The relations between the Philippines and Japan have been cordial, vibrant, and mutually beneficial for the governments and peoples of both countries, in general. This state of affairs can be widely gleaned from the broad area of cooperative endeavors between the two countries ranging from the politico-security dimension, to trade and economic cooperation, as well as in socio-cultural concerns:

Because of shared commonalities and mutuality of interests, there is convergence of views to further strengthen bilateral ties in the future.

The following are the highlights of RP-Japan relations in political; economic (which includes development cooperation, trade, investments); and tourism; cultural; consular and labor cooperation.

Since the establishment of diplomatic relations between the Philippines and Japan in 1956, cooperative partnership in the political arena has remained harmonious and stable. This has been characterized by high-level exchanges of visits (i.e. heads of government, top government officials, and parliamentarians), that articulate the importance of the bilateral relationship between the Philippines and Japan in all areas of cooperation.

The conduct of political exchanges between the Philippines and Japan has strengthened efforts to address bilateral issues and concerns. In this respect, policy dialogues and consultations have not only been useful in clarifying issues but also in finding a common ground upon which mutual interests could be served. Japan and the Philippines make use of available fora to discuss bilateral concerns in the areas of trade, investment, ODA, labor, immigration, and consular matters. Among these mechanisms for consultations include: the Philippines-Japan Sub-ministerial Meeting; the ASEAN-Japan Forum; and the ASEAN-Japan Informal Summit.

The Philippines and Japan have established a cooperative effort to respond to the difficult issue of former wartime comfort women through the Assistance to Lolas in Crisis Situation (ALCS) funded by the Asian Women’s Fund (AWF). The ALCS Project has successfully been completed and as of 30 September 2002, the Project has served a total of 185 comfort women (171 are living and 14 are deceased). In view of its completion, the Philippines and Japan are working on the establishment of a geriatric center that will cater to the needs of the remaining/surviving former comfort women.

The RP-Japan relations received a boost when President Gloria Macapagal Arroyo embarked on a working visit from 12 to 15 September 2001 upon the invitation of the Japanese government. The President met with Prime Minister Junichiro Koizumi. The two leaders affirmed their commitment to elevate cooperation into a higher level of partnership in the future in bilateral, regional and global concerns. Both leaders reaffirmed the need to schedule immediately the first Politico-Security Talks and decided to launch a technical cooperation framework to assist third countries under the "Japan-Philippines Partnership Program" to jointly promote human resources development particularly in ASEAN countries and East Timor. Both leaders also condemned the September 11 terrorist attack on the United States and vowed to cooperate jointly against terrorism.

Prime Minister Junichiro Koizumi visited the Philippines on 9-10 January 2002 to strengthen bilateral relations with the Philippines and to embark on a renewed Japan-ASEAN cooperation for prosperity, stability, and cooperation for the future.

On 20-24 May 2002, President Arroyo embarked on her second working visit to Japan to address the Nikkei Shimbun’s 8^th International Conference on the Future of Asia" in Tokyo and Mainichi Shimbun’s "Asia and Japan in the 21^st Century-Proposals by Female Leaders Conference" in Osaka. The President also had a bilateral meeting with PM Koizumi which gave an opportunity for the President to outline the country’s vision of Philippine-Japan partnership in "working and advancing together" for East Asia. The two leaders agreed to jointly study the possibility of signing an Economic Partnership Agreement.

The Philippines has become one of Japan’s top recipients of official development assistance (ODA). Japan, likewise, has become the Philippines’ number one source of external development funds. Since 1992, the Government of Japan (GOJ) has been extending an average of US$ 800 million worth of ODA loans to finance development projects of the Philippine government every year. This figure accounts for about 61 % of total ODA financing sources available to the Philippines on a yearly basis. As of first semester 2002, Japan shares 81 % of the country’s ODA commitment or a sum of US$ 634 million with the loan signing of the seven projects under the 25^th and Special Yen Loan Packages. The Philippines has been among the largest recipients of Japan’s ODA. The amount of ODA extended to the Philippines was approximately US$ 299.34 million in 2000: From the fifth largest recipient of ODA in 1999, the Philippines went down to sixth place in 2000 after Indonesia, Vietnam, China, Thailand, and India.

On the quantitative side, Japanese ODA has been increasing through the years, starting from less than US $50 million in the late 60s to over hundred million dollars in the 90s. On the qualitative side, there has been a wider mix in the sectoral allocation of ODA. From a predominantly infrastructural orientation in the early years, Japanese ODA has increasingly given attention to other equally vital sectors like energy, transportation, and communications.

Japan has deliberately emphasized the importance of providing social safety nets to vulnerable sectors of society, sustainable development, and environmental conservation. For environmental projects in particular, Japan has offered ODA loans to an unprecedented interest rate of 0.75 percent per annum, with a repayment period of forty years like the projects under the Special Yen Loan Package or the so-called Obuchi Fund.

In July 2002, the Special Term Economic Partnership (STEP), the follow-on facility to the Special Yen Loan Package, has been declared effective. STEP is the tied-loan facility of the GOJ administered by JBIC, with interest rate of 0.9%, repayment period of 40 years including 10 years grace period. Prime contractors are tied to Japanese firms.

.JAPAN’S ODA TO THE PHILIPPINES FOR CY 2002

*(As of 19 April 2002) ** ¥ 1 = P.38 US $1 = P 51 US$1= ¥ 129.13

In March 1999, Japan’s High Level Mission for Economic and Technical Cooperation (the Matsuda Mission) came to the Philippines to conduct policy dialogues with the Philippine government regarding Japan’s economic and technical cooperation. Consequently, the two sides agreed on the following priority issues and areas for the mid-term bilateral aid activities:

1. Strengthening of the economic structure for sustainable growth;

2. Mitigation of disparities (poverty alleviation and mitigation of regional disparities);

3. Environmental conservation and disaster management; and

4. Human resources development and institution building.

In sum, Japan’s ODA to the Philippines has helped accelerate the pace of the country’s development by providing the needed funds for the implementation of development projects. At the same time, the quantitative and qualitative changes in the administration of Japanese ODA and the accompanying policy thrusts have increased the resilience of the Philippine economy in adjusting to external shocks.

2. Trade

In the area of trade, Japan is the Philippines’ second largest trading partner and leading source of imports. Although bilateral trade has largely been in favor of Japan, it is the Philippines’ second largest market for its electronics such as semiconductor devices, electronics data processing, office equipment, telecommunications as well as machines, transport equipment, apparatus and parts. Meanwhile, Japan exports the following items to the Philippines: intermediate goods such as materials and accessories for manufacture of electrical goods; components/parts/accessories for assembly of passenger cars.

During the past five years, exports of Philippine products to Japan increased from US $4.19 billion to US $5.06 billion while imports from Japan declined from US $7.42 billion to US $6.10 in 2001. The decline has been attributed to the effects of the financial crisis in the region.

For the year 2001, Japan remained the Philippines’ second largest export market after the United States. Philippine exports to Japan in 2001 accounted for 15.73% of total Philippine exports to the world. This represented a decline of 9.83% over 2000 exports. Japan tops the Philippines’ supplier of imports for 2001 amounting to US $6.10 billion (FOB) or 20.64% share of the total Philippine imports.

Exports during the first seven months of 2002 totalled US$ 3.04 billion, 3.55% lower than the total during the same period in 2001. Imports during the period January-July 2002 totalled US$ 3.88 billion, 6.67% higher than the total during the same period last year.

In both trade and investment sectors, opportunities abound in sectors other than electronics, which should be pursued by the Philippines such as fresh and processed fruits, wood and rattan furniture, jewelry (costume), basketworks, marine products, construction materials, ICT services, and automotive parts. In the ICT sector, Japan has provided funding opportunities for projects under the "Mori Initiative" of $20 billion announced at the G-8 Summit in Okinawa in July 2000. The Philippines should continuously tap into the funds by submitting projects that could upgrade the country’s ICT capability.

One of the challenges for the Philippines is improving trade balance. The country has experienced consistent trade deficit with Japan. While the terms of trade with Japan have shown substantial improvements in the recent past, the persistent trade deficit of the Philippines is still attributable to Japan’s exports of more value-added items than those being exported by the Philippines to Japan. But the more important reason is due to the natural practice of Japanese companies in the automotive and electronic sectors to import parts for manufacturing products in the Philippines from their mother companies or Keiretsu Companies. The final products are of course exported to U.S.A., Japan and Europe. All ASEAN countries, except Indonesia and Brunei, have trade deficits with Japan. Indonesia and Brunei export oil and gas to Japan.

A number of market access issues also continue to hamper Philippine export performance to Japan. There is also a need to promote other agricultural products to Japan, such as asparagus and flowers. The fast depreciating Japanese yen and slowdown in retail sales show lack of business and consumer confidence in Japan’s economic outlook. These factors impact negatively on Japan’s imports from the Philippines.

In the area of investments, Japan has become the Philippines’ second largest investor. The Philippines, on the other hand, has become a strong export base for electrical and electronic products of Japanese-affiliated companies.

Japanese investments in the Philippines, particularly in the electrical and electronics industry, stimulated the development of Philippine support industry and in the process, strengthened local supplier capability. Japanese investments have likewise loosened some of the constraints on technology and finance which presently impede the development of the country’s support industry. The demand for locally-sourced components which can pass quality control standards has compelled local suppliers to upgrade their technology and look for viable sources of financing.

Japanese investments have also generated employment opportunities for thousands of Filipinos as well as contributed in the government’s efforts to promote human resources development. In particular, the Japanese scholarship programs, skills training and related technology transfer have improved the skills and competencies of Filipino workers employed in Japanese-affiliated companies.

Japan and the Philippines need to focus more on technical assistance projects of medium to long-term basis than outright financial assistance. This would accelerate the development of SMEs in the Philippines, particularly in supporting industries. The Philippines should explore the possibility of establishing an "SME Exchange" with Japan.

A major challenge in attracting Japanese investments in the Philippines is the depreciating yen and pessimism in Japanese business circles on their country’s economic outlook and the recent developments in peace and order situation in the Philippines, such as the "Abu Sayyaf’ and kidnappings, have led other foreign investors, including the Japanese, to invest in other Asian countries. Moreover, the "cost of competitiveness factor" in making investment decisions by SMEs recently surveyed by JASMEC places the Philippines at a disadvantage when measured on the length of its tax holidays. The Japanese are also worried about the Philippines’ labor unions.

B. BOI APPROVED JAPANESE INVESTMENTS BY SECTOR

Value in US$ Thousand January-December 2001

C. MAJOR INVESTORS*

One area of bilateral relations where people-to-people contacts have been on the rise is tourism. Statistics show that Japan is the second largest single country source of tourists, next only to the United States. From a level of 215,634 in 1989, tourist arrivals from Japan have been on the upswing, reaching 390,517 in 2000. In 2001, there was a decline in Japanese tourists arrivals to 343,840 or a decrease of 46,677 tourists. The Philippines remains included in Japan Ministry of Foreign Affairs’ Travel Advisory alert level.

The challenge is to apprise the Japanese government of the measures taken and being undertaken by the Philippine government to improve the peace and order situation. The Philippines also needs to request the delisting of Metro Manila from the travel advisory to help mitigate the slowdown in Japanese outbound tourist traffic to the Philippines.

Cultural Cooperation is one aspect of Philippines-Japan relations which has aided in liberating the Filipino consciousness from the memories of Japan’s role in the war. Cultural programs such as the Japan-ASEAN Youth Friendship Programme for the 21^st Century and the Ship for Southeast Asian Youth Program (SSEAYP) have provided opportunities for the youth of both countries to learn about each other’s culture, to appreciate the differences, and to form friendships on the basis of mutual respect and understanding. There have also been cultural exchanges between the Philippines and Japan through exchange of performing artists, film festivals, etc.

The increasing number of Filipinos residing and working in Japan and the need for dialogue resulted in the first and second rounds of Bilateral Consular Consultation talks in 1998 and 1999. Among the issues discussed were the entry of criminal elements, Filipino-Japanese intermarriages, illegal workers and those who overstay, falsification of documents for visa, passport fraud, and the hiring of Filipino entertainers. The discussions focused on immigration and labor, passport and visas, protection of nationals, and joint cooperation on crime preventive measures. The Japanese Delegation also raised issues on illegal entry and overstaying of Filipinos in Japan.

The Japanese Immigration Bureau reported a total of 157,667 registered Filipinos in Japan as of 31 December 2001, marking a 9% increase from the previous year. It is also estimated that there are 29,649 "overstayers", thus bringing to 187,316 the total number of Filipinos all over Japan.

The number of Filipinos living within the jurisdiction of the Philippine Embassy in Tokyo is no less than 112,000 representing 77% of the total Filipino population. The remaining 23% fall under the jurisdiction of the Consulate General in Osaka.

For the year 2001, the Immigration Bureau reported that a total of 186,262 Filipinos entered Japan, of whom 38% (or 70,944) are classified as "re-entrants". Of the total entrants, majority are entertainers (39%), followed by spouses/children of Japanese nationals (22%), then by holders of temporary visitor’s visa (16%).

Philippines-Japan relations have strengthened in the last fifty years. The economic ties are extremely important and cooperation in the political and security spheres have also expanded. The Philippines and Japan have a mutual security treaty with the USA. Both countries are democracies and are committed to a free market system. They have cooperated with each other in the establishment of multilateral institutions like the ASEAN Regional Forum (ARF) and APEC. They support each other in the United Nations and other international organizations.

In the political and security field, both countries should continue to cooperate with each other in preventive diplomacy like the restoration of political stability in Cambodia, and peacekeeping operations in East Timor. The Philippines is going to undertake South-South cooperation in East Timor with Japan. This will involve Japan funding 85 percent of a project and the Philippines will finance the 15 percent.

In terms of age, 45% are 30-39 years old while 41 % are 20-29 years old. Five percent are 19 years old and below while 9% are 40 years old and above.

For the year 2001, the Immigration Bureau reported that a total of 186,262 Filipinos entered Japan, of whom 38% (or 70,944) are classified as "re-entrants". Of the total entrants, majority are entertainers (39%), followed by spouses/children of Japanese nationals (22%), then by holders of temporary visitor’s visa (16%).

The increasing number of Filipinos residing and working in Japan and the need for dialogue resulted in the first and second round of consultation talks in 1998 and 1999. The discussion focused on immigration and labor, passport and visas, protection of nationals, and joint cooperation on crime preventive measures.

The Filipino Community in and around Tokyo area

The Filipino Community in and around Tokyo area is composed of OFWs, students, professionals, religious and lay missionaries, spouses of Japanese nationals and other foreign nationals, and employees of international and non governmental organizations. A good number of Filipinos are long time residents, some of whom have been granted permanent residency by the Japanese Immigration authorities while some have overstayed their visas. Majority of them could be considered transients as they are OFWs with visas allowing them to stay in Japan for a maximum of only three to six months.

Most of the Filipinos, with or without proper visa, belong to one or more organizations. There are now thirty-seven (37) organizations duly registered with the Philippine Embassy. The organizations registered with the Philippine Embassy are of various orientation ranging from purely fellowship among those coming from the same province or region, sports, religious, and assistance to fellow Filipinos.

Fourteen (14) of these organizations belong to the Philippine Assistance Group (PAG), an umbrella organization directly under the guidance of the Philippine Embassy. To formalize the unification of these organizations, a Memorandum of Agreement (MOA) was signed at the end of April 1997 by the fourteen charter members. PAG members are: Association of Filipino Students in Japan (FSJ), Association of Filipino Wives in Tokyo (AFWT), Christian Association Serving Traditional Laymen’s Evangelization (CASTLE), El-Shaddai Japan Chapter, Filipino Bowlers Club (FBC), Filipina Circle for Advancement and Progress (FICAP), Filipino Ebisu Group Association (FEGASSO), Filipino Maritime Network (FMN), Kalipunan ng Lakas at Adhikain (KALAHI), Overseas Workers Association (OWA), Philippine Men’s League (PML), Samahang Pilipino (SP), Toyoshiki Filipino Community (TFC), and Yokohama Filipino Community (YFC).

The MOA specifies the rules and regulations governing PAG and the guidelines for the disbursements of the community fund. The guidelines specify that all funds generated by PAG would be used solely for medical care and repatriation of Filipinos.

CAPITAL: Tokyo.

LOCATION : Eastern Asia, island chain between the North Pacific Ocean and the Sea of Japan, east of the Korean Peninsula.

LAND AREA : 377,835 sq. km.

CLIMATE :Varies from tropical in south to cool temperate in north.

POPULATION : 126,549,976 (July 2000 est.)

POPULATION GROWTH RATE: : 0.18% (2000 est.)

LITERACY RATE : 99% (1970 est.)

ETHNIC GROUPS : 99.4% Japanese; 0.6% (mostly Korean)

RELIGIONS Observe both Shinto and Buddhist 84%, other 16% (including Christian 0.7%)

LANGUAGE  Nihongo (Japanese)

Government type: Constitutional monarchy

Chief of State : Emperor Akihito (since 7 January 1989)

Head of Government : Prime Minister Junichiro Koizumi (since 2001)

Cabinet : Cabinet appointed by the prime minister

Elections : None, the monarch is hereditary, the Diet designates the prime minister, the consti-tution requires that the prime minister must command a parliamentary majority, there-fore, following legislative elections, the leader of the majority party or leader coalition in the House of Representatives usually becomes the prime minister.

Legislative branch: Bicameral Diet or Kakkai consists of the House of Councilors or Sangi-in (252 seats; one-half of the members elected every three years – 76 seats of which are elected from the 47 multi-seat prefectural districts and 50 of which are elected from a single nationwide list with voters casting ballots by party; members elected by popular vote to serve six-year terms) and the House of Representatives or Shugi-in (500 seats – 200 of which are elected from 11 regional blocks on a proportional representation basis and 300 of which are elected from 300 single-seat districts; members elected by popular vote to serve four-year terms)

Judicial branch: Supreme Court, chief justice is appointed by the monarch after designation by the cabinet, all other justices are appointed by the cabinet.

International organization participation AfDB, APEC, AsDB, Australia Group, BIS, CCC, CE (observer), CERN (observer), CP, EBRD, ESCAP, FAO, G-5, G-7, G-10, IADB, IAEA, IBRD, ICAO, ICC, ICFTU, ICRM, IDA, lEA, IFAD, IFC, IFRCS, IHO, ILO, IMF, IMO, lnmarsat, lntelsat, Interpol, IOC, IOM, ISO, ITU, NAM (guest), NEA, NSG, OAS (observer), OECD, OPCW, OSCE (partner), PCA, UN, UNCTAD, UNDOF, UNESCO, UNHCR, UNIDO, UNITAR, UNRWA, UNU, UPU, WFTU, WHO, WIPO, WMO, WToO, WTrO, ZC

Economy - overview Government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation (1 % of GDP) have helped Japan advance with extraordinary rapidity to the rank of second most technologically powerful economy in the world after the U.S. and China. One notable characteristic of the economy is the working together of the manufacturers, suppliers, and distributors in closely knit groups called keiretsu. A second basic feature has been the guarantee of lifetime employment for a substantial portion of the urban labor force. Both features are now eroding. Industry, the most important sector of the economy, is heavily dependent on important raw materials and fuels. The much smaller agricultural sector is highly subsidized and protected, with crop yields among the highest in the world. Usually self-sufficient in rice, Japan must import about 50% of its requirements of other grain and fodder crops. Japan maintains one of the world’s largest fishing fleets and accounts for nearly 15% of the global catch. For three decades overall real economic growth has been spectacular: a 10% average in the 1960s, a 5% average in the 1970s, and a 4% average in the 1980s. Growth slowed markedly in 1992-95 largely because of the aftereffects of over investment during the late 1980s and contractionary domestic policies intended to wring speculative excesses from the stock and real estate markets. Growth picked up to 3.9% in 1996, largely a reflection of stimulative fiscal and monetary policies as well as low rates of inflation. But in 1997-98 Japan experienced a wrenching recession, centered about financial difficulties in the banking system and real estate markets and exacerbated by rigidities in corporate structures and labor markets. In 1999 output started to stabilize as emergency government spending began to take hold and business confidence gradually improved. The crowding of habitable land area and the aging of the population are two major long-run problems. Robotics constitutes a key long-term economic strength, with Japan possessing 410,000 of the world’s 720,000 "working robots".

GDP purchasing power parity - $2.95 trillion (1999 est.)

GDP real growth rate - 0.3% (1999 est.)

GDP purchasing power parity - $23,400 (1999 est.)

Exports - $413 billion (f.o.b. 1999 est.)

Exports Commodities - motor vehicles, semiconductors,

office machinery, chemicals

Exports Partners - US 31%, Taiwan 7%, China 5.5%,

South Korea 5.4%, Hong Kong 5.2% (1999)

Imports - $306 billion (c.i.f., 1999 est.)

Imports Commodities - fuels, foodstuffs, chemicals, textiles, office machinery

Imports Partners - US 22%, China 14%, South Korea

5.1%, Australia 4.2%, Taiwan 4.1%

(1999)

CURRENCY

Yen (¥)