(My latest for Japan Focus) Osprey Deployment a New Tinderbox on Okinawa

V-22 Osprey

Osprey Deployment a New Tinderbox on Okinawa


On May 23, 1988, in Arlington, Texas, Bell Helicopter unveiled with much fanfare a new combo-aircraft; a fixed-wing plane that could climb and hover like a helicopter, but also rotate its giant propellers forward and fly like an airplane.

On that day, Peter Van Sant, then correspondent for CBS Evening News with Dan Rather, called the plane a "revolutionary new aircraft" that was the latest "future shock". He expected it to carry commuters to Washington or Boston from Manhattan, as it could take off and land in downtown business districts, reducing travel times.

It was called the V-22.

"By the year 2000, there could be a market of five to eight million passengers annually," a company spokesperson at Bell Helicopter predicted at the ceremony.

Twenty-four years later, the V-22 has yet to be used as a commuter aircraft between New York and Boston. Instead, across the Pacific, the Bell-Boeing MV-22 Osprey tilt-rotor aircraft, having been deployed in Iraq and Afghanistan, is becoming the next tinderbox issue on Japan's southernmost subtropical island prefecture, Okinawa.

Ospreys over Futenma
Plans to deploy 12 Osprey aircraft to US Marine Corps (USMC) Air Station Futenma in Okinawa prefecture within this year have emerged as a fresh flashpoint between Okinawa residents and Tokyo and Washington. How the two national governments handle islanders' sensitivities over the Osprey could prove critical for the future of the Japan-US alliance.

The dispute over the controversial MV-22 erupted on June 7 when the Okinawa chapter of the ruling Democratic Party of Japan (DPJ) demanded that newly appointed Defense Minister Morimoto Satoshi resign over remarks related to the safety of the Osprey deployment. The Japanese Defense Ministry had asked the US government to conduct a thorough investigation prior to the aircraft's planned deployment to Futenma, following a MV-22 crash in April in Morocco which killed two marines.

However, Morimoto, known for his pro-US stance, said at a press conference on June 5, "It would be ideal to receive all the results [from the US] on the investigations into the accident prior to the deployment, but there is a chance that might not happen."

"Does the [Japanese] government view the Okinawans as Japanese!" Chobin Zukeran, a DPJ lawmaker representing Okinawa, shouted tearfully at a press conference in Naha City on Okinawa. "Don't think Okinawans are stupid!" said Zukeran, who appeared in his shirt sleeves to emphasize his anger at the new defense minister, who was appointed the previous day.

Futenma air base is located in the heart of densely populated Ginowan City. In August 2004, a US Marines CH-53 military helicopter crashed into a university building in the city, causing no serious damage or injuries but causing a major international incident. (Thanks to summer vacation, most students were off-campus.)

Futenma surrounded by Ginowan City

In 1959, a US fighter jet also crashed into an elementary school in central Okinawa, leaving 17 people dead, including 11 children. Okinawans remember these accidents vividly.

"Defense Minster Morimoto's remarks show nothing but contempt for Okinawans," the chapter said in an emergency statement. "There is no more room to reach a compromise between Okinawa and the Japanese government. This should be taken as all-out confrontation.

"It is unacceptable to increase the burden borne by the people of Okinawa prefecture anymore. This can't help but spark the public opinion that Okinawa should become independent," the statement also said. In damage control mode, the Japanese Ministry of Defense (MoD) announced on June 8 that a US investigation into the crash in Morocco had found no mechanical flaws in the MV-22. However, the ministry admitted that the investigation was ongoing and had yet to specify the crash's cause.

On June 13, the MoD also outlined its support for USMC plans to deploy Ospreys to Okinawa. In the face of local concerns about the risk of MV-22 crashes at Futenma, MoD officials insist that the Osprey has a safety record that more than matches other USMC aviation assets.

Yet another crash in Florida
The row over the aircraft didn't end there, however. To make matters worse, on the same day, an Air Force CV-22 Osprey crashed during a routine training mission in Florida, injuring five crewmembers. It was the second crash in three months for the aircraft.

Okinawans protested vehemently. "The accident reinforced the impression that Ospreys often crash," Okinawa Governor Nakaima Hirokazu said in a nationally broadcast interview on June 14. "Until this sort of accident stops occurring, the deployment is impossible."

In Tokyo, Chief Cabinet Secretary Fujimura Osamu announced that Japan would suspend any procedures for the planned deployment of the MV-22 to Futenma until the cause of the accident in Florida could be ascertained.

"The Japanese government won't take any new action until details of the accident become evident," Fujimura said at a regular press conference on June 14.

However, Fujimura toned down his rhetoric the following day, saying that the Japanese government would not request that the US suspend the deployment of Ospreys, although he still called on Washington to provide detailed information on the crash.

His retreat came after Colonel James Slife, commander of a special operations wing at an Air Force base in Florida, on June 14 said that no fundamental design flaws were suspected in the CV-22 Osprey aircraft, and that their operation will not be suspended despite the accident.

On June 17, thousands of Okinawans gathered in Ginowan City to oppose the deployment of Ospreys at Futenma in a built-up area of the city.

"I urge an immediate halt to the plan to deploy the Osprey, whose safety is in question, at the Futenma Air Station which sits next to private homes," said Sakima Atsushi, the mayor of Ginowan, who stressed the fact that Futenma is often described as the most dangerous base in the world, and the tilt-rotor aircraft's safety is in doubt.

Miyabi Kyan, a 15-year-old female student at the nearby Ginowan High School, said, "I want just this one thing to be heard: Please don't bring the Osprey into the city of Ginowan," drawing a storm of applause at the rally held in a seaside park in the city.

"It would be too late to do anything after an accident occurs," Kyan said, urging the governments to reflect on the US helicopter crash at Okinawa International University eight years ago and a series of accidents with the Osprey.

Starting later this year, the US and Japanese governments are planning to deploy a total of 24 Ospreys to the controversial USMC air station at Futenma in Okinawa to replace ageing 24 CH-46 transport helicopters.

However, this comes amidst a decade-long deadlock over plans to relocate Futenma air station to Henoko, Nago, in northern Okinawa by constructing a new sea-based replacement facility off Camp Schwab.

Local governments, supported by the majority of Okinawans, have demanded the immediate closure and transfer of Futenma outside of the prefecture, but the US and Japanese governments continue to move forward with their plans in the face of Okinawan opposition.

In April, the Japanese government agreed to pay the costs for refurbishing the Futenma base until the sea-based replacement facility is constructed on the north of the island. Okinawans are quick to point out that maintenance and repair work on Futenma means a US-Japan commitment to its continued use.

Plans to deploy the Osprey at Futenma strengthen Okinawan fears that the air base will become a permanent fixture. In an apparent attempt to ease tensions, the US and Japanese governments reportedly considered temporarily stationing the Osprey at USMC Air Station Iwakuni in Yamaguchi prefecture in July, and demonstrating their safety by conducting test flights there. The MV-22 would then be deployed to Futenma by mid-August, the Asahi Shimbun reported on June 9.

An alternative plan to transport the Ospreys in pieces by sea to the Naha Military Port on Okinawa as early as July, with the aircraft to be assembled there, was aborted as the Naha City Council unanimously opposed the plan and Naha Mayor Onaga Takeshi followed suit.

"Any logic that does not understand the Okinawan mind and our history won't be accepted," Onaga told a press conference on June 6. "While we are requesting the easing of the burden, they are bringing excessive burdens on us further. There is no need to consider the deployment."

The planned deployment of the MV-22 to Iwakuni fell apart in the wake of the most recent accident in Florida. On June 14, Yamaguchi Governor Nii Sekinari met with Defense Minister Morimoto and asked that the proposal to have Iwakuni Air Base serve as a stopover site be put on hold, citing safety concerns.

Iwakuni Mayor Fukuda Yoshihiko told reporters the same day, "My doubts and concerns about safety have increased. Under the current circumstances, we simply cannot give our approval."

Thus, the Japanese government, caught between a domestic rock and a diplomatic hard place, that is, between local governments and the US, has been unable to resolve the dispute over the deployment of the MV-22.

For its part, the Okinawa Defense Bureau hews to its “know nothing” stance about the deployment plan until June 2011, despite the fact that deployment of the Osprey to Futenma was announced in the US Navy’s 1992 document “Master Plan for Marine Corps Air Station Futenma” and in the 1996 Special Action Committee on Okinawa (SACO) draft.

According to a joint survey conducted by the Asahi Shimbun and the Okinawa Times in April, 50% of residents of Okinawa Prefecture pointed to "discrimination by the mainland" as the reason why the scale of US military bases in the prefecture remains unchanged forty years after Okinawa's reversion to Japanese sovereignty.

"The opinion that mainland discrimination is behind the failure to reduce US military bases in Okinawa has spread since around 2010, when then Prime Minister Yukio Hatoyama broke his promise to relocate the US Marine Corps Air Station Futenma outside the prefecture," the Asahi Shimbun concluded.

Hirohito and MacArthur
Today’s Okinawa problems are deeply rooted in a deal reached during the US occupation following Japan’s defeat in World War II, when Emperor Hirohito suggested to Gen. Douglas MacArthur, then the post-surrender potentate in Tokyo, that the US continue occupying Okinawa and other islands in the Ryukyu chain for 99 years in exchange for keeping the imperial system intact.

MacArthur saw limited Japanese opposition to US retention of Okinawa because “the Okinawans are not Japanese.” Hirohito's suggestion, and the US military’s desire to retain its most important base in the Western Pacific, underscored the reality that the islands were being sacrificed for joint US-Japan interests.

This thinking on Okinawa has remained deeply embedded in the minds of mainstream political elites, bureaucrats, politicians and the mass media in Tokyo, including in the Ministry of Foreign Affairs, which is often criticized as being subservient to U.S. diplomacy. When Democratic Party of Japan Prime Minister Hatoyama Yukio sought to question this logic, conservative forces joined to topple him in June 2010, in part over his mishandling of the Futenma issue.

Political impasse over Okinawa base issues has continued for subsequent Japanese administrations.

The widow-maker The MV-22 Osprey tilt-rotor vertical take-off and landing (VTOL) transport aircraft was once called the "widow-maker" due to a series of accidents during its development. Development of the MV-22 got off to a rocky start with the deaths of 23 marines in two crashes during testing more than 12 years ago. A US Air Force version of the tilt-rotor aircraft, the special mission CV-22, crashed in Afghanistan in April 2010, killing three service members and one civilian contractor. According to the Project On Government Oversight, 36 people have died in V-22s since the plane began flying.

This safety record has led the Okinawa prefectural government and local residents to fiercely oppose the planned deployment. The Pentagon has dismissed such safety concerns.

"The MV-22 is among the safest aircraft in the Marine Corps' inventory," Captain Richard K Ulsh, USMC public affairs officer stated in an email interview with the author on June 8. "Including the mishap on April 11, 2012 in Morocco, since the Marine Corps resumed flight operations in October 2003, the MV-22B has demonstrated a safety record that is consistently better than USMC averages while conducting military training, humanitarian assistance missions, and combat operations in very challenging environments."

According to Ulsh, the class A mishap rate for each of the identified aircraft is as follows. These rates are determined by the number of mishaps over a period of 100,000 flight hours. The rate of MV-22 Class A mishaps is higher than that of ageing CH-46, but is the second lowest among the five aircraft and lower than the average.

MV-22: 1.93
CH-46: 1.11
CH-53E: 2.35
CH-53D: 4.51
AV-8B: 6.76
ALL USMC: 2.45

"The Marine Corps views the MV-22 as a highly capable, reliable and safe aircraft," Ulsh said.

But those data did not take into account the most recent crash in Florida. Critics also point out that all of the factors, such as the length of flying hours, the number of take offs and landings and the number of aircraft deployed and operational duties in combat zone, must be considered if one wants to measure its real safety. Otherwise, they say, the figures would be meaningless.

On June 15, Pentagon spokesman Navy Captain John Kirby confirmed plans to deploy the MV-22 to Futenma this year. He reiterated that there has been “no change" in the US government's existing planned deployment of Ospreys despite a recent crash in Florida.

On June 19, Okinawa Governor Nakaima and Ginowan Mayor Sakima met Defense Minister Morimoto Satoshi and Foreign Minister Gemba Koichiro in Tokyo and formally requested that the government cancel deployment of the Ospreys.

Once on Okinawa, the Ospreys would move around the mainland of Japan, according to “Final Environmental Review for Basing MV-22 at MCAS Futenma and Operating in Japan” published by the USMC in April 2012. Detachments of two to six Ospreys will make two- or three-day deployments to Iwakuni and the Combined Arms Training Facility at Camp Fuji. In addition, the US plans to conduct low-level flight training down to 500 feet, or 152 meters, above ground level in six courses including those above Tohoku, Hokuriku and Kyushu.

“Based on expected training activities, MV-22 aircrews would fly approximately 55 annual operations along each route for a total of 330,” the review said.

Latent anti-US base sentiment is likely to rise in coming months as local elections approach. Naha's mayoral election is scheduled for November, and there is speculation that low approval ratings for Prime Minister Noda Yoshihiko's administration, currently running at around 20%, could soon spur a general election. Major political parties and prefectural chapters in Okinawa are likely to use the election to campaign for relocation of the Futenma facility outside of the prefecture as well as to halt the V-22 deployment.

"It was unavoidable that the deployment of the Osprey would become a source of friction and conflict," Japanese military analyst Shikata Toshiyuki, a special advisor to former Defense Minister Tanaka Naoki, said in an interview with the author. "Without the accident in Morocco, the situation would have been better. Okinawans vividly recall the 2004 crash of a marine helicopter into Okinawa International University. The US and Japanese governments will now be forced to delay the deployment later than originally scheduled. A cooling off period is needed."

This is a revised and expanded version of an article that appeared at Asia Times Online. A companion piece to this article by the author is US Marines Eye Japan as a Training Yard.

Kosuke TAKAHASHI is a Tokyo-based Japanese journalist. He currently works as Tokyo correspondent for Asia Times Online and IHS Jane's Defence Weekly. He also served as TV commentator for Nikkei CNBC (news television channel broadcast in Japan) from March 2009 to March 2012. A graduate of Columbia University's Graduate School of Journalism and the School of International and Public Affairs, he is a dual master's degree student. His twitter is @TakahashiKosuke

Recommended citation: Kosuke TAKAHASHI, "Osprey Deployment a New Tinderbox on Okinawa," The Asia-Pacific Journal, Vol 10, Issue 26, No. 3. June 25, 2012.

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posted by Kosuke at 00:38| Comment(0) | Japan Focus


(My latest for Japan Focus) Japan and China Bypass US in Direct Currency Trade

Japan and China Bypass US in Direct Currency Trade


Japan and China started direct trading of their currencies, the yen and the yuan, on the inter-bank foreign exchange markets in Tokyo and Shanghai on June 1 in an apparent bid to strengthen bilateral trade and investment between the world's third- and second-largest economies.

Direct yen-yuan trades also aim to hedge the risk of the dollar's fall in the long run as the world's key settlement currency and as the main reserve currency in Asia, the world's economic growth center in the 21st century. By skipping the dollar in transactions, the region's two biggest economies indicate their intention to reduce their dependence on dollar risk and US monetary authorities' leeway and prowess on the Asian economy. The move aids China's goal of undercutting US influence in the region while strengthening China-Japan financial ties.

This is the first time that China has allowed a major currency other than the dollar to directly trade with the yuan. For Beijing, this new step brings benefits of further internationalization of the yuan. For Tokyo, direct trading confers a favor of incorporating China’s dynamic growth more effectively and economically. The possible future correction of China's still artificially undervalued yuan may also result in a weaker yen, boosting the competitiveness of Japanese exporters such as Toyota and Sony in the long term.

Japan's three megabanks - Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group - all began direct yen-yuan trades with major Chinese banks on June 1. Exchange rates between the yen and the yuan are determined by their transactions, delinking the current "cross rate" system in which the US dollar intermediates in setting yen-yuan rates.

"We can lower transaction costs and reduce settlement risks at financial institutions as well as making both nations' currencies more useful and energizing the Tokyo market," Japan's Finance Minister Azumi Jun said on May 29.

China also welcomed the new trading agreement.

"This will help lower currency conversion costs for economic entities, facilitate the use of RMB [the renminbi, another name for the Chinese currency] and Japanese yen in bilateral trade and investment, promote financial cooperation and enhance economic and financial ties between the two countries," the People's Bank of China (central bank) said in a statement.

Direct trading between the yuan and the yen is part of a broad agreement reached during the summit last December in Beijing to reinforce financial ties between Asia’s two most powerful nations.

It appears that business is business. The heightened tension between the two nations in recent years did not prevent this new dealing in the financial community, even after China gave Tokyo a diplomatic brush-off, cancelling a string of VIP visits with Japan in the wake of Uighur exiles holding their annual meeting in Tokyo in mid-May and Tokyo Governor Ishihara Shintaro's offer to buy the Senkaku Islands in the East China Sea. The islands, which are part of Japan's Okinawa Prefecture, are also claimed by China. But these tensions did not prevent new development in their currency trading.

Bypassing the dollar
Up until June 1, Japanese and Chinese firms had paid currency conversion fees twice in trade and other bank transactions. Japanese companies first had to convert the yen into the dollar, then they exchanged the dollar for Chinese currency. For Chinese firms, it was vice versa. With this removal of the interim step by skipping the dollar in transactions, many expect cost reductions.

Japan ranks fourth among China's trading partners after the European Union, the United States and the 10-country Association of Southeast Asian Nations (ASEAN), while China has been Japan's largest trading partner for the past three years.

The total share of China and Japan in the world’s combined gross domestic product (GDP) was 19.9%, based on purchasing power parity (PPP), according to the IMF World Economic Outlook Report published in April 2012.

Bilateral trade rose 14.3% year-on-year to reach US$344.9 billion in 2011, hitting a new record for the second consecutive year. China accounts for about 20% of Japan’s world trade value. Around 50% to 60% of that is being settled in dollars, with less than 1% of it settled in yuan. One Chinese news outlet has estimated direct yen-yuan transactions will realize $3 billion in cost savings.

There are still cautious views on the scale of cost reductions among Japanese market participants.

"Dollar-yen transaction costs are already very low," Karakama Daisuke, market economist at Mizuho Corporate Bank in Tokyo, said. "The cost reduction effect of direct yen-yuan trading should be limited."

No pressure from the US
In the past, the US appeared displeased to see China and Japan forge stronger economic ties with each other. For example, then US Treasury secretary Larry Summers was viewed as a key official involved in spiking Japan's proposal during the 1997 Asian economic crisis to establish an Asian Monetary Fund, an idea put forward by Japan's then-vice minister of finance for international affairs, Sakakibara Eisuke.

More recently, the US opposed the establishment of an East Asian Community, or an economic and political bloc that might become equivalent to the European Union, as proposed by former Japanese Prime Minister Yukio Hatoyama. For the US, it’s not a welcome step to see China and Japan unite in East Asia, excluding the US.

“Regarding yen-yuan direct trading, we have maintained close contact with the US government and exchange views sufficiently,” an official in charge of foreign exchange at Japan’s Ministry of Finance (MOF) said. “We have repeatedly said this is not something that calls for a change in the dollar-centered postwar Bretton Woods system. So there has been no pressure from the US.”

The official pointed out that for China, direct yuan-yen trade may have the merit of reducing the risk China faces from a volatile US dollar. The collapse of Lehman Brothers in 2008 and the ensuing financial crisis caused the dollar's value to plunge, leading China's foreign exchange reserves to suffer a decline in value and making Beijing cautious about holding dollars.

The direct trading of the yuan and the yen may meet China's desire to minimize risk, as investors view the yen as a safe haven currency during the ongoing global financial crisis.

The MOF official said there are no signs that other nations such as South Korea will follow suit. “To start direct-trading with yuan, sufficient trading based on actual demand as well as financial deregulation are necessary. South Korea may not satisfy those conditions,” the official said.

Internationalization of the yuan
For China, this is a step in its moves to internationalize the yuan, accelerating the currency's wider use. More than 9% of China's total trade was settled in yuan last year, up from only 0.7% in 2010, according to Xinhuanet.

Yuan-denominated trade between mainland China and Hong Kong started in July 2009, as Beijing allowed companies in Shanghai and four cities in the southern province of Guangdong to use yuan in trade with Hong Kong, Macau and members of ASEAN. In July 2010, China also allowed the yuan to be more freely traded and transferred in Hong Kong, establishing an offshore yuan market for the first time. Yuan-denominated deposits and financial services are also gaining ground in Japan and the big three Japanese financial groups allow Japanese companies to hold yuan generated through trade as deposits.

But many experts such as Mizuho's Karakama believe China will soon face a trilemma in its economic policy.

An economy cannot combine at the same time a non-floating dollar peg currency, free capital mobility and autonomy in its monetary policy. Developed nations such as Japan and South Korea abandoned a dollar peg system in order to secure international inflows of money and discretionary monetary policies. (By contrast, countries using the euro abandoned individual monetary policy by consolidating their financial policy instruments to the European Central Bank.)

In April, the People's Bank of China announced it would widen the yuan's daily trading limit against the dollar to 1% from 0.5%.

"With the internationalization of the yuan, it will become more and more difficult for China to control the value of the yuan," Karakama said.

Should China shift to a limited floating exchange rate system, the yuan will likely appreciate against major currencies such as the dollar. Japan's business with China expanding and the growing presence of the yuan in Japan's international trade will push down the yen's effective exchange rate against major currencies. Annual trade between China and Japan more than doubled in the past 10 years, reaching $346.6 billion in 2011. In the first four months of 2012, Japanese foreign direct investment in China rose by 16% to $2.7 billion from one year earlier.

This is a revised and expanded version of an article that appeared at Asia Times Online.

Recommended citation: Kosuke Takahashi, "Japan and China Bypass US in Direct Currency Trade," The Asia-Pacific Journal, Vol 10, Issue 24, No 3, June 11, 2012.

Kosuke TAKAHASHI is a Tokyo-based Japanese journalist. He currently works as Tokyo correspondent for Asia Times Online and IHS Jane's Defence Weekly. He also served as TV commentator for Nikkei CNBC (news television channel broadcast in Japan) from March 2009 to March 2012. He graduated from Columbia University's Graduate School of Journalism and the School of International and Public Affairs as a dual master's degree student. His twitter is @TakahashiKosuke
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posted by Kosuke at 18:39| Comment(0) | Japan Focus