Section 2. Contributions to the Harmonious Development of the World Economy
1. The year 1973 was an eventful year in the economic field also, The advance of inflation simultaneously in various parts of the world, the shifting of the currencies of major countries to the floating rate system, food shortages, and the so-called oil crisis since the OAPEC members' announcement of supply cutbacks in October, all very seriously affected the economies of various countries, The problem from now is how to establish a new order in the international economy which has been thrown into a state of confusion by these upheavals, and to find a course of harmonious development.
Since Japan is heavily dependent on foreign countries for important resources and food, it is inevitably affected decisively by the trends of the world economy. On the other hand, Japan's economic policy and trends directly affect the world economy because of Japan's great economic strength. Japan, therefore, firmly maintains the attitude of seeking stable prosperity for the whole international community and of playing a role commensurate with its economic strength in the world economy. It has made positive contributions toward achieving the stable growth of the world economy at international conferences dealing with various problems of the international economy.
A feature of the recent changes in the international economy is the emergence of new problems that cannot be regulated by conventional international economic rules, such as resources, energy, food, international investment and the international spread of inflation, in addition to such traditional international economic problems as trade and currencies, and that these problems of the international economy are closely related with each other. For instance, the aggravation of global inflation affected the stability of the international currencies, and the decline in the value of the dollar was a factor in the raising of crude oil prices by OPEC members. On the other hand, the oil crisis had an impact on the international payments of various countries, a new factor of change in the monetary situation.
2. In connection with the oil crisis, which was the biggest problem in 1973, Japan endeavored to promote broad relations of friendship and cooperation with the countries possessing petroleum resources through personnel and cultural exchange, while showing a deep understanding of their enthusiasm for nation-building and also of their uneasiness about the fact that their petroleum resources would eventually dry up. Acting from the basic attitude that the creation of harmonious relations between the oil-producing and oil-consuming countries is essential for a fundamental solution of the oil problem, Japan at-tended the Washington Energy Conference held in February 1974 at the proposal of the U.S. Government. Japan's stand won full understanding of the participating countries, and its view was also reflected in the communique of the conference.
At the conference, Japan supported the creation of a coordinating group mainly charged with the task of preparing for an opening of a dialogue as early as possible between the oil-producing and oil-consuming countries, from the standpoint that such a dialogue was indispensable. The group has already met several times. Since direction has been given by and large to the moves to settle the problem through the efforts of various countries concerned, Japan has been making positive contributions, while consulting with other countries concerned, toward creating harmonious relations between the oil-producing and oil-consuming countries.
3. In the monetary field as well, 1973 was a year of upheavals. The Smithsonian monetary system came to an end due to the second devaluation of the U.S. dollar and the shift of the currencies of main countries, including the yen, to the floating rate system with the monetary crisis in Europe early in 1973 as a turning-point. On the other hand, the oil crisis exerted a serious influence, which was completely different from any other event before, on the international payments of various countries. The trend toward an increase of the foreign exchange reserves in the hands of the oil-producing countries is expected to affect any new monetary system and also its operation, and the task of working out a new international monetary system is likely to prove difficult. However, Japan, from the standpoint of its basic position mentioned above, has played a positive role in discussions on international monetary reform in the belief that the early establishment of a stable monetary order is necessary, especially in a time of upheaval like today.
4. In the field of trade, Japan stressed the need for a further expansion of trade under a free and open economic system on the occasion of the GATT Ministerial Meeting in September 1973, and tried to help adjust views between the United States and the EC for the adoption of the "Tokyo Declaration," which marked the start of the new round of the Multilateral Trade Negotiations, This reflected Japan's positive intention to contribute toward the establishment of a world economic order.
If the trend toward global recession develops further be-cause of the oil crisis, some countries may make protectionist moves, such as import restrictions, from the standpoint of giving priority to their domestic industries. Under these circumstances, it is necessary for Japan, whose national policy is the promotion of trade, to uphold the ideals of free trade in order to maintain and strengthen the world economic order.
5. As for food, export restrictions on foodstuffs in 1973,including American soybeans, carne as a shock to Japan, and the sense of crisis over food deepened throughout the world. However, the demand-supply situation in food has improved because world food production in 1973 reached a record high level and also because of forecasts of good crops in 1974, and the food crisis is abating.
But food prices still remain high while the level of the world's stockpiles of food is very low, and it is expected that the food problem will go through more ups and downs.
At the world food conference and the GATT Multilateral Trade Negotiations scheduled to take place under these circumstances, it is necessary for Japan to secure stable supplies of needed foodstuffs over a long period of time and to make due contributions toward settling the world's food problem, This means that Japan will be required to study from new angles what kind of attitude it should take toward the problem of not only this country stockpiling foodstuffs, but also the world, and also how to help the developing countries in their agricultural development.
6. Another feature of the trends in the international economy is that the degree of external influence on domestic economic policies has increased as the degree of interdependence among the economies of various countries has deepened in re-cent years, and that it is becoming difficult to distinguish between domestic and external policies. It has become necessary to hold consultations among the governments of different countries on policy matters in various fields that were considered domestic economic problems in the past.
Japan, therefore, must always have an overall grasp of the complicated interrelationships in the whole range of economic activities in carrying out its economic diplomacy, and also wrestle with the difficult task of assuring the stable growth of its economy over the long range, while contributing to the harmonious development of the world economy through bilateral and multilateral negotiations, and while taking the need for harmony with domestic policies into consideration.