As the country currently representing the European Union, Sweden hopes that the coming decade will see the Japan-EU relationship broaden into the political arena, based on the solid economic ties that have been developed between the two countries, according to Swedish Ambassador Krister Kumlin.

Swedish Ambassador Krister Kumlin speaks with The Japan Times in Tokyo.

On Jan. 1, Sweden took its first presidency of the European Council, the decision-making body of the 15-member European Union. During its presidency, Sweden expects Japan and the EU to finalize an action plan that lists concrete measures for cooperation over the next 10 years, designated as the "Decade of Japan-Europe Cooperation in the 21st Century."

"The EU and Japan have been close in the economic field. However, at a political level, we have not developed a sense of cooperation. A basic idea for this action plan is to increase political cooperation," said Kumlin, 62, who has been the country's top envoy to Japan since 1997.

Kumlin explained the four main objectives of the action program as promoting peace and security, enhancing economic and trade partnerships, cooperation in coping with global and social issues, and facilitating the exchange of people between Japan and the EU, which the Nordic country joined in 1995.

The agenda of facilitating peace and security covers such issues as regional conflict prevention and working to reform the United Nations, while cooperation in global and social issues will focus on the environment and the so-called digital divide.

Under those objectives, the action plan, expected to be adopted at the annual Japan-EU summit to be held in Sweden in early May, will attempt to establish prioritized immediate and long-term approaches, Kumlin said.

On the economic front, Kumlin said he welcomes the ongoing trend of globalization that is helping both Japan and the EU to open their markets and make way for new economic dimensions such as direct investment and cross-border mergers and acquisitions.

As an example of the growing economic ties between Japan and the EU, Kumlin pointed out that France recently passed the United States as the largest foreign investor in Japan. In fiscal 1999, French investment in Japan reached $6.68 billion, showing an increase of 51 times over the previous year, after French companies such as automaker Renault SA and insurance group Axa invested capital in Japanese firms.

The EU is hoping to accelerate the ongoing dialogue on regulatory reforms between Japan and the EU as a way to further open markets on both sides and increase trade and investment, Kumlin said.

Considering Japan's economic weight, especially in Asia, Kumlin expressed concerns that the current downturn of the Japanese economy coincides with the slowdown of the U.S. economy.

"We think, as an observer, there is still restructuring to be done within the Japanese economy. The crisis in the financial sector remains unresolved," said Kumlin.

The Swedish government managed to ride out it's country's financial crisis in the early 1990s by swiftly taking measures that included forcing some banks to go bankrupt while still guaranteeing deposits, Kumlin explained.

"Our experience shows that if a government takes decisive action, a turnaround (of the economy) can happen very quickly," Kumlin said.

Meanwhile, Kumlin expressed his satisfaction with the expanding business relationship between Japan and Sweden, noting that bilateral trade grew to a record level of $4 billion last year.

There is particularly strong potential for growth in bilateral trade in the telecommunications sector. Swedish prefabricated houses are also enjoying growing popularity in Japan, Kumlin said.