[Title] Remarks by Japanese Prime Minister Ryutaro Hashimoto "Japan's Path and the Japan-U.S. Relationship"

Prime Minister Hashimoto: President Sammon, ladies and gentlemen, I am grateful to be invited to the distinguished National Press Club, and I should like to thank Mr. Rickman for that kind introduction. I also feel very uptight because I understand there are quite a few scary people around here.

At the outset, I cannot help but express how pleased I am to see the seizure of the Japanese Ambassador's residence in Peru come to an end recently with the vast majority of the hostages freed safely, although there were three unfortunate casualties. I would like to take this opportunity to convey my heartfelt condolences to the bereaved families, and at the same time I would like to express my sincere gratitude to the Peruvian government, under the leadership of President Fujimori, for all its efforts, and to the international community, including the United States, for its solidarity and support. And I wish to reiterate that Japan is determined to continue its fight against terrorism.

This evening I would like to express my frank views on how to further deepen the ties between Japan and the United States.

In the beginning of this century, as pressures from the Western powers were mounting, Asia was said to have finally awakened from its sleep. As we now approach the end of the 20th century, Asia is leaping forward, together with the Oceanic region, toward the 21st century. During this century, Japan and the United States have overcome the past tragic conflict to share the same values and dreams, even with our different cultural backgrounds. Now we are joined as allies and our cooperation extends throughout the world.

It would be no exaggeration to say that the shape of the Asia-Pacific in the 21st century will be sculpted by the paths that our two countries choose, and by the ways our countries join their forces. From this perspective, my message to you today are the following three: my resolve for the pursuit of economic and social reforms in Japan, my commitment to the Japan-U.S. alliance, and thirdly, my determination to promote Japan- U.S. cooperation in the Asia-Pacific.

Japan's path toward the next century can be described as a "road to creation" that will transform the old systems, or what have now become "the ancien regime", which have supported Japan since the end of World War II, to new ones that can meet the challenges of the future. In the course of this half-century, Japan's administrative, fiscal, financial, and socio-economic systems have been built upon the rather linear concept of catching up with and surpassing other industrialized economies. These systems overall have so far functioned efficiently.

Now that the Japanese economy and society have entered the era of maturity, the Japanese public has begun to seek greater freedom of choice. The systems and practices that have underpinned the growth of Japan have become bottlenecks to moving forward. Therefore, I am exerting my own initiative to implement reforms in six areas in order to restore our nation's dynamism.

These six areas are: first, administrative reform; second, fiscal structural reform; third, economic structural reform, including deregulation in such fields as lifting the prohibition on holding companies and eliminating limitations on market entry based on supply and demand adjustments; fourth, financial system reform; fifth, social security structural reform covering such wide-ranging sectors as medical care, pensions, and nursing care, while maintaining universal health coverage; and sixth and finally, education reform based on greater respect for individual character and creativity.

No one in Japanese society looks for a system in which the central government closely dictates and supervises activities of the private sector and local authorities. The system must be changed for both central and local authorities to streamline their work and for the private sector to exert entrepreneurship under a minimum and crystal-clear set of rules.

We will pursue financial reform with three key principles of freedom, fairness and globalization. In other words, we will make available more competitive and diversified services through promotion of market entry, diversification of available products and instruments, and liberalization of fees. Rules and regulations will be made clearer and more transparent. Legal, accounting and monitoring systems will be overhauled to keep abreast of globalization.

We have embarked upon this task by submitting a bill to the Diet, our congress, that will drastically change the foreign exchange control system which regulates capital transactions and cross-border settlements. And this bill has already passed the House of Representatives, the lower House.

As for the fiscal situation of Japan, it is currently in the worst state of all the major industrialized countries, with the amount of debt-financing bonds outstanding at about $2 trillion. It is very encouraging to see the efforts made in the United States to balance its budget by 2002. I am determined to achieve negative growth of general expenditures in fiscal 1998 budget with the ultimate aim of bringing national and local budget deficits down from their current ratio of 5.4 percent of GDP to 3 percent by fiscal year 2003.

Deregulation and socio-economic structural changes, which have already started in Japan, have expanded market access for American companies. When I welcomed President Clinton to Tokyo last year, I got Starbucks coffee from the United States because I learned he liked it. On the streets of Tokyo today you see Starbucks Coffee and Subway sandwich shops, so President Clinton can come to Tokyo anytime and enjoy his Starbucks coffee, and he can also munch on Subway sandwiches. Parents and children wearing Nike shoes and Gap jeans visit showrooms of Chrysler recreational vehicles or U.S. housing exhibitions.

Revitalizing Japan to meet the challenges of the 21st century will require more than reforms of individual systems. Japan's post-war system as a whole must undergo a shift of paradigm. We in Japan must accomplish this formidable task in a swift and sweeping manner on our own. Even though I fully realize that this endeavor naturally will be accompanied by much pain, I am strongly committed to accomplishing these reforms while overcoming initial difficulties.

Ladies and gentlemen, I am described by the mass media, or especially Anglo-Saxon mass media, compared to other Japanese politicians as the "Old Guard" or at best, described as a very cautious person. I hope you'll change that perception and realize that I have moved to "Hashimoto the Reformer," because that is true.

Over the last century or so, the United States had enormous influence on Japan at the two major turning points of Japanese history; namely, the formation of the modern state as a result of the Meiji Restoration, and the establishment of democracy in the wake of Japan's defeat in World War II. This has led Japan to seek its future path with full trust in the United States as its ally. In fact, we found that this choice was a most outstanding one wonderful one, and this choice is the foundation on which the peace and prosperity of Japan and Japanese activities in the Asia-Pacific and the international community over the last 50 years have been based. When talking to Asian leaders, I acutely feel how important a role the firm relationship between Japan and the United States plays to give the sense of reassurance to other countries.

The cornerstone of such a bilateral relationship is the Japan-U.S. security arrangements. During the Cold War era, the security arrangements were the pillar of stability and prosperity in the region. In the post-Cold War period, with factors of instability still existing on the Korean Peninsula and elsewhere, the value and role of the security arrangements have not diminished, but grown.

In the history of our security arrangements, first comes Prime Minister Yoshida's decision 46 years ago to conclude a peace treaty with the countries of the free world, laying their foundation. Prime Minister Eisaku Sato later consolidated the arrangements through the reversion of Okinawa 25 years ago.

Last year in April, President Clinton and I issued the Japan-U.S. Joint Declaration on Security, reconfirming the significance of the security arrangements and indicating future directions for bilateral defense cooperation. As a concrete step to implement the declaration, Japan and the United States are currently working together on the review of the "Guidelines for Japan-U.S. Defense Cooperation," which will spell out in concrete terms what specific cooperative responses are needed in the event a contingency occurs or may occur, with a view to completing the task by fall this year. I would like to ensure a high degree of transparency in the review process both at home and abroad for active discussions.

Now I must turn to issues concerning Okinawa. Okinawa was the only area in Japan to suffer the horrors of intense ground battle during World War II; approximately 100,000 residents perished. Okinawa was not reverted to Japan for a long time. Furthermore, about 75 percent of the land area of U.S. military facilities and areas in Japan are located in Okinawa, which makes up only 0.6 percent of Japan's total land area. All these factors have affected the living environment and perception of the local communities.

It is therefore one of the top priority policy issues for my government to have all the Japanese share psychological and physical burdens of Okinawa prefecture. Since becoming prime minister, I have led the efforts to squarely tackle this issue. Fortunately, joint work between Japan and the United States led to an agreement on the reversion of 11 U.S. facilities and areas, including Futenma Air Station.

Since then, my Cabinet has been trying its utmost in implementing this agreement and policies for economic development of Okinawa, while taking into consideration the feelings of people in Okinawa. Last week, a bill to secure title for the use of land for U.S. facilities and areas was passed in the Diet by an overwhelming majority.

I understand that the U.S. House of Representatives recently adopted a resolution expressing gratitude toward the people of Okinawa for supporting the Japan-U.S. security arrangements. Dealing earnestly with issues concerning Okinawa will enhance the credibility of the security arrangements through securing widely-based support for them among the Japanese, which contributes to national interests of both countries. I would like to say that it continues to be important that the United States remain sensitive to these issues.

Japan and the United States have established a friendly and cooperative relationship encompassing not only political and economic matters, but also social, cultural and any other aspects of our peoples' lives. Our bilateral cooperation is further expanding with a global outreach in such regions as the Middle East, Bosnia, and Africa . The two countries are vigorously pursuing cooperation to meet such global challenges as AIDS, narcotics, and environment as the "Common Agenda."

Now, the mass media people, regardless of Orient or Occident, tend to like to jump at bad news rather than good news. But I do hope the mass media will also take interest in such matters as the "Common Agenda."

The people of Japan are fully aware that the Japan-U.S. security arrangements provide the foundation for such an extensive cooperative relationship which is called the most important bilateral relationship in the world.

Bilateral economic relations between Japan and the United States are in transition as well. In recent years, Japanese companies, particularly manufacturing industries, have actively expanded investment in and technology transfer to the United States and Asia. They have carried out their business activities with great contributions to local economies, including job creation.

For example, Japanese automobile manufactures have invested more than $12 billion in the United States, maintain manufacturing bases in 9 states, create many jobs , and export automobiles assembled in the United States to Japan and Europe. Such structural changes have had positive impact on bilateral economic relations, and Japanese trade surplus with the United States is diminishing as a long term trend.

I believe that many of the individual economic issues that may arise in the future will be resolved through progress achieved in six reforms underway in Japan. I am also confident that our bilateral economic relations will be further deepened as the experiences accumulated through many years reduces frictions.

Ladies and gentlemen, the Asia-Pacific region is diverse in history, ethnicity, religion and culture. This has led to energetic interactions that create abundant opportunities and rapid economic growth as economic globalization accelerates. However, it also is true that this region still faces many challenges.

I expect that China's presence in the world will further increase in the first half of the 21st century. There are some experts who forecast that China's GNP will be the world's largest at that time. It is extremely important for regional stability and prosperity that we support China's reform and openness policy so that it consolidates its status as a constructive partner in the international community.

At the same time, there is an increasing need for China to adjust a variety of its domestic systems so that they will become consistent with international rules and standards. China's accession to the WTO will promote such adjustments, which will not only contribute to its economic growth, but also strengthen the international trading system. From such a perspective, I have emphasized the need to assist China's early entry into the WTO at APEC meetings as well as meetings with President Clinton.

On security, it bears much significance for China to continue efforts to increase transparency in defense. The impact of vast population growth and rapid economic development have upon food and energy supplies and the environment is an important issue that countries in this region must tackle together. I strongly expect China to play a constructive role in this respect as well.

Because of its enormous size, I believe points of contact between China and the international community will not broaden instantly, but steadily in stages. Geographically, economic growth will spread inland from the coastal areas. As people's standards of living rise, I believe that greater awareness will develop with regards to human rights and other social issues.

I intend to closely watch what sort of trickle-down effects Hong Kong after reversion may have as a showcase to mainland China by continuing to prosper as a trade and financial center under the principle of one country, two systems.

There still are many factors of uncertainty on the Korean Peninsula. I strongly hope that four-party talks will promptly be commenced, and that the dialogue between the Republic of Korea and North Korea will be advanced, for peace and stability on the peninsula. Moreover, it is essential to steadily advance the projects of the Korean Peninsula Energy Development Organization, or KEDO, from the viewpoint of nuclear nonproliferation and regional security. And Japan will continue to take an active part in the KEDO projects.

In recent years, multilateral mechanisms for dialogue and cooperation, such as APEC and ASEAN Regional Forum, have been formed in the Asia-Pacific region. These mechanisms are being promoted under an Asian approach to finding solutions through consensus, while sharing worries arising out of the development process. It is important for Japan and the United States to respect such an approach and to lead it to success.

We are on the verge of opening a door to the 21st century and also to the next millennium. When we look back on this century and realize how the destinies of Japan and the United States, countries with totally different historical and cultural backgrounds, have become intertwined, we are encouraged by the boudless possibilities of the human kind.

In the new chapter of our new century, Japan and the United States will be bound with even stronger ties and will further learn to live together and prosper together. This is essential for peace and prosperity in the world. The reforms I am pursuing are the very first step that must be made towards reaching such future, and I intend to do my very best for accomplishing those reforms with indomitable resolve.

Thank you very much. And I hope you'll be very gentle with me with your questions. Thank you.