Japan’s economic size is on the way to maxing out. Relative to its faster growing neighbours, its share of regional GDP is declining, as too is its share of global income.

Japan remains one of the wealthiest countries in the world. It is also blessed by one of the highest levels of social security and community safety anywhere on earth. But it no longer projects economic size and 10 or 20 years hence that is not going to change.

These facts are the premise on which Japan must now make its way in the world. They are facts that creep up on you, if you’re living life out in the community. They’re reflected by the greying of crowds in the streets, the smaller cohorts entering schools and universities, and the expansion of the mortuary business. It’s no wonder that they take a while to imprint themselves on strategic outlooks formed in years of bustling youthful growth and a growing reach around the world.

But these facts must eventually change Japanese strategic outlook in every dimension.

For many years, Yoshihide Soeya has sought to reinvent his country as a middle power. What a strange idea it seemed to his countrymen and women a decade or two ago when he first proposed it — and to most commentators outside Japan hard-wired into Japan’s ambitions of the past! And still it remains a conception of Japan’s place in the world that has little traction among the current Japanese leadership nor impact on Japanese strategic thinking.

Soeya was surely prescient, although his starting point was from the postwar constraints on Japanese security policy: the Constitution (and its pacifist Article 9) and the US–Japan Security Treaty. ‘Both have fundamentally constrained Japan’s freedom of action in international security and limited Japan’s foreign policy options to those of a middle power’, Soeya suggests. ‘This diplomatic style allowed Japan to focus on postwar economic recovery, which eventually proved to be the key to the nation’s rise as an economic power.

But even as Japan achieved economic strength it maintained a restrained posture in dealing with political and security issues, and concentrated instead on cultivating economic and cultural relations with Asia and the world’. More recently he observed that ‘[w]hether one likes it or not, Japan’s status may also be evolving into that of a middle power, in which the creation of a culturally rich welfare society, living in an increasingly interdependent and globalised world, is the natural goal of an ageing nation’.

Now Japan’s economic power is shrinking, Shiro Armstrong suggests in this week’s lead essay, that this imposes a third constraint on national ambitions and how they might be achieved. In that context, he continues, ‘[t]he preoccupation with growing the aggregate economy and, for Abe, returning Japan to some form of pre-war glory, appears a strange distraction … The Abenomics policy package to revive the economy is palpably failing’. But even if it were to succeed, it would not reverse the big structural trend towards ‘peak Japan‘. This does not make Japan irrelevant, as Brad Glosserman says, but establishes a frame for reasonable national goals.

No future, including that of Japan, is set in stone — Japanese immigration policy could in principle be reversed and the productive power of women be called up — but both developments would seem at this point, as Armstrong notes, highly unlikely.

So what are the implications for Japan’s place in the world and the country’s national agenda?

Whatever Prime Minister Shinzo Abe’s ambitions for Japan’s security policy may have been, recent changes in Japanese security policy are modest adaptations that permit Japan to exercise the right to collective self-defence and satisfy its alliance partner, but within constraints that protect the thrust and credibility of its peace constitution.

A security strategy consistent with this circumstance would be one that is more multi-faceted, that deals with long-standing issues that affect relations with its neighbours in the region. While the alliance with the United States remains the anchor of Japanese security policy, its diplomacy and foreign policy in years to come has to be welded into Asian coalitions. This requires a broader conception of security policy that is not purely military in its character, and a return to an updated version of the comprehensive security policy that has anchored security policy in the past.

In this conception of Japan’s capacities and its reach, there would be more active engagement in coalitions for cooperation not only in hard security affairs with partners like Australia but also with China and the rest of Asia in economic and energy cooperation through the Regional Comprehensive Economic Partnership and other big political initiatives. This multifaceted strategy of underpinning the US forward military presence in Asia, engaging politically and economically in China, and supporting regional multilateralism would signify a return to Japan’s critical role in managing China’s peaceful rise in the region, as Evelyn Goh has argued.

The breadth and depth of Australia’s relationship with Japan positions Australia’s place in Japanese regional diplomatic initiatives. Although its recent submarine deal with France might appear to take the shine off Australian engagement with Japan on all these fronts, it’s really a wake-up call for a new, proactive diplomacy between these partners that can endure beyond the Abe era and demonstrate common cause with Japan in pursuit of regional security, and economic and social development.

The EAF Editorial Group is comprised of Peter Drysdale, Shiro Armstrong, Ben Ascione, Ryan Manuel and Jillian Mowbray-Tsutsumi and is located in the Crawford School of Public Policy in the ANU College of Asia and the Pacific.