TRANSCRIPT: 1/20 FOLEY Q&A AT JAPAN FOREIGN CORRESPONDENTS CLUB

[USIA]

USIS Washington File

21 January 1998

TRANSCRIPT: 1/20 FOLEY Q&A AT JAPAN FOREIGN CORRESPONDENTS CLUB

(Immediate task for U.S. and Japan is to check contagion) (4620)

Tokyo -- The instability in Asia has shaken not only confidence in
Japan, but has created clouds on the economic picture far beyond Asia,
according to Thomas S. Foley, U.S. Ambassador to Japan.

"It's emphasized again how interdependent we are globally, when a
currency crisis in one country can spread to another and we can have a
circumstance where it's all the result of a contagion. Checking that
contagion, stabilizing financial institutions, improving the economy
and stabilizing the world economy is such an important task that the
United States and Japan I think have no more important immediate task.
And I hope their efforts have proved successful. We'll only know in
the future. There's no way to tell the answer to that question," he
said.

In a question-and-answer session that followed his speech at the
Foreign Correspondents Club of Japan January 20, Foley applauded the
Prime Minister's decision to initiate a two trillion yen tax cut. "And
we hope that there will be consideration given, perhaps, in the future
to any other steps that may be deemed necessary to adequately move the
Japanese economy forward."

Foley dismissed the idea that the United States is tolerating Japan's
growing trade surplus with the United States because it helps keep
interest rates down in the United States and that the American economy
is doing so well that growing Japanese imports are not hurting job
growth in the U.S.

"Regardless of how strong the U.S. economy is," Foley said, "the rapid
growth in the U.S.-Japan trade deficit will be -- already is -- a
growing issue in the United States. There is some, I think, comforting
-- I don't want to call it a delusion -- but a misconception in Japan
that as long as the American economy remains strong and unless and
until the American economy begins to falter, the issue of our trade
deficit will not be very important in the United States. I can't put
it more bluntly than to say that is dead wrong. Dead wrong."

"It is very important," he said, "that we achieve success in our
discussions with the Japanese government and Japanese authorities to
continue to open the market in Japan to U.S. and other foreign
imports, even though those imports may be slowed by currency and other
conditions. The removal of what are considered to be artificial
barriers to entry into the Japanese market remain a sore point with
many in the Congress. And even though the trade deficit will not be
turned around dramatically, perhaps, in a very short period of time,
success in achieving market opening agreements is a very weighty and
effective argument against political resentment and reaction."

Following is a transcript of the question-and-answer session:

(begin transcript)

MODERATOR: Thank you, Ambassador Foley. We'll take questions now and
when I call upon you to come up to the microphone, please identify
yourself by name and affiliation. Gebhardt?

Q: My name is Gebhardt. I am correspondent of Zie Deutche Zeitung of
Germany. Mr. Ambassador, it's interesting to hear your speech without
one mentioning of security issue -- a problem when your Secretary of
Defense is arriving in Japan tonight. Is that caused by the fact that
there are problems between you and Japan on the security issue? More
directly, I would like to ask a specific question on the Okinawa
problem. It seems that what was once advertised as a solution out of
the emotional problems around the bases in Okinawa is going to drag on
and there will be not much of a solution in terms of reducing pressure
either on the people of Okinawa or on the critical views vis a vis the
U.S., where actually these views should be directed more against the
Japanese home government. My question is to give some relief to the
people in Okinawa would be if some of the 25,000 or so marines could
be transferred to Hawaii, which I understand the governor of Hawaii
has actively tried to promulgate. But for instance the U.S. government
has taken no interest in this issue at all and whenever I've asked
questions around this they always say that's a non-issue and Japan has
to solve the problem. But the "solved problem" isn't being solved, so
I'm asking, will you reconsider this problem, or, if not, why not?
What are the reasons?

FOLEY: Well, first of all, I think I did mention very briefly at the
beginning of my speech that we have a very important security
relationship with Japan, which is one of the two principal foundations
of our association. And it's certainly true that the Secretary of
Defense is coming today we're going to have extensive meetings with
Japanese officials in the Defense Agency and the Foreign Ministry.

The United States from time to time does a review of its force
structure around the world. The Quadrennial Review was the most recent
one. And at that time, it was judged that the present level of
American troop deployment in Asia and in Japan in particular is at
about the right level. That doesn't preclude an opportunity to look at
the question from time to time. If situations change dramatically in
the future, there will perhaps be occasion to review it. But for the
present I think we feel that the position of the marines is very
important in Okinawa, as well as other U.S. forces in Japan,
particularly under conditions where there is continuing concern about
stability on the Korean Peninsula.

MODERATOR: Okay. Next question. Right here.

FOLEY: But just one other comment. We are serious about implementing
the Special Action Program on Okinawa and trying to reduce the
pressures on the Okinawan population from the presence of a
significant portion of U.S. forces in Japan. The problems associated
with the closing of Futenma Air Station and its transfer are matters
that are under consideration and review at the present time. I don't
think there's any particular reason for me to speculate on the future,
except I don't take the necessarily pessimistic view that your
question implies. We're also interested in doing whatever is possible
to achieve the goals of that undertaking on Okinawa. We had something
like 26 objectives. Thirteen of them have been accomplished and we
intend to move forward on others as quickly as possible. Those
involving land are more difficult to resolve quickly than others.

Q: Yuri Kageyama, Associated Press. You said that you hope the
Japanese government will take steps toward vigorous recovery in the
economy. What are some of these steps? Are you saying that the steps
that are taken so far are not enough? And are you thinking tax cuts?
If so, how much?

FOLEY: Well -- thank you. We applaud, as I said, the Prime Minister's
decision to initiate a two trillion yen tax cut. And we hope that
there will be consideration given, perhaps, in the future to any other
steps that may be deemed necessary to adequately move the Japanese
economy forward. But that's not for me or for the United States to
determine. Obviously, that's a matter for Japan. But we believe that
the Prime Minister is very serious about his efforts to move forward
on domestic demand-led growth in Japan, and we emphasized again and
again how important we think this is, not only to Asia but the entire
world economy. Japan should never be underestimated as an enormous
factor in the total world economy. Without any disrespect to any other
country in Asia, including China, the economic statistics of Japan
overwhelm every other. And the welfare and growth of this economy is
so fundamentally important to international economic progress that it
gives every country a stake in the key decisions made in this country.

Q: Bob Neff with Business Week. Conventional wisdom has it that the
U.S. government is currently willing to tolerate Japan's growing trade
surplus with the United States because it helps keep interest rates
down in the United States and that the American economy is doing so
well that growing Japanese imports are not hurting job growth in the
U.S. To what -- as a former politician -- to what extent do you worry
that, if the U.S. economy does slow down and Japanese imports to the
U.S. -- exports to the U.S. -- continue to grow, to what extent do you
worry that that will become a political issue in this year's
Congressional elections? And, if not then, further out in the next
presidential election?

FOLEY: Thank you for that question, by the way. I do worry about it
because I think, regardless of how strong the U.S. economy is, and I
believe it continues to be very, very strong, the rapid growth in the
U.S.-Japan trade deficit will be -- already is -- a growing issue in
the United States. There is some, I think, comforting -- I don't want
to call it a delusion -- but a misconception in Japan that as long as
the American economy remains strong and unless and until the American
economy begins to falter, the issue of our trade deficit will not be
very important in the United States. I can't put it more bluntly than
to say that is dead wrong. Dead wrong.

There is already, in my judgment, growing concern in the Congress
about the rapid rise of the deficit. Much of that, of course, is
structural. It is not going to be easily or quickly turned around.
There is no sort of magic bullet by which you can reverse these trade
flows. But it is very important, I think, that we achieve success in
our discussions with the Japanese government and Japanese authorities
to continue to open the market in Japan to U.S. and other foreign
imports, even though those imports may be slowed by currency and other
conditions. The removal of what are considered to be artificial
barriers to entry into the Japanese market remain a sore point with
many in the Congress. And even though the trade deficit will not be
turned around dramatically, perhaps, in a very short period of time,
success in achieving market opening agreements is a very weighty and
effective argument against political resentment and reaction.

MODERATOR: I can assure you, that was not a planted question.

Q: If I may, a question about security. It's Kenji Kohno, NHK. Sir,
you said that you will not speculate for the future about Okinawa, but
the Okinawan government has already made up their mind about the
replacement heliport for Futenma Air Base. And the objection would
make the Futenma return impossible and could hurt the U.S.-Japan
security alliance. So I'm just wondering how would you deal with the
situation as Ambassador? And part two -- a question also about
security, the navy -- the U.S. navy -- aircraft have started
nightlanding practice, giving very short notice before they started.
And that raised concern among Japanese citizens against the attitude
of U.S. forces. How would you deal with this, sir?

FOLEY: Let me take the second part of the question first. We regret
that there was lack of usual notice before nightlanding practice was
initiated very recently. There are reasons why that was difficult to
do, but we recognize that as an unusual and undesirable condition. And
we will use our very best efforts in the future to ensure that such
actions are not taken without appropriate notice, and under the most
appropriate conditions possible to reduce the impact on the Japanese
population. We wish to express our appreciation to those in the
affected areas who have been inconvenienced by this action.

As far as the question of Futenma Air Base is concerned, I think I
heard you say that there had been a decision not to approve this by
the Okinawan authorities. I'm not aware that that is the case.
Governor Ohta has not yet stated his position. There is a mayoral
election apace. The Mayor of Nago City, as you know, approved the
selection and then resigned from office. So I think the matter is
still very much under consideration by Okinawan authorities and the
Okinawan community.

Q: Anthony Rowley, Business Times. Ambassador, it's really an
extension of the point about possible U.S.-Japan trade friction. The
Asian countries that have been affected by the crisis have an urgent
need for foreign exchange and there are two ways in which they will
obtain it. One is by increasing their exports and the other is by
foreign investment. Do you think this need on the part of Asian
countries to increase their exports to the United States and to other
areas of the world could also be a source of possible friction? And do
you expect Europe is going to pull its weight in helping absorb those
exports? And, second question, if I may. What is the outlook for U.S.
foreign investment now in Asia? Now, after the crisis, in terms of
both manufacturing investment and also, you know, Wall Street,
portfolio investment?

FOLEY: Well, I think I would certainly express a hope that Europe will
also be a source of import from Asia to help diversify, if you will,
the export potential of Asian countries. And also Japan. I think one
of the reasons that Japan's recovery is important is that Japan itself
needs to be an engine of growth for the region. As only Japan can be
in this region. There is no other country that can assume that role to
the same degree. As far as Europe is concerned, again, I think there's
some evidence that Europe is -- the European economies are recovering,
and that might well be the case. The United States is bound to
probably receive greater imports, and I think that almost has to be
expected. What we do not wish to see is an artificially stimulated
effort to expand exports in order to achieve recovery by that, and we
are heartened by the continued assurances of Prime Minister Hashimoto
that the Japanese economy will not seek recovery by any but domestic
demand. The question you asked -- the last part of your question was
--

Q: about U.S. investment.

FOLEY: U.S. investment in Asia. I think there is an increasing sense
that there are legitimate opportunities for U.S. investment in Asia in
this particularly complicated and difficult time. It's important that
those judgments are made carefully. But again, we think of the
strength of the economies of Asia, if there is an opportunity in many
of them for competitive investment from outside the region, both from
the United States and Europe and other places. For example, in Japan,
there has been recent interest on the part of American companies to
make investments here, and I think that's a healthy thing. And
conditions which artificially restrict that in any country I think are
not desirable.

MODERATOR: All right. Next question.

Q: R.J. Kelley, from Pacific Stars and Stripes. I'm wondering,
presumably while Secretary of Defense Cohen is in Tokyo, and the
discussions that are expected with Ministers Obuchi and Kyuma and I
assume your office and yourself will be going on the next day or so,
and I'm wondering what do you expect to result from that as far as the
furtherance of the implementation of the U.S.-Japan Guideline
Agreement, and how active a role will you personally and the Embassy
play in those sorts of discussions?

FOLEY: Well, I think it will be the subject of discussion between us,
as to the current state of the development of these guidelines and the
implementation of structures and institutions to further implement the
guidelines. I will be involved to some extent as a surrogate for
Secretary Albright here while the Secretary of Defense is here, and in
addition to Minister Kyuma and Foreign Minister Obuchi, I'll be
playing a role in those discussions, as, I think will Ambassador
Saito, as well, who is in Tokyo.

Q: Good afternoon. James Simms from Dow Jones. Just one question.
There was a report in the Asahi Shimbun on the weekend saying that
Japan had promised to compile a large-scale supplementary budget as
early as April, which was later denied. Can I get your comment on
that?

FOLEY: I have no information on that at all, frankly. I've heard the
report but I have no information.

Q: Hi, Cheryl Wu Dunn with the New York Times. There has been so much
talk recently about political instability, about the prospect that
even the Prime Minister is on edge because of his job. Can you just
give us what you think -- what are your concerns now about the
political situation, if you have any? Can you just sort of outline for
us what the risks are if something should happen to the current
government, any kind of change, what are the risks?

FOLEY: I don't see the present Japanese political situation as
unstable. And while I can't predict any more than anyone else the
future of Japanese politics, I assume that we're going to be dealing
with Prime Minister Hashimoto on matters relating to U.S.-Japan
relations for the foreseeable future.

Q: (inaudible)

FOLEY: Well, I don't know what you mean by risk. I mean, every
political society has the possibility of change, but I don't see that
this is a particularly unstable time for Japanese politics, and I find
Mr. Hashimoto is entering his second year in the Prime Ministership,
and I don't see anything likely to change that picture in the
foreseeable future.

Q: Tony Boyd, Australian Financial Review. The Japanese government has
complained about excessive movements in the yen, including in
December, I think, the Bank of Japan made substantial intervention in
the market to strengthen that against the dollar. Could you comment on
what role you see the yen playing in avoiding any trade friction? And
also, do you think there is a need for some coordinated international
policy to bring the yen back to some sort of level that is amenable to
both countries?

FOLEY: When I was first elected to Congress, I made a pledge to myself
that I would never discuss popular referendums in the State of
Washington. Never comment on them at all. And that saved me
innumerable difficulties, as all kinds of very controversial issues
came on the public ballot. When I became Ambassador to Japan, I
resolved that I would not comment on yen-dollar relationships in any
way. And so far that has kept me from similar difficulties.

When I was a member of Congress, before the Plaza Agreement, I was
here in Japan and I think, not in this room, but at a meeting in which
a number of press were invited by the JCIE. And I was asked at that
time, which was about 1984, about the relationship between the dollar
and the yen. And I said at that time, the yen is too weak. The yen
needs to be strengthened. It both should be stronger, could be
stronger, and will be stronger. I went home to the United States to
receive dozens and dozens of calls from people like dentists in Omaha,
Nebraska, lawyers in Buffalo, New York, real estate people in
California, all of whom had invested in futures markets in yen trading
and were furious with me for having changed the yen/dollar ratio a
point or two. So if you don't mind, I'll adhere to my principle. There
is a relationship between the dollar and the yen. If you wish to know
what it is, check your daily newspaper.

MODERATOR: I told the Ambassador before we started, this would be a
good time to test to see just how far a U.S. Ambassador could move the
yen in one day. But --

FOLEY: I hope, not at all.

MODERATOR: Okay. I see a hand in the back there.

Q: Jocelyn Ford, Market Place Radio. Back in the days of the IMF
bailout for Thailand, the U.S. was slow out of the gate, you could
say. Now the U.S. seems to be taking a major leadership role in the
Asian financial crisis. Do you consider the role that the U.S. plays
now as very important to what the U.S. role in Asia will be in the
next century? That's the first question. Second question is, I'm sure
Ambassador Mondale left behind his crystal ball. Where do you think we
are in the Asian financial crisis? Some analysts yesterday were saying
maybe we're turning the corner. Where do you think we are?

FOLEY: Well, first of all, I think the United States and Japan will
have a strong continued partnership in the next century, and I think
that's going to be key to the success of both countries in dealing
with not only security problems but their economic difficulties, and
will contribute enormously to the stability and progress of Asia. That
may sound very pat, but I think it is fundamentally true. Today every
once in a while you hear that song about the United States used to
bash -- and now it's passing -- Japan, and that China is our most
recent country of fascination. And while it is true, and I'm glad of
it, that U.S.-Chinese relations are improving, nothing -- nothing --
changes the fundamental relationship between the United States and
Japan, now and in the next century. And, indeed, the emergence of
China makes that relationship all the more important and fundamental.

As far as my crystal ball on the Asian problem is concerned, it's no
better than yours. I hope, certainly, that it is true that we have
turned the corner. Again, the instability in Asia has shaken not only
confidence here, but has created clouds on the economic picture far
beyond Asia. And it's emphasized again how interdependent we are
globally, when a currency crisis in one country can spread to another
and we can have a circumstance where its all the result of a
contagion. Checking that contagion, stabilizing financial
institutions, improving the economy and stabilizing the world economy
is such an important task that the United States and Japan I think
have no more important immediate task. And I hope their efforts have
proved successful. We'll only know in the future. There's no way to
tell the answer to that question.

MODERATOR: I think we've got time for a couple more questions.

Q: Toshio Aritake, Bureau of National Affairs. Ambassador, your
predecessor, Mr. Mondale, was very bullish about opening Japanese
markets, particularly successful at other trade issues. For example,
in the auto, U.S.-Japan auto trade issue, it was him who resolved this
trade issue. And in the case of cell phone issue, it was him who
banged the table out of (PORTION OF TAPE LOST) settled this dispute.
Is this the kind of policy you're planning to take? Or is your policy
approach toward Japan a sort of a soft-soft, friendly, bowing to each
other?

FOLEY: Well, I'm not a natural table banger, and I don't think Fritz
Mondale was, either, frankly. He was, I think, very efficient, and
effective, in bringing the U.S. concerns to the Japanese government
and there were successful conclusions to those efforts, and I hope to
be successful in many areas, myself. But it's not just one ambassador
or one country. Trade agreements require the cooperation of many
people, many organizations and groups. If I have a message that I
would probably want to give to the Japanese government, it is that we
think that the market opening efforts are in our interest, certainly,
or we wouldn't be recommending them. But we think, fundamentally, as I
tried to say in my prepared remarks, they are in the interests of the
Japanese consumers, Japanese suppliers, Japanese employers, Japanese
employees, the Japanese economy.

And, in fact, if there are some areas -- I don't want to get into them
-- where I think Japan is artificially less than at the front rank in
the world's economy in some sectors, it is because there has been too
much regulation. Because nothing else explains how a country so
innovative, so fundamentally strong in its economic structure, with
such a superb education system and with so many other advantages has
not been in the forefront of every single technology and industry in
the world. And so it is, in our judgment, a message that we think is
as much in the Japanese interest as in the American or other foreign
interest. And I don't, frankly, think that any country responds to
table banging and hard language. We don't in the United States. I
don't think Japan does. But enlightened self-interest is a great
motivator and a great persuader.

MODERATOR: Okay, we'll take one last question. Pat.

Q: Pat Kellen, Number One Shimbun, that's the club's hard-hitting
newspaper. Mr. Ambassador, sometimes the mark of an ambassador is his
relations with his home country. I have two questions I'd like to ask
you. If you'd talk a little bit about your relationship with President
Clinton. And number two, Japan is now being asked to pay more for the
United Nations. And how do you answer the criticism that the United
States is being something of a deadbeat?

FOLEY: Well, I -- as far as my relations with the President are
concerned, I think they're excellent. And I'm greatly honored to be
the President's representative as well as the representative of the
United States government in Japan. And I look forward, by the way, to
going back to the United States from time to time, three or four times
a year, not only to have an opportunity to consult with Administration
officials, including the President, but to keep contacts with my
colleagues in both parties, in both the House and the Senate. We're
very happy to welcome this week a number of Congressional visitors:
Senator Roth, Senator Sarbanes -- Senator Rockefeller was here last
week. We have seven House members here. Congressman Leach is coming
from the House Banking Committee. We have a group of very high-ranking
economic staff of members visiting Japan. And these are, I think,
wonderful things for us in the Embassy because they give an
opportunity for us to share views with our fellow citizens,
particularly those in the Congress that have great influence on
policy, obviously.

As far as the -- what was your second question, again?

Q: The U.N.

FOLEY: Oh, the U.N. Yes, the U.N. I guess I blanked on that a bit
because I think I'd have to plead guilty. I don't think the United
States has much excuse for failing to pay its dues to the U.N. And we
hope -- the Administration hopes -- that it can work effectively with
the Congress in developing a method so that, in the very near future,
the United States will restore its position as fully complying with
its financial requirements to the U.N. By the way, on that subject, I
have long, personally, been a strong supporter of the concept of Japan
being a member of the Security Council. By any standard of modern
economic or political life, Japan deserves that position. In fact,
it's overdue. And I hope that it will be possible in the coming months
to work out a formula by which Japan can join the Security Council as
a permanent member.

(end transcript)