiral through the air in a stable trajectory 57 00:04:34,320 --> 00:04:38,960 Speaker 2: and hit targets during the tour. The smell of machine 58 00:04:39,000 --> 00:04:42,480 Speaker 2: oil hang in the air. There was a constant bus 59 00:04:42,520 --> 00:04:47,440 Speaker 2: from cutting steel. Some beams supporting the ceiling were rusty, 60 00:04:48,080 --> 00:04:52,400 Speaker 2: which wasn't surprising given the factory was built before World 61 00:04:52,480 --> 00:04:57,880 Speaker 2: War Two. The local managers who gave me the tour 62 00:04:58,560 --> 00:05:02,440 Speaker 2: said they never let a journalist in before. They all 63 00:05:02,560 --> 00:05:06,279 Speaker 2: declined to be quoted. They said their families might be 64 00:05:06,400 --> 00:05:11,320 Speaker 2: harassed with the nature of their work was publicized. After all, 65 00:05:11,720 --> 00:05:16,520 Speaker 2: this is Hiroshima, the Wall's mecca for past fismen. But 66 00:05:16,680 --> 00:05:28,480 Speaker 2: then I met Kato arigatomas the Chio. Kato was fifteen 67 00:05:28,560 --> 00:05:31,680 Speaker 2: years old when she began working at the j stew 68 00:05:31,920 --> 00:05:36,039 Speaker 2: factory in nineteen forty four. At her old girls school, 69 00:05:36,480 --> 00:05:40,480 Speaker 2: students were forced to skip classes and work at factories 70 00:05:40,800 --> 00:05:44,839 Speaker 2: while their fathers, brothers and uncles was sent to fight. 71 00:05:45,640 --> 00:05:50,880 Speaker 2: Kato and her classmates pulled twelve hour shifts making bullets 72 00:05:51,040 --> 00:05:51,839 Speaker 2: around the clock. 73 00:05:52,400 --> 00:05:55,320 Speaker 3: That Couninotoman, it's a good letter. 74 00:05:55,640 --> 00:05:59,440 Speaker 5: We were told all the Wifelome Elementary School that we 75 00:05:59,520 --> 00:06:03,880 Speaker 5: shouldn't spare our lives in order to stop donation. We 76 00:06:04,000 --> 00:06:07,719 Speaker 5: thought we must work hard for Japan. That was all 77 00:06:07,880 --> 00:06:09,000 Speaker 5: we care about. 78 00:06:09,040 --> 00:06:14,120 Speaker 2: Demo On August sixth, nineteen forty five, Kato took Adeo. 79 00:06:14,920 --> 00:06:18,720 Speaker 2: Because the factory was closed for a routine power saving day, 80 00:06:19,560 --> 00:06:23,400 Speaker 2: Kato and some friends planned to go swimming outside town. 81 00:06:24,000 --> 00:06:27,039 Speaker 2: She was waiting for a train when the bomb hit up. 82 00:06:33,480 --> 00:06:37,880 Speaker 2: She doesn't remember the blinding flash or deafening sound that 83 00:06:37,960 --> 00:06:41,560 Speaker 2: other survivors would later recall. She just woke up on 84 00:06:41,600 --> 00:06:45,520 Speaker 2: the ground, perhaps ten meters away from where she was standing, 85 00:06:45,720 --> 00:06:50,039 Speaker 2: and found her two friends. One's face turned brown like 86 00:06:50,120 --> 00:06:54,000 Speaker 2: a samber, the other's right arm was studied with shells 87 00:06:54,040 --> 00:06:58,760 Speaker 2: of glass. They staggered toward a shelter where other survivors 88 00:06:58,920 --> 00:06:59,479 Speaker 2: flooded in. 89 00:07:02,240 --> 00:07:06,120 Speaker 5: The skin was killed off, all the while hanging from 90 00:07:06,160 --> 00:07:09,880 Speaker 5: their fingernails. The three of us held all together and 91 00:07:09,920 --> 00:07:15,520 Speaker 5: cry it were Chellish even in hell. I don't think 92 00:07:15,720 --> 00:07:18,080 Speaker 5: it would be the horrible. 93 00:07:17,640 --> 00:07:18,560 Speaker 6: Good Man and. 94 00:07:21,040 --> 00:07:25,760 Speaker 2: The war ended soon afterwards, and Kato never returned to 95 00:07:25,800 --> 00:07:30,680 Speaker 2: the factory, which stopped making weapons. In nineteen forty seven, 96 00:07:31,160 --> 00:07:35,520 Speaker 2: Japan adapted a new constitution that the renownced war for 97 00:07:35,680 --> 00:07:41,000 Speaker 2: good and pledged its armed forces wouldn't be maintained. Then 98 00:07:41,400 --> 00:07:46,280 Speaker 2: the Korean and Cold Wars came about, threatening peace in 99 00:07:46,360 --> 00:07:51,680 Speaker 2: the area. Jess w started making weapons again. The constitution 100 00:07:51,920 --> 00:07:56,960 Speaker 2: remains the same even today. But in reality, Japan has 101 00:07:57,080 --> 00:08:02,800 Speaker 2: built self defense forces, which is military, and companies have 102 00:08:02,960 --> 00:08:08,240 Speaker 2: long made weapons for them. Now it's going to take 103 00:08:08,280 --> 00:08:11,320 Speaker 2: a lot of work to get to parent's defense industry 104 00:08:11,680 --> 00:08:17,600 Speaker 2: ready to meet Seer's goals. Many contractors have shattered defense 105 00:08:17,720 --> 00:08:22,200 Speaker 2: operations in recent years. They can barely make ends meet 106 00:08:22,680 --> 00:08:27,840 Speaker 2: with low profit margins in government contracts. They cannot export 107 00:08:28,040 --> 00:08:34,160 Speaker 2: their products easily either, due to tight regulations. Defense ministry 108 00:08:34,320 --> 00:08:39,400 Speaker 2: manager costchemets Motto told me he cannot keep track of 109 00:08:39,679 --> 00:08:40,960 Speaker 2: how many are gone. 110 00:08:44,280 --> 00:08:49,200 Speaker 6: There is not much profitability or possibility for expansion. That's 111 00:08:49,240 --> 00:08:56,080 Speaker 6: why new players, investments, or resources aren't coming in. As 112 00:08:56,080 --> 00:09:01,559 Speaker 6: a result, our technical strengths has weakened in our advantage 113 00:09:02,200 --> 00:09:10,960 Speaker 6: is being threatened. That's the state of the defense industry. 114 00:09:11,880 --> 00:09:16,679 Speaker 2: Shots were fired at Camp Kaitechi for self defense poces. 115 00:09:17,120 --> 00:09:20,160 Speaker 2: The camp is just next to the js W factory. 116 00:09:21,120 --> 00:09:25,200 Speaker 2: Soldiers who are training and preparing for the camp's seventy 117 00:09:25,280 --> 00:09:33,320 Speaker 2: second anniversary. I struck a conversation with Koki Hiroka, a 118 00:09:33,440 --> 00:09:38,160 Speaker 2: twenty one year old medic. Hiroka told me that people 119 00:09:38,240 --> 00:09:41,880 Speaker 2: may be rullying for peace, but the officers still have 120 00:09:42,000 --> 00:09:44,040 Speaker 2: to be ready for enemy attacks. 121 00:09:45,679 --> 00:09:50,800 Speaker 6: I'd be lying if I say I'm not scared. But 122 00:09:50,920 --> 00:09:55,160 Speaker 6: if we quit one after another, nobody will be left 123 00:09:55,160 --> 00:09:59,920 Speaker 6: to protect Japan. I try to gether my courage. It's 124 00:10:00,120 --> 00:10:01,439 Speaker 6: my duty to serve. 125 00:10:05,360 --> 00:10:10,200 Speaker 2: On August sixth, last year, peace activists rallied along the 126 00:10:10,240 --> 00:10:14,520 Speaker 2: main street in Hiroshma. They chanted against the Kishida's moves, 127 00:10:15,280 --> 00:10:19,240 Speaker 2: which they considered as weakening the constitution and arming Japan. 128 00:10:20,000 --> 00:10:23,679 Speaker 2: But Paul's are showing more people are favoring a booster 129 00:10:23,800 --> 00:10:28,720 Speaker 2: to defense spending and gaining more military capability. Even Kato, 130 00:10:29,080 --> 00:10:32,360 Speaker 2: who worked for js W as a girl, is becoming 131 00:10:32,480 --> 00:10:37,040 Speaker 2: less idealistic. She is now ninety four. Every year on 132 00:10:37,080 --> 00:10:41,080 Speaker 2: August sixth, she cries at the ceremony to commemorate the 133 00:10:41,160 --> 00:10:45,440 Speaker 2: nearly seven hundred students and teachers from her school killed 134 00:10:45,480 --> 00:10:49,760 Speaker 2: by the Bond. The idea of a rearmed Japan breaks 135 00:10:49,800 --> 00:10:54,320 Speaker 2: her heart, but she also has no illusions about peace keeping. 136 00:10:56,720 --> 00:11:00,880 Speaker 5: Has renounced to war. But if others are chance, Japan 137 00:11:01,000 --> 00:11:04,120 Speaker 5: will have to protect. 138 00:11:06,640 --> 00:11:13,040 Speaker 2: For now that place. Bell continues to talk in for 139 00:11:13,120 --> 00:11:24,960 Speaker 2: Boomberg News, Am Yosha. 140 00:11:34,760 --> 00:11:37,960 Speaker 1: Well, that was such a thoughtful and evocative piece there 141 00:11:38,120 --> 00:11:41,679 Speaker 1: from Hiroshima by Yoshi Hara, and there's there's a lot 142 00:11:41,720 --> 00:11:46,079 Speaker 1: of strands there that would be worth following up. And 143 00:11:46,480 --> 00:11:48,600 Speaker 1: I'm going to talk to two experts now who could 144 00:11:48,679 --> 00:11:51,320 Speaker 1: run away with any one of them. Richard McGregor is 145 00:11:51,320 --> 00:11:56,240 Speaker 1: an Australian journalist, writer and author. He is currently working 146 00:11:56,280 --> 00:11:59,960 Speaker 1: as a Senior Fellow at the Loewi Institute based in Sydney, Australia, 147 00:12:00,080 --> 00:12:04,520 Speaker 1: and has written numerous extremely influential books on China, including 148 00:12:04,520 --> 00:12:10,559 Speaker 1: The Party, Asia's Reckoning and more recently Sijinpink The Backlash. 149 00:12:10,840 --> 00:12:13,800 Speaker 1: We also have Rory Metcalf, who has been head of 150 00:12:13,840 --> 00:12:18,240 Speaker 1: the National Security College at the Australian's National University for 151 00:12:18,280 --> 00:12:22,439 Speaker 1: a long time. He's also written a lot of influential books, 152 00:12:22,480 --> 00:12:27,400 Speaker 1: including most recently Indo Pacific Empire, China America and The 153 00:12:27,440 --> 00:12:32,760 Speaker 1: Contest for the World Pivotal Region. Well. One reason obviously 154 00:12:32,880 --> 00:12:35,800 Speaker 1: we wanted to go to Hiroshima is that Prime Minister 155 00:12:35,840 --> 00:12:38,360 Speaker 1: Kishida has himself chosen that as the location for this 156 00:12:38,400 --> 00:12:46,120 Speaker 1: weekend's G seven Leader's Summit. Rory, there's clearly a message there. 157 00:12:46,160 --> 00:12:51,520 Speaker 1: The symbolism is about the dangers of unrestrained geopolitical conflict, 158 00:12:53,000 --> 00:12:56,920 Speaker 1: but the military build up in Hiroshima itself, which she 159 00:12:57,000 --> 00:12:59,640 Speaker 1: talks about in that piece, you know, underscores that to 160 00:12:59,720 --> 00:13:02,440 Speaker 1: a you've pieced, Japan now thinks you have to increase 161 00:13:03,040 --> 00:13:08,720 Speaker 1: preparations for war. So, just stepping back a little, you know, 162 00:13:08,840 --> 00:13:12,960 Speaker 1: how much of a change does this represent in Japan's strategy. 163 00:13:13,920 --> 00:13:18,280 Speaker 7: So, Stephanie, it does seem to point to a dissonance 164 00:13:18,320 --> 00:13:22,599 Speaker 7: in the way that Japan thinks and acts strategically in 165 00:13:22,640 --> 00:13:26,240 Speaker 7: the world. But in fact this isn't so new, you know. 166 00:13:26,280 --> 00:13:31,160 Speaker 7: For the past fifteen years, almost twenty years now, I 167 00:13:31,200 --> 00:13:36,080 Speaker 7: think Japan has begun to emerge as a strategic actor 168 00:13:36,120 --> 00:13:40,120 Speaker 7: in the Indo Pacific region. Indeed, the very idea of 169 00:13:40,160 --> 00:13:46,320 Speaker 7: a connected Indo Pacific region which kind of enables countries 170 00:13:46,400 --> 00:13:48,959 Speaker 7: like India and Japan to work together, or India in 171 00:13:49,000 --> 00:13:53,000 Speaker 7: Australia or the Quad to work together, was driven in 172 00:13:53,040 --> 00:13:57,520 Speaker 7: significant part by Japan, by Japanese leadership, by Prime Minister, 173 00:13:57,679 --> 00:14:02,120 Speaker 7: the late Prime Minister Abe. I think it's really important 174 00:14:02,160 --> 00:14:05,200 Speaker 7: to bear in mind that this is not the kind 175 00:14:05,240 --> 00:14:09,480 Speaker 7: of militarization of Japan that the Chinese like to warn 176 00:14:09,559 --> 00:14:14,240 Speaker 7: us all about. It's still relatively restrained, and it's really 177 00:14:14,280 --> 00:14:19,360 Speaker 7: about Japan trying to adopt a defense posture that most countries, 178 00:14:19,400 --> 00:14:21,800 Speaker 7: the most powerful countries in the world, would recognize as 179 00:14:21,800 --> 00:14:24,440 Speaker 7: as being a pretty normal thing to do. But it 180 00:14:24,520 --> 00:14:28,800 Speaker 7: is a big change for Japan, and it points to 181 00:14:28,840 --> 00:14:35,560 Speaker 7: a Japan that's more sober and realistic about the realities 182 00:14:35,560 --> 00:14:37,520 Speaker 7: of armed force in the world. So the lesson I 183 00:14:37,640 --> 00:14:40,400 Speaker 7: draw is how well is Japan go to strike the 184 00:14:40,480 --> 00:14:47,960 Speaker 7: new balance of diplomacy, deterrence and a I guess, more 185 00:14:49,320 --> 00:14:55,720 Speaker 7: realistic effort at economic prosperity that reduces the risks that 186 00:14:55,840 --> 00:14:59,240 Speaker 7: come with globalization and connectiveness. 187 00:15:00,360 --> 00:15:03,040 Speaker 1: Richard, I guess I should We could go straight on 188 00:15:03,120 --> 00:15:06,960 Speaker 1: from there. I mean, how realistic is that effort by Japan. 189 00:15:07,840 --> 00:15:10,480 Speaker 8: Well, in some respects, you know, most of the attention 190 00:15:10,640 --> 00:15:13,760 Speaker 8: on the you know, the Japanese efforts to rebuild its 191 00:15:13,840 --> 00:15:17,000 Speaker 8: military focused on money. So in some ways raising the 192 00:15:17,040 --> 00:15:20,640 Speaker 8: money is easy. Spending it is difficult for multiple reasons. 193 00:15:21,320 --> 00:15:25,040 Speaker 8: You know, in post war Japan, the Ministry of the military, 194 00:15:25,160 --> 00:15:27,360 Speaker 8: you know, self defense forces they're called, by the way, 195 00:15:27,400 --> 00:15:32,720 Speaker 8: which tells you something. As the military in Japan has 196 00:15:32,720 --> 00:15:39,040 Speaker 8: been a very low prestige and low profile institution, You 197 00:15:39,200 --> 00:15:43,880 Speaker 8: rarely see Japanese military officers on the street in their 198 00:15:43,960 --> 00:15:48,160 Speaker 8: uniform in Tokyo or elsewhere, and that's been quite deliberate 199 00:15:48,200 --> 00:15:51,920 Speaker 8: because they didn't want to attract attention to themselves. The 200 00:15:52,600 --> 00:15:55,480 Speaker 8: military inside Japan has really been seen more as a 201 00:15:55,520 --> 00:16:00,640 Speaker 8: disaster relief organization rather than an organization which can really 202 00:16:01,240 --> 00:16:06,800 Speaker 8: fight and win wars. So for all those reasons, the 203 00:16:07,080 --> 00:16:09,160 Speaker 8: government might have lots of money to spend, but they're 204 00:16:09,200 --> 00:16:13,040 Speaker 8: going to struggle to recruit people and train people and 205 00:16:13,320 --> 00:16:16,640 Speaker 8: keep them. With a declining population and a still slightly 206 00:16:16,680 --> 00:16:21,920 Speaker 8: growing economy, there's many more jobs on offer than people 207 00:16:22,000 --> 00:16:24,320 Speaker 8: there are people to fill them. They're going to really 208 00:16:24,360 --> 00:16:29,400 Speaker 8: struggle to actually fulfill the task that mister Kishiderra set 209 00:16:29,440 --> 00:16:34,040 Speaker 8: for them, that is to build a much more modern military, 210 00:16:34,120 --> 00:16:37,880 Speaker 8: a much more mobile military, and a military which is 211 00:16:38,000 --> 00:16:42,840 Speaker 8: much more suited to the perilous strategic circumstances that Japan 212 00:16:42,920 --> 00:16:44,000 Speaker 8: now finds itself in. 213 00:16:44,920 --> 00:16:48,640 Speaker 1: Rory Richard's talked about sort of the very practical problems 214 00:16:48,680 --> 00:16:51,920 Speaker 1: involved in this. I guess, as an economist, I look 215 00:16:51,920 --> 00:16:58,440 Speaker 1: at a much more basic issue that even though the 216 00:16:58,880 --> 00:17:02,480 Speaker 1: political approach, that geopolitical stance with respect to China may 217 00:17:02,560 --> 00:17:06,280 Speaker 1: have changed significantly over the last ten to twenty years, 218 00:17:07,040 --> 00:17:11,640 Speaker 1: if you by any measure, that economic connectedness of Japan 219 00:17:12,000 --> 00:17:14,720 Speaker 1: and China, and indeed probably every country in the world's 220 00:17:14,880 --> 00:17:19,000 Speaker 1: connectedness to China has increased. So how is it going 221 00:17:19,040 --> 00:17:22,840 Speaker 1: to be possible to keep on to keep those two 222 00:17:22,920 --> 00:17:26,080 Speaker 1: things operating on separate tracks. 223 00:17:26,440 --> 00:17:29,320 Speaker 7: I think in the medium to long term it's probably 224 00:17:29,320 --> 00:17:32,960 Speaker 7: not realistic to keep those on separate tracks, or to 225 00:17:33,000 --> 00:17:37,040 Speaker 7: do both. Unless China changes, you know, unless China becomes 226 00:17:37,200 --> 00:17:42,679 Speaker 7: a less risky or reckless or coercive force on the 227 00:17:42,680 --> 00:17:45,960 Speaker 7: international stage, then something's going to have to give at 228 00:17:46,000 --> 00:17:47,800 Speaker 7: some point. I'm not the economists in the room. It's 229 00:17:47,800 --> 00:17:51,720 Speaker 7: important to distinguish trading relations and relationships and investment relationships 230 00:17:51,720 --> 00:17:55,639 Speaker 7: for example, you know, going to the Australian experience with China. 231 00:17:55,720 --> 00:18:01,040 Speaker 7: For example, of course, even during the ear of Chinese 232 00:18:01,119 --> 00:18:04,160 Speaker 7: economic coercion or the phase of Chinese economic coersion against 233 00:18:04,160 --> 00:18:07,359 Speaker 7: Australia over the past five years, you know, the trade 234 00:18:07,400 --> 00:18:11,639 Speaker 7: relationship effectively grew, you know, signifally because of the price 235 00:18:11,680 --> 00:18:15,080 Speaker 7: of iron ore and China's dependence on Australian iron or 236 00:18:15,320 --> 00:18:20,520 Speaker 7: but the investment relationship was already going downhill and effectively 237 00:18:20,520 --> 00:18:23,639 Speaker 7: went over a cliff and will be hard to rebuild. 238 00:18:23,760 --> 00:18:26,879 Speaker 7: So I think we do need to look below the 239 00:18:26,920 --> 00:18:28,919 Speaker 7: surface of the numbers. I think it would be interesting 240 00:18:28,960 --> 00:18:33,600 Speaker 7: to understand in Japan, particularly how the business business community 241 00:18:33,720 --> 00:18:38,320 Speaker 7: is thinking about investment in China, is thinking about the 242 00:18:38,440 --> 00:18:42,359 Speaker 7: risks that come with becoming to entangle even things like 243 00:18:42,400 --> 00:18:46,840 Speaker 7: the consular safety and welfare of their own staff and executives. 244 00:18:47,400 --> 00:18:49,720 Speaker 7: And I think that's not only a Japan China story. 245 00:18:49,760 --> 00:18:52,760 Speaker 7: That's a story for Australia, it's a story for Europe, 246 00:18:53,280 --> 00:18:57,240 Speaker 7: of course, it's a story for the United States as well. 247 00:18:57,600 --> 00:19:01,520 Speaker 7: I think the hardening of Japan's fence posture that we've seen, 248 00:19:02,320 --> 00:19:05,560 Speaker 7: while that might be the pointy end of a more 249 00:19:05,640 --> 00:19:12,120 Speaker 7: robust national security response to a dark strategic environment, it's 250 00:19:12,160 --> 00:19:15,040 Speaker 7: not the only response. And I'd be surprised if there 251 00:19:15,080 --> 00:19:18,080 Speaker 7: isn't thinking in the Japanese system about, you know, what 252 00:19:18,119 --> 00:19:20,520 Speaker 7: does the future of the supply chains look like, what 253 00:19:20,560 --> 00:19:23,960 Speaker 7: does the future of critical technologies look like? And a 254 00:19:23,960 --> 00:19:26,680 Speaker 7: lot of that will be I think informed by the 255 00:19:26,760 --> 00:19:30,320 Speaker 7: kind of de risking approach that we've at least heard 256 00:19:31,119 --> 00:19:34,879 Speaker 7: Europeans speak about at a at a leadership level, although 257 00:19:34,880 --> 00:19:37,520 Speaker 7: we may not be seeing it happening across the board 258 00:19:37,720 --> 00:19:39,200 Speaker 7: among corporates yet. 259 00:19:40,320 --> 00:19:42,840 Speaker 1: Well, actually, Richard, I was going to ask you, I mean, 260 00:19:42,880 --> 00:19:45,320 Speaker 1: you do hear this language now of de risking the 261 00:19:45,359 --> 00:19:50,600 Speaker 1: relationship with China around the world rather than decoupling, which 262 00:19:50,640 --> 00:19:53,320 Speaker 1: sounds marvelous and I think, especially if you're a businessman 263 00:19:53,359 --> 00:19:57,760 Speaker 1: who doesn't want to really completely untangle the supply chain 264 00:19:58,280 --> 00:20:02,240 Speaker 1: with China, it sounds much better. But does it actually 265 00:20:02,280 --> 00:20:03,680 Speaker 1: mean anything? Is it possible? 266 00:20:04,240 --> 00:20:08,080 Speaker 8: Well, it's not quite pigh in the sky, but it's 267 00:20:08,280 --> 00:20:12,919 Speaker 8: almost impossible for global economies to disentangle themselves from China. 268 00:20:13,520 --> 00:20:15,639 Speaker 8: The good news, though, is that the same applies to 269 00:20:15,720 --> 00:20:20,240 Speaker 8: China itself, because China can't disentangle itself either. Now, obviously 270 00:20:20,320 --> 00:20:22,680 Speaker 8: China has been trying to do that for many years. 271 00:20:22,720 --> 00:20:26,359 Speaker 8: They've got their own sort of policies, so called dual circulation, 272 00:20:26,520 --> 00:20:30,040 Speaker 8: in other words, that they can de risk their own 273 00:20:30,080 --> 00:20:33,920 Speaker 8: economy against the kinds of sanctions that America is pursuing 274 00:20:33,920 --> 00:20:37,240 Speaker 8: against it right now. But I feel that the amount 275 00:20:37,320 --> 00:20:40,600 Speaker 8: of decoupling or de risking that has taken place is 276 00:20:40,720 --> 00:20:45,679 Speaker 8: pretty superficial compared to the depth of it. At the moment, 277 00:20:46,200 --> 00:20:49,200 Speaker 8: it's the word buzzword on everybody's lips, but if you 278 00:20:49,359 --> 00:20:53,960 Speaker 8: talk to business people in any detail, then it's just 279 00:20:54,040 --> 00:20:56,760 Speaker 8: about impossible. And that this is in fact quite a 280 00:20:56,800 --> 00:20:59,800 Speaker 8: positive thing, I would say in many respects, it can be. 281 00:21:00,040 --> 00:21:03,760 Speaker 8: It's a negative thing to or rely on China, of course, 282 00:21:03,840 --> 00:21:10,080 Speaker 8: but it's positive in as much as it restrains Chinese behavior. 283 00:21:10,200 --> 00:21:16,760 Speaker 8: Because the entire global economy really goes through China, Japan, Taiwan, 284 00:21:17,720 --> 00:21:21,919 Speaker 8: South Korea, to a lesser extent Southeast Asia. Any interruption 285 00:21:22,080 --> 00:21:25,359 Speaker 8: to that has an immediate and dramatic effect on the 286 00:21:25,400 --> 00:21:31,119 Speaker 8: global economy and on each economy individually. So I'm not 287 00:21:31,240 --> 00:21:36,480 Speaker 8: quite sure how anybody can get out of China, and 288 00:21:36,560 --> 00:21:41,639 Speaker 8: I hope that ultimately is a stabilizing factor in geopolitics 289 00:21:41,680 --> 00:21:43,240 Speaker 8: because it affects China as well. 290 00:21:43,680 --> 00:21:45,680 Speaker 1: For many of people listening who are sitting in the US, 291 00:21:45,720 --> 00:21:48,560 Speaker 1: they do only see this, or we often will only 292 00:21:48,600 --> 00:21:51,240 Speaker 1: see it through the US lens. So I think highlighting 293 00:21:51,280 --> 00:21:55,400 Speaker 1: that there are now these other relationships and other strategic 294 00:21:56,040 --> 00:21:59,280 Speaker 1: partnerships rising up is a good one. But Richard, I 295 00:21:59,320 --> 00:22:01,960 Speaker 1: did notice twenty sixteen was also the last time that 296 00:22:02,000 --> 00:22:04,720 Speaker 1: you had the G seven meetings, including the I think 297 00:22:04,760 --> 00:22:10,600 Speaker 1: there was a foreign minister meeting in Hiroshima. Since then, 298 00:22:10,640 --> 00:22:15,920 Speaker 1: you've had the Trump administration, You've had now the Biden administration. 299 00:22:17,080 --> 00:22:22,240 Speaker 1: Out of the Biden administration, how has the US changed 300 00:22:22,240 --> 00:22:26,879 Speaker 1: the games? How has the US's emerging attitude to the 301 00:22:26,920 --> 00:22:29,400 Speaker 1: region affecting the way countries think about it? 302 00:22:29,920 --> 00:22:33,240 Speaker 8: Well, it depends what country you're in. Certainly the US 303 00:22:33,800 --> 00:22:38,040 Speaker 8: has changed its geopolitical policies towards China, defense policies, and 304 00:22:38,080 --> 00:22:42,440 Speaker 8: I think that started rather abruptly under Trump, but it's 305 00:22:42,520 --> 00:22:45,320 Speaker 8: you know, to give him credit, but it's been refined 306 00:22:45,359 --> 00:22:49,840 Speaker 8: and kept by President Biden. I think President Biden also 307 00:22:50,720 --> 00:22:57,720 Speaker 8: has also changed US economic policies. Not it's probably a 308 00:22:57,800 --> 00:23:01,560 Speaker 8: bit unfair to call it along Trumpian lines, but you know, 309 00:23:01,680 --> 00:23:06,520 Speaker 8: they maintained the tariffs against China. They're accelerating a form 310 00:23:06,560 --> 00:23:10,120 Speaker 8: of industry policy in the United States through the Inflation 311 00:23:10,320 --> 00:23:14,800 Speaker 8: Reduction Act, through various incentives to build semiconductor plants in 312 00:23:14,840 --> 00:23:17,720 Speaker 8: the United States, and of course the speech recent speech 313 00:23:17,800 --> 00:23:21,080 Speaker 8: by Jake Sullivan where he laid it out as part 314 00:23:21,160 --> 00:23:25,600 Speaker 8: of a core part reindustrializing the United States, as a 315 00:23:25,640 --> 00:23:30,120 Speaker 8: core part of US geopolitical strategy. Now, this affects all 316 00:23:30,160 --> 00:23:33,560 Speaker 8: sorts of countries in different ways. You know, for example, 317 00:23:34,600 --> 00:23:38,720 Speaker 8: South Korea and Japan, which you want close relations with 318 00:23:38,760 --> 00:23:41,520 Speaker 8: the US and in fact depend on them, have had 319 00:23:41,520 --> 00:23:45,480 Speaker 8: to adjust their own domestic economic policies and tech policies 320 00:23:45,520 --> 00:23:48,640 Speaker 8: to fit in with that. A country like Australia, which 321 00:23:48,680 --> 00:23:52,639 Speaker 8: sees itself as a sort of renewable energy superpower, is 322 00:23:52,720 --> 00:23:55,800 Speaker 8: now going to struggle to attract the investment it needs 323 00:23:55,840 --> 00:23:59,199 Speaker 8: to do that because the Inflation Reduction Act is the 324 00:23:59,240 --> 00:24:03,280 Speaker 8: giant sucking sound which is taking you know, attracting global 325 00:24:03,280 --> 00:24:06,920 Speaker 8: capital to the United States instead of to other countries. 326 00:24:07,520 --> 00:24:11,200 Speaker 8: The US thinks that it fell behind in strategic competition 327 00:24:11,320 --> 00:24:15,000 Speaker 8: with China and is now rushing to catch up again. 328 00:24:15,680 --> 00:24:18,160 Speaker 8: And so it's not going to take you know, it's 329 00:24:18,200 --> 00:24:23,120 Speaker 8: looking for leverage just about it at every point, and 330 00:24:23,160 --> 00:24:27,000 Speaker 8: that in some respects is extremely welcome in parts of 331 00:24:27,280 --> 00:24:31,719 Speaker 8: the region. But of course if the US pursues policies 332 00:24:31,800 --> 00:24:35,320 Speaker 8: like that, then it's going to rebound on them as well. 333 00:24:35,359 --> 00:24:38,719 Speaker 8: And I think particularly in the economic sense in Asia, 334 00:24:38,800 --> 00:24:43,159 Speaker 8: where you know, China is really i think starting to 335 00:24:43,160 --> 00:24:45,800 Speaker 8: streak well ahead at the moment, and where the US, 336 00:24:45,840 --> 00:24:49,280 Speaker 8: because of its suspicion of trade in the administration and 337 00:24:49,320 --> 00:24:52,880 Speaker 8: in Congress, is really struggling to catch up. 338 00:24:53,080 --> 00:24:56,520 Speaker 1: I just have one one last question. There is one 339 00:24:57,320 --> 00:25:01,840 Speaker 1: event which is a long way away from from Hiroshima, 340 00:25:01,920 --> 00:25:09,240 Speaker 1: but seems to have changed attitude quite significantly at summits 341 00:25:09,400 --> 00:25:11,600 Speaker 1: like this weekend's G seven summit, and that's of course, 342 00:25:11,640 --> 00:25:16,280 Speaker 1: Russia's invasion of Ukraine. That is an ongoing story. In fact, 343 00:25:16,440 --> 00:25:21,400 Speaker 1: the long awaited counter offensive by Ukraine. We're certainly anticipating 344 00:25:21,440 --> 00:25:26,240 Speaker 1: it potentially in a matter of days. So Rory, how 345 00:25:26,320 --> 00:25:30,679 Speaker 1: much has Russia's invasion of Ukraine and China's response to 346 00:25:30,720 --> 00:25:34,560 Speaker 1: it affected conversations like the ones the leaders are going 347 00:25:34,600 --> 00:25:35,960 Speaker 1: to have at Hiroshima. 348 00:25:36,600 --> 00:25:40,080 Speaker 7: Look seriously, I think, very seriously. I think that the 349 00:25:41,200 --> 00:25:47,280 Speaker 7: impact of Putin's disastrous and brutal decision to invade Ukraine 350 00:25:47,600 --> 00:25:51,440 Speaker 7: here in the Indo Pacific is pretty profound. It has 351 00:25:51,520 --> 00:25:58,119 Speaker 7: reinforced the national security and defensive aspect of Japan's state craft. 352 00:25:58,119 --> 00:26:03,120 Speaker 7: It's done the same here Australia. It's made it difficult, however, 353 00:26:03,280 --> 00:26:05,359 Speaker 7: for a number of other partners in the region to 354 00:26:05,400 --> 00:26:07,920 Speaker 7: work together. I think the fear of conflict in this 355 00:26:08,000 --> 00:26:12,320 Speaker 7: region has risen, I think has been heightened by Russia's 356 00:26:12,359 --> 00:26:17,760 Speaker 7: invasion of Ukraine. Now, paradoxically, you could make a case 357 00:26:17,840 --> 00:26:22,640 Speaker 7: that the day when shutin Pin will decide to invade 358 00:26:22,680 --> 00:26:26,600 Speaker 7: Taiwan to send the pla across the Taiwan straight, perhaps 359 00:26:26,680 --> 00:26:30,960 Speaker 7: that day has been delayed because Chinese forces have seen 360 00:26:32,080 --> 00:26:36,480 Speaker 7: how no battle plan survives first contact, and how the 361 00:26:36,560 --> 00:26:43,159 Speaker 7: Russian military is so poorly and grotesquely performed in Ukraine. 362 00:26:43,359 --> 00:26:45,200 Speaker 7: But we can't be sure, and so I think there's 363 00:26:45,240 --> 00:26:49,080 Speaker 7: now an open debate in this region about whether conflict 364 00:26:49,160 --> 00:26:52,439 Speaker 7: is more or less likely as a consequence of Ukraine, 365 00:26:54,080 --> 00:26:56,880 Speaker 7: Whether in fact Taiwan needs to be looking much more 366 00:26:56,960 --> 00:27:01,720 Speaker 7: robustly to its own defenses, and ultimately how important military 367 00:27:01,720 --> 00:27:05,879 Speaker 7: deterrence is. Now at the start of this conversation, we 368 00:27:05,960 --> 00:27:09,479 Speaker 7: talked a little bit about de risking and about the 369 00:27:09,800 --> 00:27:15,160 Speaker 7: economic and commercial calculations being made constantly as we study geopolitics. 370 00:27:15,600 --> 00:27:19,560 Speaker 7: And I would say that one consequence of the Ukraine conflict, 371 00:27:19,600 --> 00:27:22,240 Speaker 7: the Russian invasion here in the Indo Pacific is that 372 00:27:22,280 --> 00:27:26,280 Speaker 7: I encountered many more voices in business communities who are 373 00:27:27,280 --> 00:27:31,080 Speaker 7: worried about the reality of war as a factive life 374 00:27:31,119 --> 00:27:34,680 Speaker 7: in the twenty first century. Who know now that they 375 00:27:34,760 --> 00:27:38,680 Speaker 7: need to have at the very least contingency plans for 376 00:27:38,840 --> 00:27:43,960 Speaker 7: a Taiwan conflict, for their investments, for their personnel, for 377 00:27:44,000 --> 00:27:47,760 Speaker 7: their staff. Those are conversations that weren't happening three or 378 00:27:47,760 --> 00:27:52,600 Speaker 7: four years ago, even two or three years ago. And ultimately, 379 00:27:52,680 --> 00:27:55,719 Speaker 7: wherever the G seven lands on this issue, I mean, 380 00:27:55,760 --> 00:27:58,439 Speaker 7: I'm sure the Japanese would like to use the G 381 00:27:58,600 --> 00:28:01,560 Speaker 7: seven as a platque to be putting pressure both on 382 00:28:01,680 --> 00:28:05,080 Speaker 7: China and Russia. No matter where the summer tree goes 383 00:28:05,119 --> 00:28:08,320 Speaker 7: this week, these realities are going to remain in this region. 384 00:28:08,760 --> 00:28:10,720 Speaker 7: It's not the in that sense, you know, It's not 385 00:28:10,880 --> 00:28:14,760 Speaker 7: the globalized or corn ucopean world we were looking at 386 00:28:15,080 --> 00:28:18,240 Speaker 7: when we were talking Rosalie about the Asian century just 387 00:28:18,280 --> 00:28:19,280 Speaker 7: a decade or two ago. 388 00:28:21,240 --> 00:28:24,000 Speaker 1: This is so fascinating. We could carry on for many, 389 00:28:24,320 --> 00:28:26,280 Speaker 1: many more hours, but I know that we all have 390 00:28:26,320 --> 00:28:29,399 Speaker 1: to get on with our lives, and we have already 391 00:28:29,400 --> 00:28:33,040 Speaker 1: taken more time than I had suggested. So Richard McGregor, 392 00:28:33,160 --> 00:28:34,800 Speaker 1: Rory Metcalf, thank you so much. 393 00:28:35,320 --> 00:28:36,480 Speaker 6: Thank you so much, thank you. 394 00:28:42,600 --> 00:28:44,640 Speaker 1: Well, that's it for this episode of Stephanomics. We'll be 395 00:28:44,680 --> 00:28:47,320 Speaker 1: back next week. In the meantime, you can get a 396 00:28:47,400 --> 00:28:50,720 Speaker 1: lot more economic insight and news from the Bloomberg Terminal 397 00:28:50,920 --> 00:28:55,080 Speaker 1: website or app. This episode was produced by mangnus Henrickson, 398 00:28:55,480 --> 00:28:58,840 Speaker 1: Yang Yang and Summer Sadi, and the sound engineer for 399 00:28:58,880 --> 00:29:03,720 Speaker 1: the Hiroshima segment was Zion Lee, with special thanks to Yoshiahara, 400 00:29:03,960 --> 00:29:11,320 Speaker 1: Paul Jackson, Yoshito Okubo, kiko Uji, Khani Takashi, Nakamichi Torofujioka, 401 00:29:11,680 --> 00:29:16,760 Speaker 1: Stacy Wrong, Richard McGregor, and Rory Metcalfe. The executive producer 402 00:29:16,800 --> 00:29:19,880 Speaker 1: of Stephanomics is Molly Smith and the head of Bloomberg 403 00:29:19,920 --> 00:29:21,479 Speaker 1: Podcast is Sage Bowman.