Keidanren Business Partnership Mission luncheon

I am delighted to be here today, and to see so many familiar faces.

Let me begin by congratulating Mr. Ejiri for his role as the overall leader in the recent Keidanren Partnership Mission to Canada. I would also like to thank Mr. Zaizen and Mr. Ihara for leading the two sector teams that travelled across Canada to meet with Canadian business.

This is my first official bilateral visit to Japan as Prime Minister, though I was in Osaka for last year's APEC Summit, and have been here many times before in different capacities.

Each time I travel in your gracious country, I am struck by the dynamism, vitality and tremendous energy of the Japanese people.

I am also struck by how much our bilateral relationship has developed over the years.

Japan is Canada's most important partner across the Pacific. We export as much to Japan as we do to all of the rest of Asia combined. That means jobs for Canadians -- and that is an extremely important priority of my government.

Japan and Canada are engaged across a wide range of issues -- political dialogue on major international issues, a strong economic relationship, extensive cultural exchanges, and personal connections based on the growing movement of tourists and students in both directions.

One good example is the "Today's Japan" festival that ran for 10 weeks in Toronto last year. The festival was opened by Prince and Princess Takamado, and was a tremendous success, drawing more than half-a-million visitors.

The Canada-Japan relationship is a model of the relations we want to enjoy with all of our partners across the Pacific. We are very different countries, but we can still work together. We can grow closer while still remaining true to our traditions and ways of life.

Canada's growing cooperation with Japan comes from an increased awareness in Canada of our destiny as an Asia-Pacific nation. As we look outside our borders to a much larger world, we see that the Asia-Pacific region is very much front and centre.

To affirm this important dimension of Canadian life, my government has declared 1997 as the Year of Asia-Pacific in Canada. This will be an important opportunity for all Canadians to celebrate the many connections that increasingly link us to this region.

I met earlier today with Mr. Ejiri and members of the Keidanren Partnership Mission who visited Canada last September. They spoke positively of the dramatic changes that they have seen in Canada.

I am told that many Japanese business leaders have been watching the fundamental reforms taking place in Canada's economy. Over the past three years, my government has initiated fundamental fiscal reforms and economic restructuring.

When our government took office three years ago, we faced a monumental task. Canada's deficit was over 6% of Gross Domestic Product. We had one of the worst fiscal records in the G-7. We knew that fundamental change was required.

In the last three years, we have put the country's finances in order. It has not been easy, but we have had the full support of the Canadian people. And for that my government is very grateful.

We have reduced spending dramatically. Our deficit in 1996-97 will be less than 3% of Gross Domestic Product on a public accounts basis. More important, new financial requirements -- which is the way most industrialized countries measure their deficits -- will be less than 1% of GDP in 1997-98. In 1998-99, the government will have no new borrowing requirements. In other words, in 1998-99, on a national accounts basis, Canada's budget will be in balance. This is a remarkable achievement in a few short years.

We have achieved this with virtually no inflation. The Canadian economy has created more new jobs than Germany, France and the United Kingdom combined. And we have been able to preserve our social safety net.

Interest rates are lower than they have been in forty years. Canadian short-term rates are more than three points lower than comparable American rates. And for the first time in a long time, ten-year Canadian and American rates are about the same.

Independent forecasters, including the OECD and the IMF, predict that Canada's economy will grow faster than that of all other G-7 countries in 1997 and 1998.

We have enormous natural resources, an educated and skilled workforce, and a high technology sector that is at the cutting edge in many industries.

For Japanese investors like yourselves, Canada's economy has never before offered such an inviting investment climate.

The implementation of the NAFTA is also significant for members of the Keidanren looking to invest in Canada or expand their existing operations. Under this agreement, you can invest in Canada and have secure access to a market of over 360 million consumers.

NAFTA strengthens an already convincing case for investing in Canada. That message is being heard in Japan.

Japanese investment is vital to Canada's economic prosperity, and an important creator of jobs for Canadians. Japan is now the third largest foreign investor in Canada, with 440 firms employing almost 50,000 people.

Major Japanese companies such as Toyota and Honda see the attractiveness of the Canadian market, and are expanding their plants in Ontario. So too do smaller firms, such as Sakai Spice, which is building a mustard crushing plant in Alberta. There are many other examples in the last year alone.

Japan is also Canada's second most important source of portfolio investment. The increasing quality and attractiveness of Canadian financial assets has not gone unnoticed by Japanese investors. The latest survey shows major Japanese financial institutions holding over $40 billion of Canadian government assets.

But the flow is not all one way. Canadian companies are moving into the Japanese market. Cognos, Northern Telecom, Newbridge Networks, and Four Seasons Hotels have joined the expanding ranks of Canadian companies in Japan.

Outward-looking organizations such as the NAFTA and APEC contribute to prosperity through enhanced trade and investment.

I was very pleased with the progress that APEC leaders made at our recent meeting in Manila towards our shared vision of free trade in the Asia-Pacific region.

For Canada and Japan, trade has been the pillar of our relationship.

Over 37% of Canada's GDP depends on exports. Japan is our second largest market in the world, after the United States.

In 1995, our exports to Japan increased by 24% to exceed $12 billion, while two-way trade between our two countries topped $24 billion.

Overall, Canadian exports to Japan during the past three years have increased in value by a remarkable 61%.

Canada is also an important market for Japanese manufactured goods. Japanese exports to Canada have seen strong increases in recent years, driven by a growing Canadian economy.

While we continue to be a major supplier of raw and semi-processed products, there are significant increases in our manufactured exports.

We used to sell only lumber to the Japanese housing market; now, we sell whole packaged houses -- complete with tatami rooms, finished doors and windows.

I will visit some of these homes tomorrow during my visit to Nagoya.

Canadian software exports now exceed $100 million, and programming is being tailored expressly for Japanese clients. For example, the software that guides Tokyo City's traffic control system was developed by a company from Montreal.

I will visit this site later this afternoon.

Japan is also the number one source of overseas tourism revenue to Canada. A record 670,000 Japanese visited Canada in 1995, an increase of almost 19% over the previous year. I want to set as an objective that within a few years there be one million Japanese tourists visiting Canada on an annual basis.

We want to build on our strengths, and move to the next stage of economic engagement with Japan.

Canada's business community, supported by the federal and provincial governments, has developed Canada's Action Plan for Japan, which is helping to diversify our economic relationship. A revised version of the Plan was released earlier today.

We took a hard look at Canadian capabilities and technologies, and matched them against Japan's newly emerging import sectors, to identify those Canadian industries most likely to succeed here.

The Plan is working -- businesses are increasing their awareness of the Japanese market, adapting their products to suit Japanese tastes, and systematically seeking new business opportunities here.

The growth in trade and investment has been helped by effective public and private sector institutions.

The Canada Japan Business Conference, which many of you regularly attend, is now in its 20th year. I am proud to have played a part in starting the Conference when I was Minister of Industry, Trade and Commerce.

I am pleased to recognize at this time three Keidanren members who have each made an important contribution to the Canada-Japan relationship -- Mr. Ejiri, Chairman of Mitsui & Company; Mr. Morohashi, Chairman of Mitsubishi Corporation; and Mr. Okawara, Executive Adviser to the Keidanren.

I will be discussing with Prime Minister Hashimoto ways in which our governments' economic consultations can be made even more responsive to our business communities -- to facilitate trade and avoid disputes.

Today, I have spoken about the many connections that bind us together.

The peoples of Canada and Japan are more prosperous for these developments, and our economies are more secure.

But we must not be complacent. Too much is at stake. As partners across the Pacific, we must continue to show leadership in a rapidly changing world.

Working together, we can face the future with confidence and hope.

Thank you.