[Congressional Record Volume 144, Number 47 (Friday, April 24, 1998)]
[Senate]
[Pages S3593-S3596]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  SENATE RESOLUTION 216--EXPRESSING THE SENSE OF THE SENATE REGARDING 
                  JAPAN'S DIFFICULT ECONOMIC CONDITION

  Mr. LIEBERMAN (for himself, Mr. Lugar, Mr. Graham, Mr. Brownback, Mr. 
Bingaman, and Mr. Rockefeller) submitted the following resolution; 
which was referred to the Committee on Foreign Relations:

                              S. Res. 216

       Whereas the United States and Japan share common goals of 
     peace, stability, democracy, and economic prosperity in the 
     Asia-Pacific Region;
       Whereas the current economic crisis in the Asia-Pacific 
     Region represents a new challenge to United States-Japan 
     cooperation to achieve these common goals;
       Whereas the Japanese economy, the second largest in the 
     world, has been growing a little over 1 percent annually 
     since 1991 and most forecasts suggest that Japan is unlikely 
     to experience any significant growth in the near future;
       Whereas Japan's is the second largest trading partner of 
     the United States and accounts for 11 percent of our total 
     foreign trade;
       Whereas Japan accounts for over 70 percent of the Asia-
     Pacific Region's gross domestic product and therefore has a 
     particular interest in the stability of the Region's economic 
     and financial system;
       Whereas a strong United States-Japan alliance is critical 
     to American forward engagement and stability in the Asia-
     Pacific Region;
       Whereas the importance of the United States-Japan alliance 
     was reaffirmed by the President of the United States and the 
     Prime Minister of Japan in the April 1996 Joint Security 
     Declaration;
       Whereas United States-Japan bilateral military cooperation 
     was enhanced with the revision of the United States-Japan 
     Guidelines for Defense Cooperation in 1997;
       Whereas Japan's failure to contribute to the Region's 
     recovery from the current economic crisis or failure to 
     prevent a further contraction of the Japanese economy could 
     undermine regional stability, cause a setback in the close 
     United States-Japan bilateral security cooperation achieved 
     over the past 3 years, and increase Japan's bilateral and 
     global trade surplus;
       Whereas the low level of foreign direct investment in 
     Japan, at less than 1 percent of Japan's gross domestic 
     product compared to foreign direct investment in the United 
     States of over 8 percent of the United States gross domestic 
     product, contributes to large external trade imbalances and 
     impedes market access for competitive foreign firms and 
     products;
       Whereas the United States bilateral trade deficit with 
     Japan increased from $48,000,000,000 in 1996 to 
     $56,000,000,000 in 1997 and has recently increased from 
     $4,000,000,000 in January of 1998 to $5,300,000,000 in 
     February of 1998;
       Whereas the recent weakness in the yen, following a more 
     than 20 percent depreciation of the yen against the dollar 
     over the last few years, has placed competitive price 
     pressures on United States industries and workers;
       Whereas a period of deflation in Japan would lead to lower 
     demand for United States products;
       Whereas the estimated $574,000,000,000 of problem loans in 
     Japan's banking sector has the potential to threaten the 
     recovery of the Asia-Pacific Region and could destabilize 
     global capital markets;
       Whereas the unnecessary and burdensome regulation of the 
     Japanese market constrains Japanese economic growth, raises 
     the costs to business and consumers, lowers the standard of 
     living, and impedes imports;
       Whereas the United States strongly encourages Japan to 
     pursue a domestic demand-led economic recovery and thereby 
     prevent further increases in Japan's external trade surplus;
       Whereas the Japanese Government has responded to the Asia-
     Pacific Region's economic crisis with financial commitments 
     of approximately $19,000,000,000 to the International 
     Monetary Fund; and
       Whereas the United States appreciates Japan's efforts to 
     stimulate its economy with the recently announced package of 
     16,000,000,000,000 yen that includes 4,500,000,000,000 yen in 
     tax cuts and 11,500,000,000,000 yen in government spending: 
     Now, therefore, be it
       Resolved, That it is the sense of the Senate that--
       (1) the American people and the countries in the Asia-
     Pacific Region are looking for a demonstration of Japanese 
     leadership and close United States-Japan cooperation in 
     resolving the current crisis;
       (2) encouraging the strengthening of the Japanese economy 
     should be one of the Administration's central priorities in 
     all its bilateral and multilateral discussions with Japan;
       (3) every effort possible should be made to ensure that all 
     other negotiating objectives are consistent with the overall 
     goal of promoting economic growth in Japan, improving market 
     access to Japan, and restoring stability to international 
     financial markets;
       (4) the President should continue to voice his serious 
     concern about the economic situation in Japan, the 
     international, regional, and bilateral implications of the 
     situation, and the need to address significant structural 
     impediments to competition in the Japanese markets, in order 
     to restore confidence in the Japanese economy and contribute 
     to the Asia-Pacific Region's political stability and economic 
     recovery;
       (5) the President, the Attorney General, the Secretary of 
     the Treasury, and the United States Trade Representative 
     should emphasize the importance of financial deregulation, 
     including banking reform, market deregulation, and 
     restructuring bad bank debt;
       (6) the President, the Secretary of the Treasury, the 
     United States Trade Representative, and the Secretary of 
     Commerce should press vigorously for comprehensive and urgent 
     deregulation and fundamental structural reform of the 
     Japanese economy and sectoral markets, liberalization of the 
     distribution system, and elimination of nontariff barriers 
     and anticompetitive business practices that restrict the free 
     flow of competitive goods and services, in order to increase 
     market efficiencies and enhance competition, lower prices, 
     improve market access, and redress global trade imbalances;
       (7) the President, the United States Trade Representative, 
     the Secretary of Commerce, and the Attorney General should 
     continue to press for--
       (A) increased antitrust enforcement by the Japan Fair Trade 
     Commission, and

[[Page S3594]]

       (B) strengthening of the Antimonopoly Act to eliminate 
     private practices that restrict competition;
       (8) the President, the Secretary of the Treasury, the 
     United States Trade Representative, the Secretary of 
     Commerce, and the Secretary of State should urge the 
     Government of Japan to open the Japanese market to increased 
     foreign direct investment and eliminate barriers to foreign 
     direct investment in order to increase the competitiveness of 
     the Japanese economy and stimulate investment and consumer 
     spending; and
       (9) restoring economic growth in Japan and stability in 
     international financial markets should be given the highest 
     attention at the upcoming meeting of the G-7 countries that 
     will be held in Birmingham, England.

  Mr. LIEBERMAN. Mr. President, I rise today to offer a bipartisan 
resolution expressing the sense of the Senate regarding Japan's 
difficult current economic condition.
  I am privileged to do so on behalf of my original cosponsors, Senator 
Lugar, Senator Graham, Senator Brownback, Senator Bingaman, and Senator 
Rockefeller.
  Mr. President, for the last 46 years almost to the day--since April 
of 1952, when the American occupation of Japan ended and immediately 
our two Nations entered into a security agreement--the United States 
and Japan have shared the common goals of peace, stability, democracy 
and prosperity in the Asia-Pacific region and throughout the world.
  The fact is that Japan has been our most critical strategic ally and 
our most important economic partner in the region. We have worked 
together to bring unprecedented prosperity and security to our people's 
through mutual understanding and cooperation. The importance of the 
United States-Japan alliance was reaffirmed by President Clinton and 
Prime Minister Hashimoto in the April 1996 Joint Security Declaration 
and the United States-Japan bilateral military cooperation critical to 
our security in the Asia-pacific region. It was enhanced with the 
revision and promulgation of the United States-Japan Guidelines for 
Defense Cooperation in 1997.
  Japan is our second largest trading partner--not in Asia but in the 
world--and a huge and growing consumer of American goods and services. 
Japan imported $65.6 billion of American goods in 1997, third only to 
our neighbors to the north and south, Canada and Mexico. That figure 
has increased 37 percent from 1992 to 1997. In addition, Japan has 
played an important role in the current Asian financial crisis with 
financial commitments of approximately $19 billion through the 
International Monetary Fund, while we, as the news indicates today, 
have trouble coming up with a comparable amount authorized by members 
of Congress.
  However, the current economic crisis in Japan is real and represents 
a new and serious challenge to United States-Japan cooperation to 
achieve the common goals of economic prosperity and national security. 
We must not allow this extraordinary bilateral relationship to falter 
at this critical time, but, rather, we should do everything in our 
power to support the people of Japan and encourage the Government of 
Japan to implement new policies that will promote strong and sustained 
economic recovery.
  In less than a decade, Japan's economy has slowed so much that 
pundits have coined the phrase ``passing Japan,'' meaning that many in 
the world now look past Japan and toward its continental neighbor, 
China, as the economic engine for Asia. But I take these observations 
to be premature. Japan retains enormous long-term economic strength 
but, nonetheless, has some very serious immediate economic problems 
which cannot be ignored. Experts believe that Japan's economy will be 
stagnant or shrink this year; real industrial output was down 3 percent 
for the first 2 months of this year. Unemployment, while still low by 
world standards and American standards, is at approximately 3.6 
percent, which is a 45-year high in Japan, in a society that, 
incidentally, lacks the kind of social safety nets that we have built 
in our country. The Nikkei Index is hovering around 15,000, near its 
lowest level in 10 years; bad and doubtful bank debts are estimated at 
an astounding $574 billion; the Asian crisis has dried up an important 
source of trade and corporate earnings for the Japanese economy--that 
is, the regional crisis--and the Bank of Japan's most recent Tankan 
survey showed Japanese business outlook for the future to be gloomy.

  At least so far, we have been fortunate that the fallout on our 
economy from Japan's economic woes, as well as the collapse of the 
other troubled Asian economies, has been minimal. That is another way 
of validating the enormous resilience and strength in the American 
economy. Nonetheless, we have had serious and real early warning signs. 
In the trade figures announced last week, we see evidence that Japan's 
economic troubles are starting to have a direct impact on us here in 
the United States. If Japan's economy continues to deteriorate, there 
is good reason to believe that it will affect our ability to create 
jobs and to sustain current GDP growth.
  Today, my colleagues and I introduce this resolution to express to 
our President and to the Government of Japan that the Congress of the 
United States is deeply concerned about Japan's poor economic 
performance and the pressure it is putting on our overall bilateral 
relationship. It is widely agreed among economists throughout the 
world, including most that I have read about in Japan, that more than a 
quick-fix fiscal stimulus is needed to address the underlying problems 
that are now being seen in the Japanese economy.
  In that regard, I was very encouraged to see that earlier today Prime 
Minister Hashimoto announced a more long-term approach to restoring 
economic growth in Japan than had previously been presented by his 
government. Along with the details of the Japanese Government's $123 
billion stimulus package, the Prime Minister announced today that he 
would delay by 2 years his self-imposed deadline to balance the 
national budget. That is a significant change. This will provide the 
opportunity for Mr. Hashimoto to make his proposed income and targeted 
tax cuts permanent. And I believe this is the right policy and will 
help lead Japan out of its current economic troubles.

  The resolution that we submit today also calls for a number of 
fundamental economic reforms in Japan--deregulation of the Japanese 
economy, improvement of market access, and enforcement of fair trade. 
These are all actions which should increase the competitiveness of the 
Japanese markets and of Japanese companies and provide greater 
opportunities for investment in Japan and for the success of individual 
entrepreneurs within that country.
  Finally, the resolution describes the implications of the weakening 
Japanese yen which could lead to another round of competitive currency 
devaluations throughout the region. Of particular concern is the effect 
of the weak yen on the Chinese yuan. Further devaluation of the yen 
could lead to a devaluation of the yuan, an event with significant 
ramifications of the regional, global and, therefore, of course, 
American economies.
  For economic, political and strategic reasons, we must support and 
encourage economic reform in Japan. It is absolutely necessary. In the 
end, a more open and healthly Japanese economy is in the interest of 
the Japanese and American people. The sooner Japan recovers from its 
economic problems, the sooner the United States, Japan, and the world 
will reap the benefits of a stable and growing Asian-Pacific region.
  As we express our concerns about Japan's current economic 
difficulties, we must also remember the very significant economic 
strengths that Japan has. It is the second largest economy in the 
world, second only to ours, and maintains enormous human and capital 
assets. The fact is that one of this century's most dramatic stories is 
Japan's rise to economic superpower status, achieved by a citizenry 
dedicated to education, hard work, and fiscal responsibility. Japan is 
the most literate society in the world, and 94 percent of the 
population completes high school. The Japanese save more than any other 
people in the world. I know some critics may argue that too much 
savings is not good for the economy, but the point I want to make here 
is that in Japan saving is a virtue, as it was for a large parts of our 
own history. We lost that truth for a period of time and, fortunately, 
we are now recovering it, saving in larger numbers again, and that is 
part of the reason why our economy is doing so much better today.

[[Page S3595]]

  Japan also maintains huge foreign reserves and continues to be a 
major contributor to international organizations. Unlike the United 
States, Japan is a net creditor nation. Simply put, Japan's potential 
for the 21st century continues to be very bright. Its strategic 
importance to the United States continues to be critical. Long into the 
next century, Japan will remain our economic trading partner and 
strategic ally, sharing our goals of regional and world prosperity and 
peace.
  Given the significance of the current crisis in Japan and the 
importance of Congress making its voice heard on this crisis, I urge my 
colleagues to review and hopefully support this bipartisan resolution.
  Mr. ROCKEFELLER. Mr. President, as someone who has had a tremendous 
interest in Japan throughout my life, I have gained a great deal by 
maintaining direct and meaningful contact with Japan as a country, a 
people and a fascinating culture since my days as a student there in 
the 1950s. And although it is tested constantly, I truly believe the 
relationship between Japan and the United States continues to be 
strong. It is a relationship based on shared interests in democracy and 
the market economy, as well as mutual respect and fundamental 
friendship. It is from that perspective--as a friend of the Japanese 
people--that I feel it is so important to introduce this resolution 
today with my esteemed colleagues.
  It was not very long ago that Americans were up in arms about the 
trade deficit and Japan in particular--blaming the Japanese and other 
foreign countries bitterly for plant closings, job losses and our long 
list of economic ills. It was a very difficult time for our 
relationship with Japan, and a very difficult time for America as we 
struggled to get our own economic house in order.
  It was, however, also a cathartic time that I think was both 
inevitable and ultimately healthy for both countries.
  During that time, the United States was going through its own banking 
difficulties with the S&L scandals that saw many of our banks close 
their doors. Unemployment was way up and wages were stagnating. Our 
federal deficit was exploding and our national debt was climbing into 
the trillions. And corporations, many of which had traditionally 
employed their workers throughout their lifetime, were shedding 
employees by the thousands.
  The pressure to change intensified, as the American people watched 
our edge in certain industries and technologies slip and our people's 
anxieties and personal pain grow. The pressures strained our political 
system. In a nation of great diversity, ideas were born and rejected, 
consensus embraced, then rejected. While the U.S. still has plenty of 
room for improvement, I think there would be a large consensus that 
would agree that the United States has effectively tackled many of our 
``structural problems''--the ones that Japan was right to point out to 
us so often.
  Today, Japan faces a similar crisis. A creeping economic crisis that 
has profound and dangerous implications for all of Asia, and the world. 
At stake, in my opinion, is Japan's leadership in the world and the 
stabilization of the Asian economies. This world and the United States 
cannot move forward successfully, without Japan's leadership.
  I feel so strongly about this and that is why this resolution is so 
very important. It is not to speak harshly of Japan, but to push for an 
honest, frank discussion, among friends, to talk about the very serious 
issues facing Japan that could lead to problems around the world.
  I would remind my colleagues that this crisis is not a recent 
phenomenon. For more than six years, we have had warnings of problems 
on the horizon. Many Japanese have told me the biggest mistake that 
Japan could make would be to continue to delay action and postpone 
reform. One of the things I and many Japan watchers worry about is that 
because of Japan's strong financial reserves, they will somehow get 
through this crisis, and there will be those who say, ``see everything 
is OK. The system works fine;'' that Japan will get through this crisis 
without learning anything from it.
  By turning inward and ignoring the need for change, at the moment 
that Japan is challenged to lead, Japan risks abdicating its long term 
global and regional security and economic responsibilities to emerging 
powers like China or even India. This has serious implications for the 
United States, as well.
  In terms of Japan, it is hard to not believe that Japan will once 
again face the problems that require action, and come out stronger as a 
result. The Japanese know more than anyone that many so-called ``Japan 
watchers'' in the United States and elsewhere are more pessimistic--
saying that the talk in Japan of reform, adjustment, and stimulating 
the economy from within is not real. But when I think of Japan's 
history and what Japan's leaders in government and business know about 
economic success, I still personally choose to be more optimistic.
  I recall 1973, with the oil shock and the end of the Bretton Woods 
system, when it led the Japanese to a national commitment to reduce 
energy consumption and to increase energy efficiency. The overall 
effect on Japan as a whole was dramatic and impressive.
  Again, in 1985, with the Plaza Accord, when the yen began its 
dramatic strengthening--resulting in a commitment from Japanese 
industry to become much more efficient and squeeze out enormous waste 
and costs. The result was an incredibly competitive manufacturing 
machine.
  Now it is 1998, when the problems of other Asian countries require 
plans for international bail-outs and very harsh measures. President 
Clinton has called on Japan to become the engine of growth and recovery 
in Asia. I agree with him and encourage him to continue pushing Japan. 
Frankly put, Japan's future depends on a prosperous Asia and world. And 
America's future does as well.
  But, we also need to be realistic about what can and cannot work in 
Japan. American or European solutions to problems will not necessarily 
work there. If Japan is to lead Asia out of this crisis, Japan needs to 
move more quickly to recognize the extent of this problem and to find 
the uniquely Japanese solutions to them. But, only Japan can chart 
Japan's future.
  Japan needs to continue to work toward the reforms in their 
regulatory system which Prime Minister Hashimoto has begun. While there 
has been some small movement on this front, still, many more 
regulations remain that are a strait jacket on competition and free 
commerce. Telecommunications, housing and distribution are all sectors 
ripe for deregulation.
  In a similar vein, opening Japanese markets to more products, 
particularly products  from Asia, is critical to the Asian recovery. 
This won't be easy--and that's where leadership comes in--especially as 
Japan itself struggles to regain its balance. Open markets, over the 
long term, will position Japan to become the leader of a reborn Asian 
miracle.

  One extremely important foundation in a Japanese recovery, and in 
promoting Japanese economic leadership in an Asian recovery, is the 
fostering of a new pluralism of ideas in their political system. Every 
nation goes through times of introspection. America often does. 
Certainly, a national dialogue in Japan on this crisis and how to 
emerge from it stronger than ever, can't hurt. And efforts to institute 
significant political reform here should not be slowed. Diet Members, 
as the most direct representatives of their districts, need to become 
actively engaged in finding solutions. At all levels of government, 
accountability is key. Ministers need to have the power to lead their 
departments, and become responsible for their success and failure. 
Bureaucrats need to take orders, as easily as they give them.
  Over and over again, my Japanese friends point to the fact that 
Ministry of Finance and its bureaucracy has a far greater influence on 
policy than is appropriate and prudent in a parliamentary democracy. 
This has been said to me by Japanese time and time again over a number 
of years. It would seem to me, and not to be idealistic here, that the 
ministry ought to reflect the views of the Prime Minister and those 
elected to represent the people, and not the reverse. In our country 
this is a subject of extensive discussion and complaint by people who 
care about Japan. Accountability in a democracy is paramount.

[[Page S3596]]

  Why should it be that when I meet the Minister of Finance, or any 
Minister for that matter, that I know that I'm not speaking to the 
person who makes the decisions? How can that be in a democracy? In 
Great Britain they share Japan's Parliamentary system, but their 
cabinet agencies reflect the views of the Prime Minister and the people 
who elect the parliament, and they run the agency. Of course the 
Ministers consult with the bureaucrats, but they are held accountable 
for reflecting the Prime Minister's views and the national will. 
Unfortunately, that can't be said about today's Japan.
  I also find it ironic that the political reforms, such as single 
delegate districts, that were supposed to open up Japan's democracy and 
decision making, have not brought about the fundamental change in the 
system that everyone expected. The lack of a strong multi-party system, 
with a strong and viable opposition party remains a barrier to reform 
and serves as a wall through which ideas and change cannot penetrate.
  Just as Americans still have much to learn from Japan's successes, my 
point must also be to emphasize that we are affected by how Japan 
handles the challenges now posed by the weaker parts of their economy. 
Our relationship is not just a matter of the ties between our leaders, 
the tremendously important military alliance we share or the many forms 
of business and investment we transact between one another. We are 
increasingly connected through currencies, our banking systems and loan 
policies, the value of stocks, and whether Japan puts too much emphasis 
on exporting its way out of the problems rather than internal measures. 
We in the U.S. hope that our economic condition will insulate ourselves 
from the downturns in Asia. But we have to worry about markets 
shrinking for our products and especially any growth in our sizable 
trade deficit with Japan.
  My biggest fear is that if the Asian crisis remains unchecked, and 
average Americans begin to feel the impact of the succeeding market 
collapses on their incomes, they will begin to question Japan's 
national resolve and political will to deal with these problems. I 
especially don't want to see any further reasons for Americans to turn 
within or fear an active role in world trade. Throughout my political 
career, I have pushed very hard in my state of West Virginia for open 
markets, a global economy and fought against the forces of isolation 
and protectionism. Competition has served both my state and my country, 
and they will Japan as well.
  So, the actions Japan takes, or does not take, will affect America, 
as surely as they will their neighbors in Asia.
  I hope both our nations' leaders will continue to place the utmost 
importance on the U.S.-Japan relationship. Its strength is the basis 
for honesty with one another, for the ability to address problems 
together, and to pursue regional and shared objectives. We also must 
maintain and nurture this strength, which especially requires us to 
appreciate the role that our economies have on one another--because of 
their effect on our people and our sense of ourselves as nations. And 
this is a time when steps are more urgently required to ensure progress 
and prevent any kind of setback. I pledge to do my part in continuing 
to promote the importance and the potential of a strong, close U.S.-
Japan relationship at all levels.

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