Sunday, March 3, 2024

Japan’s Economic Support for Ukraine

Promises not actions

By Takuya Nishimura
, Senior Fellow, Former Editorial Writer for The Hokkaido Shimbun
The views expressed by the author are his own and are not associated with The Hokkaido Shimbun
You can find his blog, J Update here.
February 25, 2024. Special to Asia Policy Point

As seen during his chairmanship of the Group of Seven last year, Prime Minister Fumio Kishida has been keen to show Japan’s leadership role in supporting Ukraine. Because Japan’s constitution precludes explicit military contributions, Kishida has focused on the economic reconstruction of Ukraine. The February 19 international conference in Tokyo to address reconstruction in Ukraine was an attempt to demonstrate Japan’s capacity for economic contribution. However, the prolonged war makes Japan’s investment in Ukraine difficult, for now.

The day after Russia’s invasion of Ukraine two years ago, Kishida accused Russia of a unilateral change of status quo by arms and a breach of international law by violating the sovereignty and territorial integrity of Ukraine. “It cannot be tolerated, and I strongly blame it. It also cannot be ignored in terms of security of Japan,” said Kishida. He demanded an immediate retreat by the Russian military in order to abide by international laws.

Diplomacy is one of the tools available to a Japanese prime minister to maintain his domestic popularity. Former Prime Minister Shinzo Abe was not willing to join international sanctions against Russia when it annexed Crimea in 2014 because he wanted to maintain a close relationship with Russian President Vladimir Putin. If he achieved a breakthrough in negotiations with Russia over the Northern Territory of Japan, it would have been a great legacy of Abe. Kishida, who served in the Abe cabinet as Minister for Foreign Affairs for four years and eight months, is one of those premiers who is firmly interested in diplomacy.

As Western countries pledged military support for Ukraine, providing tanks, missiles and fighter jets, Japan’s contribution to Ukraine’s war effort has been limited to non-lethal equipment such as bullet-proof jackets and helmets. One of Japan’s three principles for exporting defense equipment prohibits transporting such equipment to a party involved in a conflict.

In the summit meeting between Kishida and Ukrainian President Volodymyr Zelenskyy in Kyiv last March, both leaders shared the view that the private sector should play an important role in the recovery and reconstruction process. Zelenskyy showed strong expectations toward Japanese investments in various ways.

After returning to Japan, Kishida convened a small meeting with other government officials to discuss public-private cooperation in rebuilding Ukraine. Kishida sought to pave the way for any company willing to participate without taking on the risks of war.
Attendees at the meeting discussed the improvement of the economic environment for investment, inclusion of third parties, cooperation with international organizations and the involvement of Japan’s official development assistance (ODA). A former foreign minister, Yoshimasa Hayashi, visited Kyiv last September with a business delegation to investigate the opportunity for investment in Ukraine.
After those preparations, Kishida administration held the Japan-Ukraine Conference for Promotion of Economic Growth and Reconstruction at Tokyo in on February 19, with Ukrainian Prime Minister Denys Shmyhal in attendance. Japan pledged economic support for Ukraine in seven categories.

One of the seven categories typical of Japan’s foreign assistance is mine sweeping and disposal of debris. With advanced search technology, Japan has experience with mine sweeping in Cambodia and South Sudan as part of ODA or United Nations peace-keeping operations. To rebuild the cities in Ukraine destroyed by Russian attacks, Japan’s skill in sorting and disposing of debris that was sharpened in responding to the East Japan Great Earthquake may bring efficiency to reconstruction efforts.

Japan also offered assistance with humanitarian relief, including medical care, electrical power, agriculture, biotechnology, digital industry, infrastructure and prevention corruption. To make investment in Ukraine easier, both counties agreed to tax breaks for companies engage in reconstruction and to expedite the visa process for businesspeople. Japan also decided to open an office of the Japan External Trade Organization (JETRO) in Kyiv.

The greatest hurdle for Japanese private investment in Ukraine is security. For any company that plans to invest in Ukraine’s recovery, guaranteeing the safety of workers will be a critical issue. With no end in sight for the war, a company must take safety costs into account when assessing the feasibility of a reconstruction project. The Japanese government has taken no position on a ceasefire.
It is undeniable that Japan has a sense of fatigue in its support of Ukraine, much like other Western countries. The prolonged war has caused commodity prices in food and energy to rise. There is a political argument that the Kishida administration must address domestic inflation before helping Ukraine. Some companies, which still have business relationships with Russia are skeptical about supporting Ukraine, considering Russia’s adverse reaction to their doing so.

As a lawmaker elected from Hiroshima, Kishida has shown determination in supporting Ukraine, which remains under a nuclear threat from Russia. “The more success Russia will have in Ukraine, the more conflicts and wars around the world will see in the future,” said Shmyhal in the press conference in Tokyo. But as long as the war continues, it is unrealistic to expect full-scale investment in Ukraine. As a result, the reconstruction effort will be a long-term consideration for Japanese businesses.

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