A bill giving ministry status to the Defense Agency has been approved. Although the matter is generally seen as being merely procedural - a name change - it is another milestone in Japan's redressing its legacy of defeat handed down from World War II, and it also modifies a postwar system marked by strong antiwar sentiment. For those who support promoting the Defense Agency, the change was exactly what was needed so that the defense establishment can be up to the job it has to do in the changed security environment and the national mood. But the public remains ambivalent and divided on the establishment of the Defense Ministry. There is a lingering wariness about the nightmare of a military juggernaut in the future. The fundamental issue is how confident Japanese are in the ability of their democracy to keep the military under firm control.

Prime Minister Abe appointed former environment minister Yuriko Koike as a Special Advisor to the Prime Minister in charge of national security. Some in the government propose to provide the Special Advisors with the authority to instruct respective ministries, but it would challenge the principle of the parliamentary system. It is desirable to appoint a Deputy Chief Cabinet Secretary to look after the NSC. The Constitution assigns executive authority to conduct foreign policy to the Cabinet. Important policies, therefore, should be advanced by the prime minister, who is held politically accountable for policy decisions, assisted by the Mnistry of Foreign Affairs.

The new Abe administration has made revising the education law its top legislative priority, and a bill to revise the law is pending in the Diet to be passed over strong objections by the opposition parties and liberal circles. The changes to the law are coming as a multitude of problems is badly shaking the education system and schools. But the proposed revisions are unlikely to answer these problems, as Abe's goal is rewriting the Constitution, and the proposed education law revision is merely meant to be a prelude. The Abe government's education policies are also characterized by encouraging competition among students and schools. But there is a concern that it could only add to the inequality already broadening in Japanese society.

Having received the International Leontief Centenary Award of the Leontief Center in St. Petersburg, Professor Shuntaro Shishido praises Professor Wassily Leontief as a scholar on a global scale, contributing not only to contemporary economic theory, but also to the advancement of political thought in the global environment and to peacemaking through his various energetic activities. Prof. Shishido also points out the important role played by the Leontief I-O model in economic planning for high economic growth in post-war Japan. Even today, Leontief-type models are quite useful in offering alternative growth policy scenarios for Japan, according to Prof. Shishido.

Chadwick Smith (Consultant based in Japan) points out that although the American people have grown weary of the Iraq war and sought new leadership in the 11/7 election, it is important to note what effects this may have on the North Korean issue. The results of the midterm election may slow down momentum if the Democrats wish to pursue bilateral negotiations. In addition, a major platform on which many leading Democrats were elected was the issue of trade with China. But anti-China sentiment would only benefit Pyongyang as it would create divisions that would hinder any concerted pressure during the Six Party Talks. According to Mr. Smith, however, there is already evidence of growing domestic turmoil within North Korea. Also reports of an increased business presence in North Korea are further indication of change. Yet the sanctions following the nuclear test will most likely hinder future efforts. It is already evident that the North Korean regime can survive if isolated and will skillfully negotiate for benefits in exchange for any type of nuclear disarmament deal, but the real test will be if the regime can survive in the face of increased business and legitimate trade. The history of communism has already demonstrated that this is a near impossible task.

One of the major pillars to support Prime Minister Abe's policy agenda is "Proactive Diplomacy." And the international economy is also an important area of diplomacy. A pressing issue for Japan now is the advancement of FTA (or EPA - Economic Partnership Agreement) negotiations with Asian countries. ASEAN has concluded FTAs in the form of ASEAN+1 separately with China and S. Korea, which could put Japan in disadvantageous positions in certain cases. Japan should speed up concluding bilateral FTAs with ASEAN countries while wrapping up the ASEAN+Japan agreement.

The philosophical foundation of European conservatism is considered to have been laid out by Irishman Edmund Burke. It calls for achieving progress and innovation in an orderly way without losing what is valuable from the past. From this viewpoint, authentic conservatism has never taken root in Japan, as the development has been so high-pitched and marked by continual spectacular change. Shinzo Abe, some say, is the first serious nationalist and conservative leader in the postwar period. He has expressed his willingness to stress the importance of family, community, nation, history, tradition, culture and the like. He is Japan's first prime minister born after World War II, representing those generations without the trauma of the War, and such generations constitute the majority of the population today. Abe's emergence as a leader could represent a whole new political paradigm.

Chadwick Smith maintains that North Korea's nuclear test indicates that the Six Party Talks were fruitless and did not prevent Pyongyang from acquiring nuclear status, which has a number of serious implications on regional security. The diplomatic failure to constrain North Korea's nuclear ambitions now leaves very few options for a cooperative disarmament agreement. The general consensus remains that something must be done; hopefully, the nuclear test will be the impetus for the adoption of a truly united effort against the continued development of nuclear weapons and their proliferation. In this sense, the UNSC unanimous vote for sanctions, supported by China, is a step forward if it revives diplomatic efforts and avoids military action. However, the real test will be whether all states can cooperate to enforce these measures and eventually spur future dialogue, according to Chadwick Smith.

Keisuke KAMIMURA (Senior Research Fellow, Associate Professor, GLOCOM, International University of Japan) maintains that in the information age the environment surrounding copyrighted works has become more diverse and complicated than that supposed by the current Copyright Act, and "Creative Commons" can offer an answer to various problems associated with the current copyright system by using standardized CC licenses with explicitly expressed conditions for the use of contents. This would enable us to reduce the cost of obtain permission to use them, and could lead to the extension of the scope for freely shared creative works, possibly opening up a new horizon for creative activities in the new information age, according to Mr. Kamimura.

On the eve of the birth of a new government to be led by Abe, Japanese politics seems to be finding itself in a strange air of suspension that is both upbeat and weary, snug and unsettling. Koizumi is stepping down amid high approval ratings, which have averaged around 50% throughout his time in office, a marvelous record in the recent history of Japanese politics. And Abe is a product of the five-and-a-half years of the Koizumi government. Abe's platform aims at a "beautiful country" that "every Japanese can be proud of," vague but fitting slogans amid the prevailing national mood. Abe calls for regaining the pride that the nation lost as a result of the war, and this inevitably suggests an inclination to accommodate nationalistic sentiment on the rise.

Keikichi HONDA (Special Advisor, NCR Japan), as a member of Nippon Keidanren's Committee on the U.S. Affairs, suggests that Japan and the U.S. should conclude a comprehensive economic partnership agreement (EPA) between the two countries, where not only free trade of goods and services, but also human interaction as well as institutional coordination are to be encouraged in every spectrum of society in order to prevent "dilution" in the Japan-U.S. relations. If Japan resolved two major problems, agriculture and human mobility from the international point of view, serious talks about an EPA between the two countries could readily take place. While Japan and other Asian countries may be able to conclude a bilateral FTA or a partial EPA, it would not be possible to move to a comprehensive EPA arrangement, at least in the foreseeable future, given the wide gaps in the stage of economic development and also in the socio-economic systems. Meanwhile, Japan and the U.S. should go ahead and set a standard for a comprehensive EPA, based on the already attained degree of economic and social homogeneity between the two countries, according to Mr. Honda.

Toshihiko KINOSHITA (Professor, Waseda University) talks about how to proceed beyond coexistence between Japan and Asia in his presentation at Nippon Keidanren's Higashifuji Summer Forum. There is no choice but to move forward in Asia, as in the 21st century Japan will be running with China and India, constantly joined by America and Europe in Asia, where severe competition will prevail among Japan and other countries. While Japan has its strengths in manufacturing and technology, especially in resource-saving areas, it is important for Japan to try to appreciate and foster competitive areas of other countries and to grow together with them for mutual prosperity, according to Professor Kinoshita.

The bottom of the simmering domestic polemic over the Yasukuni Shrine issue - triggered by Prime Minister Junichiro Koizumi's visits - is the question of Japan's identity as a nation. What complicates the Yasukuni issue is the convergence of Shinto, the emperor and the wars Japan has fought since the Meiji Restoration. Shinto's position in the national psyche and in life is not something that can be easily brushed aside. But Japanese cannot forever keep reeling from a past that they dumped into the abyss of oblivion. The Yomiuri Shimbun has run a series of articles on wars in the Showa period in an attempt to track down and identify political and military leaders who should be held accountable for atrocities, deaths and damage done on both to Japanese themselves and to people of neighboring countries. Only with this kind of attitude can Japanese confidently restore ties to their traditions, culture and history.

The Internet is now commonplace, and introduction of new media tools such as blogs has caused the volume of information created by man and machines to increase at an exponential rate exceeding the ability of individuals to manage. Such "information explosion" is causing new issues beyond the scope of information management. There are possibilities of new problems to evolve over judgments and behaviors of people in an increasingly vulnerable society established upon traditional information systems. It is critical to cope with these new issues affecting social systems, and studies have only just begun.

Kuniaki SETO (Executive Director, Japanese Business Association of Southern California, Los Angeles, California) argues that many Japanese women living in Southern California are quite capable and very successful in their own business, and there are a number of distinct women presidents at Japanese start-up companies in California, especially in the service sector. Since the business capability and talent of Japanese women have been amply proved overseas, it is about time for Japan itself to make fuller use of them, especially their abilities to develop human networks and serve customers on a long-term basis. Otherwise, Japanese business might not be able to survive in global business under severe competition, according to Mr. Seto.

Japan is admittedly one of the most affluent societies in the world. But a matter of major concern is the declining population. Factors cited include women's growing reluctance to get married and their tendency to postpone marriage to later in life, as well as married couples choosing to have fewer children than before. But the real problem is what lies behind these trends. While cost of education is high in Japan, young people are discontented and negative about future - the view supported by researches through comparison with other countries. It is necessary for the Japanese to change their views on affluence, and value culture as a way of life. Japanese people must reorient their way of life and outlook, adopting a calm and confident attitude in the use of the affluence they have built.

Koichi MERA (Professor, University of Southern California) maintains that while Japanese nationalism appears to become visible only recently, it has gradually been growing among the Japanese public over many years. In order to manage Japanese nationalism, serious studies and discussions should take place regarding Japan's recent history, especially about the Pacific War and its causes and consequences, and Japan's almost complete dependence on the U.S. military forces regarding national security should be critically reviewed for Japan to become a "normal," ordinary nation with healthy nationalism as well as strong will for self-defense, according to Prof. Mera.

Last week's exceptionally cordial welcome by President Bush upon Prime Minister Koizumi's visit underscored the perceived importance of the two nations' alliance. Koizumi has never been apologetic about the supreme importance he attaches to Japan's alliance with Washington. He is an outright fundamentalist, strictly adhering to his own doctrine. With the near demise of the leftist argument, voiced by the defunct Japan Socialist Party, to scrap the military alliance with the U.S., the Japanese people appear to have fully accepted that they do not have any other realistic option. But that does not mean they are free of reservations about a still-deepening alliance with Washington. Japan must make it perfectly clear to the U.S. that sharing the same strategic goals does not necessarily mean unconditionally siding with the U.S. all the time.

Although Free Trade Agreements (FTAs) are being concluded among various groups of countries, the WHO Doha Round is experiencing hard sailing at its critical stage. The principle of universal nondiscrimination is essential in realizing efficient allocation of resources while certain regional issues may be better handled by more focused approach. The WTO and FTA each has its unique advantages, and both should be incorporated to facilitate a better world. The Doha Round negotiation should focus on trade liberalization of goods and must achieve consensus on modalities without delay.

Koichi MERA (Professor, University of Southern California) argues, based on his frequent visits to China, that although China is being criticized by many Americans, Chinese officials seem to know what to do to respond to such criticism, for example, revalue the yuan, however gradually, in response to the US demand. On the other hand, from the US viewpoint, Japan has been doing well in reforming its economic structure under Mr. Koizumi's leadership. However, Japan will have to reevaluate its relationship with the US from different perspectives as the geo-political situation changes in Asia in the future. What Japan needs is a new "model" for a country that is not a superpower in international relations but an influential nation with respectable economic and moral power in the global community.

Pyongyang is skillfully exploiting both the US-Japan collaboration and tensions between Tokyo and Seoul. North Korea's main goal now is to delay resumption of the Six Party Talks until it believes that the political situations in Tokyo and Washington are more favorable to it. It is waiting for Japan to name a new prime minister and Americans to elect a new Congress this fall. Pyongyang is also adroitly playing Beijing and Seoul against Washington and Tokyo while, at the same time, exploiting the continuing tensions between Seoul and Tokyo. Without US-Japan economic pressure and Seoul-Tokyo tensions, North Korea's strategy of delaying resumption of the Six Party Talks could not be effective.

Prime Minister Koizumi has stood out by never budging over his visits to Yasukuni Shrine, even at the cost of deteriorating relations with China and South Korea. But at the heart of the issue is the Japanese view of themselves as a people who have neglected to focus their minds on who were responsible for the war. It is necessary for Japanese to rid themselves of the evasiveness that cites foreign intervention or coercion as an excuse. In the emerging race for succession to Koizumi, the relationship with China and Korea, and with Asia as a whole, is going to be the primary issue. As the American author William Faulkner wrote, "The past is not dead. In fact, it's not even past."

During the 1974-85 period, Japan posted huge trade deficits with the oil-producing countries, which was offset by trade surplus of with Western countries. Meanwhile, the trade deficit of the U.S. and European Community with Japan was financed by sales of weapons to and accepting investments from the Middle East. But while East Asian countries grew significantly since then, developing countries including many oil producers failed to build healthy economies. The lesson from the widely different economic fortunes of East Asia and developing countries in other parts of the world is that higher oil prices sorely test the ability of governments to promote energy-efficient economic growth.

At a time when Japan's economic outlook is brightening, companies should get back to the basics of "monozukuri," which can be translated into "manufacturing" in a broad sense, focused on "genba" (work-site or shop-floor) operations. The essence of broadly defined monozukuri lies not in material, but in design. Design in this case comprises creating design information aimed at customer satisfaction (development), transcribing design information on a medium (production), and transmitting such information to the customer (marketing). In other words, monozukuri covers the entire process of creating the flow of design information bound for the customer. A chain of high performance is needed for monozukuri efforts to generate earnings, and it comprises the following four stages: (1) organizational capability for monozukuri, (2) invisible competitiveness or genba performance, (3) visible competitiveness or market performance, and (4) earnings power. As the economy recovers and companies grow bullish, now is the time for companies to make patient efforts to build their capability.

Recent proposal to introduce English - the language of international business - in elementary schools by a panel of the Central Council for Education sparked outrage among some grownups. But the arguments of the adversaries are often based on a deep-seated suspicion that a foreign language learned at an early age impinges on a child's mental purity. There is also the view that only people who need English or expect to need it in the future should learn the language. The Japanese education system has yet to work out a consensus on exactly who needs English and to what extent. But the largest deterrent seems to be a failure to take a more pragmatic view on the need for English - a view free of nationalistic or cultural hang-ups.

Japan's public borrowing, at 160% of GDP and still increasing, needs to be cured. Discussions to achieve primary balance of the budget is under way so as to halt further increase of the debt. But it is also necessary to take measures to reduce the volume of the debt itself. One way to do this is by selling government-owned assets, but priliminary analysis indicate the effect would be minimal.

Kinji IWAHASHI (President, Daikanyama Suteki Institute, Japan) maintains that community value consists of a complicated set of values in many respects, where the following four areas are especially important, that is, (1) economic value, (2) environmental value, (3) informational value, and (4) cultural value. Mr. Iwahashi studies these values as well as brand power in the case of the Daikanyama area in Tokyo, and proposes the creation of a COE (Center of Excellence) to facilitate commuinity development and regional revitalization for a higher community value.

Corporate governance is when the directors as representatives of shareholders supervise managers to fulfill corporate objective of seeking profits while avoiding illegal or illicit behaviors. In order for corporate governance to function effectively, separation of the functions of governance and management is becoming a global trend. In Japan, governance and management have customarily been integrated as in the case observed commonly that the board of directors would elect among themselves a representative director - effectively a CEO - to manage the company. Sound governance and proper management needs to be established for Japanese companies to fare well in global competition.

Reform of public sector lending is a top policy priority for the government of Prime Minister Koizumi along with the privatization of postal services as they are closely linked to form huge public lending machinery. There are nine such institutions, and a plan has been announced to privatize two, scrap one, and merge five and a part of the remaining institutions into one entity. The new public lender created will rival the lending by a leading commercial bank. But during the past five years, the five institutions received 136.8 billion yen in government subsidies annually to avoid losses. The new institution must be refashioned into a more efficient entity and enhanced public oversight is required.

The recent policy switch by the Bank of Japan to end quantitative monetary easing was prematurely implemented and could wither the expectation of inflation that finally has begun to emerge. In order not to retrace to deflation, the central bank should continue zero interest rates until inflation exceeds 2%. If a deflation-led recession recurs, discussions on re-revision of the Bank of Japan Law could commence by way of arguments on the responsibility over monetary policy.

The issue of declining birthrate may be divided into three aspects: birth and infant care, protection and nurturing of children, and balancing of child-raising and working career. First, cost of delivery, birth and fertility treatment should be borne by health insurance, and privately owned child-care centers should be facilitated to provide various and abundant services. Second, "crammers" should be established whereby retired workers and mothers would accept and take care of pupils after school while the parents are working. Introduction of "child-raising support taxis" should be sought as well. Third, flexible allocation of tasks and roles for mothers in companies is necessary. In addition, mandatory furnishing of child-care services at workplaces, and networking of those services should be effective. Until recently, the decline of birth rate was largely due to the declining number of marriages. But currently, the birth rate of those couples married for 5 to 15 years is showing a significant decline, indicating the difficulty for ordinary married couples to raise children. It is of utmost urgency, therefore, to address the three aspects discussed above.

Takafumi Horie, the former Livedoor president arrested in January on charges of breaking securities laws, was one of the last men to "pay the price" for the excesses of Japan's bubble economy (1987-90). During the bubble, there were shrewd people who clinched land deals with just a few phone calls, making a killing overnight. They forgot that it is "honesty" that made Japan rich in the first place.
The ideological basis of Prime Minister Junichiro Koizumi's administration is market fundamentalism -- the belief that the market is almighty. But although the idea of bureaucratic initiative is dead, the opposite, i.e. private-sector initiative, is also a misconception.
What is necessary is to draw clear-cut lines between what the government should and should not do. There is much the government should do. Leaving everything to the market is not the way to create a "livable" society.

Takafumi Horie, founder and former president of high-flying Internet firm Livedoor Co., was a champion of the times, viewed as representing a new force at work in a society that is undergoing profound change in moving to a deregulated, market-oriented and competitive capitalist economy. But his arrest for alleged fraudulent securities transactions and accounting malpractices has raised a question of whether his now tainted fame was a result of Koizumi's reform agenda, and now the policy is criticized as encouraging the growth of inequality in a society. Koizumi's reform agenda, however, covers a vast scope in which Horie was no more than a mood maker. The Koizumi cabinet's approval rating has posted a significant fall since last December. Koizumi must convince the public that his reform agenda is solid enough not to be shaken by this incident. This also means that the public's resolve for reform is being sorely tested.

Advancement of digital technology has made the traditional method of separating communication and broadcasting obsolete. The rules controlling content also require a new structure to cope with varied needs of society. The new configuration should be formulated on a cross-sectional framework seeking a "Japanese style" legal system that sets a precedent in the world.

Protection of investors' legal rights has been advocated in Japan in recent years to promote expansion of market-oriented financing. But progress toward implementation of a new system has been very slow. "Bureau pluralism" imbedded in Japan's policy decision-making system is affecting discussion on the proposed "investment services law." It may be necessary to "re-reorganize" the current bureaucratic framework of administration to realize the necessary change.

Keikichi HONDA (Senior Fellow, Japan Center for Economic Research) maintains that it is important to understand the whole picture of Japan-Russia relations from the historical and geopolitical viewpoint and to help Russia make use of its vast accumulation of science and technology by transferring it from military to civilian and commercial use for the benefit of the Russian economy as well as the global community. It would be Japan's advantage to cooperate with Russia in this regard, rather than sticking to the Northern Territory issue, according to Mr. Honda.

In Prime Minister Junichiro Koizumi's New Year statement he remarked that he could not understand the forces both at home and abroad that criticize his visits to Yasukuni Shrine. While Koizumi, like his predecessors, admits that Japan's wars of aggression caused great destruction, what is difficult to understand is the reason for Koizumi's adamant refusal to respond to the Chinese and South Korean protests regarding the war criminals at the shrine.
Chinese and South Koreans may also be missing the point when they equate Yasukuni and the war criminals at the shrine with Japan's lack of repentance for the war. Japanese are generally repentant, albeit clumsy and awkward in expressing it. It seems ridiculous that Japan and its two neighbors are at loggerheads on an issue that essentially lacks much substance.
Even though a majority of the nation may be critical of Koizumi's mishandling of the matter, they do not think the deterioration in the bilateral relationship is to be blamed entirely on Japan or Koizumi. A record 63.4% of the respondents to a recent government opinion poll did not feel friendly toward China.
Until China awoke about 30 years ago, Japanese tended to look down on their giant neighbor as an underdeveloped country with an uncertain future, a perception that had run deep in the Japanese mind since the 19th century. Now the two powers are vying for leadership in East Asia - an unprecedented situation in regional history. Whether Koizumi intended it or not, the Yasukuni Shrine issue has become a tinderbox for potentially inflammable nationalism separating the two countries.

President Bush argues that cuts in greenhouse-gas emissions would harm the U.S. economy. He is flat wrong. Serious efforts to develop energy-saving technologies should strengthen, not weaken, the U.S. economy. Climate change because of global warming is an immediate reality, and it is accelerating. In a recent speech, former U.S. President Bill Clinton said it is the Bush administration, not the American people, that is opposed to the Kyoto Protocol. The speech greatly encouraged nations trying to develop a new framework without the United States. Creating a post-Kyoto framework is the biggest challenge. Arrangements such as the "joint implementation" scheme, or the "clean development mechanism" (CDM) should be effective in involving the developing countries. Meanwhile, Americans appear to be unhappy with Bush's perceived indifference to climate change. They ought to criticize him more openly on this score.

The problem of a large number of households not paying subscription fees to NHK has taken the public TV broadcasting service in general into the political arena. There are indeed some types of programs that can clearly be categorized as public service, and as such, should be supported by small fees collected from a broad base. Certain fees might be collected from the sales of television sets that could be used to pay for a public broadcasting service borne by an existing TV station, which would have won the bid to provide it. As a part of the reform, overseas broadcasting facilities in the form of opinion and information dissemination must be strengthened that should aim to function as the "Asian CNN."