Let me begin by sharing with you an amusing story about Japan I heard recently. The story was on PM, ABC Radio’s current affairs program, which is not usually known for its tongue in cheek glibness. But in this story, the ABC’s Tokyo correspondent was interviewing Australian journalist and well-known “Japan expert” Murray Sayle about a curious new phenomenon—that of Japanese men using hidden video cameras to film inside the skirts of unsuspecting women.

The various perversions of Japanese men—from lingerie bars to those little shops in Tokyo that sell unwashed girls’ underwear, nicely packaged in plastic bags, of course—have always been the topic of lurid fascination in Australia, and most of these stories are probably worthy of nothing more than our ridicule.

But this story on PM was rather disturbing, because Murray Sayle attempted to link this particular Japanese male perversion to a serious social issue—Japan’s declining population. Mr. Sayle, who has lived in Japan for nearly thirty years, claimed that the fact that Japanese men were perving at women’s underwear was somehow indicative of their inability to form responsible relationships with the opposite sex, and that this led to fewer marriages and consequently lower birth rates. If things don’t change, Mr. Sayle warned, within 800 years, Japan’s population, which is now around 130 million, could shrink to a mere 45,000, about enough people to fill the Tokyo Dome.

I’m not sure what disturbed me more—the sheer stupidity of Murray Sayle’s analysis, or that such a puff piece could masquerade as serious journalism on your ABC.

Then there is the Bulletin’s cover story last week on the Japanese economy. The content of the story was well researched and informative, (and even the piece written by Mr. Sayle about the new prime minister Junichiro Koizumi was reasonable), but the ominous headline caught my eye, “Will Japan Bring Us All Down?” it said.

Japan could possibly bring down the U.S. given the bulk of its current account deficit is funded by the Japanese. But there’s little chance of Japan bringing down Australia, despite Japan being its biggest trading partner. After all, in the latter half of the nineties when Japan hobbled from one economic slump to the next, Australia’s economic performance was impressive, with GDP annual growth rates of around four to five percent—an overachiever among OECD countries.

So why is it that despite the so called mutual understanding and close bilateral friendship that the two countries are supposed to share, Australian public perception of Japan still tends to be dominated by misrepresentations: Japan is always seen as either a nation full of weird and incomprehensible people (and dirty old men), or a looming economic threat? (Let’s not forget that in the eighties when Japan was experiencing an economic boom, it was also portrayed as an economic threat—an aggressor, invading Australia with its yen for buying up land.)

I would argue that this lack of understanding is mostly on Australia’s side, and arises out of Australia’s limited view of itself in relation to Japan. The charge that Japan falsely regards Australia as a mere hole in the ground from which natural resources are extracted is, in my view, not true, and in fact it is Australia that persists in hanging on to the outdated perception of itself as a farm, quarry and tourist haven.

Why? I suspect that over 40 years of healthy bilateral trade with Japan has bred complacency in Australia, hindering any compulsion to seek a deeper understanding of Japan or to rethink Australia in relation to Japan, consequently hindering any need to rework the bilateral relationship.

Ever since Australian prime minister Robert Menzies and his trade minister John McEwen concluded the Commerce Agreement of 1957 with Japan, Australia-Japan trade has grown steadily. By 1966, Japan was Australia’s biggest export market and thanks to a trade complementarity between the two countries that fits like a glove, for the last 40 or so years Australia has enjoyed a trade surplus with Japan. The 1957 Agreement, the 1976 Basic Treaty of Friendship and Co-operation and a range of administrative mechanisms to handle the day-to-day issues of bilateral commercial activities provides a framework for bilateral trade that ensures exports to Japan are guaranteed well into the future.

Such a comfy economic relationship that cruises along on its own momentum hardly requires constant realignment or reinvention. It’s of no surprise then that despite repeated words of caution over the past decade from those in the know that Australia is losing market share in Japan, and that the relationship is waning, Australian leaders have done little to create a dynamic future path for the bilateral nexus.

As an indication of how uninspiring the Australian view of the bilateral trade relationship can be, let me refer to the report “Strengthening Australia-Japan Economic Relations” which was commissioned by the Department of Foreign Affairs and Trade and released earlier this year. It’s a useful report on one level, as both it and the report commissioned by the Japanese government on the same topic and released at the same time, document meticulously the extent of Australia’s trade with Japan.

But if the DFAT commissioned report, (which by the way was written by one of Professor Drysdale’s colleagues at the Australian National University), is to inform future government policy on Australia’s trade relations with Japan, it is sadly deficient. In the section entitled “An agenda for Government” for example, the report outlines a number of measures such as increased dialogue on competition policy, encouraging investment and the promotion of a new trade and investment facilitation agreement. It also lists a number of sectors in which exports to Japan could be increased and co-operation enhanced such as education, biotechnology, health and aged care, finance, e-commerce, IT.

None of this is ground breaking stuff, in fact, recommendations such as streamlining customs and visa procedures, or strengthening intellectual property regimes are mere housekeeping issues, and to simply expand the list of export sectors seems to me common sense, and hardly constitutes a trade policy.

So what of the Japan side? The parallel report commissioned by the Japanese government I referred to earlier has equally uninspiring prescriptions for the future of bilateral trade relations. But that’s in some ways, understandable. The Japanese economy is a lot bigger than Australia’s, and it might just be good Japanese policy to leave the bilateral trade relationship on cruise control. After all, there are many more pressing issues Japan must deal with, and disputes with Australia have always been backburner issues.

Now, that’s not to say there isn’t a genuine desire on the part of the Japanese to invigorate this 100 year old trade relationship. Japanese government, bureaucracy, institutions and businesses have an affectionate regard for Australia, as Australians do of Japan—a kind of bilateral warm fuzzy feeling—and there is a strong commitment to deepen the relationship by finding new ways of engaging with Australia. Certainly on the part of Japanese business, there has always been a healthy level of interest in their Australian counterparts.

During the seven years I was a journalist in the Sydney bureau of the Nihon Keizai Shimbun, Japan’s major economic and business daily, whenever I wrote a story about an innovative Australian company that had developed a new product or launched a new service, or had made a major scientific breakthrough, there was almost always a response from a Japanese company wanting to know more about the Australian firm in question.

I’m not sure how many commercial deals eventuated from these queries, but I can assure you that none of the Japanese firms seemed to be deterred by any false perception of Australia as a mere quarry, farm or haven for cute furry animals. In fact, my biggest problem was trying to convince my sceptical editors that an Australian invention was a world leader or a world first. They always assumed that the company must be an American subsidiary.

Japanese companies, like companies of any nationality are on the prowl for that competitive edge, and in the final analysis, it matters little if an Australian, American or Singaporean firm supplies that edge. That means Australian firms must let their own track record speak for itself, and perhaps the most valuable thing the Australian government can do to expand and reinvigorate Australia-Japan trade is to create an environment where Australian businesses can become more innovative and competitive.

ake the example of Macquarie Bank. Macquarie is a small investment bank, and by international standards, minuscule. But Macquarie has a particularly strong derivatives section, which had been involved in a joint venture in Hong Kong since the mid nineties. In 1996 when Japanese bank IBJ (Industrial Bank of Japan) racked up massive losses in its derivatives arm in London, it went looking for an American partner with solid derivatives experience in Asia. IBJ stumbled onto Macquarie instead, which at the time was trading almost 10% of the volume of Hong Kong’s futures exchange, and after three years of polite negotiations, Macquarie formed a derivatives joint venture in 1999 with IBJ, which is now part of the Mizuho Financial Group. It was IBJ’s first joint venture with a foreign bank.

For Macquarie, this deal was a major coup, as it has given the bank a foothold in Japan. It is now expanding into financial services like funds management, areas in which Australian know how is way ahead of Japan.

It might be worth noting here that despite the prevailing view that Australia is more interested in Japan than Japan is in Australia, Australia gets a hell of a lot of media coverage in Japan. Currently, there are eight Japanese media organisations with permanent bureaus in Australia. In fact, the Japanese media contingent is the biggest foreign media presence in Australia and despite the fact that Japanese corporations have been leaving Australia in droves in the past decade, two new bureaus—Fuji TV, a national TV network and The Mainichi Shimbun, a national daily newspaper—have both opened bureaus in Sydney in the past decade.

And what sort of stories do Japanese news organisations cover in Australia? Obviously the comings and goings of Japanese companies and the occasional tourist mishap are the bread and butter stories, but Australia’s policies and interests in the Asia Pacific region are high on the list of must cover topics.

Japan, especially since the formation of APEC in the late nineties, has seen Australia as a kind of natural partner in the region. While the decline of APEC has seen this regional partnership falter, Japan is acutely aware (due to its historical aggression in the region) that it lacks social skills when it comes to regional diplomacy, and is keenly interested in engaging with an English speaking democracy like Australia on regional issues.

In fact, the Japanese probably have a clearer vision of Australia’s standing in the Asia Pacific region than Australians themselves. The Japanese see Australia as a kind of United States in the region. Like the U.S., Australian acted as a major market for Asian exports during the dark days of the Asian financial crisis. Australia is, like the United States, considered to be an open, compassionate and multicultural society with a high standard of living and a strong public health and welfare sector.

Australia is also seen as unique in the region—a western democracy with traditional allegiances to Europe, yet 77 percent of all export growth in the past decade has been to East Asia. And there are very few Japanese who see Australia as the arse end of the world.

Japan is undergoing immense social, economic and political upheaval and facing an imminent demographic crisis as its population rapidly ages with social institutions that can no longer support the elderly. It is also feeling the chill wind of post Cold War reality up its skirt, (to revert to a previous theme). A country like Australia offers great opportunities for learning and partnership.

There are many such issues on Japan and Australia could co-operate. Trade is obviously one, especially in this current fluid state of affairs as the growing trend to stitch up bilateral trade deals that crisscross the region intensifies and the non-discriminatory global trading system comes under intense political pressure.

Regional defence is another area of bilateral co-operation. While both countries have a partnership with the U.S. that constrains their respective strategic agendas, there may certainly be scope in the future for forging a partnership on regional issues that may exclude the U.S. China is one area in which Japanese interests might converge with Australia’s rather than with the U.S. Domestic opposition to the U.S. military presence on Japanese soil is increasing, as is international pressure on Japan to alter its peace constitution to allow its self defence forces to participate in regional peacekeeping activities. Australia could help Japan come to terms with these new demands of a post Cold War world.

Aid is another area in which the two nations could collaborate. For years, the two countries have been swapping notes on aid and development issues in the South Pacific, but East Timor could another country where the two nations could put their heads together. Japan is heavily involved in East Timor as its biggest aid donor, but is a bit cheesed off because Portugal gets all the accolades and gratitude from the donor community and the East Timorese. Perhaps Australia can help Japan with its diplomatic/marketing skills on that score.

Perhaps the most exciting and most promising area of Australia-Japan bilateral co-operation in the regional context is the idea of an regional financial co-operation in the form of an Asian Monetary Fund. This idea was given special mention in both the Australian and Japanese reports on the bilateral relationship that I referred to earlier. This idea requires immediate action, before the Japanese economy really hits the skids.

There are many other issues I wanted to discuss, like a bilateral dialogue on Japan’s role in the Pacific War and Australia’s treatment of its indigenous population—a kind of bilateral co-operation on healing of old wounds, corporate responsibility in Australia and the region (after all, Japanese multinationals are notorious for digging big holes or destroying the environment of their host countries without offering due compensation), Sydney restaurant owner Tetsuya Wakuda and Jeff Kennett.

But let me conclude here, and I look forward to your questions.

Thank you.