PRESS CONFERENCE BY PRIME MINISTER JUNICHIRO KOIZUMI OF JAPAN: ISSUES DISCUSSED AT THE JAPAN-US SUMMIT

(PROVISIONAL)

30 June 2001

Press Conference

1. Opening Statement
2. Disposal of Non-performing loans
3. Impact of reforms on the Japanese economy
4. Specific reform measures
5. Global warming
6. Financial reforms
7. Collective self-defense and collective security
8. Possible trade friction with the US resulting from US Section 201

I. Opening Statement

Prime Minister Junichiro Koizumi of Japan: This time I met for the first time in person with President Bush and I was able to exchange views very candidly with him. I am very pleased about that. As President and as Prime Minister, and as Japan and the United States, I believe that we could see that we share values, we have mutual trust and we also have been able to establish mutual friendship and I think this was indeed wonderful. Although this was the very first meeting we had, I felt as if we had met each other many times already. Our exchange of views was so candid and very frank and as we look towards the future of Japan-US relations I believe this meeting was indeed very significant and meaningful. If we build on this common relationship of trust, I believe that although we may face some measure of frictions on various issues from time to time, we have this joint resolve to cooperate with each other and also in view of the importance of Japan-US relations, I believe that any issues can be resolved in a friendly manner. I have been convinced of this, so whatever issues we may take up, I believe it is important to have this mutual sense of trust. That should be at the very bottom. The root should be very firm and as long as the root is firm, cooperation and trust that will be built on that or that will grow out of that root, I am sure will be able to grow very firmly. It was a very friendly, relaxed atmosphere in which we had our most wonderful bilateral tete-a-tete meeting.

II. Disposal of Non-performing loans

Mr. Ogihara (NHK): About individual issues, first about the disposal of non-performing loans. During the Summit meeting, Prime Minister, I understand that you mentioned that you will cope with the structural reform in a bold and resolute manner so that there will not be any recession coming from Japan globally. The US side is interested in non-performing loans' disposal and President Bush referred to the case of his own state of Texas. How would you be coping with this issue from now on -- the issue of non-performing loans?

Prime Minister Junichiro Koizumi of Japan: The greatest mission for my Cabinet is to revive the Japanese economy - to let the Japanese economy regain self-confidence so that we can cope with the new era with bright hopes for the future and so that Japan will be able to contribute to the future. To do that I believe in the very first place the economic recovery of Japan is a must. I told President Bush that I take that as the top priority issue for us. The mechanisms that have worked for the past half a century and the institutions that we have had are no longer working. Therefore I would like to get down to reforming these. This is what I told the President. On top of that I said that many people seem to be worried about the current state of the Japanese economy and several years ago there were concerns that Japan may be the source of a global recession. I said that there is no cause for that sort of concern. Should a time arise when such a concern would be validated, then we will employ all measures possible so that a Japan-initiated global recession will not occur. In fact already this past April we have put in place flexible and bold measures so that we will not cause concern to the entire world. On top of that there are things we need to do. What are they? These are the disposal of, of course, non-performing loans in the private sector. That is very important. But, in addition to that, in the public sector we have numerous segments, which to date were not touched upon, which we were not able to reform. These are problems of public financing institutions and I believe the Japanese people and Japanese economists and commentators, in other words within Japan itself, I believe there have been many people who have taken for granted that it would be impossible to reform the public sector financing, and therefore they tended to discuss reforms in other sectors. I ran in the LDP Presidential Elections three times. I lost twice and on this third occasion, with the support of the Japanese people, and with the support of LDP parliamentarians and with the support of the ordinary members of the LDP throughout the country, I won the Presidency of the Party without any doubt. I have been stressing how important it is not to waste through the public sectors and public financing and therefore we have to simplify the system and bring better efficiency. It is essential in order to do that to reform the public sector, including the Fiscal Investment and Loan Program. In the past people tended to give up hope of touching that sector, but without engaging in reform in that area not much effect can be expected. There have been lots of political pressures and political resentment. In spite of that, my Cabinet -- the Koizumi Cabinet -- is the very first that has actually decided to move into that area and I will carry this through resolutely. We, in Japan, we say that we have market capitalism and a free market system but we did have some sort of socialistic mechanism and I have felt that this reform of the public sector is absolutely necessary. I was one of the few people who always advocated this and I am the one who advocated this seemingly impossible task and this person became Prime Minister of Japan. Many people thought the LDP members would not accept my views. Why should I run for the LDP Presidency when my views are not likely to be accepted? That is why many people thought that I was a strange person -- an eccentric person. But I advocated this seemingly impossible reform and I won in the first ballot and I will carry through this reform. All reforms, which definitely will come with difficulties, I am resolved to carry them through. I stated this very clearly. Many people have voiced their support and encouragement. President Bush in fact expressed his support for that and also expressed his encouragement.

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III. Impact of reforms on the Japanese economy

Mr. Paul Blustein (Washington Post): Prime Minister, I want to ask you about how you interpreted President Bush's encouragement of your reform plan. Many people in your government have been quite candid in saying that the short-term impact, the impact for the next year or two or three may be adverse on growth in the Japanese economy. You may have quite a prolonged period of slow growth. This may weaken the yen. I wonder if you now feel that you have President Bush's full encouragement to proceed in spite of those likely impacts on both the Japanese economy and in foreign exchange markets?

Prime Minister Junichiro Koizumi of Japan: What President Bush said was that he would not say to Japan not to do this or that. But, he said that he appreciates my reform policy and hopes that this will be translated into reality. And he said that there will be pains in this process -- I said that I would try to alleviate the pain as much as possible. But, I must also say "No Pain, No Gain." We should not fear the pains and we should not hesitate to reform. That is not something I am going to do. I am ready to take on some measure of pain, but I will also put in place adequate measures to alleviate that pain. Even if the US side would say Japan ought to do this or that specifically, I would not feel any displeasure, I would not feel that as any pressures. Rather, I would take them as advice. Japan, to date, has engaged in reform under pressures from overseas -- what we call gaiatsu. Take the example of the Meiji Restoration when, towards the end of the Tokugawa Shogunate, Commodore Perry arrived in Japan for the first time and the very place he landed for the first time in Japan was my own constituency -- Yokosuka. Back in those days many of the Japanese people were very resentful of that fact -- they were against reform. But, it was the arrival of Commodore Perry that, at the end of the day, the Shogunate was toppled. But, it was because of the arrival of Commodore Perry that the Shogunate decided to open doors and also, as a result, the Japanese people together worked to realize the Meiji Restoration. Initially people were resentful of American demands but at the end of the day they realized that the reform policy was correct. Also, I can cite the example of the Second World War. Japan started the war in opposition to the United States, but once the war was over the Japanese people, well of course they were initially fearful that the Americans may be coming to Japan as conquerors and that the Japanese may be turned into slaves. But what happened? As victor the US came and many people accepted the Americans as generous reformers. Take these two important examples of gaiatsu, or external pressures, or influences from overseas. Initially the Japanese were resentful, but at the end of the day they accepted those pressures successfully and they transformed themselves. Japan is faced with a very important turning point again. This time it is not under US pressures but it is out of the sense in the Japanese mind that doing things this way will not be right for Japan. So, the Japanese people themselves elected Koizumi to be the Prime Minister of Japan and showed their resolve that Japan itself has to carry out reform. So, this is a reform-oriented Cabinet. That is the recognition and the perception that the Japanese people have today. To date, on economic issues or on various global issues, the United States, if the US wishes to say this or that, that Japan should not do this or that, I will not take that as pressures. Rather I will accept that as advice. That is what I told President Bush. At times we may feel displeased, but in the meeting today President Bush and I shared this firm recognition of the importance of Japan-US cooperation. And to the extent that we continue to share those values, I believe that we can resolve any issues that may arise between Japan and the United States, and I am convinced of that.

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IV. Specific reform measures

Mr. Watanabe (Asahi Shimbun): In relation to the earlier question, Prime Minister, you mentioned that you will not let any depression, any global depression come from Japan and the reform policies will be bold and flexible. There could be financial, fiscal and economic policies. What are the specific measures? During the Summit meeting did you make specific measures to the type of policies you will be taking?

Prime Minister Junichiro Koizumi of Japan: We have not seen any critical situation of that sort arise. It suffices to think of the specific measures when such a crisis arises. My own perception is that we do not need to consider those specific issues when there is no critical situation, so we did not talk about such specifics in our bilateral discussions.

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V. Global warming

Bill Schneider (CNN): Mr. Prime Minister, you said that you are confident that there is still time to work out differences with the United States over the issue of global warming. What makes you confident that this is the case? Did President Bush say anything to increase your confidence that you can reach agreement on this issue?

Prime Minister Junichiro Koizumi of Japan: In the run-up to this bilateral Summit with the United States I was demanded by the opposition parties that even if the United States does not sign the Kyoto Protocol on Global Warming, Japan should go it alone and decide to ratify the Protocol. And I would say that even amongst some ruling parties, including the Liberal Democratic Party, there are some people who share that view. In order to give full life to the spirit of this Kyoto Protocol, I believe it would be better if we have US cooperation. Also, it will be better for the world if the United States sides with the spirit of the Kyoto Protocol. And if the European Union and Japan could together work on the basis of that spirit then it will be better for the world. So, we have not given up hope. I still have hope that the US will lend its ear to the views of Japan. We are after all the first and the second economic powers in the world and if we work together that will be of great benefit to the world. And we still have time. So, we would like to have those who are responsible, for Japan it is Environment Minister Kawaguchi. I would like to instruct those responsible in our governments to work and to try to find out a way out until the very last minute. This issue of global warming will have a grave impact not just on the global environment, but also on the fate of humankind. For example, the Mississippi alligator, I understand that depending on the temperature of the river, the egg of this alligator may switch gender from male to female and vice versa, and not just alligators, but fish as well. Some species, lizards and so on, and turtles, depending on the temperature of the environment, the gender switches around. We cannot slight this issue of global warming. That is the perception I have with regard to the question of global warming, ecology, the future of humankind, these are the things that we together must think about seriously. So, I would like to have those responsible discuss these matters very seriously until the very last minute with perseverance.

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VI. Financial reforms

Mr. Murai (TV Tokyo): Coming back to the economic issues, you mentioned that you would take measures to alleviate the pains caused by the reform efforts. In this connection, domestically there are voices calling for further relaxation of finances. Within the US and within the Bush Administration there are similar calls made. What is your reaction to this? What are your views?

Prime Minister Junichiro Koizumi of Japan: I am aware of the diverse opinions, but I did not get into any specifics. President Bush, I would say, responded favorably, but we did not discuss the specifics of what these painkiller policies would be and Mr. Lindsey was there as well, but without getting into specifics, he was there nodding approvingly.

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VII. Collective self-defense and collective security

Mr. Teshima (NHK): Earlier Prime Minister you mentioned reform without resorting to foreign pressure. Now, concerning security issues, Prime Minister Koizumi, you mentioned that you would study the ways of collective self-defense. Interest is high in the US too. What about PKO centering on the UN? Such a collective security -- what sort of reaction you will take attracts the international attention. This issue of collective self-defense and the collective security centering on the UN, even for you with the supporting rate of over 80%, you would have to be quite forceful in carrying these measures through. Would you consider the collective security, the collective self-defense as the priority centering on Japan's relationship with the US, or collective security centering on the United Nations, because it has much bearing on the situation in Southeast Asia and so forth?

Prime Minister Junichiro Koizumi of Japan: I do not think there is any need for me to use any forceful measures on collective self-defense. Japan's basic position is to provide Japan's security on the basis of the Japan-US Security Arrangements. That has been our basic policy. Now, on security, there are different positions between the US and Japan. Now, what are the differences? The United States, of course, will provide for its own defense and at the same time it is a country that seriously thinks about the defense of other countries as well, not just the United States and its own allies. The United States also constantly thinks how best to maintain global peace and global order. The US is a country that thinks about these very seriously and has the capability to do that. Japan is a country that works exclusively for its own self-defense. We have our Constitution, and as a means to resolve international disputes, Japan has already renounced the use of force or the threat of the use of force. There lies a clear difference between Japan and the United States. So, we have to recognize that difference in our positions as we get down to cooperation on the security front bilaterally and cooperate with each other where we can. My own constituency is Yokosuka City and there is a US naval base there. Yokosuka citizens, people in my own district, when asked the question whether it is better to have or not have US military bases, the absolute majority would say "No." Likewise, Okinawans -- the majority of Okinawans would say it is better not to have US bases there. I agree with that, but when you think of security, cooperation with the United States is indispensable for Japan and the Japanese people have the ability to arrive at that calm judgment and as Prime Minister of Japan, I am fully cognizant of the presence of US forces in Japan and US bases in Japan and I believe that the Japanese people have an adequate understanding of that as well. At the same time, as a result of defeat, Japan renounced military forces and the Japanese are extremely sensitive about the use of force. That is because before the Second World War, the Japanese military might grew so large and as a result fell into that war and there is that remorse, a sense of remorse there. The Japanese people do not have any historical recognition that the military might defended them. Rather, only that it made them suffer. So, there is a slight difference in the way people feel -- the Americans feel about the military forces that they will defend the US from other countries. I am fully aware of the importance of the US military presence in order to promote peace. Now, we have a peaceful Constitution and we have Article IX. There are people who seem to believe that Japan has no military -- but that is wrong. Now, we have had ever since the end of the War, the huge military forces -- the strong military forces in the form of the US forces. Now, there are people in Japan who tend to believe that this peaceful Constitution will defend Japan. I think that is wrong. In fact there was no time in the past when Japan had no military forces. It is the existence of the peaceful Constitution as well as the military forces that have ensured peace for Japan over the years. So, I am aware of the importance of the Japan-US Security Arrangements and the importance of the presence of US military bases in Japan. Because of that recognition I wish to cooperate with the United States to the extent permissible under the current Constitution and to that extent I wish to cooperate with the United States. We shall have our ministers responsible get down to discussions on specifics.

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VIII. Possible trade friction with the US resulting from US Section 201

Mr. Cory Daly (AFX News): Mr. Prime Minister, you have talked a lot about cooperation between the United States and Japan at this Summit. As you know recently President Bush decided to initiate a Section 201 investigation, which could limit steel imports, and the Europeans and the Japanese are none too pleased with this decision. I am wondering if you did raise that with the President and how much of an obstacle you think that that would bring to launching a new round of global trade talks?

Prime Minister Junichiro Koizumi of Japan: Well, on that score we did not raise any specific issues related to steel. We did say that there are some thorny issues on the economic front and on these we did say that we would have the officials in our governments engage in discussions. That was suggested and I agree with that. As I mentioned at the outset there may be frictions, there may be some issues that make our two countries resentful of each other, but keeping in mind the importance of Japan-US relations, I believe it is important to have those officials in our two governments engage in consultations. So there will be those discussions, and with regard to the new round of the WTO, we agreed that we shall cooperate with each other. So, we referred to these issues more or less in passing and did not get down to any specific issues like steel. Thank you very much.

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