Japan Remains Crucial To ASEAN Balance – Analyst

By Siti Radziah Hamzah

KUALA LUMPUR, Sept 23 (Bernama) -- Japan’s presence in Southeast Asia continues to play a pivotal role in balancing great-power competition as ASEAN countries diversify their markets, making it a reliable long-term financing partner and strategic market.

SPI Asset Management managing partner Stephen Innes said Japan provides ASEAN with a long-term, standards-based financing and investment partner that helps prevent overreliance on Chinese and United States (US) capital. 

“Overconcentration in US and Chinese capital would reduce ASEAN’s strategic flexibility. Japan’s continued presence helps diversify investment sources and provides a long-term financing alternative, especially in infrastructure and manufacturing sectors,” he told Bernama in a recent interview.

Japan has been an ASEAN dialogue partner since 1973, a relationship formalised in 1977 under the Fukuda Doctrine and expanded through various agreements, including the ASEAN-Japan Comprehensive Economic Partnership. 

The land of the rising sun is scheduled to hold consultation with the ASEAN bloc at the upcoming 57th ASEAN Economic Ministers’ Meeting next week. 

ASEAN-Japan trade declined from about US$268.5 billion in 2022 to roughly US$239 billion in 2023, an 11.0 per cent year-on-year drop, amid diversification and shifting trade patterns among ASEAN members. 

Innes stressed that the shift in trade and foreign direct investment patterns reflects structural rebalancing, rather than a collapse of Japanese influence. 

He noted that ASEAN has become a far more dynamic market, attracting strong flows from China, South Korea and the US, while Japan’s relative weight has eased as global supply chains reorganise.

To remain competitive, Japan must link its technological edge with agile financing. This includes incentivising corporate decarbonisation projects, expanding digital connectivity under ASEAN–Japan frameworks, and ensuring Japanese firms play a role in setting regional digital trade standards, carbon measurement systems and green infrastructure finance, Innes said.

He noted that ASEAN’s emphasis on centrality and non-alignment can be sustained if Japan engages through ASEAN-led mechanisms such as the ASEAN–Japan Comprehensive Economic Partnership and the Comprehensive Strategic Partnership. 

“The optics of ASEAN-first engagement are essential to maintaining regional trust, even as Japan remains aligned with US Indo-Pacific strategies,” he said.

On security, Innes said deeper ASEAN–Japan defence cooperation can be a net positive if handled transparently, strengthening ASEAN’s bargaining power without undermining neutrality. 

Tokyo’s emphasis on the United Nations Convention on the Law of the Sea  (UNCLOS) and maritime law in the South China Sea is a stabilising factor for Southeast Asia, as it focuses on non-provocative measures such as coast-guard capacity and surveillance support, he added.

"Japanese security assistance is more likely to strengthen maritime policing and situational awareness than transform ASEAN into a high-end naval power. The result is improved daily deterrence rather than a dramatic shift in balance,” Innes said.

The prolonged Myanmar crisis, however, continues to complicate ASEAN–Japan cooperation by slowing consensus-driven initiatives. 

Innes said Japan must carefully calibrate its engagement, aligning publicly with ASEAN’s cautious stance while privately deepening humanitarian outreach and targeted support.

Looking ahead, he said Japan remains well-placed to help ASEAN build supply-chain resilience in response to tariff volatility and geopolitical risks, while its expertise in renewables, hydrogen and carbon capture could anchor a new niche in ASEAN’s green transition.

“Economics will remain the foundation of ASEAN–Japan relations, particularly in investment, supply chains and the green transition. Security will play a visible but secondary role,” Innes said.

The biggest risk, he warned, is ASEAN fragmentation under geopolitical pressure.

“That raises transaction costs and invites forum-shopping by larger powers. To hedge, Japan should continue to work through ASEAN institutions but also build scalable bilateral partnerships that can later be reintegrated into ASEAN frameworks when consensus strengthens,” Innes said. 

-- BERNAMA