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Japan-U.S. Bilateral Meeting
between Minister for Foreign Affairs Keizo Obuchi
and Secretary of State Madeleine Albright

1. Introduction of speaker and briefing status
2. Statement by the Spokesperson
3. Closing of the Yamaichi securities company
4. Japan's economy
5. Asian financial crisis
6. Japanese economic stimulus package
7. Closing of Yamaichi securities company
8. Issue of Iran
9. Financial crisis in the Republic of Korea
10. Four-party Talks
11. Kyoto Conference

1. Introduction of speaker and briefing status

   Official of the International Press Division of the Ministry of Foreign Affairs: Good evening, ladies and gentlemen. We are now going to start the press briefing on the Bilateral Meeting between Minister for Foreign Affairs Keizo Obuchi and Secretary of State Madeleine Albright of the United States. The briefer is Mr. Hiroshi Hashimoto, Spokesman for the Prime Minister of Japan and the Japanese Delegation.

2. Statement by the Spokesperson

   Spokesperson for the Prime Minister of Japan Hiroshi Hashimoto: Today, I would like to brief you on the bilateral meeting between Minister for Foreign Affairs Keizo Obuchi and Secretary of State Madeleine Albright of the United States. First, I would like to briefly touch on the subjects that the two discussed. I can then answer your questions regarding specific areas in which you have interest regarding the content of the bilateral discussion. At the beginning of the meeting, Foreign Minister Obuchi and Secretary of State Albright decided to review several bilateral issues and international issues in which the two were interested in. They only talked for 45 minutes. Therefore, they could not spend significant time to talk in detail on these subjects. I will quickly tell you what they discussed on these subjects. First of all, on the bilateral relationship, they basically talked about economic matters. On international issues, they exchanged views on Myanmar, Cambodia, Iran, anti-personnel landmines, UN reform, the Kyoto Conference on Climate Change and Iraq. Those are the subjects they talked about. Regarding economic issues, Secretary of State Albright said that in the recent months, there has been a sharp rise in Japan's global account and a surplus in the trade balance, and these can negatively affect the bilateral relations between Japan and the United States. Against this backdrop, it is important to make steady progress on the individual economic issues such as civil aviation. She went on to say that the domestic demand-led growth is important in Japan, and if it can be achieved, it will have a good impact on the Asian economies. She said that further deregulation efforts are important. Foreign Minister Obuchi said that it is true that the surplus in the trade balance is now increasing, but the situation of today is very different than that of several years ago. The trade surplus occurred at the time when the U.S. economy was in bad shape. This time, the U.S. economy is good and the U.S. purchasing power is growing. Therefore, the situation is different now. At the same time, Secretary of State Albright said that domestic demand led growth is necessary, which is true. The Government of Japan recently announced its economic package and will endeavor to implement the policy. At the same time, Foreign Minister Obuchi pointed out that the Japanese economy is now changing. The Japanese economy is in the process of change, notably the principle of self-responsibility is playing a biggerrole in the Japanese e conomy. That is what was discussed regarding the economy, and I will be delighted to answer any questions that you might have.

3. Closing of the Yamaichi securities company

   Q: Wasthere any discussion held on the topic of the closing of the Yamaichi securities company?

   A: Secretary of State Albright did not ask about anything specific on the Yamaichi securities company situation. However, she said that a trustworthy financial system is important. Foreign Minister Obuchi explained to Secretary of State Albright about the change in the Japanese economy. He said, without mentioning the names of any particular company, that the fourth biggest securities company in Japan is now facing a problem in its management. That is the discussion held between the two. I have got to first of all remind you that Japan is still on holiday. The banks are closed in Japan. Last Friday, the Director-General of the Securities Bureau of the Ministry of Finance said that the Ministry is pressing the securities company to give its report on what it will do about its management and the future operations of the company. I understand that the Yamaichi company has not presented its final decision yet. After the report is given to the Ministry of Finance, the Ministry will take measures, specifically taking into highest consideration the interests of private investors.

4. Japan's economy

   Q: What is the new economic policy that Japan is implementing? You said that the economy is now changing and the principle of self responsibility is now playing a bigger role. What do you mean by that?

   A: Last week, the Government of Japan announced its economic package. The content of this package contains various deregulation policies. There are several fields in which American and European colleagues have been requesting for a long time such as the deregulation of telecommunications, etc. We hope that this will help recover confidence in the future of the Japanese economy. In the past, traditionally, Japanese companies have been inclined to rely on the regulations or policies of the Government of Japan. But, what the Government of Japan is now doing is to deregulate its economy, so that private companies can take initiatives on their own to help themselves on an individual basis. We hope that the initiatives of private enterprise will contribute to the development of the Japanese economy.

5. Asian financial crisis

   Q: This morning, PresidentClinton, in commenting on the Asian financial crisis said that he saw it as a glitch in the system. Mr. Tatsumi from Japan Securities has called it the equivalent of an atomic bomb. Where on that spectrum between glitch and atomic bomb does the Japanese Government see this crisis? It seems to me that it is a little more serious than previously indicated. How serious do you see the present financial crisis? Secondly, the issue of the Asian Monetary Stabilization Fund seems, in part at least, to have been incorporated into the discussions here and that there will be something set up after the meeting. It has been emphasized, however, that everything will be under the control of the International Monetary Fund (IMF). I was wondering, in particular, to the extent that this fund has to be utilized, i.e., to the extent that the IMF facilities have been exhausted in trying to deal with parts of this crisis, what will be the importance of the conditionalities? Will the countries in the area, the regional fund, be able to determine the conditions of further lending, or will they be required to subordinate themselves to further IMF conditionalities?

   A: It is very important to see the countries and economies which face currency instability and macroeconomic difficulties recover from those difficulties in the short run. We are in the same region. Japan has been enjoying very good relations with them. We have been developing and deepening relations with those economies until now. But, if you talk about the possible negative influence of the difficulties of those economies on Japan, the impact is probably not very big. I have some figures here which I will cite. For example, in regard to Japan's exports to Thailand, the Philippines, Malaysia and Indonesia, altogether the total exports to these countries consist of 12 percent of all of Japan's exports to the outside world in 1996. If Japan's exports to those four countries were to decrease by 10 percent, it will have a negative influence of 0.1 percent against Japan's GDP. Also, in 1995, Japan's exports to the Republic of Korea are equivalent to 6.57 percent of the whole of Japan's exports to the outside world. Further, I can tell you that about 87 percent of Japanese exports to the ASEAN countries consist of the intermediaries. Because of the depreciated currencies of those economies, if they increase their exports to outside countries, Japan will automatically gain profit from this. Another example, is that Japanese institutions have been lending money to companies in Asia. But basically, they have been lending their money to reliable big enterprises over there. We also have some data on outstanding credit. For your reference, the outstanding credit to Japanese financial institutions to Hong Kong, Singapore and Thailand is equivalent to about 21 trillion yen, which is about 2 percent of all outstanding credit of the Japanese financial institutions in the world. The outstanding credit of Japanese institutions in the Asian region altogether is equivalent to about 31 trillion yen, which is about 3 percent of all the outstanding credit of the Japanese financial institutions in the world. So, in reality, I do not think that the economic difficulties of those regions have a great impact on the Japanese economy. But, the trouble is a psychological one. Because of the spread of the currency instability in that area, the business confidence and confidence of the market is eroding. So, we have got to do our best to restore the confidence of the market. In this sense, the newly agreed Manila Arrangement is important. This Arrangement is compatible with the idea of the Asian Monetary Fund. Although the new Arrangement does not have its own Secretariat, it has been decided that one will be set up outside the IMF. However, it is going to be operated under close cooperation with the IMF. So, the economies which participate in the arrangement have got to abide by the conditionality of the IMF if they would like to get financial aid from the arrangement. We understand that, at first, all the IMF resources will be mobilized in case of need. However, if more money is still needed, the new Manila Arrangement will be applied. The participants of the Manila Arrangement have decided not to set aside a specific fund to operate the arrangement. This will be carried out on a case-by-case basis, mainly because the nature or characteristics of currency instability is different in each economy.

6. Japanese economic stimulus package

   Q: Thismorning, Ambassador Barchefsky commented on the new stimulus package for domestic demand-led growth in Japan. She said that although the United States appreciated the effort, it is still not sufficient and that Japan needs to go further. Was there any direct comment by Secretary Albright on the new stimulus package in the meeting with Minister Obuchi? Secondly, were there any suggestions given on how to advance the aviation talks that have been occurring and seem to be at a stalemate? Are there any new steps that they suggested to move that along further?

   A: On the stimulus package, Foreign Minister Obuchi explained the nature of the package, saying the Government of Japan will endeavor to realize the policy. While Secretary of State Albright, in general terms, talked about the importance of expanding domestic demand, at the same time, she pointed out the need to go ahead with deregulation policy. Therefore, they did not talk in detail about the stimulus package which was announced very recently. On civil aviation, Secretary of State Albright only referred to this, while she said that individual issues should make steady progress against the backdrop of the increase in the current account surplus or trade surplus. I do not think that Foreign Minister Obuchi specifically touched on the civil aviation issue.

7. Closing of Yamaichi securities company

   Q: On the Yamaichi issue, you said that the Government would take care of the shareholders. Could you explain how you would do that. Are you saying that the Government is going to guarantee the deposits of shareholders of Yamaichi if it does close? Also, there were reports out of Japan this morning that Yamaichi officials have told the Government that they do intend in their report tomorrow to report that they are going to shut down the firm. Can you tell us if that is indeed correct, if that is what you have been told?

   A: Since I do not work for the Ministry of Finance, and if I do not get any materials from that Ministry, I cannot give you an answer to that question. What I do know is from the Director-General's statement from last week, and I do not have anything to add to this. Also, I am unaware if members of Yamaichi have approached the Minister of Finance. Therefore, I do not know what the Ministry of Finance will do in order to protect the shareholders.

8. Issue of Iran

   Q: Regarding the bilateral meetingtoday, could you elaborate on the discussions on Iran? Did the discussions touch on the Iran/Libya Sanctions Act?

   A: Secretary of State Albright informed Foreign Minister Obuchi that the Clinton Administration has been closely watching the new administration over there, with the election of the new president. But, the Clinton Administration has not noted a change in Iran. Foreign Minister Obuchi said that, recently, deputy foreign ministers consultations between Japan and Iran took place in Tokyo. At that time, the Japanese side conveyed the common concern of the international community on possible terrorism carried out by Iran. At the same time, Japan advised the Iranian Government to take concrete actions to get rid of the anxiety of the international community over Iran's behavior. On Iraq, Secretary of State Albright informed Foreign Minister Obuchi that, next week, there would be another round of talks that would be held at the Security Council and asked for close consultation with Japan. Foreign Minister Obuchi replied that Japan is carefully following up on the situation in Iran and continues to consult with the United States on this.

9. Financial crisis in the Republic of Korea

   Q:President Clinton seemed to be indicating earlier today that the United States would not be the lead for this Korea bailout. I am talking about when the IMF has a plan in place. And, it sees the problem as a regional problem where Japan should be taking the lead on the issue. Did you get that feeling from Secretary Albright? What is your position on this?

   A: Japan is very happy with the newly agreed Manila Arrangement. As I told you, this could be compatible with the Asian Monetary Fund. So, I do not think that for the time being we will discuss the need to establish the Asian Monetary Fund. The important thing is that, according to the Manila Accord, we should strengthen the regional surveillance and technical cooperation, in order to prevent a further crisis. But, when the crisis takes place, we have got to study individually whether the newly agreed Manila Arrangement will be applied. But, this arrangement will be put into practice in close contact with the IMF. So, those members who actually accept the conditionalities of the IMF will be eligible for the new Arrangement. Having said this, If you talk about the case of the Republic of Korea, we have to wait till the IMF team finishes its job on the situation there. For the time being, we are carefully watching and collecting information, and we have got to wait and see what the results are of this survey of the IMF mission. I think Japan and the Asian countries, together with the IMF, the Asia Development Bank (ADB) or the World Bank, will do their best to help those economies which face economic difficulties. I am sure that the United States, as the biggest member of the IMF, will continue to be cooperative in this.

   Q: Will it be the Asian countries who actually arrange the bailout package? It seems to me that the United States does not really want to get too involved. It says that it is not going to pay as much money as it did in Mexico and that it is Asia's back yard and not really its own. So, would you envisage that it is really going to be Japan and Asia involved in this Korea bailout?

   A: If you are talking about the traditional IMF operations or activities, I do not think that the United States is in a position to say that this is a situation that should be mainly handled by the Asian countries. But, if you are talking about the Manila Arrangement, there may be some discussions and those Asian members will be more interested in helping each other. At the same time, I would like to draw your attention to the fact that the United States is also a member of the new Manila Arrangement. Therefore, I think that all the countries should be carefully watching the situation over there, and if it is necessary, they should extend appropriate aid. For example, if the economies of Asia are left alone and appropriate assistance is not given, this may have negative effects on the rest of the world. So, all countries around the world should pay appropriate attention to the process of the adjustment of the economies in Asia.

10. Four-party Talks

    Q: Was there any briefing bySecretary Albright on the Four-party Talks with North Korea? Beyond that, was there any discussion about raising money for the Korean Peninsula Energy Development Fund (KEDO)?

    A: They did not talk about the situation on the Korean Peninsula at all.

11. Kyoto Conference

    Q: Could you elaborate on theapproach of Japan and Canada on the upcoming global conference on climate change?

    A: If you look at the global conference, Japan is proposing a concrete idea to reduce greenhouse gas emissions by five percent less than the 1990 levels, taking into consideration several factors, e.g., the size of the population, etc. The EU is proposing to reduce levels by 15 percent against 1990 levels. The Americans proposal is to keep greenhouse gas emissions level even with the 1990 level. As far as Canada is concerned, I understand that they have not made their position clear on the very important issue of the environment. We sincerely hope that the Government of Canada will cooperate with Japan for the successful completion of the Kyoto Conference. Thank you very much.