27 January 2001
I arrived late last night in Zurich, and finally arrived in Davos this morning. Although I was slightly concerned that I would be worse for wear due to jetlag, on my journey here this morning, I have been totally refreshed by the sight of the snow-covered mountains. Being born and raised in Ishikawa Prefecture, a region of Japan that itself receives much snowfall, I thought that I had become used to the sight of snow, but the gleaming white vistas of Davos have provided me with a totally new and stunning experience.
The Japanese people attach much significance to the white color of snow. The word "white" in Japanese is imbued with a variety of different meanings. For example, a white background is used to give the impression of "purity and innocence." "To go back to a blank, white sheet of paper" is an expression we use when we start afresh, making a clean break from the complications and the way of thinking in the past. I would request all of you gathered here today to go back to this state by discarding your preconceived notions of Japan, and listen to what I have to say with an open mind. It is my hope that in sharing my thoughts with you today, I can be successful in achieving something of a common feeling with you all.
I have already mentioned that this is my first occasion to visit Davos, but in actual fact, today represents the first time that a Japanese Prime Minister has attended this meeting. Accordingly, until now there has been no opportunity for an incumbent Cabinet member to attend the Davos meeting and engage in an exchange of opinions with the august leaders of the world.
This point is surprising if one considers the position and responsibility Japan maintains in the global economy, occupying as it does approximately a 13% share of global Gross Domestic Product (GDP). The political leaders of Japan hold the proceedings of the Davos meeting with the utmost esteem, and for many years it has been hoped that a Japanese leader could attend the meeting. However, since every year at about this time the budget of the following fiscal year is being deliberated in the Japanese Diet, in past years the Prime Minister and Cabinet members have been unable to attend. This year, for the first time, the two schedules were compatible and I was finally able to come to Davos. From next year too, I will continue my efforts to deepen intellectual exchange with international leaders through the opportunity that the Davos meeting represents.
I would now like to begin the main part of my speech today, during which I would like to discuss three different themes.
The first theme is that in completing the process of a full-fledged rebirth, the Japanese economy will soon be in a position to once again take its place at the leading edge of the world economy and make an appropriate contribution. Since the beginning of the 1990s, through the collapse of the so-called bubble economy and the changes in the global economic environment, a number of structural problems have materialized in Japanese economy and society. The final ten years of the 20th century have come to be viewed as Japanfs "lost decade". However, I would assure all of you here today that in Japan a structure is being put in place that will ensure full recovery, while clearing the remnants of the negative legacy from the economic bubble.
A second theme for my speech is the fact that the Japanese economy is undergoing changes far and above those conceived by people in other countries. It has been pointed out that Japan has maintained a unique economic and social structure, which has been difficult for those outside the structure to understand. Due to this fact, I am also of the opinion that the changes that have been taking place in Japan over recent years may also have been difficult for the outsider to comprehend. However, in many aspects, the economic and social structure of Japan is now undergoing rapid changes, and a swathe is being cut along a path towards new growth.
A third theme is my personal resolve, which I will state here today, to see to it that Japan contributes actively to the global challenges of the 21st century
In presenting these ideas to you, I would like to convey the very close relationship that exists between the shaping of a new Japan and the shaping of a global future. Japan is committed to pursuing both of these tasks with equal resolve and this point is the most important message in my speech today.
The first theme I will talk about is the recovery of the Japanese economy from its "lost decade". Approximately ten years ago, the bubble economy of Japan collapsed and we found ourselves engaged in a struggle with severe asset deflation. Through the fall in equity and land prices alone, according to government estimates, the people of Japan lost assets amounting to 1,000 trillion yen. This represents a figure twice the size of GDP.
These points are something on which I, as somebody who maintained a key position in Japanese politics for the duration of this period, should reflect on. It is clear that Japan severely underestimated the negative influence on growth of asset deflation. Due to this fact, the trials and tribulations of the financial system worsened to a degree greater than initially expected, inviting a situation in which fear was expressed about a possible influence on global asset markets.
However, since 1998, the Japanese economy has been witnessing steady changes. In order to stabilize the financial system, large-scale public funds were injected into the banking sector, and large-scale fiscal policies as well as low interest financial measures were implemented in an attempt to boost demand. As a result of these policies, in FY2001 it is expected that the economic growth rate will rise to the point just short of a full recovery of potential growth ability.
On many occasions, criticism has been leveled at Japan from experts both at home and overseas to the effect that the speed of economic adjustment in the wake of asset deflation was particularly slow. We should perhaps accept with good grace the criticism that economic adjustment was not at all rapid in its implementation. However, what I would draw your attention to concerning this matter is the fact that in the intervening period, adjustment of the enormous amount of asset deflation amounting to twice annual GDP was undertaken, without inviting a large reduction in the income levels of the people of Japan.
I am referring to a pattern whereby rapid adjustment in asset deflation would invite a large temporary drop in income levels, and would then be followed by a similarly rapid recovery. This is the pattern that was witnessed in the serious plunges in GDP experienced by the developing countries of Asia in the wake of the financial crisis, followed by a swift, "v" curve recovery. However, I am convinced that given Japan's huge economic scale and the great influence it exerts on the global economy, we did not have the scope of maneuverability to instigate a large, say 10%, drop in income even for a temporary period.
However, despite the fact that Japan has experienced asset deflation amounting to twice GDP, today in Japan per capita GDP stands at a level 13% above that of the peak of the bubble era. Japan is continuing to adjust its economic balance sheet in the wake of enormous asset deflation, without an accompanying drop in GDP and living standards. I can confirm that Japan is now entering the final stages of this adjustment.
From the last half of 2000, equity prices in Japan weakened, leading some to view this as a sign of a downturn in business. However, these movements are taking place amidst the emergence of a forward-looking process of adjustment, whereby Japanese businesses and banks are actively progressing with adjustment of their balance sheets and attempting to make the stockholding structure more efficient. My conviction remains unwavering that the Japanese economy will soon have completed adjustment of its balance sheet and fully regained its assets.
A second theme I would like to move on to discuss is that of the changes in the Japanese economic and social structure. I mentioned previously the issue of adjustment of the economic balance sheet as a whole, in response to asset deflation, and such measures represent a policy of "Reconstruction on the Defensive" for the Japanese economy. In response to this initial phase, structural trends that are being currently promoted represent an actual "Reconstruction on the Offensive."
Over recent years, one of the main factors providing the power for the Japanese economy has been the information and communications technology (IT) revolution. IT-related capital investment and export of IT-related products are now powering the Japanese economy. Last year, I created the IT Strategy Council as a policy advisory body to the Prime Minister. I invited Chairman and CEO of Sony Corporation Nobuyuki Idei, who is here today, to chair this council, and it has compiled a number of ambitious IT promotion policies. These policies aim to realize an e-Government by 2003, and establish, within five years, a world-leading Internet infrastructure in Japan. I firmly believe that by making full use of Japan's technology and financial power, and, by using the capabilities of the private sector to their fullest extent through pro-competition policies, this plan will undoubtedly achieve its aims.
Furthermore, for the future promotion of IT, we are also looking into a transition to new Internet protocol known as IPv6. Japan possesses a high level of IPv6 technology and through putting in place a structure utilizing this technology that will enable virtually unlimited use of Internet addresses, it is believed that this will give rise to new lifestyles and industries for the IT era. Moreover, the transition to IPv6 will expand the digital opportunities for those developing countries that are in an earlier stage of IT development, and in this way Japan can make a global contribution.
In addition, another important challenge for the promotion of the Japanese IT revolution is the exchange of digital information that can be conducted by mobile telephone networks, without using a PC. Japan now finds itself in a position where 50% of the population owns a mobile phone, and what is more, 15% are using their mobiles to connect directly to the Internet. In May this year, a new era will begin with the introduction of next-generation mobile telephone technology. This technology will initially increase the speed of data transmission by 40 times, subsequently rising to 200 times, compared to current technologies, with Japan leading Europe and North America in utilizing this technology. The mobile telephone diffusion rate is also extremely high in other Asian countries, and it is expected that this will characterize the future face of IT in Asia. In actual fact, a businesswoman played a central role in the process of developing the concept of creating an Internet network accessible from mobile telephones. The activity of women in these high-tech areas that are leading the economy could be cited as another symbol of the structural changes underway in the Japanese economy and society.
If structural reform in Japan is to progress, it is necessary to promote further regulatory reform and pro-competition policies in all areas of the economy. Make no mistake; I am determined to forcefully pursue policies to promote competition. In this context also, it has proved necessary to implement reform of the administrative system to enable an enhanced political leadership for the country. Since 1998, Japan has therefore been making every effort to establish political leadership over the policy decision-making process.
First, under the Cabinet of former Prime Minister Keizo Obuchi, the Economic Strategy Council was established as a body comprised of private sector experts and intellectuals, reporting directly to the Prime Minister, and the Council compiled a plan for the economic renewal of Japan. In the reform process which I have been promoting under the banner of a "Rebirth of Japan" since my assumption of office as Prime Minister, I have also been trying to bring together the best ideas available from the private sector leaders and well-informed persons, with a view to exploring the future policy direction in such broad areas as industry, education, social security, and the judicial system. This year, in implementing the IT promotion policies which I mentioned earlier, I established the IT Strategy Headquarter, pursuant to the newly enacted "Basic IT Law", which is comprised of all the Cabinet ministers and the private sector experts. Finally, towards the establishment of a policy making structure that is led by political leaders, 6 January this year saw the implementation of an unprecedented reform of the central government.
Under this central government reform the number of ministries and agencies was reduced from 23 to 13. In addition, pursuing a goal of achieving a leaner administrative structure, severe restructuring in a form rarely witnessed around the world is also underway to reduce the number of national civil servants by 25% over the course of 10 years, despite the fact that the number, even now, is relatively small compared with other developed countries. Policy making in Japan has for many years been recognized as being firmly in the hands of the bureaucracy, but the movement that has been gathering momentum over the last two or three years represents a challenge to this long-held view. I would emphasize once again that in parallel to these administrative changes, structural reforms in the Japanese economy and society are also progressing at a faster than anticipated pace.
With the establishment of a leaner government on the one hand providing an environment in which the people can grasp the initiative and use their creativity, it is incumbent upon us to develop human resources who can make the most of such an environment to fully realize their potential. Such human resources are, however, not created over a short period. To this end, it is necessary to promote reform of the education system in fulfillment of our responsibility for the generations of the future.
At the same time, this reform must take account of the transformations in Japan over the half-century of the post-war period. Under the post-war education system, Japan achieved a miraculous recovery after the horrors of war and has reached a position where it now enjoys peace and material wealth. In this era of affluence, it is vital to seriously consider how education reform should develop social ability in children, promote independence, and nurture Japanese citizens rich in humanity and capable of making due contributions to the global society.
In these challenges, I will continue to involve myself in discussions with the people of Japan, and I am resolved to compile legislation for those challenges which need immediate tackling during the next ordinary session of the Diet, which begins upon my return home.
In the realm of the Japanese economy, a number of significant challenges still lie ahead. With a rapidly aging society, we must work to regain the nation's fiscal health, including pensions. We recognize that, in recent years, as a result of economic measures, Japan's fiscal deficit has reached a very high level. What is more, in the very near future Japan will be presented with the globally rare experience of a declining population. Ahead of other countries which may follow, Japan will therefore provide the setting for an enormous social challenge.
However, under the comprehensive program for the Rebirth of Japan, the modalities for reform have been put in place in that we are: (a) making steady progress in the adjustment of the economic balance sheet; (b) raising the potential growth rate through such supply side policies as the creation of new industry through regulatory reform, promotion of competition, and development of human resources through education reform; (c) strongly promoting the IT revolution as a core element of such policies; and (d) establishing a leaner administrative structure under enhanced political leadership.
That said, the economy is a living entity. Under a situation where we are faced with a slowdown in the US economy, Japan's responsibility in the management of the international economy is even greater. A path has already been solidly laid. I am determined to follow this path and implement the timely policy responses that will lead the Japanese economy to a full recovery.
So, in what way do I view the global issues that face us today? The third theme I would like to speak about today concerns the standpoint from which Japan can make a contribution to these global issues.
To date, in response to global challenges, Japan has consistently cooperated with other countries and made active contributions. One example of this contribution is in the area of Official Development Assistance (ODA), where for some years Japan has maintained a position as top donor country. Even during the years of economic stagnation in the 1990s, the amount of yen denominated ODA continued to rise. I hope that Japan will maintain its position as the largest ODA donor country.
However, in the new century, in both theory and in specific approaches, it is necessary to elucidate a new paradigm to tackle global issues. In my speech today, I would like to introduce a concept of "human security," and how the dynamism of the Asian region can be made to work for the prosperity and welfare of the international community as a whole.
The concept of "human security", which I advanced on the occasion of the UN Millennium Summit Meeting last fall, aims to surmount the threat to human existence itself presented by poverty, conflict, refugee movements, infectious diseases and environmental destruction. Underlying this concept is the view that places importance on each and every member of humankind. This is based on my personal historical view that the 20th century represented one hundred years of "glory and regrets" - while advancing in the fields of science and technology on the one hand, the century was also witness to two world wars and many conflicts that cost the lives of many.
In this new century, will humankind be truly able to establish "human security" by overcoming the many challenges it faces? The key to answering this conundrum lies in the future of the African continent. Words are not sufficient when it comes to describing the troubles faced by the people of Africa. With the long-term stagnation of the economy, the vicious cycle of increasing refugees due to the frequent outbreak of conflict, and pandemic infectious diseases claiming the very lives of those who will bear responsibility for the next generation, it is no exaggeration to say that just one of these problems would be more than sufficient to test the wisdom and resolve of humankind as we seek to establish "human security."
On the occasion of the G8 Kyushu-Okinawa Summit held last year, I conducted an open and friendly exchange of views with three African leaders, President Thabo Mbeki of South Africa, President Olusegun Obasanjo of Nigeria, both of whom I understand are participating in this year's Davos meeting, and President Abdelaziz Bouteflika of Algeria. This dialogue continued at the Millennium Summit of the United Nations in September last year, and this series of discussions deepened my conviction that if the problems facing Africa remain unresolved, then the world in the 21st century will not be one of stability and prosperity. Earlier this month I made the first ever visit as an incumbent Japanese Prime Minister to nations of Sub-Saharan Africa. This visit provides the starting point for the implementation of Japan's global diplomacy in the new century, and also demonstrates my resolve to make the maximum efforts in measures to achieve an African rebirth.
During my visit to Africa, in the series of Summit Meetings I held with national leaders, I presented as a basic concept for future cooperation with Africa with the dual axles of promoting development assistance and also supporting conflict prevention and refugees. In order to break the vicious cycle of conflict, the appearance of refugees, and persistent poverty, various assistance needs to be organized in a coherent manner and promoted as a unified whole. In my discussions with African leaders, I believe I attained their understanding and support for such a policy.
It goes without saying that the challenges facing the international community are not limited to the rebirth of Africa. Amidst the whirlwind of changes occurring in the international community, one important consideration we should draw on and one that I would like to take this opportunity to touch on, is to make advances in science and technology and the dynamism of globalization truly useful for the prosperity and welfare of the international community.
While the Asian region experienced the temporary economic stagnation brought about by the financial crisis that broke out in 1997, there is no doubt that Asia will be one of the most important regions in supporting the growth of the world economy in the new century. Countries that were affected by the crisis are now seeing a return to dynamic growth. In addition, against the background of a recovery of growth, we are seeing the emergence of a trend that is calling for new developments in regional cooperation. In order to see to it that Asian dynamism is linked to the prosperity of the rest of the world, I would like to see a further intensification of regional cooperation in East Asia.
IT cooperation is an important element in this policy. At the ASEAN+3 Summit Meeting, based on the "e-ASEAN Framework Agreement" that had been signed in advance by the ASEAN member nations at their annual summit, I called for a strengthened policy dialogue among the countries of ASEAN, Japan, China and the Republic of Korea, to which other leaders indicated their approval. The comprehensive cooperation package proposed by Japan, with the target of US$15 billion over the course of five years, is expected to make an important contribution to the promotion of IT cooperation in Asia.
In addition, in terms of intra-regional financial cooperation, under the so-called "Chiang Mai Initiative," efforts are to be promoted aimed at expanding the present ASEAN Swap Arrangement to all ASEAN member countries, and establishing a network for bilateral currency swap and repo arrangements among ASEAN+3 nations. This financial cooperation framework can be expected to function effectively as a mechanism to prevent currency and financial crises in the region in the future.
Preservation of the global environment is also an important challenge. In particular a matter demanding urgent attention for the sake of the whole of humanity is that of a response to global warming. To this end, Japan will do its utmost to promote maximized efforts by the international community to work towards the entry into force of the Kyoto Protocols as 2002 draws near. On the occasion of the 2002 Rio+10 "World Summit on Sustainable Development" it is incumbent on participants to engage in discussions that have a future-oriented focus looking forward to the century as a whole. Working towards Rio+10, preparations are continuing for the "Asia-Pacific Eminent Persons' Forum on Environment and Development," at which a new model should be proposed from the Asia-Pacific region.
In addition, in January this year Japan and the Republic of Singapore entered into negotiations on the Japan-Singapore Economic Agreement for a New Age Partnership. This agreement not only concerns trade and investment, but also expands the scope of bilateral cooperation to include a broad range of areas. I believe that this agreement will not only complement the multilateral trading system, but should also act as a model for new economic cooperation in the era of globalization.
Cooperation efforts such as those I have just outlined are the kind I intend to promote in order to utilize dynamism in Asia. At the same time, in this era of globalization, regional cooperation cannot and should not be a self-contained arrangement. I intend to promote these efforts in conformity with global systems and structures, such as the International Monetary Fund (IMF) and the World Trade Organization (WTO), and in such a manner as to strengthen still further cooperative relations with other regions, including North America and Europe.
From this viewpoint, it is vital that the multilateral trading system is strengthened. As was confirmed at the Asia-Pacific Economic Cooperation (APEC) Leaders' Meeting in November last year, I believe it to be of the utmost importance that a new round of WTO negotiations be initiated during the course of this year. Japan is resolved to continue to actively contribute to the achievement of consensus on this issue.
As a consequence, the ultimate result of globalization is the deepening of human exchange. However, we must not allow ourselves the luxury of assuming that the exchanges that flow from the process of globalization necessarily lead to greater mutual understanding. It is clear that the IT revolution has given us a powerful medium for communication that transcends generational and social boundaries as well as national borders. However, great waves of information alone do not produce mutual understanding. Indeed, such swells inherently pose the threat of cultural uniformity and the possibility of greater prejudice.
Instantaneous communication is now possible between Japan and the rest of the world. Still, devoid of the warmth of real face-to-face human interaction, such communication will never create greater mutual understanding and cannot build true bonds of mutual trust among our peoples. During my recent trip to Africa I had an opportunity to visit a refugee camp in Kakuma, located in the northern part of the Republic of Kenya. This camp is home to more than 88,000 people who have left their homes in eight nations including the Sudan, Somalia and Ethiopia. When I visited the tented medical facility known as "Central Hospital" I was pained to see so many children suffering from malaria and malnutrition, and their mothers agonizing in a prayer for their childrenfs earliest recovery from such sufferings. And yet the people of the camp extended a very warm welcome to my party. Peoplefs smiling faces and their warm hands are certainly not something that we can transmit by e-mail. Indeed, this visit once again reminded me that there is no replacement for real person-to-person contact.
Finally, what I would like to impress upon all of you gathered here today is the need to go beyond the opportunity for vigorous exchange of views on our common global future that this meeting presents, and to truly deepen our affinity with the five billion people, the lives of whom are intertwined with this meeting.
On this point, I do not think I am left with anything else of consequence to say. In the refugee camp in Kakuma, children who had been driven out of their homelands sang to me a song, which described their simple hopes. Allow me to close my speech by reciting this song.
"I dream that, one day girls will go to school together with boys and not have to leave school early because they have to get married. Tell me, men and women, do I have a chance? I dream that, some day women will have important jobs like men - teachers, doctors and engineers. Tell me, men and women, do I have a chance? I dream that, one day there will be no wars in the world and that people will be equal. Tell me, men and women, do I have a chance?"
Thank you very much.