On my first meeting as prime minister with Prime Minister Shinzo Abe, I described Japan as “Australia’s best friend in Asia”.

Some months later, Prime Minister Abe deftly rescued me from the difficulty that had created by upgrading the friendship between Japan and Australia to a “special relationship”.

Prime Minister Abe’s subsequent visit to Australia and historic address to our parliament – in English – was a highpoint in our nations’ friendship.

It is a special relationship because it’s not based simply on shared interests but also on shared values.

Thanks to Australia, Japan has reliable access to value-for-money raw materials such as iron ore, coal, and gas. Without Australia, Japan’s post-war economic miracle would have been much harder to achieve.

Thanks to Japan, Australia has access to high quality, value-for-money cars, electronics and machine tools. Without Japan, the lifestyles that Australians take for granted would be harder to sustain.

The $80 billion a year two way trade between Australia and Japan, and the two way investment – now close to $250 billion – should both increase substantially as a result of the Japan-Australia Economic Partnership Agreement that Prime Minister Abe and I finalised in 2014.

At least as important, though, is the values partnership that Australia and Japan have shared for almost seven decades.

Japan learned the right lesson from World War Two: not to be stronger, so that it could win the next war; but to be better, so that a war should never need to be fought.

From the Emperor down, Japanese people underwent a change of heart: no less hard-working, meticulous, respectful or proud of country than before; but now much more conscious of responsibilities towards others at home and abroad.

The difference, it seems to me, between pre-war and post-war Japan is a much greater acceptance of the universal moral norm to treat others as you would have them treat you.

Australia and Japan can have this special relationship because we are both committed to freedom under the law, democratic pluralism and a rules-based world order that gives all countries the chance to flourish.

It’s these shared values that lend an intimacy to friendships between nations that shared interests alone can never quite match.

My hope is that Australia and Japan can be a force for good in our region and in the wider world, not just by promoting countries’ common interests but also by fostering values that other countries might come to share over time.

After all, our two countries haven’t always been like-minded; there is the very dark episode in the history between us – but we’ve come through that to be countries that threaten no one and are helpful to everyone who’s prepared to work constructively with us.

Both Japan and Germany committed atrocities during World War Two for which they have rightly felt deep shame.

Australians were among the victims.

Both Japan and Germany, however, have been exemplary international citizens in the years since and have shown not the slightest tendency to militarism or expansionism.

To treat them as if nothing has changed in 70 years is to use history as a weapon, not a teacher.

No less than individuals, countries must take responsibility for all they’ve done: the low, the mean, the brutal, and the unworthy, as well as that in which they can take much pride.

But acknowledging the past, and atoning for it, should mean that they can once more be normal countries.

Damning every generation for the errors of one or two, and creating pariah nations that can never be free of the taint of the past is the way to perpetuate conflict; not to reduce it – especially since all countries have done terrible things in wartime.

Back in the 1960s, there were veterans’ associations in Australia that tried to ban Japanese cars from their parking lots because of understandable feelings about the war – but our countries’ leaders, I’m pleased to say, were bigger than that.

In 1957, the laying of a wreath at our war memorial in Canberra by Japan’s Prime Minister Kishi (Prime Minister Abe’s grandfather) and the finalisation of a trade treaty showed both our countries’ determination to look to the future, rather than to dwell on the past.

Within a decade, Japan had supplanted Britain as Australia’s principal trade partner and held that position for 40 years.

While trade and investment multiplied, and educational, scientific and cultural exchanges grew, the confidence developed that Japan and Australia were two countries that could trust each other.

We have been industrial partners since the 1960s with joint ventures in coal and iron ore followed by car manufacturing; and if Japan wins the submarine bid, Mitsubishi will be returning to Adelaide.

We became military partners in Iraq in 2005 and concluded a joint declaration on security in 2007.

The latest example of that trust is the submarine partnership that Japan is prepared to enter with Australia.

For Japan, this submarine deal is strategic; for the other bidders, it’s commercial.

Japan is offering to build a long range version of its Soryu submarine for Australia. This is the world’s best large conventional submarine specifically designed to match the nuclear submarines of other nations.

Japan’s willingness to share defence technology of such sophistication – and the United States’ willingness to work with both Australia and Japan on the installation of the most advanced weapons systems – is a sign of the complete confidence that our countries have in each other.

It shows that we regard conflict – or even serious tension – between us as almost unimaginable.

Yet only 75 years ago, Australia and America were waging total war against Japan.

This is an example of change for the better…that time, different experiences, and magnanimity has wrought.

We know that the fiercest of foes can become the best of friends because that is precisely the transformation that has taken place between Australia and Japan.

The challenge is to foster similar transformations elsewhere in our region.

Our hope must be that, over time, similar trust can develop between other countries that have a difficult history and that don’t currently share similar values.

Along with the United States, Australia was one of the wartime allies that refused to recognise the communist government of China in 1949.

Even when Australia finally did recognise China in 1972, there was scant hope of developing a strong relationship with what was still seen as a hard-line dictatorship.

Today, two-way trade with China – at well over $150 billion a year – is 1500 times what it was then.

There are now a million Australians of Chinese background and, in most years, our largest student intake and our highest tourist numbers are from China.

In 2014, not only did my government finalise the China-Australia Free Trade Agreement (China’s first with another G20 economy) but we also up-graded our relationship to a “comprehensive strategic partnership” (joining 10 other countries with such status).

While we now have more flights from China than from any other country and while our economy is more closely tied to China’s than to any other, it’s still an “interests” partnership rather than a “values” one.

We rely on China to take ever-increasing quantities of Australian raw materials and we are happy to be a source of resource, energy and food security.

We welcome Chinese investment here and we trust China enough to invest heavily there too.

We are proud of the Chinese people who have made their home in our country and become fine Australians.

But we aren’t entirely confident that, when China’s interests differ from Australia’s, there is a shared set of values that will allow a mutually satisfactory outcome.

In such circumstances, as yet, we have to rely on the goodwill between our two peoples and the understanding that individual Chinese leaders might have with their individual Australian counterparts.

The challenge for all of us is to work to ensure that China better appreciates the rules based international order that’s created the stability that’s made China’s new prosperity possible.

The rise of China has, of course, been almost as good for the wider world as it has for the half a billion Chinese who have moved from the third world to the middle class in scarcely a generation.

It’s the largest and fastest advance in human well-being in all history.

China is not only Australia’s largest trading partner – it is the United States’ and Japan’s too – as well as a potential strategic rival.

China has prospered because the government relaxed restrictions on private property, and the resultant products could be sold abroad for a good price into the expanding markets of a world largely at peace.

That peace rests on the basic principle that each country recognises every other country’s territorial integrity. Some countries might be stronger than others; but no country has more rights than others.

That’s why the South China Sea has become a potential flash point.

Countries which turn reefs into artificial islands at massive environmental cost, fortify disputed territory and try to restrict freedom of navigation are putting at risk the stability and security on which depends the prosperity of our region and the wider world.

The disputed reefs and islands have limited military value given the ability of home-based ships and planes to operate readily throughout the South China Sea.

They’re also of questionable commercial value given the difficulty of exploiting resources without clear legal title.

All the pursuit of claims has done, so far, is to intensify pleas for the United States to stay involved in the region as the one country with the strength and goodwill to respond to bullying.

By virtue of its size and economic strength, China is almost certain to become the dominant power in the South China Sea – just, say, as the United States is in the Caribbean.

But like other major countries, China should use its strength to guarantee freedom of navigation, not to challenge it.

Like many other countries, Australia does not take sides on the territorial disputes in the South China Sea and elsewhere but we do insist that they be resolved peacefully and in accordance with international law.

We deplore all unilateral alterations to the status quo; and we expect to exercise freedom of navigation in accordance with the well-understood rules.

Over the past 18 months, Australia has quietly increased our own air and naval patrols in the South China Sea.

We should be prepared to exercise our rights to freedom of navigation wherever international law permits because this is not something that the United States should have to police on its own.

We would be asserting what China itself recognised, in the 2002 Declaration on the Conduct of Parties in the South China Sea, when it committed to freedom of navigation under “universally recognised principles of international law”; and to “refrain from…inhabiting…the presently uninhabited islands and other features”.

There should be consequences when countries, even very powerful ones, don’t play by the rules; but likewise there should be benefits when they do.

As prime minister, I took the view that the establishment of the Asian Infrastructure Investment Bank was an opportunity to encourage China to be part of a rules-based world order.

When first invited to join this Chinese-led bank, Australia declined because one country, in effect, could overrule all the other members.

We never took it for granted, though, that the Chinese would refuse to listen to the case for change.

We would be prepared to join, we said, if the Bank’s rules reflected those of other institutions such as the US-led World Bank and the Japanese-led Asian Development Bank.

Eventually the Bank’s articles of association were drafted to ensure that no one country could control the board and that the board would make all investment policy decisions.

Our thinking was that you couldn’t demand that China join the international community – and then refuse to admit it when it applied. You couldn’t demand that China play by the rules – and then refuse to join in, if it did.

Making the most of the rise of China is one of the really big challenges of our time.

A China that demands that its territorial integrity be respected should be prepared to concede the same respect to others.

Provided like-minded countries – such as Australia, Japan and the US – are upfront with China about our expectations and firm when they’re not met, tensions should be manageable.

One day, perhaps, other countries will find what China does no more unsettling or potentially coercive than they do the acts of the United States.

With dialogue and with goodwill, America and China could be partners as much as rivals.

China’s participation in trilateral military exercises with the United States and with Australia in the Northern Territory; and China’s participation with the US, with Japan and with many others in the RimPac naval exercises is a good counter-point to strategic pessimism.

Eight decades ago, almost no one could have predicted that Japan would be a liberal democracy in the closest possible alliance with the United States.

It’s hard right now to envisage China as a liberal democracy with an independent legal system – but who predicted even China’s economic transformation 40 years ago?

More than anywhere else, post-war North Asia demonstrates that we should never put limits on what we can achieve.

We can do even better in the next 50 years, provided we continue to put more faith in our hopes than in our fears.