Press Conference by the Press Secretary 29 May, 1998

1. Response of the Government of Japan to nuclear testing conducted by the Islamic Republic of Pakistan
2. Japan-U.S. Guidelines for Defense Cooperation
3. Formation of the Joint Committee of the Government and the Government Parties for the Promotion of the Financial Reform Total Plan
4. Cooperation between Japan and the international community in response to the nuclear tests conducted by the Islamic Republic of Pakistan.
5. Transfer of technology
6. Sanctions against the Republic of India and the Islamic Republic of Pakistan
7. Possible meeting of Foreign Ministers regarding the India-Pakistan situation
8. Visit by President William Jefferson Clinton of the United States of America to the People's Republic of China
9. Size of bad loans held by financial institutions
10. Amount of aid from Japan to the Islamic Republic of Pakistan
11. Concept of situations in the areas surrounding Japan

1. Response of the Government of Japan to nuclear testing conducted by the Islamic Republic of Pakistan

   Several things are happening in the world and I was trying to catch up with these developments. Firstly, with respect to the nuclear testing by the Islamic Republic of Pakistan, the news of which we learned last night. We have issued two comments, both by Chief Cabinet Secretary Kanezo Muraoka, one late last night and the other this morning. We do find this testing deplorable in view of the fact that we have been urging Pakistan to exercise maximum self-restraint and that is why Minister for Foreign Affairs Keizo Obuchi called in the Pakistani charge d'affaires last night strongly protesting the testing and at the same time he urged Pakistan to immediately cease nuclear testing and the development of nuclear weapons. This morning we announced several measures which we have decided to take vis a vis Pakistan in view of our Overseas Development Assistance (ODA) charter, that is freezing grant aid for new projects except emergency and humanitarian aid and grant assistance for grassroots projects and the freezing of the yen loan to Pakistan for new projects and cautious examination of the loan programs to Pakistan by international financial institutions. We are determined to maintain our strict control on transfers of items and technologies related to weapons of mass destruction to Pakistan. In addition to urging Pakistan to immediately cease nuclear testing and the development of nuclear weapons, our intention is to work together with members of the international community in dealing with issues of dealing with the task of maintaining the non-proliferation regime and maintaining peace in South Asia. We are exploring ways to work on this with other countries. That is what I wanted to say about Pakistan.

2. Japan-U.S. Guidelines for Defense Cooperation

   I wanted to touch briefly on the questions arising from the Japan-U.S. Guidelines for Defense Cooperation (Guidelines). There have been some reports on the Diet interpellations concerning the legislation for this, especially with respect to the concept of the "situations in the areas surrounding Japan." There was a reaction by the Government of the People's Republic of China. Ambassador Sakutaro Tanino of Japan in Beijing saw one of the Assistant Ministers at their Ministry of Foreign Affairs yesterday to explain our position. I just wanted to take this opportunity to reiterate the key points of the position of the Government of Japan on this. The key points are first, that there is no change in the position of the Government of Japan on the concept of the situations in the areas surrounding Japan. That is point one. Point two, which does relate very closely to point one, is that this concept is not geographical but situational. Point three is that the cooperation to take place under the Guidelines between Japan and the United States of America will be conducted within the framework of the Japan-U.S. Security Treaty. Fourthly, there is no change in the position of the Government of Japan concerning the question of Taiwan. In fact, our position has remained consistent since the Joint Communique between Japan and the People's Republic of China of 1972. Japan sincerely hopes that the Taiwan question will be resolved peacefully through dialogue between the two parties on both sides of the Taiwan Straits.

3. Formation of the Joint Committee of the Government and the Government Parties for the Promotion of the Financial Reform Total Plan

   My next comment concerns the question of how we propose to deal with the question of bad loans or bad debts, depending on which side you are on, as a part of our efforts to reform the financial system. This morning it was announced that there has been established the Joint Committee of the Government and the Government Parties for the Promotion of the Financial Reform Total Plan. This Joint Committee comprises very senior political leaders from the Liberal Democratic Party (LDP), for example former Prime Minister Kiichi Miyazawa, Secretary-General Koichi Kato, Chairman Taku Yamazaki of the Policy Research Council, Secretary-General Masakuni Murakami of the LDP in the Upper House, meaning the House of Councillors, Secretary General Shigeru Ito of the Social Democratic Party (SDP), Chairman Tadatoshi Akiba of the Policy Deliberation Council of the SDP, Secretary-General Hiroykui Sonoda of Sakigake and Chairman Seichi Mizuno of the Policy Research Council of the SDP and on the part of the government, Chief Cabinet Secretary Kanezo Muraoka, and a number of ministers, Ministers of Justice, Finance, Agriculture, Forestry and Fisheries, International Trade and Industry, Constuction, National Public Security Committee, Economic Planning, National Land Agency and others. Without going into too much detail, let me simply say that in terms of the management of the Japanese economy, there are now three priorities. The first priority is to try to stimulate domestic demand by reducing taxes and promoting social infrastructure development. That was what the 16 trillion yen package announced in April was all about. But that is not all. Secondly, we are trying to strengthen the financial system by fundamentally resolving the bad-debt problems. Thirdly, we are trying to implement structural reforms. So our efforts in these three areas need to be pursued in tandem and this is also what Prime Minister Ryutaro Hashimoto emphasized at the end of the G8 Summit in Birmingham in his press conference. In that press conference, Prime Minister Hashimoto, in response to a question, emphasized the importance in particular of resolving the bad-debt problem. It is in that context that this Joint Committee of the Government and the Government Parties has been established. Starting from what I was saying earlier, our efforts are based on the realization that one of the fundamental causes of the current economic stagnation in Japan is indeed the bad loans or bad debts of the financial institutions. In order to reconstruct and revitalize the economy as soon as possible, it is essential to first disclose the state of the bad loans and then to dispose of them swiftly through a comprehensive set of measures. In doing that, it is also important for us to take various sets of measures to create the demand for the use of collateralized real estate. When we talk about resolving the bad loans problem, much of the problem is how you free the collateralized real assets and put them in the market. >From that it follows that it is also important to create the demand for the use of collateralized real estate. We feel that such efforts are necessary for the financial institutions to regain their original function of insuring the smooth provision of funds. Metaphorically, if you think of the economy as a human body, it is very important to insure that the blood gets back into circulation. In that context, the task of this committee is threefold. The first is to prepare the framework in which to sort out the very complicated relationship between claims and liabilities on loans with collateralized real estate. If you look at a piece of real estate which is collateralized, there can be all sorts of complicated relationships. For example, you could have a single collateral or you cold have several institutions having overlapping collaterals. How do you sort them out? How do you assess the value of that real estate when the value of these assets has declined considerably? How do you establish the value? How do you prepare them for transaction? All this is complicated and we do need to establish a framework to sort out these kinds of problems. The second task is to securitize claimants with collateralized real estate, to issue securities which correspond to this collateralized real estate. The third task is to revitalize the financial system by, basically speaking, three sets of measures. The first is to establish a rather rigorous system of disclosure. We are talking about the American Securities and Exchange Commission (SEC) equivalent standard for disclosure which is being put into effect and on the basis of such disclosure, if you identify the really bad apples as it were, you have to write them off completely. If the apples are half-bad, then you may partially write them off. You do need to go through that sort of process which is the second point under the measures to revitalize the financial system. Thirdly, these financial institutions which have been suffering, need to restructure themselves. There are measures necessary to encourage their restructuring. First, encourage them to draft their restructuring programs and to make sure they are implemented. So those are the tasks that the committee will be grappling with and that calls for certain actions and this committee has come out with an interim report on what needs to be done to implement this total plan and it includes, for example, establishing an emergency committee for real estate legal claims for which we are seeking to put forward a legislation in the next session of the Diet. The task of this emergency committee for real estate legal claims is really to sort out the complicated liabilities, obligations and issues that I was referring to earlier. The second is that if you go through these things there will be cases in which certain institutions will be waiving their claims. There arises the question of how you treat these waivers in terms of tax laws and do not ask me for further details because I find myself on increasingly shaky ground. The point I wanted to make is that these procedures, in terms of tax laws, will be clarified through administrative circulars. The third is when you try to get these pieces of real estate back into the market, there does arise the question of auction. There has been the auction procedure which has been somewhat clogged up to now. For that reason, we are putting forward legislation designed to expedite auctions processes for prompt and smooth auctions. The fourth is that we will establish the system of servicers through legislation and the function of the servicers is to collect and manage credits. We are trying to establish a system for that sort of thing. So those are the main points of the tasks which we are trying to grapple with in the context of getting rid of the bad debt problems. In that sense I come back to what Prime Minister Hashimoto said in his press conference in Birmingham when he was asked about this and he said what we are trying to do is to delete the bad loans from the balance sheets of the financial institutions.

4. Cooperation between Japan and the international community in response to the nuclear tests conducted by the Islamic Republic of Pakistan.

   Q: After the nuclear explosions yesterday by Pakistan, Japan decided to impose sanctions. Is there going to be a movement by Japan with the international community to cooperate and have more sanctions?

   A: We have taken the sort of measures vis a vis the Republic of India with an effect that I think is quite considerable, for example the freezing of ODA and so forth. We find ourselves in this regrettable situation of having to take a similar set of measures with respect to Pakistan. However, the testing has taken place. Now, what can be done from this point on? We feel that it is vitally important for both India and Pakistan to immediately cease nuclear testing and the development of nuclear weapons. We are reiterating our call on India and Pakistan not to commence a dangerous nuclear arms race and to join the nuclear Non-Proliferation Treaty (NPT) and the Comprehensive Nuclear Test Ban Treaty (CTBT) without condition. At the same time we feel that there is a need for a concerted effort by the international community to make sure that the non-proliferation regime be maintained and that peace be sustained in South Asia. In that sense, we are exploring what can be done about it in collaboration with like-minded countries. Perhaps one forum in which such efforts may be concentrated may be the United Nations. We expect to be in touch with more countries concerned on discussing the possibility of joint appeals or actions.

   Q: Japan tried to prevent Pakistan from conducting tests. How does Japan look at it?

   A: We are dismayed and we find it extremely deplorable. We feel particularly strong about this, partly because of our own experience with nuclear weapons and because of our very strong desire to realize a world free form nuclear weapons. We have been concerned about the exacerbation of the stability in that region. We have been concerned about the possible escalation of the tension. That is why we have been urging for maximum self-restraint, but the signs emanating from the fact that the nuclear testing has actually taken place do not look good at all.

   Q: Do you have plans to call back Ambassador Kubota?

   A: Yes, we are considering that but we do not know the precise timing yet. We would like to have Ambassador Minoru Kubota back in Tokyo for consultation.

5. Transfer of technology

   Q: Since it is pretty clear that Pakistan got blueprints for the bomb from China, the uranium for its first bomb from China, equipment to make more uranium from China as well as missile technology, are any types of sanctions being contemplated against China as a result of what Pakistan has done?

   A: We have been in touch with the Government of the People's Republic of China and we expect to be in touch with the Government of China about this serious situation. I am not quite sure whether I could be as confident of the sources of the equipment and technology that Pakistan has gained. I am not in a position to comment on that particular aspect.

   Q: Is Japan concerned about the transfer of technology from Pakistan to other countries in the Middle East or East Asia, like North Korea?

   A: The risk or the danger of further proliferation to other countries is a matter of very serious concern to us and that is why we keep emphasizing the need for the preservation of the global non-proliferation regime. That is why we also feel that it is important for the international community to rally for maximum self-restraint guarding against such risks of proliferation. We have to find an effective way of doing that.

6. Sanctions against the Republic of India and the Islamic Republic of Pakistan

   Q: When Pakistan conducted its nuclear test, Japan immediately included the suspension of yen loans in its package of sanctions. If I recall correctly, it took a second round of tests from India before this much more drastic step was taken. Why is there the appearance of two different standards?

   A: I do not think it is two different standards because they do stem from our concern about proliferation. What does make this particular situation very acute is that in the intervening period we have been engaged in very intensive dialogue with the Government of Pakistan by dispatching the personal envoy of the Prime Minister and also by having Prime Minister Hashimoto make a telephone call to Prime Minister Nawaz Sharif of the Islamic Republic of Pakistan urging maximum self-restraint. There has been this period in which we have been engaged in our own maximum efforts to urge maximum self-restraint. What happened last night was five tests.

   Q: Does Japan have more options available in the bilateral level if either India or Pakistan conduct more tests or take another step --

   A: I do not think it would be appropriate for me to speculate on what other bilateral options we might have available. I think the measures that we have decided on up to now with respect to India and Pakistan are pretty substantial in their effect.

7. Possible meeting of Foreign Ministers regarding the India-Pakistan situation

   Q: There are some reports that Japan has proposed an emergency meeting of nine national powers to discuss --

   A: Yes, I just heard about it before I came here. It is from the Government of the United Kingdom Foreign Secretary Robin Cook of the United Kingdom has called for a meeting of the foreign ministers of the G8 and P5 countries. With the overlap it comes out as nine countries. Foreign Secretary Cook proposed that the foreign ministers of these nine countries meet in London, possibly on 10 June to discuss the India-Pakistan situation and the nuclear issues. I am sure my colleagues are in the process of intensively being in touch with all those concerned with this idea. What I can say at this point is that such an idea is there, proposed by the United Kingdom and as I understand it, the governments approached are in the process of formulating their response to that. I think the communication came in the wee hours of this morning.

   Q: In the report they say that Japan has proposed it.

   A: I am not aware of our having proposed it. We will not deprive the United Kingdom of its proprietary interest.

8. Visit by President William Jefferson Clinton of the United States of America to the People's Republic of China

   Q: On this upcoming summit in China with President Clinton, it seems very strange to me that he is spending seven or nine days in China. It seems like more time than he has ever spent in Japan in his entire presidency. Is this a source of concern or consternation to the Government of Japan?

   A: No, no. I do not think it is a matter of concern or consternation for Japan. President William Jefferson Clinton of the United States of America has visited Japan on several occasions. Altogether he has spent a considerable amount of time in Japan. Prime Minister Hashimoto will be visiting the United States in July so the constant and frequent dialogue between our two leaders is going on. I do not think there is any cause for, as you put it, consternation or concern.

9. Size of bad loans held by financial institutions

   Q: Concerning the bad loans, do you have any idea about the size of these bad loans?

   A: No, in the sense there are many different ways of counting it. The numbers range rather wildly. I think to take one figure could be misleading. They are talking in terms of somewhere between 20 to 80 trillion yen. It depends really very much on the definitions.

10. Amount of aid from Japan to the Islamic Republic of Pakistan

    Q: How much aid are we talking about to Pakistan?

    A: With respect to Pakistan, I can give you the rough order of magnitude. For Pakistan it was 67 billion yen on a commitment basis for 1997 and it is about half the amount of ODA to India. The share of Japan's ODA in Pakistan's total bilateral aid receipts varies from year to year, but it ranges from somewhere between 50% to 80%, if you take the years from 1994 to 1996. In the case of India, for the same period, the share varied from 40% to %60.

11. Concept of situations in the areas surrounding Japan

    Q: Concerning the surrounding areas point, you mentioned that it is regarded as situational. Do you consider the Middle East as situationally an area surrounding Japan?

    A: However, at the same time, when we talk about the concept of situations in the areas surrounding Japan, we are talking about the situations which would have a serious effect or impact on Japan's peace and security. How do these impacts arise? The impacts arise in many forms, but when we are talking about security, military impact is a very important factor as well as possibly economic factors. I keep emphasizing that the concept is not geographical. We are not contemplating drawing a geographical line across the globe to say that this is an area surrounding Japan but this is not. However, at the same time, if you think in terms of the probability of events in certain parts of the world having a serious impact on Japan's peace and security, apart from the question of geographical line drawing, some places are more probable than others or some places are less probable than others, let me put it that way.