[Title] Press Conference by Prime Minister Ryutaro Hashimoto, Birmingham Summit

I. Opening statement by Prime Minister Ryutaro Hashimoto

Prime Minister Ryutaro Hashimoto: Thank you, ladies and gentlemen, for coming. I believe, thanks to the initiative of Prime Minister Blair -- the very outstanding initiative of Prime Minister Blair, I must say -- this Summit saw in full play the original Summit of the G7, which is to conduct close and in-depth discussions amongst the Leaders of major countries, who share a major responsibility for the future course of humankind, here in Birmingham, the birthplace of the Industrial Revolution. I should like to therefore express my heartfelt gratitude to Prime Minister Blair, the Government of Britain, and also to the citizens of the City of Birmingham for their very kind and warm hospitality. I should also like to say I am most gratified that I was able to have on this occasion a very substantive bilateral t te- -t te with President Clinton of the United States, President Yeltsin of Russia, Chancellor Kohl of Germany, Prime Minister Prodi of Italy, and Prime Minister Blair of Britain. The Asian currency and financial crisis, which erupted following the Denver Summit of last year, certainly has been a major matter of concern, not only for the Asian countries themselves and Japan, but also for the entire world, and it certainly was one of the major issues at the Summit this time. Ahead of the Summit meeting, I, through various channels, tried to glean as much information regarding the actual situation on the ground in Asian countries, and also have come to the Summit meeting in an attempt to communicate as accurately as possible to the other G8 member countries the views as well as the situation in Asian countries. With regard to the Indonesian situation, which has seen major developments in the most recent days, it goes without saying that we had a very lively exchange of views on this occasion. Japan certainly continues to watch the situation very closely, and we have tried to reflect the latest information in our discussions. As a result, we came out with a statement that concerning the possible loss of lives, we call upon both the government as well as the general public to avoid any surge in violence, and that we support the full implementation of the current economic reform program, and also called on Indonesia to expeditiously implement the necessary reforms. As part of our discussions on the Asian economic situation, I explained Japan's US$42 billion support program, and also stressed the importance that it is important for G8 countries to continue with their spiritual and material support for their overcoming the crisis, that we sound out a warning so protectionism will not surge because of the Asian economic crisis, and that we have confidence -- we, the international community, have confidence in the eventual recovery, robust recovery, of the Asian economies, while they may have to undergo a certain painful adjustment period, because we believe they have sound fundamentals. Alongside my views on monitoring of international capital flows and other measures for strengthening the international financial system, these views were supported by the other Leaders as well. I am very fortunate, I feel very fortunate that these were reflected in a series of documents issued. Now, in part of our discussions on the current state of the world economy, I explained about the current management of the Japanese economy: first, that we are trying to stimulate domestic demand by reducing taxes and promoting social infrastructure development; secondly, we are trying to strengthen the financial system by fundamentally resolving the bad debt problems; and thirdly, implementation of structural reform. I explained these three pillars of Japanese efforts to kick-start the Japanese economy, and I also explained that we have already submitted to the Japanese Parliament the necessary legislative proposals for a supplementary budget and tax cuts, in order to implement these measures expeditiously. This package of Comprehensive Economic Measures was strongly welcomed by the Leaders of the major countries, and I am sure this will lead to increased confidence in the Japanese economy, both at home and abroad. With regard to global economic issues, we discussed trade, development, the environment and energy apart, from the Asian economies. In the area of trade, bearing in mind that we are celebrating the 50th anniversary of GATT this year, we appealed that preparations be made so that at the WTO Ministerial next year, we shall be able to launch broad-ranging liberalization talks following the year 2000. Under the theme of development, I explained that we shall be hosting the second Tokyo International Conference on African Development, and asked for active participation and cooperation by the G8 countries. Also, I pointed out the importance of international measures against parasitic diseases, which I advocated in Denver last year, by referring to the report Japan formulated. In the area of the environment, I also pointed out the importance of maintaining our efforts to realize the Kyoto Protocol, and also engage in our cooperation to promote voluntary participation by developing countries. Of the major themes suggested by Prime Minister Blair, in the area of employment, while referring to this rapidly rising unemployment problem in Asia today, I stressed the importance of the realization of the "vibrant, employable society" which was recommended by the Kyoto Jobs Conference last year, as well as the nurturing of new industries. In the area of international organized crime, I stressed the importance of drugs and especially amphetamines, and expressed our determination to strengthen our response, both internationally and domestically. Last, let me touch on Indian nuclear tests. Whilst denouncing such tests as running counter to efforts for the global non-proliferation regime and the peace and stability of the world, we called on India to participate in the NPT and CTBT, and called on Pakistan to exercise greater self-restraint and support the non-proliferation regime. I announced that we are taking new measures to suspend any new commitments to India under the yen loan program, and that I had sent, as my personal envoy, Mr. Noboru, Councillor of the Cabinet Office of Foreign Affairs, to Pakistan. I advocated that the G8 come up with a clear-cut message. Now, we did receive a report that Pakistan had conducted a nuclear test this morning. This has not been confirmed, but if it is confirmed, if it is true, then we will not be able to condone that, and we feel totally regrettable about that. I sincerely pray that this report is groundless. Last but not least, I should like to express my appreciation to Prime Minister Blair for the most outstanding Chairmanship, and also I should like to express my heartfelt gratitude to the Government of Britain and people as well as the citizens of Birmingham for their very kind hospitality. Thank you very much.

II. Japan's active role in the G8 Summit

Q: At the Summit this time, I believe you discussed the Indian nuclear test, the Indonesian economic crisis, and the Japanese economic situation. These three items related to Japan were taken up. I wonder in these three areas if you have fully played a role as Japan?

Prime Minister Ryutaro Hashimoto: Well, conclusions first. As far as Japan is concerned, I think we have made our utmost efforts and have made our utmost contributions. We are the only G8 participant from Asia, and all of these issues that you referred to are items on which I spoke out very actively. I also offered my views, and I believe I was able to set the direction for our discussions. As the G8 would have to continue to provide support to these countries involved in the Asian crisis, I also stressed the importance of indicating international confidence in the future of these economies, and this position of mine was supported by the other Leaders. Of course, international confidence in the Japanese economy is also very important, so I explained about the Japanese economic package, and I believe that the strong welcome was something more than I had hoped for. Now, with regard to the Indonesian situation, in March I visited Jakarta and spent a long time in a t te- -t te with President Suharto. So, while stressing the importance of improving the economic situation, I believe it is also necessary to carry out well-balanced reform, involving a political reform as well. And I believe this view of mine was reflected in our statement. As I said, we cannot condone Indian nuclear tests at all, and I explained to the other Leaders we had struck a very tough stance against, or had taken very tough measures against, India. I also stressed the importance of strong words to condemn Indian nuclear tests. I believe it was quite significant that the G8, in unison, came up with a statement that criticizes Indian nuclear tests. Certainly this should not be seen as a carrot, but rather this must be seen as a stick. Having conducted nuclear tests must meet the stick or penalty, and I think we have stressed this point, which is very important.

III. Japan-China coordination on certain issues

Q: Prime Minister, Japan is facing two big problems: illegal immigrants and drugs. Both come from China. Most of the illegal immigrants come from China. Most of the drugs which are smuggled to Japan are manufactured in southern China. What are you going to do with China in order to combat these two problems?

Prime Minister Ryutaro Hashimoto: Number one, Japanese authorities in that area -- that is, the Chairman of the Public Security Commission visited China and had a meeting with the Chairman of the relevant organization, and has already launched bilateral discussions on these issues. Now, on this question of illegal immigrants in Japan, you referred to China. But it is not just the Chinese, in terms of illegal entry into Japan. Of course, the Iranians are causing problems, and they are not alone either; of course, there are other nationals as well. Now, vis- -vis drugs or stimulants, Japan found it relatively easy to control their entry in the past, but we are today faced with a third crisis. The core problem is the amphetamine-type stimulants. The younger ones are starting to use stimulants, which is a grave concern for us. These amphetamines are not necessarily ones only produced in China. The so-called "Golden Triangle," which used to produce opiates, has now shifted much of its weight into the manufacture of stimulants. Also, stimulants come from other parts of the world by mail -- and not just stimulants, but new types of drugs are now washing the shores of Japan, and we have to stop them at the shore. To do that, the enforcement authorities, the investigative authorities, certainly must engage in international cooperation, and at the same time we have to further jack up the domestic enforcement system. In addition to that, I believe each person in our society needs to have a strong determination that he or she will not use drugs. These drugs, amphetamines, are arriving in Japan from all directions. You only pointed to the two problems, but there is also is the problem of smuggling of guns and firearms. That is something that we have to address seriously as well, and the relevant authorities are already establishing international cooperation.

IV. Russia's desire to host the G8 Summit in the year 2000

Q: On the question of Russia hosting the Summit meeting in the year 2000, I wonder what sort of results you got at the meeting this time, this morning?

Prime Minister Ryutaro Hashimoto: The other day, when I had the t te- -t te with President Yeltsin, he raised this point. While Japan is to host this G8 Summit in the year 2000, would it not be ready to yield that to Russia? Now, the year 2000, needless to say, is a very important year between Japan and Russia. We are engaged in very intensive political discussions, and the year 2000 is a year we have to mark as a symbol of strengthening friendly ties between our two countries as well. So in response I said, "It is not for Japan alone to make a decision on that. I have heard you, but following Japan comes Italy and then Canada. This order of hosting countries has already been set, and we have a rule for this order. So we have to discuss your request in our gathering with the other Leaders." Just before we were about to finish our meeting this morning, President Yeltsin raised this point. Chancellor Kohl had to get back to Germany; he had already left our gathering. So we did not reach any conclusion this morning. So if Russia gets in and Japan and other countries move one notch down, that is fine; that is still acceptable. If Japan is to be shoved off somewhere in thin air, of course that is not something that I can accept. That is what I said. But as I said, "Mr. Yeltsin," I told him, "This is for the group as a whole to decide on, and it is not for Japan alone to decide." But I told him that I shall tell Tony Blair there was this sort of suggestion. So Prime Minister Blair ended the meeting by saying that we will have our people discuss this matter. So I think the accurate answer to your question is that there is no conclusion. Having said that, Italy and Canada spoke out rather strongly that they do not want the order to be reshuffled or moved.

V. China's coordination with Japan and the G8

Q: Following the previous question on the Summit process, it has been observed that Japan is the only Asian country, and might very usefully be supplemented by China's presence in this now expanded group -- a question particularly relevant because of the Asian financial crisis. Would you favor China being admitted to this group, or initially the group planning closer coordination and liaison with China?

Prime Minister Ryutaro Hashimoto: In the first place, the question is whether China wishes to join us. On various occasions, I do meet with the leaders of China, and we certainly cooperate very closely with China on the WTO and other areas. And of course we have already reached an agreement on trade in goods; the trade in service question still remains. But China is already participating in various fora. Now, whether China wishes to participate in the G8 or not, this question has never come up in my interlocutions with the Chinese. Having said this, whether this partnership should be further expanded or not should be fully discussed amongst the participants of the G8. That, I believe, is the very nature of the question. Now, apart from this, someone said that there was so little reference to China in this current Asian economic crisis that the Chinese resisted the temptation to devalue the renminbi, their currency, and the international community should show greater appreciation for this Chinese stance. Some Leaders did indicate this position, and I expressed my concurrence with that. So I believe the Chairman will make this point in his press statement.

VI. Japan's economic recovery measures

Q: For economic recovery, what additional measures do you consider necessary? On the tax front, what are your ideas? When do you think the economy will, in fact, recover?

Prime Minister Ryutaro Hashimoto: At this Summit and also in my bilateral meetings with the Leaders, we received very high appreciation for the measures included in the package and for the entire package as well. They also voiced their hope that this package will be implemented as early as possible. I already explained that we already have embarked on Parliamentary debate on the relevant legislative proposals, and they said, "Well, that must be tough for you, but we wish you good luck." So they have given me words of encouragement. The important point is the tax cuts for economic recovery and social infrastructure development: to what extent can these measures stimulate domestic demand? That is the first point. And then the second important question is the resolution of non-performing asset problems at banks. Starting the reporting of results at the end of March -- that is, the end of the Japanese fiscal year -- Japanese financial institutions have had to employ the standards equivalent to SEC disclosure. So, adopting these and other measure, we are promoting the resolution of the bad debt problem. I think this will be an important pillar, alongside the financial Big Bang or financial system reform. We shall also carry out further economic structural reform. And we hope that as a result of these measures, we shall see the strong, robust recovery of the economy. On tax cuts, on the corporate tax front, within the coming few years, as early as possible, we should like to reduce the overall corporate tax rates, harmonize the overall corporate tax rates at international levels by conducting our studies. There is certainly the corporate business tax, which is an important part of our local taxes, and which is a major issue. So, considering the importance of this question, I cannot go beyond saying that we shall try to harmonize the tax rates at the earliest possible time within the coming three years. We should also like to work on the personal income tax as well. Now, since we have non-Japanese press here as well, I would like to say this: the minimum taxable threshold of 3.61 million yen, I believe, is a very high threshold amongst the industrialized countries, in terms of the personal income tax. We now have a special income tax cut. So the minimum taxable threshold has been further raised. Now, it is true that Japanese tax rates are high for high-income bracket people. So in the days ahead, we shall have to expand our consideration of a tax system to asset income or capital gains taxes as well as pension taxes. Now, in Japan, I must say that many Japanese -- speaking in terms of the minimum taxable threshold -- there are many people in Japan with a higher income than in the West or other European countries who are exempted from taxation. So we should like to take the necessary measures, appropriate measures on this so that we shall see tangible results on the tax front as early as possible.

VII. Japan's approach to financial system reforms

Q: In one of our briefings -- in fact, in our very first briefing -- it was mentioned that the Government was willing to take "drastic steps" toward reforming your financial institutions. I wonder if those drastic steps will include allowing weak institutions to fail?

Prime Minister Ryutaro Hashimoto: When you say "allowing weak financial institutions to fail," are you suggesting that we can try to continue to help the weak financial institutions to continue to exist? That certainly is not what we intend to do. We have prepared funds to protect the Japanese public's deposits amounting to 17 trillion yen, so that even when weak institutions fail, the deposits of the general public in the institutions will not be affected. The amount we are preparing is 17 trillion yen. This means that if we assume that all financial institutions will have to survive into the future, we do not need that kind of funds. On the other hand, of course we hope that the strong institutions will become even stronger, so we have instituted measures to further strengthen the capital base of these healthy institutions. Perhaps it is because we have instituted these measures in parallel that we have caused the kind of misunderstanding you might have indicated. But let me say that we are now imposing much stricter disclosure standards than before. We have imposed the SEC equivalent disclosure standards, starting with the reporting at the end of last fiscal year, March -- the end of March, that is. So I am sure such properly disclosed information will come out very soon, perhaps next week or next month. So while protecting the assets of the Japanese people, I believe for the Japanese financial institutions to regain, win back confidence both at home and abroad, efforts, I am sure, will be made. We do not intend to take measures along the line that you had indicated. Thank you very much.