#Newer Developments

#Some Ratios

Newer Developments

Some Ratios

Edit: based on a (relatively) new developments pointed out in the comments, this may need a bit nuance.

#Newer Developments

Japan started strengthening its defense forces in the mid 90s. Starting in 1995, it began a program of re-building its own air force. These planes started entering service sometime between 2010 and 2017. According to Wikipedia, the JASDF had an estimated 50,324 personnel as of 2013, and as of 2013 operated 777 aircraft, approximately 373 of them fighter aircraft.

Around the same time as the reliance on the US protection guarantees became somewhat less important (despite the fact that Japan is still under the US nuclear umbrella), "Abenomics" (named after PM Abe) became a new political trend in Japan. It pursues the policy of somewhat softer Yen (which really means printing more money).

In 2019,

Japan's GDP stands at $5.2T

US' GDP stands at $20.5T

In 2016,

US' military expenses were $611B

Japan's military expenses were $46B

In 2017

Japan spent $5.5B on the US base in Japan. It's not clear to me (from a cursory glance) if that number is a part of Japan's (~$46B) defense budget.

#Some Ratios

US GDP / Japan's GDP ~ 4.1

US military budget / Japan's military Budget ~ 13 (assuming the base expenses are not included in the $46B)

US military budget / Japan's military Budget ~ 15 (assuming the base expenses are included in the $46B)

Which shows that the cost of the military is roughly 3-4 times greater to the US than it is to Japan.

Assuming that these ratios remain roughly the same for these years (2016-2019), these ratios demonstrate why the security guarantee is still (largely) in place. It is no longer the main day-to-day form of defense, but rather an insurance policy against an all-out war. So it makes sense that some of the "discounting" of the trade due to the currency imbalance would be wound down, but only somewhat.

Japan is a special case. Largely because it doesn't have any real military.

By not deflating its currency, Japan allows other countries, and most notably the US to exercise a so-called "carry trade." The US deflates its currency while running trade deficits. This is a policy of a "weak dollar". The US issues long-term bonds, which are repaid with dollars of lower value in the future. The countries which sell to the US, end up buying a certain amount of these bonds and accepting payments on them, in the future, with lower-value dollars. By not doing the same thing, Japan effectively allows the US to trade with Japan at a discount.

This isn't done for free though. Japan enjoys a full security guarantee from the US. Japan doesn't have a standing military despite its proximity to a number of nations hostile to it. These nations were even more hostile during the Cold War. So the security guarantee started to play an important role back then. While it can be argued, that it started with the US being an occupational power in Japan. And was a result of the US not wanting Japan to re-militarize, that's clearly not the case today.

Today this arrangement is convenient for both sides. Japanese society does not have to participate in the arms race of modern warfare. It does not have to spend the human capital of having its young men spend a time of their lives in the military. And the US gets a discounted trade arrangement with Japan in exchange for spending part of its human capital and its economy on maintaining military readiness which can defend both the US and (among others) Japan against any future aggression.

Japan is a special case. Largely because it doesn't have any real military.

By not deflating its currency, Japan allows other countries, and most notably the US to exercise a so-called "carry trade." The US deflates its currency while running trade deficits. This is a policy of a "weak dollar". The US issues long-term bonds, which are repaid with dollars of lower value in the future. The countries which sell to the US, end up buying a certain amount of these bonds and accepting payments on them, in the future, with lower-value dollars. By not doing the same thing, Japan effectively allows the US to trade with Japan at a discount.

This isn't done for free though. Japan enjoys a full security guarantee from the US. Japan doesn't have a standing military despite its proximity to a number of nations hostile to it. These nations were even more hostile during the Cold War. So the security guarantee started to play an important role back then. While it can be argued, that it started with the US being an occupational power in Japan and was a result of the US not wanting Japan to re-militarize, that's clearly not the case today.

Today this arrangement is convenient for both sides. Japanese society does not have to participate in the arms race of modern warfare. It does not have to spend the human capital of having its young men spend a time of their lives in the military. And the US gets a discounted trade arrangement with Japan in exchange for spending part of its human capital and its economy on maintaining military readiness which can defend both the US and (among others) Japan against any future aggression.