Section 4. Japan's External Economic Attitude
It is a self-evident truth that Japan, whose national policy is to establish the State on the basis of trade, needs to maintain harmony between its economy and the world economy in order for its own economy to continue to grow. To harmonize its economy with the world economy, Japan so far has regarded the world economy as a given condition and tried to achieve harmony in the form of responding to that condition. However, now that Japan has become one of the countries of the world with great economic power and its acts exert a great influence directly on the world economy, and the economic trends and economic policies of Japan have come to draw the attention of the international economic community, Japan is required to always have in mind the prosperity of the world economy as a whole, to share responsibility commensurate with its economic strength for the improvement and development of world economic order and to enjoy its prosperity only within a prosperous world economy.
It is especially important to consider the world economy from an overall point of view at a time when the GATT and IMF systems, which have supported the prosperity of the world economy for a quarter of a century after the War, have become disturbed and when there may be a tendency to review the international economic rules on the basis of past experience, for securing the well-balanced development of the world economy.
What is particularly important for Japan to play a role commensurate with its role as one of main constituents of the international economy is to improve its economic structure, promote a free trade policy, and contribute in a positive manner toward the construction of a new world economic order.
First of all, Japan should try to strike a long-term balance in its external economic relations by changing its economic structure.
Although it was only several years ago that Japan began to register a chronic surplus in its balance of trade, it would inevitably cause friction if a country's trade surplus increases too rapidly, especially in trade with a particular country. It is also generally pointed out that the accumulation of a trade surplus causes a loss in terms of the national economy. It is from this point of view that Japan has set a target for its international payments balance that calls for reducing its surplus in current transactions to about 1 per cent of its GNP in a few years in order to balance its payments and receipts.
The most basic measure to cope with the excessive trade surplus problem is to make a structural change in the Japanese economy, which means a shift from an economy where importance is attached to exports and plant and equipment investment to one that stresses better living standards and welfare for the people. Needless to say, such a shift is not only significant from the standpoint of international cooperation but also meets the wishes of the nation. Since it will take years before such a fundamental structural change can be achieved, such measures as the acceleration of the liberalization of the economy should be taken for the time being. Japan recently took such measures as 100 per cent liberalization of capital movements in principle, tariff reductions by a wide margin, import liberalization, expansion of import quotas, and so on. In order to achieve a balance development of its external economic relations, it is necessary to take further measures to promote liberalization.
In the area of exports, Japan needs to maintain order in its export trade more than ever before in order to avoid disruption and friction in foreign markets.
Since last year, there has been a growing awareness at a variety of international discussions that there have emerged new problems that must be solved through cooperation among nations, such as international investment, resources, and the conservation of the environment, in addition to various problems in the field of trade and monetary affairs. Moreover, domestic economic policies have come to exert a greater influence than before on the external world as economic interrelationships among countries have become increasingly closer as is evident from the problem of inflation. This has given rise to the thinking that it is necessary to take external effects into consideration when adopting and carrying out domestic economic policies. And this has made it clear that an essential factor for establishing a new international economic rule is not the leadership of the superpowers but a consensus among Japan, the United States and the EC countries.
In order to secure its growth under such circumstances, Japan needs to make positive contributions, together with the United States and the EC countries, for establishing in the world economy a new order which should guarantee an open economic system based on the principles of free trade and non-discrimination. Japan's positive attitude toward this contribution is expressly indicated by the fact that the GATT Ministerial Conference meeting launching a new round of multilateral trade negotiations was held in Tokyo (in September 1973) at the invitation of Japan. Japan, henceforth, must constantly consider from an overall point of view the complicated inter-relationship among such problems as trade, monetary affairs, investment, energy and resources, and the environment, and wrestle with the task of creating an international consensus by conducting bilateral and multilateral negotiations in each field, while bearing in mind the problem of maintaining harmony between domestic policies and these problems, Needless to say, this is not an easy task, and a flexible economic diplomacy is needed for this purpose. Japan must establish a posture of pursuing long-term national interests, without thinking of an immediate profit, based on the awareness that the prosperity of the world economy is indispensable to Japan's own prosperity and that it can develop only through international cooperation.
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