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Speech made by Ambassador Orita on the occasion of his visit to Manchester

(Dinner hosted by the Manchester Chamber of Commerce and Industry, the UK-Japan Society of the Northwest, and the Japanese Companies Association of Northwest England)
27 November 2003

Distinguished Guests, Ladies and Gentlemen,

Thank you Mr.Bunt you for your kind words of welcome and introduction. My wife and I have been enjoying the warm hospitality of Manchester since we arrived here this morning. You have also so kindly arranged all kinds of weather, from sunshine, cloudy weather to rain. We even saw beautiful big rainbow, actually double rainbow. I think that this is a good sign from the heaven.

First of all, I should like to express my gratitude to the UK Japan Society of the North West, the Manchester Chamber of Commerce and Industry and the Japanese Companies Association of the North West for inviting me to this splendid occasion. These three organisations have been playing a tremendously important role in promoting cordial economic relations and deeper mutual understanding between the North West region and Japan. In this regard, I understand that the trade visit to Tokyo and Osaka in October organized by the Manchester Chamber of Commerce and Industry went very well, thereby serving to further strengthen our thriving ties.

The last time I visited Manchester was when I attended the reception to close Japan 2001 festival, and now I am very happy to be back this time with my wife. Manchester is the commercial, financial, educational and cultural capital of the UK's largest economic region outside London. Furthermore, it provides one of the most striking examples of successful industrial regeneration that I have seen in Britain. The city's flourishing links with Japan go back more than 130 years. Thus Manchester is a most fitting setting for me to explore the current state and future direction of Japan-UK business relations.

The enduring relationship between Manchester and Japan goes back to the late Edo period. Next year will be the 150th anniversary of the signing of the first treaty between Japan and the UK. It allowed for occasional visits to Japan by Royal Navy ships and British whaling vessels. However, British merchants were already pressing for more, and it was the Chambers of Commerce of Manchester and Liverpool that wanted a treaty that would expand trade. Thus the second treaty was concluded in 1858, allowing for the opening of some Japanese ports. In the 1860s Japan opened up extensively to the outside world and immediately set about seeking new ideas and technology from the western world to absorb. To this end, the Iwakura Mission was sent on a tour of European countries, including Great Britain, and arrived in this country in 1872. The Mission was comprised of 107 people, who included Tomomi Iwakura and other influential political leaders as well as the cream of Japan's talented young people, who were later to found universities and become leaders in government, business and other fields. The members of the Mission were eager to learn about western science, education and social structures and whatever else they could learn while in Europe. They made a point of visiting Manchester, one of the main industrial centres in Britain and a bastion of free trade and economic liberalism. During their stay, the visitors were struck by this dynamic industrial city, whose prosperity was based upon a solid bedrock of innovation and manufacturing strength. Upon their return to Japan, they tried to apply what knowledge they had gained during the visit to the task of modernising Japan.

A brave man of Japan who jumped the gun a little in pursuing commerce with the outside world was Godai Tomoatsu., politically minded businessman. He was the one who broke the central government's ban on foreign travel and came to Manchester to do business. He was from Satsuma where I myself is from. Satsuma is situated in South of Japan. This year marks 140 anniversary of the Battle of Satsuma between British naval fleet and Satsuma. The capital of Satsuma was destroyed. At that time, this Godai made a strong recommendation to the local government of Shimazu. He said " It is not a time to fight with a western country and, despite the ban on foreign travel imposed by the central government, the local government should go into business with western countries and also should send young men abroad to learn new ideas" Based upon his recommendation, the local government sent 15 young men to England. And he himself made a trip to Europe, arriving in here in 1865 to place Japan's first order for cotton textile machinery without the kind support which foreign companies receive now from the North West Development Agency and the Chamber of Commerce of Manchester. The following year the Platt company of Manchester sent seven technicians to assist in the establishment of Kagoshima Bosekisho, a steam-driven plant with 3,648 spindles. That factory, which based in Kagoshima, operated successfully for over 30 years and spearheaded the development of the textile industry in Osaka. This Godai went on to found the Osaka Chamber of Commerce and the Osaka Stock Exchange. Manchester featured in many other elements of Japan's industrial development as well, for instance as the city where around 350 steam locomotives for Japan's railways were manufactured. I am not quite sure whether you still produce spindles or locomotives here.

Now, more than thirteen decades after the Iwakura Mission's historic trip, Japan and the UK have forged economic and business links that rest on strong, durable foundations. With trade friction a thing of the past, we are both committed to encouraging mutually-beneficial investment and trade. Our bilateral trade is currently stable at around 1.5 trillion yen (8 billion pounds) a year, and for the UK Japan is second only to the US as a market outside the EU. The deepening of our economic relations owes much to the efforts of private companies on both sides. Meanwhile, public or semi-public bodies have also played their part in fostering an environment conducive to investment and trade. For instance, the British Industry Centre in Yokohama has performed a significant role in complementing the activities of Japan External Trade Organization (JETRO) in London.

The UK remains the top European destination for Japanese direct investment. For instance, reflecting large-scale investment in the mobile telecommunications sector in fiscal 2000 the UK received more investment from Japan than did the United States or anywhere else. Altogether, more than 1,000 Japanese companies are now operating in the UK, and in the manufacturing sector their activities have led to the creation of over 80,000 jobs. These companies include household names such as Fujitsu, Sharp Electronics and Brother International, which are based here in the city of Manchester. In February of this year, JTI (Japan Tobacco International) also opened a new branch here.

I am convinced that the activities of Japanese companies have benefited the British economy in other ways as well. A case in point is the car industry, whose productivity has improved dramatically as a result of the influence of the major Japanese car manufacturers with operations here. It is quite something to note that quite recently a Toyota factory in the UK started exporting to Japan Toyota cars manufactured in the UK. Thus people in Japan are already driving British-made Toyota cars on the left side of the road, of course!

The activities of Japanese firms in the UK also embrace areas of technology which may not slip off the tongue easily to the lay person, but which are nonetheless impressive. A few hours ago I visited the impressive facilities of Kratos Analytical, a division of the industrial machinery group Shimadzu. This is where Mr Koichi Tanaka, with his research partners, performed the groundbreaking work in the field of mass spectrometry which led to him being awarded the Nobel Prize for Chemistry last year. The company then established the Koichi Tanaka Laboratory in Kyoto, with a European branch based at the Kratos site in Manchester. There Mr Tanaka and his colleagues are pursuing further breakthroughs in mass spectronomy.

Japanese inward investment into the UK is one aspect of our commercial relations. By the same token, Japan is very keen to see a rise in the number of British companies investing there, and we would very much welcome the participation of Manchester-based firms in this regard. The Japanese government recognises that investment into Japan has a valuable role to play in line with the process of restructuring and reform under way in the economy. The Japanese economy now needs the stimulation and fresh ideas that foreign companies can bring, just as the British economy has benefited from the increased productivity stemming from the impact of foreign companies, including those from Japan. We need a strong driving force for change. While insiders tend to be trapped in the web of vested interests, change often comes from outside in such forms as foreign direct investment, imports and M&A activities. It is based on this line of thinking that Prime Minister Koizumi explained to Mr Blair in April and in July about the Japanese government's plan to double the amount of direct investment into Japan within five years.

Just to give you some idea as to the investment environment in Japan for foreign investors now, the percentage of the Japanese stock market owned by foreigners by market value has increased from around 5 percent in 1990 to 17.7 percent in 2002. Furthermore, in accordance with the relentless pressure on companies to restructure their activities as well as with changes in the Commercial Code and accounting practices, Japanese M&A activity has been steadily increasing, rising from around 400 cases in 1993 to around 1,700 cases in 2002. In addition, foreign acquisitions in Japan have increased from only 19 cases in 1990 to 175 in 2000. In fact, British companies are becoming increasingly active in Japan. Vodafone, having made a huge investment in Japan, has a well-established operation there which is part of its highly advanced mobile-phone network using Japanese technology. Not only can you talk with your friends using your mobile, but you can immediately send them pictures as well.

Whereas Japanese attitudes towards foreign direct investment into Japan were somewhat ambivalent in the past, I doubt whether anyone would argue now that it benefits us just as much as the investors, creating an undoubted win-win situation. This is certainly the view of the government, which is leaving no stone unturned to smooth the ways for companies interested in investing in Japan. For instance, the Development Bank of Japan (DBJ) is on hand to provide long-term, fixed and low-interest loans for foreign companies investing in Japan, as well as supplying market information, identifying suitable business contacts and helping with mergers and acquisitions. All in all I can say with confidence, based on the current state of the economy, that it is a good time to invest in Japan! If you are interested in making business contact with Japan, don't hesitate to make contact with our embassy, JETRO or DBJ.

It stands to reason that the development of Japan-UK economic relations should be greatly influenced by trends in our respective countries, and in this respect I would like to make a few remarks about the state of the Japanese economy. Despite the so-called 'lost decade' of the 1990s, the fundamental strengths of the Japanese economy remain intact. These include our abundant purchasing power, our skill at creating high value-added products and Japan's plentiful capital. Our GDP amounts to around 4.8 trillion dollars, second only to that of the US. To put this figure into perspective, this amounts to around 60 percent of the GDP of the whole of Asia, about three times that of the UK and four times that of China.

We are also seeing an acceleration of the 'Louis Vuitton and Hundred Yen (Half a pound) Shops' trend, whereby markets for luxury brands as well as for low-priced bargain goods coexist, and companies which can respond to the emergence of such niche markets are enjoying healthy growth. Japan has plenty of companies which are competitive globally based on their high technology. In fact, one can easily think of numerous products featuring advanced Japanese technology, such as mobile phones offering an internet service - a field pioneered by Japan - and hybrid cars. Moreover, the fact that Japan accounts for around 20 percent of global research & development suggests that it will maintain its technological prowess. It is also noteworthy that the number of international patent applications by Japan has increased by more than fivefold from a decade ago.

Moreover, in order to help these fundamental strengths take hold, Japan has been undertaking structural reforms to tackle such problems as its governmental budget deficit, bad loans in the financial sector and the excessive supply capacity of industry. It has made real progress in this regard. I am pleased to say that we can now see positive signs of economic recovery in Japan, including steadily rising stock prices and improving corporate profits. Reflecting sustained efforts to deal with the problem of bad loans, corporate bankruptcies are now down from their peak of 8 percent of GDP in 2000 to around 2 per cent. Meanwhile, during the first half of 2003 Japan recorded the highest economic growth rate among the major developed countries for two consecutive quarters. In September, the IMF made a substantial upward revision in its estimate of Japanese economic growth for 2003-2004 in its World Economic Outlook Report. When I was back in Tokyo last month, I met a number of top business people, including top leaders of Keidanren (the Federation of Economic Organizations of Japan). I was impressed by the general feeling of optimism among them. While I hesitate to get carried away, I feel entirely justified in finding the recent trend most encouraging.

Of course, it is true that we still have challenges to overcome, such as deflation, the lingering effects of the bad loan problem and the long-term demographic problems of our low birth rate and the ageing society. However, I strongly believe that the mixture of lower prices and costs, deregulation and favourable economic prospects makes Japan a 'buy' for overseas investors. My message here is clear and simple: our mutually-beneficial economic ties with the UK remain firm, we see clear signs of fundamental economic recovery in Japan despite its difficulties, and Japan now comprises a very good opportunity for overseas investors. Why not take advantage of them?

As yet another step for strengthening our relations, I am pleased to note that, with an eye to the future, Japan and the UK are working together on a number of projects to address issues of common concern. When Prime Minister Tony Blair visited Japan in July, three Joint Statements were issued by the two Prime Ministers. One was on Science and Technology, another was on Environmental Challenges and the other one was on Information and Communication Technology. These statements are a demonstration not only of our collaboration in the relevant specific fields, but also of the fundamental strength of our friendship in contributing to the progress of humankind.

Here, on a final note, I would like to draw your attention to the 2005 Aichi Expo, a forum inspired by a noble vision shared by many for the future development of humankind. The theme of the Expo is 'the Earth's Wisdom'. This is not a world exposition of the old type, motivated by a sense of competition for national prestige. It is a forum for pooling the wisdom of the widest possible range of people from around the world to address tasks common to all of us. In this regard, I regard Aichi as an eminently suitable location for the forum as it is generously blessed by natural beauty as well as being a hotbed of industrial and technological achievement.

We were very pleased indeed when Prime Minister Blair announced, during his visit to Japan in July, his government's decision to participate in this ambitious venture. As a major world player in the field of advanced technology, the UK will surely make a valuable contribution to the success of the Aichi Expo. This international exposition provides a wonderful opportunity for us to explore together new ideas about how human beings can coexist with the earth and about how we can reduce our dependency upon finite energy resources. We want to impress the world with an exciting vision of new ways of living in the century just begun. I sincerely hope that many of you will visit Japan for this special occasion, when you will be able to witness Japan-UK collaboration in action. This, of course, will also be a great chance for you to see with your own eyes what our nation has to offer as an investment destination.

Let me also mention that the planned opening of the new Chubu International Airport near Nagoya will make it even easier for you to visit the Aichi Expo. Whether you are an investor or a traveller, this new facility beckons you! That said, whichever port of entry you use, you can be assured of a warm welcome in a country offering a unique blend of history, culture, tradition and ultra-modern entertainment!
EEI trust that this evening's event will help strengthen yet further the healthy, growing links between Manchester and Japan. In closing, may I wish you all every success in your endeavours.

Thank you.

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