Japan Defence and Security Report Q3 2009

The political landscape in Japan remains in flux. Katsuya Okada appears to be the better candidate for the leadership of the opposition Democratic Party of Japan (DPJ). A general election will be held by September at the latest and there remains a significant chance that the DPJ (better-known in Japan as Minshuto) will assume power after more than 50 years' of unbroken rule by the Liberal Democrat Party (LDP).

On the economic front, Japan's real GDP fell a record 4% quarter-on-quarter (q-o-q) in the first three months of this year. This was significantly worse than other major economies including the US and eurozone, which registered falls of 1.6% and 2.5% respectively over the same period. On an annualised basis, the first quarter real GDP decline was 15.2%, which was worse than the previous quarter's downwardly-revised 14.4% drop as the global downturn and the strong yen continued to depress exports and domestic consumption.

When broken down into GDP by expenditure, it becomes evident that the bulk of the decline was due to weaker domestic demand. Japan has agreed to bear much of the cost of relocating 8,000 US Marines and their families from Okinawa to Guam by 2014. The relevant pact was signed by Japan's Foreign Minister and US Secretary of State Hillary Clinton during her visit to Tokyo in February. It paves the way for the Japanese government's payment of US$2.8bn (or about less than half of the total cost that it must bear for the relocation) in the near term.

Japan continues to take a more active role in international missions. Earlier this year, the government extended the navy's involvement with refuelling foreign warships in the Indian Ocean as a result of the US-led campaign against terrorists in and around Afghanistan. It has also committed to continuing its programme of assistance to the East Timor government, under the aegis of the UN Integrated Mission in East Timor.

This quarter, we have introduced a significant new aspect to BMI's Defence reports, which is the City Terrorism Rating (CTR). This assesses the risk of a terrorist attack. The CTR takes into account the overall BMI Terrorism Rating for the country in question. It also incorporates the 'prevalence' of terrorism, which recognises the frequency of attacks, and whether the city is a target for terrorists. The CTR also recognises the 'threat' of terrorism in terms of the likely numbers of victims and the ability of groups to launch sustained campaigns.

In Japan we assess the CTRs for Tokyo, Yokohama and Osaka which all rate a high 92.5. These City- Specific Ratings are created via an integration of the state-wide threat, with an evaluation of the cityspecific characteristics and level of activity.