[Title] Press Conference by PRIME MINISTER ABE

Opening statement by Prime Minister Shinzo Abe

PRIME MINISTER ABE: Since April, the Japanese people have been shouldering a consumption tax rate of 8 per cent. Ever since I took the decision to raise the tax rate by 3 percentage points, from 5 per cent to 8 per cent, I have been considering all the while whether or not we should carry out a further increase to 10 per cent in October 2015, as scheduled. A raise in the consumption tax rate is necessary in order for Japan to pass down to the next generation a social security system that is one of the best in the world and in order to enhance our support for child-rearing. It is precisely for these reasons that during the days of the government led by the DPJ, we the LDP supported the bills to reform the tax system, even as an opposition party.

However, if raising the consumption tax causes the economy to falter, it will impart a major strain upon people’s daily lives. And if, as a result, tax revenues do not increase despite raising the tax rate, then no benefits will derive from it. The economy is a living thing.

Yesterday, the preliminary quarterly estimates of GDP were released for July, August, and September. Regrettably, the economy has not returned to a growth track. I listened to the views of more than 40 eminent persons regarding whether or not to raise the consumption tax rate. I also sought out the views of the members of my economic policy “brain trust,” holding numerous discussions over time. Taking all of that into comprehensive consideration, today I reached the conclusion that it is better to postpone raising the consumption tax rate to 10 per cent by 18 months rather than increase it in October 2015 as set forth in the relevant laws, in order to ensure that Abenomics succeeds in getting rid of deflation and making the economy grow.

However, what I would like to say to all of you on this occasion is that the “three arrows” of my economic policy are most certainly poised to bring positive results. Within economic policy, the most important indicators in any country are employment and wages. Since the inauguration of this government, employment has increased by more than 1 million people. The ratio of job offers to job seekers is now at its highest level in 22 years. This spring, salaries increased by more than 2 per cent on average. This is the highest rate of increase during the past 15 years. An economic virtuous circle is truly just beginning to take shape, in which corporate earnings increase, employment expands, wages rise, and consumption grows, leading to an economic recovery.

Therefore, I have kept my eyes fixed on trends in personal consumption more than anything else. According to the preliminary GDP estimates for July through September released yesterday, personal consumption has decreased by more than 2 per cent year-on-year, continuing the trend of the April through June period. At present, the 3 percentage point increase in the consumption tax rate is a significant weight tamping down personal consumption. I have come to the conclusion that raising the consumption tax rate by 2 per cent from next October, following upon the 3 per cent increase this past April, will further depress personal consumption and jeopardize Japan breaking free from deflation.

Since September, we have once again convened the meeting of the government, management, and labor. We held this meeting for the first time last year. As the government vigorously put the Growth Strategy into practice, business circles also took the step of raising wages. We will carry out the Growth Strategy even more intensely than before by reviving manufacturing and revitalizing small- and medium-sized enterprises and by creating environments in which women find it easy to work. Through this, we will create a situation in which income will rise steadily next spring, then again the following spring, and yet again the spring after that. By reliably boosting the income of the public overall, we will make the effects of economic recovery carry over amply into the economies of our local regions as well. I believe that by doing so, we will be able to prepare the environment for raising the consumption tax rate.

For this reason as well, we will boost consumption by individuals and carry out robust economic countermeasures that raise the level of the local economies. We will submit the necessary supplementary budget to the next ordinary Diet.

I will now address fiscal reconstruction. The laws on the comprehensive reform of social security and taxation systems provide for a decision to be made on whether or not to raise the consumption tax rate in light of the economic situation. Based on these provisions for making a decision on the state of the economy, I have decided at this juncture to postpone the increase.

However, that does not mean that we are lowering the flag of fiscal reconstruction. We must ensure trust in Japan within the international community. In addition, we will carry out our duty to hand down the social security system to the next generation. This position of the Abe Cabinet will never waver.

There are some who say that we will postpone the October 2015 increase by 18 months and then once those 18 months have passed, we will postpone it yet again. Here, I declare unambiguously to you that there will be no further postponements. The April 2017 increase will be carried out without fail, without any provisos for decisions based on the economic climate. I am determined that, by advancing the “three arrows” more over the next three years, we will most certainly be able to create those economic conditions.

We will resolutely stay the course towards our goal for fiscal soundness to be achieved by fiscal 2020. By the summer of 2015, we will draw up concrete plans for achieving this goal.

We will simultaneously bring about the dual goals of economic revival and fiscal reconstruction. The decision that will make this possible is the one that I took today.

In order to bring into realization all that I have just conveyed to you, as we work to formulate the budget for fiscal 2015, we will also advance our preparation of relevant bills and submit them to next year’s ordinary Diet.

In this way, now that I have taken this decision that is very weighty in terms of both people’s daily lives and the national economy, I have determined that it is imperative to seek a popular mandate promptly. I will dissolve the House of Representatives this week on the 21st. I wish to ask for the decision of the public regarding the point that we should postpone the raising of the consumption tax rate by 18 months and raise it to 10 per cent without fail in April 2017, and also regarding whether or not the economic policies and Growth Strategy we have been pursuing should be advanced further.

I will explain why I will dissolve the House of Representatives this week. It is because in asking for the public’s judgment, I considered this week to be the last possible timing for not causing a delay in preparing the budget for fiscal 2015.

Currently in the House of Representatives, we, the ruling coalition of the LDP and New Komeito, hold a large number of seats. This is something for which I am grateful. I am aware that some voices are saying, ‘what are you thinking—if you hold an election, you will surely end up with fewer seats.’ I am fully aware that the election campaign will be an intense one.

However, the tax system is very closely connected with people’s daily lives. ‘No taxation without representation.’ That was a reason for the American War of Independence. I have now made an important decision in terms of the tax system, which greatly impacts people’s lives. Moreover, there are pros and cons of the economic policies we have been pursuing. There is also resistance to them. I have concluded that in order to advance the Growth Strategy together with the people, we absolutely need to listen to the people’s voice. Without the trust of the people, the government cannot stand. The government cannot do without the trust and cooperation of the public.

There are now criticisms against Abenomics that it has been a failure, or that it is not going well. However, if that is the case, then what should be done instead? Regrettably, I have yet to hear a single concrete idea. In present-day Japan, we cannot afford to criticize time and again for the sake of criticizing and come to a standstill. Are the economic policies we are pursuing mistaken, or correct? Are there really other alternatives? Through the debates in this election campaign, we will make these clear. And, I intend to listen to the voices of the people.

Looking back, when my government had just been inaugurated, there was nothing but dissenting opinions regarding my bold policy of monetary easing. The Growth Strategy, including its reduction of the corporate tax rate, was also the subject of various criticisms. However, it was “restore a strong economy” that was the mission we were given and the voice of the people in the general election two years ago. It has been in that belief that I have carried our policies ever forward. I have also worked to tackle regulation that is hard like bedrock.

Two years later, employment has improved and wages are beginning to increase. We must not put a halt to the flow of the economic virtuous circle that has at long last begun to shift into motion. The Japanese people have finally seized the opportunity to break free of the deflation that they suffered under for 15 years. We must not let this opportunity slip out of our hands. We cannot return once more to the dark days of turmoil.

In order to break free from deflation, make the economy grow, and bring affluence to people’s daily lives, no matter how difficult the road before us, there is no other road we can follow. Economic recovery is the only path forward. I am determined to move steadily forward along this road, with the understanding of the public.

I will end my opening statement here.

2. Questions and Answers

CABINET PUBLIC AFFAIRS SECRETARY: We will now open the floor to questions from the press.

I will begin with a representative of a company coordinating the press club. Please first state your name and affiliation before asking your question.

REPORTER (HARA, NHK): I am Hara, with NHK, one of the companies coordinating the press club.

Even at the meetings of eminent persons that have taken up the matter of the increase in the consumption tax that have been convened until now, a number of views were voiced that the tax rate should be raised. If raising the consumption tax rate is postponed, will there not be question marks emerging over Japan’s efforts towards fiscal reconstruction, or repercussions upon people’s daily lives, such as impacting home mortgages? First I would like to ask if you have any such concerns.

Also, you yourself said just now that this will be a difficult election campaign. When you considered the number of seats in the Diet currently held by the ruling parties, there are voices even within the ruling parties themselves that this number may well decline. What are your views on what constitutes the line separating victory from defeat in this election?

PRIME MINISTER ABE: We will not lower the flag of fiscal reconstruction whatsoever. Moreover, we will raise the consumption tax rate to 10 per cent in April 2017 with absolute certainty. In addition, we will resolutely stay the course towards our goal for fiscal soundness to be achieved by fiscal 2020. By doing these things, I firmly believe that the issue of an international loss of confidence will not arise.

There can be no transition to fiscal soundness without a revival of the economy. And, this transition to fiscal soundness will end as but a dream unless we break away from deflation. That is exactly why we should move forward decisively towards breaking free of deflation. I believe that we will obtain sufficient international understanding of this.

In the previous general election, the LDP and New Komeito combined came to hold a large number of seats in the Diet, for which I am truly grateful. However, I think we can fairly say that the tax system is emblematic of a parliamentary democracy. I felt that when major changes are to be made to that tax system, it is best to bring the matter to the people.

Also, having said that, if the ruling coalition of the LDP and New Komeito is unable to maintain a majority, it will be impossible to press onward with our economic policy of the “three arrows,” or “Abenomics.” If we cannot obtain a majority of seats, that will mean a repudiation of Abenomics, and therefore I will step down.

CABINET PUBLIC AFFAIRS SECRETARY: Next I would like to take a question from another company coordinating the press club. Yes, go ahead.

REPORTER (MIYAZAKI, NISHINIPPON SHIMBUN): I am Miyazaki with the Nishinippon Shimbun.

There has been criticism regarding this dissolution [of the House of Representatives] from not only the opposition parties but also the ruling parties and the general public that there is no reason to do so. Just now, Mr. Prime Minister, you stated that, having made an important decision on the tax system, you will seek a popular mandate. The preliminary quarterly GDP estimates for July through September were at minus 1.6 per cent growth, a number substantially below market expectations. Had you postponed the tax rate increase according to the clause on economic conditions in line with the law and then conferred at the Diet, most of legislators in the opposition parties would have supported the postponement. In light of that, there have been comments that such an option would have been preferable to creating a political vacuum through an election, or that rather than create a vacuum within economic policy through an election, it would be better to devote all energies to economic countermeasures right now. Please explain the reason that you are seeking the will of the people through an election at this juncture, rather than taking such steps.

PRIME MINISTER ABE: First of all I would like to comment on why it is that two years ago the DPJ suffered a resounding defeat. It is because the DPJ carried out a raising of the consumption tax rate not appearing in the party’s Manifesto without seeking a popular mandate.

Do you remember the query session at the Diet in January 2012, by Mr. Tanigaki, President of the LDP at the time? It is taxes that are quintessentially democratic. Parliamentary democracy has truly walked the path together with taxes. Matters in this area of taxes should not fail to appear within public pledges made. We called for a snap election. In the previous general election, we pledged, based on the agreement among the three parties, to raise the consumption tax by 3 percentage points, then 2 percentage points, from 5 per cent to 10 per cent. The postponement by 18 months, and then in addition the fact that we will raise the tax without fail in April 2017, eliminating the clause on economic conditions, are highly significant changes. It is only natural to seek a public mandate for such kinds of changes, and as a democratic person I think it is fair to call it the “royal road” to follow.

In addition, I also made a new pledge, to raise the consumption tax rate by 2 percentage points three years from now. In order to create the conditions for that, it is necessary to press steadily ahead with the “three arrows” and the Growth Strategy, bring recovery dependably to the economy, and make wages rise.

The understanding of the public is necessary in order to move forward on these kinds of policies. A difficult policy such as this kind of Growth Strategy will not make progress without the cooperation of the public. That is precisely why it is necessary to hold a snap election, in terms of both the tax system and advancing this Growth Strategy. I intend to listen to the voices of the public and move forward together with the Japanese people. I believe that by doing do, we will be able to forge the conditions for raising the consumption tax rate without fail three years from now.

CABINET PUBLIC AFFAIRS SECRETARY: Next, I would like to take a question from someone other than the companies coordinating the press club. When you are called on, please first state your name and affiliation before asking your question. Mr. Yoshimura, please go ahead.

REPORTER (YOSHIMURA, YOMIURI SHIMBUN): I am Yoshimura with the Yomiuri Shimbun.

I would like to ask about measures to assist low-income people, accompanying the rise in the consumption tax rate. New Komeito is arguing for the introduction of a reduced tax rate when the consumption tax is raised to 10 per cent. In response, until now there have been cautious statements within the LDP from the perspective of time limitations [for preparing such a system]. In postponing the increase by one and a half years, do you have any intention to introduce a reduced tax rate from April 2017? If such a system were introduced, what are your thoughts on the kinds of items that would be subject to it?

PRIME MINISTER ABE: As for introducing a reduced tax rate, I intend for the LDP and New Komeito to examine the matter thoroughly between us going forward. Both parties have experts on taxation. The two parties will conduct a thorough consideration of the matter.

CABINET PUBLIC AFFAIRS SECRETARY: Now I would like to take the next question, so please raise your hands. Mr. Nishigaki?

REPORTER (NISHIGAKI, FUJI TELEVISION NETWORK): I am Nishigaki, with the Fuji Television Network.

Mr. Prime Minister, just now during this press conference, you stated that the government will with absolute certainty raise the consumption tax that is being postponed for 18 months. Some indicators suggest that personal consumption is in quite a difficult state at present. Against that backdrop, in setting this promise as an issue for the election, what will the administration set forth from now, including in the area of economic policy, that will be sufficient in making the public believe that pledge?

PRIME MINISTER ABE: The Abe administration was inaugurated in December 2012. Immediately afterward, the economy transitioned from minus to positive growth. I consider this truly to be the result of the economic policies we have been pursuing.

Then, this year, we raised the consumption tax rate. However, as I said earlier, regrettably, the raising of the consumption tax rate has depressed personal consumption. Therefore, we will steadily advance our policies of the “three arrows,” and wages will certainly rise next year, the year after, and the year after that. By creating circumstances in which nominal income rises and real wages also improve, I intend to create that kind of economy, and I believe we will be able to create that kind of economy.

The ratio of job offers to job seekers is at its highest level in 22 years, while this April we saw the highest rate of wage increases in 15 years. In addition, as an example, the number of bankruptcies reached its lowest level in 24 years. Moreover, the percentages of both high school and university graduates who found work have increased. The percentage increased markedly in the case of high school graduates in particular. There can be no mistake that the policies we have been pursuing have been successful.

That said, personal consumption has been depressed by the rise in the consumption tax rate. I have concluded that raising it two years in succession would jeopardize Japan breaking free from deflation. However, if there is a three-year interval [between the two tax increases], and if in this election we firmly attain the confidence of the people and properly move the policies of the “three arrows” forward, I am firmly convinced that we will be able to make good on this pledge with absolute certainty.

CABINET PUBLIC AFFAIRS SECRETARY: I believe we have time for roughly one more question. Ms. Sekiguchi, please go ahead.　

REPORTER (SEKIGUCHI, THE WALL STREET JOURNAL): I am Sekiguchi with The Wall Street Journal.

You have said that this election will be one in which voters are asked about the pros and cons of postponing the increase in the consumption tax rate and also the course Abenomics is following. However, in fact, the Abe administration is also dealing with energy, security, and other important policies and measures beyond economic growth. Mr. Prime Minister, will you view the results of this election as confidence in not only your Growth Strategy but also the restart of nuclear power plants and the laws related to the right of collective self-defense that has come about through [changes in the] constitutional interpretation?

PRIME MINISTER ABE: This is true in the case of the consumption tax as well, but in elections, the LDP always indicates its stance to the public fully, without shirking. Therefore, naturally, regarding energy policy, nuclear policy, security policy, and other areas, we will properly incorporate our stance into our party pledges and engage in this election campaign in a confident manner. I intend to conduct meaningful debates.

CABINET PUBLIC AFFAIRS SECRETARY: We have now gone beyond the scheduled time, so I would like to bring Prime Minister Shinzo Abe's press conference to a close. Thank you very much for your cooperation.