(Provisional Translation)

Speech by Prime Minister Mori at the gRebirth of Japanh

Public Policy Conference

7 December 2000

1. Introduction

I am extremely pleased today that thanks to the cooperation and efforts of all of the parties involved we are able to hold this Policy Conference for the Rebirth of Japan. Also, Professor Takenaka has just presented a summary of the morning session of the Conference. It appears as though various perspectives on reforms for the realization of the Rebirth of Japan were discussed in depth, and I have extremely high expectations for the success of this Policy Conference.

In this meeting, we expect to hold discussions primarily concerning the rebirth of the economy and issues related to information technology (IT), with the participation not only of Japanese experts but also of distinguished scholars from the United States, the United Kingdom, the Peoplefs Republic of China (Hong Kong) and the Kingdom of Thailand. I sincerely hope that we will be able to produce meaningful results, for the future of Japan as well as the international community.

The words gRebirth of Japanh were used in my first policy speech following my designation as Prime Minister by the Diet, after former Prime Minister Keizo Obuchi fell ill and was suddenly forced to step down this April. The Rebirth of Japan symbolizes our intention in our basic governmental policy to work unceasingly towards reforms for the next generation, aiming for the realization of ga nation of people who live in security, embracing our dreams for the future,h ga nation of beauty rich in spirith and ga nation that engenders the trust of the world.h

In terms of specific measures for the Rebirth of Japan, in October, the gPolicy Package for New Economic Development Measures for the Rebirth of Japanh was compiled, and we are presently working towards their accomplishment. Moreover, in order for the fulfillment of my initiative, I have established various meetings composed of experts from every sector of society. Various issues that Japan is facing are being studied in the IT Strategy Council, the Industrial Rebirth Council, the National Commission on Educational Reform, and the Deliberative Council of Experts on Modalities for the Social Security Structure.

As such, the Rebirth of Japan entails sweeping reforms to transform the entire Japanese socio-economic framework into a structure and concept appropriate for this new era of diverse knowledge. I believe that the IT revolution will pave the way for the swift accomplishment of these crucial tasks to drastically transform the Japanese economy. Consequently, the ongoing IT revolution has been characterized as ga historic reform comparable to the Industrial Revolution.h

2. Three Stages for the Rebirth of the Economy

The Japanese economy was confronted with a serious crisis between 1997 and 1998. The short-term trend of geconomic recessionh; the gbalance sheet depressionh which occurred due to the financial crisis and business slowdown resulting from the collapse of the bubble economy; and the gsocial structure depression,h or the inability of the Japanese economic structure and social practices, which were geared towards standardized mass production, to adapt to the new era of diverse knowledge-these three events combined gave rise to a gtriple depression.h

I believe that we must go through a three-stage process in order to revive the Japanese economy from this serious downturn. In other words, there must first be emergency economic measures in order to emerge from the deflationary spiral, followed by grebuilding on the defensiveh to resolve the long-standing glegacy of debt,h and finally, grebuilding on the offensiveh to create a highly efficient structure and generate new industries and workplaces.

The first stage was executed through steps such as the Comprehensive Economic Measures adopted in the autumn of 1998.

At that time, Prime Minister Obuchifs Cabinet adopted drastic emergency economic measures-including the injection of public funds into financial institutions, the bailout of small- and medium-sized businesses, the addition of public works projects, and the generation of demand through sweeping tax reductions-thereby managing to rescue the Japanese economy from the threat of a deflationary spiral.

As a result, the economy began to gradually recover after bottoming out sometime around April 1999. As of now, this December, although the Japanese economy is somewhat lethargic, the corporate sector in particular continues to improve, and I believe that, before long, there will be further encouraging signs from the household sector as well.

The purpose of the second stage of economic recovery, or grebuilding on the defensive,h is to resolve the gthree excessesh-excessive capacity, excessive employment, and excessive debt caused by the collapse of the bubble economy, and to repair the countryfs financial system and corporate management practices.

In this regard, the Government is injecting public funds into banks, while, at the same time, promoting the introduction of market principles into the financial sector, thereby regaining Japanfs international credibility. Additionally, as a result of the independent efforts of many corporations to resolve excessive capacity and excessive employment, corporate profits have increased and capital investment has grown since the fall of 1999. The Government, in order to further encourage this trend, has adopted an expansionist fiscal policy for FY1999 to stimulate public demand, and has established conditions for financial liberalization and the revision of corporate legislation. I believe that it is important to further secure the establishment of these conditions and to emerge from the stage of gemergency relief measuresh to escape the deflationary crisis, and thus to promptly accomplish grebuilding on the defensive.h

The third stage of the rebirth of the economy is grebuilding on the offensiveh to create new mechanisms for Japanese industry and the Japanese economy. To this effect, measures to strengthen supply capacity, such as the improvement of technological development and human capabilities, the dissemination of a new system, and systemic reforms to business practices-in other words, a Supply-Side Policy-will be necessary.

This Supply-Side Policy is more than the temporary expansion of demand; rather, it is a policy to heighten the capacity for growth inherent in the Japanese economy. Specifically, it is a policy to realize a more efficient society by generating new industries and promoting competition through regulatory reforms, as well as by reforming public works projects. It is also a policy to enhance human resources through education reforms and to accelerate technological progress through science and technology development. In todayfs global economy, there is a great chance to heighten the capacity for growth by utilizing the vitality inherent in the market. It is reported that the capacity for economic growth in the United States has risen approximately 0.7% as a result of the information revolution. Japan intends to further improve potential economic growth capacity itself. By doing so, I believe that we can work towards promoting structural reforms while realizing long-term economic growth, thereby orchestrating the genuine rebirth of the Japanese economy.

In the recently adopted gPolicy Package for New Economic Development Measures for the Rebirth of Japan,h four crucial areas were raised based on this perspective-the dramatic advancement of the IT revolution; environmental measures in order to form a grecycling societyh; measures to respond to the aging of society towards creating a future society full of vitality and comfort; and the upgrading of urban infrastructure to build convenient and hospitable cities. Two-thirds of the social investment provided in the supplementary budget is concentrated in these four areas.

Also, the Action Plan for Economic Structure Reform, for the growth and development of the Japanese economy, which is facing great environmental changes, was adopted on 1 December. In line with this Action Plan, the entire Cabinet will use its full strength to promote economic structural reforms.

3. Spurring the IT Revolution

Drastic advances in the IT revolution have been raised as a key element of the Supply-Side Policy. This is an important issue affecting Japanfs future, and I am confident that, with political momentum from both the supply and demand sides, we will be able to orchestrate a complete grebirthh rather than a greconstructionh of the Japanese economy, and develop a leadership role in the new civilization of tomorrow.

After the Second World War, Japan developed its electronics industry to the extent that Japan was praised as the most productive and competitive country in the world. However, in the process of developing an IT society linked by an information and telecommunications network, Japan has maintained its old practices and traditional systems in various related fields and is held back by high fees and regulations that cannot accommodate new systems. Consequently, it lags behind the United States, Europe, and some of the advanced Asian countries. I believe that we must face this reality, and bounce back from the sense of impending crisis by orchestrating the IT revolution together with the people.

The recent extraordinary Diet session adopted the IT Basic Law, stipulating a basic policy aimed at the creation of an environment where people can fully exercise their abilities through the establishment of an advanced information and telecommunications network of the highest international standard, the realization of e-Government, and the formulation of rules for electronic commerce, in order to build a society where all people can enjoy the benefits of IT. I believe that we must quickly determine what specific measures we should focus on, and then push forward with sweeping regulatory reforms, changes to systems, and the development and dissemination of new technologies.

I believe that the spread of an advanced information and telecommunications network and the permeation of IT into all aspects of society and the economy will not only improve human capabilities, but also rationalize the allocation of human resources and the application of capital and heighten Japanfs potential capacity for economic growth. In this way, I am confident that Japan will be able to contribute to global economic development and have a positive impact on the creation of a comfortable lifestyle for the people of the 21st century.

4. Resolutions in Facing the New Era

Here, I would like to offer three resolutions as we enter the new era.

The first is to implement the aforementioned grebuilding on the defensiveh quickly, thoroughly, and without hesitation.

The second is to emphasize supply-side measures in future policy-making, and to form an open and competitive society free from existing vested interests, circumstances or practices. With the declining birthrate and aging population, Japan must generate new ideas and revise old ones if it is to enter the era of diverse knowledge. It will also be absolutely necessary implement the liberalization and abolition of various restrictions as well as the drastic review of public works projects.

The third resolution is to push forward in forming a knowledge-based society by heightening human values. It is necessary to enable all people to acquire knowledge equally and fairly actualize their capabilities and desires by providing them with low-cost and easy access to the information and telecommunications network. We must commit ourselves to the creation of a world where the weak and disadvantaged are protected with rights and respect, where comfort is shared and hardship is borne together, and, as a result, where all people can be proud of their dreams, their security, and their happiness.

In January 2001, the Japanese Government will be reorganized, which will increase cohesion amongst ministries and agencies, inaugurate a Cabinet Office able to support the leadership of the Prime Minister, and strengthen the staff of the Cabinet Secretariat. The Cabinet Office, which is to be presided over by the Prime Minister, will host the Council on Economic and Financial Policy to be comprised of economic ministers and experts from the private sector. The Council on Economic and Financial Policy will deliberate basic policy directions on economic management and budget formulation, as well as long-term modalities for the socio-economy. I will make good use of such a forum to actively contend with the various issues faced by Japan.

5. Conclusion

I have outlined to you my understanding of the issues we face. I also hope to hear frank discussions and useful suggestions from experts in Japan and throughout the world.

Thank you very much.