It is not possible to spend more than a few minutes with a Japanese diplomat or scholar without hearing the "C," namely China. Most of them are convinced that the People's Republic is expanding its global influence while Japan's is shrinking. The entire world, and most worryingly Asia, which used to look toward Japan when Harvard scholar Ezra Vogel crowned it "No. 1" now sees China not only as the country of the future but already as today's only Asian giant.

There is an element of truth in this concern. China has deepened and expanded its economic, political and cultural reach in the past two decades. Japan, on the other hand, has failed to show the same dynamism. Past and current Japanese administrations have sought to counteract these trends, but their ambitions have generally been thwarted by the unwillingness to spend more (foreign aid, cultural diplomacy, etc.) and the power of the agricultural lobby, which has forced Japan to lag behind China in initializing free-trade agreements (the value of which may be disputed, but they do have a public-relations impact).

There is one area, however, where Japan could engage in a strategy that would simultaneously help its economy and give it an edge over China. This is immigration. Japan is unique among economies that are highly developed and in demographic decline in having so few immigrants. In fact, even European states that are in much better demographic condition also have large numbers of foreigners and recently naturalized citizens in their labor force.