We have obtained HST FOC f/48 long-slit spectroscopy of the inner 4 of the Narrow Line Region of NGC 1068 between 3500-5400A with a spectral resolution of 1.78A/pixel. At a spatial scale of 0.0287 per pixel these data provide an order of magnitude improvement in resolution over previous ground based spectra and allow us to trace the interaction between the radio jet and the gas in the NLR. Our results show that, within +/-0.5 of the radio-jet the emission lines are kinematically disturbed and split into two components whose velocity separation is 1500 km/sec. The filaments associated with the radio lobe also show a redshifted kinematic disturbance of the order of 300 km/sec which probably is a consequence of the expansion of the radio plasma. Furthermore, the material enveloping the radio-jet is in a much higher ionization state than that of the surrounding NLR gas. The highest excitation is coincident with the jet axis where emission in the coronal line of [FeVII] 3769A is detected and the HeII 4686A is strong but where [OII] 3727A is depressed. This large localized increase in ionization on the jet axis is accompanied by the presence of an excess continuum. Because the electron density is substantially larger in the jet compared to the surrounding NLR, these results can only be explained if there is a more intense ionizing continuum associated with the jet. This can be accomplished in a variety of ways which include an intrinsically anisotropic nuclear radiation field, a reduced gas covering factor or the presence of a local ionization source. The morphology, kinematics and, possibly, the ionization structure of the NLR in the vicinity of the jet of NGC 1068 are a direct consequence of the interaction with the radio outflow.