Address to the ASEAN Committee
Luncheon speech, by Taro Aso, MHR, former Foreign Minister of Japan
April 25, 2008, Botan no Ma, Imperial Hotel, Tokyo
Thank you. Thank you very much, Ambassador
Simaskul. I am glad to meet you all. And thankyou for giving me a good chance to speak withyou.

He has published many books. And still, I cantell you. His policy will do little.
What’s going on now is even more serious thanthe Japanese post-bubble recession. Because thistime, there is no concentration of bad assets.
Instead, they are scattering everywhere, on thebalance sheet of so many banks in so many
countries. I can see a credit squeeze of a massive,and huge scale down the road.

You know that I was Minister for Foreign Affairs
until recently. I know what you do as anambassador. You hear my talk, go back to yourembassy, dictate what you just heard, and you
send your telegraph to your own minister, don’tyou? So I will say a lot today except for one thing.
I won’t say bad words about Prime Minister
Fukuda. You cannot amuse your boss back home,saying like “Aso was really harsh on Fukuda” In
any event, it is not Mr. Fukuda alone who isfaced with a serious threat. It’s the LDP itself
that is threatened.

But if you think about it, the US economy was
the consumer of the last resort. Japan, China, andmany others depended on the US market. Also,
the US economy was just like a huge bank.
People bought dollar-denominated assets. Money
flowed into the US. From the US, hedge funds
and others bought assets in China, Japan, Russia
and so forth. Both functions, buyers and bankers,
are now gone. US consumers won’t buy as much.
The great bank of America has stopped rollingon.

Now, my first point is about Japan’s economy.
Later on, I will speak on Japanese diplomacy, andJapan’s relations with ASEAN countries.
Now, more than anytime before, the global
economy needs us, namely, the Japaneseconsumers.

That’s why the Japanese economy must now
stand up. It must create demand. And it must be
domestic demand, like consumption. Now is thetime for Japan to ease the economic pain of theworld, by encouraging Japanese consumers tobuy more, and save less.

Imagine, you have a balance sheet. You have theasset side, and the liability side. Yesterday, youthought you had 10 on your asset side. Today,
you find that’s only 5. But on your liability side,
you still have 10. You are now insolvent.

How can we do that? I am saying that we should
abolish the pension premium. Japanese pension
system is already broken and largely insolvent.
Remember, under the current system, you pay 5,
and your company pays 5. And the total amount,
10, will be put into the government safety box. Itwill sleep there for 25 years, until you become
eligible to get them back as pension.

That’s what happened in Japan during thepost-bubble recession. Here, normal financial
policies wouldn’t work. To lower the interest rate
will do absolutely no good. Because you have to
reduce your liability side by the same amount, 5.
Because you need no more loan. To pay it back iswhat you should do. In that context, interest rate
reductions mean almost nothing.

First, lots of people, like college students, are notpaying the premium from the beginning. Second,the government is doing a very bad job tomanage the safety box. For these two reasons,the government pension system has lost credit,
and is now already broken.

That’s what the so-called “balance-sheetrecession” is like. It happened in Japan recently,
and that is exactly what is happening now in theUS. The Chairman of the US Federal Reserve,
Ben Bernanke, is making the interest rate lowerand lower. He knows a great deal about finance.

And that is exactly the reason why people in1

Japan are feeling anxious and very much uneasy
about their own future. They think they can trustnothing.

important country for Japan to live on.
Why do I say so? If you want me to do that, I
can speak for two hours or even longer about
why I say so. For now, I should only say thefollowing.

It’s always better to have complaints. Because if
you have complaints, you think you must change
something. Complaint is the mother of action.
But if you feel uneasy, trusting nothing, what will
you do? You just don’t want to take any risk any
more. You stay in bed, if you like. In bed, at least
you can stay warm. And that is what you see
happening in Japan. They are so risk-averse, thatthey just stay in bed, doing very little else.

Number one: Japan and the US make up 40% ofthe world output. The two giants, when together,can stabilize the world. If apart, you will have a
totally different rule of the game.
Number two: the military alliance between thetwo now provides the world with one of thelargest insurance policies. It reduces future risks,enhances predictabilities. This aspect is all themore important because we now have, in thispart of the world, some great uncertainties in themaking.

So, to make them feel secure and safe is the mostimportant economic policy that Japan should donow.
My idea is, we should now get rid of the pension
premium. The pension should be covered by theconsumption tax. Then you will have no worry
about your pension coverage. You will feel moreat ease about your future.

Number three: Japan and the US are two of thelargest, longest-standing democracies. Tokyo andWashington DC have had many disputes. We
may have still more in the future. But the alliancehas not changed. It has even gained strength.
That’s because Japan and the US are establisheddemocracies. And it is always a democracy you
can count on. Together, the two nations, Japanand the US, should be the ones you can rely on.

True, you must pay more when you buy goodsand services. But you don’t have to pay thepension obligation. The company doesn’t have topay the matching amount. They can pay youmore, instead. Plus, you feel safer about yourfuture. As a consequence, I am sure the Japanese
will spend much more.

While I was Foreign Minister, I knew I would
have to do a lot in investing into the alliance.
Alliance, at the end of the day, is a contract. As
with any contract, to keep the alliance valid andviable, you just can’t leave it on your desk.

You may say that my idea sounds like mycampaign platform. Yes, you may say so. I will
run for office again, when the time has come.
This, you may also report back to your minister.
More seriously, though, I believe Japan muststand tall in the international community. For
Japan to stand tall, its economy must keep onrolling. My policy, therefore, is an economic
policy, but it is also a diplomatic policy.

It takes a constant effort to make it effective.
With this firm in my mind, I went to Canberra,Australia, Delhi, India to strengthen the ties withthese two great democracies. I went also toBrussels, Belgium to address the North Atlantic
Council, Baghdad, Iraq and the old town Jericho,
in the Palestinian territory. I did that for Japan’s
own sake, but I did that also for investing into
the Japan-US alliance.

Let me turn now to the diplomacy, Japanesediplomacy.
Please make no mistake. For Japan, no othernation is more important than the US. There aresome politicians who say different things,depending on the audience. They say America isnumber one, to the Americans. But to the people
from Southeast Asia, they may say they can counton America no longer. I say always the samething, no matter who I am talking to. So I should
once again say that the US will remain the mostWith that same idea in mind, I pushed an
initiative, “the Arc of Freedom and Prosperity”.
The arc is designed to serve Japan’s purposes. Itis also for Asia, for NATO and for a lot ofothers. But importantly, when Japan cares about
the world, it is always to an extent, to the benefitof the US. Because no other nation is more
widely exposed to the world uncertainties than2

the US.

to share the joy and sorrow with the local people.
That, I think, is what is best about the Japanese.
That, I believe, is what gives them leadershipcapacity. And that, I also believe, is enduring.
Even if Japanese economy will lose some of theground, the Japanese characteristics I justdescribed will not go away. My hope is that theJapanese will gain more trust from theirneighboring Asians.

Now on Asia in general, and about ASEAN inparticular..
What I should say briefly is about the source ofJapanese leadership in the world. For some,Japan’s world leadership derives from its capital
power. For others, it’s the technology. And forstill others, it’s the Japan-US alliance I justtouched on. Some may count manga and anime.
Others may say that Haruki Murakami is the only
novelist that sees no borders in Asia. At any rate,
what can make Japan a leader of the region?

You may know that I have had a firm conviction
about how a society develops. That is to gain
peace and happiness through economic
prosperity and democracy. Asians in general, andpeople in ASEAN nations in particular, have
either already lived through that process, or havejust started it. ASEAN represents more and more
the set of values that Japan also regards highly.
Democracy, rule of law, respect for human rights
and so on are the values ASEAN appreciates.

I think it’s a combination of almost everything I
just said. Last year, as Foreign Minister, I started
something called the International Manga Award.
It is an annual event. For this year, the numberof applicants more than doubled. 368 manga
artists applied, and 156 of them, or 42% of thetotal, came from Asian countries. Hence there
can be no doubt that Japan offers many things
that are attractive, interesting, and useful for theAsians, young and old.

This is an encouraging development. And I cantell you. Once your charter is complete, andASEAN gets more like an institution, Japan willtalk to ASEAN just like its talking to theEuropean Union. Sooner rather than later, Japan
will set up an ASEAN representative office justlike the one in Brussels. An ASEAN Ambassador
will be appointed, too.

But, what makes me feel happiest is the kind ofJapanese people I see in Indonesia, for example.
They are the Japanese police officers. One ofthem is Mr. Mano, who is from Okayama
Prefecture Police. He and his colleagues haveworked hard in Indonesia, in a city called Bekasi,
to introduce Japan’s koban system into thecountry. Thanks to Mr. Mano’s effort, policeboxes, or koban stations, are there in Bekasi.
One of those police boxes has a couple of policeofficers. But they are all female officers. I think
this is a beautiful achievement. Because it showsthat people in the local community now pay
respect to those women officers. I feel proud, asa Japanese, to have people like Mr. Mano.

I know that the gap between the rich and poor
among the ASEAN member nations will remain
one of the hardest issues. On that, I should saythat the CLV nations, Cambodia, Laos andVietnam will continue to be large on the Japaneseradar screen. A large portion of developmental
aid will keep flowing to that region from Japan. I
wish I could include Myanmar and call the region
not CLV but CLMV. Yet I can’t. I should urge
you to put a healthy peer pressure on Myanmar
so that even if gradually, they will understandthat more democracy and less military rule will be
the only available option for them to take.

And in many other countries, there are lots ofJapanese men and women who paid no respect
to their own financial gains, but worked hard
together with the local people. One of them isthe late Dasho Keiji Nishioka, who dedicated hiswhole life to fostering agriculture in Bhutan.

ASEAN and Japan have come a long way
together. You stay seated behind the wheel.
Japan will remain a trusted partner, and astabilizing force, together with the US, for theASEAN nations. We can do more together down
the road for the Asians and beyond. Because
now, we can call each other more mature anddemocratic than any time before.

Japanese leadership derives from the very
attitude Mr. Mano, Dasho Nishioka, andnumerous others have shown to the local people.
These Japanese aid workers simply like working
together with them. They like to sweat. They likeThank you very much.
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