Chapter III. Regional Developments

(1) North America

Both the United States and Canada experienced a change of the governing party in 1994. In the United States, as the administration of President Bill Clinton faced difficulties in its policy management, the midterm congressional elections in November 1994 resulted in the Republican Party gaining a majority in both houses of Congress for the first time in 40 years. With the 1996 presidential election coming up, public attention has been attracted to the interplay between the Democratic-controlled administration and the Republican-dominated Congress and its effect on the domestic political scene.

President Clinton, who entered his second year in office in 1994, continued to place importance on his domestic agenda, especially by putting a great effort into the enactment of bills on health care reform and on comprehensive anti-crime measures. The anti-crime bill, after many twists and turns, eventually was enacted, but the health care bill, which was seen as the most important issue facing the Clinton administration, failed to draw a consensus and was dropped due to opposition in Congress, especially from the Republican Party. In addition, suspicions about Clinton's political ethics during his tenure as a state governor flared up again. As a result, the president's approval rating among the American public continued to decline.

The midterm congressional elections were held amid deep-rooted public mistrust in politics (see note 1). It has been pointed out that voters who had called for change in the 1992 elections were disillusioned with the Clinton administration, which in their view was not meeting expectations. President Clinton was also widely seen, to the dismay of many American voters, to be promoting liberal big-government policies despite his campaign pledge to maintain his position as a "New Democrat" (see note 2). This public disenchantment is believed to have led to votes against the president and votes of opposition to the Democratic Party, which previously controlled the Congress, and this caused the party serious setbacks in the congressional elections.

The U.S. economy remained buoyant, and the employment situation also improved. Reflecting this favorable turn in the domestic economy, the growth of U.S. imports exceeded that of exports, with the result that the U.S. trade deficit with the rest of the world in 1994 will almost certainly exceed the figure for 1993. While the U.S. fiscal deficit continued to decline, it will be worth watching the situation, particularly in light of the tax-cut policy of the Republican Party, which now holds a majority in the Congress.

In the area of foreign policy, the U.S. administration continued to give priority to economic relations, from the viewpoint that the United States will have difficulty maintaining strong world leadership without a strong domestic economy. The United States actively promoted its relations with Asia, lifting economic sanctions against Vietnam, renewing China's most-favored nation status, arranging a Framework Agreement with North Korea, and continuing its participation in APEC. It also made positive contributions to the Middle East peace process, the institution of the"Partnership for Peace" (PFP) in the North Atlantic Treaty Organization (NATO), and the restoration of democracy in Haiti. However, as a result of the victory of the Republican Party in the midterm elections, the rationale of U.S. involvement in foreign affairs will be scrutinized more severely than before in the light of national interests. Controversies over such issues as external assistance and peace-keeping operations, on which the administration and the Congress take opposite positions, should be closely watched in this respect.

In Canada, the political situation has been stable. The government of the Liberal Party under Prime Minister Jean Chretien, placing top policy priorities on the creation of jobs and reduction of the fiscal deficit, has been enjoying strong support from the public. In Quebec, however, Parti Quebecois, which aims to achieve sovereignty (separation and independence), returned to power in the provincial election in September. Canada attaches importance to its relations with the United States, with which it has close political, economic, and cultural ties, and this is reflected in the fact that the North American Free Trade Agreement (NAFTA) entered into force in January 1994. Nevertheless, while recognizing the importance of relations with the United States, the ruling Liberal Party believes that Canada should reduce its dependence on the United States and expand its relations with the Asia-Pacific region, Europe, and Latin American countries.

(2) Europe

In Europe, efforts have continued to build a new framework for a post-Cold War order in which the European Union (EU) will play a central role. Japan, which shares common values with Europe, has been promoting dialogue and cooperation in a wide range of areas, from economics to politics and security. It is essential that these cooperative relations be further expanded. It was from this perspective that Prime Minister Tsutomu Hata visited Europe in May 1994, holding meetings with the leaders of France, Italy, Germany, and the European Commission, among others. This visit contributed to the strengthening of Japan-Europe relations.

(a) European Integration

The European Union, inaugurated in November 1993, is making steady progress in its deepening integration by, on the economic level, preparing for an Economic and Monetary Union (EMU) and, on the political level, implementing common foreign and security policies by, for example, providing overall assistance for elections in Russia and South Africa.

Progress was also made in the European Union's expansion during 1994. In January the European Economic Area (EEA) agreement took effect, and the 12 EU member countries formed a single market with five countries of the European Free Trade Association (EFTA), excluding Switzerland and Liechtenstein. Negotiations on accession to the European Union by Austria, Sweden, Finland, and Norway were concluded in March. Three of these countries (excluding Norway, which rejected accession in a national referendum) joined the European Union on January 1, 1995. Furthermore, the European Union is promoting the liberalization of trade and investment with countries in Central and Eastern Europe that aspire to EU membership. The leaders of these countries were invited to a conference of the European Council (the EU Summit) in December 1994.

As European integration has progressed, the number of EU member countries has increased. In light of this, it will be particularly important to review the Treaty on European Union, including the area of institutional reforms, at the intergovernmental conference scheduled for 1996.

(b) European Economic Recovery and Prospects

With the world economy as a whole showing signs of recovery, the economies of the EU member countries in 1994 generally moved onto a recovery track. (According to the European Commission, the real GDP growth rates of the European Union as a whole in 1994 and 1995 are expected to reach an estimated 2.6% and 2.9%, respectively.) This recovery of the EU economy is the result of increased exports, which have led to a recovery of investment and consumption. However, it will not be easy for member countries to fully meet the conditions for economic convergence stipulated in the Treaty on European Union as the prerequisite for moving to the third stage of the EMU-the establishment of a European Central Bank and the introduction of a single currency (see note 3). It is widely believed that it will be difficult, in light of the present situation, to proceed to the third stage in 1997.

Spurred by the recovery in economic activity, the employment situation, which is the biggest concern in the European Union, is also improving. Although EU member countries, especially in Southern Europe, continue to face problems deriving from structural causes, such as the high rate of unemployment among young people and the high proportion of long-term unemployed, the unemployment rate for the European Union as a whole seems to have peaked in the spring of 1994 and is expected to come down gradually from its high of 10.9%, recorded in 1994. As a part of policies to maintain the present recovery and create even more jobs, at the end of 1993 the European Commission issued a White Paper on Growth, Competitiveness, and Employment (the Delors Report), on the basis of which the Brussels European Council formulated an action program. Much is expected to be achieved in the follow-up to this program.

(c) Developments in Former Socialist Countries in Central and Eastern Europe

In some Central and East European countries, there have been expressions of dissatisfaction against the drastic nature of reforms, which in some cases has led to changes of government. Nevertheless, the basic direction of reforms toward parliamentary democracy and the market economy has remained unchanged. Such countries as the Czech Republic, Poland, and Hungary, which are in the forefront of reform efforts, have expressed their desire to join the European Union and NATO and seek political and economic stability through a strengthening of cooperation and ties with the Western European nations. Russia, on the other hand, regards this rapid integration of Central and East European countries with Western Europe as the erection of a new wall in Europe. Following the collapse of socialist administrations in Central and Eastern Europe, there is an increasing danger that disputes with ethnic or religious causes will give way to an outbreak of armed conflicts in the region. Conflicts which have erupted in such places as the former Yugoslavia and Nagorno-Karabakh are not showing any signs of reaching a settlement and have become destabilizing factors in the region.

(d) Searching for a New Security Order in Europe

In Europe, the Treaty on Conventional Armed Forces in Europe is being implemented with the aim of full execution by November 1995. In the meantime, a framework for European security, conflict prevention, crisis management, and dispute settlement has been sought in the Organization for Security and Cooperation in Europe, NATO, and other forums (see note 4).

At the summit meeting of the CSCE in December 1994, it was agreed to further strengthen the organization's structure and to enhance its function in preventing and settling disputes on the basis of Chapter VIII of the U.N. Charter, concerning regional arrangements. Japan participated positively in this meeting. Meanwhile NATO, while maintaining its basic function as an organ of collective security, is searching for a new role to ensure stability in the whole of Europe. Regarding relations with the countries of Central and Eastern Europe, NATO, mindful of its future expansion of membership, is promoting cooperation through the &quotPartnership for Peace" (PFP) program, based on an agreement made at a NATO summit in January 1994, in addition to the existing dialogue and cooperation promoted through the North Atlantic Cooperation Council (NACC). As regards the expansion of NATO, the foreign ministers of NATO member countries decided at a meeting in December 1994 to begin discussion within a year on why NATO should be expanded and how. Russia opposes this decision.

(3) Russia and the New Independent States

(a) Russia

In Russia, efforts were made in 1994 to boost the economy while securing social stability and to further promote reform under a new constitution, enacted in December 1993. Although there was no recurrence of the kind of serious power struggle between president and Parliament that took place in 1993, the situation in Russia remained fluid due to a backlash against radical reform policies, maneuvering by political forces prior to the next parliamentary and presidential elections, and the use of military force in the republic of Chechnya.

(i) Maintaining Reform Policies and Searching for Stability

As a result of parliamentary elections at the end of 1993, President Boris Yeltsin, who had been pushing for drastic economic reform and giving priority to coordination with the West, was forced to alter his course and adopted a more moderate economic reform policy and a more assertive foreign policy that stresses the interests of Russia as a great power. As early as January President Yeltsin approved a cabinet reshuffle that ousted such radical reformists as First Deputy Prime Minister Yegor Gaidar and formed a ministerial lineup centered on Prime Minister Viktor Chernomyrdin and other "industrialists" or former economic apparatchik. President Yeltsin enunciated the change of course in his State of the Union speech to Parliament in February. At the same time President Yeltsin tried to effect a national reconciliation and signed a Civic Accord at the end of April with the administration, the Parliament, federal entities, political parties, social groups, and others, which brought about a temporary political lull.

However, as political maneuvering and tactics by various forces came into play in anticipation of the next parliamentary elections in 1995 and the presidential election in 1996, criticism of the president's political style and the government's economic policy gradually came to the surface, and the political situation in Russia became increasingly fluid. In particular, a no-confidence motion in the cabinet, which had been submitted in the wake of the ruble's crash in October 1994, gained more support votes than had been expected, although it was eventually rejected, and this gave rise to demands for a cabinet reshuffle. In addition, when President Yeltsin decided in December 1994 to use military force in the republic of Chechnya, which had claimed independence, the reformists and others were extremely critical and the international community, including Japan, expressed concern.

(ii) Economic Reform and the Present Economic Situation

Three years have passed since the Government of Russia embarked upon fundamental economic reforms in January 1992, immediately after the dissolution of the Soviet Union. The cabinet of Prime Minister Chernomyrdin, inaugurated after a cabinet reshuffle in January 1994, has been implementing an economic policy that gives greater consideration to the interests of individual industries while maintaining this reformist course.

Specifically, in line with a policy of fiscal austerity, the FY 1994 budget was passed in June and the government submitted its draft for a belt-tightening budget for FY 1995 to Parliament in October 1994. There were some favorable developments in 1994, including a real increase in incomes and a rise in savings. Inflation, however, which had calmed down once around the middle of the year, flared up again in the fourth quarter and has become unpredictable due to the Chechen conflict. With the level of production still in a deep slump, accumulating corporate debts, and a rising unemployment rate, the Russian economy remains in a difficult situation.

(iii) External Relations

As domestic nationalist sentiment has grown stronger, Russia has become increasingly assertive on various international issues, including issues regarding the former Yugoslavia. In his speech to the U.N. General Assembly in September, President Yeltsin declared that Russia continues to be a major power. In the speech, he made particular reference to Russia's relations with the member countries of the Commonwealth of Independent States (CIS), and stated clearly that the main peace-keeping responsibilities in the territory of the former Soviet Union fall to Russia.

Regarding the issue of NATO expansion, President Yeltsin expressed his vehement opposition, proclaiming that any eastward expansion of NATO would be tantamount to drawing a boundary between Russia and NATO along Russia's national border. Russia and the United States were in conflict on this issue at the CSCE summit in December.

With respect to the issue of the withdrawal of Russian troops stationed in foreign countries, the Russian military completed its withdrawal from Germany, Latvia, and Estonia in August. Hence, Russian troops have withdrawn completely from Germany and the three Baltic states, including Latvia, from which they had pulled out at the end of August 1993. As a result, as is often said, the postwar period has come to an end in Europe.

As regards relations between Japan and Russia, the two countries signed the Tokyo Declaration at the time of President Yeltsin's visit to Japan in October 1993, thereby establishing an advanced basis for negotiations on the territorial issue. Since then the political dialogue has been steadily underway. Deputy Prime Minister and Minister for Foreign Affairs Tsutomu Hata made an official visit to Russia in March and held talks with Prime Minister Chernomyrdin and Foreign Minister Andrei Kozyrev, in which the two sides reaffirmed their determination to further promote Japan-Russia relations on the basis of the Tokyo Declaration. Furthermore, Russia's First Deputy Prime Minister Oleg Soskovets visited Japan in November for the first high-level political dialogue since President Yeltsin's visit. In December, the fourth Working Group on a Peace Treaty Between Japan and Russia and Japan-Russia working-level consultations were held in Tokyo.

Since 1993 Russia appears to have tightened its control in the sea around the Northern Territories. There has been an increase in illegal seizures of Japanese fishing vessels, and shooting incidents have occurred. Concerning the development of fishery cooperation in these waters, at the time of the visit to Japan of First Deputy Prime Minister Soskovets, Japan and Russia agreed to initiate negotiations in the near future between representatives of both countries with the aim of reaching a mutually acceptable agreement on this issue.

In October a large earthquake struck the eastern part of Hokkaido, including the Northern Territories, and Japan provided humanitarian relief goods to residents of the Northern Territories twice in accordance with its basic policy of supplying appropriate assistance from a humanitarian perspective.

(b) The New Independent States

The new independent states (NIS) that comprised the former Soviet Union, excluding Russia, continued to experience economic difficulties in 1994 due to the breakup of the previous division of labor following the collapse of the Soviet Union and confusion caused by the introduction of a market economy. In addition, many countries have been facing political instability caused by such factors as the existence of ethnic problems and the fragility of their governmental bases. Under these circumstances, the main issue for these countries is to balance their domestic nationalist movements with their relations with Russia and to ensure real political and economic independence.

After independence, Ukraine suffered from economic deterioration, inflation, and tense relations with Russia. In a presidential election in July 1994, however, the pro-Russia and business-minded former Prime Minister Leonid Kuchma was elected, and he began to tackle the implementation of full-scale economic reforms and the improvement of relations with Russia. Meanwhile, the international community showed increasing interest in the stability of Ukraine, which had a stockpile of nuclear weapons and dangerous nuclear power plants left over from the Soviet era. The international community is strengthening its efforts to provide Ukraine with economic support and assistance for the safety of its nuclear power plants. For example, the issue was taken up at the G-7 Summit in Naples in July and at the Conference on Partnership for Economic Transformation in Ukraine, held in Canada in October. In addition, as a result of diplomatic efforts by the major industrial countries, including Japan, Ukraine joined the Nuclear Non-Proliferation Treaty as a non-nuclear- weapon state in December.

Regarding regional conflicts in this area, ceasefires have been achieved through mediation by Russia and others in the civil war in Tadzhikistan, in the dispute in Georgia over the Abkhazian autonomous republic's claim to independence, and in the dispute in Azerbaijan over Armenia's claim to the Nagorno-Karabakh autonomous oblast. In the former two cases, CIS peace-keeping forces led by Russia have been deployed. Meanwhile, U.N. ceasefire observer missions have been dispatched to Georgia and Tadzhikistan.

(4) Asia and the Pacific

(a) China and Neighboring Countries and Territories

Although facing such problems as soaring inflation, widening gaps among different regions, and corruption, China is pushing ahead with reform and open policies under a "socialist market economy" to continue achieving high economic growth-around 13% in 1993. In addition, against this background of economic development, China also is achieving steady results in its international relations. In particular, after the United States decided in May to renew China's most-favored nation status, delinking human rights from the annual extension of the status, high-level talks have taken place between the two countries in a wider range of areas, including economics and security. As a result, there was a considerable improvement in bilateral relations, which had deteriorated since the Tiananmen Square incident in 1989.

As for Japan-China relations, although there was a difference of opinion over the issue of Taiwan's representative to the Asian Games in Hiroshima in October, Japan and China agreed at a summit meeting in Jakarta in November that they would continue to develop their bilateral relationship.

Regarding the issue of Hong Kong's restoration to China, talks between the United Kingdom and China showed signs of an improvement. Taiwan is seeking to strengthen relations with other countries and international organizations, with democratization well underway and its economy gaining importance in the world economy. Mongolia is making steady progress toward democratization and the development of market economy.

(b) The Korean Peninsula

On the Korean Peninsula, a series of major events took place in 1994, including the heightening of tension concerning North Korea's suspected development of nuclear weapons (see Chapter I, Section 3) and the sudden decease of President Kim Il Sung, who had been North Korea's paramount leader for a long time. If the U.S.-North Korea Agreed Framework for the settlement of North Korea's suspected development of nuclear weapons is implemented by North Korea in a sincere manner, the Agreed Framework will not only solve the nuclear problem but also contribute immensely to the relaxation of tension in the region by bringing about an improvement in U.S.-North Korea relations.

However, there is little prospect of any early resumption of the North-South dialogue, with an agreed upon summit meeting postponed because of Kim Il Sung's sudden decease. Moreover, there appears to have been no change in the military confrontation between the two sides over the demilitarized zone.

As for the domestic situation in North Korea, although Korean Workers' Party (KWP) Secretary Kim Jong Il, who is expected to become Kim Il Sung's successor, has not yet been appointed to the posts of President and General Secretary of the KWP, there is no particular reason to refute the view that North Korea is taking steps to establish a Kim Jong Il regime. The Republic of Korea, for its part, has continued to promote reform measures under President Kim Young Sam, including the enactment of a package of political reform bills in March 1994.

As the situation on the Korean Peninsula has moved into a critical phase, Japan has continued its efforts to promote friendly and cooperative relations with the Republic of Korea. President Kim Young Sam visited Japan in March, and Prime Minister Tomiichi Murayama visited the Republic of Korea in July 1994.

(c) Southeast Asia

The countries of Southeast Asia, especially the member states of the Association of Southeast Asian Nations, are recording high economic growth, leading to an expansion of investment opportunities in the region and intra-regional trade. In addition, these countries are coming to play a leading role in various forums for regional cooperation and dialogue in the Asia-Pacific region. Under these circumstances, Myanmar was invited to attend the ASEAN Ministerial Meeting in July as a guest of the Chair, Thailand. As a result, foreign ministers from the ASEAN countries, the three Indochinese countries, and Myanmar-10 countries altogether-were assembled under the same roof for the first time. Furthermore, Vietnam formally applied for membership in ASEAN in October. Thus, Southeast Asia has embarked on a course of strengthening cooperative and harmonious relations. Reflecting this development, the relationship between Japan and the countries of Southeast Asia is now entering a new era. It was in this context that Prime Minister Tomiichi Murayama made a visit to Southeast Asia in August to further promote cooperative relations with these countries.

In an effort to join in the spectacular economic development of the East Asia region, the countries of Vietnam, Cambodia, and Laos are promoting economic reforms oriented toward market economy. In view of these efforts, the international community is providing support to the Indochinese countries through such forums as the International Committee on the Reconstruction of Cambodia and the Vietnam Consultative Group. Furthermore, the Forum for Comprehensive Development of Indochina, proposed by Japan, is scheduled to hold a ministerial meeting in February 1995. This forum is expected to continue to play an active role in the development of the Indochinese region as a whole.

In Myanmar, moves toward democratization and the improvement of the human rights situation have been seen, such as talks between the government and Aung San Suu Kyi, the leader of the democratic movement who was under house arrest. Japan's policy has been to promote democracy in Myanmar through a dialogue with the government. The United States, Europe, and other countries are also shifting to a course of dialogue with Myanmar.

The dispute over territorial claims on the Spratly Islands remains a destabilizing factor in the region, although moves were evident in 1994 toward a peaceful settlement of this problem.

(d) Southwest Asia

India and Pakistan are making efforts to strengthen relations, especially economic ties, with the major industrial countries. India's epoch-making policy of economic liberalization and reform since 1991 has been successful and has attracted enormous international interest, as shown by the remarkable increase in foreign investment. Meanwhile, the issue of the territorial claim on Kashmir, which has been a source of constant tension between India and Pakistan ever since their separation and independence, still shows no signs of a settlement and continues to represent a destabilizing factor for the whole of Southwest Asia. Furthermore, suspicions about the development of nuclear weapons by both countries continue to be a matter of international concern.

(e) Oceania

Both Australia and New Zealand have made all the more clear their desire to give greater attention to the Asia-Pacific region. This can be seen in their further encouragement of cooperative relations with Japan, in their dealings with APEC, and in their expansion of economic ties with ASEAN countries. The South Pacific Forum (SPF), comprising Australia, New Zealand, and the Pacific Island countries, has also promoted regional cooperation by engaging in dialogue with leading countries outside the South Pacific, including Japan.

(5) Latin America

The fact that presidential elections were held smoothly in eight countries in Latin America in 1994 and in five other countries in 1993 signified both at home and abroad that democracy is taking root in the region. Above all, the overwhelming victories in presidential elections of former Education Minister Ernesto Zedillo, who advocated the continuation of the economic reforms of former President Carlos Salinas, in Mexico in August, and former Finance Minister Fernando Cardoso, who had succeeded in bringing inflation under control, in Brazil in October, symbolize the aspirations of the people of the Latin American countries for economic reform. As a result of economic reforms, the Latin American region has become the second largest growth center in the world economy after East Asia. These countries are also addressing various issues, such as the alleviation of social imbalances through the expansion of education and the improvement of infrastructure, to enhance the achievements of economic reforms and realize a mature society.

At the end of 1994 Mexico plunged into a serious financial crisis caused by a huge devaluation of the peso, which caused concern not only in Latin America but also in the emerging markets of Asia. However, with full assistance from the United States-debt guarantees and other measures-and cooperation and support from the international community, Mexico has been making efforts to achieve stable management of its economy.

Together with these domestic reform efforts, regional cooperation is being strengthened on both the political and economic levels. On the political level, close consultations have been held on the situation in Haiti and on other important issues affecting the stability of the region in such bodies as the Organization of American States (OAS) and the Rio Group (comprising 12 leading countries in Latin America). On the economic level, regional economic integration designed to liberalize intra-regional trade has been well underway, for example, through the customs union called MERCOSUR, established in January 1995. At the Summit of the Americas held in Miami in December 1994, the leaders of 34 countries agreed on wide-ranging and specific policy targets in such fields as the strengthening of democracy and the promotion of economic and social development and also set the goal of concluding negotiations on the establishment of a Free Trade Area of the Americas (FTAA) by 2005.

One of the notable diplomatic postures taken by Latin American countries in recent years is their increased interest in strengthening relations with the Asia-Pacific region, especially Japan. This trend is reflected in the fact that Mexico and Chile officially joined APEC in 1993 and 1994, respectively, and that five heads of state and nine foreign ministers from Latin America visited Japan in 1994.

Japan is of the view that the maintenance and fostering of favorable political and economic conditions and the securing of long-term stability in the countries of Latin America is essential to the stability of the international community. It is from this standpoint that Japan attaches pivotal importance in its policy toward Latin America to assisting democratization and efforts to develop market economy. For example, at the time of the presidential elections in El Salvador in March and April 1994, Japan dispatched 15 election observers to participate in the U.N. Observer Mission in El Salvador (ONUSAL). Moreover, in view of the fact that the countries of Latin America are becoming increasingly important partners in the international community, Japan is making efforts to maintain and strengthen its policy dialogue with this region. Foreign ministerial talks with the countries of the Rio Group have been held during the U.N. General Assembly six times, including the one in 1994. Deputy Prime Minister and Minister for Foreign Affairs Yohei Kono visited Brazil and Argentina from August to September 1994. In Brazil Minister Kono held talks for the second time with the foreign ministers of the Rio Group's troika countries (the three presiding countries in 1994-Brazil, Ecuador, and Chile), exchanging opinions with them on a wide range of issues including the strengthening of the functions of the United Nations, international trade issues, and nuclear non-proliferation.

(6) The Middle East

The Middle East peace process, which was started with the Madrid Conference in October 1991, led to the beginning of interim self-rule by the Palestinians in the Gaza Strip and Jericho in May 1993. Since then important progress has been made, such as the signing of a peace treaty between Jordan and Israel in October 1994. (For more details, see Chapter I, Section 2.)

Although the Middle East peace process is in progress, destabilizing factors remain in the Middle East. In the Persian Gulf region, Iraq, which is calling for the lifting of U.N. economic sanctions, attempted to sway international public opinion by assembling its troops near the border with Kuwait in early October. When this ploy proved unsuccessful, Iraq officially recognized the sovereignty and national borders of Kuwait in November. However, the U.N. Security Council, judging that Iraq still had not fulfilled its responsibilities under the Council's resolutions, refused to lift the economic sanctions against Iraq. In Iran, it was noteworthy that President Hashemi Rafsanjani stated in June that Iran would not physically obstruct the Middle East peace process, although Iran has not altered its position of political opposition to the peace process. In addition, suspicions about Iran's behavior, such as its alleged support of terrorism and development of weapons of mass destruction and missiles, remain a cause of concern for the international community.

Japan welcomes Iraq's recognition of the sovereignty and the borders of Kuwait as a step forward and takes every opportunity to strongly urge Iraq to execute all the relevant resolutions of the U.N. Security Council. In the meantime, Japan has persistently urged Iran to take appropriate actions in order to remove the suspicions of the international community, while providing ODA loans to Iran with the object of supporting its pragmatic policies, such as its efforts toward economic reconstruction, and promoting regional stability.

In Yemen, the conflict between the leaders of the former North and South Yemen developed into a military clash in May 1994. After two months of fighting, the civil war came to an end when the leader of the former South Yemen fled the country. In Algeria the activities of radical terrorist groups linked to Islamic fundamentalism are leading to a deterioration of public security and instability in domestic politics.

(7) Africa

Continuing efforts are being made in Africa toward democratization and the development of market economy.

On the political level, there have been several favorable developments: in South Africa constituent assembly elections were successfully held in April and a Government of National Unity was thereby established; presidential and parliamentary elections were also successfully held in Mozambique in October; and an agreement for peace in Angola was signed in November. On the other hand, there are quite a few countries that face various difficulties, such as Rwanda, where tribal and political conflicts have surfaced in the process of democratization (see Chapter I, Section 2).

On the economic level, many African countries have been engaged in various economic reforms, mainly through a "structural adjustment" program under the guidance of the World Bank and the International Monetary Fund (IMF). It has been pointed out over the years that this structural adjustment program can put short-term pressure on people's livelihoods because of the institutional fragility of the economy, poor infrastructure, and immature private sectors in African countries. Despite this problem, the need for economic reform itself is commonly recognized.

The 50% devaluation (against the French franc) in January of the CFA franc, which is the common currency of the six members of the Central Africa Customs and Economic Union and the seven members of the West Africa Monetary Union, yielded favorable results, such as an increase in exports and the return of capital from outside these countries. Nevertheless the future does not necessarily warrant optimism.

In line with the results of the Tokyo International Conference on African Development in 1993, Japan supports the self-reliance efforts of the countries that are making serious efforts toward democratization and economic reform and are putting "good governance" into practice. In this regard, Japan has been extending humanitarian assistance and has been engaged in active cooperation for human resources development and infrastructural improvements, which could foster an environment for sustainable development. As a follow-up to the Tokyo International Conference on African Development, together with the United Nations, the U.N. Development Programme (UNDP), the Government of Indonesia, and the Global Coalition for Africa (GCA), Japan co-sponsored the Asia-Africa Forum, which was held in Bandung, Indonesia, in December. At the forum, discussions were held on how best to promote cooperation between Asia and Africa, using Asia's experience in Africa's development.

Japan has also made active contributions to regional stability in Africa by, for example, sending more than 40 election observers to South Africa on the occasion of the constituent assembly elections there in April and dispatching personnel to Mozambique to participate in coordinating transportation and observing election activities there as part of the United Nations Operation in Mozambique.

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