(1) Most important, Japan has told North Koreait is prepared to offer a large-scale economic aid package -- on the order of $5 billion - $10 billion-- to compensate for the Japanese occupation of the Korean Peninsula from 1910-1945. Japan also is important to the North Korean situation because it is a significant source of North Korea's foreign exchange. Not only is Japan North Korea's third-largest trading partner, but theJapanese market also is a major destination for the North Korean government's suspected drug-running operationsand of remittances from Korean permanent residents in Japan. Finally, Japan arguably has been the strongest supporter in East Asia of the Bush Administration's policy of pressuring North Korea to abandon its nuclear program. (3)

	The Pyongyang Declaration

		The Koizumi-Kim Summit

On September 17, 2002, Japanese Prime Minister Junichiro Koizumi and North Korean leader Kim Jong-il held a one-day summit in Pyongyang that momentarily restarted normalization talksbetween the two countries, which had been stalled since November 2000. Koizumi, in turn,apologized for Japan's colonization of the Korean Peninsula and offered to provide North Koreawith a large-scale economic aid package, much as it gave South Korea economic assistance whenTokyo and Seoul normalized relations in 1965. (6)

		The Talks Break Down

The Japan-North Korea normalization talks and parallel security talks stalled due to two developments shortly after the Koizumi-Kim summit: North Korea's October 2002 admission toU.S. officials that it has a secret nuclear weapons program based on the process of uraniumenrichment; and popular outrage in Japan at Kim Jong-il's admission that North Korea hadkidnapped 13 Japanese, eight of whom the North Koreans said had died since their abductions. Selected Issues in Japan's Policy toward North Korea

		North Korea's Nuclear Program and Japan's Increased Willingness to Consider Coercive Diplomacy

In the Pyongyang Declaration, Japan and North Korea promised to "abide by all relevant international agreements in order to comprehensively resolve the nuclear issue on the Koreanpeninsula." (8)
Since the revelations about North Korea's uranium nuclear program were made public in October 2002, Japan has been the Northeast Asian country most supportive of the BushAdministration's policy of combining multilateral dialogue and pressure to convince North Koreato abandon its nuclear program. Remittances to North Korea are estimated to be in the tens of millions ofdollars annually. The shipment reportedly was bound for Thailand, and from there was to be sent to North Korea. (16)
Like most Japanese leaders, however, Koizumi has equivocated on the subject of taking more coercive measures against North Korea, such as economic sanctions, absent an escalation of thesituation by Pyongyang. Japan worries that an outbreak of military hostilities could lead NorthKorea to launch long or medium range missiles at Japan -- including U.S. bases. (23) Japanese officials have not deniedthese reports.
Japan and North Korea have not established official relations since the Korean Peninsula, which the Japanese Empire annexed in 1910, was liberated from Japanese rule and divided into twoseparate states following Japan's defeat in World War II. Attempts to establish normal relations inthe early 1990s and again in 2000 ended in failure, due to seemingly unresolvable obstacles. InSeptember 2002, a one-day summit was held in Pyongyang between Japanese Prime MinisterJunichiro Koizumi and North Korean leader Kim Jong-il, the first ever between the leaders of thetwo countries. Koizumi and Kim momentarily appeared to break longstanding stalemates on severalissues and agreed to restart bilateral normalization talks, but the talks subsequently stalled, due totwo developments: North Korea's apparent admission to U.S. officials in October 2002 that it hada secret nuclear weapons program based on the process of uranium enrichment; and popular outragein Japan at Kim Jong-il's admission that North Korea kidnapped 13 Japanese in the 1970s and 1980and brought them to North Korea to live. Subsequently, according to the North Korean government,eight of whom died.
Japan's role is potentially critical in the current crisis over North Korea's nuclear weapons programs for a number of reasons. Most importantly, Japan has promised North Korea a large-scaleeconomic aid package to compensate for the Japanese occupation of the Korean Peninsula from1910-1945, much as it gave South Korea economic assistance when Tokyo and Seoul normalizedrelations in 1965. The assistance is to be provided after the countries agree to normalize relations,a process that Japan now links to a resolution of the nuclear issue. Reportedly, Japanese officialsare discussing a package on the order of $5-$10 billion, an enormous sum for the North Koreaneconomy, the total GDP of which is estimated to be in the $20 billion range. Currently, Japan is asignificant source of North Korea's foreign exchange, by virtue of the large Japanese market for theNorth Korean government's suspected drug-running operations, and of remittances from Koreanpermanent residents in Japan. Japan is North Korea's third-largest trading partner.
Since the fall of 2002, Japan has been the Northeast Asian country most supportive of the Bush Administration's policy of pressuring North Korea to abandon its nuclear program, and has takena number of steps to curtail North Korea's ability to earn hard currency and to import dual-usetechnology. Since North Korea launched a long-range missile over Japan in 1998, relations withNorth Korea have been a highly politicized issue inside Japan, creating strong domestic support fortaking a hard line against Pyongyang. Prime Minister Koizumi, however, has equivocated on takingmore coercive measures against North Korea, such as economic sanctions, absent an escalation ofthe situation by Pyongyang. Japan fears such measures could provoke a military response by NorthKorea and/or trigger a surge in refugees.
This report will be updated periodically to track developments in Japan-North Korea relations.