Chapter I.
General Overview

B. Major events in 1998

1. Nuclear tests by India and Pakistan

Parliamentary elections in India resulted in the March inauguration of a coalition government dominated by the Bharatiya Janata Party, and the National Agenda for Governance was announced, which referred to reviewing India's nuclear policy and exercising the option of introducing nuclear weapons. Neighboring Pakistan, on the other hand, conducted a trial launch of an intermediate-range Ghauri missile on 6 April. Concerned over the heightening tension in South Asia, Prime Minister Ryutaro Hashimoto sent a letter to Indian Prime Minister Atal Behari Vajpayee, calling for India's prudence in regard to its nuclear policy, while the Pakistani Government was also requested to refrain from any missile or nuclear development. However, India went ahead with two nuclear tests on 11 and 13 May respectively.

In the wake of India's nuclear tests, domestic pressure rose in Pakistan to conduct similar tests. Despite the critical stance taken by the entire international community toward India's nuclear tests, as shown in the G8 Joint Communique issued at the Birmingham Summit of the Eight on 16 May, and such diplomatic efforts as Japan's dispatch of a special envoy of the Prime Minister to urge Pakistan to exercise self-restraint over nuclear testing, Pakistan conducted two nuclear tests on 28 and 30 May respectively.

The nuclear tests by those two countries not only negatively affected the peace and stability of the South Asian region, but also posed a serious challenge to the international nuclear non-proliferation regime centered around the Nuclear Non-Proliferation Treaty (NPT) and the Comprehensive Nuclear Test Ban Treaty (CTBT), running counter to those international efforts for nuclear disarmament toward a world without nuclear weapons. Japan conveyed its position to India and Pakistan: namely, that it viewed both countries' nuclear tests as intolerable, as well as regrettable, and therefore was adopting stringent measures such as the suspension of new grants (excluding emergency and humanitarian assistance and grassroots grants) and new yen loans.

As for the international fora, the Permanent 5 (P5) Foreign Ministers' Meeting held in Geneva on 4 June issued a Joint Communique. United Nations Security Council Resolution 1172 (proposed jointly by Japan and a number of other members) was adopted on 6 June, and a Joint Statement was adopted on 12 June at the G8 Foreign Ministers' Meeting held in London. This string of declarations and resolutions enumerated the benchmarks the international community was requesting that both India and Pakistan fulfill, such as the suspension of further nuclear tests and the adherence to the CTBT by both countries.

In addition, as Japan's initiative, Foreign Minister Keizo Obuchi proposed at the above-mentioned G8 Foreign Ministers' Meeting that a task-force be established to review the efforts by India and Pakistan with regard to the nuclear non-proliferation regime and also to consider concrete measures for relieving tensions and confidence-building between the two countries. This task-force met twice in London. The Tokyo Forum on Nuclear Non-Proliferation and Nuclear Disarmament was also held in Tokyo in late August, with the second forum in December in Hiroshima, both jointly hosted by the Japan Institute of International Affairs and the Hiroshima Peace Institute, with the aim of issuing recommendations on nuclear non-proliferation and nuclear disarmament by key intellectuals participating from Japan and abroad.

In response to these moves by the international community, India and Pakistan seemingly changed their stance on nuclear non-proliferation in the desired direction, with Prime Minister Nawaz Sharif of Pakistan announcing in his general address at the UN General Assembly in September the intention to adhere to the CTBT before September 1999, while comments by Prime Minister Vajpayee of India also suggested a forward-looking approach to the conclusion of the CTBT. In addition, both countries announced their intention to participate in the negotiations on the Fissile Material Cut-Off Treaty.

Japan also stressed dialogues with both countries, and State Secretary for Foreign Affairs Masahiko Koumura thus met with Deputy Chairman of the Planning Commission of India Jaswant Singh during the Ministerial Meeting of the ASEAN Regional Forum (ARF) at the end of July. Foreign Minister Koumura subsequently held talks with Foreign Minister Sardaj Aziz of Pakistan during the United Nations General Assembly in September, and when Foreign Minister Aziz met with Foreign Minister Koumura again during his November visit to Japan, he reiterated a clear commitment, on behalf of Pakistan, to adhere to the CTBT by September 1999 and to bring into law tighter nuclear and missile-related export regulations. Given these commitments, and the fact that the deterioration of the Pakistani economy in the wake of the nuclear tests could trigger regional destabilization, Japan announced its support for the financing by international financial institutions that was necessary for the International Monetary Fund's support program for Pakistan, and also announced that consideration could be given to partial re-launching of bilateral economic assistance with regard to Pakistan's commitments.

In the wake of those nuclear tests, the international community also witnessed reopening of dialogue between India and Pakistan. The tenth South Asian Association for Regional Cooperation (SAARC) Summit in July brought about the first India-Pakistan Summit talk after their nuclear tests, and the leaders met again on the occasion of the UN General Assembly in September, agreeing upon reopening vice-ministerial level consultations. As a result, vice-ministrerial level consultations on the Kashmir issue and peace and security were held in October, followed by other bilateral vice-ministerial level consultations in regard to respective areas such as economy and culture. The international community will be watching for further progress in India-Pakistan dialogue.

2. Missile launch by North Korea

a) Facts of the situation and Japan's response

At around noon on 31 August, North Korea launched a ballistic missile.Note 1 In the evening of 31 August, the Chief Cabinet Secretary issued a statement condemning this missile launch from the perspective of the security of Japan and the peace and stability of Northeast Asia, as well as the prevention of the proliferation of weapons of mass destruction, noting that Japan strongly opposed this action by North Korea. On the same day, condemnation of the missile launch was also communicated directly to the North Korean Government. On 1 September, the Chief Cabinet Secretary also stated that the Government had decided to take the following measures in response to the North Korean missile launch.

  • Promotion of exchanges of views and information between Japan, the ROK and the United States
  • Investigation of the possibility of raising the issue in an appropriate form at the United Nations
  • Communication to North Korea of Japan's condemnation of the launch, lodging of a strong protest for an explanation, as well as a demand for the suspension of missile development and export
  • Provisional suspension of the resumption of Japan-North Korea normalization talks, of food and other support, and of KEDO progress
  • Consideration of measures to increase Japan's own information-gathering capacity, such as promotion of surveys on the use of visual image satellites Note 2
  • Continued research on ballistic missile defense, as well as the early formation and approval of bills related to the Guidelines for Japan-U.S. Defense Cooperation

In addition to these measures, on 2 September, Japan also withdrew the permission which had been granted to North Korea's Air Koryo for nine charter flights between Pyongyang and Nagoya, and decided not to permit any further chartered flights.

Regarding the Korean Peninsula Energy Development Organization (KEDO) as the most realistic and effective framework for preventing North Korea from developing nuclear weapons, and judging that Japan should not give North Korea an excuse to resume nuclear weapons development by causing the collapse of this framework, the Government announced on 21 October that it would reopen cooperation in KEDO. Japan simultaneously made clear that it would maintain the above-mentioned measures other than those related to KEDO so as to avoid any misunderstanding by North Korea.

b) Approach of the international community

Japan's concern over the North Korean missile launch was widely echoed by the international community. At the request of Japan, the President of the UN Security Council released a press statement on 15 September. This statement noted the concern of Security Council members that the action taken by North Korea in August had harmed the regional fishing industry and maritime freight activities and run counter to confidence-building among countries of the region; condemnation was also expressed over the fact that the launch had been conducted with no prior notification. Moreover, at the 22 September Japan-U.S. Summit talks, leaders noted that the North Korean missile launch was not only directly related to Japan's security but was an extremely grave action in terms of the peace and stability of Northeast Asia. They affirmed that they would use various occasions to place strong pressure on North Korea not to launch, develop or export missiles. Two days later, tripartite talks were held among the foreign ministers of Japan, the United States and the Republic of Korea in regard to the North Korean issue, producing a joint statement. The joint statement leveled clear criticism at North Korea's missile launch and affirmed the importance of maintaining the Agreed Framework and KEDO, expressing the resolve of the United States to use the U.S.-North Korea missile consultations to prevail upon North Korea to suspend the launching and development of missiles and the export of related materials and technology. Further, at the Japan-ROK Summit talks on 8 October, both leaders shared the concern and condemnation expressed by the President of the UN Security Council, and also agreed that a laissez-faire attitude to North Korean missile development would impact negatively on the peace and safety of Japan, the Republic of Korea and the entire Northeast Asian region. At the September Montreal Assembly of the ICAO and also the October Budapest Plenary Meeting of the MTCR, members shared concern over North Korean missile-related activities, with various chairman's statements and resolutions adopted in regard to the North Korean missile launch.

3. Economic situation in Asia and the world

a) The Asian economic situation

The Asian currency and financial crisis triggered by the crash of the Thai baht in July 1997 subsequently spread to such countries as Indonesia and the Republic of Korea, with a negative impact on the world economy as a whole. Thailand and the Republic of Korea avoided a crisis situation through such measures as the steady implementation of their IMF agreements, but Indonesia was to see a slowdown in exports and imports, the collapse of the distribution system, which had depended on the Chinese-Indonesians, and soaring prices and shortages of food and medicine. The growing severity of these problems gradually escalated to social unrest and then riots, creating the political instability that led to the resignation of President Soeharto in May. This turmoil drove foreigners working in foreign subsidiaries in Indonesia out of the country for the duration of the crisis, with many Japanese companies having to temporarily suspend their activities.

Characteristics of the recent Asian currency and financial crisis include the fact that the crisis was engendered by rapid and massive outflows of short-term capital. Furthermore, one of the direct causes was the excessive rise in the level of pressure for the repayment of private foreign debt. Other elements missing from previous economic crises included the weakness in financial systems, political instability and psychological factors.

Currency and financial markets later settled down due to the efforts by the Asian countries themselves and support from various countries, with Japan playing the central role, as well as from international institutions such as the IMF and the World Bank. Current account balances and other macroeconomic indicators also improved to a certain extent, and by late 1998 most countries could be said to have generally broken free of their currency crises. On the real economy side, however, there were marked economic slowdowns and unemployment increases, and even the Philippines, Malaysia, Viet Nam and other Asian countries, which initially had only been lightly affected, are now feeling the impact.

In terms of the tasks facing these Asian countries, where the biggest challenge at the outset of the crisis was the defense of currencies, the focus is now shifting to economic revitalization, structural reform and human resources development, relief for the socially vulnerable, and medium- to long-term currency stability. Overcoming such challenges will depend first and foremost on the efforts of these countries themselves, but support from the international community will also be necessary. Recognizing this, immediately after the outbreak of the crisis, Japan announced that it would coordinate with the IMF to provide a total of US$19 billion in assistance, and subsequently announced various other support measures, amounting to an unequaled total of around US$80 billion up until the end of 1998, and has been steadily implementing them. Japan has been utilizing these funds to address the challenges as described below.

  • Economic revitalization

    Capital shortages and a loss of confidence have made it difficult for the Asian countries to independently implement adequate economic stimulation measures and employment measures, including the reinstatement of private capital. Responding to this situation, Japan has announced various assistance policies for Asia and launched cooperation. For example, in October, Japan announced the New Miyazawa Initiative, amounting to about US$30 billion, followed by the joint announcement with the United States of the Asian Growth and Economic Recovery Initiative at the November APEC Ministerial and Economic Leaders' Meetings, and then in December the establishment of Special Yen Loans up to 600 billion yen over three years as an additional support package contributing to economic recovery, employment and structural reform in the Asian countries.

  • Structural reform and human resources development

    While the Asian countries are working on financial system development, including settlement of private sector debt and non-performing loans, structural adjustment, development of laws and fostering of industries, they lack the necessary human resources and know-how. Japan is providing support in this regard through, for example, the Japan-ASEAN Program for Comprehensive Human Resources Development, local training for 10,000 personnel and the dispatch of experts to technical development centers operated jointly by governments and private sectors.

  • Relief for the socially vulnerable

    One issue of great concern to all the Asian countries is relief for the socially vulnerable, who have been the most severely affected by the economic crisis. Should the destitution of the socially vulnerable trigger social unrest and lead to political instability, resolution of the economic crisis would be significantly delayed. Japan noted this risk at a very early stage, and, in addition to such assistance as rice and medicine, has been actively implementing support measures for the socially vulnerable using fast-disbursing yen loans.

  • Currency stability

    The recent crisis resulted in widespread recognition of the problems associated with speculative currency transactions and other large-scale rapid capital movements. It has also become clear that the current IMF-centered international financial system needs reform. In September, Malaysia adopted various emergency measures, including measures to control exchange rates and regulate capital flows, seeking to contain the impact of hedge funds and other such instruments. While no other country in Asia has followed suit, there has been a growing call for enhanced monitoring of capital movements and some form of hedge fund surveillance and regulation. Japan is now addressing the urgent task of reform of the international financial system.

    The Asian countries have expressed great appreciation and great expectations for the massive support provided by Japan in facing the crisis. At the same time, with similarly strong expectations that the Japanese economy, which comprises two-thirds of Asian GDP, will again become the "leading goose" for the Asian economy, drawing other regional economies along, it is becoming even more important that Japan make positive contributions to the development and growth of the Asian economy.

b) The world economic situation

The 1997 Asian currency and financial crisis subsequently sparked the Russian financial crisis and spread to emerging markets in Latin America and elsewhere in 1998. This affected not only the Japanese economy but also the economies of the United States and Europe, raising serious concerns about worldwide deflation. First of all, in the Russian Federation, plunging crude oil prices led to the deterioration of economic fundamentals such as maladjustment of the current account balance and expansion of the fiscal deficit, which in turn seriously undermined confidence in the banking system. This uncertainty spread through the entire financial system, including the foreign exchange and stock markets, and in August, the Russian Government and central bank announced a series of countermeasures such as effective tolerance for ruble devaluation and freezing of some foreign debt repayments. The plunge in exchange rates and stock prices eventually leveled out temporarily, but the failure of consultations with the IMF left financing on ice, and the Russian economic situation remains bleak.

Struggling with current account and fiscal deficits which left them dependent on foreign capital even for foreign debt repayments, many Latin American countries nevertheless experienced massive outflows of capital. For example, Brazil was placed in a critical position when around US$25 billion in foreign-denominated capital flowed out of the country over August and September alone. To combat this situation, the Government announced a succession of different measures, such as a high-interest policy and a fiscal adjustment program, and the G7, the IMF and other parties announced support of more than US$41 billion in total (excluding aid through international institutions, Japan provided US$1.25 billion in bilateral assistance), avoiding large-scale economic turmoil. However, given its close ties with the U.S. economy, the destabilization of the Latin American economy has the potential to rock the world economy as a whole, and Latin American economic trends will continue to merit close scrutiny.

In addition, the economic and financial crises experienced by emerging markets also affected developed countries, with temporary downturns in stock prices and other signs of economic slowdown emerging not only in Japan but also in the United States and Europe. For example, at the end of August, stock prices in the United States had fallen close to 20% from the mid-July peak, while in late September the collapse of Long-Term Capital Management (LTCM), a major hedge fund, became apparent, with economic prospects becoming increasingly opaque. Developed country governments responded to these signs with concerted interest rate cuts and other countermeasures.

The recent Asian economic crisis and the subsequent global-scale chain reaction clearly revealed the weakness of the existing international economic system. Addressing this will require immediate review of the existing system, not only in the financial area but also in areas such as trade, investment and development. Moreover, the economic crisis has not only developed into a political issue in some countries, causing, for example, changes in political leadership, but has also impacted particularly heavily on the socially vulnerable in these countries, and efforts are also needed from a social perspective.

The experience of providing various types of support in the face of the Asian economic crisis has led Japan to believe that carefully-planned country-specific responses are vital in terms of avoiding crisis, designing feasible measures for crisis-hit countries, providing fast and effective international support and determining the conditionalities which countries receiving support should be required to meet. Japan is working to contribute to discussions on these matters. Moreover, while remaining sensitive to the socially vulnerable, technical cooperation needs to be enhanced in areas such as macroeconomic policy management, financial technology and fostering of supporting industries.

4. Situation in Iraq

While instances of refusing cooperation and obstruction have become marked since around June 1997, in January 1998, the Iraqi Government rejected United Nations Special Commission (UNSCOM) inspections related to the disposal of weapons of mass destruction, arguing, for example, that the nationality of inspection team members was overly dominated by the United States and the United Kingdom. The international community sought Iraq's full cooperation with UNSCOM, but met with rejection from the Iraqi side. This led the United States Government to state that it would be prepared to use armed force, and the Iraq situation became increasingly tense. In February, United Nations Secretary-General Kofi Annan visited Iraq to attempt conciliation, agreeing and signing with the Iraqi Government a Memorandum of Understanding in regard to cooperation with UNSCOM inspections. Responding to this, in early March, the UN Security Council adopted Resolution 1154, warning Iraq of the severest consequences for any violation of relevant Security Council resolutions, and therefore a conflict was averted.

Iraq continued to cooperate with UNSCOM and the International Atomic Energy Association (IAEA) from the time of its agreement with Secretary-General Annan until summer. However, in early August, negotiations broke down when UNSCOM Executive Chairman Richard Butler visited Baghdad, and at the end of October, Iraq decided to suspend all cooperation with UNSCOM. This stirred another crisis, with the Security Council adopting Resolution 1205 in November, criticizing the Iraqi action as a flagrant violation of relevant Security Council resolutions. At the time, the United States and the United Kingdom took an unbending stance on the issue, indicating that they would not hold back from the use of armed force where Iraq continued to refuse its cooperation, and Iraq agreed to resume cooperation with UNSCOM, with crisis again averted for the meantime.

However, cases were repeated whereby Iraq did not cooperate with UNSCOM inspections, and on 15 December, UNSCOM submitted to the Security Council a report to the effect that Iraq had not extended the full cooperation to UNSCOM that it had promised. The United States and the United Kingdom responded by launching an armed attack on 100 military targets in Iraq using cruise missiles and other weapons in what was dubbed "Operation Desert Fox." This armed attack was concluded four days later on 20 December with President William Clinton of the United States and Prime Minister Tony Blair of the United Kingdom announcing that their objectives had been achieved. Since the armed attack by the United States and the United Kingdom, the Iraqi Government has been refusing to cooperate with inspections and monitoring by UNSCOM and the IAEA, and the international community is faced with the problem of how to ensure that Iraq fulfills its obligations under relevant Security Council resolutions, such as the disposal of weapons of mass destruction. In addition, on both 28 and 30 December, Iraq fired surface-to-air missiles at U.S. and UK military aircraft flying over so-called no-fly zones in the north and south of Iraq, with the U.S. aircraft retaliating by firing on an Iraqi missile base, bringing concern that the Iraq situation looks likely to become tense once again.

Within Iraq, the UN sanctions which have continued for more than eight years appear to be taking their toll on the economy, producing supply shortages and inflation. To redress this situation, UN Security Council Resolution 986 (adopted in April 1995) was put into force in December 1996, allowing Iraq to engage in limited oil exports so that it might purchase humanitarian supplies such as food and medicine. This resolution has been renewed every 180 days, with Security Council Resolution 1153 raising the ceiling for restricted oil exports from US$2 billion to US$5.256 billion as of June 1998. However, factors such as weak oil prices on international markets prevented Iraq from obtaining adequate income from restricted oil exports even over the six months from June to December 1998, which may mean greater suffering for the people of Iraq.

5. Second Tokyo International Conference on African Development

Japan held the Second Tokyo International Conference on African Development (TICAD II) in conjunction with the United Nations and the Global Coalition for Africa (GCA) from 19 to 21 October. The conference was attended by 80 countries (51 African countries, 11 Asian countries, 18 countries from North America and Europe), 40 international organizations and 22 non-governmental organizations (NGOs), and, based on the conviction that a bright future is possible for Africa, aimed at nation-building by the African countries themselves through education, health care, private sector development, gender mainstreaming and peace, etc.

Recent years have seen such hopeful signs as annual GNP growth rates of more than 5% in around 20 of the 47 countries located in sub-Saharan Africa, while on the political front, an increasing number of countries are conducting elections on the basis of multi-party systems. On the other hand, the majority of countries have been left behind by globalization, with 40% of the population in sub-Saharan Africa still having to live on an income of less than a dollar a day. In addition, problems such as frequent conflicts and refugees remain grave.

Recognizing these dual aspects of the current situation, TICAD II sought to strengthen nation-building efforts on the basis of ownership (self-help) by the sub-Saharan African countries and of partnership (cooperation) with donor countries and organizations. To this end, the nation-building of Japan and Asia were put forward as a major reference, with the Tokyo Agenda for Action toward the 21st Century adopted in regard to, for example, human development through education and health care, gender mainstreaming, agriculture and private sector support. At the conference, Japan presented, inter alia, the following new African support programs to lend momentum to support for African development.

  • Provision of around 90 billion yen in grant assistance over the next five years in the areas of education, health and medical care and water supply (social/human development)
  • Establishment of an Asia-Africa Investment and Technology Promoting Center; holding of an Africa-Asia Business Forum; human resources development toward improved debt management capacity; expansion of areas eligible for debt relief grant cooperation (economic development)
  • Support for the removal of anti-personnel landmines in Southern Africa; concerted support by the United Nations Development Programme (UNDP), the Organization of African Unity (OAU), the United Nations High Commissioner for Refugees (UNHCR) and other institutions in the areas of good governance and conflict resolution (foundations for development)
  • Training programs targeting a further 2,000 Africans over the next five years (South-South cooperation)
  • Establishment of bases for African human capacity-building; development research institute network concept (strengthened cooperation)

One major outcome of the conference was the development of a shared awareness as to the need for the African countries to take responsibility for their own nation-building, making maximum use of their potential, as well as the need for African countries to advance development as equal partners with donor countries and organizations. Given strongly-rooted pessimism toward the African countries, the fact that the conference as a whole was able to present a bright future for Africa based on recent economic trends and democratization provided an important message to the international community. The next step will be for the international community to link the Tokyo Agenda for Action and the Illustrative List of African development projects and programs created and distributed at TICAD II as those which could be referenced in realizing the Action Agenda with actual efforts, basing these on the ownership and partnership approach.

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