[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
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(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.
____________________