, the share of imports from the middle east, which was nearly 30 percent in the mid - 1970s, has been declining, to about 10 percent recently. on the other hand, the share of trade ( both exports and imports ) with east asian economies, which was around 25 percent in the mid - 1980s, recently exceeded 40 percent. in particular, the share of imports from china in total japanese imports expanded to 18 percent in 2002 from 5 percent in 1990. the share of imports from china has overtaken that from the united states, making china the largest importer for japan. an examination of imports reveals that the character of japan ’ s trade structure - importing raw materials for manufacturing and exporting products - has changed. for instance, the share of raw materials in total imports from east asian economies has declined to about 15 percent recently, from about 35 percent in 1990. in the meantime, that of machinery and textile goods has exceeded 50 percent recently, compared with around 25 percent in 1990. the degree of penetration of imported products in the domestic market illustrates a rise in the value added to imported products. in the 1990s, the growth in penetration of textile goods was conspicuous, but since 2000 it has leveled off at around 30 percent. the penetration of electrical and general machinery has increased to nearly 30 percent very recently, from 17 - 18 percent in 2000. these changes reflect progress in industrialization and the accumulation of technology in east asian economies since 1990. they are also attributable to japanese firms ’ activities to transfer production sites overseas. at the same time, these changes make us consider what kinds of industries we should nurture and what types of economic value we can create as sources of japan ’ s future growth. b. the aging economy japan is shifting from a growing economy to a mature one at an unprecedentedly fast pace. since the second half of the 1980s, japan ’ s birthrate has been declining significantly and the aging of the population pyramid has accelerated. the nation ’ s population is expected to decrease from 2006. given these circumstances, the japanese socioeconomic system, including the employment system, social security, local budget and tax systems, needs to be drastically reconstructed from one based on a growing economy to one suited to a mature economy. the reforms of the system comprising the economy and society of a nation inevitably entail conflicts of interest, and it is becoming increasingly difficult to resolve such conflicts through the benefits from economic expansion. thus, it is a very difficult challenge indeed for japan to implement

the second world war, and the wto, a legitimate successor to gatt, have become the targets of such protests? perhaps the phenomenon can be seen as a typical example of increased tension between those who have ridden the tide of the market - oriented economy and those who have grave concerns about global environmental issues and widening gaps among regions which are possibly caused by rapid global developments. i think many agree that the world economy is currently in the midst of one of its most important turning points since the industrial revolution of the 19th century. ongoing globalization and computerization are mega trends which will continue well into the future. in this context, competition at the global level is expected to intensify. it is global competition which is the principal driving force behind economic dynamism. no one can stop this trend and we should react positively. however, we cannot deny the fact that newly formed tensions and uncertainties have emerged. therefore, we should continue to look for ways to promote the sound and stable development of the world economy through steady efforts to establish appropriate rules and regulations that are compatible with the new trends. one thing is certain, such efforts will be accompanied by difficulties, involving some disagreements on the international front, and it is incumbent upon us to try to find solutions. 3. meaning of imf reform against the background of such trends, the international monetary and financial system is burdened with further responsibilities. in particular, the asian currency crises brought to the fore various issues of concern to international financial circles including the prevention and resolution of future currency crises. and, the outcome of discussions constitutes part of the concept of the so - called “ new financial architecture ”. the financial stability forum, which was inaugurated last april at the request of the g7, has published recommendations on such issues as highly leveraged financial institutions ( for example, hedge funds ) and international capital flows. this is one example of the fruit of work undertaken by international financial fora. the reform of the imf has been a most important issue. and it was also the asian currency crises that triggered intense debate about the necessity of such reform. the asian currency crises that broke out as the result of the rapid outflow of short - term capital are called “ 21st century - type crises ”. here, the imf has come to be the target of criticism which holds that imf should improve its surveillance ability and increase transparency of its policy - making processes because it has not sufficiently carried out its mission of crisis prevention and resolution. i personally think