A speech by Ambassador Kenichiro Sasae
“Japan’s New Sunrise?”


June 6, 2013
At the Chicago Council on Global Affairs


Ms King, Mr. McCarthy, ladies and gentlemen, thank you for your kind welcome. I am delighted to be here in Chicago. Chicagoans must be a very strong and hardy people. I am told that Chicagoans think going to a Bears game in single digit temperatures with a wind off the Lake is fun. But I am happy to be in this beautiful city, and I think I will come back in January to get the full Chicago effect.


Let me begin with a quote that I've always liked by an English clergyman, John Henry Newman. He said, "Growth is the only evidence of life."


I would say that applies to economics as well. And more importantly, it is what Prime Minister Abe believes.


Japan had the Lost Decade, which stretched into what some have called the Lost Two Decades. During this period there was not much evidence of active economic growth or life. As the Wall Street Journal recently pointed out, "An entire generation of Japanese have graduated from college, gotten jobs and, now approaching middle age, known only deflation."


So the question is: can Japan grow? And how?


Prime Minister Abe is determined to take the actions necessary to revitalize Japan's economy. Now, you may ask—why is his determination different from his predecessors, including a previous administration of Mr. Abe himself?


This time the policies are not just being written. They are not just being developed. They are being implemented. “Without action, no growth.” This is PM Abe’s key phrase.


I also think Japan itself is more ready to accept change. An article in the Washington Post recently quoted a Tokyo-based entrepreneur and venture capitalist who said, "I think Japanese feel this is the last chance for change." I don't believe it is the last chance, but clearly people are hungry for progress.


Growth is possible in Japan.


The prime minister's vision has become known as Abenomics. Abenomics is an attitude and outlook on the world that will enable Japanese people, companies, and industries to compete globally.


And you can genuinely feel something starting to happen. Japan has been like a man who was paralyzed but is now beginning to feel his fingers and toes and beginning to move. Life and growth are returning.


The quiver of Abenomics has three main arrows.


The first arrow is monetary policy. To defeat deflation, the Bank of Japan began quantitative and qualitative monetary easing, purchasing over $70 billion of Japanese government bonds per month. $70 billion a month is real money. And it is a fundamental policy change for the Bank and for Japan. An economist at JP Morgan Japan recently said, "This is a historical change in BOJ policy."


The second arrow is fiscal stimulus including a $ 100 billion supplementary budget. This is combined with deficit control that includes increases in the consumption tax starting next year if economic conditions improve. We don't have a tea party movement in Japan but we know we have to keep on top of the debt.


As a result of these two arrows and other factors, we have already seen significantly higher stock prices and an increase in household and corporate confidence. This in turn is feeding into the real economy through consumption and production. Real GDP grew by 3.5 percent at annual rate in the first quarter of this year.


But it is the third arrow—the growth strategy—where the structural changes will occur that will carry Japan forward for the long term.


The strategy has a number of elements to it. You can't have growth without a stable energy supply. You can't bring about real long-term growth without various reforms, such as regulatory and tax reform to disrupt the old order. You can't expect growth without measures to become more competitive and innovative.


The prime minister's vision shakes up the status quo in all those areas.


My interpretation of his vision is “turnaround.” As a mature society, Japan is facing big challenges as are most developed countries: a decreasing birthrate and an aging society. Energy constraints and environmental concerns. Labor cost and inflexibility and so on.


Mr. Abe’s strategy is to turn these constraints into growth by mobilizing people, science and technology, competition and innovation.


It is well known in Japan that our low birth rates and aging population are limiting our economic future. People aged 65 or older will increase from around 23% of the population today to 40% by 2060. In comparison, the proportion of elderly in the U.S. will not even reach where Japan is right now for another 40 years.


Meanwhile, Japan is already in population decline. To sustain even the population we currently have, it would take a fertility rate of 2.1, which is the number of children a woman would have to give birth to in her life. Today, the number is around 1.4.


Japan is a country with scarce natural resources—no oil, no iron, no coal. Our only resource is our people and the ideas and technologies that flow from them. This must be the foundation of future Japanese growth.


That means women and seniors. And it means education reform. The U.S. has a number of distinguished American universities. Only two Japanese universities are on the list of the best 100 universities in the world.


Prime Minister Abe wants to reform this situation so that universities can be a driving force of Japan’s growth, producing future generations who can face the rigors of global competition.


It also means sending more Japanese college students overseas and hiring more university teaching staff from abroad, including doubling the number of foreign teachers in eight national universities in three years.


Another way to expand Japan’s economic growth is through the free movement of people, goods and money across the borders. The prime minister recently said, "For Japan to remain inward-looking means we are giving up on the possibility of growth."


We are simultaneously pursuing various trade and economic agreements, including a Japan-EU economic partnership agreement; a Japan-China-Korea Trilateral free trade agreement; and the Trans-Pacific Partnership, which is called TPP.


This is a much more open Japan than the Japan of only twenty years ago when there was much talk of the trade wars. I speak first hand because I was a veteran of those trade wars.


Japan’s participation in Trans-Pacific Partnership will add great value to TPP itself since Japan’s GDP is larger than those of all 10 non-U.S. TPP members put together. TPP with Japan included will cover 40% of world GDP and a third of global trade. And it would form a large marketplace with common trade and investment rules.


Japan also started economic partnership negotiations with the EU in April, while the U.S. and the EU will soon begin trade and investment partnership negotiations called the TTIP.


We hope that by developing Japan-EU-US economic partnerships in parallel, we can bring about high-standard global trade and investment rules, as well as contribute to worldwide economic growth.


Speaking of the worldwide growth, Japan just hosted a summit meeting on African development called TICAD V last weekend.


Japan launched this framework, the Tokyo International Conference on African Development in 1993, and since then, it has been the main arena of multilateral efforts for the African development. Africa’s impressive growth together with our wisdom can further bring great benefits for the entire world.


Energy, of course, is also key to economic growth, and Japan is focused on diversifying its energy supplies after the earthquake and tsunami, which includes restarting nuclear power plants once their safety is assured. There really is no choice, but this is a difficult decision because many people are still cautious of nuclear power after the 3.11 accident.


Importing liquefied natural gas from the U.S. is also important. We believe this will not only enable Japan to secure a stable energy supply, but will also stimulate the U.S. economy.


Next week, the Japanese Government will decide the Growth Strategy.


Prime Minister Abe will set benchmarks for all policy areas, such as restoring levels of private investment to $70 billion within 3 years, expanding infrastructure exports to $30 billion by 2020, doubling FDI to $35 billion by 2020, increasing agricultural exports to $1 billion, ensuring 10 Japanese universities place among the top 100 universities in the world within 10 years, and most importantly, increasing per capita Gross Domestic Income by more than $15,000 within 10 years.


These are ambitious goals, but with strong determination and prompt action, I believe Japan can achieve them.


Finally, let me talk for a few minutes about a different kind of growth—a growth in how Japan perceives its role in security matters.


This is a different but interrelated aspect, as the integrated economic growth of two countries, a sound basis for the future defense and security infrastructure building, should contribute to the prosperity of the entire Asia Pacific region.


Right now Japan is committed to addressing the security challenges and is looking at the role of its Self Defense Forces. When the prime minister was in the U.S. in February, he told President Obama he would increase Japan's defense capabilities in response to rising tensions in Asia.


This is just for comparison, but China’s defense budget has increased even more sharply than the country’s rapid economic growth. The disclosed budget has grown 5.2 times over 10 years and reached to $ 102 billion in 2012.


Japan’s defense spending has continued to fall for the past 11 years and is about $ 60 billion in 2012. This includes the $ 1.8 billion Japan annually spends as part of our contribution to maintaining the 50,000 U.S. military personnel based there.


These Americans are not there just to protect Japan. The Japan-U.S. Alliance is the cornerstone of the U.S. presence in Asia, which in turn is the basis of Asia-Pacific peace and stability. Japan welcomes the president's plan of pivoting America toward Asia and is ready to work to that end.


In addressing the U.S. rebalancing, the most immediate concern is North Korea.


Despite more than two decades of negotiations, the fact is that the North Korean threat has been increasing, not decreasing.


I think there exists a rough consensus among North Korea experts that the dual approach of “pressure and dialogue” must be maintained. The question is always the magnitude and timing of such actions.


Eventually North Korea has to realize two paths are ahead: further isolation and confrontation or more constructive relations and more lasting peace.


I believe that the basic framework can be still found in “the 2005 Joint Statement of the Six-Party Talks.” It will not surprise you that I support this approach since I myself was involved in negotiating it.


But the first step North Korea should take is to demonstrate with specific actions its seriousness in abandoning its nuclear and missile programs.


Since we as yet see no evidence of that, we must increase the international pressure, and deterrence through Japan-U.S. Security arrangements.


Next, let me talk briefly about China.


It is now clear that China has a big role to play in the international community. Every country benefits in some way from the growth of the Chinese market. We hope China makes positive use of its increasing economic power for the region and beyond.


The United States and Japan share a common interest in China becoming a constructive partner in the Asia-Pacific region and developing a genuine win-win relationship with us.


I am sure that President Obama is having a talk with his counterpart based on such an idea this weekend. Likewise, Prime Minister Abe insists on the advancement of the “Mutually Beneficial Relationship based on Common Strategic Interests” with China.


China’s external stance, however, is becoming more assertive these days. Japan is concerned about the situation surrounding the Senkaku Islands in the East China Sea, as well as those in the South China Sea. We also share the U.S. concern over Chinese cyber attacks and human right situation.


Twice in one month, a Chinese naval ship locked its weapons-guiding radar on a Japanese naval ship and helicopter. This act often precedes actual firing.


Japan has maintained a resolute stance when it comes to our legitimate sovereign territory, while being self-restrained in its response to Chinese provocation, which occurs almost everyday. And we will continue to do so. Japan has no intention of making the relationship with China confrontational, even though a Chinese newspaper surprisingly claimed to Okinawa.


In the meantime, Japan and the U.S. must try to engage China so that it fulfills responsibilities commensurate with its emerging presence and power in the world.


China is the world's second largest economic power. This country of 1.3 billon people creates the economic equivalent of another Spain every year. Its responsibilities should include commitments to an open and transparent market economy, climate change, foreign economic assistance and resource development overseas and not least of all, security and stability in Asia.


So, Asia has all this economic growth and potential, but on the other hand the security situation is unsettled.


Japan and the U.S. have the same goals for Asia. Although I am the Japanese ambassador, I think I can speak for my American colleagues in the U.S. government when I say that Japan and the U.S. stand together and ready to build a stable, peaceful and prosperous Pacific region.


In closing, I think an important thing to remember is this. The Japanese people are a hard-working people. We are an educated people. We are a people who can pull together for a common goal when that goal is made clear to us. And, although our cultures may be different, we are a people who share the same values as the American people.


Japan can once again become an engine of global prosperity as it once was. And when it does, I want you to know that the United States will have an even more powerful friend and ally.


Thank you for inviting me, and thank you for your very kind hospitality.