Press Conference by the Press Secretary 19 June, 1998

1. Intervention by the Government of Japan and the Government of the United States of America regarding the exchange rate of the Japanese yen
2. Report of the Development Assistance Committee of the Organization for Economic Cooperation and Development on official development assistance disbursements in 1997
3. Announcement of the High-level Open Symposium on Development Cooperation on 22 June at the United Nations University Headquarters in Tokyo
4. Support of the Government of Japan for the national elections in the Kingdom of Cambodia on 26 July 1998
5. Possible future interventions by the Government of Japan and the Government of the United States regarding the exchange rate of the Japanese yen
6. Possible visit by Secretary of State Madeleine Albright of the United States of America to Japan
7. Position of the Government of Japan for meeting of finance officials
8. Policy of the Government of Japan regarding development in Africa
9. Situation regarding the Japanese financial system

1. Intervention by the Government of Japan and the Government of the United States of America regarding the exchange rate of the Japanese yen

   I have several comments to make. Firstly, I think you are aware of the telephone conversation that took place between President William Jefferson Clinton of the United States of America and Prime Minister Ryutaro Hashimoto on 17 June, in which they agreed on the joint intervention with respect to the yen which has been effective as you know and in that conversation, Prime Minister Hashimoto underlined Japan's determination to restructure and revitalize the Japanese economy and to that end, to restore the health of Japan's banking system, to achieve domestic-demand-led growth and to open and deregulate Japan's markets. There was also a statement by Finance Minister Hikaru Matsunaga as you recall in which Finance Minister Matsunaga elaborated on the importance of restructuring the financial system by disposing of the bad assets aggressively and also through abandoning the convoy system and restructuring the financial system in accordance with market mechanisms. To follow this up, Deputy Secretary Lawrence Summers of the United States of America is in town today. He met Minister for Foreign Affairs Keizo Obuchi for about half an hour this morning, and in that meeting, Deputy Secretary Summers expressed his pleasure at the fact that the joint intervention by Japan and the United States has been successful and he expressed his appreciation for the set of measures announced by Prime Minister Hashimoto and Finance Minister Matsunaga and he also said that he felt it important that these measures be implemented promptly. In response, Foreign Minister Obuchi expressed his appreciation for the United States efforts behind the joint intervention and said that it is our intention to work hard towards the implementation of the set of measures announced by the Prime Minister and the Finance Minister designed to revitalize the Japanese economy. He also said that he fully realized that such efforts on the part of Japan are important for Asia and the world as well. He also underlined the importance of Japan and the United States continuing to work closely together for the stability of the Asian and world economies and with respect to the question of stabilizing the financial system, Foreign Minister Obuchi said that it is the intention of the Government of Japan to grapple squarely with this task.

2. Report of the Development Assistance Committee of the Organization for Economic Cooperation and Development on official development assistance disbursements in 1997

   Secondly, the Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD),announced the figures about official development aid provided by each member country in 1997. I think you have an excerpt of that, consisting of two pages. Japan's total Overseas Development Assistance (ODA) disbursement in 1997 amounted to US $9.36 billion which is a slight decrease from the 1996 figure of US $9.44 billion, but Japan is still at the top of the list of donors, a position in which Japan has found itself for seven consecutive years. The number two position has now gone to the French Republic. The United States has come down from second to third position, and the number four position is held by the Federal Republic of Germany.

3. Announcement of the High-level Open Symposium on Development Cooperation on 22 June at the United Nations University Headquarters in Tokyo

   Also in the context of development, there will be one international symposium on development cooperation and one international conference on new development strategy, both taking place in Tokyo. Let me briefly touch on the background. When you talk about the United Nations (UN)reform, there are three areas; Security Council reform, financial reform and reform in the area of development and this area of development is an area in which Japan has been taking certain initiatives. At the time of the Tokyo Summit in 1993, we advocated a new approach to the question of development in the form of a new development strategy, the main idea being that we should be moving in this post-Cold War era from the confrontation between the North and the South to a more global partnership in which importance will be attached to the idea of ownership on the part of the developing countries and partnership among the developed countries, international organizations and nongovernmental organizations. Partly as a result of this, the DAC of the OECD adopted the new development strategy and Japan has taken initiatives to organize international meetings and conferences to discuss this strategy further, including the conference that took place in Okinawa in July 1997. In the meantime, Secretary General Kofi Annan of the United Nations announced his own program for reform in this area. We feel that given this background, it is worthwhile for us and the international organizations and countries concerned to get together to address the question of development in the 21st century, centering on the question of the new development strategy and the role of the international organizations concerned. So it is against this background that there will be held this High-level Open Symposium on Development Cooperation on 22 June at the United Nations University Headquarters, which is sponsored by the Ministry of Foreign Affairs and the United Nations University, and also supported by the Yomiuri Shimbun. Among the participants are Ambassador Hisashi Owada, Permanent Representative of Japan to the United Nations, Director General Carlos A. Magarinos of the United Nations International Development Organization (UNIDO), Executive Director Carol Bellamy of the United Nations Children's Fund (UNICEF) and Senior Vice President Joseph E. Stiglitz of the World Bank and other personalities. This international symposium is designed to heighten the public awareness on this whole question of development cooperation and the new development strategy. Back-to-back with this symposium, there will be a Tokyo conference on the new development strategy which will take place at New Takanawa Prince Hotel on 23 and 24 June. More or less the same people will be attending this conference, the only difference is that this conference is a closed conference, whereas the symposium is an open symposium. In this conference there will be, for example, talk about the possible application of the new development strategy to Africa, partly bearing in mind the fact that later this year in Tokyo there will be the Tokyo International Conference on African Development (TICAD) II and the result of this conference is to be distributed as a United Nations document.

4. Support of the Government of Japan for the national elections in the Kingdom of Cambodia on 26 July 1998

   The election in the Kingdom of Cambodia is scheduled to take place on 26 July and the preparations are underway. The process of voter registration is going on. According to the recent announcement by the National Election Commission of Cambodia, more than 90% of the voters have registered. Japan has been actively promoting, together with other like-minded countries, the implementation of a free, fair and open election in Cambodia. You may recall the Japanese proposal consisting of the four pillars in Cambodia. To assist the implementation of this election, we have decided to send 30 election observers to Cambodia. They will be arriving in Cambodia in mid-July and they will join the Joint International Observer Group (JIOG), under the United Nations coordination and support, to make objective evaluations on the election's fairness, equality and transparency and they are planning to stay in Cambodia until early August. This team of 30 observers will be headed by General Tetsuya Nishimoto who is the former Chief-of-Staff of the Japanese Self-Defense Force (SDF). General Nishimoto has volunteered to go to Cambodia partly because he was closely involved in the dispatching of SDF personnel for UN peace-keeping operations some years ago. That was the first example of Japan's participation in UN peace-keeping operations as you recall. We have also been making substantial financial contributions to Cambodia with a view to assisting their election. Our financial support to Cambodia already amounts to US $9.12 million, including US $3 million to the United Nations Development Programme (UNDP) Trust Fund for the purchase of 12,500 ballot boxes -- I hear these ballot boxes are made of steel and rather sturdy, so you cannot easily tamper with the votes. It also includes US $2.8 million to the UNDP Trust Fund for the purchase of polling facilities, logistics and allowance for polling and counting staff, and US $3.32 million, which will be in the form of the local currency, the Riel, because we approved the use of the counterpart fund of the non-project grant aid, which has been provided by Japan to Cambodia for the purchase of vehicles, telecommunication machines and other equipment. That is the financial support to Cambodia. We have also been providing financial support to the UN which totals US $550,000, consisting of US $250,000 to help the UN monitoring activities for the safe return and free political activities of the exiled politicians which we extended in mid-April and US $300,000 to help defray the costs of the Election Assistance Secretariat of the UN, which has been coordinating and supporting the activities for the election observers. In terms of personnel cooperation, I referred to the dispatching of the 30 observers and in addition to that, there is one Japanese expert who has been there for several weeks to work on the coordination of the election observers. I might also mention very briefly that we have also decided to contribute US $1 million to the Organization for Security and Cooperation in Europe(OSCE) to assist the implementation of the elections to take place in the Republic of Bosnia and Herzegovina in September. This US $1 million contribution will be used to, for example, produce ballot papers. I might also mention that at the time of the election in Bosnia in September 1996, we provided US $2 million worth of support and also at the time of the election last September in Bosnia, we provided US $1.5 million.

5. Possible future interventions by the Government of Japan and the Government of the United States regarding the exchange rate of the Japanese yen

   Q: Concerning the cooperation between Japan and the United States in the financial markets, is there any agreement about the necessity in the near future for such intervention by these two countries?

   A: As a spokesman, I have learned the art of not offering any predictions as to currency fluctuations and currency interventions. Let me simply say that Treasury Secretary Robert Rubin of the United States of America issued a statement dated 17 June in which he said "In the context of Japan's plans to strengthen its economy, the U.S. monetary authorities operated in the exchange market this morning [that is on 17 June] in cooperation with the monetary authorities of Japan. We are prepared to continue to cooperate in the exchange markets, as appropriate." I think that is all I would say at this point.

   Q: Why is it so difficult for Japan to convince local investors that it is serious about following through with these reforms?

   A: I do not know whether that question is meant to be a psychological question or not because one is dealing with the realm of psychology, but after these announcements by Prime Minister Hashimoto and Finance Minister Matsunaga, and after the conversation between Prime Minister Hashimoto and President Clinton, there should be no doubt that Japan is indeed determined to move the Japanese economy forward through its efforts in the three main areas that I mentioned; with a view to restructuring and revitalizing the Japanese economy, restoring the health of the banking system, achieving domestic demand-led growth and opening and deregulating Japan's markets. It is clear that the Government of the United States supports these efforts on the part of Japan and that with the intervention in the exchange rate market, the market responded favorably to that. So there should be no doubt about our determination.

6. Possible visit by Secretary of State Madeleine Albright of the United States of America to Japan

   Q: There are some news reports that Secretary Albright will come to Tokyo soon. What is the situation?

   A: I am aware of the report and the situation is that the Government of the United States is contemplating the possibility of sending a senior person to Japan after the visit of President Clinton to the People's Republic of China, and we understand that the Government of the United States is in the process of coordinating this, but it has not been decided yet that Secretary of State Madeleine Albright of the United States of America will actually be visiting Japan.

   Q: So there are talks between the U.S. and Japan concerning who the high-ranking official will be?

   A: A high-ranking person, yes.

7. Position of the Government of Japan for meeting of finance officials

   Q: There will be an important meeting of financial ministers from G7 members and other countries. What is the message that Japan will deliver at this meeting?

   A: I would not like to encroach too much on the territory of another agency in the Government of Japan, but let me refer back to what Foreign Minister Obuchi told Deputy Treasury Secretary Summers this morning which is that we are indeed determined to make the utmost efforts to revitalize and restructure the Japanese economy though our efforts in these three areas that I mentioned and we are fully aware that our efforts are important, not only for Japan but also for Asia and the world, and I think that is the context in which these financial experts will be carrying out their discussion.

8. Policy of the Government of Japan regarding development in Africa

   Q: What will the thrust of the upcoming conference on Africa be? We know that a lot of aid has been given to African countries in the past. In this conference perhaps the participants will also want to review how the aid has furthered African development. Sometimes it appears that some of the donor countries do not want to be sincere. There are certain primary industries that are non-existent. Without these, donors are just continuing to waste money. There will be no visible difference. In the steel industry in Nigeria, billions of dollars have been invested. We have collaborated with the Russians and the French on several steel mills. They will have a business for four or five years and the whole thing will die notwithstanding all the money spent there. How do you monitor the money and decide where to put it? How is Japan advising those African countries requesting aid on areas to seek assistance? We know it is important for African countries to decide where they need assistance. A child should not be given a gun when it really needs a pig or some rice. You must start with the foundation. You cannot start at the top.

   A: I am not quite sure whether your question is directly addressed to Japan's ODA to Africa, so I will have to respond in a somewhat generalized manner. When I was talking earlier about the new development strategy, I was saying that one of the important concepts there is the concept of ownership on the part of developing countries, ownership in the sense of encouraging the initiatives of the developing countries or in the context of aid, encouraging the initiatives of the recipients. On that basis it is for the donors and the recipients to work in partnership, rather than in terms of a sort of one-sided dependence. I think that is an idea which should be encouraged and that is an idea which was discussed in TICAD I and I am sure that it will be discussed in TICAD II as well. I think it will naturally follow that there can be some relevant discussions as to what sort of priorities the recipient country may assign to different sectors of development and how best the donors on their part can help the efforts of these recipient countries. I think there will be a natural synergy there. At this point it would be a bit difficult for me to go beyond that to comment on specific cases.

9. Situation regarding the Japanese financial system

   Q: Regarding the Japanese economic recession, some reports say that the solution of the G7, the United States especially, being offered to Japan is likely to be in the form of short-term measures. In fact however, there are fundamental problems surrounding the rate of the yen to the dollar and the depression in consumption. There are reports about the large amount of fraud in the accounting system which is covered up, and about the borrowing of short money by banks involved in the real estate sector for long-term ventures. What is Japan doing about these problems?

   A: There are several different issues involved, depending on the time frame in which you address these questions. In the short-term there has been this acute problem of the exchange rate, the falling value of the yen, that had to be stopped and there was joint intervention between Japan and the United States, and the yen rate has recovered considerably. However, that is not the end of the story. In that sense I agree with you. There are important underlying issues involved in restructuring and revitalizing the Japanese economy, and in that sense I come back to the three areas that I was mentioning. I think our first priority and immediate priority is to restore the health of the financial system and the problem that we have to deal with is to remove the overhang of bad assets from the books of the financial institutions and we are in the process of putting forward legislation and other measures to go ahead to tackle this serious challenge. We need also to restructure our financial institutions rapidly and Finance Minister Matsunaga said on 17 June that the convoy system will be abandoned, that is another way of saying that instead of protecting the weaker institutions, we will take aggressive measures to restructure the financial system and institutions in accordance with the market mechanism. So this is a challenge that we have to face and that will also require improving transparency and disclosure on the part of the financial institutions concerned. Secondly, we need of course to reflate our economy, we need to achieve domestic demand-led growth. For that purpose we announced this very sizable package of 16 trillion yen towards the end of April, but that package can only be implemented on the basis of budgetary backing and that is why the supplementary budget has been debated in our Diet and that supplementary budget has just been passed. We will be going ahead to implement the tax cuts as well as the public investment, and we are hoping that there will be tangible effects coming out of this in the coming months, towards the latter half of this year. Thirdly, there is also the task of opening and deregulating our markets and the "Big Bang" in the financial market is one example of where we will be going forward with efforts in that regard. Also, I talked about the fiscal stimulus package, but Prime Minister Hashimoto also said in his statement on 17 June that we will reform both corporate and individual income tax structures and the Prime Minister said in his press conference yesterday that with respect to corporate taxes, his intention is to lower the rates of corporate taxes to what is an internationally common level in less than three years. So these are the areas in which we will be working very hard.

   Q: I heard one report that said that some of this money from the economic stimulus package could start flowing as early as August.

   A: I said the tangible effects coming out in coming months --

   Q: When will the money actually begin to flow?

   A: One important aspect of this stimulus package is the frontloading of about 80% of our public expenditure in the first half of the fiscal year. That can start immediately. What I was talking about was when public expenditure in terms of public investment will start and when I was talking about in the coming months or in the latter half of this year, I am talking about those measures having the effect on the behaviors of the consumers and on domestic demand in general.