Ukraine–Japan: partnership for modernizationa

Japan is the example of a country that has modernized itself still preserving its national identity. Now the Land of the Rising Sun is in a not-so-good economic situation caused by the crisis that erupted in the US. How is this country trying to beat the crisis and why can’t it offer a “Marshall Plan” to bail out the US economy? This is the subject of an exclusive interview with Tadashi IZAWA, Japan’s Ambassador to Ukraine.

JAPANESE RECIPE FOR MANAGING THE CRISIS

Mr. Izawa, I have come across a phrase saying that Japan is permanently in crisis or, in other words, it lives from crisis to crisis. How your country is living through the current global financial crisis?

“Indeed, Japan has been in numerous crises. There were hard times for the Japanese economy. But the crisis Japan is going through now is a very serious one. We are even saying that a crisis like this occurs once in 100 years. Now Japan’s economy, just like Ukraine’s, is in dire straits.

“Japan’s mostly export-oriented economy has been burgeoning in the last while. Japanese automobiles and electronic products sold abroad very well. But the crisis has drastically cut Japanese exports to the US and Europe. Unfortunately, our optimistic outlooks that the crisis will not touch upon the market of BRIC (Brazil, Russia, India, and China) countries have not come true. And now, due to a worsening economic situation, also in the BRIC countries, Japanese exports are dwindling at a very fast pace.

“Besides, such large producers as Toyota are considerably reducing their output. This, in turn, is having a very negative effect on small and medium business. There are even instances of small and medium businesses going bankrupt.

“Like Ukraine, Japan is facing an acute problem of unemployment and, naturally, the Japanese government is now determined to solve this complicated problem. The purchasing power of individuals is going down. Even people in the money are not sure of their future, cutting down on consumption and buying fewer goods. They say in Japan that consumption accounts for 60 percent of the GDP, so its reduction has a strong impact on the state of Japan’s economy. I would also like to emphasize here that this situation is more or less the same all over the world.”

What measures is your government taking to find a way out of this situation?

“The government of Japan is trying to manage this situation by introducing measures that are resorted to in force-majeure circumstances. I could broadly single out four main directions of the measures now being taken by the Japanese government.

“First, combating unemployment, creating and preserving jobs. Second, supporting small-scale and medium businesses. Third, supporting the social sphere: medicine, child care, etc. Fourth, helping the most affected regions.

“At the same time, the Japanese government is attaching great importance to overcoming the crisis not only inside the country but also in other crisis-stricken countries of the world. The government of Japan recently decided to lend an additional $100 billion to the International Monetary Fund.”

“THERE ARE NO PREREQUISITES NOW FOR ANOTHER CURRENCY TO REPLACE THE DOLLAR”

Mr. Izawa, which of the two approaches would your country prefer to take to beat the crisis: the American one, which means stimulating the economy by injecting additional funds, or the European one, which puts more emphasis on regulating the economy?

“Both approaches are important and indispensable, although they differ from each other. Regarding additional financial injections, we in Japan think that no matter how much the discount rate may be reduced, it is still difficult in this situation to create favorable conditions for companies to continue active investments. For this reason governmental financing is very important and the government of Japan will try to go on investing, especially in the promising sectors. I mean environmental technologies and the development of new energy sources. What concerns enhanced regulation, I cannot, unfortunately, give you precise information on the Japanese government’s attitude to this matter.”

What is Japan’s attitude to certain countries’ proposals to introduce a new worldwide currency instead of the dollar?

“I personally believe that it is now absolutely impossible to replace the dollar with some other currency. Of course, the current crisis began in the US. But, this notwithstanding, the dollar is reinforcing itself and very many countries, including China, are still dependent on the US economy. So I think there are still no prerequisites for another currency to replace the dollar.”

“MANY ARE STILL EXPECTING AMERICA TO HELP THEM”

Mr. Izawa, I have come across a Japanese newspaper article titled “Japan’s Marshall Plan for the US.” Can Japan indeed offer the US a plan to ride out the crisis, as the US did after World War II for Western Europe and Japan?

(Laughing) “I do not think this is a realistic idea. The new US President Barack Obama is making very serious attempts to stabilize the American economy. America has its own resources and possibilities to tackle its problems. If, for example, Japan hypothetically decided to offer the US a Marshall Plan, the Japanese would protest asking why there is no such plan for Japan. At the same time, our policy is to overcome difficulties by joint efforts in order to not only protect our own country but also work together with other countries, avoiding the so-called policy of protectionism.

“Yet I would like to express my personal opinion that I would have never thought that such American giants as City Bank, AIG, or General Motors will end up on the rocks. We were very much surprised to learn that General Motors, a time-tested leader in automobile making, was in an extremely difficult situation. We wish this company to beat the crisis as soon as possible and continue to develop.”

UKRAINE AND THE “ARCH OF FREEDOM AND PROSPERITY”

The impression is that Japan is better aware of Ukraine’s strategically important position and the importance of this country for stabilizing entire Europe. How should we interpret the words of your country’s prime minister who stressed, when receiving the Ukrainian premier in Tokyo, the importance of enhancing the dialogue within the framework of the Arch of Freedom and Prosperity?

“The current prime minister of Japan expressed the idea of the Arch of Freedom and Prosperity when he was the minister of foreign affairs. It is about a Japanese policy aimed at supporting the democratically developing states that share such basic values as democracy, human rights, rule of law, etc. Aid is being provided for these states’ stable development and prosperity. This also applies to Ukraine, which has been actively developing as a democracy after gaining independence. Japan further intends to cooperate with and promote the prosperity of Ukraine. In particular, Japan will continue to collaborate with Ukraine in such projects as the Chornobyl cleanup, assistance to hospitals, schools, and other civic institutions, as well as the high-profile project of Boryspil airport reconstruction, for which purpose we issued a loan in yens.

“In addition, Japan annually receives dozens of Ukrainian trainees who undergo training in a broad selection of courses.”

A VERY FRUITFUL DIALOGUE OF THE JAPANESE AND UKRAINIAN PREMIERS

Continuing the subject of dialogues, what is your assessment of the recent visit of Ukraine’s Prime Minister Yulia Tymoshenko to Japan? How fruitful was her dialogue with your country’s officials?

“As Japan’s ambassador, I can say that this visit was very successful. The dialogue produced very fruitful results. The very fact is that the leaders of Ukraine and Japan managed to meet and discuss so many points on the eve of the G20 summit, when all countries are trying to overcome the economic crisis, is very important. And it is very good that Japan’s Prime Minister Taro Aso was able to hear about the economic and financial situation in Ukraine directly from Prime Minister Yulia Tymoshenko before taking part in the G20 financial summit.

“Apart from summit-level talks, Ms. Tymoshenko also had a number of meetings with the Japanese MPs who are interested in Ukraine, the top executives of large Japanese corporations, and some leading Japanese intellectuals. As there is a long distance between Japan and Ukraine, influential people in Japan usually get information about your country from the mass media. It seems to me that this visit is also very important because this time people were able to hear and receive information from Ukraine’s prime minister herself.

“Speaking of the results of the Ukrainian prime minister’s visit, I must also note cooperation under the Green Investments Scheme. It is about cooperation between Ukraine and Japan within the Kyoto Protocol framework, in the field of energy saving, environmental protection, and power generation. Japan recently signed a contract with Ukraine to buy its emissions quota. Ukraine will be able to use the proceeds of this sale to fund environmental protection and effective energy consumption projects.

“Our premiers also discussed in detail how this cooperation will be carried out and further developed. I hope that large Japanese companies will actively cooperate with Ukrainian businesses in the future, particularly in the field of energy saving and ecology.”

“UKRAINE IS TAKING MEASURES TO IMPROVE THE INVESTMENT CLIMATE”

What obstacles are preventing Japanese business and investments from coming to Ukraine?

“The first one is, naturally, a long distance between Japan and Ukraine. As for European Union countries, the Japanese regard them as a single market, the EU market. It is on this presumption that Japanese companies have been actively investing in these countries and building plants. Regarding Japanese business in Ukraine, another obstacle is, unfortunately, a still imperfect investment climate and insufficient transparency for business to be done by Japanese companies. There is also incomplete legislation.

“But we can see that Ukraine is taking measures to improve the investment climate, and we hope that this process will continue because in its bid for European Union membership Ukraine will be bringing its standards and rules into line with EU requirements. We hope that, as the investment climate improves, more and more Japanese businesses will be able to operate here in Ukraine.”

“THE JAPANESE MANAGED TO COMBINE MODERNIZATION AND PROGRESS WITH THE PRESERVATION OF THEIR IDENTITY”

During the visit, the Ukrainian premier spoke at length about modernization. Modernization in the broadest sense of the word has also been a key point of worldwide discussions. But this arouses a suspicion that modernization may affect the identity of a nation. In your opinion, what balance should be kept between modernization and preservation of a nation’s identity, considering that your country seems to have managed to carry out modernization and keep its identity intact?

“I do not know how to assess Japan’s successes in this aspect, but it seems to me that the Japanese have managed to combine high technologies, modernization, and progress with the preservation of their identity and respect for their culture and traditions. I believe the two things are quite comparable.

“What concerns Japan, it is common knowledge that it was totally ruined in the Second World War, but it still managed to rise and show active economic growth. As for Ukraine, it gained independence after the collapse of the Soviet Union just 18 years ago. It is a short period of time. Naturally, during her visit to Japan the prime minister of Ukraine spoke at length about the necessity to modernize Ukraine in certain specific areas. And the Ukrainian premier also said she wished to see Japan as a partner in this process.”

When will be able to see the fruits brought by the agreements that Ukraine and Japan have reached in the last while?

“Naturally, it would be good if the agreements signed by Ukrainian and Japanese companies began to be carried out as soon as possible because if this does not happen, say, within a year, they may just lose their importance. On our part, we are eager to start implementing the agreements as soon as possible.”

Does the political situation in Ukraine have a considerable impact on the implementation of these projects?

“Naturally, political stability can only promote the inflow of investments. As for the political situation in Ukraine, it is, perhaps, not very stable now. What regards the formation of a system in one sector or another, politics is heavily involved here, of course. But when it comes to concrete business projects and performance of enterprises, in the developed countries the state does not interfere in these matters. It is important for Japanese businesses that there should be no interference of this kind.”