Press Conference by Prime Minister Taro Aso
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Note: The opening statement and answers by Prime Minister Aso are simultaneous interpretation, and as such, may vary slightly from the phrasing used in the original language.|
MODERATOR: We would now like to start the press conference by Prime Minister Aso, open to both the Japanese and non-Japanese press. First, Prime Minister Aso will make an opening statement, then we would like to open the floor for questions. Prime Minister Aso, please.
PRIME MINISTER TARO ASO: A short while ago we concluded the Summit Meeting on Financial Markets and the World Economy. I would like to share with you the results of that meeting, as well as my own thoughts.
As you know, the world is now embarking on a new era. Global finance, if I may use the words of Mr. Alan Greenspan, is mired in a once in a century crisis. But crisis also presents opportunity. History has proven that once we overcome crisis a new order will emerge. It does no good to simply panic in a crisis, and that is proven by the Great Depression of 1929. However, today things are entirely different, because we have a framework for cooperation. The world thus has learned the lessons of the Great Depression of 1929, and on top of that Japan also has learned the lessons from the crisis of 1997-98.
On the occasion of the meeting this time I have felt very keenly the weightiness of the role that Japan is expected to play, and the role that Japan must fulfill. One of those roles is to present Japan's experiences. The experience of the collapse of the bubble and of overcoming it. Japan overcame that major crisis all by itself, of course also with major sacrifice. The other role is for Japan to take the lead in the building of a new framework. In order to respond to such expectations I made some concrete proposals, and I believe they have been reflected in the leaders' declaration today. It goes without saying that it will not be easy to immediately realize this. At least, however, I hope that the proposals that I have made will comprise part of the foundation for the new framework.
Let me briefly discuss the results of the Summit Meeting. The countries participating agreed on the response to the current financial crisis and the slowdown of the world economy and on the future direction of the international financial system and financial regulation and oversight reforms. First, on the immediate response to the crisis, we affirmed that the countries concerned shall cooperate with each other and act together. If I may cite the example of Japan, in about 15 years from 1990 asset values of real estate and shares declined by as much as three years worth of Japanese GDP, close to 1,500 trillion yen, but the GDP itself did not lose that much, in fact we managed to maintain GDP itself at the level of 500 trillion yen or so. That has been Japan's experience, so building on that experience I emphasized the following points which explain how we managed to maintain GDP at that level. Firstly, we disclosed thoroughly and at an early stage the non-performing loans or troubled loans. Also, following the disposal of non-performing loans by the financial institutions, wherever there was a need to recapitalize their capital base we injected public funds. And also through macroeconomic policy we realized it was important to underpin the real economy.
Let me turn to medium-term measures to prevent crisis. On this point, we shared the importance of providing support to smaller countries and emerging economies that have been hit by the crisis this time. We also understand together that we need to strengthen the resource base of the International Monetary Fund (IMF) and other multilateral financial institutions because of their currently weakened resource base. Of course, to realize a general capital increase or general quota increase of the IMF time will be needed, but we need to act now, and therefore Japan expressed its readiness to finance up to US$100 billion to the IMF.
Thirdly, on the reform of financial regulation and oversight, there is a need to strengthen international cooperation in an organic manner. It has been proven this time that action by a single country is not sufficient. Also the credit ratings by credit rating agencies were not really trustworthy, and therefore we shared the need to introduce a regulatory and supervisory system for credit rating agencies. Also, regarding whether we can apply mark-to-market accounting standards at times of market turmoil, of course we cannot do this because fair market values may become unclear, so I pointed out that there is a need for concerted action by the countries around the world on these points. We shall also reject protectionism and never turn inward-looking. We agreed to strive to reach agreement on the future framework, the so-called modality, of the Doha Round negotiations.
Last but not least, I said the following with regard to the longer term currency regime. One of the root causes of the problems this time is the global trade imbalances. We need to rectify this, and to do that a key currency country needs to redress its persistent deficits, and counties which rely excessively on external demand should strive to expand their domestic demand. Through such policy coordination by all countries concerned we need to strive to support the dollar key currency regime. This is what I said at the meeting.
At the same time, regional cooperation that is open to outside the region, such as regional cooperation in Asia, I believe complements globalism. In the run up to the ASEAN+3 Summit in December and the East Asia Summit Meeting that also takes place during December, Japan shall strive to make efforts to strengthen financial cooperation in Asia and to support self-sustained development. Japan feels the need to translate the result of this meeting into concrete action, and also Japan shall strive to exercise leadership toward the realization of an international economic system that corresponds to the new world economy and finance.
I would like to, in concluding, express my gratitude to the cooperation by all countries concerned. I would also like to thank the United States Government and the people of the United States for their warm welcome and hospitality, in spite of the shortness of the time available for preparations. Thank you very much.
MODERATOR: I would now like to entertain questions. If you are recognized, please proceed to the nearest microphone and state your name and affiliation. First I would like to invite the Japanese press. The gentleman over there please.
QUESTION: I would like to know how you evaluate the results of the summit meeting this time, what you think would be the challenges ahead, and where you think Japan should exercise its leadership.
PRIME MINISTER TARO ASO: I believe in the future people will say that this meeting was a historic one, in that the leaders of both the advanced countries as well as emerging countries, twenty countries in total, got together to engage in discussions. Also before the meeting started there were really doubts as to how far we would be able to finalize the leaders' declaration. But at least we were able to put into the declaration short-term and medium-term measures to deal with the financial crisis, and we managed to put into the document quite concrete and action-oriented measures, so I regard this meeting very highly. Of course, perceptions are different, and some people think that they are victims of the crisis, but at least in order to prevent the recurrence of this sort of global crisis and to prevent the further spread of the crisis I think we were able to come to some measure of agreement. Also, as I said, the increasing of the capital base. Of course, we will be utilizing existing institutions instead of creating new ones. I believe the document has put together quite concrete items. They reflect to a large extent the proposals I made, and I think we will be dealing with the situation in a fairly realistic manner. What Japan did during its own crisis was to remove non-performing loans from the balance sheets of financial institutions. I don't think that there are that many countries that have done that today, but because Japan managed to remove non-performing loans from the banks balance sheets we managed to overcome the crisis, so I believe that Japan is qualified to speak of that sort of experience, and I think this also may contribute to international efforts.
MODERATOR: Thank you very much. Now I would like to invite the US press to ask a question. The gentleman on the second row from the front wearing a green sweater.
QUESTION: You mentioned the US$100 billion that Japan is willing to provide to the IMF, and you have urged, or urgently suggested, that China and oil-rich countries should also provide some money to the IMF. Have you been disappointed that China has not, at least publically, said that it would contribute some money?
PRIME MINISTER TARO ASO: Well, this sort of discussion, that in response to what Japan has offered, countries with ample foreign reserves like oil-producing countries or China, as you referred to, I think some people say that financing by these countries should be welcome as well. I said this, but there were no others who spoke to that effect. China, I believe, has never spoken to that sort of effect in this kind of international meeting, so I believe that they will take this question back home, and then perhaps at a later date they may express their views or wish to provide financing, but I think that these are countries that do not really speak out on the spot, which means that you do not necessarily have to be disappointed just because you did not hear that kind of remark during the meeting.
MODERATOR: Thank you. Once again, I would like to invite the Japanese press to ask a question. That gentleman please.
QUESTION: A series of summit meetings are scheduled, including the APEC meeting next week, the summit involving Japan-China-Korea, and the East Asia Summit. How are you going to follow up on the results of this G20 Financial Summit?
PRIME MINISTER TARO ASO: There is a concern about the scale of impact on the smaller countries and emerging market countries, the size of the impact on the real economy as a result of the financial crisis. Doubtless the countries who are worried about their inflation may fall into deflation, like the UK and other countries. Japan was in deflation until quite recently, and since World War II Japan is the only country that has suffered from recession as a result of deflation, so we know that just because of the natural business cycle the economic situation will not return to normal. That means that some sort of artificial or policy measures need to be taken, otherwise the economy cannot be turned around into a more normal situation.
The so-called growth center of the world is still Asia, without a doubt, because Asian countries still register relatively high levels of economic growth, and we need to further promote their economic growth. So through APEC, the ASEAN+3 Leaders' Meeting and the East Asia Summit which will be taking place soon, we would like to encourage all the countries concerned to intently work on encouraging their self-sustained economic growth. If they properly manage their financial situation, etc., I am sure they can maintain growth, because many of these countries still enjoy 5-10% economic growth. Also, I believe regional cooperation would be necessary. We do in fact have various kinds of regional cooperation underway, amongst them for example is the Chiang Mai Initiative. There is the problem with the settlement system, and what these Asian countries need to work on, I believe, is their statistics, such as to what extent their statistics are accurate, and to what extent they are gleaning the necessary information. Advanced industrialized countries already have that because of the years of experience they have had, but the economy is like a living animal, and you need to always have the correct numbers and statistics, and Japan can cooperate with the other Asian countries to improve statistics, for example. Unless we can follow up the situation with all those details we may see unnecessary imbalances emerge. So we need follow up efforts on those details as well.
MODERATOR: I would like to invite a final question from the non-Japanese press.
QUESTION: Prime Minister, do you have greater confidence in the incoming presidency of America, and how do you look at Japan-US relations in coming years?
PRIME MINISTER TARO ASO: Mr. Obama will be different, is that what you would like to say?
PRIME MINISTER TARO ASO: The other day I received a phone call from Mr. Obama, so I had a conversation with him over the phone, and that is all, so I certainly would not be able to know immediately what sort of personality he is, but he was saying that he often visited Indonesia, and that he often flew from Hawaii via Japan to Indonesia, and he also said that he had a great deal of interest in Asia, so that was one of the impressions that I got from that conversation. At the State Department we see almost a depletion of people who are knowledgeable about Asia, and therefore I think for us it is important that we have someone at the helm who understands about Asia. Asians account for one half of the global population, and I think this is very important. The second point is that while conversing with him over the phone we were talking about establishing our personal relations with each other, so as I said it was just a conversation over the phone, but I recall that he spoke very educated English.
QUESTION: Prime Minister, you are fluent in English language as well, and leveraging the Japanese experience, including the press and media, how are you going to exercise your leadership with regard to the extent that Japan can be seen, and especially in relation to the incoming president of the United States, what sort of relationship are you going to establish?
PRIME MINISTER TARO ASO: With regard to who will be on the staff of Mr. Obama, from now until January 20 there will be the transition process with the transition team working on this, and I only hear rumors about who might take up what position, and you people are writing those articles. You are writing about Senator Hillary Clinton possibly becoming secretary of state, and so on, and people come up with different stories every day, so I am trying not to listen to those reports. A couple of months from now we will know the answers, so I think I simply have to wait for a couple of months.
However, in various respects, financial affairs really belongs to a very technical realm of experts. Because of bank problems settlements cannot be made, or the interbank market is not functioning because bank-to-bank credit is frozen, and this is something that the average citizen is not interested in or would not understand about, but these are the very basics of settlements, and the fact that these are frozen is really a serious problem. However, I don't see any newspaper in Japan that spoke to the seriousness of this problem. There needs to be an effort to explain to the public in such a way that these things can be understood, and politicians and others have to make those efforts, and we have to encourage people to read the press or people have to speak out on street corners or whatever is required to make the public understand, since we are faced with a financial situation where quick action is needed and people need to understand why they have to make their sacrifice.
I understand that in the United States at one time taxpayers said no. Back in 1997-98 in Japan also there was a time when the taxpayers said no, and therefore action was delayed and the problem grew even more serious. If we had acted earlier it would have cost us much less, and I think that the same thing is happening here in the United States, so in that respect, we politicians need to appeal to the general public about the need to act on the problem, and in that respect I believe that the mass media has a major role to play.
MODERATOR: Thank you very much. Since the time has come I would like to conclude the press conference by Prime Minister Aso open to both the Japanese and non-Japanese press. I would like to ask the ladies and gentlemen of the press to wait until the Prime Minister and his colleagues have left the room. Thank you very much.