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Updated Tuesday, November 17, 2009 10:12 am TWN, By William Pesek, Bloomberg

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Obama gets earful on Asian trip

China still has a long way to go. It's a developing nation that must continue raising living standards even as it maintains a weak currency, censors Google and limits human rights. The undervalued yuan is running afoul of the U.S. and Asian neighbors. Also, today's stimulus efforts could be setting China up for a bad-loan crisis a few years from now.

Yet the drift of the Bush years was good to China. It allowed the third-biggest economy to go on a commodity-buying binge and score big points with developing nations with trade agreements and financial aid. Japan lost traction in Asia, too, as China's growth trumped its return to deflation.

Japan was all but ignored during a recent panel discussion I chaired at Insead Business School in Singapore. When I mentioned Japan, the audience seemed decidedly uninterested. It seemed like a cue to pull out the Blackberrys or take a bathroom break. That's become a common experience in this region.

It's not clear Japan's new leaders understand the extent to which investors are tuning out their economy. Here, increased focus on the region will help. It's a logical and healthy shift, considering China is now Japan's biggest trading partner.

The shift in Japan's stance should come as no surprise and doesn't necessarily bode poorly for the U.S. Japan is a stable democracy and the second-biggest economy — why shouldn't it seek a more equal relationship with the U.S.? A major failure of the Liberal Democratic Party, which until September ruled Japan almost uninterrupted for 54 years, was leaving the nation subservient to the will of Washington.

The LDP thought it could flex its muscles by being in lockstep with the U.S. and visiting Tokyo's Yasukuni Shrine, which critics say glorifies Japan's wartime militarism. Hatoyama is less interested in hollow gestures than real global clout and independence from the West.

Hatoyama's campaign rhetoric raised expectations at home. That was amply on display last week in Okinawa, where 20,000 people took to the streets to protest America's massive military presence as the U.S. and Japan reassess a half-century old security alliance.

That doesn't mean Hatoyama's DPJ can afford to lose Japan's U.S. alliance. It would be a grave mistake in a region colored by North Korea's nuclear weapons, China's military ambitions and the continued importance of the U.S. consumer. You can already see signs Hatoyama and Obama are working to reduce temperature levels.

The relationship will change, as it should. Fears of a worsening rift between the world's No. 1 and No. 2 economies just don't stand up to realities on the ground.

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