TIME: Why has Australia so far escaped the worst of the Asian financial crisis?
Howard: Because our economic fundamentals are very strong and because we have been able to engage in some trade diversification over the past few years. And also because many of our exports to Asia are bound up in long-term commodity contracts.
TIME: Has Japan become more of a concern?
Howard: Japan's economy has been performing sluggishly for some years. It's now officially worse, but the change from a couple of years ago is not that dramatic.
TIME: Where do you think Japan has got it wrong? Has it been in micro or macro policy?
Howard: I think some of the micro. The lack of structural change to the banking system, which was very obviously needed a few years ago, is one of the big weaknesses.
TIME: Has Japan forfeited its leadership role in the region?
Howard: I'm not going to make sweeping statements about Japan's leadership role. That is a matter for Japan and its people. I'm an optimist in the long term about Japan.
TIME: Australia's image overseas has been badly damaged recently by reports of racism. What can the government do to correct those reports?
Howard: There's not a lot you can do. Either you're into the business of an open press or you're not. We try to put those things down whenever there is a particularly inaccurate report--I'm thinking of some of the news reports on One Nation [the right-wing, anti-immigration party led by Pauline Hanson]. You put those articles down, but they spring up again.
