 Welcome to the Carnegie Endowment for International Peace. My name is Jim Shove. I'm a senior fellow in the Asia program, and I run our Japan Studies program here at Carnegie. And it's an honor to help host, now for the fourth time, this special Japan in 2017 event today with the Japan America Society of Washington, D.C., in their special 60th anniversary year. So that's our extra honor today. I always look forward to this time of the year because our partnership with the society gives us a chance to work with their extensive network here in town and work with a lot of great people on their staff. It also gives us a chance to bring some really high quality policy makers, journalists and scholars right at the time when we are most interested in thinking about the prospects for the coming year and dynamics ahead. And we have quite a year ahead of us, I believe. As always, Carnegie today is really just the host. This is truly the Japan America Society of Washington, D.C.'s event. They do all the heavy lifting in terms of organizing and arranging the speakers and bringing our special guest Funabashi Yoyuchi all the way from Japan. It's just one of many contributions that the society makes to the community here in Washington, D.C. and to the U.S.-Japan relationship. And for this, I'd like to thank society president, Ambassador John Malat, who you'll hear from in just a moment. The executive director, Mark Hitzig, and the chairman, board chairman, Matt Goodman, for all their leadership and support in this event. Of course, thanks go to our staff for both here at Carnegie and at the society for their work as well. The Suscott Peace Foundation provides important financial support for this program through a program run by the National Association of Japan American Societies, or NAJAS. And for that, we have Peter Kelly to thank and he's here today. So I wanna extend our thanks to them as well. So I'll have a chance to talk more as a moderator of the International Panel in the afternoon. But right now, I just wanted to welcome everybody and get the event started and provide some background music while the rest of our guests trickle in. As a quick outline for the event today, we are honored to be joined this morning by Congressman Joachim Castro of Texas and our special lunch and keynote speaker, Yoichi Funabashi, who founded the Rebuild Japan Initiative Foundation. Funabashi-san will be doing double duty here today. He's a part of our first panel on Japan domestic issues so we can tap his knowledge on Japanese domestic politics and economics. And then he'll be giving a keynote speech after lunch, looking more at the foreign policy view and regional dynamics. So it's a pleasure to have Funabashi-san here today. Thank you. And we'll have our afternoon panel on international issues and then I think at the very end of the event today, we'll do a special sake toast in the back to ring in the 60th year of the society. So let me turn it over to Ambassador John Malat to get things started. Thank you. Thank you very much, Jim, and good morning to everyone. For many years, it was our dream to Japan America Society to create a symposium like this. So a serious all day look at where Japan, in U.S.-Japan relations would be going in years ahead. And finally, five years ago, thanks to help from the Sasakawa Peace Foundation in age as we were able to do it. So this is our fifth year doing this. As Jim said, it's our fourth year here at Carnegie for which we're very, very grateful for the support that Jim and Carnegie give to us. I think this probably is the most important symposium that we've ever had because we have a new administration and we have a new Congress. There's a new sheriff in town. We've all heard the statements that have come out about China and Taiwan and Japan and Korea and TPP and trade more generally and nuclear weapons and host nation support and burden sharing and so on. These have raised a lot of anxiety, concerns, interest and uncertainty here in Washington, D.C. in Japan and Asia and factor on the world. So here we are less than one week after the inauguration. In Washington, D.C. I've always said we have the greatest collection of expertise on Japan of any city in the United States with the think tanks, the government officials retired and still active, the nonprofit sector. I think it's just the greatest collection. It's not just the people on the stage, it's all the people in the audience who come here today as well. We're especially pleased to welcome a friend of many of us, Yohichi Funabashi, who's come all the way from Japan to join us today first on the panel and then to make the keynote speech later on. But first let's start with the view from the Hill, a very, very important player. We're so very, very grateful to have Congressman Joaquin Castro with us. He is the co-chair of the Congressional Caucus on Japan. He represents the 20th Congressional District from Texas, which includes San Antonio, which is I think where the congressman lives. The congressman will speak about the U.S.-Japan alliance and the new Congress for about 10 minutes, and then he will take some questions from our chairman, Matt Goodman. So Congressman, we're very pleased to welcome you. Welcome. Thank you, Ambassador, for that introduction and for the leadership you've shown in strengthening ties between Japan and the United States. And my only regret this morning is that I won't be able to stay for the sake this afternoon. I'm gonna be on a flight back home to San Antonio. But I'd also like to thank the Japan American Society for organizing today's event and the Carnegie Endowment for International Peace for hosting us. A special thanks also to Sasakawa Peace Foundation and the National Association of Japan American Societies for their support and their wonderful work throughout the year. As Ambassador Malant mentioned, my name is Joaquin Castro, and I'm now in my third term representing my hometown of San Antonio, Texas. I'm a founding co-chair of the Bipartisan U.S.-Japan Caucus, and during my time in Congress, I've spent two terms on the House Armed Services and Foreign Affairs Committee. And last year, I moved on to the Permanent Select Committee on Intelligence, where I now serve. In each of these committees, we've spent time examining U.S. foreign policy toward Asia and the events in the region that shape our discussions. We're here today to examine the future of the U.S.-Japan relationship in the year ahead and under this new administration. But before I offer some thoughts on that, I wanna take a brief moment to reflect on the progress President Obama made to strengthen the U.S.-Japan relationship during his presidency. From early on in his presidency, President Obama emphasized the need for the United States to shift our gaze toward the nations across the Pacific. America's rebalance to Asia was a smart, strategic foreign policy directive that helped our country's relationship with our allies and Japan in particular grow and mature. Over the course of his presidency, Japan and the United States have cemented their ties and worked together to build a 21st-century relationship. The past few years in particular saw a number of historic milestones between our two countries. In the summer of 2015, Prime Minister Abe became the first Japanese leader to address a joint session of Congress. President Obama paid his respects on behalf of our country at the Memorial in Hiroshima and of course, Prime Minister Abe visited the memorial at Pearl Harbor. Some folks may view these gestures as simply symbolic, but I believe that they're far more. They were significant necessary steps in closing the chapter of our nation's relationship that was defined by the events of World War II. They helped us turn our attention to what lies ahead. While we'll always remember our shared past, our shared future must now be our priority. I co-founded the bipartisan U.S.-Japan caucus in Congress to help forge that forward-looking relationship in the years ahead. The caucus is now in its fourth year and I'm pleased to be working with my co-chair, Republican Dave Reichert from Washington State, to continue to grow our ranks in Congress. We currently have more than 100 members who represent communities from across the United States. Not only do our members boast geographic diversity, they also hold influential roles on a number of key committees, including foreign affairs, armed services, energy and commerce, and ways and means. The caucus engages members on a range of relevant issues, but its particular focus is on economic and security issues. Through the caucus, members and their staff have had an opportunity to cut through partisanship and discuss, frankly, the U.S.-Japan relationship. The new administration will inherit a U.S.-Japan relationship ready for 21st-century challenges and opportunities. Now is the time of transition for the United States and our allies. A recent survey found that nearly half of Japanese respondents indicated that they believe that relations between our two nations will worsen under President Trump. I hope that that's not the case. And now, more than half, said that they think the U. administration will adversely affect Japan's economy. We in the caucus don't want to see any sort of decline in the U.S.-Japan relationship and we're going to work hard to make sure that that doesn't happen. We actively work to address areas of concern for both our countries in the Congress. One issue that elicited strong opinions and much discussion over the past couple of years amongst our membership was, of course, the Trans-Pacific Partnership. As you all know, President Trump signed an executive order officially withdrawing the United States from the TPP's negotiations earlier this week. I, like many colleagues, had concerns about the TPP, particularly the labor enforcement provisions. While I voiced that view to my constituents during town halls and to my colleagues through forums like the U.S.-Japan Caucus, Congress never had the opportunity to hold hearings or a public debate on its merits. Now, it remains to be seen what President Trump's specific economic agenda and trade agenda will entail. We can surmise from statements that the new administration will prefer tough trade enforcement and bilateral trade agreements. Hopefully, we'll learn those details in the near future. Despite that uncertainty in the demise of the TPP, the United States and Japan's strong economic partnership remains intact and I believe will continue to grow. Japanese foreign direct investment in the United States is quite significant, as you know. In fact, Japan was the second biggest source of FDI flows from 2013 to 2015 with 17% of FDI inflows the United States over that period coming from Japan. My home state of Texas has a particularly strong economic relationship with Japan, annually exporting more than $5.5 trillion worth of goods to the nation. I've spoken before about how the Toyota plant, for example, in San Antonio, has created thousands of jobs and helped transform our economy. I know communities across the nation similarly benefit from Japanese investment. Regardless of what our new president may say or do, please know that at the local and state levels, governments and business organizations will continue to prioritize economic engagement with Japan. In addition to our economic collaboration, the United States and Japan must work together to confront our new security challenges that threaten stability in the Pacific region. Let me start by saying two things. First, the U.S.-Japan relationship is the linchpin of the United States role in Asia and that will not change. Second, the United States Article 5 commitments to Japan are the ironclad law of the land. It's been reported that Secretary Mattis will soon visit Japan and South Korea. I would ask Secretary Mattis to reassure both Japan and Korea of our treaty commitments just as he has done with our NATO allies. One of the more welcome achievements of the Obama administration was the updating of guidelines for U.S.-Japan defense cooperation. These guidelines are evidence of our nation's new 21st century partnership and deepening of our security coordination. These guidelines will foster a more seamless bilateral response to the growing security challenges in the region, including asymmetric cyber threats to both of our nations. Japan's approval of the guidelines came at a moment when conditions in the region are evolving. China is playing an increasingly active role in this East and South China seas, expanding its sphere of influence. The North Korean regime's hostility flares with continued nuclear and rocket tests. It is critical that the United States and Japan maintain our unwavering alliance in the coming years and bring together the international community to strengthen our partnerships with other friends who share our principles and interests. ASEAN and South Korea in particular are allies with whom we should strive to create new linkages with an eye to the future. The posture of the U.S.-Japan relationship under the new administration, of course, remains to be seen. Where I believe the future lies is in developing the next generation of political leaders in Japan and in the United States to continue on the strength of this relationship and increasing those leaders' engagement with one another, with other allies in the region. Building those bonds between our young leaders will serve as a foundation of our 21st century partnership. In that spirit, I'll be going to both Tokyo and Seoul next month to meet with my counterparts across the Pacific. My colleagues and I will have the opportunity to build lasting relationships with our Japanese counterparts and discuss our bilateral relationship with Japan. The greater our understanding of each other's priorities, policy-making processes, and customs, the more effectively we can work together to make the world a more secure, prosperous, and democratic place. I would encourage legislators in both the United States and Japan not only to continue our engagement in Tokyo and in Washington, D.C., but also to visit each other in their home states and home districts across the country. I can't underscore enough how consequential it is to build relationships at the state and local level, whether it's economic, academic, or scientific, these state and local relationships will forge the U.S.-Japan alliance beyond our nation's capitals. These are uncertain times. If 2016 taught us anything, it's that anything is possible. But even in a moment of unpredictability, I want to leave you with a reassurance. The United States is committed to our alliance with Japan. We want to make sure that it endures and prospers in the years ahead. That will not change. I am optimistic that despite the challenges confronting our nation and the world, the United States and Japan can continue to provide leadership and hope for the nations of the world. I'm committed to this work, and I'm glad to see all of you are as well. Please have a great day. Thank you very much. Thank you so much. Thank you very much. Thanks so much. Well, thank you very much, Congressman Castro. That was a terrific speech. I mean, really, in a few minutes, you captured everything that I think is important about this relationship. And thank you for your leadership in Congress and your willingness to take on this important role of managing the founding and running the U.S.-Japan caucus and your travels to Japan. Final thank you for your support for the Japan-America side of Washington. We appreciate you, our keynote speaker at our annual dinner the year before last, and we've done this today, and we really appreciate all your support throughout. And your staff, Danny Mesa and Aaron and the team are terrific supporters as well. They've been great. And I just want to say I know you have questions, but thank you for all the work that y'all do. Thank you to the societies. The work that you do in supporting this relationship, I think you have a sense for now, is gonna be more important than ever. The work that all of us do in supporting the strength of the U.S.-Japan relationship is going to be more important than ever. I hope that you will reach out to the administration, also members of Congress, and speak up as many of these issues are discussed and talked about, because it will be consequential. Great, and that's actually in a way what I wanted to start with, is you mentioned a couple of times the importance of local and state engagement, and the contributions that are made at that level, and you could say the opposite with U.S. investment, and in Japan, I think at the local level, you can see the impact. So this is an important part of this story that I think we often in Washington don't pay as much attention to. We sort of look at the high policy, and we don't think about it. So in your district, you may ask you two questions about your district. You mentioned you have a large Toyota presence there, and the president, he was present, he wasn't president of Lackett. As president, he criticized Toyota for not having, no, maybe he was president of Lackett, it was before he was taken over. So it's hard to keep track of his tweets, right? Two weeks ago. Everything is moving so fast, it's one thing after another. It's hard to keep track. But he criticized Toyota, despite the fact that Toyota has this pretty big presence in not just your district, but across the country. How would you sort of advise Japanese companies because this may not be the last time this happens? I mean, how do you respond to something like that? And I reached out to Toyota the day that I saw the, obviously, the news about the president's tweets. And most importantly, I know that Japanese companies and businesses want to maintain a good relationship with the United States. And they try hard to do that. I thought that it was unfair of the president to single out specific companies. Not just Toyota, but he's done that with Ford and with others. And I thought Toyota had a great response in laying out the facts about their investment in the United States, but also the fact that the cars they build in Mexico are mostly going to other parts of the world and not really coming back into the United States. So I thought they did a wonderful job of responding. More generally, I would say that we need a spirit, we need to act, and the president needs to act in a spirit of cooperation. You're not gonna be able to govern just by Twitter and just by trying to bully people on Twitter. It's gonna take more than that. And if you look at what Toyota's done in San Antonio, they did something really remarkable, and I'll tell you really quickly. When they decided to locate in San Antonio, they were determined to create business owners in the supply chain for Toyota in San Antonio. So they insisted that several local business owners, mostly minority business owners, be either 49, 50% or 51% partners in that supply chain. The reason I say that's remarkable is because even big American companies that had moved in had not made the same commitment to the community there. Just say we're not just moving in and of course creating jobs, which is a great thing, but we're also going to involve folks from the community as business owners in our supply chain and we'd never seen anything like it in San Antonio at least before. So the other thing about your constituency, which may sound to this audience, like it's off the track, but I'm gonna get back to its relationship to Japan. Your constituency's about 150 miles from the wall to be and the president seems to be determined to move forward and to get Mexico to pay for it. The reason I think this is, I mean, I want your general view on that, but I think the relationship that I see with our conversation today is that, Mexico's an important partner of the United States and we're sort of, we're in a sense, we're saying things that are not exactly gonna inspire I think the kind of cooperation and support that we need from them. And similarly with Japan, we need Japan to help us deal with a lot of problems that you've, some of which you touched on in your speech around the world. So, how do we, again, how do you respond to that? How do you think about the... Well, of course, I've been very concerned about the president's statements before he was president also and even during the campaign, his statements about our alliances around the world. It's clear that at least for him, and I imagine some of his administration, they're reassessing our alliances around the world. But remember, after World War II, these institutions and multilateral groups, or bodies I should say, were established for a clear purpose. That was to promote democracy and promote peace around the world. So if you start abandoning those or taking them apart, you're risking both of those things. The same thing could be said about our relationship with our historical allies. He made what I thought, honestly, were reckless comments about backing away from our security commitment to both Japan and Korea. Well, in that same vein with Mexico, I mean, Mexico is one of our largest trading partners, a top three trading partner, has been a very good friend of the United States. And now we've got these two executive orders, which not only in the orders, but in the rhetoric, there's been a real hostility towards Mexico. So the point that I made yesterday is that I think he's essentially driving Mexico into China's hands. I think China is gonna make significant investments in Mexico and in Latin America at the invitation probably of many of those governments, and that whatever Trump, whatever President Trump takes away from Mexico, whatever billions he thinks he's gonna take from them in some roundabout way through aid to pay for the wall, I would imagine that China will make that up if Mexico needs it. Xi Jinping will be more than glad to move in and forge a very strong relationship with Mexico. They're already Mexico's second largest trading partner. We, of course, are first. And so when you do that, I think you're starting to threaten the United States position in the world and undermine these longstanding alliances, not just political alliances, but alliances that have made our nation the wealthiest nation in the world. You think about the amount of trade that my home state does with Mexico, for example, and Japan, billions and billions of dollars pumped into our state's economy. In the case of Mexico, of course, you're talking about the whole Southwest region, especially. So I hope that I know that his cabinet is just coming together, that the professionals are just coming together with him, but I hope that they'll think about these issues and that when you make a move on a chessboard, you're not playing alone. There's other people who are also moving on that board and it could cost us in the long run. So you're going to Japan next month, as you mentioned, with a group of other congressmen, I assume. And what are you gonna talk about in Japan and particularly on these sorts of issues, how are you gonna talk about what the US general posture is and how you can reassure them that we're still good allies and partners on what Congress can do to help keep this alliance strong? Well, I wanna reassure them, first of all, that there are many allies in Congress, both Republicans and Democrats, who believe in the value and the strength of this relationship, most of all. And that the legislation to make big changes to this relationship oftentimes, it's gotta go through Congress. And we wanna make sure that we have a strong relationship. Whenever I go to foreign countries, I'm also cognizant of the fact that, and especially when we travel with members of the other party, I never wanna get into a fight with them or an argument with them in a foreign country or a real disagreement. I think you have to be respectful of the fact that you're representing your nation, that you're on the same team, that whatever disputes you have among each other, that you'll settle back home. But I hope that it's a group that will also be reassuring to Japan and to Korea of our defense commitments and the fact that we wanna continue to promote economic prosperity for our countries. Good. And back here in Washington, you have the caucus with Congressman Riker and the 100 plus members, right? What did you have anything lined up for this year? What do you think you guys are gonna be talking about or working on this year? Sure, well, I mean, all of those issues on trade now that TPP is gone. I was very careful to say over the last few years because I know that there was a big push for TPA and then TPP, but I was always careful to say that no matter what happens with TPP, the relationship between the United States and Japan is bigger than just one trade agreement. And I believe that today. And so we have to continue working on our bilateral security issues, our economic issues. I saw a few days ago about the discussion by the Trump administration the possibility of a bilateral trade agreement with Japan. And so I'm interested to see what the administration comes out with there. But we'll continue to do what we've been doing, which is host many diet members, dozens and dozens of diet members. We've also made it a point to meet with the Japanese ambassador of the United States, the US ambassador of Japan. Obviously there's gonna be a new US ambassador of Japan. So we're looking forward to getting to know that person when he or she is confirmed. So there's a lot of work to do this year. Right, I want to bring the audience in if you're willing to take a couple questions from the audience. So let me just ask one more question. If you had a piece of advice that you would give the new Trump administration about how to manage this alliance, what would you focus on? What would you tell them? I would say to be sure to stick by old friends. Don't abandon your friends. There's a reason why the world looks the United States as a leader. And if you mess with those alliances too much, you're not gonna be the leader anymore. And China, I want us to have a good productive relationship with China. We also have some conflicts with China. But China is seeking to be that leader that the United States has been. And we should not seed our position as a leader in the world carelessly. Excellent, okay. Let's take questions. If you have a question, please raise your hand. I think we have microphones. Please identify yourself and ask a question. I see Mr. Self here in the third or fourth row. Right here, Mr. Gentleman. Crispin Castro for your leadership. Thank you. And for your time today. You've been a leader not only in US Japan relations, but in the trilateral US Japan ROK relationship. And I'd like your comment on the downturn, the recent downturn in Japan career relations over the comfort women issue that we had hoped and thought. And I remember your comment a year ago about the Abe agreement with President Park to really close that. How do we approach those festering wounds, especially in the context of your discussion of the US Japan ability to overcome history and really construct a forward-looking relationship as you've provided personal leadership? What can, especially with the political chaos in South Korea, what can we do to address that issue, particularly as US Japan hands? Thank you so much. That's a great question. Thank you for it. And obviously a very tough and very thorny issue. You're right, there was hope with the comfort women agreement. It is an issue that only the two nations themselves can solve. We can be helpful. And last year I was part of a dinner with legislators from both Japan and South Korea after that agreement. And so there has been a lot of hope. For the United States, what we wish for our allies is friendship and cooperation because both Japan and Korea are friends and allies of ours. And because the threats in the region, if you look at North Korea and the fact that they've got a leader who is trying to perfect nuclear weapons, the fact that China has been aggressive in the East and South China seas. And of course, the fact that you've got a new administration in the United States, all of these things tell us that we should seek to bring our friends closer together. And this trip, my trip, was meant to go over and tell them both that we want to work with both nations in the US Congress and be supportive. And so it was originally conceived as a way to bring younger legislators in both countries together to bring the next generation of leadership in both Japan and Korea together to forge those strong bonds. And so I hope that we'll be able to do just a piece of that. But I saw somebody towards the back. Okay, there's a hand right back there. Hi, my name is Enriquez from the Japan Automobile Manufacturers Association. It's great to see you, Congressman Castro. Good to see you. Thank you so much for being here. Appreciate your presence and appreciate the support of Toyota and our organization. He didn't go after Nissan, I saw that. Not yet. Not yet. So let's see what's next. But the fact of the matter is that these companies are deeply invested in the United States. You know that quite well. But in terms of the bigger picture, I think that the centerpiece of US-Japan economic engagement and strategic engagement has to this point been TPP. So this is something that a bilateral deal may not quite accomplish. So I'm wondering if you see a path forward for economic and strategic engagement in the Asia Pacific led by the US and Japan relationship? I do, and I'm hopeful for that. You know, I'm hopeful that the administration and Congress will find some way to still allow the US and Japan to be the drivers of economic prosperity and cooperation in the region. You know, it's fascinating to see even over the last several years what has happened with the relationship between, for example, China and the ASEAN nations, China and South Korea. And it certainly is testing the role of the United States in the Pacific. And that's why President Obama had talked about the rebalance years ago now and why it's so important. But I'm hopeful. You know, it's so hard on all of these issues because you have a new president that just took office last Friday. Even though he's done probably eight or nine executive orders now, he's still in his first week. You know, so a lot of this remains to be seen, but I'll tell you what we shouldn't do. We shouldn't back away from our effort. We shouldn't back away from trying. The United States cannot afford to simply go into a shell to isolate itself from not only its allies, but from the world. That is not a recipe for success in the long term. And so, you know, we're watching to see what the administration does, but we're gonna keep pressing in Congress to make sure that this relationship is the linchpin for economic cooperation in the city. You're right here, ignoring the far back. You guys, if you wanna ask a question, I'll recognize you. Jim Burr from Washington Trade Daily publication. It seems to be a great mystery in this town and around the world on what Trump trade policy is going to be. Although traders like you or trade promoters like you are optimistic that what he said during the campaign will not become reality. How important is the visit from the Mexican president to the United States on I think January 30th? And especially if President Neato cancels that, what impact do you think it's gonna have on trade policy in general as well as U.S. mix? You know, I commented yesterday after the two executive orders and all of the rhetoric previously. Honestly, I would be surprised if the Mexican president comes for his scheduled visit. You know, as an observation, I would say that he's probably concerned about the effects on the PRI, which is his party in Mexico, if he shows up, right? You know, they've got elections not too far from now and he's probably concerned that they're gonna get wiped out if he comes and comes to Washington D.C. and shows up here after the Trump administration has been quite hostile to Mexico. You know, your question about where does it go from here? I mean, of course, my answer is that I hope that the relationship with Mexico will continue to be a strong and vibrant one. And I always remind people that they still buy more stuff from us than we do from them, right? And so it's been, again, when you're talking about our best trading partners, they've been one of our best trading partners. You know, in addition to all of the human rights and other elements that we often talk about when we talk about a border wall and all those things, but if you were just considering economic terms, again, what you're doing is you're starting to weaken those strong economic alliances around the world. And as a long-term strategy, I don't think that's the way to go. Okay, other questions? Yes, ma'am. Or there's a, oh, I thought I saw, well, okay, that's just the first thing. Good morning, my name is Dr. James Lawrence and I'm an investment banker and the recent talk of the current administration relative to what sounds like almost isolationism is something we've ever heard in over 50 years. We're part of a multi-billion dollar energy company that's looking to expand into Japan. It's a little bit unnerving when you hear that kind of rhetoric to try to figure out exactly what input that has going forward to any idea whether or not this sort of isolationist talk is really a tactic because it certainly isn't a long-term strategy. Any feedback there? You're right. The talk has been quite concerning and with very strong tones of isolationism, of pulling back, of abandoning the post-World War II order of, you know, in some ways not backing up our allies around the world. Well, if people feel like, if countries feel like you're not gonna support them, then they're gonna do one of two things. They're either gonna look to someone else who will or they're gonna end up militarizing themselves. There's two things that are gonna happen there. And the United States has enjoyed over the years a place as leader of the free world and relative, I say relative compared to two World Wars, relative stability and peace, although obviously we've had wars, relative stability and peace around the world. But to one point of your question, it's gonna take companies and businesses to speak up about these policies. And I've said this before and I don't mean to pick on them, but I have been very surprised at the United States Chamber of Commerce has not said a single word when the president has bullied companies over Twitter, has talked about changing longstanding US policy and posture economically. This is the United States Chamber of Commerce that's supposed to speak up for American businesses. You're not supposed to be an arm of Donald Trump's administration. So I've been surprised at Tom Donahue and I have good friends that speak very well of him. So I don't mean to impugn him personally, but I've been very surprised that the chamber has been dead silent on these issues. Okay, excellent. Yes, ma'am, in the back there. And then let's get even closer up after that. Good morning, Robin White retired foreign service. You just spoke about business and I agree. And many of us see what I might call the sane Republicans keeping their heads down. And we're hoping sometime the sane Republicans will speak up. Could you speculate on that? You're right. Look, I think right now, and look, I don't entirely fault people because they're trying to understand what this administration is gonna look like, what the administration is gonna do. But let me use an example that has nothing to do with Japan or this relationship. Okay. The president said a few days ago that three to five million people voted illegally. That is a figment of his imagination. There is no evidence that that has happened. And I was surprised that speaker Ryan and Mitch McConnell didn't speak up and call him out on that on a basic falsehood, a basic lie. So I pose the question, if you're not gonna stand up to the president on something as bold face and large of falsehood as that, then what will you stand up to him on? And that question gives me pause because there has been silence. We can't just go along when a president says something that everybody knows is not true. You know, you get to a situation where somebody has to tell the king that he's not wearing any clothes. And so far, you know, we're the opposition party as Democrats and we're gonna play our role and but listen, we're a minority in Congress. Okay. We don't control the levels, the levers of government the way the majority party does. Somebody over there has to speak up. They have to have the courage to risk some of their political capital and perhaps future to do the right thing. And I think eventually you'll see it. I think it'll happen. There are a lot of my colleagues on the Republican side who are very sharp, very committed, you know, people with good hearts and good minds. So my answer is that I think that it will happen. I just don't know when and I don't know on what issue. Okay, there's a lady in the third row here, please. I think one more and then we're gonna have to let the Congressman catch his plane, so. Grace Clegg at the East West Center in Washington. Thank you very much for your leadership in starting the Japan Caucus. I was thrilled when that came about. And you're actually very well placed to give us some intelligence from the field, so to speak. As Ambassador Malat noted, this community between the think tanks and the government, there's a tremendous amount of understanding of the importance of the U.S.-Japan relationship at the national macro level, at the global level. But I'm from a community in Michigan where there are still very much the echoes of the bad old days of the 1980s. And so I'm curious, a two-point question. What is the perception of Japan back in San Antonio? Is it based off of friendly cultural exchange? Is it more adversarial? And what can we do in the Beltway Exclusion Zone here to get the word out to the rest of the country on the importance of this relationship? Those are great questions. Let me start by saying you're right. I mean, obviously in the 1980s, there was a very, there was this rivalry that went on between Japan and the United States, at least in terms of perception. There was a perception, and back then, Donald Trump, he wasn't President Trump, also espoused this idea that Japan was gonna take over the country economically, right? Obviously, our relationship has evolved since then in terms of perception. And you asked the question about San Antonio. San Antonio is very grateful for the economic opportunity that Toyota and other Japanese companies have created in our hometown and values that relationship. Since the 1980s, we've had a great sister city relationship with Kumamoto, Japan, for example. And the people of San Antonio were very generous after the natural disaster there. And so it's, Japan, I think, is seen in a very good light in my hometown. You know, not that there's never grumblings about the auto industry or other industries, but by and large, people see Japan in a very positive light. I was concerned a few years ago as the debate over TPP ramped up, I would take the Metro, as I'm sure many folks do, and I got off of Capitol South Metro, and for a while, there were these basically billboards in Capitol South Metro that, to me, echoed some of the tones of the 1980s. And, you know, I don't think that it's good to demonize an ally, a strong ally. You know, once in a while we'll have our differences or we'll be in competition around the world, and that's fine, but we should appreciate the strong economic benefits, cultural benefits, all of it, that come with this relationship. And I hope that the president and this administration will also and will continue to cherish it and to build it up. And then, you know, one last thing. I wanna say that we are grateful in Congress for all of the work and all of the thought that you guys contribute to the relationship. Y'all give us a lot of fuel for the things that we do. Part of the way that we understand the relationship better is a lot of the work that y'all put out. You talk about the think tags and the papers and everything, the thought that comes out of the work that you do. We appreciate it very much. And for, I know there are folks here from Japan and other countries, but for the Americans here, always remember that most people in Washington and even Washingtonians, they're Americans, but most people who work in Washington, they come from places like Texas and the Heartland and other states and you've grown up with an American experience. So, you know, it should never be said that somebody's voice doesn't matter or their opinion doesn't matter just because of the city that you live in, right? So thank you for all the work that you do. As a native Washingtonian, I'm glad to hear that my voice also counts. In the back there, please. And then that'll be the last question, unfortunately, because the Congress has to catch a plane. Thank you, Matt. Joe Bosco formally with the Defense Department. Congressman, in one of your responses earlier, you referred to the wall and you used the phrase human rights implications aside from economic implications. I wonder if you could elaborate on what you meant by that. Yeah, sure. Well, I said yesterday that the wall, I think, is a lazy and ineffective fix or strategy for our security along the southern border. 59% of Americans in a poll about a week ago were against the wall. But with respect to human rights, we've had, what we've had in our nation over the last few years is a stream of refugees from the Northern Triangle countries of Central America who are fleeing not only destitution, but also violence generated by the drug trade down there. You have three nations of the Northern Triangle who've been unable to successfully combat that. Congress, of course, I think this was a good move, allocated several hundred million dollars to help them in that plan. But of course, there's still that challenge. And so my point was that we have to be mindful that the people who seek refuge in the United States do so, not just because they simply wanna move from one country to another, but because oftentimes they are desperate people who are fleeing violence and fleeing very dangerous situations. And so the wall to me represents an attempt to not have to deal with that problem, to not have to think about those issues. And you can get rid of a problem without solving it. It doesn't mean that it's gone away or it doesn't exist. And to me, that wall is a symbol of, would be a symbol of the United States walling itself off from part of the world, but also saying that we're not gonna take on these deep human rights challenges. Our simple solution is to get rid of the problem and not deal with it. And that's never been our history. That's never been our tradition. We have been a democratic nation who has helped people, helped nations promote democracy, promote human rights, promote economic development, and not walled ourselves off from other nations. Well said. I mean no disrespect to your twin brother, but you often say that you're the better looking one. I would also say that you're possibly the smarter and more thoughtful one as well. But really, that was terrific. Really fantastic. Thank you for your support. Thank you for coming. Come again. Oh, thank you. Please join me. Ambassador, that was really, really fantastic. Thank you. Hey, nice to see you. Thank you guys. I think you're such a fantastic person. Thank you, Congressman. And we will just take a few minutes break here while we rearrange the stage and we'll try to start at 11 o'clock sharp. So stay close. Thank you. Oh, wow. Hand me a fork, just a fork. Got a full screening there? Oh, no, I got it, I got it. Just takes no water. Just hang. I'm going to give you the briefest of introductions. And it's Chandler Avery. OK, so I would just say I'm a Chandler Avery from the Congressional Research Service. Great. What's that? Yeah. The brief is to quiet everybody down. Save you that for a while. OK, ladies and gentlemen, I think we're going to get ready to start the first panel of the day. You know, priorities. OK, so it's my pleasure to kind of open the first panel here of the morning. And for that, I will turn it over to our moderator, our guest moderator, Emma Chandler Avery from the Congressional Research Service. Hello, everyone. It's great to see such a crowd here for this event. I'm delighted to be here as Jim said, I'm Emma Chandler Avery from the Congressional Research Service. I provide research and analysis to members of Congress. You may not want to trust me, though, because in this post-fact era, CRS is really about the facts. And so much so that this year in the Washington Post lists of what's in and what's out, Congressional Research Service was actually out. And the corresponding in was Pravda. So you may want to think about that for your moderator next year for this. So this panel is a great chance for us to sort of take a moment and look at Japan itself and what's going on in Japan. We are so preoccupied now with this sort of jarring transition that's going on in Washington. And I think it's a nice moment to actually take stock of some of the political and social and economic trends that are going on in Japan. In the Washington policy community, we've really sort of struggled to explain to our friends what this all means, because we don't know. And I think as the administration staffs up, perhaps some will get a little bit clearer of a sense. But we need to know what's going on on the other side of the Pacific right now, too. So let's take a closer look at Japan, which is seemingly sort of this model of stability amidst the other populist waves that are going on through the country. A terrific line up here to talk to us. I'm delighted. Let me just give quick introductions. I think that you have bios of all these folks and you probably know them already. I was delighted to see Alicia Ogawa again. She is an expert on the Japanese financial system. She has been at Lehman Brothers and has 15 years of experience working in Tokyo as well and currently serving as the director of the program of alternative investment at the center on the Japanese economy at the Columbia Business School. So she's going to give us, talk about corporate governance and give us a closer look at that. Yohichi Funabashi, Funabashi-san is probably the epitome of a wise man in Japan. I won't say old wise man because you're clearly very youthful here. Too many accolades to go through. I did note that one of the reports was a decline of post-war moderate conservatism in Japan. That sounds familiar. We may need some tips from you for what we're going to go through as well. And my old friend Frank who is a president and CEO of the Marine and Mike Mansfield Foundation has also served time at Amnesty International at INR and most importantly was a staffer and a prominent client of mine on the Senate Foreign Relations Committee for several years as well. So I'm going to turn it over to them. Each speaker is going to speak for 10 or 15 minutes or so. We'll have a little bit of a discussion and then ask questions of the audience. So thank you all very much for coming and Alicia, why don't you start us off? Yes, I got to know Emma a little bit when she was at a fellow at the Mansfield Foundation and I'm really glad to see her and Funabashi-san who I haven't seen since I was 20 years old and a lot of other old friends and thanks to Matt, another old friend inviting me here today. It's really exciting to see so many people who are still committed and passionate about the U.S.-Japan relationship which becomes I think as I would agree with the congressman ever more important to us. I'm here to talk about a revolution that the Prime Minister is attempting to create in the Japanese business community. There's only so much that monetary policy and fiscal policy can achieve in order to promote economic growth. We need a micro-revolution and that's why the title of my talk is From the Bottoms Up. What I'm talking about is the key part of his so-called third arrow which is the corporate governance and stewardship codes that were introduced in 2014. It might as well be called the Riot Act because it is a very aggressive call for change at corporate Japan too often which has become a series of iron silos and these new recommendations are to make Japanese companies more open more global, more innovative, more productive, more diverse and I think it is really the only hope that Japan has to revitalize its economy and put itself on the path to long-term fiscal sustainability. But this is not just a Japan topic. I feel very passionate about this. This is compelling because it is an opportunity that Japan has and I pray that it succeeds to create a new model of business organization that could serve as best practices for the rest of the world. Here in the United States the model of corporate governance has evolved to only two players include two players which is shareholders and management. And I think our system I would argue has been the basis of enormous increase in income inequality and the excessive compensation of executives the price of which we are paying at this very second in time. So I think this is a unique opportunity for Japan not only to pull itself itself up by its bootstraps and increase growth but it's the opportunity to evolve a new set of best practices that we all could learn from. So I sincerely wish them all the best set of successes. As I mentioned partly because of our legal system the power in the United States has evolved exclusively to boards of directors i.e. management and shareholders. In Japan oops you have a different imbalance. This is a survey taken by media a couple of years ago and the question was to Japanese corporate management who are your top constituents? Who do you pay the most attention to? 90% of them put customers first, employees second, suppliers third and shareholders and creditors and others government didn't even make it on the list whatever or communities at the very bottom and so this is an imbalance in Japan which the corporate governance code and the stewardship act is an attempt to rebalance. I opened by saying fiscal policy and monetary policy can only do so much. You're probably all aware of the extent to which the extraordinary lengths to which monetary policy has been stretched in Japan and the Bank of Japan I think is justified in claiming some victory. The 2% inflation target seems still unattainable but economic growth is steady, it's slow steady and you can see that it's been recently recently revised up so economic growth has stopped imploding deflation has stopped we're not at the inflation target we would like to see but it has stabilized. On the other hand this kind of subpar growth given the aging of the population and the fiscal situation that Japan is in is not really an option there's been some tinkering on fiscal policy but the real hard choices the real bitter pill that Japan is going to have to swallow namely welfare reform and health care costs has not been addressed and so the prime minister by championing these micro initiatives if successful it will buy himself some time if profitability of Japanese corporations increases it will buy himself some time to figure out those harder questions and in addition to improving corporate governance that will ultimately contribute to the better long term growth and dynamism for the Japanese economy so what am I talking about in terms of corporate governance you're all Washingtonians you know what the difference between bad government and good government looks like in the case of companies it's communication with shareholders it's the firm's compensation policies it's employment and promotion policies the transparency of all of this that determines whether the company will survive and prosper over the long run so corporate governance is an attempt to balance the interest of all these people I'm talking about Japanese corporate governance stewardship on the other hand is the job of institutional investors the stewards to exercise discipline on firms through dialogue with the companies that they invest in exercising their voting rights and the implicit threat of selling the shares if the management doesn't respond now what's interesting is in Japan shareholders actually have far greater legal rights than shareholders in the United States they have unbelievable rights to say on pay in a binding way to put proposals to management that management is legally bound to respond to to dictate dividend payments etc etc so the question is why haven't they used these rights management to be more innovative more productive and more open and the stewardship code that the prime minister has promulgated is an attempt to encourage them to do that with enthusiasm so why is Japanese corporate governance such a problem again it's a low stock valuations compared to global peer groups ROE of Japanese companies over the last 10 years has been literally half that of the peer group in the United States as you know Japanese companies are completely closed organizations in the classic case people are hired right out of college they stay at the firm for life there are no new entrants into the firm at mid-level and everybody's promoted and paid in lockstep based on seniority and not meritocracy here's something that I sort of knew when I'm reminded of it it always slays me there's no job descriptions so there's no way of evaluating somebody's performance even at the most senior levels in the past board of directors were composed entirely of people who spent their whole lives at the one company they entered after college and cross-shareholding by friendly banks and others meant that shareholders never challenged the decisions of management so leaving aside the value that this model might have had in the 60s and 70s it's now clearly a drag on growth and dynamism this is a slide taken from institutional shareholders that shows the global comparison of board independence so this light blue line is the total of all independent directors that sit on all boards of directors at companies as a proportion of the total number of directors in that country the other doesn't even register it but I'm sorry Japan registers last on that measure in other words the total number of directors sitting on boards in Japan as a proportion of all directors independence total number of all independent directors sitting on boards in Japan are the lowest relative register is the number of companies who have a majority of independent directors as far as I'm aware there's only one large cap company in Japan and the number of independent directors is greater than the number of internal directors and that's Omron so Japanese companies as a result of this insularity are losing their competitive edge they're losing market share the culture of insiders has led to a management style which is I'm sorry I'm rude say synchophants productivity is weak there's an increasing number of corporate scandals they're evil but because there's no open debate about important decisions you think about Toshiba Takada, the airbag company Olympus, Toyota Konebo cosmetics Mitsubishi motors and so on and so on so Abe has introduced these new requirements with the following aims in mind Japanese companies have enormous cash on their balance sheets which is just sitting there and he wants to encourage them to spend that to increase the investment domestically to spend that money on raising wages to increase the diversity of the workforce not only because that's the right thing to do but because as you know Japanese labor market is reaching historic levels of tightness there just aren't enough people in the labor force so by encouraging companies to hire older workers and women that will add to the labor pool increase of full-time jobs as you probably know Japan now has a two-track work system where at least a third of the workforce is at the sort of inferior unstable category of either part-time contract or temporary workers and he also needs Japanese companies to become more profitable first of all because he considers the level of the stock market a personal barometer of his own success echoing other people maybe in office in other places but also he needs the higher return to fund the pension system which is going to be overwhelmed shortly given the aging of the population what are the key elements oh this is a short aside but as I mentioned Japanese shareholders have incredible rights that US pension funds have been fighting for in this country for decades with no success one of the things that Japanese shareholders have the ability to do is say on pay it's a binding vote that they have on salaries of top executives so this is the level of compensation of the CEOs of these companies last year the top two are outliers this guy was the top one guy was hired from Google and he's recently been fired but you can see of the top 30 sorry there are only 30 odd companies in Japan where the CEO would need more than 10 million dollars so this is an area where Japanese shareholders have exercised their vote vigorously one would have hoped that they would have exercised their votes more vigorously on other issues because they had the legal ability to do so I seem to have lost one of my slides oh yeah here's key elements of the corporate governance code is the requirement finally that companies have at least two outside directors on the board and the definition of what is an outside director has been tightened it used to be incredibly loose committees are required this is one of the elements of the new code that Japanese companies have bought into very enthusiastically it seems that Japan always loves a committee and so the requirement there are many different options but you have to have at least an audit committee and the real sticking point is nominations and compensation committee there's been less enthusiasm for that these requirements of the code though are not legal they're voluntary and so there is a requirement to what the requirement is is that you either comply with these requirements or you explain why not and you have to do that publicly you have to put something in your annual report on the website about why you're either accepting these new requirements or why you're not and so the idea is that you will shame companies who do not comply there's a new stock index that's been launched which only includes companies whose ROE is above a certain level and who meet certain minimum levels of achievement for corporate governance in terms of diversity of workforce and disclosure and so on and so forth and this has been a powerful means of sort of shaming Japanese companies who don't achieve those levels of profitability and disclosure the stewardship code has been launched this is for investors pension funds and the like and it requires them to say that they will act in the best interests of their investors of their savers it was always interesting to me I've served on a couple Japanese government committees to learn that there is no Japanese translation for the word fiduciary it's not really Japanese concept but this is an attempt at beginning that the stewardship code also requires that Japanese investors actually speak to the management of the companies that they invest in and ask them why they are deciding this that or the other thing wouldn't it be a good idea to do something else so it's a very very important tool one doesn't work without the other if companies are not feeling pressure from their stockholders to do a better job they won't that has been the case of Japan for the last 20 years so this is a very important initiative and in tandem with that the biggest pension fund in the world government pension investment fund has had a massive reorganization the result of which is they have more than doubled their investment in Japanese equities and it is their task to lead the way in terms of engaging with investors and asking them to run their companies more profitably there are tailwinds to this moment to this movement and one of them is that the bank of Japan and its monetary policy has committed to buying enormous amounts of Japanese equities now they are not choosing the best companies they are not choosing companies who are doing a good job in increasing their profitability or hiring women or what have you they are putting money because they have to and they are buying indices so this is a sort of way for companies to become lazy because their stock price is going to be supported by the bank of Japan buying because they have to not because they are being selective this same bar for the trust banks this is a proxy for pension fund buying GPIF in particular so again there is a massive amount of money coming into the Japanese stock market tailwind in my view is something very strange the stewardship code of Japan is modeled after the one that exists in the United Kingdom and there is only one element of the UK code which is not present in Japan the UK encourages explicitly shareholders to get together and collectively pressure companies to do the right thing there is no such requirement in Japan and in fact the FSA the financial regulator has been completely silent on whether they will allow this or not and so I've had a number of public pension funds look to us in this country to kind of lobby for clarity about this so that is another tailwind another tailwind is the fact that although most of the Japanese public pensions have endorsed the stewardship code and have promised to engage with companies they invest in almost none of the private sector pension funds have and that's because there are myriad obvious conflicts of interest if you're running Nissan pension fund your decisions to invest in your suppliers or your competitors are going to be dictated by things other than what the value of the investment is so that's another tailwind the other biggest tailwind in my view is the lack of labor reform Japanese companies cannot maximize their best value unless they can hire the best people and until the liquidity of Japanese labor force and the ability to change your company from one that's not doing well to one that's doing better or unless you as a company can't replace people who are not performing with people who can you're not going to have the best result so in my view these are just some of the serious tailwinds that this movement is facing however there has been an enormous amount of action in terms of bringing in independent directors on board in terms of disclosure in terms of engaging with investors new investor relations activities are at record levels and in fact a couple of big Japanese companies have adopted job descriptions for the CFO and the CEO so things are changing to that degree when you ask how can we measure the success of this movement well I would say in the case of Prime Minister Abe as I listed up what his goals are his definition of success I think would be to see Japanese companies spend their money preferably in Japan raising wages investing in capital hiring women jacking up their share prices for me personally my definition of success would be to see Japanese companies hire more outsiders I don't necessarily mean foreigners even just Japanese outsiders the extent to you start to see Japanese CEOs coming from outside the company or Japanese senior management being recruited from outside the company that would be my definition of success so the potential for this movement I feel is enormous you remember the days in the 70s when Japanese companies were incredibly innovative and creative and taking on the global world by storm got lost as the company management became more and more inflexible and insular I think we could see a return to those good old days if Japanese companies succeed posing themselves to more market discipline and opening themselves up to new ideas and ideas from outsiders and as I said for me the most important part of this initiative is that it should deliver a model for us all to look at what is the need for better corporate governance in this country is just as pressing I think so thank you very much for allowing me to make these remarks thank you Alicia so much that was really eye-opening presentation I think we're going to change gears now and ask for Funebashi-san to offer some thoughts on the Japanese political scene sorry why in Japan we have not seen rise of populism although elsewhere in the world the world has witnessed that very strong emotional thrust for populism populist nationalism exemplified in Brexit as well as the advent of Trump administration actually at our institute we published a book titled as Emma kindly introduced the decline of the post-war or moderate conservatism we had a very very intensive discussions among scholars whether we really should name Abe administration as a sort of reflection reflecting populism or not to some extent it's actually reflected social impulse which has shared a lot with the other voices in process of economic dislocation in the advanced economies but on the other hand we have not seen a very destructive populism particularly based on race or religion those unnegotiable factors so we decided not to use the word populism but in that process I really for one also pondered on this issues populism so I actually I would like to share some of my thoughts it's all hypothetical but why in Japan we have actually not had this populism first I think Abe Prime Minister Abe himself is perhaps the most conservative political leader over the past 70 years in Japan and LDP is much more right-wing leaning party right now under Abe leadership and that perhaps is one of the reasons why the party under Abe leadership has been able to stave off that right-wing pressures from within in the party at the same time they have also be able to absorb that very much right-wing forces from that party itself as well from some society society they have been so far been very much able to reign in those very much had-aged populism at first in the initial stage Abe was actually almost demonized by some political quarters by left-wingers or liberals as sort of fascist revisionist and populist nationalist and the others but over the years particularly throughout 2015 I think he has perhaps turned out to be more a realist than nationalist his speech the future hope of alliance which he delivered in the US Congress in April 2015 and his Prime Minister statement to commemorate the 70th anniversary of Japan's defeat in World War II and then eventually his critical role of concluding that Japan ROK accord on comfort women in December in the same year all point into the evolutionary process of Abe himself as Abe government becoming to be center or mainstream so I think that's one of the reasons why the center still has been able to hold in Japan even though they have been on and off being attacked from the right-wing populism left-wing populism in Japan but as well as we are in the world right now the right-wing populism has upper hand over the left-wing populism either Greece and Spain there has emerged very much sizable left-wing populism but in the rest of that advanced economies that we have seen that the strong movements of the right-wing populism secondly I think Japan's lost decade certainly caused this dislocations and strong happiness on the part of the less fortunate people particularly among the younger ones but nonetheless over the past 20-some years when Japan has gone through these two lost decades we have not seen any major social upheaval even social unrest and I think one of the reasons is that Japanese government has increased the social security budget in a significant way over the past 20-some years in 1990 between 1990 until 2016 the social security budget has tripled in values that social security budget in ratio to that total budget has increased from 28% to 40% so in a way that this in this process in this period social stability has been financed certainly I think elsewhere in the world now that this social impulse to drive to generate this populism, particularly right-wing populism is heavily concentrated in areas where the people over 50 are less educated dwelling in rural areas are the epicenter of right-wing populism but in Japan the people in this category actually enjoy politically and electrically electrically lopsidedly positive treatment value of one vote in rural area in Japan is twice or three times as high as the people in metropolitan area I think this also has played very much in salient role in smoothing placating to the less fortunate less more insecure segment of the society particularly people over 50 are less educated and people living in rural area finally I think Japan's inability to adapt itself to globalization over the past 20 some years since the end of Cold War actually in other words delay in globalization has paradoxically helped Japan increase its resistant or immunity against that negative aspect of globalization the most salient case is Japan's refusal to allow the immigrants and migrants to Japan in 2015 Japan has only 28 people refugees only 28 so nearly 28 2.2 million Japanese foreign born 1.5% in the US as well is in UK I think that people born in abroad in foreign countries 13-14% so this perhaps is very telling in my view so all combined the old factors combined so far Japan has been very much resistant to that core driver of anti-globalization induced populism having said that I think those factors contributing factors to S2 that populist movement in Japan actually could be detrimental to Japan's stability in the long run because financing the stability just will not be sustainable as Japan's budget deficit and national debt are now reaching to a very very precarious level also lack of globalization even though it has started to change as illustrated as Alicia mentioning on say corporate governance code stewardship code much more compatible with global standard nonetheless it still is I think lagging behind and that will eventually will pay high price that it will hamper innovation in Japan's business as well as in society because innovation requires diversity and foreign talents and the new governance so I think that this should not be regarded as a model Emma talked about the model of Japan's stability but I don't think it will be a model to never become to be a model it's a temporary it may be transient but for the time being I think we enjoy a relative stability in Japan, thank you thank you Funabashi-san that was really again thought-provoking where for a while there at least you turned on its head all these factors that we always thought sure as for Japan and at least in the short medium run it turned out to be somewhat helpful so there's a lot of food for thought in those comments Frank is going to bat clean up here and we'll undoubtedly have many colorful things to say thank you Emma I hope I don't disappoint it's a wonderful pleasure for me to be here this morning in front of such an expert audience I see in the audience many of our Mansfield Fellows Mansfield Foundation has been proud to be playing a role helping to bridge the Pacific for the last 32 years and for the last 22 of those years we've been recruiting actually more than 22 years we've been recruiting Mansfield Fellows to send to Japan to work inside the U.S. government we just recruited our most diverse and one of our more selective classes in history to send to Japan 10 U.S. government employees who will miss their first year of the Trump Administration here and whether they'll be grateful or sad I'm not sure but they will be very productive in Japan and I'm delighted to appear on a panel with a member of my board of directors who understands a lot about corporate stewardship Alicia Ogawa and I want to thank her for her service to the board and other board members who are here it falls to me just to fill in a few gaps as a sort of an inexpert observer of Japan on the topics that haven't been raised yet because I agree with everything that the previous panelists have talked about in their assessment of Japan's contemporary economic and political situation but let me add a couple of observations if I may one has to do with the role of women in Japan a critical component of the third era of abinomics structural reform is doing something about the workforce Japan is likely to have only a hundred million people and that in the next 25 to 30 years and that's assuming that the birth rate increases from the current 1.4 to 1.8 absent an increase in the birth rate in Japan the population is likely to fall below a hundred million we heard from Funabashi-san already that they're spending 40% of the budget on social security and pensions for the elderly Japan's economic future depends upon improving the birth rate and womenomics is designed to provide a set of policies and incentives to bring women into the workforce and bring them in not just in temporary positions but in full-time positions is it working? No it's not no it's not not yet and Musco Mori the diet shared with us when she visited under the Thomas Foley legislative exchange program last year a wonderful story she said when she took over the office in charge of trying to promote gender equality and women's rights in Japan the first thing that she did was to look at her own bureaucracy and she asked a question of her assistant she said how many of the men in my office take paternity leave the answer was zero and of course Japan on the books on the regulations and the laws has some of the most generous maternity leave and paternity leave in the world and you would think that that progressive approach would help women balance childcare and professional obligations by having the assurance that they can leave their job for a year without salary and come back to their position without discrimination but something I learned when I was working in the senate foreign relations committee is that if men don't take parental leave super generous women's leave policies actually can be counterproductive because they convince employers that the last thing you want to do is to hire a woman who you're then going to have to say goodbye to for a year paid into an important position so why not hire a man instead to take paternity leave it levels the playing field so the first thing the musko mori did was to say well I'm going to order all the men in my office to take paternity leave of course then she was told well you can't do that that's a human rights violation you can't force them to take the leave she said alright well fine then I'm going to include it in their performance evaluations and she actually did performance evaluations and any man who takes a parental leave is going to get a bonus on their performance evaluation you can't penalize the ones who don't but I'm going to give a bonus to any man who does I raised this story because the challenges Japan faces are more than legal it's cultural and the revolution that Abe is trying to affect with his abenomics and his third arrow is more than legal and corporate governance although those are very very important the points that Alicia made but he's also at the core he's going to be successful he's going to need to change attitudes and that's harder than changing laws look at our own country so that's just one observation about Japan's future that is on my mind as I think about Japan I also want to talk about openness and internationalism and globalism in the context of Japan the Mansfield Foundation has partnered with the Gaima show in the Kakahashi program to promote exchanges between the US and Japan and we're doing it as Congressman Castro said outside of Tokyo so for the first time ever last year we had a group of University of Montana undergraduate students who went to Kumamoto Kumamoto is not just a sister state relationship with Texas but Kumamoto University has a relationship with the University of Montana in Missoula the dates back to Mansfield's days so we send a delegation to Kumamoto and what we're trying to do in this way is really to open up the eyes of young Japanese students to the value of globalism for their professional futures because unfortunately the number of Japanese students traveling abroad for education has been declining many in this room are actively engaged in efforts to try to reverse that trend but it's a real challenge for Japan but also given the corporate behavior of too many Japanese companies who upon seeing a resume like Karen Makashima wonderful member of the diet who graduated with her master's degree from George Washington University but they see a resume like that and they say well that person's not for us that person went overseas they're not on the fast track for advancement in the Japanese corporate culture maybe they're interested in working for the UN but they're not going to have the brightest future here in Japan that has to change if Japan is going to embrace the cultural shift necessary for that globalization and so we need more people like Karen Makashima who was a junior astronaut and then joins the diet and is a young dynamic political leader in Japan to be a role model and to be an example to Japanese that Japan can be successful globally through internationalization I agree completely with Funabashi-san that thankfully we don't see I don't see strong evidence of a nationalist xenophobic kind of Japan there was fear I think on the part of many especially on the political left in Japan when Abe came to power that maybe he was going to cloak himself in this kind of a nationalism I think he's been much more of a realist but I also think we can't take it for granted that that's going to remain the case and I think the rise of China I think North Korean nuclear problems I think Trump sentiments casting doubt upon the resilience of US commitments to core allies all of these things could fuel a sense of insecurity among US allies in Japan, Korea and that sense of insecurity itself could fuel a sense of nationalism or self-reliance and fear about the circumstances of Japan's surroundings so I think the US could either be a contributing negative factor or we could be a boon to help Japan have the confidence that Abe seems to have to engage the world in the Olympics in 2020 with great fanfare and success we hope and to use that Olympic moment as sort of another coming out party for Japan re-underscoring the Japan is back message that Prime Minister Abe hopes to send to the world if he is Prime Minister in 2020 and there's every indication to believe that he will do his very best to be Prime Minister in 2020 he will become the longest serving Prime Minister in Japanese history and so in a sea of political instability here in Washington in Seoul, South Korea in Europe Prime Minister Abe will indeed become potentially a bedrock of stability in the global economic and political order and I don't think that's what a lot of us would have predicted in 2012 when he became Prime Minister for the second time I think the expectations he has far exceeded many expectations in terms of his longevity and guess what his popularity latest figures I saw there may be someone in the room has more recent but from December 2016 about a 64% approval rating that's not bad and that's after his visit to Pearl where he saw a bump of 7 or 8% up as a result of his visit to Pearl Harbor and the LDP approval rating is at about 44% which compares very favorably to Congress in the US at single digits and importantly is much stronger than the opposition the DPJ figures at about 7% in Japan so 44% may not at first blush seem overwhelming but there ain't no opposition in sight for the foreseeable future in Japan and that gives Abe a bit of a pass finally there are some warning signs some of the tough choices that the Prime Minister Abe needs to make on the economy there's not a real popular way out for him so Social Security has already been mentioned 55% of the people oppose plans to cut or reform pensions that's no big surprise nobody likes to cut pensions 30% oppose legislation legalizing casinos a kind of a stopgap revenue measure which I can tell you as a Marylander it doesn't work, please don't go there but here we are people fall for it every time the allure of casino revenue coming in to fill the coffers it doesn't work out that way because governments tend to cut taxes when they see a new revenue stream they don't increase spending on education or other things that are promised and there are new sort of economic uncertainties that are impinging on Abe's prospects as well most importantly I think the demise of TPP and whether or not it will be replaced by a bilateral trade agreement or not and if not what that does to the foreign outside pressure that Abe and his government are counting on to help them ram through tough reforms that are necessary and absent that outside pressure it may be that much more difficult for him to accomplish so these are just a few observations I wanted to share and I look forward very much to your questions thank you thank you to all the panelists and everybody just went exactly twice as long as they were supposed to go so that's actually not too bad I am just going to mention a couple of things that came to mind as I listen to this pose a few questions here and then we'll open it up for Q&A from the audience first of all I want to make totally clear that I did not put Frank up to preaching about parental leave that had nothing to do with me I'm glad he brought it up I also wanted to talk about this sense of these waves of change and this upheaval that's going on right now I mean we do have to remember that it was just a few years ago when Japan had basically a revolving door of prime ministers and everyone was putting their head in their hands about how Japan had no stability and we couldn't work out agreements so things can can change and can change quickly we'll see if that happens and also just a plug since Frank brought it up about the work that Mansfield does on people to people exchanges is really crucial at a time now when we may have more disconnects at the top levels of leadership and I had a really eye-opening conversation actually it was in South Korea but it was a very prominent sophisticated guy and this is in October and asked him about his impressions of the presidential campaign what was going on and he said I never realized that in the United States until watching this that there were poor white people there and I mean it literally had never occurred to him it had not seen that and I'm from West Virginia so I'm very familiar with poor white people so that was just a sign that we need to spend more time in each other's countries and bring it up from there so I want to ask a couple of questions that were brought up by some of these presentations the first is we've talked a little bit about how Abe came into office and there was a sense that he was going to be more of a nationalist leader and that the pragmatic Abe has seemed to emerge and his behavior has moderated at least since that initial Yasukuni visit but I think there are some people that say that the US leadership played a role in that there was a lot of pressure that came from the United States to get along better with South Korea for example and to not be as provocative so I'm wondering if we have this period now where US leadership is not as engaged and takes a different approach to Japan is that going to change Abe's behavior again are we going to see a drift back towards the right that some thought may emerge initially and I'd welcome a response from Moonabashi-san perhaps I think this is very interesting question and important question to what extent has the United States administration particularly under Obama's administration played a role in moderating the Japan's conservative party politics and political impulse I think with regard to history issues particularly with regard to accommodation between Japan and ROK on comfort women issue I think it has been very much significant effect that US has I think taken on to play and it has been very conducive in my view of hard conservatism I don't think so I think he has put and expanded a lot of political capital already in making those agreements and delivering his speeches that he certainly has a strong incentive to uphold and continue and even to make it as a legacy as a political leader as Frank said Abe may be a political leader with the longest longevity since Meiji 1890 so I think he certainly is very much conscious of that his place in history and I think that he would not in my view upset that record so I think that perhaps we can expect his legacy as a sort of constant I think a positive I think the values in my view just very briefly I want to commend the role here of Deputy Secretary Tony Blinken who played a largely unsung but really vital role convening trilateral meetings with his Korean and Japanese counterparts and I think the key is as Funabashi-san said the United States did not strong arm Japan and Korea into reconciliation that would have been both impractical and frankly inappropriate I agreed very much with Congressman Castro's remarks earlier this morning that it's not the United States role to broker reconciliation between Korea and Japan I think what Tony did with the administration welcomed was an expression of the U.S. strategic interest in the cooperation of Japan and Korea and as the people of Japan as the government of Japan evaluated its relationship with ROK the clear, forceful unequivocal statement by the President of the United States that it was important to the United States for Japan and Korea to work together that was factored into how Japan managed their relationship and I think that's what tipped the balance and I also agree with Funabashi-san that I don't foresee an absence of U.S. leadership on this if that's what emerges I don't see that absence significantly changing Abe's approach I don't think the U.S. the bottle on this issue I think Abe will look to his legacy and I think that let's not forget that within Japan there is a very significant body of public opinion that seeks peaceful friendly relations with its neighbors it's not like it's not like there does not exist a domestic constituency in Japan for compassion, reconciliation, dialogue with Japan's neighbors there's a very strong domestic constituency within Japan we just don't often see it in the form of statements from elected leaders of the LDP but it's there Funabashi-san I really appreciated your presentation it did make me think about many things but your comment just now that Abe's legacy disturbs me a little bit his legacy is simply that he's the longest serving Prime Minister I'm not sure that we're being ambitious enough for him many people this morning have commented on the wealth of knowledge, experience and insights in this town on Japan and all I can say is for me as a New Yorker it's like a breath of fresh air to be here with you because in New York, which is obviously the business center there is no interest in Japan whatsoever I worked for 15 years for a Wall Street company in Japan and when I came back to New York and started working for a domestically focused company Lehman Brothers I learned very quickly that I should keep my experience in Japan a secret because if somebody came to know that I had spent 15 years working in Japan financial markets the reaction was inevitably well, she can't be very ambitious she can't be very commercial she wasted all that time in Japan and so what I would like to emphasize here is that it really disturbs me that outside of Washington there is such little interest in Japan and unless Abe really succeeds in getting the economy a little bit more vibrant I worry that that will continue I remember very few books that I read as a grad student but the one that I do remember was The Suez Crisis and it was written by Hofstadter and the conclusion I remembered to this day it was really imprinted on me the conclusion was he said that when the Suez Crisis erupted for so long the United States had taken for granted its relationship with the UK we speak the same language we come from the same place nobody had bothered to do what the Mansfield Foundation does and build personal relationships and according to Hofstadter they literally didn't know who to call like nobody knew each other and this is what really disturbs me about what I see outside of Washington in terms of the interest in Japan I'm at Columbia University the number of Japanese students studying both at the undergraduate level has dropped right off a cliff we see very few academics who are doing research on Japan I mean non-Japanese academics doing any work on Japan and I think unless Abe succeeds on Japan and maybe militarily is not the way we would like to see him to do it I don't know but certainly he needs to do it economically just push one strain in this conversation a little bit further before we turn to the crowd what Frank said about there being a significant body of people in Japan of Japanese people who seek reconciliation for peace certainly a body that's pacifist I think that that population really appreciated things like the Hiroshima visit and the Pearl Harbor visit and that was received really well by the Japanese public those two visits were based on there being a very solid, stable and growing U.S. Japan alliance and if we see that alliance fray a bit or drift or you know there's certainly concern I think that the United States is not going to have the same rock solid security commitments or not going to demonstrate it in the same way then what happens within Japan because there are certainly very prominent people in Abe's cabinet now who have already called for greater security autonomy and Japan providing for its own and they could look to develop some capabilities that are difficult for a big chunk of the Japanese public to accept so are you going to see some divisions there between the sort of still very pacifist peace living and then another set that says we need to get together our own we can no longer just depend on the defense of the United States and need to move in more aggressive ways that's I don't know if there's an answer to that but I think that that's a danger if we don't have the same solidity to the alliance I used to work for Senator Biden when he was chairman of the foreign relations committee I remember a big fight I had with him once on the train going to Wilmington where he was trying to argue to me that Japan would go nuclear if it needed to and I was like oh Senator you don't know Japan that's bullshit Japan's not and he said no Frank you misunderstand my statement sure if Japan really can rely on the United States and knows nuclear umbrella is secure and that the alliance is secure Japan doesn't want to develop nuclear weapons but don't tell me I'm a politician you're not don't tell me that in the face of a nuclear arm China nuclear arm North Korea the potential of a nuclear arm South Korea and no US security guarantee that the Japanese people will sit around and do nothing in response and this is 15 years ago that he made this comment to me and we're starting to see Japanese realists asking disturbing questions about how Japan ensures its own security if the United States abrogates its responsibility so I didn't mean to switch to a really heavy topic but I think it's not just nationalism and where Abe will take the country if the United States retreats from its engagement and commitments to the region there's serious national security ramifications of this that will drive events in a way that would be very much against in my view US interest so Emma's cautionary words I think are well put we shouldn't assume a steady trajectory if the United States diverts from its path in a very dramatic way I hope that we won't should we open it up does anybody have more questions from the audience for our panelists wait for the mic and identify yourself please also say I just got an alert on my phone that has cancelled his trip so apparently Congressman Castro had his finger on the pulse there hello my um Edgar Snow from the Japan America Society you spoke the last comment you made about the nuclear weapons now we have secretary Inada who in the past obviously brought up the possibility of Japan developing nuclear weapons and uh again we entered that climate I took a seminar recently with Japan America Society where a lot of the people really felt that perhaps Japan should develop nuclear weapons is this a concern for ourselves and Japanese neighbors we have been hearing some suggestions uh utterances whispering uh to for Japan to go nuclear on many occasions in the past in 1998 after North Korea fired a type of missile over Japan a few years ago we did and if Cheney was frustrated with China's inability to rein in North Korea he also touched on that issue I was not aware of that you know Biden also sharing this kind of sentiment but it never happened when Nakasone was the JDA chief in late 1960s he instructed JDA officials to come up with a report highly confidential report to examine that Japan's nuclear option and pros and cons its merits and demerits and they concluded that it would be very much counterproductive and it would not help Japan ensure its security I think that Japanese government has I think maintained that position up until this moment I don't think in the foreseeable future it will change even though Trump would have said that it would be not that bad if Japan would go nuclear because Japan simply does not have any strategic depth compared to that big spacious country such as the United States, Russia, China, India and Japan would be decimated and Tokyo metropolitan area would be truncated immediately if the nuclear war would be waged so that's one of the reasons also I think that if Japan would go nuclear would decide to go nuclear that automatically means that the United States would abandon Japan the United States would give up on extending that nuclear deterrence with Japan and that will be tantamount to that ending the alliance I do not think in the foreseeable future that U.S. Japan alliance would end even though Trump administration would increasingly go isolationist I want to be very clear in case I wasn't before Senator Biden was in no way advocating Japan going nuclear he was in no way that was a desirable outcome and the only circumstance under which he was envisioning it was the circumstances under which the U.S. Japan alliance had already essentially crumbled with the U.S. abrogating its responsibility so I want to clearly differentiate his views from those of the president who seemed to suggest during the campaign that it might not be a bad thing it would be a disastrous thing but an understandable thing under those circumstances if Japan were to find itself in those circumstances I think there are going to be a lot of eyes on General Mattis as he makes this trip pretty soon more questions thank you sorry to jump in here but I wanted to ask the political forecast question if I can probably mostly from the Bajasan election in 2017 and related to that question how important do you see the role of Governor Koike and Tokyo and the political dynamics that are at play kind of vis-a-vis the LDP and the opposition there and will 2017 be the year of constitutional revision kind of formally starting as a formal process for the first time in Japan's history and I'll add your thoughts on potential successors to Abe too Jim thank you for your question I wish I would know the answers which I don't but I'll try to respond to your question first I think it's likely that Abe would call for a snap election again this year perhaps later this year I think now the administration will enact the special law to apply to allow the emperor to abdicate especially to apply to the current emperor it's not permanent law they decided not to revise that imperial house law because to do so would invite vicious criticism from the right-wingers they would not like to see that revision of the law would open the possibility for woman emperor in the future so I think that's the core issue behind the scenes is about whether the government will allow the woman emperor to reign or not and at this point they have decided to seal that issue because it could be too explosive so I think they will likely contain very much explosive issues and the advent of Trump administration will inevitably increase the sense of insecurity among the public so I think that once again we may see a rally effect around the so a co-election challenge I don't think it will I think develop to appeal to the general public to the general public it's basically confined to Tokyo metropolitan area so I think this would be a very good I think opportune moment once again to call for a snap election the problem is that this is related to Alicia's critical view of the administration and I agree because the more they have got victories they have already won four elections in the past four years two upper house two lower house right the more they have won they are less driven for them to pursue reform because the old type pork barrel types have come to come back and they have actually gathered around Nikai the general security of LDP and I think they have formed a formidable impediment war against that structural reform so with regard to our economics it would not be that helpful Kishida current foreign minister may be in a good position to succeed Abe because he has been very loyal to Abe and now it seems to be to me that Inada will not be darling to Abe any longer because she has challenged Abe's position on and off to put Abe on the spot and which Kante prime minister simply hates to see so I think her chance is very much now closed I think Kishida perhaps may have the best chance to succeed Abe it's funny I have to jump in here and say that if this conference was taking place in New York nobody would ask you this question about successor to Abe they would be asking who is the successor to Karoda any more questions Hi Jim Gannon with Japan Center for International Exchange you look ahead and I'm sure there are going to be a lot of demands out of the Trump administration it seems to view U.S.-Japan relations as much more transactional than we've seen in the past but from Japan's perspective it's very hard to see any place to go but the U.S.-Japan alliance by all the security changes and so it seems that the only choice for Japan Mr. Abe is to give some more then give some more then keep giving some more as you go down the road at what point in Japan or start to build up public resentment against the United States as well as among the policy elite and does this also hurt Prime Minister Abe politically by making him look like a weaker person what's on that thank you for that question actually I was planning to touch on that issue in my speech so thank you for very much because I can now reduce my speech time it's too early to tell when Japan will start to resent but if Trump administration might not allow Japan to pursue multilateral trade agreement in Asia-Pacific such as TPP minus the United States so 11 TPP forum whether it's independently pursued or would be independently pursued will be at that RCIP forum then I think Japan of the government would start to be very start to question the wisdom and the strategic sense of Trump administration because if the United States simply would not be interested in coming up with any Asian comprehensive policy based on multilateral framework then I think it would very much compromise Japan's strategic room to a room and I think it would be very much detrimental to Japan's Asian policy so I think that may be one scenario that we can envision more questions Thank you, sorry to hog the microphone Ben Salfman's Field Foundation Alicia your very first slide after the title slide had the list of outside stakeholders that management paid the most attention to but the one that's missing from that list is management itself and I'm wondering how much you see the sort of in-group constraint that individual managers are actually most constrained by their peers within the company and how I mean I think your suggestion that bringing outsiders in is tremendously important but where can you see any management that's willing to take the risks of breaking up their group or violating the group norms and bringing in the outsiders and I think it's not only a corporate governance right it's a social and even nationwide concern Yeah this is actually a really hot topic I work by day for an activist fund and there hasn't been very much opportunity to do much in Japan but Japan cross-border M&A is now at record levels and there are all kinds of mistakes being made Japan has not had a good record in acquiring overseas to begin with and even a company like Nomura who has such global experience completely botched the acquisition of Lehman so let me give you an example the problem is that many acquisitions are made by CEOs who of course are the senpai to everybody on the board and so nobody's going to challenge that and the problem is compounded when that CEO retires and is kept on as a official advisor right so in the case that I'm involved in at my company there's a company a financial institution has made an acquisition overseas it's been terrible this target acquisition it's full of corrupt people some of them are going to jail it's obviously outside of Japan right and yet nobody on the board will say to the guy who bought it let's get out let's sell it or let's do something even though that guy is no longer CEO he's an advisor he has an office down the hall but his presence is such a pressure on the rest of the board who owe their careers to him that it's a problem now one of the things that I don't know how much in the audience you guys know about proxy firms but these are firms that make recommendations about how shareholders should vote and one of the big proxy companies in Japan is recommending voting against any company that has these kinds of informal advisors around in attempt to remove that kind of pressure but you're right it's a huge problem it's a huge problem and again to the extent that there are outsiders who are coming to serve senior positions it will alleviate the problem I'm really encouraged to see that there are a dozen Japanese companies where the CEO came from outside so the guy who runs Shiseido used to run Coca-Cola and the guy at Japan Post used to be chairman of Citi these are Japanese nationals and there are half a dozen examples now Santori Ninami who used to be at Lawson and so on and so forth and I think this is the only way you're going to get real analytical discipline around how to run a company I think we're going to wrap it up here I want to thank Carnegie for hosting Japan America Society for all the very very important work that they do on this relationship and of course most of all are knowledgeable and enthusiastic panelists here thank you everybody