The Okinawan dollar-yen juggling act

Friday, Aug. 16, 2002

Seventh in an occasional series

THE OKINAWA FACTOR

Unique Moment in Monetary History

By MAYUMI NEGISHI Staff writer NAHA, Okinawa Pref. -- On Aug. 15, 1971, U.S. President Richard Nixon took the dollar off the gold standard and introduced floating exchange rates, sending the greenback plummeting.

Photo: Matsusho Miyazato, former deputy chief of the Ryukyu Government under U.S. rule, displays marked dollars Okinawans could exchange at the time of the 1972 reversion.

By the end of August, the U.S. currency fell more than 15 percent, to 305 yen from its 360 yen peg.

In Okinawa, residents panicked at news of the "Nixon shock." Less than a year later, the islands were to be returned to Japan following 27 years of de facto U.S. military rule.

At the time of the reversion, dollars in Okinawa had to be exchanged into yen, putting at risk $ 562 million in cash and assets residents held.

Despite being under U.S. rule, more than 80 percent of Okinawa's household goods were imported from the main Japanese archipelago, and the dollar's plunge threw cold water on Okinawa's celebration of its looming reversion, forcing it to face the risk of galloping inflation.

"Those Americans, they did it again. How much more do the Okinawan people have to suffer?" asked Matsusho Miyazato, then lieutenant chief of the Ryukyu Government.

Thus began a little-known episode in monetary history, in which Okinawa succeeded in securing financial aid amounting to 260.4 billion yen from the Japanese government for losses incurred when residents exchanged their dollars for yen on May 15, 1972.

Effectively, Japanese and Okinawan policymakers temporarily created a market protected from global monetary markets for the first -- and probably only -- time in international monetary history, pegging the dollar at 360 yen.

Recalling the unprecedented incident during a recent interview, Miyazato said he found an eager ally in Sadanori Yamanaka, then director general of the Prime Minister's Office, the predecessor to the current Cabinet Office.

Yamanaka was a Lower House member from Kagoshima Prefecture, where the Satsuma clan had its power base during the Edo Period. The awareness of how Satsuma had invaded and exploited the Ryukyu Kingdom in the feudal period haunted Yamanaka, Miyazato said.

"I have to atone for what Satsuma did to Okinawa. That thought is what drove me throughout the negotiations," Miyazato quoted Yamanaka as saying.

The guilt may have been potent, but it took sleepless nights and planning to come up with a scheme that would be effective in maintaining a fixed dollar rate in Okinawa.

Behind closed doors, Miyazato, Yamanaka and Michihiro Tanabe, an official at the Prime Minister's Office who was originally from the Finance Ministry, decided to first find a way to count dollars held by Okinawans and to somehow mark the bills.

Second, they decided to close the doors of all Okinawan financial institutions and copy records of deposit and loan accounts to confirm individual assets.

To prevent dollars from flooding into Okinawa from around the world, passengers on all incoming planes and ships carrying $ 500 or more were requested to temporarily leave their money with police while the money was counted.

Deciding what needed to be done was easy, but the question of how to mark the dollars was not fully resolved until almost the last minute.

"There was no room for failure; there would be no second chance," Miyazato said. "We had to mark the money somehow -- we thought about gluing all kinds of paper onto the dollars at first. Then we thought about sticking mint, celebratory stamps of Okinawa's reversion issued by the Ryukyu Government, on the dollars. We even thought about stamping the currency."

But what would the U.S. say about foreign-looking characters on their dollars? What if Americans refused to accept the notes? Would Okinawa be charged for destruction of currency and be made to pay damages?

With time running out, and despite having printed 50 million stamps for that purpose, Miyazato agreed to Yamanaka's suggestion that they use the eraser end of a pencil, dip it in red ink, and mark the counted dollars with little red dots. In this way, they could escape possible U.S. wrath by claiming the dollars were simply stained.

The stamps were eventually used on the certificates of confirmation given to Okinawans when their dollars were counted.

On Oct. 8, 1971, Ryukyu Government employees were each handed an envelope containing confirmation certificates, stamps for the certificates and red ink to mark $ 61.8 million worth of notes citizens had in their pockets, and another $ 500.1 million in assets at the bank.

In areas other than the main Okinawa island, employees waited to open their envelopes at 8 a.m., where they found instructions.

At the same time the soon-to-be-prefecture closed its banks' doors, the Japanese government plan to subsidize losses on dollars held by individuals in Okinawa was announced to the media.

The government provided financial support amounting to 968 billion yen for Okinawan importers of 330 daily household goods, on the promise that none of the losses incurred from a fallen dollar would be reflected on prices of their products.

The Bank of Japan, guardian of the currency, did not move a finger to stop the government.

Protests from the U.S. Civil Administration of the Ryukyu Islands that marking the currency "sullied the face of the United States of America" were silenced by a couple of phone calls.

"We threatened to tell the media of the failure of the U.S. to follow through on its responsibilities to its territory, and take adequate measures to insure Okinawa's smooth reversion," Miyazato said. "I don't know if it worked, but the complaints died."

Miyazato, who lost more than 5 kg during the ordeal, looked back on the months leading to reversion.

"It may have been bending the rules of monetary policy a little," he said. "But it was to protect the lives of Okinawans.

"In those days, it was considered a politician's job to employ problem-solving skills to protect the interests of the people," Miyazato said, criticizing politicians today as relying too much on precedents and foreign models.

"Japanese politicians today are too eager to please America and avoid doing anything that America might not like."

Okinawa drops bid to catch up, pitches own pace

Tuesday, July 2, 2002
By REIJI YOSHIDA
Staff writer

THE OKINAWA FACTOR

Blue skies, blue seas and pure white sandy beaches -- a subtropical paradise and coral delight for divers.

Okinawa's exotic isles draw millions of tourists every year.

Tourism has long been a key industry since the prefecture's reversion from U.S. rule in 1972. But it was not necessarily the Okinawa government's priority as it pursued economic development over the past three decades.

Okinawa is now putting more emphasis on tourism, making promotion of the industry a top economic policy goal.

Although last year's terrorist attacks in the United States temporarily pushed down the number of visitors to Okinawa, the rate is now recovering, local officials and people in tourism say.

The prefecture is now preparing a new economic development plan for the next 10 years, shifting its focus from promotion of primary and manufacturing industries to tourism.

Some people say the shift reflects a recent rise in Okinawan pride in and awareness of its cultural identity, as well as rapid growth in revenues from tourists flocking from the mainland to the prefecture's resort islands.

Okinawa previously emphasized development of the manufacturing industry because it generates more added value than tourism, said Norikazu Higa of the prefecture's industry coordination section.

"The manufacturing industry has made a lot of efforts, but it has not grown as expected," Higa said. "Now we've decided to further build up the growing (tourism) industry."

According to the prefecture, sales of oil products, Okinawa's major industrial items shipped outside the prefecture, dropped from 121 billion yen in fiscal 1985 to 90.1 billion yen in fiscal 1999.

The share of oil products in Okinawa's ordinary revenues from outside the prefecture fell from 10 percent to 4.6 percent over that period.

During the same period, on the other hand, money from the tourism industry more than doubled, from 227.1 billion yen to 474.7 billion yen, accounting for 24.4 percent of the prefecture's total revenue from outside.

The latest 10-year program, unveiled in May and awaiting approval this month by a national government council, no longer advocates Okinawa "catching up" with the mainland. It instead calls for utilization of "comparative advantages" unique to Okinawa, such as its rich nature and proximity to other parts of Asia.

"Once we tried to catch up with the mainland, and we always looked in Tokyo's direction," said Yoshiro Shimoji, an official at the prefecture's tourism promotion bureau.

"But now we are very confident in things Okinawan. The situation is probably greatly different from seven or eight years ago," he said.

Since the reversion 30 years ago, one major item on Okinawan's agenda was to close the gap with mainland Japan. The prefecture has suffered high unemployment and an income level much lower than the national average.

But many Okinawans say their confidence in their home has greatly improved over the past decade, as their culture -- distinctly different from the rest of Japan -- became popular on the mainland as well as with local youths.

Several pop singers and groups from Okinawa, including Namie Amuro and SPEED, became top national stars in the 1990s. Many young musicians also started finding success playing songs combining traditional Okinawan music and rock.

The recent popular NHK TV drama "Chura-san," featuring life in Okinawa, also boosted tourism from the mainland.

Kimio Chinen, chief executive and president of local venture Lequios Airline Co., said the mind-set of many Okinawan people has changed from "how to catch up with the mainland" to "how to take advantage of our own characteristics."

Bolstering the growing confidence in Okinawa's culture and the tourism industry are the increasing revenues from mainland tourists despite intensifying competition with overseas destinations.

In the mid-1980s, the local tour industry seriously worried about competition with Hawaii and Guam, as the yen's value sharply rose, making overseas tours cheaper for Japanese.

But despite the explosion of overseas tourism, Okinawa has continued to be a popular destination for mainlanders. The number of visitors consistently increased throughout the 1990s, hitting a peak of 4.56 million in 1999.

Hiroshi Shimose, manager of domestic sales planning and marketing at Japan Airlines Co.'s passenger sales arm JAL Sales Network Co., said Okinawa-bound travelers are different from those going to Guam or Hawaii, who, especially young women, are mainly interested in duty-free shopping.

Travelers going to Okinawa seek to stay at a resort beach, he said.

Recently, package tours to Hawaii and Guam have drastically fallen in price as competition intensified among the travel and airline industries. But with its high-quality accommodations facilities, Okinawa has been sufficiently competitive and largely unaffected, Shimose said.

To further promote tourism, the latest development plan by the prefecture calls for the creation of facilities that can meet the more diversified needs of visitors.

Currently, about 200,000 foreigners visit Okinawa a year, accounting for about 4.4 percent of all arrivals.

To capitalize on Okinawa's proximity to other parts of Asia -- 30 minutes by plane to Taiwan, for example -- the prefecture is planning ad campaigns to lure visitors from Taiwan, Hong Kong and South Korea, and upgrading port facilities to accommodate more cruise liners.

Okinawa is also preparing a model course of eco-tourism to encourage visitors to stay longer and take in the islands' rich nature.

Okinawa's longevity rate, the highest in the nation, is another drawing card. The prefecture has launched a study into how the local diet and other conditions benefit people suffering from illnesses in an attempt to promote the area as a health resort for the elderly.

But the tourism industry is not immune from emergencies overseas, as highlighted by the aftermath of the Sept. 11 terrorist attacks in the United States. The U.S. forces in Okinawa went on high alert and security around the bases was tightened, a development widely reported by the nation's TV news programs.

Organizers of package tours to Okinawa, fearing the terrorist threat to airplanes as well as to the U.S. bases in Okinawa, rushed to cancel reservations.

According to the prefecture, at least 249,662 people in 2,130 groups canceled tours to Okinawa from October to mid-March.

In 2001, the total number of visitors dropped by 1.9 percent from the previous year to 4.43 million. Most of the decline was attributable to the cancellation of group tours, said Shimoji of the tourism promotion bureau.

It was the first significant fall in visitors in recent years, except a year earlier, when the 2000 Group of Eight summit was held in Nago. Tightened security and full booking of hotel rooms by summit participants discouraged mainlanders from coming.

Of the 249,662 people who canceled group tours, 198,306 were students planning to visit Okinawa on school-organized trips.

Fumihiko Kenmochi, research director at the Japan School Tours Bureau, a government-affiliated body specializing in research and coordination of school trips, said Japanese school principals have a group mentality, leaving the possibility always open of mass cancellations in the future.

"We received numerous phone inquiries from schools asking what other schools were doing (in reaction to the terrorist attacks). They always watch for the reaction of others," he said.

But he also said that over the long term, Okinawa will become increasingly popular for school trips because more schools are now trying to let students study a single theme during a tour, rather than simply visiting old temples in cities like Kyoto and Nara.

In that sense, Okinawa, the site of a fierce ground battle in early 1945, is a perfect place for groups to think about the issue of war and peace, he said.

According to the Japan School Tours Bureau, Okinawa was not even among the top 12 destinations in 1991 for high school trips.

But in 1999, Okinawa was ranked No. 3, trailing only Hokkaido and Kyoto, as more and more schools have chosen the prefecture despite the high travel costs.

The Japan School Tours Bureau coordinates airline reservations for high schools in Saitama and Tokyo. Both areas have already seen an increase in school trips to Okinawa so far this year compared with the same period of 2001, Kenmochi said.

According to the Okinawa Prefectural Government, total arrivals have also fully recovered, numbering 1.57 million from January to April, up 2.5 percent from the same period a year earlier.

School taps into popularity of jobs at U.S. facilities

Friday, May 17, 2002
By TAKUYA ASAKURA

Seventh in an occasional series

THE OKINAWA FACTOR

Employment vs. Base Opposition

Staff writer NAHA, Okinawa Pref. -- Growing up near Kadena Air Base and witnessing the rough antics of American soldiers, Yasuhiko Toyozato could be forgiven if he harbored negative feelings toward U.S. forces here.

But like many unemployed Okinawans, he now sees the bases as a kind of oasis.

In October, a school opened here to help the growing number of Japanese seeking civilian jobs at U.S. military facilities.

"I understood the feeling of being jobless for the first time," said Toyozato, 43, who has been out of work since quitting in October for personal reasons. "You keep worrying about what you will be doing in the future and cannot sleep at night."

Students at the school are taught English conversation, military jargon, base etiquette and any other skills that improve their chances of landing a job.

Toyozato, a student at the school, is preparing to apply for work in May.

The private school is believed to be the first vocational school in Okinawa specially designed for people seeking jobs at military bases.

"Working at U.S. bases is a great opportunity for people in Okinawa," said Mitsuru Akamine, representative of Kokusai Kyoiku Gakuin, or the U.S. Military Employment School.

"Whether it is right or wrong, we have military bases here, and there is no reason for not taking advantage of them," he said, referring to the vast area occupied by the U.S. military -- nearly 20 percent of the main island of Okinawa.

Amid the protracted economic slump, Okinawa has the nation's highest unemployment rate, up to 8.4 percent in 2001. Despite widely perceived antibase sentiment, the U.S. military is the second-largest employer after the prefectural government, hiring around 8,500 Japanese civilian workers.

Thanks to relatively good working conditions and high salaries, the competition for base jobs is fierce. Last year, 27,961 people applied for 746 positions, according to the Japanese government. Opportunities exist for doctors, secretaries, cooks, bartenders, drivers, engineers and carpenters.

Salaries are set at the same level as national government employees. Although salaries are covered by Japanese taxpayer money, the right to manage base workers belongs to the military.

The U.S. military does not discriminate by age and gender for employment and promotion, which is another reason the bases attract Japanese workers, Akamine, 42, said.

"There are people who even study at graduate school in the United States to be employed at bases here," he said.

Despite the Sept. 11 terrorist attacks putting U.S. bases on high alert soon after it started to accept applications, the U.S. Military Employment School is apparently doing well.

Courses started as scheduled in October with 150 students, according to school officials. Enrollment has since soared to 270.

But some still hold mixed feelings about being employed by the U.S. military.

Born and raised near an entertainment district catering mostly to black American soldiers in downtown Koza, today's Okinawa City, Toyozato recalled that American soldiers were very wild during the Vietnam War.

He said they often broke into his grandfather's grocery store to steal, or sometimes to hide from pursuing mobs.

Toyozato also witnessed white soldiers beaten by a group of black soldiers, saying he recognized the racial problems that plagued the U.S. military.

"I was too young to understand the controversy over the U.S. bases," he said. "I was just scared of Americans."

His views changed when his older sister married an American service member. While the brother-in-law was stationed here, he spent time with Toyozato's family on weekends.

"I felt like I saw an American soldier in person for the first time," he said.

But Toyozato still has "mixed feelings" over the fact that many people depend on military bases for job opportunities in Okinawa, where the scars of war are still fresh for many older people.

Such emotional dilemmas, however, appear to be fading for younger people.

"Perceptions toward U.S. bases among younger generations has changed, and bases are simply places for employment for many of them," said Kiyoshi Tamaki, chairman at Okinawa District Headquarters of All Japan Garrison Forces Labor Union, or Zenchuro.

Zenchuro's Okinawa headquarters, which has around 6,500 Japanese base employee members, began calling for the withdrawal of the U.S. military from the prefecture in 1971, shortly before Okinawa's reversion to Japan.

The move illustrated the plight of Okinawans torn between a wish for an island without a military and the lure of base jobs.

In 1997, the Okinawa union decided to drop the slogan of "withdrawal of bases" from its campaign policy. Frustration then increased among younger union members, who favored the withdrawal issue over job security, said Tamaki, who has led the union for several decades.

Despite the complaints, Tamaki, who worked at Kadena Air Base during the 1960s and has seen how Japanese workers were treated under U.S. rule, boasts that the current "good labor conditions at bases" are the fruits of a long struggle.

As a result of U.S. occupation of the island prefecture, some residents were driven out of their houses and farms, which were replaced by bases. Many Okinawans then had no choice but to work at the military facilities.

During the occupation period to 1972, Okinawan base employees were at the bottom of the social hierarchy -- American service personnel at the top, followed by American civilians, and employees from other countries such as the Philippines, Tamaki said.

They were often fired without rational reasons if they confronted their American bosses, prompting the union to campaign for Okinawa's reversion to Japanese governance so the rights of base workers would be protected under Japan's Constitution, Tamaki said.

A series of massive dismissals of Japanese workers around 1972 also fueled the union's campaign.

The number of base employees decreased from around 20,000 to 8,500 during the five years after reversion -- although the total area of U.S. facilities in the prefecture was barely reduced during that period, according to statistics provided by the prefectural government.

Because he sees reduction and realignment of U.S. military facilities in Okinawa as a matter of course, Tamaki said it's important that the union gain public understanding in demanding government job-security measures.

"Whether we are for or against U.S. bases, base workers will be fired at the convenience of the U.S. military," he warned.

Though the union no longer officially demands the withdrawal of U.S. bases, it still plans to actively participate in various campaigns to fight against crime and accidents involving the U.S. military and its personnel.

"Our rights were won hand in hand with the citizens of Okinawa as we walked the same path of history," Tamaki said. "Though our situation may seem contradictory, I believe encouraging (base employees) to fight alongside people in Okinawa will eventually force the government to hammer out more effective employment measures."

Love-hate ties bind Okinawans, U.S. military

Thursday, May 16, 2002
By TAKUYA ASAKURA

Sixth in an occasional series

THE OKINAWA FACTOR

Islanders forge enduring relationships with American personnel but are angered by crimes

Staff writer OKINAWA CITY, Okinawa Pref. -- Many former American soldiers who once stayed at the Diego Hotel near the U.S. Kadena Air Base here regard the hotel's manager with a reverence usually reserved for their own mothers.

Yet they are probably unaware of some of the bitter memories harbored by the 71-year-old Takako Miyagi.

Miyagi said she just received another call from a former American guest who stayed at the hotel about 25 years ago and still refers to her as "Mama-san."

She said she remembers the homesick soldier sobbing on the stairs of the hotel after the Vietnam War.

He has called her almost every year since he returned to the U.S., although Miyagi said she does not understand his English very well.

Despite the bloody confrontation with U.S. forces, Okinawa's postwar occupation and problems involving U.S. military personnel even after its reversion to Japan, many residents of Okinawa have built warm friendships with U.S. soldiers over the past half century.

Some outsiders are puzzled therefore when this apparent affability is offset by the islanders' explicit anger toward members of the U.S. military over various crimes and misdemeanors.

Okinawans say, however, that these two faces constitute no contradiction given the history of the prefecture, which has always been forced to pander to the whims of Tokyo and Washington.

Miyagi has never forgotten April 2, 1945 -- the day after the U.S. forces landed on the main island.

Before dawn, Miyagi, then 14 and staying in an underground shelter, was told a shocking piece of news by her aunt.

While trying to lay their hands on some food, her mother and grandfather had been shot by American soldiers who had occupied their home.

Miyagi immediately set out from the shelter with her grandmother on a rescue mission.

"I was too young to be scared," she said. "And I was taught that the Japanese army was strong and Japan always wins."

She later learned that the Imperial Japanese Army had already retreated in the face of the U.S. landing.

As the pair approached the house, Miyagi's grandmother was shot dead.

Fortunately, Miyagi managed to hide under a bush and was not spotted by U.S. troops. She spent the whole day under the bush, holding her breath.

After darkness fell, Miyagi ran back to the shelter, bullets whizzing past her head.

When she finally reached the dugout where her young brother and relatives were waiting, she burst into tears.

Miyagi could not recover the bodies of her mother and grandparents. She instead retrieved pebbles from the ground where they were killed and placed them in their graves instead of ashes.

During the final throes of World War II, Okinawans were forced to sacrifice themselves to defend the Japanese mainland. Okinawa eventually lost about a quarter of its population in the ensuing battles.

"That is how the citizens of Okinawa fought," wrote Rear Adm. Minoru Ota of the Imperial Japanese Navy in his final telegram to Tokyo before his suicide. "(I hope they) are granted special consideration in the future."

During the postwar U.S. rule of Okinawa, Miyagi, like many Okinawans in the central part of the island, initially had no choice but to work on a U.S. base.

That was until she opened the Diego Hotel in 1958 with her late husband.

And yet, she said, she did not mind serving members of the U.S. military.

"Individual soldiers were not responsible (for the death of my family)," she said, adding that she does not know why she feels this way.

"We were tamed by them as they gave us food when we had nothing."

During the Vietnam War, she shined U.S. soldiers' muddy shoes when they returned from the battlefields on leave.

The young soldiers looked sad when they were sent back to Vietnam.

"I was sad because they looked so sad," she said.

"I like them personally" was a common answer uttered by many Okinawans when asked for their views on U.S. soldiers.

Many Okinawans viewed the American soldiers as being frank, easygoing and family-loving -- traits generally shared by Okinawans themselves.

Discontent over human rights infringements suffered under U.S. military rule was smoldering, however, among the local populace.

Instead of the "special consideration" specified by Adm. Ota, Tokyo approved U.S. rule of Okinawa under the 1952 San Francisco Peace Treaty.

A 1947 letter sent by Emperor Showa to the General Headquarters of the Allied Forces also shows that he hoped the United States would continue its military occupation of Okinawa to defend both Japan and the U.S. from the threat posed by the Soviet Union.

During 27 years of U.S. military rule, private property was confiscated and used for military facilities, while residents suffered violence and fatal accidents at the hands of U.S. service personnel.

Local police officers were powerless to counter the latter.

In December 1970, a minor car accident involving members of the U.S. military and a local man in Koza -- known today as Okinawa City -- led to an unprecedented riot.

Photo: People stand by the burned vehicles of U.S. service personnel the morning after the Koza riot of Dec. 20, 1970.

A throng of local people surrounded the American driver, his passengers and military police who tried to clear the scene, accusing them of trying to evade charges.

This flash point came a week after a military court had acquitted an American service member of fatally running over a local woman in his car while drinking and breaking the speed limit.

Incidents of vandalism were triggered by warning shots fired by the MPs, with locals burning some 80 vehicles owned by Americans throughout the night.

Photo: Locals turn over the car of an American soldier before torching it during the riot.

The victim had eight children and had long looked after her sick husband.

In addition to the thousands of traffic accidents caused by U.S. service personnel, local police in 1970 were thwarted by the Japan-U.S. Status of Forces Agreement when they tried to arrest a U.S. soldier who brutally raped and stabbed a local high school girl.

Ko Yoshioka, a photographer who witnessed the vandalism in Koza, said it was "a struggle for Okinawans to retrieve their pride as humans."

Many people here still talk about the riot with pride.

This is partly because the frenzied rioters somehow retained some semblance of discipline, only burning vehicles carrying yellow license plates that identified them as being owned by U.S. service personnel.

Author Chihiro Isa, who depicted the riot scenes in his award-winning book "Enjo" ("Burning,") described the riot as a "one-night feast."

This was because the rioters vanished before dawn and returned to the world of U.S. rule the next day.

Okinawa's reversion to Japanese rule came about shortly after the riot. In contrast to the expectations of Okinawans, however, most of the U.S. bases remained and their green lawns still stretch through the central part of the prefecture even today.

The number of brutal crimes and tragic accidents involving military personnel gradually decreased after the 1972 reversion, but Japanese authorities are still bound by the SOFA treaty.

About a decade after the reversion, Isa remembers that an editor employed by a major Tokyo publisher asked him why Okinawans could not understand that Japan's prosperity -- including that of Okinawa -- is founded on the Japan-U.S. security alliance.

"Why don't you say it at a bar in Naha?" he responded.

"Whom do you think you owe for what you call economic prosperity? Isn't it the people on the mainland who rest on the sacrifice of Okinawa citizens?"

The anger and frustrations of Okinawans exploded again in 1995, when a 12-year-old girl was kidnapped and raped by three American soldiers.

The U.S. military refused at that time to hand over suspects to Japanese authorities before indictment under SOFA.

Tokyo has repeatedly shrugged off pleas by Okinawa for revisions to the bilateral agreement.

"Please give us back the quiet Okinawa, the island without military, and without tragedy," said Sugako Nakamura, then a senior at Ginowan High School near Futenma Air Station, to nearly 80,000 residents who gathered at the city's beach park in 1995 to protest the rape.

Nakamura said that she was chosen to represent Okinawa high school students at the rally accidentally.

She also appears in the documentary "Guntai no Nai Kuni" ("A Country Without Military,"), centering on Costa Rica, which has abandoned its own military since 1949. The film is now touring independent cinemas across the nation.

"I was just curious if the 'country without military' is really possible," she said, citing the reason behind her decision to accept the offer to appear in the film.

Nakamura used to live near the air station.

"Your television cannot be heard on full volume" while helicopters fly in formation, she said.

People on the mainland say the U.S. bases are there to bolster the "bilateral alliance" and "peace in the region," but Nakamura feels such views are phony.

"There are all kinds of opinions among the people of Okinawa, too," she said. "But at least there is no one who feels that they are protected by U.S. bases."

In fact, she added, many people on the mainland have canceled their trips to Okinawa, fearing terrorism in the wake of the Sept. 11 attacks.

Though Nakamura personally feels a distance between herself and activists who shake their fists and shout loud antimilitary slogans, she understands why people must adopt such confrontational positions to get their voices heard.

"We have no choice but to obey what the Japanese government and people on the mainland decide," she said.

"There are a lot of grandpas and grandmas in Okinawa still suffering pain from their experiences in the war. I wish we could bring back the islands of peace while they are alive."

Nuclear pact ensured smooth Okinawa reversion

Wednesday, May 15, 2002
By ERIC JOHNSTON

Fifth in an occasional series

THE OKINAWA FACTOR

Secret agreement on transport and storage of weapons exacted high toll in terms of public trust

Staff writer On Nov. 21, 1969, President Richard Nixon met with Prime Minister Eisaku Sato in Washington to discuss an extremely delicate issue.

Photo: The cave on Chichijima Island was used to store U.S. nuclear weapons in the 1950s and '60s, while nuclear arms were also kept at U.S. bases in Okinawa until its reversion in 1972.

With the reversion of Okinawa looming, the United States was anxious to secure secret permission from Tokyo to continue to have the option of bringing nuclear weapons into Okinawa, even after the islands had been returned to Japan.

But Sato, who had publicly declared that Japan would adhere to the principles of not possessing, manufacturing or introducing such weapons in Japan, was in a bind. Japanese public opposition to nuclear weapons was strong and the last thing he wanted was to inflame domestic opinion.

The result of the Nixon-Sato meeting was a secret agreement that would allow the U.S. to bring in and transit nuclear weapons through Okinawa after the islands were handed over.

If it were not for this secret agreement, political scientists believe, the reversion could not have been achieved as smoothly as it was.

The agreement was not made public until Kei Wakaizumi, a professor of international relations at Kyoto Sangyo University, published his memoirs in 1994, elaborating on his experiences as a special emissary for Sato.

"It is the intention of the United States government to remove all nuclear weapons from Okinawa by the time of actual reversion. However, the United States government also requires the standby retention and activation in time of great emergencies of existing nuclear storage locations in Okinawa," Wakaizumi's memoirs revealed. His book was titled "Tasaku nakarishi-o shinzemu-to hossu" ("I wish I could believe there were no other options.")

Sato and Nixon agreed that the secret paper be kept only in the offices of the U.S. president and Japan's prime minister and be treated in the strictest confidence between only the very top leaders of the two governments, according to the memoirs.

The agreement confirmed what many Japanese had long suspected, but the government, particularly the Foreign Ministry, had always denied -- that the U.S. stored nuclear weapons in and transported them through Okinawa in direct violation of Japan's nonnuclear principles.

By the time Wakaizumi, who died in 1996, had revealed the existence of the secret Nixon-Sato agreement, many classified documents pertaining to U.S. nuclear weapons in Okinawa during the Cold War were coming to light.

As Robert Eldridge, a specialist in postwar Okinawan-U.S. relations at Osaka University, points out, recently declassified diplomatic cables and top secret memos between U.S. and Japanese officials clearly show that American nuclear weapons were present in and around Okinawa long before the Sato-Nixon summit.

"U.S. aircraft carriers were bringing nuclear weapons into Japanese ports in the 1950s with the tacit approval of the Japanese government and bases on Okinawa were storing nuclear weapons," the American academic said. "When the U.S.-Japan Security Treaty discussions were taking place in the late 1950s, the continued ability of the U.S. to deploy nuclear weapons was a major point of contention."

The result of negotiations over the U.S.-Japan Security Treaty in 1959 and early 1960 was an agreement that allowed the U.S. to bring nuclear weapons into Japan without having to first spend time discussing the issue with the Japanese government.

The secret held for two decades until May 1981, when former U.S. Ambassador to Japan Edwin O. Reischauer admitted that a verbal agreement had been made in the 1960 talks that Japan would allow U.S. warships with nuclear weapons access to Japanese ports and territorial waters.

Despite Reischauer's comments, and those of other U.S. officials who backed him, the Japanese government strongly denied that such an agreement existed.

Prime Minister Zenko Suzuki specifically said there was no such agreement. Foreign Minister Sunao Sonoda, during questioning in the Diet on the issue, blew up, saying that "Reischauer is an uncalled-for meddler who pokes his nose into matters that are none of his business."

The Japanese government continued to deny Reischauer's claim, citing a lack of written evidence for a verbal agreement.

Finally, in the late 1990s, the U.S. government declassified material that was touted by scholars and opposition party leaders as the "smoking gun."

In a document titled "Record of Discussion," dated June 20, 1959, U.S. and Japanese officials agreed that the section of the Japan-U.S. Security Treaty that reads "major changes in the deployment into Japan of United States forces and major changes in their equipment . . . shall be the subjects of prior consultation," means "the introduction into Japan of nuclear weapons, including intermediate and long-range missiles, as well as the construction of bases for such weapons."

The treaty itself, with this provision understood by both sides, was signed on Jan. 6, 1960.

"Here, though, we come to another important point," Eldridge said. "The word used by the Japanese side for 'introduce' was not 'dounyu' but 'mochikomu,' which is usually translated into English as 'to bring in.' This allowed the U.S. to store weapons on Okinawa, then under U.S. control, and have nuclear weapons on ships in transit or docked in Japanese ports, as it was understood by both sides that such actions did not violate the meaning of 'mochikomu.'

"The end result was that both sides could say they were adhering to the letter of the treaty, while continuing to use Okinawa as a nuclear weapons base."

And Okinawa, with it's geographically strategic location, was especially convenient for storing nuclear weapons.

"Okinawa's value is enhanced by the absence of any legal restrictions on American free access to or use of the bases, which permits storage of nuclear weapons," says a National Security Council report from 1969.

Declassified documents from National Security Archives in 1999 show hydrogen bombs, short and intermediate-range nuclear missiles, and smaller bombs were regularly brought in and out of Okinawa between the early 1950s and 1972.

Which raises the question of where U.S. nuclear weapons were actually stored.

Kadena, in central Okinawa, was a major storage facility for air-based nuclear warheads in the late 1950s and 1960s, as well as nuclear missiles. Iwo Jima was used for storing nuclear weapons used by naval ships; the U.S. Navy wanted a secret base where such weapons could be loaded in a hurry, according to various declassified reports from the U.S. military and the State Department.

In addition to the Okinawan islands, it was learned only in 1999 that Chichijima, one of the Ogasawara Islands, briefly played host to various kinds of nuclear devices, including nuclear-tipped warheads, in the mid-1950s and mid-1960s. Like the Iwo Jima base, the Chichijima facility was designed as an emergency nuclear weapons storehouse that could be accessed quickly by the U.S. Navy.

The secrecy surrounding the U.S. nuclear presence on Okinawa and Japan was encouraged all the more by U.S. policy regarding public questions on the issue, which was to "neither confirm nor deny" -- a policy that continues to this day.

U.S. officials say that all nuclear weapons were removed from Okinawa when it returned to Japan in 1972. In addition, while official U.S. general policy since 1993 has been not to carry nuclear weapons aboard surface ships, attack submarines and naval aircraft, the U.S. will not confirm or deny the presence of nuclear weapons aboard a specific ship, submarine or aircraft.

Although many in the U.S. and Japan saw this policy as necessary in the midst of the Cold War, the secrecy of both governments has exacted a high toll in terms of public trust in Japan.

During the mid-1960s, as the Vietnam War escalated and Okinawa became more important, concerns were particularly strong that a nuclear weapons-laden ship would either trigger a nuclear war or be involved in an accident.

In 1989, fears about an accident appeared to have been justified when a declassified U.S. Navy report revealed that an accident involving nuclear weapons had taken place on a warship about 130 km off the coast of Okinawa.

On Dec. 1, 1965, the aircraft carrier USS Ticonderoga, heading toward Yokosuka after operations in Vietnam, conducted an exercise in which an aircraft was loaded with a hydrogen bomb.

While the plane was being transferred to the flight deck, however, its brakes failed and the plane, with the bomb still attached, rolled overboard and sank to a depth of about 5,000 meters. U.S. media reports indicate that the bomb was later recovered.

The revelation that both an accident had occurred so close to the coast and that the ship continued to Yokosuka with weapons aboard shocked and outraged many Japanese.

In the 1990s, as more documents related to secret U.S. negotiations over the reversion of Okinawa became available, the extent of the U.S. nuclear presence in both Okinawa and Japan, and the extent to which both countries sought to mislead the public, became much clearer, fueling even more anger and distrust.

"The legacy of the presence of U.S. nuclear weapons on Okinawa until reversion in 1972, and the revelations of secret agreements concerning those weapons, have left a deep reservoir of doubt among many ordinary Okinawans of current U.S. military intentions on Okinawa and of the future status of the bases," Eldridge said.

"While it may seem to be an historical issue, it is directly related to the political challenges facing a host of U.S.-Japan bilateral security issues."

Handover of Okinawa to Japan was prickly issue

Tuesday, May 14, 2002
By SAYURI DAIMON

Fourth in an occasional series

THE OKINAWA FACTOR

U.S. military, political interests 30 years ago affected assistance, control of former Ryukyu

Staff writer Tsuyoshi Sakurai remembers when Japan allocated 1 billion yen to Okinawa in its first financial assistance package in fiscal 1962, when the islands of the Ryukyus were still under U.S. rule.

"Until 1961, the U.S. never allowed us to provide money to Okinawa. They feared that the Okinawans would look toward Tokyo, instead of the U.S., if we provided money," said Sakurai, 67, who worked on Okinawan issues from 1965 through the early 1980s as an official of the Prime Minister's Office and the Okinawa Development Agency.

Photo: Signs celebrating Okinawa's reversion to Japan hang over the main street in Naha, Okinawa Prefecture, in this photo dated May 15, 1972.

President John F. Kennedy greenlighted the initiation of financial assistance in 1961, and by 1972, when Okinawa reverted back to Japanese rule, the budget allocation had snowballed to 45 billion yen.

In 1969, Prime Minister Eisaku Sato and President Richard Nixon agreed to the reversion, and on May 15, 1972, Okinawa was returned to Japan after 27 years under U.S. administrative control.

"By 1968, the amount that we allocated to Okinawa exceeded that of the budget provided by the U.S., and the U.S. must have lost legitimacy to keep the islands under their rule as Okinawa received more money from the Japanese government," Sakurai said.

'Abandoned children'

In the 1960s, sentiment in Okinawa was already moving toward reverting to Japanese rule.

The growing antibase movement spurred the two governments to negotiate on the issue, according to experts and various declassified documents. The fluid international political situation in the midst of the Cold War also played a pivotal role in pushing the U.S. to accept Japan's longtime plea.

Okinawa, then called Ryukyu, was handed to the U.S. under the memorandum announced by the Supreme Commander of Allied Forces in 1946. It was officially separated from Japanese rule by the San Francisco Peace Treaty, signed by Japan and 48 other nations on Sept. 8, 1951.

"Okinawans must have felt like abandoned children," Sakurai said. "Okinawa was virtually under U.S. military control as its high commissioner, the top administrative authority of Ryukyu, had to be a U.S. military officer on the active list."

The plight of Okinawans is reflected in remarks made in 1963 by Paul Caraway, then U.S. High Commissioner for Ryukyu, who criticized the Ryukyu government for wanting to expand its autonomy.

Okinawa's autonomy should be no stronger than that of a state in the U.S., he reportedly said.

As Japan moved toward economic expansion in the 1960s, the economic disparity between Okinawa and the mainland grew, fueling resentment among Okinawans.

"The pressures have built up in both Japan and Okinawa to the point where I can see virtually no hope of stalling off beyond the end of next year a decision on the timing of reversion, although the actual return would take place later," wrote Richard L. Sneider, then minister in charge of Okinawa issues at the U.S. Embassy in Tokyo, in a report to William Bundy, assistant secretary of state, on Dec. 24, 1968.

The victory of leftist opposition candidate Chobyo Yara in the election for chief executive of the Ryukyu government earlier that year appears to have added to the concerns of the U.S.

"The potential for an incident involving an open clash between demonstrators and American military forces protecting our bases is much higher today than ever before," Sneider warned in the report.

Shunji Yanai, a former ambassador to the U.S. who was directly involved in negotiations on the reversion of Okinawa, said Japanese officials also told the U.S. that it would be in the U.S. interest to return Okinawa to Japan.

"We told the U.S. that if the U.S. occupation of Okinawa continues, it would fuel anti-American feeling among Japanese people, seriously impacting on the overall Japan-U.S. relationship," said Yanai, who was an official of the Foreign Ministry's Treaties Bureau at the time.

A thorn in the U.S. side

According to Masaaki Gabe, a professor at Ryukyu University, the U.S. was also concerned about the possible termination of the Japan-U.S. Security Treaty, which would become possible after 1970 -- 10 years after the treaty went into force.

Under the terms of the treaty, either party may give notice a year in advance of its intention to terminate.

"The U.S. State Department feared it may endanger the security treaty with Japan if it insisted too much on maintaining the free use of U.S. bases in Okinawa," Gabe said. "In the eyes of Tokyo and Washington, the Okinawa issue became too much of a thorn in the side of the Japan-U.S. relationship."

The changing face of international politics in Asia at that time also appears to have reduced the strategic importance of Okinawa to the U.S. military.

The U.S. began moving toward returning Okinawa after the election in 1968 of Nixon, who called for a reduction of U.S. forces in Vietnam, according to Gabe.

Between around 1968 and early 1969, U.S. bombers frequently departed for Vietnam from Okinawa, but as aerial bombing proved to be ineffective, the U.S. military began to ease its stance on Okinawa, he said. In early 1972, Nixon declared that the U.S. military would pull out of Vietnam.

Documents dated prior to 1968 confirm Gabe's account.

In 1967, then Prime Minister Sato and President Lyndon Johnson agreed to keep the problem under joint review.

Johnson said he understood Sato's interest in agreeing on a reversion date within a few years.

However, at that meeting, according to a document later declassified by the U.S. State Department, "the Japanese were advised, more confidentially, that due to the U.S. 1968 election and Vietnam, the U.S. government was unable to give an answer on Okinawa before 1969 at the earliest and that there were both problems of military (e.g. nuclear) requirements and congressional opposition to deal with."

The U.S. finds a new friend

Yanai, now a professor of law at Chuo University, pointed out that the U.S. rapprochement with China in the early 1970s may also have influenced the U.S. decision at that time.

Henry Kissinger made a surprise visit to China in 1971 as a special envoy of Nixon, paving the way for Nixon's visit there the following year.

At the time, Japan was unaware of the U.S. policy shift, Yanai said, adding that it is possible that the U.S. was already moving to improve relations with China simultaneously with talks on the Okinawa reversion to Japan.

"In retrospect, the U.S. must have already been aiming to improve ties with China, and it is also related to the end of the Vietnam War," he said.

"Though the Cold War was still continuing at that time, the underlying international situation surrounding Okinawa was moving in such a direction (of detente)."

As a result, Nixon and Sato reached an agreement in November 1969 to work toward the reversion of Okinawa to Japan by as early as 1972.

Conditional return

According to Yanai, Japan's policy throughout the negotiations was to win back Okinawa without nuclear weapons and at the so-called homeland level, meaning the U.S. bases on Okinawa would be restricted to the same level as those on the mainland, as outlined in the Japan-U.S. Security Treaty.

The U.S. agreed to reduce the number of bases within about 1 1/2 years of the 1969 agreement. All nuclear weapons were removed from Okinawa when it was returned to Japan in 1972.

In return, the Japanese government shouldered the $ 320 million in reversion costs, including the transferal of U.S. assets in Okinawa to Japan and the removal of nuclear weapons.

"Considering the removal of nuclear weapons from Okinawa, we made a highly political decision of paying $ 320 million to the U.S.," Yanai said.

Sakurai, who was transferred to the Naha office of the Okinawa Development Agency immediately after the reversion, said various opinion polls at the time showed that the jubilant locals were most happy about the fact that they no longer needed a passport to visit the mainland.

"Many people don't realize it, but Japan was also a nation divided into two by the tragedy of history," Sakurai said.

Nago ponders base-for-cash community conundrum

Thursday, May 2, 2002
By TAKUYA ASAKURA

Third in an occasional series

THE OKINAWA FACTOR

Staff writer NAGO, Okinawa Pref. -- A prefabricated building behind Jisei Asato's home in the Toyohara district of Nago used to be an office occupied by the Kube Area Economic Promotion Council. It is now closed and bears "for rent" signs.

"Whatever we say, we don't get our voice heard by the big powers," said Asato, 81, a former head of the district.

Following a 1996 agreement that the U.S. would return the central Okinawa land upon which the U.S. Marine Corps Futenma Air Station is located in five to seven years, this coastal area of Nago became a candidate site for an alternative facility, which is required under the accord.

The majority of Nago residents expressed opposition to playing host to a U.S. base, in a 1996 plebiscite.

But Asato, who hoped his rural community would benefit from a government economic promotion package, campaigned on behalf of the relocation plan on condition that the new facility be constructed far offshore.

His hopes were dashed, however, when a government task force decided in December that the facility, a joint civilian-military airport, will be built on a reef near the coast -- a move that many feel will put the ecosystem at risk.

Nago's anguished decision to receive financial aid from Tokyo in return for accepting the airport symbolizes a dilemma that has plagued Okinawa ever since its reversion to Japanese rule on May 15, 1972.

Even after the 27-year period of U.S. rule came to an end, the U.S. military presence in the prefecture has continued to be enormous.

Some 27,000 U.S. troops are currently stationed in the prefecture, with bases occupying about 20 percent of the main island.

Critics have thus condemned the national government for having poured money into the local economy and using economic assistance as a lever to preserve a hefty military presence in a geopolitically key area for both Tokyo and Washington.

Asato, who remembers when his neighborhood lacked even basic infrastructure, initially urged local residents to grab this "big chance" to achieve sustainable development via national government funds.

"Humans have an everlasting desire to have a better life," he said.

In terms of the new airport's potential repercussions for the local community, Asato thought the proposed idea of a floating structure 3 km off the coast would minimize noise pollution and environmental damage.

Believing this would be the prominent option on the table, he backed Tateo Kishimoto, who was elected Nago mayor in 1998, defeating antibase candidate Yoshikazu Tamaki.

But the national government, Okinawa Gov. Keiichi Inamine and Kishimoto have decided to build the airport on the reef -- a plan Asato and many local people believe could cause grave damage to the environment.

A land-reclamation scheme now seems likely, although the government has never officially approved this as a concrete strategy.

The national government hopes to decide on a method of construction by late May, but it was apparently reluctant to pursue the floating airport idea due to the potential technical difficulties and huge budget involved.

"The coral reef is alive," Asato snapped. "If the reef is filled in, all kinds of changes can be anticipated in the current, which will also affect the coast, and the whole environment will surely be destroyed."

Following Nago's decision to accept the facility, the national government has pledged to provide 100 billion yen over 10 years to 12 northern municipalities whose combined population stands at around 124,000.

As part of an economic promotion drive for the northern area, the Nago City Multimedia Center and Global Oceanographic Data Center have already been opened, at a cost of billions of yen from Tokyo, near the planned airport site.

Although critics question whether these facilities will benefit the local economy, the centers have provided young people with employment.

The average unemployment rate in the prefecture in 2001 stood at 8.4 percent -- the worst in the nation.

The jobless rate is even higher among the prefecture's young people.

An employee at the oceanographic center said she is grateful for the facility.

"I've been interested in computer-related jobs, but it was difficult to find that kind of job in an area where I can commute from home," said the woman, who is in her 20s.

But there are also projects that have made local residents frown.

In the Toyohara district, a plan to build a new residents' hall featuring a sports facility has been proposed. But local residents believe managing the complex will become a heavy financial burden for the small village in the future.

Shoichi Chibana, a member of the Yomitan village assembly, likened military bases to drugs that are painful to kick once one becomes addicted to the benefits they provide, referring to economic stimulus incentives provided by Tokyo in return for the heavy U.S. military presence. Other benefits include the jobs the bases provide, the rents the government pays for the land and the local consumption linked to the installations.

When former Okinawa Gov. Masahide Ota warned Tokyo of his plans to oppose the construction of an alternative facility for the Futenma base in 1998, the national government hinted that it could halt the economic stimulus measures, scaring business leaders in the prefecture.

In the gubernatorial race later that year, Ota was beaten by Inamine, who pledged to "open the pipeline from the national government."

Some landowners whose property is being used by the U.S. military depend on lease income for their annual revenues and are reluctant to have their properties vacated without prospective redevelopment plans.

But in Chibana's case, the opposite was true.

Chibana drew nationwide publicity in 1996 when he refused to renew the lease of his land, which is part of the property where the U.S. Navy Sobe Communications Site sits, with the national government. The incident resulted in the government's forced renewal of the lease so the U.S. military could continue using the land.

The episode ended about a year later, when the government enacted a law to allow the prime minister to sign a lease contract on behalf of landowners.

"What the government has done to Okinawa these 30 years (after reversion) has been aimed at maintaining the U.S. military presence and has not worked to promote economic independence," Chibana said.

Though many people in Okinawa have consistently demanded a reduction in the number of U.S. military bases in the prefecture to levels akin to those on the mainland, about three-quarters of the land allocated to the U.S. military in Japan is in Okinawa.

Ota, now a House of Councilors lawmaker, has claimed that crimes, accidents and pollution involving the U.S. military have already driven Okinawans to the limit of their tolerance.

The brutal 1995 rape of a 12-year-old Okinawan girl by three U.S. service members, for example, provoked outrage throughout the prefecture.

Hawaii Gov. Benjamin Cayetano, shortly after the incident, sent a letter addressed to Ota and the people of Okinawa in which he said: "The American military presence in Okinawa can be reduced. Some units or bases could be even returned to the United States -- including Hawaii -- where they would be more welcome."

Ota has met the Hawaiian governor as well as other high-ranking U.S. officials and politicians, all of whom have reportedly said they are ready to discuss the issue when formally approached by their counterparts in Tokyo.

Ota complained, however, that Tokyo has downplayed the matter as an "Okinawan problem," rather than treating the issue as one that affects the entire nation.

Tokyo and Washington boast that the land used by the U.S. military in Okinawa will be reduced by 21 percent once the 1996 bilateral agreement hammered out by the Special Action Committee on facilities and areas in Okinawa is completely carried out.

But most of the base-return projects in the SACO initiative feature provisions to relocate current activities within the prefecture -- a scenario that could divide more local communities and provoke environmental concerns akin to those in Nago.

"What made Okinawans happy about the reversion was that they would be able to freely visit the mainland," Ota recalled. "But as more Okinawans have exchanges with people on the mainland, they may be feeling even a deeper social distance from the rest of Japan."

Okinawa gung-ho on wooing companies

Saturday, March 30, 2002
By MAYUMI NEGISHI and TOSHI MAEDA
Staff writers


THE OKINAWA FACTOR

Tax havens for financial firms in Nago fuel hopes as skeptics grumble

The city of Nago, Okinawa Prefecture, wants to be home to more than a breathtaking coastline and a future U.S. Marine Corps airfield.

The city's leaders are pushing to create a financial tax haven in the eastern outskirts of the city, hoping to attract big money players and their investing finesse.

A law enacted by the Diet on Friday allows Okinawa to cut taxes for financial institutions, and brings the vision a step closer to reality.

The legislation will replace an Okinawa promotion and development law enacted when the prefecture was returned to Japan from U.S. rule in 1972. The previous legislation expires Sunday. The new law, which is effective until March 2012, also promises a similar arrangement for information technology firms relocating to envisioned IT zones.

"A financial sector will bring more than one-time benefits," said Tateo Kishimoto, mayor of Nago, located at least a two-hour plane trip and two-hour drive from financial regulators in Tokyo. "It will act as an engine for the community's self-sustained growth and make Nago a positive force in our nation's troubled financial industry."

It's a visionary idea, a departure from conventional public works projects, and Tokyo's Otemachi financial district is interested. But executives are saying they want to wait and see how well the system works before they invest.

Since Okinawa's return to Japanese rule 30 years ago, they say they have seen too many government-led economic projects in the prefecture peter out.

Tax breaks and then some

Under the new law, financial institutions can receive either a 35 percent corporate tax deduction for 10 years or up to 15 percent tax deductions on initial capital expenditures. Under an existing law to promote development in northern Okinawa, Nago also covers 80 percent of communications costs at new companies in designated industries.

It also plans to offer financial institutions office space at 1,100 yen to 1,600 yen per sq. meter -- 5 percent to 10 percent that of Tokyo rent -- at an incubator facility in the town of Toyohara on the east coast. Plus, it offers new companies grants of up to 100,000 yen a month for two years per local hire aged 30 or under.

Such tax havens are not new overseas. Dublin created the International Finance Service Center in 1987, where corporate taxes are down to 10 percent from 24 percent; JP Morgan & Chase Bank has an office in a tax haven in Tampa, Fla.; and some 2,776 companies are registered at Malaysia's Labuan Offshore Financial Service Authority, where corporate taxes are at 3 percent.

Dublin was able to create around 14,000 jobs at over 1,000 companies and slash its unemployment rate from 19 percent to 4 percent in 14 years.

Cynics call Okinawa's new tax breaks more "guilt money," to compensate for the relocation of the U.S. Marine Corps Futenma base in central Okinawa to off Nago, adding it will do little more than the 6.7 trillion yen the national government has sifted into Okinawa development projects since 1972.

Kishimoto, at least, believes the tax breaks could help transform Nago's future and that a financial hub could give birth to 7,000 much-needed jobs over the next 10 years.

Online securities firm United World Investments (Japan) K.K. is ready to prove that companies don't need to be in Tokyo to do finance. President Kazuto Hayashi announced in February he would transfer the firm's support and maintenance operations to the incubator facility. The company will start operations in June with a staff of 15.

"We can keep operating costs at a minimum in Nago, while maintaining productivity and access to both Tokyo and our headquarters in Hong Kong," Hayashi said. But more incentive is needed to draw companies from Tokyo and other parts of Asia, he said.

"Our decision was based on a set of very special conditions," Hayashi said. "Okinawa's advantages start to fade when you begin comparing operating costs with those in Singapore, Taiwan and China."

Nago officials are forced to agree.

Companies must employ at least 20 people to qualify for the corporate tax reductions under the new law, while the tax deduction will not exceed 20 percent of personnel costs.

The conditional clause precludes the creation of companies on paper only, but it also means that the law offers no incentive for firms with less than 20 employees, like United World Investments and venture firms. Because of the tax deduction cap, incentives for larger companies also diminish as profits rise.

Meanwhile, critics say the timing couldn't be worse to woo big domestic players. Survival is the big issue of the moment and the trend is to cut staff, as domestic banks, life insurers and brokerages continue to struggle with bad loans, portfolio losses and weak customer demand.

Critics see 'no prospects'

"I see no prospects of firms coming here. I even think this project might be scrapped before it can be realized," said Seigen Miyazato, a local political scholar and former professor at Ryukyu University.

Like Tokyo's other "Okinawa promotion" items, Miyazato said Tokyo overestimates potential demand for its projects. Building a financial district is as bad as a working plan to build a graduate school specializing in IT, nanotechnology and other high-tech industries in Okinawa, which he said is unlikely to attract students and less likely to offer reasons for students and teachers to stay.

Kazutoshi Oshiro, who heads the Nago municipal industrial development task force, countered that the city still has a trump card to play.

Mayor Kishimoto is requesting Nago be designated as the sole place in Japan to allow major companies to establish their own insurance firms and design policies especially to cover the parent company's operating risks. So far, over 100 Japanese firms have such captive insurance companies overseas, and Nago estimates the potential demand is at least twice that.

However, the national government has left the matter pending, as details about how to regulate these companies and their insurance policies has not been debated. The campaign has sparked vocal support from executives of the Japanese branches of U.S. financial giant AIG KK and French-based AXA Life Insurance Co., both with experience in captive insurance consultation.

But until Nago officials begin courting companies in May, when the city unveils a detailed plan for the tax haven, it is hard to tell which firms will come, and whether Okinawa's campaign to transform itself into islands teeming with Internet service providers, corporate data centers and Net securities companies will succeed.

Hiroshi Iizuka, a Cabinet Office official in charge of Okinawa policymaking, credits the government for its efforts in creating more than 4,000 jobs since 1997.

In the same period, Okinawa has increased subsidies to the firms that moved their operations to the prefecture.

"The people of Okinawa are in charge of leading the prefecture to a self-sustaining economy, but the government will do its utmost to create a new Okinawa," said Koji Omi, minister for Okinawa and Northern Territories Affairs.

An example of successful government campaigning was the establishment by Nippon Telegraph and Telephone Corp. of two call centers in Okinawa to take 104 number information calls placed from Tokyo. On a daily basis, 500 part-time employees handle an average of 100,000 calls.

Financial services company Orix Corp. is another example, with a full-time staff of 250 at its call center, established in Ginoza, just south of Nago, in 1998.

Less successful is a tax haven for manufacturers launched in 1998 in the Nakagusuku free-trade area in central Okinawa. Eight firms have committed to come, filling less than 10 percent of the company slots allotted.

"It took Dublin seven years before things began to really move," said Tsunemi Tamaki, deputy director of Nago's five-member International IT and Financial Center Establishment Team. "Don't jump to conclusions before we even start."

Economic disparities, bases frustrate Okinawa

Friday, March 29, 2002

THE OKINAWA FACTOR

As U.S. security alliance strengthens, locals turn from military issues to boosting business

2002 marks the 30th anniversary of Okinawa's reversion to Japan from the U.S. As the two nations boost their security alliance, Okinawa's strategic importance appears to be increasing, but it continues to suffer political, social and economic problems. This is the first article in an occasional series on Okinawa issues. By TOSHI MAEDA Staff writer Three decades after its reversion to Japan, Okinawa is still dominated by U.S. bases, suffering economic disparities and seeking ways to vent its frustration.

Okinawa has trailed the other prefectures economically.

Unemployment, which stood at 8.4 percent in 2001, is the highest among all 47 prefectures, while its wage level is the nation's lowest.

Although the key U.S. military installations are one of the island's major employers and revenue sources, residents near them often complain of noise and air pollution from aircraft, while forest fires and the drift of red clay caused by live-fire drills also draw complaints.

Okinawa, a bloody battle ground in the final months of World War II, was returned to Japan on May 15, 1972. The island prefecture, which accounts for only 0.7 percent of Japan's total area, still provides some 75 percent of the land being used exclusively by the U.S. military stationed in Japan.

A deterrence to China

During the Cold War, the U.S. dubbed Okinawa the "keystone of the Pacific" in deterring possible Soviet or North Korean aggression in Northeast Asia.

Since the collapse of the Soviet Union, however, bases in Okinawa are serving as a deterrent to China and possible conflicts in the Taiwan Strait, and to North Korea.

"Okinawa's advantage is that it is located 'not too close' and 'not too far' from potential war zones. In other words, you can project power while keeping an appropriate distance," said Toshiyuki Shikata, professor of Teikyo University and former commanding general of the Ground Self-Defense Force's Northern Area Army.

Okinawa lies about 800 km from the Taiwan Strait, 1,400 km from Pyongyang and 2,000 km from the Russian Far East.

"Some people argue Okinawa's role has ended now that the Cold War is over," Shikata said.

"But with the U.S. having shifted its focus from the north (the former Soviet Union) to the west (China and terrorist networks), the significance of Okinawa in a strategic sense is increasing even more."

In the post-Cold War world, the U.S. and Japan have sought to beef up their security alliance by pursuing an "equal partnership."

The Japan-U.S. defense cooperation guidelines, enacted in 1999, opened the way for the Self-Defense Forces to provide logistic and other noncombatant support for the U.S. military should hostilities erupt near Japan -- most likely in the Taiwan Strait or on the Korean Peninsula.

Richard Armitage, U.S. deputy secretary of state and an influential policymaker on Japan, noted in an October 2000 report that he "sees the special relationship between the U.S. and Great Britain as a model for the (U.S.-Japan) alliance."

The U.S. Quadrennial Defense Review released in September by the Pentagon highlighted the uncertainty of Asia's security environment.

"Maintaining a stable balance in Asia will be a complex task. The possibility exists that a military competitor with a formidable resource base will emerge in the region," the report said, obviously referring to China.

Another report compiled by the QDR 2001 Working Group set up at the U.S. National Defense University provides a clear explanation about Okinawa's strategic role.

"The air base at Kadena (in central Okinawa) is vital to U.S. security because it is the only U.S. air base within tactical fighter range of Taiwan," it said. "Without access to Kadena, the United States would be forced to rely primarily on carrier-based aviation to support defense of Taiwan in the event of a Chinese attack."

Okinawa, Shikata notes, is the "adhesive of the Japan-U.S. relationship."

Relocation efforts

Following the 1995 rape of a 12-year-old Okinawan girl by three U.S. servicemen, local resentment against the U.S. bases reached a peak.

In 1996, Tokyo and Washington agreed to relocate the U.S. Marine Corps Futenma Air Station from its central residential location in Ginowan on condition that Tokyo provide the marines with an alternative airport on the island.

Although Tokyo is pushing to build the alternative airport on a reef off the town of Nago, in the north of Okinawa island, the outlook remains uncertain as local governments insist that the U.S. military's use of the new airport be limited to 15 years -- a condition Washington is reluctant to accept.

Local media and scholars say the U.S. should reduce the number of marines in Okinawa, which accounts for more than 60 percent of the roughly 25,000 U.S service members stationed in the prefecture.

"The marines are here mostly for exercises only. I don't see the reason why they must be here if they can do the same exercises in the U.S.," said Seigen Miyazato, a political analyst in Okinawa.

Indeed, reduction in the number of Okinawa-deployed marines seems to be among the Pentagon's future options.

"The inherent mobility of the marines means there is no absolute requirement for them to be in Japan, particularly if they were no longer needed for a Korean contingency," said the QDR 2001 Working Group report.

"If a reduction in the U.S. military presence in Japan were necessary, the Marine Corps facilities in Okinawa and the Air Force base at Yokota (west of Tokyo) probably are the least vital of major American installations in the country and therefore the most likely candidates for reduction."

Fishing rods, not fish

Amid the island's bleak economic outlook and speculation that an immediate withdrawal or cutback in U.S. forces is unlikely, Okinawan voters in recent years have chosen leaders more conscious of the economy than anti-U.S. base sentiment.

In a 1998 election, then Okinawa Gov. Masahide Ota, a hardline opponent to the U.S. presence, lost his seat to local tycoon Keiichi Inamine. In Nago, Tateo Kishimoto, who declared his intention to accept an alternative to Futenma, won the mayoral race twice running in 1998 and 2002.

Under Inamine's "We need fishing rods, not fish" slogan, Okinawa has sought ways to stop relying on subsidies from the central government and stand on its own feet.

"When Okinawa reverted to Japan, it was in a miserable plight. Under (U.S.) rule, infrastructure had not been built," said Munetaka Takeda, chief of Okinawa Development Bureau at the Cabinet Office.

"Over the last three decades, our focus has been on bridging the infrastructure gap with the rest of Japan," he said.

"And now, the focus has shifted to improving its economic performance. Okinawa needs to invite firms with advanced technologies so they can attract more firms and industries in a ripple effect."

The subtropical prefecture, where tourism has served as the leading industry, came up with a new concept in 1998 to turn itself into a "multimedia island," hoping to serve as an Asia-Pacific information and technology hub.

To help realize the project, the Diet is expected to enact a new law today to allow Okinawa to launch tax havens for IT-related and financial firms -- the first such attempt in country.

The law also calls for setting up a technology graduate school in Okinawa and continuing a reduction to the fuel tax on flights between Okinawa and the main islands.

"We are satisfied as we have got what we wanted. This is pretty much like the 'one nation, two systems' policy that we were asking for," said Kazutoshi Oshiro, head of the industrial development task force at the municipal office of Nago, where the tax havens will be most likely introduced.

Some observers point out that the tax havens are the major component of the carrot-and-stick deal between Tokyo and Nago in an attempt to promote the construction of the joint civilian-military airport off Nago.

Events related to Okinawa bases

February 1995 -- Joseph Nye, a former U.S. assistant secretary of defense, declares the U.S. will keep 100,000 troops in Northeast Asia indefinitely, subject to review in 2015. This angers Gov. Masahide Ota.

September 1995 -- A 12-year-old local girl is raped by three U.S. servicemen. The incident spurs widespread public anger toward the U.S. presence.

April 1996 -- Japan and the U.S. agree to relocate Futenma Air Station on condition that Tokyo provide an alternate facility for the marines in the prefecture.

September 1996 -- In a prefectural plebiscite, 89 percent of those who voted -- 53 percent of eligible voters -- call for a reduction of U.S. bases in Okinawa.

December 1997 -- In a local plebiscite, 53 percent of the residents of Nago object to the town's plan to accept a Futenma alternate airport.

February 1998 -- Futenma relocation proponent Tateo Kishimoto elected mayor of Nago.

November 1998 -- Local business leader Keiichi Inamine elected governor of Okinawa.

July 2000 -- Group of Eight summit held in Nago.

February 2001 -- Private e-mail from Lt. Gen. Earl Hailston, then top commander of U.S. forces in Okinawa, to other U.S. officers is leaked. He referred to prefectural officials, including Inamine, as "all nuts and a bunch of wimps," venting frustration over the local response to an indecent act committed by a marine that month.

June 2001 -- A local woman in her 20s is raped by a U.S. Air Force staff sergeant.

December 2001 -- Tokyo and Nago agree to build an airport on a reef off Nago for marine helicopter operations.

February 2002 -- Nago Mayor Kishimoto re-elected.

How Okinawa fits in
	Okinawa	Entire nation
Annual income per capita	2.17 million yen (1999) (71.9% of natinal average)	3.02 million yen (1999)
Unemployment rate	8.4% (2001)	4.85% (2001)
Real ecconomic growth	1.2% (1999)	1.4% (1999)
Area used exclusively by U.S. military (As of March 2001)	23,445 hectares (74.8% of national total)	31,349 hectares
Population (As of Jan. 2002)	1.33 million (1.05% of national total)	127.28 million
Total area	2,272 sq.km ( 0.67% of national total)	337,880 sq.km