Thank you very much, Mr. Wilson, for your kind introduction.
It gives me a great pleasure to speak to this distinguished gathering at the Pacific Council on International Policy. Today I am going to talk about Asia now. But it would be a daunting task for me to illustrate within 20 minutes what's happening in Asia. I guess many U.S. correspondents and analysts are able to do a better job. Therefore, I would like to give you a broad picture of what I see most important developments underway in Asia in the context of Japan-U.S. relations.

1. Asia as a Success Model of Globalization
Let me begin my remarks by discussing the influence of globalization on Asian landscape. Asia has offered a success model in the global economy. Asia, including Japan, China, and India, increased its share of world GDP by over 10 percent during the past three decades, while the others, except for Europe, have reduced its proportion. Globalization has benefited Asia and its economic prosperity promoted democracy with a rise of the middle-class in the society. The mechanism deserves to be termed "Asian miracle."
As we all know, Asian characteristic of its economic success lies in the model of export-driven growth, in other words, Asian economies have engaged themselves with the rest of the world by exporting goods and services. A unique characteristic of the Asian success is to keep their windows open to the world on the basis of international division of labor and world trading system.
In fact, even amidst the Asian Currency Crisis of 1997, many Asian countries took advantages of foreign capital inflows to achieve economic recovery. In Japan, the Koizumi administration focused on privatization, deregulation policy, and introduction of foreign direct investment to strengthen banks' capital in the early 2000s. Japan successfully moved out of a severe deflationary condition after the long period of the so-called lost decade of procrastination.

2. Changes in Global Economy
Having said this, however, some sort of backlash over globalization is at the moment gaining strength in many parts of the world. Last year Australians voted for the leader of the Labor Party after a decade-long Conservative party government. Koreans also recently elected a new President in the hope for new economic growth focusing on the recovery of small and medium size enterprises. The Chinese central government also took policy of alleviating social disparity. In Japan, too, its political setting changed dramatically around the time of the unexpected resignation of Prime Minister Abe, and the Parliament is now divided between the LDP-Komeito controlled Lower house and the opposition controlled Upper House.
Faced with this reality, the Fukuda administration has begun to slow the pace of domestic reform. Although it might in theory be possible to compete for reform with the opposition party, an acceleration of reform for global competition seems to have become unpopular, thus a politically incorrect policy option in Japan. Today political leaders are paying more attention to income disparity and industrial protection against foreign capital.
These changes in the political climate are of course influenced by the dark side of globalization, in particular, in the financial market. The financial turmoil triggered by the sub-prime mortgage fiasco discontinued the goldilocks economy that had prevailed the U.S. economy since the mid-1990s. It is by no means a coincidence that the income disparity is now high on the agenda also for U.S. Presidential election campaign.
We must bear in mind that if we allowed these backlashes to grow, the basis of global economic prosperity could easily be lost. When we look back in history, after the Black Thursday in 1929, protectionism rose in many countries, and global economic prosperity came to an end, which eventually led to World War II.
Today, it seems to me that such a backlash is less serious in Asian region than in the rest of the world, since Asia knows that it has benefited most from global trades and investments. But there is a possibility that Asian leaders might strengthen its regionalism in a closed manner, if the U.S. or E.U. takes on a protectionist approach. I am afraid this lead to a worst scenario for the U.S., which has an implication for its national security, because Asian regionalism would hardly be compatible with U.S. strategy of forward defense. It would also hurt the basis of the U.S. long-term economic prosperity that consists of multilateral trades and financial transactions. The Asian miracle would never be possible without a globally open trading system backed by the power of the U.S.

3. Competitive Changes in Asia
During this decade, with the rise of power of China and India, and a lesser presence of Japan, the Asian region has reached some sort of a threshold toward a new stage. I would like to quote a few words of two fairly young Asian leaders.
First, the former Foreign Minister of Thailand, Dr. Surin Pitsuwan, pointed out a positive effect of the Asian Currency Crisis. He said, after the crisis, Asian countries started to face each other, fully recognizing the meaning of a phrase "Asia is one," although they had tended to turn to the U.S. or Europe before 1997. Likewise, it was not until around that time that Japan considered itself as part of Asia.
Second, one of my Malaysian friends who served as Governor of Malaysian Postal Saving insisted that Japan should start the look-west policy to study from the East Asian experience, instead of Dr. Mahathir's famous look-east policy. This implies the importance of foreign direct investment in the context of revitalizing economy.
Economic integration in Asian countries has deepened as demonstrated by the fact that the increase in intra-Asian trade during the past ten years has outperformed that of world trade by a wide margin. Against this background, an interesting development is unfolding in Asia. Competition in Asia is intensifying. For example, Tokyo Stock Exchange competes with Singapore Exchange and Hong Kong Stock Exchange. Narita International Airport competes with Incheon International Airport, Korea. A new game has begun.
Thanks to these renewed competitions, Asia seems to be young with potentials as a region, despite its thousands of years' history. The relationship among Asian countries is widening in a way challenging, emulating, and cooperating among themselves.

4. What the U.S. Should Not Do
With such fundamental changes in Asia, let me offer my thoughts about what the U.S. should avoid. I would like to point out three no's.
The first no is protectionism. As I mentioned a few minutes ago, short-sighted protectionist approach to trade of goods and services would seriously hurt long-term prosperity in Asia, as well as in the U.S.
The second no is a weak dollar. In Asia, the dollar dominates payment flows in intra-regional trade, to say nothing of investment flows. In the Chinese foreign exchange market, the U.S. dollar captures more than 95% of the transactions. Also, most of Japanese multinationals use dollar payments for their supply chain management in Asia. In other words, the U.S. dollar is a linchpin of trade and financial activities in Asia. If the dollar value weakens, it would destabilize these activities in the short run. Even worse in the longer run, the dollar might lose its vehicle currency role, entailing tremendous losses in seigniorage, financial services profits, and intelligence capabilities associated with the dollar payment system.
Third, lack of interest. If the U.S. took hands-off policy towards Asia, the Asian region could easily become chaotic, since the remnants of the Cold War still exist especially in Northeast Asia. Against the background of its diverse and fluid nature in Asia, the military presence of the U.S. is an indispensable element for regional stability which ensures economic prosperity in Asia.

5. What the U.S. should do
The U.S. should promote positive changes in Asia by maintaining reliability of its deterrence power, which I would describe as follows.
First, strengthening regional security in Asia. With respect to the six-party talks, the North Korean nuclear issue cannot be solved without the leadership of the U.S. In order to maintain stability in Taiwan straits, the U.S. must deal with both Beijing and Taipei attentively. I am extremely interested in hearing Presidential debates over Taiwan issues. Growing terrorist threat in some Asian countries is of significant interest to the U.S.
Second, strengthening the rule of law in Asia. We must closely monitor whether China's economic growth benefits world economy. In other words, observation of rules of laws, international standards, and shared international responsibility by China could offer a basis of global prosperity. This also applies to transparency of Chinese military spending. Moreover, as for climate change issues, we have to have both China and India fully committed, together, of course, with the U.S., three major emitters of GHG that are outside of Kyoto Protocol framework.
Third, strengthening alliance. The U.S.-Japan alliance is a corner stone for stability in Asia since it provides basic power structure in the region. The alliance could broaden its role for the benefit of the global security as well as that of northeast Asia. Also, the alliance should be extended to the standard setting in economic areas, which will promote prosperity in Asia further.

6. Conclusion...Japan as a gateway to Asia
In conclusion, I would like to draw your attention to the fact that Japan is located in the U.S. gateway to Asia from a geopolitical viewpoint. Both the U.S. and Japan must be determined to keep the Western Pacific the sea of prosperity, safety and, freedom.
While the dramatic growth of China and India is attracting the world's attention, Japan remains the second largest economy in the world. Japan's reform must be focused on promoting Japan's strength in the global economy with the power base in Asia, so that Japan would not lose its competitive edge. We must keep Japan's economy growing, since it would be beneficial to Asia and the rest of the world. I, as a politician, must make sure that Japan will never go backward.
Japan is not only large in its economic size but closer to the U.S. than other Asian countries are in terms of political system, legal system, law enforcement system. Food safety and hygienic regulations are also similar. In this way, Japan could contribute to Asia in an effort to introduce higher standards with the exercise of Japan's soft power. Indeed, Japan's cutting-edge technology, sophisticated social practice, and new dynamism of cool-Japan culture continue to attract people, goods and capital from the world.
Last but not least, Tokyo houses the largest number of gourmet restaurants in the world listed by the Michelin Guide. In other words, Tokyo is located not only in the gateway to Asia, but it is the final destination for gourmets the world over. For those of you who do business widely in Asia, Tokyo is definitely the best home for its attractiveness in term of safety, hygiene, and food. Thanking you for your attention during the past twenty minutes, I hope to see you next time in Tokyo.
Thank you.