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Can a Japan-Led Alliance Contain China?

It's official. Japan is a global military power again.

More importantly, it just might become a counterweight to an aggressive China.

China's famous "nine-dash line," which claims as China's exclusive province nearly all of the South China Sea. Boxed areas indicate areas of ongoing conflict with Vietnam and the Philippines. Illustration: Wikimedia Commons.

Spooked by recent Chinese moves to lay claim to sovereignty within its "nine-dash line" (pictured above), Japan's government has been debating a "reinterpretation" of its post-World War II constitution to permit its military to take a more active role in global affairs. On July 1, the Cabinet of Prime Minister Shinzo Abe approved this reinterpretation. Henceforth, it is Japan's official position that when a hostile military force threatens an allied nation, and said ally requests assistance, Article 9 of Japan's constitution will permit the Japanese military to exercise "collective self-defense."

Put more simply, Japan can go to war to defend its allies.

What Japan can do
Strictly read, Article 9 of Japan's Constitution still renounces "war as a sovereign right of the nation and the threat or use of force as means of settling international disputes." Article 9 even goes so far as to say that Japanese "land, sea, and air forces, as well as other war potential, will never be maintained."

Nevertheless, Japan does maintain a pretty robust military. Its "Self-Defense Force" boasts 230,000 active-duty personnel, hundreds of combat aircraft and helicopters, tanks, armored personnel carriers, surface warships, submarines, and even aircraft carriers -- in short, all the accoutrements of a modern military power. Yet the country's military still pales in comparison with that of China.

Japan Maritime Self-Defense Force helicopter destroyer JS Hyuga (DDH 181). Photo: Wikimedia Commons.

What can Japan really do?
From one perspective, Japan -- the world's third-biggest economy -- should be a viable counterweight to China, the world's second-biggest economy. Yet at an estimated $188.5 billion in annual spending, China's defense budget dwarfs the $48.6 billion that Japan spends on its military. So even if Japan now has the will, and the legal authority, to assist its allies, what can it really do to oppose a threat from China?

It's not an idle question. Over the past year, we've seen multiple acts of aggression by China vis-a-vis its neighbors. In October, 20,000 Chinese troops conducted a military exercise simulating the amphibious invasion of Taiwan. In December, China annexed 1 million square miles of airspace over the East China Sea, declaring a unilateral "air defense identification zone" and demanding that aircraft entering it file flight plans with Chinese authorities. That move prompted Japan to announce a $240 billion program of military investment, featuring purchases of maritime surveillance drones such as Northrop Grumman's (NYSE: NOC  ) Global Hawk, surveillance aircraft including Boeing's (NYSE: BA  ) P-8A Poseidon, and new V-22 Osprey tiltrotor aircraft from Textron (NYSE: TXT  ) for its fleet of helicopter destroyers.

Recent months have seen Chinese warships threatening civilian fishing boasts off the coast of the Philippines, and blockading a Filipino military outpost in the South China Sea. To the west, a Chinese flotilla escorting a CNOOC (NYSE: CEO  ) oil rig has skirmished repeatedly with Vietnamese fishermen, in one case ramming and sinking a Vietnamese boat.

Red China and the seven dwarfs (plus Japan)
It's not inconceivable that Japan's neighbors might one day forgive the country's past bad acts in World War II and consider allying with the island nation to form a new Anti-China "Asian NATO". But for such an alliance to counterbalance China, Japan will need to attract a lot of friends to its cause.

How many?

All data courtesy of SIPRI.

Lining up the top defense spenders in the Pacific and Southeast Asia, it seems Japan would need to enlist at least seven more nations -- India, South Korea, Australia, Taiwan, Singapore, Indonesia, and Pakistan -- to form a coalition big enough to top China's defense spending. Other countries that might be willing to pitch in, including their defense budgets:

  • Thailand: $5.9 billion, plus one aircraft carrier already built.
  • Malaysia: $4.8 billion.
  • The Philippines and Vietnam: $3.5 billion and $3.4 billion, respectively.
  • Possibly tagging along with Australia, New Zealand -- $1.8 billion.

Is this realistic?
Any student of international relations (or anyone who was paying attention during President Bush's attempt to assemble a "coalition of the willing" in 2002) knows that it's not easy to get large numbers of nations moving in the same direction -- which they must do if Japan is to form a true regional counterweight. That said, Vietnam's and the Philippines' disputes with China suggest they might be willing to team up for a common purpose. (A good first step: Vietnamese and Filipino naval forces are already playing volleyball together in the Spratleys, not far from where Chinese warships cruise.)

What it means for investors
As I argued last week, the creation of an "anti-China NATO" would encourage the purchase of standardized weaponry among the allies. Four of the biggest spenders in the region -- Japan, South Korea, Australia, and Taiwan -- are already big purchasers of U.S. weaponry. And even India has been pivoting away from its historical reliance on Russia for its weaponry and buying increasing amounts of American arms as well. Attracting more allies into a regional alliance would only increase U.S. arms sales.

But whether or not Japan succeeds in parlaying its constitutional change into a true alliance, it's unlikely that these other nations will be spending less on defense in the face of an aggressive China. Indeed, the naval markets specialists at AMI International say spending on warships alone is likely to surge by $200 billion in the region over the next two decades.

The only real question for investors in the defense industry now is how much bigger the opportunity will grow.

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Read/Post Comments (3) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 20, 2014, at 3:00 AM, jobie wrote:

    i agree with Japan's plan.Japan from the past is not the same Japan of today..I support her to lead other nations from Southeast Asia together with India and Australia given that her military might(especially Japanese navy)is advance ,properly trained and has the economy to back her military spending.Asian countries cannot simply rely on ASEAN because some of them are puppets of china like cambodia.

  • Report this Comment On July 20, 2014, at 3:42 AM, Commonsense15 wrote:

    I think these nations should be working on how to share, negotiate without intimidation and use their brilliance to succeed together to develop that massive piece of water versus destroying it together, “duh.” I think with the savings we could wipe out the 500,000 people that die of starvation a month. We could utilize money to compete towards exploring to live in space. Think how fast we would get there with that kind of a budget. I think then everyone would be racing to live there, as earth becomes the dinosaur. Think about how much is out there in space if earth is not but a spec of sand on all the beaches when comparing how big our Universes are, which by the way, scientist don’t truly know how much is out there.

    From the beginning of time man has been his own worst enemy. As we fast forward at warp speed from the 1800's to present, we can truly recognize we have evolved when looking at transportation, computers that are outdated before they hit the market, options of travel and destinations, utilization of pharmaceuticals to fix all, except the common cold, electronics and living in a cave, then out the cave and back to the cave where I have my XBOX, Sony Play station, PC, IPAD, cell ready to text and working from my living room, wearing my pajama's Monday to Friday, "I win."

    Have we really evolved when looking at man's biggest challenge is who will conquer all men. Only now it's new and improved where we have perfected how to use bigger means and project who will play with us. We've gone a big circle a bunch of times now and still expecting a different outcome. I pray that our leaders here my message to start with the commonalities and build from there. I live in an international city and have been exposed to a lot of different cultures and I have found we all have the basic wants, needs and aspirations that drive us. I have learned that each experience with different people from different parts of the world is enlightening, enriching and has brought me peace to know we are so much the same.

    We have to choose to except one another or not accept one another. Thank you for reading. Please pray for our leaders or at least have positive thoughts for mankind changing course for the survival of all mankind. “United we are stronger, divided we will flourish.” By vhj

  • Report this Comment On July 20, 2014, at 6:27 PM, JJ82 wrote:

    Japan is more than capable of checking China and they know it. They already pulled their rig out of Vietnamese waters because of their talks with Japan.

    They are afraid of a military coalition forming against them but it will happen now no matter what.

    Vietnam, the Philippines Indonesia and Taiwan have asked Japan to set up their security role. South Korea may still have a grudge against Japan but weather or not that grudge is bigger than their fear of China taking over is questionable.

    India has close ties to Japan and China releasing a map showing a province of theirs as part of China along with their deal with Pakistan on a railroad going through an area India is in dispute with Pakistan over is enough to make India side with Japan.

    As for Singapore, they want no part of China and China wants them...they are a shoe-in for an alliance against them.

    BTW, Military spending means little if the quality isn't high. China WOULD have to spend 10x of what Japan is in hope that numbers will make up for that quality difference...also, Japan is making a lot of weapons deals which will further push their military economy higher and thus make it easier for them to make weapons for themselves.

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Rich Smith

As a defense writer for The Motley Fool, I focus on defense and aerospace stocks. My job? Every day of the week, I'm monitoring the news, figuring out the winners and losers, and tracking down the promising companies for you to invest in. Follow me on Twitter or Facebook for the most important developments in defense & aerospace, and other great stories.

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