DIRECTORATE-GENERAL FOR EXTERNAL POLICIES OF THE UNION DIRECTORATE B - POLICY DEPARTMENT -

BACKGROUND NOTE

ON THE POLITICAL AND ECONOMIC SITUATION OF

JAPAN

AND EU- RELATIONS

Abstract:

The present note provides an overview of the political and economic situation of Japan at the beginning of Prime Minister Shinzo Abe's term of office. It also examines his probable policy choices on economic, fiscal and constitutional issues as well as in foreign policy.

Any opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the official position of the European Parliament.

DGExPo/B/PolDep/Note/2006_ 176 05/10/2006

EN This note was requested by the European Parliament's Delegation for relations with Japan.

This paper is published in the following languages: English

Author: Stefan Schulz

Copies can be obtained through: [email protected]]

Brussels, European Parliament, 5 October 2006.

2 1. POLITICAL SITUATION

1.1. Basic data Population: 127,8 million

Ethnic groups: Japanese 99%, others 1% (Korean 511,262, Chinese 244,241, Brazilian 182,232, Filipino 89,851, other 237,914) (year 2000)

Religions: Shinto and Buddhist 84%, other 16% (including Christian 0.7%)

1.2. Political structure Japan is a constitutional monarchy with a parliamentary government.

Executive The head of government is the Prime Minister, who is designated by the Diet (parliament) and appoints the cabinet (government). Traditionally, the leader of the majority party or coalition becomes Prime Minister; a change in party leadership thereby signalling a new PM and cabinet.

Legislature The Diet consists of two chambers, the House of Representatives and the House of Councillors. The House of Councillors consists of 242 members and the House of Representatives of 480 members. Councillors are elected for six-year terms, with half of the House coming up for election every three years. Representatives are elected every four years, 300 to single-seat constituencies, with the remaining 180 being elected by proportional representation in 11 regional blocs. Both houses are directly elected by universal suffrage. The House of Representatives is constitutionally superior to the House of Councillors, having the power to overrule the "Upper House" in the selection of the Prime Minister, in passing the national budget and in approving international treaties.

1.3. Political Background

Except for an 11-month interlude in 1993/94, post-war Japan has been governed continuously by the Liberal Democratic Party (LDP) or coalitions dominated by it. One consequence of this situation is that the rivalry of factions within the party largely replaces the usual competition between majority and opposition. Although no longer able to govern alone, the LDP continues to dominate the political landscape. It currently governs in a formal coalition with New Komeito (which is itself closely allied to a large lay-Buddhist organisation, Soka Gakkai). Although the coalition enjoys dominance in both houses of the Diet, the parties differ on many key policies, such as defence and fiscal reform. The LDP is also internally divided on policy, particularly on radical economic reform introduced by former PM Koizumi, much of which directly threatens the vested interests of the party’s old guard.

The largest opposition party, the DPJ, has too few parliamentary seats to be able to challenge the LDP on its own. The party’s unity is also uncertain - it was formed from the original DPJ and the fragments of its predecessor as largest opposition party, Shinshinto (New Frontier Party), and embraces a correspondingly wide range of ideologies, both left- and right-wing. It currently 3 has ten or so internal groupings, agitating for issues as wide-ranging as preserving the “peace” constitution and promoting policies for urban voters. The party’s weakness has forced it to look for allies in other opposition parties in order to bolster its parliamentary support. The recruiting into government of the third-largest party, New Komeito, by the LDP has, however, depleted the opposition ranks.

Composition of the Diet (number of women members in parentheses) Party House of Representatives House of Councillors as of 8 June 2006 as of 4 October 2006 LDP 292 (26) 111 (12) New Komeito 31 (4) 24 (5) Government Total 323 135 DPJ and 113 (10) 83 (11) 'Club of Independents' Japanese Communist Party 9 (2) 9 (3) Social Democratic Party 7 (2) 6 (1) People's New Party, 6 (-) 4 (1) New Party of Nippon and Group of Independents Independents 20 (1) 5 (2) Vacant seats 2 - Total 480 242

By-elections for the two vacant seats are to be held on 22 October 2006. The last general election for the lower house was in September 2005; the next election must be held by November 2009. The last election for the upper house was in July 2004; the next election for the will be held in mid-2007.

1.4. Recent developments

Having secured his nomination within the LDP, PM Koizumi's Chief Cabinet Secretary, Shinzo Abe, was duly confirmed as the new Prime Minister by the Diet on 26 September 2006. At 52 Mr. Abe is the youngest prime minister since the Second World War. He is also one of the most inexperienced, which has led some in his party to question whether he has the political skills necessary to carry on where his popular predecessor left off.

The ease of Mr. Abe's victory in spite of this apparent handicap was due largely to his public popularity. This factor used to be of little importance in the traditional back-room negotiations to select prime ministers. After Koizumi however, vote-gathering power now ranks alongside, or even above, factional affiliation, seniority and experience in key portfolios. The reason for this shift in perspective among the LDP's powerbrokers may lie in the hectic electoral schedule: After two by-elections in October and local polls in April next year, an Upper House election will have to be held by July, and a general election could be held as soon as late 2008.

Some of the appointments announced by the new Prime Minister would appear to indicate a return to traditional party politics after Mr. Koizumi's somewhat iconoclastic style. Certainly the faction system, which Koizumi had hoped to overcome, is well represented among the new cabinet, and senior party appointments also seem to reflect a desire on Mr. Abe's part to 4 reinforce his support within the party by rewarding those factions that backed him for the party presidency.

Other key appointments however, together with Mr. Abe's inaugural speech to the Diet on 29 September, show him as a leader with a bold vision for "a beautiful country - Japan", equally unafraid to follow through on his predecessor's economic reforms, taking on special interests, and to shift direction towards more pragmatic approaches in other areas, notably foreign policy. The main instrument for implementing his policies will be the Prime Minister's Office, for which he intends to abandon the traditional seconding of bureaucrats from other departments in favour of a personal selection of his advisers and staff, including from the private sector.

1.5. Economic Reform

PM Abe is committed to completing the privatisation of the postal services launched by his predecessor, and plans to follow this up with further privatisation of public services. At the same time he intends to open up the country to foreign direct investment, aiming at doubling the amount of FDI in relation to GDP by 2010. In combination with the planned strengthening of local autonomy, this could provide a much-needed boost for Japan's regions, many of which where left behind by resuming growth in the economic hubs. Capitalising on recent and projected GDP growth, Mr. Abe hopes to encourage innovation and modernise Japan's employment structures with a view towards long-term sustainability.

While 73-year old Koji Omi as Finance Minister is not known as a reformer, his task will lie more in addressing the fiscal dilemma the government faces. Economic reforms will probably be driven by other institutions and individuals: Yasuhisa Shiozaki, a radical reformer and close ally of Mr. Abe, will serve as Chief Cabinet Secretary, while Hiroko Ota, a protégée of outgoing reformist Economy Minister Takenaka, will head the policy-making Council on Economic and Fiscal Policy.

1.6. Constitutional and societal issues

Mr Abe has long advocated rewriting the constitution explicitly to permit Japan to play a more prominent role abroad as well as explicitly to allow participation with other countries in "collective security" operations. His popularity is based in part on the promotion of these themes at a time when Japan's own security seems under greater threat than at any time since the end of the second world war. North Korea’s missile launches in 2000 and July this year played into Mr Abe's hands by persuading the Japanese public that Japan needs to enhance its ability to defend itself from potential threats from the North Korean regime. China's growing economic and military might has added to the feeling of insecurity.

Doing away with the "Peace Constitution" will not be easy however, as the post-war generations identify strongly with the nation's new-found, pacifist identity and already opposed Mr. Koizumi's decision to send a contingent of the "Self-Defence Forces" (SDF) to support the US troops in Iraq. At the same time, the constitution's foreign origin, being imposed by the occupying US authorities at the time, rankles with most Japanese. This could provide an opening for Mr. Abe's "dignity" theme.

5 Beyond the single issue of normalising the SDF, Mr Abe's administration could indeed be one of the most right-wing since the Second World War. His new cabinet is stacked with hawks who broadly favour promoting a war-guilt-free national identity - including Sanae Takaichi, the Minister for Gender Equality who also reportedly deplores the right of married women to keep their maiden names. The pending education bill, reinstating a more patriotic curriculum, could prove the first indication of Mr. Abe's vision of Japanese society. Another test will be his attitude towards Yasukuni Shrine, on which he has so far studiously avoided to commit himself.

1.7. Foreign Policy In the foreign policy arena, Mr Abe is expected to follow in the footsteps of his grandfather, Nobusuke Kishi, who as prime minister in the late 1950s and early 1960s did everything he could to make Japan more autonomous in its diplomacy. Again, the nomination of an American- style National Security Adviser shows his intention of creating his own structure for the purpose.

In the face of multiple security threats, the privileged relationship and close alliance with the will remain the constant in Japan's foreign policy. Indeed, Mr. Abe announced the creation of a framework for "constant communication" between his Prime Minister's Office and the White House, and barely a week after her nomination as National Security Adviser, Ms already met her US counterpart.

Meanwhile, PM Abe himself is sending another signal to Japan's Asian neighbours: By seeking summit meetings with President Hu of China and President Roh of South Korea, possibly as early as 9 and 10 October, he attempts to break out of the isolation caused by his predecessor's much-publicised visits to Yasukuni. Moreover, by scheduling these meetings before any inaugural visit to Washington, he shows both his confidence in the "Japan-US Alliance for Asia and the World" and the importance he attaches to Japan's ties with Asia.

Towards North Korea on the other hand, Abe's inaugural message was firm and clear: the issue of Japanese citizens abducted during the 1970s and 1980s must be resolved before any normalisation can take place. In order to raise the profile of the issue, Mr. Abe has established a "Headquarters on the Abduction Issue" chaired by himself and vowed to keep pushing for the return of all surviving abductees.

Finally, Mr. Abe's assertive bid for "leadership" on foreign policy issues translates into the renewed pursuit of a permanent seat at the UN Security Council. This is likely to be backed up by a number of initiatives on regional issues such as North Korea's nuclear programme.

6 2. ECONOMIC SITUATION

2.1. Basic data 2001 2002 2003 2004 2005 GDP at market prices (¥ trn) 496.9 489.7 490.7 496.1 503.3 GDP (US$ bn) 4,088.4 3,905.7 4,232.8 4,585.0 4,566.1 Real GDP growth (%) 0.4 0.1 1.8 2.3 2.6 Consumer price inflation (av; %) -0.7 -0.9 -0.3 0.0 -0.3 Population (m; Oct 1st) 126.9 127.1 127.2 127.3 127.5 Exports of goods fob (US$ bn) 383.6 395.6 449.1 539.0 568.1 Imports of goods fob (US$ bn) 313.4 301.8 342.7 406.9 474.3 Current-account balance (US$ bn) 87.8 112.5 136.2 172.1 163.6 Foreign-exchange reserves excl gold (US$ bn) 395.2 461.2 663.3 833.9 834.3 Exchange rate (av; ¥:US$) 121.5 125.4 115.9 108.2 110.2 Economist Intelligence Unit

2.2. Background

Historically, Japanese companies, like their German peers, have relied on bank financing rather than on equity and bond issuance, and employees at big firms tended to stay throughout their careers. Another striking feature of the economy is that it consists of two distinct tiers: first, the large and powerful multinational companies, many of which have become global household names in the past three decades; and second, the plethora of small, often family-owned enterprises. This two-tier structure has been cited as one of the reasons for the dynamism of some parts of Japanese industry, as smaller companies provide the flexibility and innovation that is often lacking in larger enterprises.

Manufacturing, dominated by the electronics and car industries, has been the mainstay of the economy since the 1960s and today accounts for just over 20% of current-price GDP. After huge success in penetrating international markets, export-oriented sectors have suffered in recent years from the strength of the yen, prompting a wave of outward direct investment to low-cost countries, in particular those in Asia. Japan is the world’s largest maker of machine tools, exporting much of that output to the US and South Korea. It is also one of the world’s most important iron and steel makers, although in production terms, Nippon Steel was overtaken by Arcelor and Mittal even before their merger.

Japan exhibits little openness to foreign trade: As a proportion of current-price GDP, the value of two-way foreign trade in 2005 stood near 23%, contrasting with around 65% for Germany and 64% for China. Japan’s lack of openness to trade largely stems from official and unofficial restrictions on merchandise imports, which remain in place to protect less efficient industries such as textiles, food, and pulp and paper, despite pressure from the US and other important trading partners. This failure to open to foreign trade has often been cited as one of the reasons for the persistence of structural problems in the economy, and especially of the poor productivity of companies operating in the non-tradeables sector.

Despite Japan’s recent economic problems and the poor quality of some of its infrastructure, the material affluence of ordinary Japanese people is generally high, as shown by high rates of

7 ownership of consumer durables and sophisticated electronic goods. At around US$36,000 at market exchange rates, Japanese GDP per capita is also among the highest in the world.

2.3. Current trends

The Japanese economy has largely recovered from the woes of the 1990s. Real GDP grew by 2.6% in 2005, the fastest outturn since the technology boom of 2000, driven mainly by a much improved domestic economy and strong demand for Japanese exports in the rest of Asia and the US. The financial system is in far better shape than in the 1990s, companies have made substantial progress on restructuring their operations, profitability has recovered and a tightening labour market is boosting consumer demand. Despite further monetary and fiscal policy tightening due over the next two years, analysts expect the economy to grow by an estimated 2.8% in 2006, before slipping back to 2.1% in 2007 and 1.5% in 2008.

2.3.1. Employment Although the recent economic difficulties have pushed unemployment up from the low rates enjoyed in the 1980s, the increase has been slow, and officially declared unemployment (under 5%) remains low by the standards of many other developed countries. Traditional reluctance to lay off employees has forced many companies to freeze or cut new recruitment, which has hit young people hardest. This has given rise to the “freeter”phenomenon, young people who work only part-time. The number of “freeters” has rocketed during the 1990s, from less than 2 million “freeters” (aged 15-34) to 4.2 million by 2001, and probably more since. The government is concerned about the socio-economic impact of the phenomenon, and in his programme speech to the Diet, PM Abe announced targeted efforts to reduce the"freeters'" numbers.

The opportunity to achieve this seems to be on hand: As 2006 is the fourth year of above potential growth, the slack from the earlier depression has been absorbed and the economy is now operating at or above its potential. More companies are now reporting labour shortages as fewer youngsters enter the job market while more seniors reach retirement.

2.3.2. Fiscal Policy The reliance on expansionary fiscal policy over the past decade has supported activity but has been unable to launch a durable economic recovery, while boosting the public debt to GDP ratio to extraordinarily high levels. Without drastic changes the situation can only worsen despite resuming growth, as welfare costs for the ageing population outstrip increases in revenue.

Focussing the domestic part of his inaugural speech on the issue, PM Abe called the fiscal situation "extremely severe" and set himself the target of achieving a budget surplus by fiscal year 2011. The first step is to be a cap on the issue of new government bonds. In order to achieve fiscal consolidation without stifling growth through taxation, the new PM intends to conduct a thorough review of expenditure, sell government assets and promote administrative streamlining, including a reduction of the civil service corps by more than 19.000 officials over the next five years

8 2.3.3. Monetary Policy Japanese monetary policy has been loose over the past few years. Since 1997, with a brief interruption from late 2000 to early 2001, the short-term interest rate through which the Bank of Japan (BoJ, the Central Bank) influences commercial activity has been stuck at 0%.

The OECD suggested in January 2005 that the BoJ should focus on ending deflation as it was bad for growth. However, it was improvements in the domestic economy that prompted the BOJ to normalise monetary policy and end its emergency monetary policy stance (so-called quantitative easing), which had been in place for five years, in March. On July 14th the BoJ announced that it was no longer targeting zero interest rates.

The latest data support analysts' expectations that the BoJ may now raise interest rates sooner rather than later - possibly even as early as December or the beginning of next year - as confidence in the current economic recovery is now well-entrenched.

2.3.4. Trade The economic upturn of 2002-2004 was led in large part by booming exports. External demand was concentrated in other Asian economies, which were responsible for a third of the increase in Japanese exports over that period. In recent months exports of a number of products have dropped, while imports have risen due to the surge in global crude oil prices - oil being Japan's single largest import. Yet Japan's trade surplus had been growing steadily, due to strong exports of electronic products and automobiles and auto products to the US, Europe and China.

2004 saw China (including Hong Kong) overtake the US as Japan's largest trading partner, at just over 20% and around 19% respectively of Japan's total trade. China has therefore turned into an important market for Japan, rather than a threat that might flood Japan's domestic market with cheap products, as has been previously feared.

9 3. EU-JAPAN RELATIONS

The EU maintains good relations with Japan, which are developing steadily in many different areas. Common principles for these relations between Japan and the EU and its Member States were laid down in a political declaration of 1991. A "Joint Declaration on Relations between the European Community and its Member States and Japan" was signed on 18 July 1991. At the 9th EU-Japan Summit held in Tokyo on 19 July 2000, a ten-year Action Plan to reinforce the bilateral partnership and move it from consultation to joint action was agreed. This Declaration established common principles and shared objectives in the political, economic, co-operation and cultural areas and established a consultation framework for annual meetings between Japan and the EU. These include the annual Summit meeting between the President of the European Council, the President of the European Commission and Japan’s Prime Minister; biannual Ministerial Troika meetings between the EU Troika at Foreign Ministers level and the Japanese Minister of Foreign Affairs and an annual Commission-Japan Ministerial meeting.

3.1. The Bilateral Action Plan

Relations between the two sides are now directed in accordance with the Action Plan. It addresses four major objectives: (1) promoting peace and security; (2) strengthening the economic and trade partnership utilising the dynamism of globalisation for the benefit of all; (3) coping with global and societal challenges, and (4) bringing together people and cultures.

The Action Plan is intended "to lay the foundation for well diversified EU-Japan relations over the decade ahead". The parties plan to co-ordinate regularly, and to update the Action Plan as necessary at the annual EU-Japan Summit.

At the June 2004 EU-Japan Summit, Tokyo, the main issues emphasised were agreement on Disarmament and Non-Proliferation, the co-operation framework for the promotion of EU-Japan two-way investment, as well as other ongoing objectives such as the joint initiative for the enforcement of intellectual property rights in Asia and co-operation on information and communication technology or co-operation in the WTO to abolish customs duties on medicines. It was also agreed to fully utilise EXPO 2005 (Aichi Prefecture, Japan) and the 2005 Japan-EU Year of People to People Exchanges to deepen mutual understanding as well as to increase two- way flows of tourists. With the establishment of the first EU Institute in Japan, the Summit anticipated the opening of a second EU Institute in 2005.

The strengthening of EU-Japan political relations remains a priority objective. Bilateral political dialogue is now quite developed. Each side co-operates actively in each others' geographical region. For example, Japan is a generous and welcome donor to the reconstruction and rehabilitation of the Balkans. The EU, for its part, is engaged in the Korean Peninsula through the KEDO project and in humanitarian assistance to North Korea.

3.2. Regulatory Dialogue

Another major pillar of bilateral EU-Japan relations is Regulatory Reform Dialogue, aimed at reducing the number of unnecessary and obstructive regulations that hamper trade and foreign 10 investment. Since 1995, the EU and Japan have participated actively in each other's regulatory reform efforts. Recent progress has been made in such areas as journalism within Japan and work permits for EU Member States, while the Mutual Recognition Agreement (2002) has marked an important step in facilitating market access.

The nature of bilateral dialogue has therefore changed: while in the past economic relations with Japan were dominated by trade disputes today the focus is on the EU's request for deregulation and structural reforms in Japan. The EU presents requests to Japan in a manner designed to feed into the annual work cycle of the Consultative Council on Regulatory Reform, while Japan submits requests on its concerns in the EU.

3.3. Trade and Investment The trade relationship between Europe and Japan has historically been characterised by strong trade surplus in favour of Japan. Trade figures have become much more balanced recently, but Japan continues to be a country where, for specific structural features of the Japanese society and economy, doing business or invest is often particularly difficult. The less favourable evolution of the Japanese economy and the slowdown of economic growth have obviously influenced the EU's economic relationship with Japan in the last decade.

Between 2003 and 2004, EU exports grew by 5.2%. At present the trend seems to have become more stable with a growth of 0.7% in 2005.With a share of 4.1% (2005) of the EU exports, Japan is the EU's fifth largest export market after the USA, Switzerland, Russia and China. Japan accounts for 7.36% of EU agricultural exports, 5.46%of textile, 5.39% of chemical products, 4.21% of transport materials.

With a 6.2% (2005) share of the EU import market, Japan is the fourth largest source of imports into the EU after the USA, China and Russia. Imports from Japan are mainly in the sectors of machinery and transport equipment (45.1) and chemical products (15.4%). Taking into account factors such as the exchange rate and the Japanese production in China, Japan still remain overall our second trade partner after the USA.

Europe is equally a very important market for Japan. In 2004, the EU occupied rank number 3 in Japan's imports and rank number 2 in its exports. In 2004, EU imports and exports of services from and to Japan were 10.2 and 18.9 billion euro.

The trend in flows of FDI has been quite dynamic over the past 5 years, with a substantial increase of two-way investment flows in the period 1999-2000 and a moderate decrease in the following years. Japan is a major investor in the EU. In 2003, 4.1% of EU inflows came from Japan. At the end of 2003, 5.03% of the stock of EU inward FDI came from Japan, while 0.6% of the EU outflow went to Japan. Over the past 5 years, the EU has become an important investor in Japan. At the end of 2003, 1.82% of the stock of EU outward FDI was in Japan, with a negative inflow (-0.58%) in 2003. Japan's inward FDI has soared since the mid-1990s. The EU has been the major contributor there, with Vodafone’s investment of US $11 billion the biggest single direct foreign investment in Japanese history.

3.4. Other Areas of Co-Operation

11 The EU and Japan co-operate across a very broad range of subjects. There are standing forums for discussion on sectors such as industrial policy, science and technology, research, telecommunications and related services, social affairs, development aid, environmental protection, dialogue on macroeconomics and financial issues as well as transport issues. Inevitably however, differences arise, as over Japanese ratification of International Criminal Court agreements. ICC and EU officials were in Japan in December 2004, however, the lack of progress on the Japanese side is usually put down to practical difficulties (especially within the sluggish Treaties Bureau) rather than a change of political will - though, the US's stance may obviously be a factor.

Likewise, the death penalty remains a potentially divisive issue. Meetings in Troika format raise the issue biannually with the Japanese. Yet, with popular support for the penalty's continuation, the government, as well as the Japanese at large, view the espousing of European standards as unwelcome cultural interference.

In November 1999 a first meeting of consumer associations of the EU and Japan took place in the framework of an EU – Japan consumer dialogue. The European Commission supports the EU-Japan Business Dialogue Round Table (EUJBDRT), a private sector initiative to strengthen links between European and Japanese businesses, and welcomes focused private sector input to government authorities to promote trade and investment between Europe and Japan. The EU- Japan Business Dialogue Round Table significantly contributes to the identification of mutually beneficial initiatives and keeps close track of the progress achieved by both the European and the Japanese administrations.

Since 1979, the European Commission has been encouraging European enterprises to penetrate the Japanese market. To this end it has put in place various promotional activities to further European exports to Japan and to maximise business opportunities there. These promotional activities are known as the Commission's EXPROM programme, which consists of three pillars: • The 'Gateway to Japan' export promotion campaign, which assists small and medium sized companies to enter the Japanese market through Trade Missions and Fairs in specific areas of industry. • The 'Executive Training Programme' in Japan which is an 18-month Human Resources development programme to enable executives of EU companies to build up an in-depth knowledge of the Japanese business culture and language improving thus their efficiency in the Japanese market, • An 'Ad-hoc' scheme through which the Commission can provide selective one-off financial support to European market access initiatives aimed at the Japanese market.

The EU-Japan Centre for Industrial Co-operation, which was established in Tokyo in 1987 and in Brussels in 1996, organises training courses and topical missions for EU managers in Japan. It also manages the Vulcanus Programme, which offers courses combining language and in- company training for Japanese engineering students in Europe and for European engineering students in Japan.

3.5. The Role of the European Parliament

In most years since 1979, a delegation from the European Parliament has met with a delegation from the Japanese Diet. Since 1996 this has been a regular once-a-year occasion. The European 12 Parliament has thus played an important role in developing EU-Japan relations, not only in building contacts with Diet members but also enhancing the EU's political profile amongst Japanese decision-makers. The last EP/Japan inter-parliamentary meeting (the 26th) took place in Tokyo- on 16-20 May 2005.

At it, among the main issues discussed were: the EU's prospective role in the world (especially in relation to enlargement and a Constitution), the situation in N. Korea (particularly in terms of the abductees and how this restricted Japan's options), aspects of the 'Lisbon agenda' and the EU's concessions to the WTO on agricultural (in light of Japanese preference for protection of self-sufficiency). Iraq and Japan's security relationship with the US highlighted the range of views on offer, while the issue of the site for the International Thermonuclear Experimental Reactor project was again raised, as were examples of cultural exchange, with specific reference to 2005 EU-Japan Year of People-to-People Exchange.

The EP has held several debates over the last few years on relations with Japan, dealing both with problems created by Japanese exports to Europe and with the obstacles meeting European exports to Japan. The following resolutions are of particular relevance: resolution of 18 September 1997, on the Commission communication "The Next Steps"; Resolution of 13 April 1999 on the amended proposal for a regulation on implementation by the Commission of a programme of specific measures and actions to improve access of EU goods and cross-border services to Japan; Resolution of 7 October 1999 on the nuclear accident in Japan; Resolution of 13 June 2002 on the abolition of capital punishment in Japan, South Korea and Taiwan and the Resolution of 3 July 2002 on the EC/Japan agreement: co-operation on anti-competitive activities. The resolution of 13 June 2002 was to put pressure on Japan, South Korea and Taiwan to take measures to abolish capital punishment and to introduce a moratorium for prisoners on death row. MEPs recognised the efforts being made in the Japanese Parliament to achieve this goal, but nevertheless noted that 55 persons were on death row in Japan.

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