 Welcome to the Carnegie Endowment for International Peace. My name is Jim Schoep. I'm a senior fellow here in the Asia program, and I run the Japan program, and it's my pleasure to welcome you out of the cold and into a warm place for what is our annual collaboration with the Japan America Society of Washington, D.C. This is Japan this year, Japan in 2019. And this is the sixth time that we've co-hosted this event with JSAW. I always look forward to this event because it kind of forces me to really get back in touch and on top of what's going on in Japan, what are the various prospects across economics, politics, foreign policy, get a chance to work with some really good quality journalists and scholars from around the country. And this is, of course, a particularly interesting year in the sense that this is the end of the Heisei era in Japan in 2019. So that gives us a little extra historical angle, so to speak. So, as always, Carnegie is hosting today, but this is really very much a Japan America Society of Washington, D.C. event. They did most of the hard work pulling together our keynote speakers and panelists. Just one of the many contributions that the society makes to the Washington community and the bilateral relationship. And for this, I'd like to thank the Executive Director of Japan America Society, Mark Hitzig, Interim President Abigail Friedman, who will be speaking later on today, Board Chair Matt Goodman, who I'll introduce in just a moment for their leadership and to the staff on both organizations for taking care of the details. Today's program is also supported by the National Association of Japan America Societies. So I wanna say thank you to Peter Kelly on that front as well. So I'll have a chance to talk a little bit later. I'll be moderating the domestic panel. But first, I wanted to get a chance to welcome you all. As a quick outline of today, we're honored to be joined by Dr. Sheila Smith, of the Council on Foreign Relations who will help kind of frame the discussion today. We're very fortunate that she was able to join us. Mark Napper, the Japan Director at the State Department was originally scheduled to speak, but the government shutdown has continued to inhibit the State Department's ability to do their work. So we're very grateful for Sheila's participation today. Then we'll have the domestic panel and we'll take a short break and grab sandwiches before lunch keynote speech by Masahiro Kawai on trade dynamics in Asia for 2019 and it's great to welcome you back Kawai Sensei. And then we'll wrap up with our foreign policy, US-Japan relations panel in the afternoon. And that session will be moderated by Matt Goodman and it's my pleasure to introduce Matt, the Senior Vice President and William E. Simon Chair in Political Economy at CSIS. He is also more importantly the Chairman of the Board of the Japan American Society, Washington D.C. And Matt, I turn it over to you to say a few words of welcome. Well, thank you, Jim. It's a real pleasure to be here. Thank you to you and your colleagues at the Carnegie Endowment for once again hosting this annual policy event that we do to kick off the year at the Japan America Society of Washington D.C. And on behalf of the Board of Trustees and the staff of the society, we're delighted to welcome you here today in this cold weather. Thank you for coming out. This is an important event for us. We are an educational and cultural organization that promotes understanding of Japan and US-Japan relations in the greater Washington D.C. area. But we think that because of the business model of Washington D.C., at least the traditional business model right now we're not doing our traditional business of government but government and public policy is an important part of what we do. And so we find it important to do this kind of event and particularly this event at the beginning of the year to look ahead. And it's meant to be as the nature of all forecasting a little imprecise but also to give some things to watch out for. And we hope we'll have a little fun as we go along the way here because this isn't meant to be too serious on a cold January day. But we have some terrific people lined up to talk. And again, I thank both Carnegie Endowment for hosting and the National Association of Japan America Societies and Peter Kelly for their support again this year. We really couldn't do this without them. So thank you so much. So I have an easy task today. I'm not Abigail Friedman by the way who she and I are doing a little swap. She's gonna be here later in the day but she allowed me to have this honor of introducing my friend and former trustee of the Japan America Society, Sheila Smith. We're delighted to have her. I think she lives very well known to this audience as a leading scholar on Japan, particularly on political affairs and the US Japan Alliance but she's sort of been branching out and I think she's been doing more work. She had a great book a few years ago entitled Japan's New Politics and US Japan Alliance but then she followed that pretty quickly with a book on intimate rivals, Japan's domestic politics and a rising China. So she's been looking at that relationship as well. And most recently, it's not out yet but I think this may be the first public announcement here, maybe not, of a forthcoming book in April called Japan Rearmed, The Politics of Military Power. I think I got that right, which is forthcoming in April from Sheila and so look out for that. She's a senior fellow at the Council on Foreign Relations between here and New York and she's a widely read commentator on all of the above and I think you all know her well so I don't need to spend any more time introducing her. You should hear from here. Sheila, please come on up. Thank you all very much and thank you Matt and Abigail, Jim, everybody, Peter Kelly as well. I'm delighted to be here. I am no more knapper, I will say, I understand your disappointment at not having the official representative of our relationship with Japan but as you know, we are in the 22nd day of our government shutdown and hopefully we will not be able to see this unfold much longer but anyway, let me fill in as best I can. I will not give you again an official view but just my vantage point from sitting here in Washington and watching the relationship up close. It's a very difficult time to predict the future especially here from this side of the Pacific. I do with a colleague, I write three quarterly reports on the US Japan relationship in comparative connections put out by Pacific Forum. So when I was asked to come, I went back and looked at the year behind us, 2018 and even I had to stop and pause at the transformations that went along over the course of 2018 and so I'm a little more hesitant than usual to make prescriptions about what's ahead of us in 2019 but let me just sort of remind you at the beginning of 2018 where we were, there's some very critical issues that I think are gonna continue to define this relationship in 2019 and I think they were there in 2018 that will continue to be with us for this next year but in January 2018, we were still aligned very closely with Tokyo on maximum pressure against North Korea, remember, we had not yet moved to a moment of diplomacy between President Trump and the leader of DPRK, Kim Jong-un. We were still at that point in time also divided over how to think about best negotiating the future of our economic relationship. In Japan, there wasn't a lot of confidence that a bilateral trade agreement would fix the deficit problem which is the way that the Trump administration defined the trade relationship with Japan. Instead, I think the Japanese had embraced a more multilateral approach not only in Asia but as you saw unfold in 2018 also beyond Asia to embrace the Japan-European trade relationship and I think we were not really sure yet in the beginning of last year whether or not the Trump administration and the Abe cabinet would embrace the same vision of their future in Asia. Remember that was still early on in the American thinking or the Trump administration's thinking about the Indo-Pacific. That changed over the course of the 2018 and we got a little bit more aligned. The beginning of this year though we have now an abrupt shift to diplomacy, there's been a as yet somewhat mysterious outcome to the first summit between President Trump and Kim Jong-un. I think we all know, however, we had a North Korean visitor to Washington last week so I think we all pretty much feel that we're on the threshold of a second Trump-Kim summit potentially. I think there's been a sharp decline in some ways in the relationship between Tokyo and Seoul of late that also complicates our trilateral coordination of how to deal with the North Korean problem. So 2018 didn't necessarily leave the US and Japan firmly on the same footing with Seoul and I think there's some ambivalence and ambiguity about what's ahead in 2019 for how we manage the North Korea challenge. Again, as I said, we have shifted on the trade relationship as well. In September last year, Prime Minister Abe and President Trump met in New York for the UN General Assembly and announced that indeed the US and Japan would begin a bilateral discussions on a trade agreement. That is ahead of us in 2019 and I'm sure that we'll have a lot of conversation about that here, but what I wanna point out is although the framing of that bilateral trade agreement is yet ahead of us, what is also very obvious is that Japan has moved very forcefully in the direction of embracing multilateralism. You have now the conclusion of what we once called TPP-11, we now refer to it as the CPTPP, lots of initials, but we also have the Japan-European Trade Pact, which I think is a very substantial statement of not only Japanese, but European desire to continue to embrace multilateralism when it comes to global trade. We've had the Trump administration shift gears in this year, however, to Section 232 in position of tariffs. A new punitive approach, some would say protectionist approach to the way in which our government manages our trade relationships not just with Japan, but with everyone. And I think that for me and others here we're more prepared to speak about the details of this, but I feel the jury is still out yet on how these tariffs will effectively enhance American trading relationships or threaten our global economic performance. So 2019 is a big year for trade, not just in the U.S.-Japan partnership, but across the board in terms of American trading partnerships and in the architecture of trade globally. The other place where I think it's wise to look back as we try to look forward is the major power relations in Asia have been pretty dynamic. This 2018 was a year of major power symmetry in Asia. It's accelerated if you leave out the United States for a second and just look at the symmetry around Asia. It has been a fairly fruitful year, is a busy year at least. Some may not think that we've come to a lot of conclusions about what major power relations in Asia look like in the year ahead, but we've certainly had a lot of people trying to shape them. And I think that's an important piece of the puzzle. Our relationship with both Russia and China, as you know, has been defined in our national defense strategy or national security strategy. We now see Russia and China as revisionist powers and therefore the strategic competition with both is the framing of those relations going forward. Trade conflict with Beijing has heated up, obviously, so it not only has a strategic dimension, but obviously an economic dimension that when you read the press in Beijing, it sounds to me like many people in China think they are two sides of the same coin. In other words, strategic competition is both military and economic. I'm not sure that that's correct, but I'm looking forward to hearing others' comments about that later this morning. I think Japan's relations in the region are on a slightly different trajectory. I don't think Mr. Abe is embracing Beijing, but you'll notice that he has in his visit to Beijing last fall, has come to some understanding with Xi Jinping on how to manage the future of their relationship. There was a restatement of the need to reduce risk. There was a reconformation of the need for confidence-building in the form of hotlines and crisis communication mechanisms. There was, again, a continued interest on the sides of both parties to make sure that their economic relationship was steady and stable. And then finally, and I think importantly, both Xi and Abe, although there was no joint statement, there was clearly an emphasis on cooperation across the Asia Pacific. And here I think the Abe cabinet has done a very good job of bringing forward the common interests that Japan and China have on the economic development, in particular the infrastructure needs of the region, and trying to figure out ways in which perhaps the two countries can find common cause. For now, there are limited projects, I think, that that summit has begun. But I do think there's a little bit more of an emphasis that Japan and China have to live in the same region. They have similar interests in its long-term economic development. Xi Jinping, however, continues to focus on the Belt and Road Initiative. Mr. Abe continues to emphasize a free, open, and inclusive Indo-Pacific. So the rhetoric is not necessarily the same, but there is a quiet attempt to find a way to find common cause looking outward in the future. Another major power relationship that we're paying attention to, especially this morning, is the Japan-Russia relationship. Mr. Abe is in Moscow. And this is a place I think we have not paid as much attention to in Washington as perhaps we should have. But there is an opening here that Mr. Abe would like to create with President Putin. He has openly said that he's willing to consider a two-island solution. That's a fairly vague terminology about what that actually means. But I think the Prime Minister is looking to find an opening with Mr. Putin that might finally bring the two countries to a peace treaty. There are special emissaries. There's a lot of diplomatic activity. And again, this Moscow trip is part of the activity that I think we'll see whether or not Mr. Putin is really engaged in making that relationship a little bit more predictable than it's been in the past. We all know that the Indo-Pacific partnership between Tokyo and New Delhi has strengthened. It continues to be a great partnership between Prime Minister Modi and Prime Minister Abe. I think of all the countries of the Asia Pacific where the Indo-Pacific concept itself has most overlap. It's really between India and Japan. You hear the Prime Ministers speak in terms of connectivity. You hear them talk about an Indo-Pacific vision that doesn't stop at India, but in fact extends all the way over to the East Coast of Africa. They focus very much on the maritime dimension of course and their military cooperation deepens every year and 2018 was no exception. I think it's also worth noting we just had a national defense program guideline announcement in Tokyo. And here I would just simply say, perhaps presaging my new book, but I think that Tokyo is doubling down on its investment in hard power. I wouldn't see or read Mr. Abe's diplomacy as simply diplomacy and a desire for cooperation, but as part of a larger strategic shift that Japan has been making now for some years, but it is not unrelated to the US-Japan relationship nor to Japan's own awareness and willingness to defend itself should its interests be threatened. So let's come here to Washington. I've been asked to be light and airy and funny, but it's kind of hard to be that these days in DC. Not only is it cold outside, but yeah, we're in a little bit of a moment where it's hard to be optimistic. So I think the president's unpredictability is well known to this audience, so I won't belabor the point, but when it comes to foreign policymaking, I think his abrupt announcement on Syria really took a lot of people by surprise. Not necessarily because of the policy announcement, but the way in which it was done without interagency coordination, without his principles in his cabinet being on board. So you see a president who is increasingly willing to make decisions in isolation from his advisors and that's worrisome. You know also that we have lost Secretary Jim Mattis from the foreign policy team. Again, no matter I think which country you come from, including from the United States, I think that's probably seen as a loss to our foreign policy and defense policy. Our federal government has literally stopped functioning and I'm hoping that not only for Mark Napper's sake, but for others that that will come to a quick end soon. So we know the much anticipated midterms brought this very slowly unfolding, but nonetheless blue wave to the house. We still have a Republican Senate. So we have a divided Congress. We will have a new balance of power that will put more pressure on the White House as it moves forward. There's gonna be a lot of hearings we know not only on the president and his business dealings and his behavior since he came into office, but also on our foreign policy. We should not expect that there will not be congressional scrutiny of North Korea, for example, or any other decision that we are making in the foreign policy realm. It is going to be a serious challenge, I think, because Congress is now much more interested in exerting oversight of the White House and the president's policies. We do and I won't belabor this point, of course, we still have an investigation by special counsel Mueller, which I suspect will be forthcoming soon. It's another element of unpredictability. I do think that while we look at the Syria decision as perhaps the straw that broke the camel's back for Secretary Mattis, I, for one, took a deep breath when I read his resignation letter, largely because it was less about Syria and more about our international partnerships and our alliances writ large. And that's a warning bell for me when somebody as serious as Jim Mattis decides to publicly make the statement that he made in his resignation letter. So right now we see NATO in the headlines, right? And perhaps this conversation inside the White House about withdrawing from NATO. But I think for all of us who think about the US-Japan relationship and our alliances in Asia, we should be paying very close attention to the ideas that are coming out of the administration in the months ahead. So let's see, where are we for 2019? Trade talks, right? Abe and Trump still use a different language. Again, I'm gonna leave it to our trade experts and economic experts later in the morning to talk to you about the specifics. But Minister Motegi continues to refer to a trade agreement in goods. I have never heard an American official use that language. I think we're not still on the same page. But nonetheless, I think we are going to see some kind of compromise between the two governments how fractious that is going to be remains to be seen. Internally, I think in domestic politics, there is a lot to keep both Mr. Abe and Mr. Trump busy. I've already talked a little bit about the president, but there is also this question of Mr. Abe. This is a full year for Japan. As Jim alluded to, we have an abdication. We have a transfer of power at the end of the Heisei era. We can take bets later on in the morning about what the new name is. We have Golden Week, which lasts for 10 days, or however long it is. It's a very long Golden Week. We won't have as many visitors come through Washington, I think, as a result. But it is a momentous time in Japan as you see the shift in imperial leadership, but also in terms of the Japanese themselves. Think about their future. I don't know whether Abe's Russia diplomacy will produce a peace treaty in 2019 between Russia and Japan, but I do believe it is something the prime minister feels is a legacy issue. And so I think we should expect to pay attention to the headlines as they move forward. I have always thought in that relationship that much depends on Mr. Putin and his sincerity or his strategic thinking about the relationship between his country and Japan. But I wouldn't put it past him to use this relationship a little bit to his advantage, given the difficulties that he has created in his relationship with Washington. So again, the future of the Abe initiative with Russia remains to be seen, but it is certainly something for the US and Japan to be very closely coordinating on and discussing. Some people in Tokyo think that this is the legacy project that will replace constitutional revision, which is something we talked about last year. Maybe that might be the case. We have an upper house election in Japan this summer. So for a lot of us who've been watching constitutional debate, I feel that the window is closing somewhat on Mr. Abe's opportunity. I'm not sure if he's given up on that opportunity, but at least that is also something to pay attention to at home. And then there's international meetings in Japan. There's a consumption tax. There's all kinds of things to keep the Abe cabinet focused at home, even as Mr. Abe continues to try to manage major power relations in Asia. So let me conclude with a few thoughts. Some of them I've alluded to already. I think the US-Japan relationship, it still is the strongest. And I say that not lightly or not because I support it, but I think still if you look at the overlay of America's relations with other allies, I do believe the US-Japan alliance is on a firmer footing than many others. I think the Abe-Trump relationship that continues to be the fulcrum for stabilizing and managing this partnership, despite all of the kinds of hurdles and bumps that I have noted, I still think that the prime minister and the president continue to reach out to each other and see each other as colleagues in attempting to deal with some of these political challenges. I think that a lot of the same issues are gonna be on the headlines in 2019. We could of course have a surprise, but the North Korea and the second summit, if it happens, will be just one more opportunity to make sure that Tokyo and Washington are aligned on the military balance in Northeast Asia. And of course the priority for Tokyo will be to ensure that extended deterrence remains firm, visible, and effective. And I think our defense officials will have a little bit of work cut out for them on that. Again, Jim Mattis led that reassurance strategy when he was the Secretary of Defense. It will be up to his successors to continue that as we go forward. Not sure to me what compromises the US might make in a Trump-Kim second summit. Not sure to me either what the private conversations we've been hearing about, how much of those will become public. But I do think the second summit either has to prove that Kim Jong-un is willing and ready and intent on changing his behavior, or we will perhaps head back in a very different and less comforting direction. US trade talks, I think we're on the, there's whispers of a cusp of a deal with China. It's important for the US and Japan to remember that trade is not just about our bilateral, but it's also about other ways in which the United States has negotiated its trade with others in the region. Not sure where we are on that. There's others in the room who can speak to that more effectively than I. But there's common ground between Japan and the United States on questions like CFIUS enforcement, IPR protections, even though the United States seems a little bit forward-leaning on that, I don't think Tokyo is all that far behind. So in the larger structural questions of how China and Japan, China and the United States, China and the global economy are to work, I still think that Tokyo and Washington have more in common than they do differences. The US Mexico-Canada Agreement is gonna be on the hill. How that, I don't think anybody here anticipates a lot of problems, but I have a little inkling and my trade experts here could probably assuage you of that worry that this non-market economy clause that is inserted into our deal with Mexico and Canada could become a precedent for other relationships. And that of course would cause challenges in Tokyo. And I'm not sure in the US-Japan trade talks. Are we on new ground? Are we on common ground? Or will we continue to see this dissonance in terms of the objectives? All this remains to be seen. So trade is gonna continue to be on the top of our agenda this year. Asia's major power dynamics, I think. Again, I've already alluded to this, but I think the Japan and the United States are pretty much on the same page on China. I heard so many of my Japanese colleagues commend the speech by Vice President Pence, saying, finally, the United States is getting tough on China. But of course, there are many others around the region who didn't welcome the Pence speech so warmly. So again, we have to be careful of high expectations and continue to try to coordinate that relationship as best we can. Again, you probably understand this already from my earlier remarks, but I think we need to be very careful about Russia. The perception of differences, the perception of we are coming into slightly different senses of strategic challenge from Moscow, that perception in and of itself could be problematic, especially on the Hill. So we may have a little bit of reassurance strategy, and I hope that Prime Minister Abe continues to brief our government closely on his expectations for that future. And I think on the Indo-Pacific strategy, although I welcomed Secretary of State Pence's speech earlier this year, I still think the United States needs to bring a lot more resources to the table. If we are going to firmly become and embrace the Indo-Pacific vision as articulated by Mr. Abe and Mr. Modi, and with Australia, if we are really going to revitalize the Quad, then I do think we need to bring some more attention and resources to that strategy. Our colleagues like Mark Napper in the State Department are gonna have a busy year. Let's hope they get back to work and that their families get their paychecks. And so with that, let me finish here. Thank you very much. Well, that's just terrific, Sheila, that you were able to stand up, stand in and provide so much meat for us to chew over. Actually, when I talked to Mark Napper last week, when unfortunately he told us he was constrained and wouldn't be able to speak today, he did offer to present his views on the US-Japan Alliance in interpretive dance because he's apparently not constrained from doing that. But in the end, I'm actually glad that we made the decision to bring Sheila in here rather than to witness that. But so we're gonna give the audience a chance to ask Sheila some questions. And so please start thinking about what you wanna ask her. But I'm gonna take the liberty of asking two questions to kick things off. One about domestic politics and one more international. So just domestically, looking as a non-expert at Japanese politics from the outside, it looks like on one level Japan is a very stable place politically. It's had the same guy in charge for the first time and a long time for five or six years. He's gonna be in place for another couple of years. It doesn't seem like there's any real challenge to his position within or without the party. And it seems as though things could go along here for some time. On the other hand, it sounds like he can't get some of the things done that he was hoping to get done. He faces a whole bunch of a couple of local elections and then the upper house election later this year or questions about whether he can sustain his position even through the period that he's in theory able to continue. So I just wonder, should we see Japanese politics as stable or not stable and what's going on internally? I do, okay, thank you. I would actually like to see, have seen Mark Napper's interpretive dance so I'm a little disappointed. We'll get him another time. So stable is Japan's politics stable. Obviously in comparison to ours at the moment, they look nice and predictable. But of course, like every parliamentary system, elections come along and those can completely disrupt in and of themselves, right? So there's whispers like there are at the beginning of every year where you have an upper house election. There are whispers about a general election. Will the prime minister try one more time to get a Japanese voter mandate for the things that are difficult? Clearly he can't walk away from the consumption tax issue. It's legislated, it's done. He's promised he's already thrown down the electoral gambit for that in 2014. So that's coming and that's not gonna be popular. And as most of you who know Japanese politics understand, upper house elections are typically where the electorate may support the LDP but they certainly register their disapproval over time. And so sometimes failure in the upper house elections lead prime ministers, even strong prime ministers, to resign. I'm not saying Mr. Abe is going to do that. I'm just saying we're not without precedent where stronger prime ministers at an upper house defeat or setback have taken the blow basically. I think Mr. Abe is unlikely to do that for a number of reasons. One, you've got the Tokyo Olympics next year. We talked about 2019, but you can see just over the horizon to 2020. And this is really something that the prime minister strongly about. I think also we saw in the LDP leadership election that while Ishiba Shigeru did the right thing and stood up when nobody else really wanted to take on Mr. Abe, there is an internal LDP conversation now about what a post-Abe LDP will look like. Who's coming? I'm not sure they're ready for that. So I'm not sure there'll be party pressure. Should even, should the upper house election go badly for the LDP? I'm not sure that the internal dynamics are yet ready to try to test the waters in a post-Abe. So I think we'll see. There's others in the room, particularly our reporters and other political scientists who are probably better than I at figuring out whether or not a general election is likely. I tend to think not because it doesn't really redound to Mr. Abe's favor, honestly. But still, the upper house could be a little shaky. I think Japan at the moment is probably not well poised for a transition that's messy. I think it's a lot of risk aversion. I think we saw that actually in the LDP presidential election that inside the party, there may be some grumbling and there may be some differences on specific issues such as economic policy or the constitution. I think study as we go is probably the motto inside it. So that's my general read on the politics ahead. Parliamentary systems are not always stable abundant at the moment, right? But I can't imagine the Japanese politicians aren't watching Theresa May's difficulties with some care and some caution. Whether it's for a referendum or whether it's just simply shaking things up a little bit. This is not a good time for Parliamentary systems. Okay, well terrific and we will discuss this more in the panel later this morning and others may have questions about that. But let me ask the international question, which is, so Abe has been different in that he's been quite a prominent figure on the international scene. He's done some pretty dramatic things in terms of that people didn't expect of taking forward TPP when it was failing and taking some new diplomatic initiatives towards China and Russia, as you mentioned, generally cutting a bigger figure on the international stage. And I guess the question is whether that new posture for Japan and international affairs is going to survive Abe? And whether this is something unique to him or whether there's something structural that puts Japan in a position to be a much more engaged and forceful player in particularly in the end of Pacific region, but beyond as well. And then I guess I'd also maybe just throw a googly in there and ask about whether this will survive Trump. That is to say, and how much of this is because of the concerns about the US posture in the region and the world being different and are sort of withdrawing from the scene on some level, and specifically things like TPP, but there are probably other examples as well. And whether some of this was just a necessary, in a way, hedge or a response to that action. And so to what extent is this a permanent thing or temporary? That's a question that goes beyond 2019, at least I assume it does. But... No, great. Those are, there's two questions embedded there, but I think they're both great questions. And I think there's two things I am impressed with when I watch Prime Minister Abe. And first of all, he is one of the longest serving leaders in among the liberal democracies, right? So he has a lot of experience. And you could see that in the early months of the Trump administration, in fact, throughout 2017, and he kind of took on this advisory role for the president of one of you was going to G20 and other things. So I think Mr. Abe is very comfortable in the global stage. And in him, although you can critique certain policy positions if you'd like, but in him they have a very global, globally literate and globally respected leader. I thought it was very interesting that he wrote the op-ed for Brexit, for example. I mean, Japan has stakes in not only Asia Pacific, but across the board in supporting what we now refer to cryptically as the liberal order. But I think Japan's leadership is well served by Mr. Abe specifically. But I also think you're right, that the Trump moment has created a bigger opportunity, perhaps in Japan, not just Mr. Abe that Japan might have had otherwise. Japan has always had and carried these positions. But for example, the Japan European trade pact, right? Both sides were dilly-dallying on that for some time because it was painful politically. But the Trump moment opened up that opportunity in a way for both sides that I think may not have come easily had it not been for American transgressions on trade. Let's prove that way. The next prime minister, I think now, and I could be wrong on this, but my gut level tells me today that the next prime minister is going to have to be somebody who can walk and talk on the global stage effectively. I think the days or the expectations when you can elect any prime minister, and it's okay in Japan are probably gone. And I don't say that out of criticism. You had some who didn't look like they were necessarily great statesmen, but who then became great statesmen. Here, I have this line, for example, right? But I think the expectation now of the prime minister of leadership in Japan is going to have this added component to it. They don't have to be Abe 2.0, but they certainly need to be able to articulate and advocate for Japan on the global stage and in Asia as well as more broadly. And I think that's a new place, probably, for the domestic discussion or at least for the internal LDP discussion. So you hear names like Kishida Konotaro, people like that who actually do have that portfolio, have had that foreign minister's portfolio and have that strength, you know, bubbling up in ways that perhaps wouldn't have happened in an earlier time, right? So I think that's what, I don't know who it's gonna be. I don't have that kind of crystal ball, but I do think the expectation is how is this person going to fare with Trump or with this different America? Or how are they going to fare with Xi Jinping? How are they gonna fare globally? I think that matters now more. On the second question, how much is this all about Trump? I think some of it is. I think it's hard for me to make an assessment on the trade side. I was a surprise, perhaps, maybe more surprised than I should have been in 2016 by the extent to which the anti-trade voice in both the Republican and the Democratic parties seemed to sway our leadership election. So again, the Democratic National Committee, you had the no TPP signs. Looked like the agricultural cooperatives in Japan. I was like, where did that come from? But it's both sides of the political spectrum now are deeply questioning, right? Our global economic role and our trade agreements specifically. So that was new. That's not necessarily all about Trump in my mind, but it is something I think for our Japanese colleagues to take seriously inside the United States. Not sure how this is gonna rectify itself for 2020 or if it is going to rectify itself. So the United States on the economic side is gonna be slightly different than we've experienced it before. And I think that's gonna stay with us way beyond 2019 or beyond 2020. On the security side, I think the shock here, and I alluded to it in my opening remarks, President's willingness to question our alliances so fundamentally. And I think you could look at polling, whether it's the Chicago Council's polling on foreign policy or the Gallup U.M.U.D. polling. You can look at polling over time. And what you'll get is differences between, for example, Republican and Democrats on reliance on an alliance or multilateralism or unilateral military power. You'll get differences, right? But you won't get a serious questioning of the premise that our alliances are a great thing. That premise is starting to kind of, at least bubble up a little bit. And I don't wanna alarm people by thinking we're about to abrogate the treaty or anything like that, but you're hearing it. When I go out and talk around the country, I have people ask me, I do Americans need to be. Why does this alliance make sense to the United States? Now people like Jim Schof and I and you and others can answer that question, right? And we should get out and answer that question as should our Japanese colleagues. But that's a new moment, I think, our politics and our foreign policy because we have to answer to these alliances like an interest and that they are deeply about who we are on the global stage, right? So again, just to walk it back, is it all about Trump? I think on the alliances side, he has open questions that I don't think others would have opened. And I worry, you know, I worry about that matter's resignation letter. And I think we shouldn't just take it as, oh, Secretary Mattis, he was coming, we shouldn't take it lightly. There was a message in that letter and I think we need to take it seriously. So that piece of the puzzle on the Trump side, I think, is new. And I think Japan ought to take it seriously. I think Mr. Abe's done a good job of hugging, as I said earlier, hugging Mr. Trump's clothes. That is gonna have to continue to be a Japanese strategy. I'm not sure I'm ready yet for Japan that is actively hedging. I'm not sure we're quite there yet. But I do know that you're sort of the security planners in Tokyo, I think. That's a longer term conversation for Japan. So the next guy should also have a golden golf putter ready to hand to Mr. Trump. Okay, terrific. Let me let you ask the smart questions. I see a hand way in the back. I assume there are microphones. If you could just quickly identify yourself and in fact stand up first please so we can see you and then ask a question if you would if Sheila, thanks. Steve Winters, independent consultant, hello Sheila. Hi, nice to see you. I wonder what your thoughts are. You mentioned the transition from the Hase area era to the new emperor. I get the feeling that maybe here in DC we don't really feel the impact of the emperor's role in Japan probably because of historical reasons. So do we have some emperor watchers here? I mean the fact that the new emperor is a graduate of Harvard University, former diplomat, speaks several languages including Russian. I mean must be occurring to people, whether this... And also just briefly, I learned from some very top Japanese recently that their opinion is that the current emperor the speech he gave to the people after the great East Japan earthquake was actually him stepping outside of his role that's prescribed by the constitution and doing something that actually, technically he shouldn't have done but which was what he should have done. But so again sort of indicating there's more there than speaks the eye. I agree. So I was, we all watched after the great East Japan earthquake and of course there was contentious politics in Tokyo and there was a systemic challenge of trying to manage a crisis of that magnitude, right? And I watched the emperor's video and I can tell you without a fact and our Japanese colleagues here a better place to comment on this than me but I could feel the oh thank goodness that kind of pervaded the atmosphere in the country that there was a unified spokesperson for the people of Japan in their time of distress. Now I don't take that as contradicting whatsoever article one of the constitution, right? I do think that the emperor stepped forward because he understood that his voice mattered to the Japanese people in that time of crisis and I think he did an excellent job of maybe not fixing the crisis which if he had attempted to speak on how to fix the crisis I think you're right, that would have been a different problem but that's not what he did. He wanted to make sure that the Japanese people understood that his family, the emperor, the country they were all unified. I also think it was very important that the emperor and the emperors went to Tohoku to the shelters to demonstrate that they were there with the people who were suffering. So again, this has all been part of the very visible role that the imperial family has played in making sure that they are the people's emperor and emperors and I think it's very consistent with their post-war role. I think the abdication or the succession of the crown prince to the position of emperor is going to bring, as you said, a much more younger generation obviously, a more cosmopolitan generation. The crown princess has already made a statement that she's looking forward to being more active in public affairs but again, each emperor puts a very different imprimatur on their reign and we'll have to watch and see how this new younger emperor and emperors lead Japan and discuss some of the issues that are on the table in Japan. I myself, I know it's a very delicate topic inside the country about what they're supposed to do and not supposed to do but I think the imperial family has always found a way delicately to play a positive and constructive role. And so I expect that the next generation will lead that way as well. I do think the emperor watchers, I don't know that people here don't think the imperial family is important. I think maybe the abdication of this all, the ceremony and the name and all this stuff, when you're in Tokyo it's palpable. Everybody has to get a new notebook. Every company has to get new everything and they're shutting down for a tremendous amount of time. The markets will shut down, Japan will shut down and I was there when Emperor Hirohito passed away and that transition I think was much more edgy in some ways. I don't think that's what we're gonna see this year. I think you're going to see a quiet celebration and I probably a sense of gratitude to the current emperor because he has worked very, very hard in his role and I think there'll be a sense of optimism about the next generation coming forward. But beyond that I don't sense that this is a political challenge for Japan. I think it's just a moment of transformation and I'm looking forward to seeing what the new emperor and emperors are, how they're gonna put their mark on Japanese society. Thanks Sheila for navigating a very tricky year where lots of moving parts very well. You mentioned briefly Japan-ROK relations which are troubled on a number of fronts, comfort women, the Supreme Court decision reopening the whole issue of flames and this latest Mabel thing of locking on a radar. But also the US had its own issues with the ROK we're apparently in abeyance now on our post-nation support agreement. So you just talk a little bit about the ROK as sort of a challenge to both and how this is gonna do a wild card in the relationship in a way. Sure, thank you Rusty. It's a subject that could take an hour or more but I'll try and do it very briefly. I am troubled by the state of the relationship. I think it is all of the issues that we know trouble the relationship have all of a sudden like Hydra's head all come back. I think the fire lock, the radar lock on by a South Korean naval vessel on the Japanese surveillance aircraft. Well, it's dangerous, right? I wasn't worried that we were about to erupt into war but I think the management of that incident by both sides has displayed a difficulty in the relationship that actually I had underestimated. So we are all aware of both the structural differences in how South Korea and Japan treat the 1965 treaty, right? We are also aware of the courts playing an increasing role in grievance disputes by citizens in South Korea and in China for that matter. So that's a new aspect to the diplomacy that wasn't there a decade or more ago, right? It really wasn't part of the diplomacy and now it is. And that's going to put an awful lot of pressure on that 65, that peace treaty. I don't know if it's gonna end up in the International Court of Justice, it could because it's a new phenomenon and I'm not sure we have a blueprint for how to manage it other than to try to make it better but I'm not sure we're gonna make it better. I think there's some serious structural issues here that require perhaps adjudication in the International Court, I don't know. But the military piece of the puzzle, it's not the first time of course that the South Koreans have scrambled their military in response to a Japanese. You know, when there was a geological survey ship out and around the Dr. Takeshima Islands in 2016, South Koreans responded, right? I don't know if you were in, you were probably in government at the time, right? I mean, so 2006, not 2016, 2006. So this is not the first time that the South Koreans have been somewhat anxious to make sure the Japanese don't test their ability to defend their interests. I found this one though, what I would have liked to have seen, let's put this in a different way, I would have liked to have seen both governments say how this risk, this is an unacceptable risk and of course neither country thinks that either is a military threat and of course they will do better at informing their militaries how to respond to such mistakes. That's what I would have liked to have seen. The fact it's drawn on for such a long time and there isn't a common ground or ability to manage that level worries me a little bit. And again, I don't think the two countries are about to go to war, but I think it reveals a certain level of problem in the relationship that I think, and we don't have I think the attention span nor the finesse here in Washington to try to help. You may criticize the Obama administration if you'd like about their ability to try to work through with Prime Minister Park and Prime Minister Abe, the Comfort Women Agreement. I actually thought, I was very grateful to our colleagues in government for facilitating that process, but I'm not sure this is an administration interested in facilitation or even paying attention because we've got so many other things on our plate. So absent an active U.S. role to help facilitate, it seems to not, it just seems to be stalling out in a way that I think is very, is very unhelpful and worrisome for me. On the host nation support thing, and this is where President Moon Jae-in, I think, has been under a lot of pressure from the Trump administration that I think we don't often talk about, right? Remember, he came into power on May 9th, 2017. So after Mr. Abe and Mr. Trump had already had a fairly detailed discussion on the North Korean missile launches. And so he came late to the game and he has moved forward and the South Koreans have played a fairly catalytic role in the Trump-Kim Summatory. So there's this edginess to who's the right ally, who's the closest ally? And I know that our diplomats don't speak in those terms, but clearly, trilateral coordination has been done effectively by our Secretary of State, by Jim Mattis when he was Secretary of Defense, but at the presidential level, it still seems a little discobobulated to me. Trade, the chorus. So the chorus agreement was under pressure from the Trump administration early on. Now the host nation support agreement, which for those of you who don't know what that is, it's a special measures law agreement, rather, between Seoul and Washington over who pays for various aspects of our U.S. forces in South Korea. Unlucky for Seoul. Renegotiation of that agreement came up in the first year of the Trump administration. So as you know, the president campaigned on better burden sharing, quiet, kept under the radar kind of problem in the bilateral, and I don't think it's getting better. I think the Trump administration is taking a very hard line, and taking a very hard line at the exact same moment that Trump and Kim are meeting. And so when I heard our president after the Singapore summit say, ah, war games, they're expensive, I heard a message to Seoul, a lot of message to Pyongyang, and I worry about that because this is a very tough game to play at a time when the future of the peninsula is on the table, frankly, in the Moon-Kim dialogue as well as in the Trump-Kim dialogue. We're not paying as close attention as we ought to, and I think, especially in Tokyo, I understand the bilateral difficulties, but I think we should also recognize that the larger structure of the U.S. ROK Alliance and the U.S. Japan Alliance is under a little bit of strain, and it would try to help alleviate that strain. Thanks, I think I saw Robin's hand. Thank you, Sheila and Matt. Robin White, retired Foreign Service. This is a more micro question. We see a certain amount of foreign criticism of what might be called the rule of law in Japan, particularly pre-indictment detention, no lawyer's very high prosecution rate. Are the Japanese concerned about this at all? Do they see this as a problem until one of them gets arrested, I guess? So yeah, we're watching the CEO at Nissan suffer somewhat. So I guess this is not something that I'm an expert on, Robin, so I don't want to speak beyond what I feel comfortable talking about. I'm sure that there are plenty of people in Japan who are and have been for decades and decades advocating more on the side of victims' rights, right? Access to those detained who are Japanese citizens, right? Not just foreign citizens, right? And I do believe with the new jury system, there's been a lot of judicial reforms that have changed some at least of the prosecutorial process in Japan. Are there still problems? Are there still pressures? Sure, and I think there's more and more foreign attention now being paid. The spotlight is being put on Japan. I don't know how much and how we would evaluate whether how far Japan has come versus how far it has to go. Is it the freedom? The organization that, is it Freedom House Index? Annually does a report on the state of democracy across the globe. And 2018, they raised some concerns about Japanese prosecutorial process. So I think there's others beyond me who are watching this very closely. On the other hand, the larger structural questions of representative government, of the need to pay more attention to gender equity, the Freedom House Index covers a lot of issues. So they don't go into depth on this, but it did get flagged in the 2018 report. So people who are paying attention in that community are paying attention. I don't know whether or not, I'm just not aware of the current debate in Japan over additional reforms. Okay, other questions right here? I'm Hiroki Takeuchi at Southern Misses University. My question is, could you talk about a little bit more about the implication of Brexit? Because it will happen quite quickly. Within two months, something may happen. And this is something that both business people in both Japan and the United States are really concerned. And so my question is, is there anything that either United States or Japan can do to make it smoother? No. Next question? No. The gentleman sitting to your right might be able to answer that question better than me. So I don't know, many of you may or may not know this, but I'm Scottish by birth. So I watched the Brexit with some fascination about the internal future of the UK. It's a story about the future of the UK, not just in its relations with Europe, but internally as well. And I just, I don't think we've ever seen British politics as in disarray as we see them today. So it's not just the economic questions about what about all that Japanese investment in the UK? It's really a fundamental question about the future of the constellation of interest inside the UK itself. And I, we can talk all about the Scottish National Party at another time. It's a big theory. It's a big focal point of my family. Generationally, they feel very different about independence of Scotland, but there is a younger generation in Scotland that really feels strongly about it. So EU, this whole Brexit conversation is not just about the trading relationship and the economic interdependence. It's really also a future question about the composition of the UK itself. I don't know what anything we can do. I think, Mr, I guess I mentioned, Abe's op-ed prior to the vote, like please don't do this. It's much better for you. It was great, but I don't think foreign advocacy on this issue. So President Obama did the same before the referendum, right? I mean, President Obama made it very clear why the UK should stay. And they, lots of people, Neil Farage and others said stay out of our business, foreigner. Not just US president, but foreign people have no reason to be in this conversation. So I think I'm not sure what we can do to mitigate the exposure of Japanese and companies and investment. And again, in later panels, maybe somebody can help you with that. I don't know that those of us outside of the UK have a very persuasive voice at this point. For me, the question is, is there going to be a second referendum? Are politicians going to feel like they have it to take it back to the people in order to get the legitimacy to do anything, even if it's a trying to manage a Brexit with no deal? The real problem is, of course, the big complicated divorce is always a real problem. But the politics inside the UK for me are really the underpinning of why we have this problem, right? And I, a second referendum could give us anything, right? So it has mobilized all the forces in the UK that were so active at the initial referendum. I think Theresa May has got her hands full and I'm not sure, and this is no disrespect to her ability to lead, but I'm not sure the parliament today can manage this process, honestly, without the divisions that we were already seeing. So short answer was no. Sorry. Yes, I also have a UK passport and I'm just finding it just in possible situations that is really a Greek tragedy and brought self-inflicted, but none of the options seem good. And in fact, the second referendum, the first referendum was so not what it should have been and it was expected that I'm not sure I'd wanna open that can of worms again much as there's a reason that anyway shouldn't give my own opinion. Just say that there's a lot to talk about on that and the stakes are huge for the US and by the way, as an economist, I always remind people, Britain is the fifth largest economy in the world and if this happens, if there's a crash of Britain out of the EU, it's gonna have big implications for the global economy. So it's important. Did I see this gentleman here? Palicius, Minister of Council and Embassy of Serbia. I am in Washington four years and half. Due to circumstances, 20 years ago, I was in Tokyo four years and half. That was the time when Ambassador Demin was heading American negotiations regarding the guidelines and so on. I was very much impressed 2014 at your lecture then at Council on Foreign Relations that you announced a lot of things which happened in varieties during the Obama administration. Today, besides clear explanation, you are much more cautious. My question is different. Although everything is intermingled while we are waiting the second summit, nobody today or before mentions the Russian Federation and its role during the first summit is any and is that related anyhow? That is an excellent question. I wish I could answer it. So I'm cautious. Let me just sort of back up a little bit. I'm cautious today because I'm being very honest here that I'm not quite sure where we're headed. Whereas in previous administrations, Republican or Democrat, we kind of had at least an idea of where we wanted to head, whether circumstances would end up allowing us to head in that direction. I think we are less, it's less obvious to me today where, what the outcome is, even if we just isolate the North Korean Peninsula. What is the end game and what do we wanna see on the Korean Peninsula at the end of this? I don't have any idea what our government wants at the end. Now I understand that there is a serious effort by Secretary of State Pompeo to move the denuclearization forward, that there is some indication that Kim Jong-un may be willing today, more than previous Kims to engage. I haven't seen the evidence yet. I really haven't. So that's just my own personal take and if there is a second summit, it's kind of time to pony up the evidence in my mind by Kim Jong-un, right? I mean, if you're gonna do it, now's the time. The Russia question, and it's a really good one and I wish I could answer, but two pieces of the question is, so what would denuclearization look like? How do we assure North Korea that it is safe? Because that's always been in Kim Jong-un, Kim Jong-il. They've always wanted to have the security guarantee by the United States that they would be safe. They would like denuclearization of the entire peninsula. You could get really wildly skeptical and because you asked me, I'll get wildly skeptical, with no basis in fact, so just take that caveat, that there is a different extended deterrent question for the peninsula, be it for the North, in which case Russia might have a fairly significant role in that and for the South, right? So, we had at a quiet conversation hosted by Jim a week or so ago, we had some very knowledgeable Japanese colleagues, experts, kind of saying we're kind of waiting to see whether extended deterrence, what comes out of the next round on extended deterrence. Now, would Russia be willing to offer Pyongyang extended deterrence? I don't know, would we be happy with that offer? I really don't think so. So, but that's at the end of the day, the security guarantees that the North gets is part of what we're trying to figure out what the Trump administration is thinking. Clearly, that's going to be a major component in any negotiation. But I can't think that the United States would be sanguine about that. Would Mr. Abe want that? So you ask about the current discussion in Moscow. I suspect that Abe and Putin are certainly talking about North Korea. Well, I think that that dialogue is a comprehensive vision of what should happen there. I doubt it. I don't think that's Mr. Abe's ambition. But I definitely think Mr. Putin would want to raise what happens in North Korea and how Mr. Abe would think about various options that Russia may be thinking about, I don't know. Highly speculative answer on my part, that you asked a really, really big and speculative question. So thank you for that. Okay, I'm going to take one more question and then I think we're going to move right into the next panel. So if you have a question, a burning question, I thought I saw somebody in the back, but maybe I didn't. Well, then maybe we don't have another question, but I'm going to ask you one. You don't want to, I'm going to force you to try to make a prediction about, you don't have to say what both characters are going to be in the new Imperial era, but how about one character? If you had to pick one character, I'll throw one out there just to get the conversation started. I think the character Shin knew, or something sort of new or fresh is going to be in them. So I have a similar impulse. I don't think Shin is the word, but I think fresh, something optimistic, right? So hey, say it's all about peace, right? And so I suspect that this new generation is going to reflect a little bit of youth, a little bit of optimism. And I don't know exactly what, Shin would not be my choice, I know, I know because I haven't actually given it a lot of thought about which specific character, but I do think it's going to be a fairly optimistic rendering. And I think younger, we could see something that has something illusion, younger Japanese and their future. Great, well, I would encourage future panelists up here today to take a guess as well, just for fun, what's the harm? So with that, let me ask you to join me and thank you, Sheila, for a terrific presentation. Thank you so much. Thank you so much. You're welcome, thank you, you're welcome. And we're going to, I think, roll straight into the next panel. So please, if you have to go, please do, but there's not a coffee break right now. We're going to go straight into the next round. Thanks. Okay, thank you, everyone. We're going to switch some name plates up here and seat our panelists, and then we'll get right into it. The interpretive dance. I'm all up with it. I'm at the end. We're going to get two new ones. Okay, welcome back. Thank you for tolerating our seamless transition there. But I was really grateful to Sheila for stepping in and really providing a wonderful opening for our event today. She really touched on the wide landscape of issues that Japan faces in 2019 and kind of gave us a good tease on a number of issues. And for Yuki, you just arrived, I think you missed the, we're going to have a competition to see if we can guess at least one of the characters in the new imperial name, the new era name. So you can think about that in preparation. So this is a nice switch for me because normally I've been, and also I've been encouraged to speak into the microphone so that people in the back can hear us. The last couple of years, I've handled the foreign policy or international panel. So it's nice to be able to switch back to domestic today. This is a transition year for the Imperial House. This is also Prime Minister Abe's seventh year as Prime Minister. And by the end of it, he could end up being Japan's longest serving Prime Minister ever. It is also the year of the Boar, which every 12 years in Japan is a unique situation where local elections coincide with an upper house election. So we have local elections taking place earlier this year and then the upper house election in the summer. The last time this happened in 2007, it was a huge defeat for the LDP. They lost the upper house majority and we entered the twisted diet. On the other hand, six years ago, the year that the seats that are going to be up for grabs this particular time was a great election victory for the LDP, where they won 65 seats and ended the twisted diet. So it's interesting, this is often a dynamic year in Japanese politics and we don't have to wait too long to see the opening salvo in this next Sunday or this coming Sunday is the governor's election in Yamanashi prefecture and that will be one of the early bellwethers on that front. A number of other issues, obviously this year domestically we had at the end of last year the passing of temporary worker, new immigration rules in Japan, the implementation of that will be going forward. Pension reform is on the table, potentially raising the retirement age up to 70. Consumption tax hike is on schedule but we'll see how that goes. Many issues to consider both on a political and economic front. So we have a terrific panel today to begin diving into these issues. I will introduce all the way from the far left, Mikio Sugeno, who joins us here, he was born in Sendai and went to Waseda University, joined Nikkei Publication Group in 1987 and so he's had a long career there covering to a wide extent economic policy in Japan. He's also been a correspondent in Berlin two times and in London for seven years I believe so we may get his take on the Brexit impact on Japan's domestic economy. He's also been a commentator as well as editorial writer in Tokyo and since April 2018 he's been the bureau chief here in Washington so very pleased to have Sugeno-san with us. In the middle here is Hiroki Takeuchi who is an associate professor of political science and director of the Sun and Star program on Japan and East Asia in the Tower Center at Southern Methodist University so he comes to us all the way from Texas. We're very pleased to have him with us. He's a specialist on comparative politics, China and Japan in particular and he previously taught at UCLA and at Stanford University. And then to my left, my good friend and frequent guest here at Carnegie Yuki Tatsumi. She's the co-director of the East Asia program and director of the Japan program at the Stimson Center. She's before joining Stimson, she worked as a special assistant for political affairs at the Embassy of Japan and Washington but more importantly she's a member of the board of trustees of the Japan America Society of Washington DC as well. So we're going to start off with short presentations by each of our speakers then we'll have a little conversation up here diving into some of these issues in more detail and then open it up to the panel, to the audience for questions. And we're going to ask Takuhi Sensei to start us off today. Okay, thank you Jim. Can you, oh you can, yeah. So good morning, I'm Hiroki Takuhi. Thank you for inviting me here. It's always exciting to come to Washington DC. I'm usually in Dallas, Texas and I'm very glad to see Takuhi-san who has been, who was the leader of the business community of Dallas Fortress for a long time and now it's a very tough job of the government affairs of NAC here in Washington DC. So today I'm asked by Jim about talking about Japanese domestic politics and also he said, well, you know, so mainly talking about Japanese domestic politics but you can talk about economy, you can talk about foreign policy and also, you know, feel free to, and also, you know, please put us on future because this is Japan in 2019, but at the same time talking about the past experience. So sounds like everything. So, and then by the way, it's within the longest 10 minutes so I'll do my best. But that actually makes sense because, you know, those things are all related to each other. So I'd like to start with interesting observation as a political scientist. That is Japanese politics, especially the Abe administration is opposite to what political science textbook says. So political science textbook says that if you do a good job or if you do a good job or if you are popular in democratic politics, then like you can stay in office for a longer time. Abe's case is somehow opposite. That is because he has been in office for a long time, he has become more popular. That's actually, to me, interesting but at the same time, if you remember what happened in 2012 and what people wanted in 2012 when second time Abe administration started, that makes sense. That is, at that time, what we thought, meaning what Japanese thought, and then also a foreigner thought, was whoever is fine, but we want Japanese prime minister to stay in office longer. Before that, like six prime ministers, including his first time after Toizumi, stepped down within a year. So the six prime ministers in a row, the different, six years in a row, so January 1st and December 31st of the year has different prime ministers. And then, since December 2012, when Abe came into office, basically Abe has stayed in office and then that's actually what Abe was expected to do or wanted to do by many people. So that's actually what is going on. And then, so then a little bit more like a future perspective. So what will happen for the next few years? That's actually Abe is expected to stay in office. First of all, Abe administration is very stable. For some reasons. And one reason is a lot of opposition party. And so this year, Japan has the upper house election, and but we don't see opposition parties, the strong opposition parties in Japan. So that's actually one of the reasons why Abe administration has been stable for a long time. But actually today, I'd like to add more like kind of positive reason why Abe has stayed in office for a long time. So I actually simplify the Japanese domestic politics. And so two major issues that is one is security policy, the other is the trade policy. And security policies, there are like historically two major views that are between more military roles versus less military roles. And then trade policy is somehow divided between free trade and protectionism. And so this is actually my take of the two by two matrix. And then we often say the right versus left, but right and left exists in both ends of the dimension of the security policy. And so Abe's case is originally when Abe came back to office in 2012, many people are concerned with whether he is really just like a ideological nationalist. And well, I was a little bit optimistic, but he actually didn't push that agenda so much. And then more like he was like a more like a side of what I say proactive diplomacy. So he was rather committed to internationalism and taking the position of a pro free trade. So which means he was more moderate than people had been concerned with. And that's actually one of the reasons why his administration has been stable. I think that the first term he tried to push more his own agenda or like a more like a nationalist agenda. And then like he didn't work and then it led to short term in office. So one reason why Abe has been very stable is in the middle. So he stayed in the moderate. And there are like some like arguments that is Japan like to turn into right. Well, a little bit. But that's actually not going to the nationalism side but more like the left within the left hand side of this two by two matrix. So it's more like a more military roles but still within the extent of internationalism, pro free trade stance. So that's actually, that makes the Abe administration stable. One thing that I'd like to comment about the current Japanese domestic politics is yes, like opposition parties are effective strong opposition parties are lacking. And so the last election, if you remember, there was a attempt to organize the party called Party of Hope. And we expected that to be at least to be the largest opposition party but they failed to do that. And then currently the largest opposition party is so-called constitutional Democrats. And the constitutional Democrats are more left. So as a result, other Abe administration still takes the very comfortable, very takes the very like a large, comfortable range of right hand side including the kind of moderate right. So in that sense, this coming upper house election, still Abe administration expects to get the positive outcome. So in that sense, the last election, last like the lower house election, we say Abe one or the LDP one and that's actually true. But the one thing that is regrettable, I would say, is the Party of Hope which should take the real like a moderate range of the political spectrum didn't work. So as a result, Abe does not now, Abe administration does not receive the enough pressure for reformism. So what Abe has been doing as a result of the stable power basis so what has been achieved? He has mainly achieved the holding policy area. So one thing that the Abe administration has should do for next few years until 2021. So especially in 2019, so as Jim always says, we should focus on what will happen in 2019. So in 2019, the biggest task that the Abe administration has to do is trying to elevate the reputation of the commitment to the domestic reform. So he has been doing a good job for holding policy side. So Abe administration passed the security legislation as well as actually new defense guidelines in 2015. That actually really made the security relationship, especially with the United States very stable. And secondly, well, as you know, Abe administration participated in the TPP and then ratified in the diet. And then after US withdrew from the TPP, basically Japan took the initiative of concluding what is now CPPP. And then this is actually remarkable because this is actually probably the first international trade agreement that Japan took the initiative that US opposed. So that's actually the, so I think it's a remarkable achievement. What Abe administration has been doing but not so much successful. And then, well, some progress, but not so much successful is domestic reform. Now you may remember Abenomics and then what was the third, three arrows of Abenomics, right? So in 2012, he said Abenomics and then like three arrows and especially, we said third arrow is very important. And the third arrow is structural reforms or economic reform or growth strategy. Abe has done something. So one like they had, they did the JAA reform, Japan Agricultural Corp reform and the more broadly agricultural reform and the labor reform. But well, to make a long story short, it's not sufficient. So foreign policy, very good achievement, domestic reform, kind of a half for half empty. And the one thing that Abe has not been doing, Abe administration has not been doing is actually constitutional amendment. And this is interesting. And then, but actually overall, I think this was a good thing or had a positive impact on the popularity of the Abe administration. So briefly saying people wanted economic growth and structural reform, but constitutional amendment does not help for economic growth. So in that sense, constitutional amendment if like Abe administration wants to use it, I wants to do a constitutional amendment and then like I use the political capital for a constitutional amendment, that would be a big challenge for Abe administration. Not only this year, but also for next three years until his term ends. So I will stop here and then I'll pass this to Sugeno-san. Thank you. That's terrific. Thank you very much. I'm glad you covered and kind of weaved together the politics and the economics because that's definitely something I want to follow up and follow up on in the Q&A. So Sugeno-san, I'm going to turn to you and ask your thoughts on these issues. Hello. Thank you for having me, Jim-san, and welcome, Hyok-san, from Texas. I was in Texas to run a marathon on Sunday. I was really cold at 30 degrees. Nowadays here in Washington we have 70 degrees, you know. Okay, I think I'm only journalist from media with many distinguished speakers today in this program. So my, I suppose my role would be to add some flavor to the discussion. Therefore, I try to be as bold and frank as possible. And I ask you, please do not take this as fake news. Sorry. So I brought my presentation, so as you see, to clarify my thoughts. I mean, anyway, I can say the year 2019 in Japan would be a very tricky year. So I'm trying to characterize with the three adjectives. One is dependent, dependent on external uncertainty. Secondly, an eventful, and thirdly, bumpy. What's happening? So let's go to the first of all, it must be highly dependent on uncertainty and externally. Japanese economy is very dependent on the overall global economy's development. On top of that, we have, of course, the so-called trade war between US and China, which seems to be, or maybe, getting worse. We have just known that the Chinese economy grew at the slowest pace since 1990. It's according to the very recent statistics. It was in line with, in my opinion, the comment by the CEO of the NIDIC, or Nihon Densan, which is an excellently competitive manufacturer of high-tech motors or electrical parts. So its CEO is a famous manager, who is Mr. Nagamori, had to revise its earning plan to downwards because of the plunge of demands since November last year. And he described it as unprecedented since his assignment as the CEO almost a half century ago. It sounds really worrisome to me, as we may imagine that the trade war might take negative effect on the economy. He may be a so-called canary bud in the coal mine. So while Japan's dependency on the export itself is not too high, but our companies, Japanese companies, especially big businesses, are very much vulnerable to the tensions by imposing tariffs, export bans, and controllable flow of free investment and human resources. In parallel, I would argue that there is a general trend of the global slowdown of the economy, are the IEM estimates in its very recent World Economic Outlook appeared yesterday. Global growth in 2019 would be 3.5%. Lower by 0.2 percentage point than its previous assumption three months ago, and it is a consecutive downwards revision from the last time, I mean probably over last year. So, and Japan cannot be immune from this global trend. We are going to have more confusing issues like Brexit, government shutdown here in the US. So, probably, so, we have a lot of eventful, so we can see that's eventful. We have a lot of political events. First of all, of course, in the upper house election, possibly in the end of July, I do not know what kind of outcome we will see. And, but in general, it would be the tough campaign from my point of view for the ruling coalition because they had the landslide victory six years ago. So, so that they have a challenge to get votes and seats, J.K. Barron to the last, last, or so six years ago's election. And then we'll have G20 meeting in Osaka in the end of June and it is a host, Japan is the first time to host G20 meeting. So, and then we will have also some events like, well, so we will have the most important issue probably is, right, okay, sorry, and I have to reorder them. We will have, of course, the tax hike, consumption tax hike in October. But we will have also the kind of such positive events, so Rugby World Cup 2019, and this is not the case of the 2019, but it's a preparation for the 2020 phase of war. And export 2025 is a little bit exaggerated, but we will have such a kind of positive trend. And I would like to argue about the, so emperor's successions in May 1st could take a positive effect in our emotional things and our mindset. Thirdly, so bumpy, I would like to say, so it must be very bumpy. First of all, I have already said that consumption tax hike in October, so it's a really, you can say bumpy development. If you look at the GDP quarter of the quarter, quarter on the quarter, so in Japan, you will realize that we will see the boom and bust in this year. So, so this one. But okay, this is, you can see the presentation, so where it is one of the, one at Sink Tank, an economic Sink Tank in Japan, JCEA Japan Center for Economic Research, and which is, which creates a monthly survey of the forecast stars about the economic outlook, which aggregate the forecasting by 37 prominent economists. You can see in the presentation that we will have a relatively high growth in the first quarter to third quarter, but we will have the 9 in October in this year. So we'll have the negative growth, probably by 3% annually. So, of course the government, Abe administration tried to minimize this negative effect or offset this boom and bust by introducing some measures like vouchers, providing vouchers or low income households or tax break for the houses and the automobiles. So, but it's not sufficient. It might be a very bumpy year. And I'd like to add on probably more volatility on the financial markets. It is no longer the case like we have enjoyed in the 2019, which was called in the Goldilocks. It's a kind of very comfortable moment for the investors. But we will see the lower growth on the one hand and the very volatile market because we cannot rely on the stocks for the investment. So we will see that some kind of up and down and the major central banks in the world must tackle on the with the lower inflation or lower growth while they need or they see kind of exit strategy from the ultra so monetary easing. So it is very, can I say, very changeful, very, very unstable market I would say. So I'm looking for the speech of the Prime Minister Abe in doubles in coming days and what will happen I will see. Thank you so much. Thank you very much, Saganosan. I'm so glad you really dwelled on the economic piece because I think that's particularly important this coming year and I want to follow up with some questions on that too. But before we get to the questions, let's gather yet another view, perhaps with a little bit of a defense policy angle and whatever else you want to focus on, Yuki. Good morning, everyone. Thank you again for Carnegie and Japan America Society to give me the opportunity to come up here and speak. I'm looking at Nakayama-san down the room and who he's supposed to talk about foreign policy. So I'm gonna tread carefully here not to go into what he will be speaking shortly this afternoon. But, and then thank you also, Takeuchi-sensei and Saganosan for a very informative presentation. Actually, if I can have that Takeuchi-sensei's go to go for square matrix, because I think that is kind of important as we look forward, especially toward the post-Abe administration. Just take a second. Yeah, so while they get that going, I'm gonna keep my remarks short obviously, but I would agree with Takeuchi-sensei's assessment that Mr. Abe is very stable and that was one of the mandate that public gave him when he returned to the power in December 2012. But I slightly disagree with Takeuchi-sensei in the sense that Prime Minister Abe's stability does not necessarily come from his popularity, his own popularity, I should clarify. But instead, his popularity or stability comes because he stands on everyone else's weaknesses. And Takeuchi-sensei did a fantastic job laying out how opposition parties are in disarray. They could not even get their act together during the lower house election last time when they actually did have a chance. And looking down on the upper house election, current I guess biggest, quoting for biggest opposition party, constitutional democratic party of Japan looks a little bit too much like Cold War era social democratic party. It does not excite voters' imagination. So overall, things are looking favorable relatively for Mr. Abe and his coalition partner, Kometo. But that is because everyone else is so weak. And Takeuchi-sensei went through a long list of Mr. Abe's foreign policy achievements. But it is interesting that within the seven years in his office, if he were truly popular for his own merits, he would have been able to deliver some of the harder one on the domestic side, mainly economics. And I will shy away from the economics as I'm not an economist and I think that Sugino-san will probably have much better insight into this. But the truth of the matter is, he's kind of spent the last six to seven years in the office by doing what's relatively easy as a Japanese leader, which is remain very visible, especially in the international stage, have a very, basically as a top, being a very top diplomat to raise the Japan's profile in international community. I think he did excellent job, probably much better than Prime Minister Koizumi, who was another long-serving prime minister before Mr. Abe got the helm back in 2006. But that is not to minimize the achievement that his administration did on concluding TPP-11, because that is really a very tough negotiation to basically bring everyone else to the goal when most of those countries, let's face it, Murie probably have more to say about this, but they did sign up because US signed up, they went, Japan went along the way, and then, okay, those two giants are doing it, so I guess we should do it too. And when US left and withdrew from TPP, there was a great uncertainty that that TPP-11 is gonna even hold. So it is really his administration's major external policy achievement to bring that to a conclusion and then went into force. But other than that, I actually was really worried when Sugeno-san started showing the GDP growth outlook because Takeuchi-sensei also mentioned the Mr. Abe's achievement on the national defense security policy realm, and one of the more recent achievement was the Japanese government revised its next five-year defense policy guidance and acquisition plan, called National Defense Program Guideline and a Mitchell Defense Program. Those were very ambitious agenda that those two documents laid out, which actually takes a lot of budget. And if your pro-defense LDP diet member, the economic outlook that Sugeno-san just shared with you this morning should worry them very, very much because that's a very expensive acquisition list which requires that Japanese economy remain strong and robust and be on a steady growth pattern, which was really not the case at all with what Mr. Sugeno-san just showed us. So even from national security's perspective, I'm a little bit worried about this whole thing. But, and then also, I guess, highlighting two more issues that I'm sure will come up with Q&A, aging. Japan is rapidly aging. It's now getting into a hyper-aging society realm. And what that means is the ratio of pension payment that occupies within Japan's national budget will continue to grow, not the other way around. And at the same time, because of all the public spending initiatives that Mr. Abe has been doing before getting into the third arrow of the structural reform and the revitalization of the Japanese economy at the fundamental level, national debt is also rising too. So those two factors are already really weighing heavy on Japanese government. They need to somehow try to balance the budget on a current balance sheet but have increasingly difficult time to do so. And the only reason why Mr. Abe has not been held accountable is Takuya sensei talked about weakness in opposition party. I would say weakness both within and out of ruling party. If this were liberal democratic party 10 years ago, Mr. Abe is not a no longer prime minister. But during the Mr. Koizumi era, he was so successful in institutionally centralizing the power, authority and financial resources, meaning financial resources for elections into party leadership that once you have a strong party leader, it is extremely hard for the within liberal democratic party to have intra-party competition amongst ideas, amongst policies and power source. And that is what's vividly unfolding while Mr. Abe is in the office for the last seven years. So looking down the road, 2019 I think Jim probably framed it as an Arab execution. There are a lot of questions even on the foreign policy realm where Mr. Abe has been really, really successful. We have Japan-Russia relations where Mr. Abe is really eager to try to bring the conclusion, the peace treaty negotiations but signs from Russia really indicates the otherwise. North Korea situation, we just have to see what the Mr. Trump and Mr. Kim will come out and say at the end of their second summit if there is really, there is no cancellation and uncancellation in all the drama. Japan's relations with its closest neighbor, South Korea has been very, very rocky to say the least since December. And I think it's seen the downfall that I've never seen in my recent memory of following the bilateral relations with no site to break through into a positive. Japan-China finally starts to mend its ties to a constructive route but still a lot of uncertainties. Even with the Japan's relationship with the United States. So far Mr. Abe has been one of the few world readers that has not been torn into pieces by Mr. Trump's Twitter. And actually that alone is quite an achievement the way that he's been torn into other world leaders. But even he could not shield Japan from Mr. Trump's some of the tough trade measures vis-a-vis Japan. And now that bilateral trade talk will come into full gear that relationship could get a little tense here a little bit. And especially as Mr. Trump's domestic political situation gets worse he will have something to show to the voters, to his supporters as his major victory or big deal. So Japan could certainly expect a lot of pressure on the trade front to deliver on that. So that's also uncertain. And with uncertainties and a domestic policies Takeuchi-Sensei already had run through the list but then this is an election year and Jim mentioned that the year of the bore I was actually born in the year of the bore and I'm not quite sure what to think about it when one of the political correspondents told me you know on the year of bore all kinds of major political change happened and he started giving me the list of things and I wasn't sure whether I feel lucky or unlucky to be born in that particular year because it just only happens every 12 years. But then domestic policies that Mr. Abe will have to deliver on are all really difficult and if he couldn't deliver on any of those that he ever has not been when he was actually genuinely popular for his own merit because he's to have this public mandate to be a strong leader and stable leader which was earlier into his administration I would say between 2012 into like 2014 if he couldn't even tackle those when he was genuinely popular I'm not quite sure how much of a political capital he has left in his bank to execute any of these. So there are a lot of uncertainties but then I will throw you another monkey wrench is what happens if something happens to Mr. Abe and he steps down. You are looking at LDP with no heir apparent which is very very negatively unique situation for given the history of the LDP and we all know the self-dispractiveness of the opposition party that never fails to disappoint us. They could disappoints again in upper house election this summer you watch. So I would say there are a lot of uncertainties not everything is, of course not everything is negative like we talked about Sugino-san and both Takao-sensei also talked about the imperial succession that usually gives a moral boost in the country and then also rugby cup, they're die hard rugby fans so that period will be all positive but beyond that when you actually look at political landscape and economic outlook that Japan goes into in the 2019 and perhaps I would say beyond because one thing that really alerted me about Sugino-sensei economic forecast chart is even during the Olympic year which is supposed to give the country Olympic boom that indicators are really flat. So I'm not quite sure how to interpret that data and what it means for Japanese economy and the strength of Japanese economy as a baseline of the country's national strength. So I'll wrap up. Thank you for your attention. Terrific, no thank you Yuki. You steered us in a more ominous direction for 2019 but with some good reason and I actually I want to pick up on that and probe a little further with our panelists because 2018 was pretty good year economically for Japan. I mean they had one negative quarter I think but overall this is Japan is in its second longest economic expansion in its history about 60 months or so relatively moderate but still pretty consistent. But there are if you look at some of the forecasts coming out of the different security houses and even from the Japanese government's economic forecasts they're expecting some economic slowdown coming up. Sugeno-san mentioned you got the China slowdown potential Brexit impact. I'm also and we know that the economic peace has been so critical to Abe's political strength. That's the one thing in addition to his foreign policy work. And we also know that the TPP-11 the new TPP implementation requires some politically unpopular steps with regard to opening up agriculture market, et cetera. So I guess I want to press a little farther on how negative do you think this kind of economic turn could become in 2019 and what are the options that the government has to help manage this? Thank you. Difficult question. Well, Abe-san is a very lucky guy I would say. So Jim-san said that we have the second longest economic expansion in Japan. I would say that if we have the expansion also in January this year we will have the longest expansion post-war. I mean, even though this is a very flat, it's a low, but Abe-san is very lucky because the economic expansion began exactly with his assignment by the prime minister on December 2012, I would say. So he's a very lucky guy, he knows no recession during his second term by prime minister. I mean that, of course, there will be a bumpy road and there's a very tricky road in 2019 and it's a very challenging for him. So I hope I may be wrong, but we will have a very slower, slower growth and a very challenging year and in Japan we will have some problem with the trade talk Japan-US trade talk. Of course, the United States is now focusing on, mainly focusing on the trade talks with China, but at the end of the day we will have the bilateral talk Japan and US and Shira-san mentioned that the both sides talking in different worlds, I would say. So we'll have a challenge because from the US side the challenge is on the farmer side, I would say in agriculture. So they are taking tariffs on export to Japan and while the TPP is now in effective and so we'll have the lower tariffs from the meats from Australia or something like that while we have the higher tariffs. And I support that in the US side would be sticking to the decent lowering the tariffs because for farmers it is critically important to have an achievement earlier this year. While in Japan we have the problem also for the farmers. So while we have agreed on TPP including the US to reduce the tax tariffs on agricultural goods like meats or something, but the US has withdrawn from that and we have to begin the talk from the scratch with the US and it seems to be probably by the farmer side it means kind of loss of their advantage and it affects politically not so good. So I mean, so as if Japan made some concessions on that. So this is a very tough talk and from the Japanese side there's no kind of merits or interest by having such kind of talk with the US. This is one of the key thing, I will stop them, thank you. No thank you and I wanna pick up on that because our afternoon panel will talk about US-Japan relations and I'm sure that the trade negotiations will be a part of that. But purely from a domestic political perspective I'm curious to ask the panel this question. So we expect the Trump administration will come in very early because of this agriculture lobby demand that the disadvantage they're at in the context of new TPP and the suffering with some of the trade war with China. They want some early gains, they're gonna want some compromises from Abe on agriculture access. At the same time Abe and as part of the midterm defense plan that Yuki talked about has committed to buy over 105 new F-35 fighter aircraft, very expensive, about $130 million a piece. And so this is a huge increase, buying ages ashore, et cetera. Part of this is because of the security demands that Japan faces but part of it, so it's been talked about is also a way to help alleviate pressure from Trump to buy American. How much domestic political pressure is there on Abe to say no or to refuse the Trump administration and it's in kind of early demands for concessions or does it have to get something back from Washington in the context of that negotiation to make it politically palatable or does Abe have some room to still make some compromises do you think for anyone? Okay, I would pass the military expenditure question to Tatsumi-san but I would answer the question in the way of the trade negotiation, the pressure through the trade negotiation. And to me, so again, domestic politics is always somehow divided. So there is no like a uniformed public view but those who support free trade and reforms in Japan, whom I call moderates, their view is they would like to use the opportunity of the pressure from the United States as more reform in agricultural industry. And agricultural industry, of course, as you know, needs reform. It's like a median age of the farmers right now is 67 years old and only 4% of the farmers are under 40 years old and that's actually the data of a few years ago. So which means it's even worse. So that's it, so agricultural reform, maybe like the best scenario of the US-Japan trade negotiation right now is would be using the taking advantage of the pressure and then advancing more the agricultural reform. And more in general, current FDA, so later I think Kawaisensei would talk about this, but typically TPP, but other free trade agreements too, are talking about domestic regulations a lot. So it's actually a lot of the FDA makes a rule of domestic regulations and then that's actually also is a good kind of pressure or like Japanese called Gaiatsu for the regulatory reforms. So that's actually what Japanese moderates or reformists try to take from the pressure from the US pressure. I guess I'm very quickly, I think the key for Mr. Abe's calculation would be when those demands come in from Washington because we're looking at the local elections in April. So if he appears weak or making concessions against the pressure before those elections, LDP and the ruling party actually may have to pay at the poll that price. And I keep thinking like really, I think Japanese opposition party really needs to hire President Obama as a consultant. I'm not saying this lightly because I think there are a lot of disenfranchised voters who are not terribly excited about the current leadership, but then can't find anyone else. So basically they ends up what the former President Obama called shlaking, which is they don't vote. And if there is some way to energize those voters to make them think that what their ballot counts, we may be looking at totally different political game here, but even minus that, I think an image of Japanese Prime Minister caving to US pressure on trade negotiation looks too much like 1980s. Doesn't look very much, doesn't look good at all for Mr. Abe. So it really depends on, because we know that this election in April is coming and it's all at the local level and local assemblies and those small districts gets hit worse by those public voters' mood swings. So I would just say that. Well, and then you have the summer upper house election as well, so there's really no good time. And then in theory, a consumption tax hike in the fall. So politically you can see this is gonna be tough to navigate to find a window of momentum. So that brings me to constitutional revision and the upper house elections. The LDP and Kometo have a super majority currently as I understand it in the upper house. Will they hold on to that super majority after the upper house election? Yes or no? What do you think? My forecast will be no. They still will have a large majority, but not enough to have two thirds. My prediction is no and normatively it shouldn't. I agree with that. I have to make the discussion much more interesting, but I cannot say yes. I would say... You said no in a different way. Well, no, no, but no, I would say. Actually, unless we will have such kind of kamikaze in the tailwind, like in a sports world or something which makes people so enthusiastic, yeah. But it comes later, I mean, so rugby work of Tokyo 2020 comes later. So we have no chance to have a kind of, so great, great victory for the other administration. Thank you. Right, right. Okay, well, I tend to agree too that they'll still do well. They still will hang on to a majority in part because of the weakness of the opposition. But so then that suggests to me, constitutional revision, a formal move, a formal submission forward would be difficult, but what do you think about that? Are we gonna see any, in 2019, will we see any formal step in the initiation of the process toward constitutional revision? Well, so that's actually related to my answer to the first question. So that is, I don't think so because the Abe administration cannot win big enough in the upper house election. At the same time, I don't think it's a good idea, not because the constitutional amendment per se is not a good idea. I think it's in general a good idea if administration doesn't have to spend too much political capital, but I don't think it's possible to advance the constitutional revision without using significant amount of political capital. So in that sense, Abe administration should use more political capital for reform and also kind of leading international order now as the United States seems to be stepping down. I think it really depends on what Mr. Abe wants his legacy to be and what he wants to be remembered with. So if he wants to be remembered like more of an international leader who basically let Japan through this really timeless time and actually try to feel the void of U.S. leadership to maintain the post-war liberal order, then it is not politically wise to do this for all the reasons that Takochi sensei had outlined, but at the same time, depending on those two elections that we're seeing this year, he could be really quickly turning into a lame duck to come fall this year. Then another extreme argument was then he has nothing to lose. He's not going to be another prime minister for another five years, so he might as well do what he always wanted to do, which is constitutional revision, even if there are not enough numbers. At least keep that debate alive. And I personally think he's not the type of Japanese leader who delivers constitutional revision to Japan. Too much political baggage of conservatism, nationalism comes with the people leader like him. If this were to happen in Japan, it will be delivered by someone much more moderate, almost dovish in the Takochi sensei's metrics, more like closer to pacifist image of the prime minister, because that makes it more politically palatable to Japanese public and to the media to a large extent also, so. Please remark. So to do this for the Prime Minister Abe is really like Yuki-san already said that this is a really, really tough, tough, tough project like constitutional change or so establishing peace treaty with Russia and good relationship making. So with China on the one hand, on the other hand to the United States is tremendously difficult task. And I don't think that he cannot give or invest his political capital to this. Thank you. Can I, I don't know where Alex went. I was hoping we could maybe swap the file back to Takochi's presentation. Somebody can help me with that. Okay, here's another difficult issue. I'm just throwing all kinds of terrible issues on the table. The matter of fact, just today or essentially it's been revealed the Ministry of Defense is looking to kind of change some of the parameters of the landfill program for the relocation project of the Fatema Marine Air Corps Station in Okinawa. To do that, they're gonna have to get some approval from the Okinawan prefectural government for these kinds of landfill permit changes. In 2019, oh thanks. Does anyone on our panel expect any kind of development on the Okinawan issue? Is are we gonna reach such an impasse that it would force either just a decision to stay at Fatema and reinvest in the base in Fatema or some new consideration of another option? It's hard to imagine another option being considered, frankly, especially by this Trump administration, but also because of having gone through the process of examining all kinds of options before and not finding any politically and operationally viable. But on the other hand, it's hard to imagine the Governor Tamaki and the Okinawan prefectural government approving new changes to the landfill permit that would allow continued progress on that project. So any thoughts on this one? We can use another whole day to talk about all kinds of dimensions of Okinawan problem, but so the fundamental issue is this project, since its original conception back in 1996, so we're entering the 23rd year of trying to move this air station from the original agreement, and then even from the updated agreement, which was 2004, we're entering into 15 years of impasse. We just have, I think one thing that might be interesting to see is current Okinawan Governor, Governor Tamaki, is try to present a united front vis-a-vis central government as Okinawa as a prefecture is unified against this current plan and he's tried to do the voter referendum to it, but already he's having a fissure that at least three localities saying we're not participating in that because our different localities are impacted in a different way in different plans and we're not gonna go along with your political plot, essentially. So yes, the referendum is still technically happening on February 14th in Okinawa, but then how much would that be able to be called or regarded as Okinawa as a unified position as Okinawa is highly doubtful? So I don't think it comes to the point of the revision of the current plan. It does definitely reach an impasse though, but then depending on if there are any further localities within Okinawa that drops off from this referendum, then it is going to also put Governor Tamaki in a very tough political position because then he just looks like he's using this base issue to basically make himself politically good and vis-a-vis central government and that probably will also not be looked too favorably by his own voters either. And then I think what really could move the needle is actually the decision coming out of Marine Corps. Marine Corps could say this is taking way too long. It's not happening right now. It's not, this is not to suggest that I'm hearing anything, anything remotely close to it at this point, but they could say this is taking way too long. We cannot plan our operations based on the plan that has been kind of tabled for like two decades. So we're gonna go, we're gonna, we are going to go back to the drawing board, but that's almost like an opening another Pandora's box. So... When you say we are gonna go back to the drawing board, you mean just, we're just gonna stay at Ftema and not consider change or actually consider some other kind of change? I'm thinking if they're gonna pack up and leave back to Guam. Wow, intriguing. You heard it here first. Any other thoughts on the Okinawa issue? I would add one like a very pessimistic perspective. I'm very pessimistic about this issue because basically since Hatayama administration, I would say irresponsibly opened Pandora's box, LDP actually has never won any like popular votes in any election for national level, so in Okinawa. So only like, you know, the House representatives coming from Okinawa are only from Portia representatives. So, so, and then like, you know, this time the last election of the Okinawa governor, Tamaki is, Mr. Tamaki is elected and then I hope to have the Tima-san might be strong enough. And, but he was actually quite moderate, but even he couldn't win. So I don't think there is any like a better solution right now and then it's kind of like in terms of idea, this is a real stalemate. And then Okinawan politics is like a really like quite unified against the idea of the moving of Tima to Henoko. I'm not a not at all a specialist on Okinawa and the political thing, but I would say, I just say two things, I mean, who would be the most pleased by the such kind of confusion in Okinawa, namely China, probably, yeah. And secondly, if we have the kind of quarrel in domestically in the earlier part of this year, so it affects on the political side of the part of this year. So it affects on the, can I say, smooth handover of the emperor. So this kind of discussion makes the circumstances very worse, I would say. Okay, I'd like to steer towards a more optimistic or positive discussion here as I close my Q&A portion. And I do want to touch on the imperial transition because this is, I think, the first time in our history of Japan this year that we've had an all Japanese panel, albeit to them living totally in the United States. Actually, everybody living in the United States. But to ask this question about what do you think, how important is the imperial transition? And what kind of potential impact? I mean, there's a potential economic impact or perhaps some kind of short term cultural impact. But I don't know, I think about, I was in Japan as well when the show Emperor passed away and the whole transition happened. I happened to be living there at the time. And so I feel this connection to the Heisei era as being the whole formative years of my focus on Japan. And it's been... Emperor Akito has really been quite a positive model, I think, for that institution. And we're going to have kind of a new era and I wonder what you think this could mean for Japan, if anything. Well, as I mentioned that we will have some positive effects, but how big those positive effects is, I guess, of course, and a question. Of course, it's a kind of... We can reset the mindset that with... So, deflationary way of thinking in Japan, we had no price hike of the commuter trains in Tokyo since, I would say, for 20 years, I think. So the kind of thing is that we can see that the Heisei era was lost decades, lost two decades, lost three decades, so to say. And so it was really the highest point of the stock exchange in Tokyo. So we can reset such a kind of downward, somewhat very negative impression that we can have a new era. And so I hope that it will work. But the economic impact, I cannot say... I can say one of the economists might say that we will have the baby boom in Japan because we have the kind of children or babies who will be born in the first year of the new era. But I cannot say. So it highly depends on what's going on the overall global economic development. So the mindset is very important, I would say. And of course, politics will play a role, big role, but as we have discussed, Abe-san, Prime Minister Abe, seems to be avoiding such kind of painful reform or renewal of the Japanese system. This is the problem. One thing that I was impressed in the process of the new emperor coming in, such a big issue, but it seems to me that it's quite smooth. And then this is actually a positive side of how Abe administration is handling various issues. That is, he's actually quite good at delegating the issues to the experts, and then experts, he organizes the experts committee, and then let them make a decision. And this is actually one successful case, one of the successful cases of delegating this issue to committee, led by Professor Mikuri of the University of Tokyo. And then they made a certain conclusion, and then the government follows. And I hope that this will be, you will see this trend for other issues, especially for reform issues. And so I agree with Tatsumi-san about, so my evaluation, positive evaluation of Abe administration is really about administration, not Prime Minister Abe himself, necessarily. So in that sense, this trend, I hope that this trend will continue, and then really an economy depends on whether Japan can be, how much Japan can be committed to reform policies. Very quickly. I think it'll be around the fall, when there's a big ceremony happens, and then around May, we'll see two pockets of a very optimistic boost, morale, among the public. But next emperor is going to be very different from Ember Heisei. So I'm not quite sure how that will play out. And also, without sounding horribly disrespected or horribly disrespectful, current imperial family is the symbol of Japan's hyperaging, if you look down the road. And that image would also trigger another round of discussion about the succession of the emperor. Does it really have to be always a boy? Does it really match the time at this day and age in things like that? That's what I would say. Although, I mean, the nice thing is, you do have, I think the abdication opportunity and the chance to allow an emperor to retire, rather than maybe carry on for five or six more years or however long, gives a chance for some vitality to kind of come in. And we have the, I guess the enthronement ceremony will be in April, but then the, I forget the name of the event, but the big kind of parade and the more will be in October. So that'll be something to look forward to. Make your travel arrangements early. So now I'd like to open it up to the audience for questions for our panel. We'll have microphones come to you. Let us know who you are. And if you have a specific person you'd like to ask and mention them, we'll start up here. This woman here. Thank you. This was really illuminating. My name is Mindy Reiser. I'm the vice president of an NGO called Global Peace Services. And I'm also on the board of governors of the Labor and Employment Relations Association chapter here in DC. And that's where my question is coming from. At one point, Japan was kind of seen as the technological leader of the world. And we've talked about the aging of the population and there's a lot of discussion now on the future of work all over the world. So I'd like to hear from you what is going on in intellectual circles and government circles in Japan looking at innovations in technology and artificial intelligence to capitalize on a rather minimally sized workforce going into the future. Maybe they'll be a baby boom, but it will take a while for the babies to grow up. So please share your thoughts about the future of work Japanese style. Great question. It's hard to answer, but I mean, so it's a great question. Of course, we are facing the shortage of the labor. As obvious, we will have kind of a very pure labor force and we have to develop this kind of high-tech things. And the demand makes some kind of innovation. I hope that. Abe's administration will try to figure out such kind of reforms. But I have to say, although I haven't covered this direction of reforms in Japan, but Abe-san wants to avoid any kind of painful reform. This is kind of a question. So for example, he introduced a new rule of the overseas labor force to Japan, but he tried to add the flavor that the labor force cannot be in big cities but in local cities because of the... So it's a political reason. Probably in the local cities are left behind. So such a kind of thing makes the reforms much more inefficient, I would say. And high-tech is, of course, a critical role, but in this sense... I think the problem may cause... because of the tension between the U.S. and China, in this sense, I would say. So because the U.S. is trying to block the Chinese influence on the U.S. and vice versa problem, so we cannot cooperate in a global cooperation. So we have to face such a kind of situation which creates less innovative inventions and tensions and development. Thank you. When we discussed where economic vitality comes from, our conclusion, mainly with economists, our conclusion is it's actually the increase of nominal GDP. And so in that case, what increases nominal GDP? One is population. So Japan has that problem. And number two, the productivity of each person. And then third is, in order to increase nominal GDP, it doesn't have to come from Japanese citizens. So this is actually what I'm trying to bring here. What I'm trying to bring here is the recent, like a very interesting policy of the expansion of the holding workers. And then this is actually the first, I would say, the migration policy, which the administration will never say but still that's the case. And then if you listen to the debate, this is actually of course a huge political debate in the United States and it will be a huge political debate in Japan too, but in the United States when we talk about immigration policy, the proponent of immigration usually says that its diversity increases the productivity. And the innovation for people get together from the different backgrounds. And then that's actually good for innovation. And then there is no guarantee that it's not the case for Japan too. So in terms of, you mentioned about innovation, I think perhaps immigration policy, more open immigration policy may enhance innovation and productivity of Japan. Very quickly, because your question was what kind of discussion that are happening within Japan about innovation, AI. I would imagine there are lots of active discussion within the government about how Japan should or be able to capitalize on innovations and AI amongst the people who probably sit as the farthest away from those norm itself. And innovation cannot be either forced or directed by the government. Government can set up the environment that facilitates those things. And then when I look at what any, you know, it's not just even Mr. Abe, but since Japanese economy starts going to recession and we're entering the gloss decade to two decades and not three decades, nothing has been done in terms of really changing the banking regulations for example to make the lending practice easier for those startups or how do, you know, is there a grant that are easily accessible or like a seat money grants by local business bureaus. I really have not seen any of those things happening like a nationwide, maybe some pilot cases here and there where government thought that might be the special district, but then that kind of is contained in that era. So I would look at rather than what kind of discussion is happening among the government, whether those, the actions that are required to facilitate those practice is taking place or government is trying to push those institutional regulatory changes into place. Thanks. This will actually be a big year for the Japan Society 5.0 initiative which touches on a lot of these issues. And so we'll see whether the implementation matches some of the policy rhetoric and goals. I have a question here. All right, Steve Winters, independent consultant. I guess I'd direct this to either Sugano-san or Takeuchi-san. I want to probe a little bit more deeply into some of the support for Prime Minister Abe. I hope this isn't too controversial but as you know there's been a so-called Japanese conservative union formed and if you're familiar with that at all and Steve Bannon has been connected with that group. I spoke to the group in Tokyo. They're very strong supporters of the Abe administration and his policies and Bannon has actually recently said publicly that he felt that there may be a sort of a populist type movement coming up in Japan just as you see in several European countries. So I don't want to go into all the details about that. Most people here have never even heard of this stuff but what do you make of this connection, Bannon and Abe? And actually Bannon met with, if I get this right here, Kawai Katsuyuki-san, a member of the lower house and the advisor to the president of the LDP party on foreign policy. So this is actually something going on here. Well, and a lot of people have talked about the fact that Japan seems immune from this populist wave that's gone around different countries around the world. I wonder if that's, will that continue in 2019 or might there be some change? I think that one of the elements which may play a role would be on employment. We have in Japanese labor market it's a really good, partly because of the labor shortage and partly because of good economy so far. But if we have some problem with employment and then I don't know which direction it will move, I mean, so forth, so extreme right or extreme left, I don't know, but there may be some potential risk in Japan as well. Because the structure of the society has been changed. I'm from the newspaper. So in Japan, there are lots of leaders. I'm thankful to that. So people are so swaying from reading the newspaper as happening here in the U.S. and over all. So we can have a program probably expanding the SNS or something like that and we will have the kind of problem. But so far, we haven't seen that. But in the future, I cannot exclude on that. I think what you raised is a group like in this 2x2 matrix is a group of the nationalists and Abe was, Abe did support from that group and as you said, they support many of the policies that Abe is doing but at the same time, they don't like many of the policies that Abe is trying to make and then mostly that is a reformist policy and free trade policy. So it's very important for Abe to be in the upper left-hand side rather than the upper right-hand side. And then so that's actually, as long as Abe is in that position then the sort of nationalists will not rise in Japan. One concern that you may have is as Tatsumi-san said, after the upper house election this year, Abe says, okay, so I'm kind of lame that as a result. So therefore, I will do what I really wanted to do, that's actually constitutional revision. If Abe makes that move, then we may have to be concerned. But so far, Abe's calculation is as long as he's at the upper left-hand side of this matrix then he would maintain his support. So, well, you can, I'm optimistic but you can be pessimistic. My prediction is, Bannon will not be an influential figure in Japanese politics in 2019. I think he's out of his element a little bit there. I have a hand in the back. Is the microphone on? I can't quite hear it. Stanley Kober, following up on the economy, the demographic issue was raised. However, there's also the issue of the low interest rates, which are affecting the stability of Japanese financial institutions. I've seen regional banks, but there's another problem. The United States is raising interest rates. We are normalizing the interest rates. What does that do with Japan? Already something like 25% of the budget is debt repayment. If Japan continues with this level of deficit financing and the interest rates go up, how do you meet your budget payments? Good question. That's a great question. We, and I personally, as a commentator of Nike, I warned about this kind of too late reform on the budget side. I postponed twice the consumption tax hike. For the latter one was because of the possible economic shock, which was equivalent to the Lehman. That's the case, I'd say. That's true. We have very few measures to take. I can only say that we have to address as soon as possible this debt problem, otherwise we cannot have, I would say, the future. Because we have, as I said, we have probably lower growth by aging problem and booming the social security costs and so on. The time matters, I would say. We have no remedies to tackle this problem. The time matters, I would say. The lower interest rate is true in the Bank of Japan. It cannot take some measures to the exit of the ultra-easing monetary policy for the time being and we cannot have a kind of exit strategy within this positive cycle. It means that you cannot see an eternally problem with the exit strategy. This is the main concern for me. Thank you. Any other thoughts? We have time for one more question and I wouldn't like to ask it. But if not, we can also get a head start on our lunch preparations. Okay. So I think we've outlined some pretty big challenges for Japan this year. But of course, some of the big impacts are, it's not all just within Japan's control domestically, whether it's Brexit, whether it's relations with China or what happens with North Korea and of course, the relationship with the Trump administration, etc. So we're going to dive into all of those dynamics in our afternoon panel. But more importantly, we're going to invite Kawai sensei to come speak to us starting at one o'clock sharp. And so I'd like to ask everyone to be back here at least five minutes beforehand. And Kawai sensei is going to kind of expand the scope here and bridge the gap between domestic and international with his expertise in trade and the region. So we have some sandwiches outside that you're welcome to and to bring them back here and eat. But we will start at one o'clock sharp. And in the meantime, please join me in thanking our wonderful panelists. It was terrific. Thank you. Great.